TIDMAVM
RNS Number : 2170L
Avocet Mining PLC
08 August 2013
Improved Inata mine plan and Unaudited Interim Results for the
quarter ended 30 June 2013
Improved Inata life of mine plan & Tri-K feasibility
study
-- Stronger cash generation from Inata - US$65m in hedge period, US$190m thereafter;
-- New life of mine plan with 36% increase in recovered ounces over the life of mine;
-- Life of mine total cash costs and all-in cash costs (incl.
capex) reduced to US$906/oz and US$958/oz respectively;
-- Inata cash flows to fund US$6 million carbon blinding circuit with completion by mid-2014;
-- Capex reduced to an average of US$7 million per annum over
the next five years, including construction of the new carbon
blinding circuit; and
-- Tri-K feasibility study on track - ESIA and project summary
presented to Guinea government in July.
Q2 results
-- Q2 production of 31,245 ounces at cash cost (including royalties) of US$1,238 per ounce;
-- Milestone of four million hours without a lost time injury reached during June;
-- Access to higher grade, high recovery Minfo East oxide ore in
Q2 - recovery of 91% achieved in June and 12,072 ounces
recovered;
-- Monthly production for H2 to be in line with June with
processing of oxide ore until mid-2014;
-- Mining costs to fall in Q3 after end of waste catch-up
campaign and standing down of mining contractor during Q2; and
-- Impairment of US$73.3 million driven by revised gold price
assumptions - partially compensated by US$60.8 million decrease in
hedge liability.
Quarter Quarter Quarter Six months
ended ended ended ended
30 June 30 June 31 March 31 June
KEY FINANCIAL METRICS 2013 2012 2013 2013
Period Unaudited Unaudited Unaudited Unaudited
=========================================== =========== =========== =========== ===========
Gold production (ounces) 31,245 32,917 30,481 61,726
=========================================== =========== =========== =========== ===========
Average realised gold price (US$/oz) 1,304 1,439 1,422 1,361
=========================================== =========== =========== =========== ===========
Total cash production cost (US$/oz) 1,238 1,006 1,169 1,204
=========================================== =========== =========== =========== ===========
(Loss)/profit before tax and exceptional
items (US$000) (8,422) 2,458 181 (8,241)
=========================================== =========== =========== =========== ===========
(Loss)/profit before tax (US$000) (20,907) 2,458 (44,792) (65,699)
=========================================== =========== =========== =========== ===========
(Loss)/earnings per share
(US cents per share) (9.48) 0.81 (20.30) (29.78)
=========================================== =========== =========== =========== ===========
EBITDA (US$000) 844 8,679 6,748 7,592
=========================================== =========== =========== =========== ===========
Net cash (used in)/generated by operating
activities (US$000) (10,615) 20,717 (15,374) (25,989)
=========================================== =========== =========== =========== ===========
David Cather, Chief Executive Officer, commented:
"The Q2 results announced today are in line with expectations
and the mine's performance in June in particular has shown
encouraging progress. The new life of mine plan at Inata is an
important step forward for Avocet, as it positions us to produce
over a third more ounces than the previous plan, at lower costs.
Key to this progress is the planned carbon blinding circuit, which
will allow processing of carbonaceous ore at significantly higher
recoveries. This is the main driver behind the improved life of
mine plan and will dictate Inata's performance for all types of
ore. In adjusting to lower gold prices, Inata pits have been
optimised with lower mining volumes, cost savings and a reduction
in capex as we focus on positive cash generation. Longer term, I
fully expect ore from the Souma deposit, when permitted, to improve
Inata's life of mine plan even further. In Guinea, the feasibility
work at Tri-K remains on track for completion in H2 2013, which we
are targeting to be Avocet's next new mine."
Management Conference Call
The Company will host a presentation at the offices of its PR
Consultant (Pelham Bell Pottinger) for investors and analysts at
9am (UK) on Thursday 8 August 2013 to discuss both this release and
the new Inata life of mine plan, which was also released today in a
separate release. This presentation will be made available on
Avocet's website (www.avocetmining.com) ahead of this meeting
taking place.
A conference call facility is also available for this call; dial
in details are as follows:
UK: 0800 6940257
Norway: 21563013
Alternative number: +44 (0)1452 555 566
Conference ID # 14084368
A recording of the conference call will also be made available
on the Avocet website later on the same day.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining Pelham Bell Pottinger J.P. Morgan Cazenove Arctic Securities SEB Enskilda
PLC Financial PR Corporate Broker Financial Financial Adviser
Consultants Adviser & &
Market Maker Market Maker
============= ===================== ========================= ================= ==================
David Cather, Daniel Thöle Michael Wentworth-Stanley Arne Wenger Fredrik Cappelen
CEO Petter Bakken
Mike Norris,
FD
Rob Simmons,
IR
------------- --------------------- ------------------------- ----------------- ------------------
+44 20 7766 +47 2101
7676 +44 20 7861 3232 +44 20 7742 4000 3100 +47 2100 8500
NOTES TO EDITORS
Avocet Mining PLC is a gold mining and exploration company
listed on the London Stock Exchange (ticker: AVM.L) and the Oslo
Børs (ticker: AVM.OL). The Company's principal activities are gold
mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The
deposit at Inata currently comprises a Mineral Resource of 4.7
million ounces and an Ore Reserve of 0.9 million ounces. The Inata
Gold Mine poured its first gold in December 2009 and produced
135,189 ounces of gold in 2012.
Other assets in Burkina Faso include eight exploration permits
surrounding the Inata Gold Mine in the broader Bélahouro region.
The most advanced of these projects is Souma, some 20 kilometres
from the Inata Gold Mine, where there is a Mineral Resources
estimate of 0.8 million ounces.
In Guinea, Avocet owns exploration licences in the north east of
the country. Mineral Resource development has been ongoing since
2005 and the Tri-K project is the most advanced project, which is
currently in the feasibility study stage.
CHIEF EXECUTIVE OFFICER'S REVIEW
Improved Inata life of mine
Today we announce a new life of mine plan for Inata, which shows
an expected increase of 36% in the life of mine gold ounces
produced, compared to that shown in the mine plan announced in
March. The new plan reflects significant improvements to gold
recoveries and includes near-surface Inferred oxide material
identified since the previous life of mine plan. The mining
schedule has been optimised so that waste mining is spread more
evenly over the life of mine and at a lower annual rate, despite
which annual gold production has increased 21% from an average of
96,000 ounces to 116,000 ounces over the presently defined 8 year
mine life. Inata's life of mine cash costs and all-in costs
including capex have fallen to US$906 per ounce and US$958 per
ounce respectively, from US$964 per ounce and US$1,028 per ounce.
As a result, the net cash generated is significantly higher than
the previous mine plan, especially in the next four years, even at
gold prices lower than current spot levels.
Importantly, this new mine plan demonstrates that the steps we
have taken to adapt to a lower gold price environment will ensure
Inata remains cash generative, despite the fall in the gold price
from US$1,600 per ounce at the start of the period to current
levels of US$1,300 per ounce.
As set out in more detail in the separate life of mine release
issued today, the main driver of improvement has been the
metallurgical work completed by our team at Inata. This has
confirmed that a new carbon blinding circuit will achieve
significantly higher recoveries when processing the carbonaceous
ore found at depth in some of Inata's pits. The higher recovery
rates alone equate to over 60,000 additional ounces of gold
production. A further benefit of the blinding circuit is that high
grade ore previously excluded from the mine plan due to high PRI
(carbon) values is now economic. Together with the inclusion of
areas containing Inferred Mineral Resources previously excluded,
these factors mean that the life of mine gold produced has
increased by 36%.
Unlike previous work which indicated that such improvements
would require a complex solution with significantly higher capital
expenditure, the planned new carbon blinding circuit is a simple
project with an estimated capital cost of US$6 million. This
investment will be met from Inata's own cash generation. Orders
have already been placed for the longest lead time items and the
project is scheduled to be complete by mid-2014.
The new life of mine plan is based on the same pit shell price
assumption of US$1,200 per ounce as the previous mine plan
announced in March. Importantly, however, the Company has
identified changes it could make to Inata's life of mine plan, if
necessary, to increase grades and reduce cash costs in order to
remain cash generative at prices as low as US$800 per ounce, albeit
with a shorter life of mine and a reduction in life of mine ounces
produced.
Although Souma continues to show promise as a satellite feed of
ore for later years at Inata, the new plan announced today does not
include any ore feed from Souma. During 2013, work at Souma has
focussed on additional targets for a 2014 exploration campaign, but
in response to lower gold prices, further exploration at Souma has
been deferred until 2014 (subject to sufficient free cash flow from
Inata). However, to preserve its upside options, the Company has
commenced the low cost work stream of preparing an Environmental
and Social Impact Assessment ('ESIA') to facilitate a mining
licence application for Souma in 2014/2015.
Tri-K project in Guinea
The Tri-K feasibility study is on track for completion and
application for a mining permit. The required drilling for the
project's maiden Ore Reserve was completed during the quarter and
subsequent resource and reserve estimation work is nearing
completion. The ESIA report was completed and submitted to the
Guinean government in July. A presentation on the project was also
given to the government in July at the start of the assessment
process expected to culminate in the grant of a mining permit
following completion of the feasibility study in H2 2013. The
Company intends to provide a full technical update to the market in
H2 when the mining permit application is submitted to the Guinean
government.
Financing
During March 2013, Avocet announced that it had reached
agreement with Elliott Management, its largest shareholder, and
Macquarie Bank Limited ('MBL'), as a result of which an affiliate
of Elliott agreed to provide a loan of US$15.0 million, to be drawn
down in three equal tranches, repayable by 31 December 2013. This
agreement was subsequently approved by Avocet's shareholders at an
EGM on 28 May 2013. Discussions on financing, including the
repayment of the Elliott loan, are ongoing with a number of
parties. These are being progressed with a view to a refinancing by
the end of the year, predicated on the new improved life of mine
plan at Inata announced today and a successful feasibility study at
Tri-K.
Results for the quarter ended 30 June 2013
Avocet's underlying operational performance in the quarter was
broadly in line with expectations with gold production for the
quarter of 31,245 ounces. Total cash costs (including royalties) in
the period were US$1,238 per ounce, an increase compared to the
prior quarter reflecting the timing of maintenance in the mine and
plant and higher drill and blast costs, as well as the impact of
changes in gold in circuit which benefited the Q1 but reduced Q2
production.
A highlight in the quarter was the accessing of high grade oxide
ore in the Minfo East pit, which yields higher recoveries and plant
throughput than other ore types. During June recoveries averaged in
excess of 90% and over 12,000 ounces were recovered. With further
oxide ore scheduled to be available for the rest of 2013, monthly
gold production in H2 2013 is expected to average approximately
12,000 ounces per month. During the quarter, the waste catch-up
campaign initiated in mid-2012 came to an end and the mining
contractor used in the campaign was demobilised. As a result of
lower mining rates and the absence of mining contractor costs,
together with higher gold production and cost savings in the rest
of the year, cash costs are expected to be significantly lower in
H2 2013.
The safety of our employees and contractors is key to a
successful operation, and our safety record at Inata remains
strong, with the milestone of four million hours without a lost
time injury reached during June.
The Company's financial results were impacted by lower gold
prices in the quarter, with prices falling below US$1,200 per ounce
in June. The overall fall in prices from approximately US$1,600 per
ounce at the start of Q2 to US$1,192 per ounce at the end also
resulted in two large non-cash accounting adjustments, with an
impairment of Inata's fixed assets of US$73.3 million being
partially compensated by a US$60.8 million reduction in the hedge
liability.
INATA OPERATIONAL REVIEW
Gold production and cash costs
2012 2013
-------------------------
Q1 Q2 Q3 Q4 FY 2012 Q1 Q2 H1
Ore mined (k tonnes) 578 610 559 906 2,653 817 971 1,788
Waste mined (k tonnes) 7,240 6,689 7,565 8,980 30,474 9,127 8,700 17,827
Total mined (k tonnes) 7,818 7,299 8,124 9,886 33,127 9,944 9,670 19,614
Ore processed (k tonnes) 608 651 643 654 2,556 616 620 1,236
Average head grade (g/t) 2.36 1.82 1.62 2.03 1.95 1.65 1.84 1.75
Process recovery rate 87% 86% 91% 83% 87% 82% 87% 84%
------- ------- ------- ------- ========= ------- ------- -------
Gold Produced (oz) 38,296 32,917 33,067 30,909 135,189 30,481 31,245 61,726
Cash costs (US$/oz) Q1 Q2 Q3 Q4 FY 2012 Q1 Q2 H1
Mining 332 402 374 562 412 542 582 562
Processing 283 332 279 350 309 360 371 366
Administration 122 145 167 219 161 163 188 176
Royalties 113 127 117 115 118 104 97 100
------- ------- ------- ------- ========= ------- ------- -------
850 1,006 937 1,246 1,000 1,169 1,238 1,204
Year to date gold production of 61,726 ounces is in line with
expectations. H2 production is expected to be higher than H1 as a
result of mining higher grade oxide ores at the Minfo East pit.
Waste stripping at Minfo East commenced on 25 April and June was
the first full month of ore mining from this pit.
Ore mined during the quarter came from the Inata North, Inata
Central, Minfo East and Sayouba pits, with mining focused on the
latter two pits towards the end of the quarter as sources of oxide
ore. Total tonnes mined in Q2 remained in line with Q1 at 9.7
million tonnes; this figure is expected to decrease during Q3 and
Q4 as the period of high waste stripping has come to an end. Strip
ratios during Q2 dropped 20% compared to Q1 to 8.96 as a result of
ore mining commencing in new areas (Minfo East and Sayouba). Rental
equipment belonging to mining contractor African Mining Services
was stood down at the end of the quarter following the completion
of a period of increased wasted stripping in late 2012 and early
2013.
Processing for the quarter totalled 620,000 tonnes and is in
line with expectations for the year, despite maintenance being
undertaken on the crusher and mills. As guided at the end of Q1,
the mining of ore from Minfo East during Q2 has resulted in an
increase in head grade to 1.84 g/t Au. The oxide nature of the ore
from Minfo East has also resulted in the quarter's average recovery
increasing to 87% (including June at 91%), compared to 82% in Q1
when ore was predominantly sourced from more carbonaceous ore
sources.
Q2 cash costs of US$1,238 per ounce were higher than the
previous quarter. Mining costs were US$582 per ounce, or US$1.88
per tonne mined, an increase compared to US$1.66 per tonne in Q1,
including the effect of timing of mobile maintenance and higher
drill and blast costs.
Plant costs were US$371 per ounce, or US$18.70 per tonne milled,
which was slightly higher than US$17.81 per tonne in the first
quarter, largely due to mill liner changes and higher lime
prices.
Souma exploration project, Burkina Faso
Work undertaken at Souma during H1 focussed on additional
targets for an exploration campaign in 2014. RC drilling was
conducted during Q1, and to a lesser extent Q2, to scout drill
potential extensions to the orebody. A geophysical survey over the
full extent of the Souma trend has given an improved understanding
of the region's geology and shows a distinct IP chargeability
anomaly along which mineralisation is associated.
In the current gold price environment, the decision has been
taken to scale back exploration for the remainder of the year.
Souma continues to show promise as a prospective satellite feed of
ore for later years at Inata, and low level work conducted during
the remainder of 2013 is aimed at identifying targets for drilling
in 2014, subject to sufficient cash flow from Inata. To preserve
its upside options, the Company has commenced the low cost work
stream of an ESIA as part of a mining licence application in
2014/2015.
Tri-K development project, Guinea
Work in Guinea in Q2 included infill drilling of the Inferred
mineral resource estimate at Kodiéran, heap leach column testwork
and development of a maiden reserve and mining schedule for both
Koulékoun and Kodiéran deposits.
Significant intercepts from infill drilling during Q2 at
Kodiéran were published on 3 July. Highlights from this work
included:
-- KD000575: 36 metres @ 6.84 g/t Au from surface;
-- KD000508: 21 metres @ 9.29 g/t Au from 27 metres depth, and
11 metres @ 12.10 g/t Au from 49 metres depth; and
-- KD000639: 34 metres @ 8.45 g/t Au from 24 metres depth.
The Tri-K feasibility work envisages an initial heap leach
project on the oxide portion of the resource, and the study will
form part of the Company's application for a mining licence in H2
2013. All drilling was completed during the quarter and this work
will be incorporated into the feasibility study, as well as
contributing to a maiden reserve. In addition, an ESIA was
completed over the project footprint during the quarter, which will
form a key part of the licence application. Technical studies are
ongoing with Tenova Bateman in South Africa. The Company will
provide a full technical update to the market when the mining
licence application is submitted.
Cost saving measures
In light of the prevailing gold price environment, the Company
has sought to reduce costs throughout its activities.
At Inata, full year capital expenditure guidance is now US$18m,
including US$3m of costs relating to the carbon blinding project.
Excluding this new project, total capex is some US$5 million below
original guidance, as a result of savings on the new tailings
management facility, construction of which has been completed
earlier than planned, as well as reduced mobile plant component
changes to the mobile fleet in H2 2013 as mining volumes decrease.
The decision to stand down the mining contractor African Mining
Services will reduce monthly costs by approximately US$1.1 million
per month going forward. Total reductions of 25% have also been
made in expatriate staff numbers both within the mine and
exploration teams, with exploration activities curtailed for the
remainder of 2013 except for resource definition drilling within
the Inata mining licence.
In London, cost saving initiatives have resulted in the total of
full time equivalent positions being reduced by five.
Costs for the Tri-K feasibility study were largely as budgeted
for H1, and the main aspects of this study are either complete or
nearing completion. It is not envisaged that Tri-K will require
material investment during the second half of this year.
FINANCIAL REVIEW
Revenue in the quarter was US$39.6 million, reflecting sales of
30,368 ounces of gold at an average realised price of US$1,304 per
ounce (including 8,250 ounces of gold delivered into forward
contracts at US$937 per ounce), compared with revenue of US$40.9
million in Q1 2013, representing 28,751 ounces at an average
realised price of US$1,422 per ounce (including 8,250 ounces of
gold delivered into forward contracts at US$949 per ounce).
EBITDA for the quarter totalled US$0.8 million compared with
US$6.7 million in Q1 2013.
The fall in gold price during the period led to a review of the
value of the Inata assets for impairment, particularly since the
impairment of US$135.3 million recognised in 2012 had been
partially reversed at 31 March 2013 as a consequence of the
recognition on the balance sheet of the forward gold contract
liability. As a result of this review, which was based on updated
production estimates and revised consensus gold prices, an
impairment of US$73.3 million has been recognised in respect of
Inata assets as an exceptional item. This is discussed in greater
detail in note 9 to the accounts.
Since the market value of the forward contracts was recognised
in the balance sheet on 31 March 2013, the fall in the gold price
led to a US$60.8 million reduction in the value of this liability
at 30 June 2013. This movement was recognised as a gain in the Q2
results, but is not included in operating profit.
The loss from operations in the quarter was US$80.6 million,
which included the effect of the impairment, compared with a
US$73.6 million profit in Q1 2013, which included the effect of the
reversal of the 2012 impairment. Excluding the impairment and
impairment reversal, the operating loss in Q2 2013 would have been
US$7.3 million compared with an operating profit of US$1.4 million
in Q1 2013.
The loss before tax for the quarter, including exceptional
items, was US$20.9 million, compared with a loss of US$44.8 million
in Q1 2013. Excluding exceptional items, the pre-tax loss was
US$8.4 million compared with a pre-tax profit of US$0.2 million in
Q1 2013.
Net cash consumed by operating activities in the quarter was
US$10.6 million due to adverse working capital movements, namely
increases of US$5.4 million in stockpile inventory and US$1.1
million in spare parts and gold inventory, and a reduction in trade
creditors of US$5.6 million.
Other cash flow items in the quarter included capex of US$4.0
million (26% lower than Q1), US$5.1 million of capitalised
exploration costs (US$2.1 million in Burkina Faso and US$3.0
million in Guinea), as well as the US$5.0 million drawn down of the
second tranche of the Elliott Loan.
Total cash decreased in the quarter by US$15.3 million, with
closing cash standing at US$17.7 million, and US$15.0 million of
external debt (US$5.0 million due to Macquarie Bank Limited and
US$10.0 million due to Elliott).
OUTLOOK
Over the remainder of 2013, Avocet will be focussed on
optimising cash flow at Inata, while meeting its targeted
production full year guidance of 135,000 ounces. Work will continue
on both the Tri-K feasibility study and the planning of the carbon
blinding project.
Refinancing will also remain a key priority, with discussions
centred on the key projects described above, and the Company will
provide updates as appropriate.
DAVID CATHER
Chief Executive Officer
DIRECTORS RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the EU;
-- The interim management report includes a fair review of the information required by:
i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
DAVID CATHER
Chief Executive Officer
CONDENSED CONSOLIDATED INCOME STATEMENT
For the three months ended 30 June 2013
Three months ended
Note 30 June 2013 30 June 2012
Unaudited Unaudited
=============================================== ===== =============== ==============
US$000 US$000
Revenue 2 39,603 49,255
Cost of sales 2 (44,375) (42,734)
=============================================== ===== =============== ==============
Gross (loss)/profit (4,772) 6,521
=============================================== ===== =============== ==============
Administrative expenses (2,419) (3,166)
Share based payments (65) (471)
Impairment of mining assets 3,9 (73,300) -
(Loss)/profit from operations (80,556) 2,884
=============================================== ===== =============== ==============
Change in fair value of forward contracts 60,815 -
Finance items
Exchange (losses)/gains (8) 219
Finance expense (1,172) (743)
Finance income 14 98
(Loss)/profit before taxation (20,907) 2,458
=============================================== ===== =============== ==============
Analysed as:
(Loss)/profit before taxation and exceptional
items (8,422) 2,458
Exceptional items 3 (12,485) -
=============================================== ===== =============== ==============
(Loss)/profit before taxation (20,907) 2,458
=============================================== ===== =============== ==============
Taxation - (589)
=============================================== ===== =============== ==============
(Loss)/profit for the period (20,907) 1,869
=============================================== ===== =============== ==============
Attributable to:
Equity shareholders of the parent company (18,885) 1,611
Non-controlling interest (2,022) 258
=============================================== ===== =============== ==============
(20,907) 1,869
=============================================== ===== =============== ==============
Earnings per share
- basic (cents per share) 5 (9.48) 0.81
- diluted (cents per share) 5 (9.48) 0.81
EBITDA (1) 4 844 8,679
=============================================== ===== =============== ==============
(1) EBITDA represents earnings before exceptional items, finance
items, taxation, depreciation and amortisation. EBITDA is not
defined by IFRS but is commonly used as an indication of underlying
cash generation.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2013
Six months ended
Note 30 June 2013 30 June 2012
Unaudited Unaudited
=============================================== ===== =============== ==============
US$000 US$000
Continuing operations
Revenue 2 80,488 109,511
Cost of sales 2 (81,124) (78,741)
=============================================== ===== =============== ==============
Gross (loss)/profit (636) 30,770
=============================================== ===== =============== ==============
Administrative expenses (4,554) (5,320)
Share based payments (394) (1,030)
Partial reversal of impairment of mining
assets 3,8 72,200 -
Impairment of mining and exploration
assets 3,9 (73,616) -
(Loss)/profit from operations (7,000) 24,420
=============================================== ===== =============== ==============
Gain and loss on financial instruments
Restructure of forward contracts 3 (20,225) -
Loss on recognition of forward contracts 3 (96,632) -
Change in fair value of forward contracts 3 60,815 -
Finance items
Exchange (losses)/gains (122) 364
Finance expense (2,551) (1,601)
Finance income 16 114
(Loss)/profit before taxation from continuing
operations (65,699) 23,297
=============================================== ===== =============== ==============
Analysed as:
(Loss)/profit before taxation and exceptional
items (8,241) 23,297
Exceptional items 3 (57,458) -
=============================================== ===== =============== ==============
(Loss)/profit before taxation from continuing
operations (65,699) 23,297
=============================================== ===== =============== ==============
Taxation 37 (7,473)
=============================================== ===== =============== ==============
(Loss)/profit for the period from continuing
operations (65,662) 15,824
=============================================== ===== =============== ==============
Discontinued operations
Loss on disposal on subsidiaries(1) 3 - (105)
=============================================== ===== =============== ==============
(Loss)/profit for the period (65,662) 15,719
=============================================== ===== =============== ==============
Attributable to:
Equity shareholders of the parent company (59,301) 14,103
Non-controlling interest (6,361) 1,616
=============================================== ===== =============== ==============
(65,662) 15,719
=============================================== ===== =============== ==============
Earnings per share
- basic (cents per share) 5 (29.78) 7.09
- diluted (cents per share) 5 (29.78) 7.02
EBITDA (2) 4 7,592 36,780
=============================================== ===== =============== ==============
(1) During 2011, the Group disposed of all of its trading
subsidiaries which were classified as discontinued
operations. All operations for 2012 are continuing. Refer to note 3 for further information.
(2) EBITDA represents earnings before exceptional items, finance
items, taxation, depreciation and amortisation. EBITDA is not
defined by IFRS but is commonly used as an indication of underlying
cash generation.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the three months ended 30 June 2013
Three months ended
30 June 2013 30 June 2012
=========================================== ===== ============= =============
Note Unaudited Unaudited
=========================================== ===== ============= =============
US$000 US$000
(Loss)/profit for the period (20,907) 1,869
Revaluation of other financial assets 10 (166) (684)
=========================================== ===== ============= =============
Total comprehensive income for the period (21,073) 1,185
=========================================== ===== ============= =============
Attributable to:
Equity holders of the parent company (19,051) 927
Non-controlling interest (2,022) 258
=========================================== ===== ============= =============
Total comprehensive income for the period (21,073) 1,185
=========================================== ===== ============= =============
Total comprehensive income for the period
attributable to owners of the parent
arising from:
Continuing operations (19,051) 927
Discontinued operations - -
=========================================== ===== ============= =============
(19,051) 927
=========================================== ===== ============= =============
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2013
Six months ended
30 June 2013 30 June 2012
=========================================== ===== ============= =============
Note Unaudited Unaudited
=========================================== ===== ============= =============
US$000 US$000
(Loss)/profit for the period (65,662) 15,719
Revaluation of other financial assets 10 (372) (604)
=========================================== ===== ============= =============
Total comprehensive income for the period (66,034) 15,115
=========================================== ===== ============= =============
Attributable to:
Equity holders of the parent company (59,673) 13,499
Non-controlling interest (6,361) 1,616
=========================================== ===== ============= =============
Total comprehensive income for the period (66,034) 15,115
=========================================== ===== ============= =============
Total comprehensive income for the period
attributable to owners of the parent
arising from:
Continuing operations (59,673) 13,604
Discontinued operations - (105)
=========================================== ===== ============= =============
(59,673) 13,499
=========================================== ===== ============= =============
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2013
30 June 2013 31 March 2013 31 December
Unaudited Unaudited 2012
Note Audited
=============================== ===== ============= ============== ============
US$000 US$000 US$000
Non-current assets
Intangible assets 6 53,016 55,081 49,442
Property, plant and equipment 7 147,910 217,910 145,653
Other financial assets 10 227 393 599
201,153 273,384 195,694
Current assets
Inventories 11 69,440 62,904 56,949
Trade and other receivables 12 27,614 28,387 25,124
Cash and cash equivalents 13 17,671 32,933 54,888
=============================== ===== ============= ============== ============
114,725 124,224 136,961
Current liabilities
Trade and other payables 44,867 50,408 42,023
Other financial liabilities 14 27,518 46,159 6,105
=============================== ===== ============= ============== ============
72,385 96,567 48,128
Non-current liabilities
Other financial liabilities 14 26,439 63,551 2,434
Deferred tax liabilities - - 37
Other liabilities 6,383 6,317 6,251
=============================== ===== ============= ============== ============
32,822 69,868 8,722
Net assets 210,671 231,173 275,805
=============================== ===== ============= ============== ============
Equity
Issued share capital 16,247 16,247 16,247
Share premium 146,040 146,040 146,040
Other reserves 15,769 15,911 16,117
Retained earnings 47,796 66,134 106,221
Total equity attributable
to the parent 225,852 244,332 284,625
Non-controlling interest (15,181) (13,159) (8,820)
=============================== ===== ============= ============== ============
Total equity 210,671 231,173 275,805
=============================== ===== ============= ============== ============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2012
=====================================================================================================
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
=============== ======== ======== ========= ========= ============= ================ =========
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December
2011
(Audited) 16,247 149,915 15,273 208,129 389,564 991 390,555
Profit for the
period - - - 14,103 14,103 1,616 15,719
Revaluation of
other
financial
assets - - (604) - (604) - (604)
=============== ======== ======== ========= ========= ============= ================ =========
Total
comprehensive
income for
the
period - - (604) 14,103 13,499 1,616 15,115
=============== ======== ======== ========= ========= ============= ================ =========
Share based
payments - - - 1,425 1,425 - 1,425
Release of
treasury
and own
shares - - 914 (865) 49 - 49
Final dividend - - - (13,505) (13,505) - (13,505)
=============== ======== ======== ========= ========= ============= ================ =========
At 30 June
2012
(Unaudited) 16,247 149,915 15,583 209,287 391,032 2,607 393,639
=============== ======== ======== ========= ========= ============= ================ =========
Six months ended 30 June 2013
=====================================================================================================
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
=============== ======== ======== ========= ========= ============= ================ =========
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December
2012
(Audited) 16,247 146,040 16,117 106,221 284,625 (8,820) 275,805
Loss for the
period - - - (59,301) (59,301) (6,361) (65,662)
Revaluation
of other
financial
assets - - (372) - (372) - (372)
Total
comprehensive
income for
the
period - - (372) (59,301) (59,673) (6,361) (66,034)
=============== ======== ======== ========= ========= ============= ================ =========
Share based
payments - - - 779 779 - 779
Release of
treasury
and own
shares - - 24 97 121 - 121
At 30 June
2013
(Unaudited) 16,247 146,040 15,769 47,796 225,852 (15,181) 210,671
=============== ======== ======== ========= ========= ============= ================ =========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the three months ended 30 June 2013
Three months ended
30 June 2013 30 June 2012
============================================= ===== ============= =============
Note Unaudited
============================================= ===== ============================
US$000 US$000
Cash flows from operating activities
(Loss)/profit for the period (20,907) 1,869
Adjusted for:
Depreciation of non-current assets 2,7 8,100 5,795
Impairment of mining assets 9 73,300 -
Share based payments 65 471
Taxation in the income statement - 589
Change in fair value of forward contracts (60,815) -
Non-operating items in the income statement 1,166 1,036
909 9,760
Movements in working capital
Increase in inventory (6,536) (2,324)
Decrease in trade and other receivables 773 1,971
(Decrease)/increase in trade and other
payables (5,589) 11,556
============================================= ===== ============= =============
Net cash (used in)/generated by operations (10,443) 20,963
Interest received - 72
Interest paid (172) (318)
Net cash (used in)/ generated by operating
activities (10,615) 20,717
============================================= ===== ============= =============
Cash flows from investing activities
Payments for property, plant and equipment (4,046) (7,067)
Exploration and evaluation expenses (5,116) (13,980)
Net cash (used in)/generated by investing
activities (9,162) (21,047)
============================================= ===== ============= =============
Cash flows from financing activities
Proceeds from debt 5,000 -
Financing costs (352) -
Payments in respect of finance lease (123) (371)
Net exercise of share options settled
in cash - (141)
Loans repaid - (6,000)
Final dividend - (13,166)
Financing costs - -
Net cash generated by/(used in) financing
activities 4,525 (19,678)
============================================= ===== ============= =============
Net cash movement (15,252) (20,008)
Exchange losses (10) (120)
Total decrease in cash and cash equivalents (15,262) (20,128)
============================================= ===== ============= =============
Cash and cash equivalents at start of
the period 32,933 100,508
============================================= ===== ============= =============
Cash and cash equivalents at end of period 17,671 80,380
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2013
Six months ended
30 June 2013 30 June 2012
============================================= ===== ============= =============
Note Unaudited
============================================= ===== ============================
US$000 US$000
Cash flows from operating activities
(Loss)/profit for the period (65,662) 15,719
Adjusted for:
Depreciation of non-current assets 2,7 13,176 12,360
Partial reversal of impairment of mining
assets 8 (72,200) -
Impairment of mining and exploration
assets 9 73,616 -
Share based payments 394 1,030
Taxation in the income statement (37) 7,473
Loss on recognition of forward contracts 96,632 -
Change in fair value of forward contracts (60,815) -
Non-operating items in the income statement 1,657 1,950
Discontinued operations 3 - 105
============================================= ===== ============= =============
(13,239) 38,637
Movements in working capital
Increase in inventory (12,491) (12,194)
Increase in trade and other receivables (2,491) (341)
Increase in trade and other payables 2,469 9,056
============================================= ===== ============= =============
Net cash (used in)/generated by operations (25,752) 35,158
Interest received 2 138
Interest paid (239) (727)
Net cash (used in)/ generated by operating
activities (25,989) 34,569
============================================= ===== ============= =============
Cash flows from investing activities
Payments for property, plant and equipment (9,449) (13,716)
Exploration and evaluation expenses (10,787) (22,036)
Disposal of discontinued operation, net
of cash disposed of 3 - 1,980
Net cash (used in)/generated by investing
activities (20,236) (33,772)
============================================= ===== ============= =============
Cash flows from financing activities
Proceeds from debt 10,000 -
Net exercise of share options settled
in cash - (141)
Final dividend - (13,166)
Financing costs (502) -
Payments in respect of finance lease (366) (371)
Loans repaid 13 - (12,000)
Net cash generated by/(used in) financing
activities 9,132 (25,678)
============================================= ===== ============= =============
Net cash movement (37,093) (24,881)
Exchange (losses)/gains (124) 25
Total decrease in cash and cash equivalents (37,217) (24,856)
============================================= ===== ============= =============
Cash and cash equivalents at start of
the period 54,888 105,236
============================================= ===== ============= =============
Cash and cash equivalents at end of period 17,671 80,380
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated interim financial statements, which
are unaudited, have been prepared in accordance with the
requirements of International Accounting Standard 34 as adopted for
use in the European Union. This condensed interim report does not
include all the notes of the type normally included in an annual
financial report. Accordingly, this condensed report is to be read
in conjunction with the Annual Report for the year ended 31
December 2012, which has been prepared in accordance with IFRS as
adopted by the European Union, and any public announcements made by
the Group during the interim reporting period.
The financial information set out in this interim report does
not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006. The unaudited condensed financial statements
for the six months ended 30 June 2013 have been drawn up using
accounting policies and presentation expected to be adopted in the
Group's full financial statements for the year ending 31 December
2013. The accounting policies are not different to those set out in
note 1 to the Group's audited financial statements for the year
ended 31 December 2012, with the exception of certain amendments to
accounting standards or new interpretations issued by the
International Accounting Standards Board, which were applicable
from 1 January 2013. These have not had a material impact on the
Group.
The Company's statutory financial statements for the year ended
31 December 2012 are available on the Company's website
www.avocetmining.com. The auditor's report on those financial
statements was unqualified and did not contain a statement under
sections 498(2) or (3) of the Companies Act 2006.
Going Concern
On 25 March 2013, the Company announced that it had concluded
financing agreement with an affiliate of its largest shareholder,
Elliott Management ("Elliott"). On 28 May 2013 this agreement was
approved by shareholders at an Extraordinary General Meeting.
The Elliott loan facility of US$15m will be due for repayment 31
December 2013. Further finance will be required in order to repay
the Elliott Lender at that date and provide working capital for
2014. The directors have concluded that obtaining the required
finance represents a material uncertainty that may cast significant
doubt upon the Company's ability to continue as a going concern and
that, therefore, the possibility exists that the Company could be
unable to repay amounts owed to the Elliott Lender and to fund its
corporate activities in 2014.
As a gold mining company, Avocet's cash generation is inevitably
dependent on the prevailing gold price, along with prices of a
number of other input costs (eg fuel/oil prices). However, the
recent fall in gold prices has highlighted the risk that, if the
gold price were to fall further below current production cost
levels, and remain at a lower price level for a sustained period,
then it is possible that a number of the covenants in respect of
the loan and forward sales agreement with MBL would be breached.
The consequences of this might be that further negotiations would
be necessary with MBL and/or an alternative finance provider which,
if unsuccessful, would represent a material uncertainty that may
cast significant doubt upon the Company's ability to continue as a
going concern.
Discussions continued during the quarter with potential sources
of finance. These discussions have been constructive and will be
assisted by the improved Inata life of mine plan which demonstrates
significantly higher gold production and cash generation.
The directors therefore have a reasonable expectation that the
Company will obtain sufficient funding prior to 31 December 2013
and that consequences of the gold prices will be remedied. For
these reasons, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
Estimates
Certain amounts included in the condensed consolidated interim
financial statements involve the use of judgement and/or
estimation. These are based on management's best knowledge of the
relevant facts and circumstances, having regard to prior
experience. However, judgements and estimations regarding the
future are a key source of uncertainty and actual results may
differ from the amounts included in the financial statements.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the consolidated financial
statements for the year ended 31 December 2012, with the exception
of those highlighted in the exceptional items in notes of these
statements.
2. Segmental reporting
IFRS 8 requires the disclosure of certain information in respect
of reportable operating segments. One of the criteria for
determining reportable operating segments is the level at which
information is regularly reviewed by the Chief Operating Decision
Maker (CODM) for the purposes of making economic decisions. In this
report, operating segments for continuing operations are determined
as the UK, West Africa mining operations (which includes
exploration activity within the Inata mine licence area), and West
Africa exploration (which includes exploration projects in Burkina
Faso, Guinea and Mali). Discontinued operations for 2012 represent
the disposal of one of the remaining assets in South East Asia that
was subject to the agreement with J&Partners L.P. (note 3).
2. Segmental Reporting
West Africa
For the three months ended mining West Africa
30 June 2013 UK operations exploration Total
========================================== ======== ============ ============= =========
US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 39,603 - 39,603
========================================== ======== ============ ============= =========
Cost of Sales 745 (43,974) (1,146) (44,375)
========================================== ======== ============ ============= =========
Cash production costs:
- mining - (18,193) - (18,193)
- processing - (11,606) - (11,606)
- overheads - (5,861) - (5,861)
- royalties - (3,023) - (3,023)
========================================== ======== ============ ============= =========
- (38,683) - (38,683)
Changes in inventory - 5,109 - 5,109
Expensed exploration and other
cost of sales (a) 765 (2,320) (1,146) (2,701)
Depreciation and amortisation (b) (20) (8,080) - (8,100)
=================================== ===== ======== ============ ============= =========
Gross profit/(loss) 745 (4,371) (1,146) (4,772)
Administrative expenses and share
based payments (2,484) - - (2,484)
Impairment of mining assets - (73,300) - (73,300)
(Loss)/profit from operations (1,739) (77,671) (1,146) (80,556)
Change in fair value of forward
contracts - 60,815 - 60,815
Net finance items (382) (784) - (1,166)
========================================== ======== ============ ============= =========
Loss before taxation (2,121) (17,640) (1,146) (20,907)
Taxation - - - -
=================================== ===== ======== ============ ============= =========
Loss for the period (2,121) (17,640) (1,146) (20,907)
========================================== ======== ============ ============= =========
Attributable to:
Equity shareholders of parent
company (2,121) (15,618) (1,146) (18,885)
========================================== ======== ============ ============= =========
Non-controlling interest - (2,022) - (2,022)
(Loss)/profit for the period (2,121) (17,640) (1,146) (20,907)
========================================== ======== ============ ============= =========
EBITDA (c) (1,719) 3,709 (1,146) 844
=================================== ===== ======== ============ ============= =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provision at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
West Africa
mining West Africa
At 30 June 2013 UK operations exploration Total
================================== ===== ========= ============ ============= ==========
US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL POSITION
Non-current assets 757 143,329 57,067 201,153
Inventories - 69,171 269 69,440
Trade and other receivables 521 23,447 3,646 27,614
Cash and cash equivalents 3,328 13,816 527 17,671
Total assets 4,606 249,763 61,509 315,878
========================================= ========= ============ ============= ==========
Current liabilities (12,999) (56,181) (3,205) (72,385)
Non-current liabilities (430) (32,392) - (32,822)
========================================= ========= ============ ============= ==========
Total liabilities (13,429) (88,573) (3,205) (105,207)
========================================= ========= ============ ============= ==========
Net assets (8,823) 161,190 58,304 210,671
========================================= ========= ============ ============= ==========
West Africa
For the three months ended 30 mining West Africa
June 2013 UK operations exploration Total
================================== ===== ========= ============ ============= ==========
US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
Loss for the period (2,121) (17,640) (1,146) (20,907)
Adjustments for non-cash and
non-operating items (d) 466 21,485 (135) 21,816
Movements in working capital (932) (9,671) (749) (11,352)
========================================= ========= ============ ============= ==========
Net cash used by operations (2,587) (5,826) (2,030) (10,443)
Net interest paid - (172) - (172)
Purchase of property, plant
and equipment - (3,925) (121) (4,046)
Deferred exploration expenditure - - (5,116) (5,116)
Proceeds from debt 5,000 - - 5,000
Financing costs (352) - - (352)
Other cash movements (e) (4,916) (2,149) 6,932 (133)
================================== ===== ========= ============ ============= ==========
Total decrease in cash and cash
equivalents (2,855) (12,072) (335) (15,262)
========================================= ========= ============ ============= ==========
(d) Includes depreciation and amortisation, share based
payments, taxation in the income statement, and other non-operating
items in the income statement;
(e) Other cash movements include cash flows from financing
activities, intragroup transfers, and exchange gains or losses.
2. Segmental Reporting (continued)
West Africa
For the three months ended 30 June mining West Africa
2012 UK operations exploration Total
======================================= ======== ============ ============= =========
US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 49,255 - 49,255
======================================= ======== ============ ============= =========
Cost of Sales 1,031 (41,878) (1,887) (42,734)
======================================= ======== ============ ============= =========
Cash production costs:
- mining - (13,225) - (13,225)
- processing - (10,914) - (10,914)
- overheads - (4,789) - (4,789)
- royalties - (4,182) - (4,182)
======================================= ======== ============ ============= =========
- (33,110) - (33,110)
Changes in inventory - (97) - (97)
Expensed exploration and other
cost of sales (a) 1,064 (2,909) (1,887) (3,732)
Depreciation and amortisation (b) (33) (5,762) - (5,795)
================================ ===== ======== ============ ============= =========
Gross profit/(loss) 1,031 7,377 (1,887) 6,521
Administrative expenses and
share based payments (3,637) - - (3,637)
======================================= ======== ============ ============= =========
(Loss)/profit from operations (2,606) 7,377 (1,887) 2,884
Net finance items 426 (843) (9) (426)
======================================= ======== ============ ============= =========
(Loss)/profit before taxation (2,180) 6,534 (1,896) 2,458
Taxation - (589) - (589)
======================================= ======== ============ ============= =========
(Loss)/profit for the period (2,180) 5,945 (1,896) 1,869
======================================= ======== ============ ============= =========
Attributable to:
Equity shareholders of parent
company (2,180) 5,687 (1,896) 1,611
======================================= ======== ============ ============= =========
Non-controlling interest - 258 - 258
(Loss)/profit for the period (2,180) 5,945 (1,896) 1,869
======================================= ======== ============ ============= =========
EBITDA (c) (2,573) 13,139 (1,887) 8,679
================================ ===== ======== ============ ============= =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provision at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
============================================================================================
West Africa
mining West Africa
At 30 June 2012 UK operations exploration Total
================================== ===== ========= ============ ============= =========
US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL POSITION
Non-current assets 1,816 267,862 45,282 314,960
Inventories - 52,352 356 52,708
Trade and other receivables 531 24,089 4,582 29,202
Cash and cash equivalents 43,019 36,584 777 80,380
Total assets 45,366 380,887 50,997 477,250
========================================= ========= ============ ============= =========
Current liabilities (3,529) (43,958) (6,701) (54,188)
Non-current liabilities (430) (28,993) - (29,423)
========================================= ========= ============ ============= =========
Total liabilities (3,959) (72,951) (6,701) (83,611)
========================================= ========= ============ ============= =========
Net assets 41,407 307,936 44,296 393,639
========================================= ========= ============ ============= =========
West Africa
For the three months ended 30 mining West Africa
June 2012 UK operations exploration Total
================================== ===== ========= ============ ============= =========
US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
(Loss)/profit for the period (2,180) 5,945 (1,896) 1,869
Adjustments for non-cash and
non-operating items (d) 78 7,583 230 7,891
Movements in working capital 484 8,965 1,754 11,203
========================================= ========= ============ ============= =========
Net cash (used in)/generated
by operations (1,618) 22,493 88 20,963
Net interest received/(paid) 72 (318) - (246)
Purchase of property, plant
and equipment (47) (6,892) (128) (7,067)
Loans repaid - (6,000) - (6,000)
Deferred exploration expenditure - (104) (13,876) (13,980)
Final dividend (13,166) - - (13,166)
Other cash movements (e) (7,008) (6,995) 13,371 (632)
Total (decrease)/ increase in
cash and
cash equivalents (21,767) 2,184 (545) (20,128)
========================================= ========= ============ ============= =========
(d) Includes depreciation and amortisation, share based
payments, taxation in the income statement, and other non-operating
items in the income statement;
(e) Other cash movements include cash flows from financing
activities, intergroup transfers; and exchange gains or losses.
2. Segmental Reporting (continued)
West Africa
mining West Africa
For the six months ended 30 June 2013 UK operations exploration Total
============================================= ======== ============ ============= =========
US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 80,488 - 80,488
============================================= ======== ============ ============= =========
Cost of Sales 1,478 (80,236) (2,366) (81,124)
============================================= ======== ============ ============= =========
Cash production costs:
- mining - (34,688) - (34,688)
- processing - (22,576) - (22,576)
- overheads - (10,844) - (10,844)
- royalties - (6,194) - (6,194)
============================================= ======== ============ ============= =========
- (74,302) - (74,302)
Changes in inventory - 9,183 - 9,183
Expensed exploration and other
cost of sales (a) 1,511 (1,974) (2,366) (2,829)
Depreciation and amortisation (b) (33) (13,143) - (13,176)
====================================== ===== ======== ============ ============= =========
Gross profit/(loss) 1,478 252 (2,366) (636)
Administrative expenses and share
based payments (4,948) - (4,948)
Partial reversal of impairment
of mining assets - 72,200 - 72,200
Impairment of mining and exploration
assets - (73,300) (316) (73,616)
(Loss)/profit from operations (3,470) (848) (2,682) (7,000)
Change in fair value of forward
contracts - (96,632) - (96,632)
Restructure of forward contracts - (20,225) - (20,225)
Change in fair value of forward
contracts - 60,815 - 60,815
Net finance items (1,111) (1,528) (18) (2,657)
============================================= ======== ============ ============= =========
Loss before taxation (4,581) (58,418) (2,700) (65,699)
Taxation - 37 - 37
============================================= ======== ============ ============= =========
Loss for the period (4,581) (58,381) (2,700) (65,662)
============================================= ======== ============ ============= =========
Attributable to:
Equity shareholders of parent
company (4,581) (52,020) (2,700) (59,301)
============================================= ======== ============ ============= =========
Non-controlling interest - (6,361) - (6,361)
(Loss)/profit for the period (4,581) (58,381) (2,700) (65,662)
============================================= ======== ============ ============= =========
EBITDA (c) (3,437) 13,395 (2,366) 7,592
====================================== ===== ======== ============ ============= =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provision at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
West Africa Continuing
For the six months ended mining West Africa operations Dis-continued
30 June 2012 UK operations exploration total operations Total
====================================== ======== ============ ============= ============ ============== =========
US$000 US$000 US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 109,511 - 109,511 - 109,511
====================================== ======== ============ ============= ============ ============== =========
Cost of Sales 1,858 (77,515) (3,084) (78,741) - (78,741)
====================================== ======== ============ ============= ============ ============== =========
Cash production costs:
- mining - (25,932) - (25,932) - (25,932)
- processing - (21,741) - (21,741) - (21,741)
- overheads - (9,474) - (9,474) - (9,474)
- royalties - (8,521) - (8,521) - (8,521)
====================================== ======== ============ ============= ============ ============== =========
- (65,668) - (65,668) - (65,668)
Changes in inventory - 5,066 - 5,066 - 5,066
Expensed exploration
and other cost of sales (a) 1,924 (4,619) (3,084) (5,779) - (5,779)
Depreciation and amortisation (b) (66) (12,294) - (12,360) - (12,360)
=============================== ===== ======== ============ ============= ============ ============== =========
Gross profit/(loss) 1,858 31,996 (3,084) 30,770 - 30,770
Administrative expenses
and share based payments (6,350) - - (6,350) - (6,350)
====================================== ======== ============ ============= ============ ============== =========
(Loss)/profit from
operations (4,492) 31,996 (3,084) 24,420 - 24,420
Loss on disposal of
subsidiaries - - - - (105) (105)
Net finance items 429 (1,567) 15 (1,123) - (1,123)
====================================== ======== ============ ============= ============ ============== =========
(Loss)/profit before
taxation (4,063) 30,429 (3,069) 23,297 (105) 23,192
Taxation - (7,473) - (7,473) - (7,473)
====================================== ======== ============ ============= ============ ============== =========
(Loss)/profit for the
period (4,063) 22,956 (3,069) 15,824 (105) 15,719
====================================== ======== ============ ============= ============ ============== =========
Attributable to:
Equity shareholders
of parent company (4,063) 21,340 (3,069) 14,208 (105) 14,103
Non-controlling interest - 1,616 - 1,616 - 1,616
====================================== ======== ============ ============= ============ ============== =========
(Loss)/profit for the
period (4,063) 22,956 (3,069) 15,824 (105) 15,719
====================================== ======== ============ ============= ============ ============== =========
EBITDA (c) (4,426) 44,290 (3,084) 36,780 - 36,780
=============================== ===== ======== ============ ============= ============ ============== =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provisions at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
For the six months ended 30
June 2013 UK West Africa mining operations West Africa exploration Total
================================ ===== ======== ============================== ======================== =========
US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
(Loss)/profit for the period (4,581) (58,381) (2,700) (65,662)
Adjustments for non-cash and
non-operating items (d) 1,537 50,467 419 52,423
Movements in working capital (1,059) (11,826) 372 (12,513)
======================================= ======== ============================== ======================== =========
Net cash used in operations (4,103) (19,740) (1,909) (25,752)
Net interest received/(paid) 2 (239) - (237)
Purchase of property, plant and
equipment (1) (9,228) (220) (9,449)
Deferred exploration expenditure - - (10,787) (10,787)
Proceeds from debt 10,000 - - 10,000
Financing costs (502) - - (502)
Other cash movements (e) (9,461) (3,903) 12,874 (490)
Total decrease in cash and cash
equivalents (4,065) (33,110) (42) (37,217)
======================================= ======== ============================== ======================== =========
West Africa Continuing
For the six months mining West Africa operations Dis-continued
ended 30 June 2012 UK operations exploration total operations Total
===================== ===== ========= =============== =============== =============== =============== =========
US$000 US$000 US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
(Loss)/profit for the
period (4,063) 22,956 (3,069) 15,824 (105) 15,719
Adjustments for
non-cash and
non-operating items (d) 667 22,192 (46) 22,813 105 22,918
Movements in working
capital (4,095) (2,188) 2,804 (3,479) - (3,479)
============================ ========= =============== =============== =============== =============== =========
Net cash (used in)/
generated by operations (7,491) 42,960 (311) 35,158 - 35,158
Net interest
received/(paid) 138 (727) - (589) - (589)
Purchase of property, plant
and equipment (164) (11,773) (1,779) (13,716) - (13,716)
Deferred exploration
expenditure - (367) (21,669) (22,036) - (22,036)
Net proceeds from disposal
of discontinuing
operations 1,980 - - 1,980 - 1,980
Loans repaid - (12,000) - (12,000) - (12,000)
Final dividend (13,166) - - (13,166) - (13,166)
Other cash movements (e) (14,032) (10,224) 23,769 (487) - (487)
Total (decrease)/increase
in cash and cash
equivalents (32,735) 7,869 10 (24,856) - (24,856)
============================ ========= =============== =============== =============== =============== =========
(d) Includes depreciation and amortisation, share based
payments, movement in provisions, taxation in the income statement,
and other non-operating items in the income statement;
(e) Other cash movements include deferred consideration paid,
cash flows from financing activities, and exchange gains or
losses;
3. Exceptional items
30 June 2013 (three months) Unaudited 30 June 2012 30 June 2013 (six months) Unaudited 30 June 2012
(three months) (six months)
Unaudited Unaudited
============== ====================================== ================ ==================================== ==============
US$000 US$000 US$000 US$000
Restructure - - (20,225) -
of forward
contracts
Loss on - - (96,632) -
recognition
of forward
contracts
Change in
fair value
of forward
contracts 60,815 - 60,815 -
Partial - - 72,200 -
reversal of
impairment of
mining assets
Impairment of - - (316) -
Mali
exploration
asset
Impairment of
Inata mining
assets (73,300) - (73,300) -
Loss on
disposal of
subsidiaries - - - (105)
Exceptional
loss (12,485) - (57,458) (105)
============== ====================================== ================ ==================================== ==============
Change in fair value of forward contracts
The forward contracts are required to be valued at each
reporting date and the movement recognised through the income
statement. Based on a spot price of $1,192 per ounce, the forward
contract as at 30 June 2013 had a fair value of $35.8 million. This
represented a decrease of $60.8 million, which was recognised as a
gain in the period.
Impairments of Inata mining assets
In June 2013 Avocet recognised an impairment of non-current
mining assets in respect of the Inata Gold Mine driven by a
reduction in the forecasted gold price. Further details are
provided in note 9.
Restructure and recognition of forward contracts
On 25 March 2013, Avocet announced the restructure of the
Macquarie forward contracts for delivery of gold bullion. The
restructure consisted of eliminating 29,020 ounces under the
forward contracts at a cost of US$20.2 million and shortening the
delivery profile of the remaining ounces by 18 months so that all
ounces are delivered by December 2016.
The recognition of the liability is in accordance with IAS 39
(see note 14 for more information), and reflects that the recent
buy back demonstrates a practice of cash-settling forward
contracts. Under IAS 39, this means that the own-use exemption
previously applied is no longer appropriate. The fair value of the
forward contracts has been recognised at 31 March 2013 at $96.6m.
Further details are provided in note 14.
Partial reversal of impairment on mining assets
In March 2013 Avocet recognised a partial reversal of impairment
of non-current mining assets in respect of the Inata Gold Mine
driven by the requirement to recognise the forward contract
liability. Further details are provided in note 8.
Impairment of Mali exploration asset
During Q1 the company decided to discontinue operations at the
N'tjila permit located in the Republic of Mali. As a result the
$0.3m capitalised in relation to the permit has been impaired and
recognised as an exceptional item.
Loss on disposal of subsidiaries
Completion of one of the last two exploration assets occurred on
16 February 2012 for proceeds of US$2.0 million, resulting in a
loss of US$0.1 million. There are no remaining assets or
liabilities recognised in the Group statement of financial position
in respect of the last remaining South East Asian exploration
company, which the Company no longer expects to sell.
4. EBITDA
Earnings before interest, tax, depreciation and amortisation
(EBITDA) represents profit before depreciation/amortisation,
interest and taxes, as well as excluding any exceptional items and
profit or loss from discontinued operations and changes in fair
value of forward contracts.
30 June 2012 30 June 2013 30 June 2012
(six months)
Unaudited
(three months) (six months)
30 June 2013 Unaudited Unaudited
(three months)
Unaudited
US$000 US$000 US$000 US$000
(Loss)/profit before
taxation (20,907) 2,458 (65,699) 23,297
Exceptional Items 12,485 - 57,458 -
Depreciation 8,100 5,795 13,176 12,360
Exchange (gain)/losses 8 (219) 122 (364)
Net finance income (14) (98) (16) (114)
Net finance expense 1,172 743 2,551 1,601
======================== ================ ================ ============== ==============
EBITDA 844 8,679 7,592 36,780
======================== ================ ================ ============== ==============
5. Earnings per Share
Earnings per share are analysed in the table below, presenting
earnings per share for continuing and discontinued operations.
30 June 2013 30 June 30 June 2013 30 June
(three months) 2012 (three (six months) 2012 (six
Unaudited months) Unaudited months)
Unaudited Unaudited
====================================== ================ ============= ============== ============
Shares Shares Shares Shares
Weighted average number of
shares in issue for the period
- number of shares with voting
rights 199,014,701 198,968,407 199,104,701 198,965,402
- effect of share options
in issue(1) - 974,247 155,764 1,952,498
====================================== ================ ============= ============== ============
- total used in calculation
of diluted earnings per share 199,014,701 199,942,654 199,260,465 200,917,900
====================================== ================ ============= ============== ============
US$000 US$000 US$000 US$000
Earnings per share from continuing
operations
(Loss)/profit for the period
from continuing operations (20,907) 1,869 (65,662) 15,824
Less non-controlling interest 2,022 (258) 6,361 (1,616)
====================================== ================ ============= ============== ============
(Loss)/profit for the period
attributable to equity shareholders
of the parent (18,885) 1,611 (59,301) 14,208
====================================== ================ ============= ============== ============
(Loss)/earnings per share
- basic (cents per share) (9.48) 0.81 (29.78) 7.14
- diluted (cents per share)
(1) (9.48) 0.81 (29.78) 7.07
====================================== ================ ============= ============== ============
5. Earnings per Share (cont)
Earnings per share from discontinued 30 June 2013 30 June 30 June 2013 30 June
operations (three months) 2012 (three (six months) 2012 (six
Unaudited months) Unaudited months)
Unaudited Unaudited
US$000 US$000 US$000 US$000
Profit/(loss) for the period - - - (105)
Less non-controlling interest - - - -
====================================== ================= ============== =============== ===========
Profit/(loss) for the period
attributable to equity shareholders
of the parent - - - (105)
====================================== ================= ============== =============== ===========
Earnings/(loss) per share
- basic (cents per share) - - - (0.05)
- diluted (cents per share) - - - (0.05)
====================================== ================= ============== =============== ===========
Total (loss)/earnings per
share
- basic (cents per share) (9.48) 0.81 (29.78) 7.09
- diluted (cents per share)
(1) (9.48) 0.81 (29.78) 7.02
============================= ======= ===== ======== =====
(1) As a result of the loss for the period, in calculating the
diluted earnings per share the effect of share options in issue has
been ignored for the 3 months and 6 months ending 30 June 2013.
6. Intangible assets
Intangible assets represent deferred exploration expenditure.
The movement in the period is analysed below:
US$000
At 1 January 2013 (audited) 49,442
Additions 10,786
Capitalised depreciation(1) 590
Impairment of Mali exploration assets (316)
Transfer of exploration assets (7,486)
======================================= ========
At 30 June 2013 (unaudited) 53,016
======================================= ========
30 June 31 December
2013 2012
(Unaudited) (Audited)
============== === ============== =============
US$000 US$000
Burkina Faso 24,728 26,577
Guinea 28,288 22,574
Mali - 291
=================== ============== =============
Total 53,016 49,442
=================== ============== =============
(1) Capitalised depreciation represents the depreciation of
items of property, plant, and equipment which are used exclusively
in the Group's exploration activities. The consumption of these
assets is capitalised as an intangible asset, in accordance with
accounting standards and industry practice.
7. Property, plant and equipment
Mining property and plant
===============================================
Mine Vehicles, Exploration
development Plant and fixtures, and property Office
costs Machinery equipment and plant equipment
============== =============== ============== =============== ===============
Six months ended
30 June 2013 Note West Africa West Africa West Africa West Africa UK Total
================= ===== ============== =============== ============== =============== =============== =========
US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 January
2013 (audited) 96,789 87,589 55,568 5,242 1,121 246,309
Additions 5,489 3,438 177 237 1 9,342
Addition to mine
closure
provision 295 - - - - 295
Transfer from
exploration
intangibles 6 7,486 - - - - 7,486
Partial reversal
of impairment
on mining
assets 8 72,200 - - - - 72,200
Impairment of
mining assets 9 (73,300) - - - - (73,300)
At 30 June 2013 108,959 91,027 55,745 5,479 1,122 262,332
(unaudited)
================= ===== ============== =============== ============== =============== =============== =========
Depreciation
At 1 January
2013 (audited) 56,958 23,624 18,677 822 575 100,656
Charge for the
period 7,182 3,791 2,186 - 17 13,176
Charge for the
period -
capitalised(1) - - - 590 - 590
================= ===== ============== =============== ============== =============== =============== =========
At 30 June 2013 64,140 27,415 20,863 1,412 592 114,422
(unaudited)
================= ===== ============== =============== ============== =============== =============== =========
Net Book Value
At 30 June 2013 44,819 63,612 34,882 4,067 530 147,910
(unaudited)
================= ===== ============== =============== ============== =============== =============== =========
At 1 January
2013 (audited) 39,831 63,965 36,891 4,420 546 145,653
================= ===== ============== =============== ============== =============== =============== =========
(1) Capitalised depreciation represents the depreciation of
items of property, plant, and equipment which are used exclusively
in the Group's exploration activities. The consumption of these
assets is capitalised as an intangible asset, in accordance with
accounting standards and industry practice.
8. Partial reversal of impairment on mining assets as at 31 March 2013
At 31 December 2012, the Group recognised an impairment of
$135.3m in respect of mining assets at Inata. In accordance with
IAS 36 Impairment of Assets, an entity is required to assess at the
end of each reporting period whether there is any indication that a
previous impairment loss may no longer exist or may have decreased.
If such an indication exists, the entity should estimate the
recoverable amount of that asset.
The forward contract liability at fair value in March 2013 was
excluded from both the carrying amount of the cash generating unit
('CGU') and the cash flows of the value in use ('VIU') calculation.
This avoids double counting of the liability's cash flow and
provides a more stable basis to assess the CGU's fair value. The
Company concluded that the requirements of an indication of a
reversal of impairment were identified in relation to the Inata
mining assets. An assessment was therefore carried out of the fair
value of Inata's assets, using the discounted cash flows of Inata's
latest estimated life of mine plan to calculate the VIU. As a
result of the review, a pre-tax partial reversal of impairment
losses of $72.2m was recorded in Q1 2013 and allocated to mine
development costs.
When calculating the VIU, certain assumptions and estimates were
made. Changes in these assumptions can have a significant effect on
the recoverable amount and therefore the value of the impairment
recognised. The key assumptions are outlined below:
Assumption Judgements Sensitivity(2)
------------- -------------------------------------- -----------------------------------
Timing of Cash flows are forecast over the An extension or shortening
cash flows expected life of the mine. The of the mine life would result
current life of mine plan forecasts in a corresponding increase
mining activities to continue until or decrease in reversal
2017, with a further 3 years during of impairment, the extent
which stockpiles will be processed of which it is not possible
and rehabilitation costs will be to quantify.
incurred.
------------- -------------------------------------- -----------------------------------
Production Production costs are forecast based A change in production costs
costs on detailed assumptions, including of 10% would increase or
staff costs, consumption of fuel decrease the pre-tax reversal
and reagents, maintenance, and of impairment attributable
administration and support costs. by US$37.4 million(1) .
------------- -------------------------------------- -----------------------------------
Gold price Analyst consensus prices were used A change of 10% in the gold
for the forecast of revenue from price assumption would increase
gold sales, based on an average or decrease the pre-tax
consensus at March 2013 for the reversal of impairment recognised
period 2013-2020. Prices range in the year by US$79.1 million(1)
from US$1,775 per ounce in 2013 .
to US$1,293 per ounce from 2017.
------------- -------------------------------------- -----------------------------------
Discount A discount rate of 10% (pre-tax) A change in the discount
rate has been used in the VIU estimation. rate of one percentage point
would increase or decrease
the pre-tax reversal of
impairment recognised in
the year by US$6.0 million(1)
.
------------- -------------------------------------- -----------------------------------
Ore Reserves The life of mine plan is based A 10% increase or decrease
and gold on Ore Reserves of 0.92 million in ounces produced, compared
production for the Inata Mine as at 31 December with the current Ore Reserve,
2012, less the Q1 2013 production. would increase or decrease
The Ore Reserve is estimated in the pre-tax reversal of
accordance with the principles impairment recognised in
the JORC Code and was reviewed the year by US$79.1 million(1)
and approved by Clayton Reeves .
(refer to page 22 of the 31 December
2012 Annual Report).
------------- -------------------------------------- -----------------------------------
(1) Sensitivities provided are on a 100% basis, pre-tax. 10% of the
post-tax impairment would be attributed to the non-controlling interest.
(2) The impairment reversal on the Inata mining assets would be limited
to US$130.1 million, being the previous impaired value less the impact
on depreciation as a result of the impairment.
------------------------------------------------------------------------------------------
9. Impairment of mining assets
In accordance with IAS 36 Impairment of Assets, at each
reporting date the Company assesses whether there are any
indicators of impairment of non-current assets. When circumstances
or events indicate that non-current assets may be impaired, these
assets are reviewed in detail to determine whether their carrying
value is higher than their recoverable value, and, where this is
the result, an impairment is recognised. Recoverable value is the
higher of value in use ('VIU') and fair value less costs to sell.
VIU is estimated by calculating the present value of the future
cash flows expected to be derived from the cash generating unit
('CGU'). Fair value less costs to sell is based on the most
reliable information available, including market statistics and
recent transactions. The Inata Mine has been identified as the CGU.
This includes all tangible non-current assets, intangible
exploration assets within the mine licence area, and net current
assets (excluding cash). The CGU does not include exploration
assets at Souma or in Guinea, these assets are held in different
entities and there have not been any indications of impairment.
As a result of the review of impairment indicators, the Company
has concluded that the recent fall in spot price and market
forecasts is considered to be an indicator for impairment. An
assessment was therefore carried out of the fair value of Inata's
assets, using the discounted cash flows of Inata's latest estimated
life of mine plan to calculate their VIU. As a result of this
review, a pre-tax impairment loss of US$73.3 million has been
recorded in June 2013, being an impairment of mine development
costs.
When calculating the VIU, certain assumptions and estimates are
made. Changes in these assumptions can have a significant effect on
the recoverable amount and therefore the value of the impairment
recognised. Should there be a change in the assumptions which
indicated the impairment, this could lead to a revision of recorded
impairment losses in future periods. The key assumptions are
outlined below:
Assumption Judgements Sensitivity
---------------- ------------------------------------- ------------------------------------
Timing of cash Cash flows are forecast over An extension or shortening
flows the expected life of the mine. of the mine life would result
The current life of mine plan in a corresponding increase
forecasts mining activities or decrease
to continue until 2018, with in impairment, the extent
a further 17 months during of which it is not possible
which stockpiles will be processed to quantify.
and rehabilitation costs will
be incurred.
---------------- ------------------------------------- ------------------------------------
Production costs Production costs are forecast A change in production costs
based on detailed assumptions, of 10% would increase or decrease
including staff costs, consumption the pre-tax impairment attributable
of fuel and reagents, maintenance, by US$56.5 million(1) .
and administration and support
costs.
---------------- ------------------------------------- ------------------------------------
Gold price Analyst consensus prices were A change of 10% in the gold
used for the forecast of revenue price assumption would increase
from gold sales, based on or decrease the pre-tax impairment
an average consensus at July recognised in the year by
2013 for the period US$69.0 million(1) .
2013-2021. Prices range from
US$1,278 per ounce in 2013
to US$1,230 in 2015, and US$1,260
per ounce from 2016.
---------------- ------------------------------------- ------------------------------------
Discount rate A discount rate of 10% (pre-tax) A change in the discount rate
has been used in the VIU estimation. of one percentage point would
increase or decrease the pre-tax
impairment recognised in the
year by US$6.7 million(1)
.
---------------- ------------------------------------- ------------------------------------
Gold production The life of mine plan is based A 10% increase or decrease
on gold production of 0.96 in ounces produced, compared
million for the Inata Mine. with the life of mine gold
production, would increase
or decrease the pre-tax impairment
recognised in the year by
US$81.8 million(1) .
---------------- ------------------------------------- ------------------------------------
1 Sensitivities provided are on a 100% basis, pre-tax. 10% of
the post-tax impairment would be attributed to the non-controlling
interest.
10. Other financial assets
30 June 2013 30 June 2012 30 June 2013 30 June 2012
(3 months) (3 months) (6 months) (6 months)
Unaudited Unaudited Unaudited Unaudited
======================= ============= ============= ============= =============
US$000 US$000 US$000 US$000
At 1 January/1 April 393 1,908 599 1,828
Fair value adjustment (166) (684) (372) (604)
======================= ============= ============= ============= =============
At 30 June 227 1,224 227 1,224
======================= ============= ============= ============= =============
Other financial assets represent available for sale financial
assets which are measured at fair value. The fair value adjustment
is the periodic re-measurement to fair value, with gains or losses
on re-measurement recognised in equity.
Other financial assets relate to shares in Golden Peaks
Resources Limited. The shares were acquired as consideration for
the disposal of two of the Group's assets in South East Asia in
2011. In January 2012 Golden Peaks announced that it had changed
its name to Reliance Resources. Reliance Resources is listed on the
Toronto Stock Exchange.
11. Inventories
31 December
30 June 2013 2012
Unaudited Audited
US$000 US$000
Consumables 37,153 33,844
Work in progress 26,905 20,001
Finished goods 5,382 3,104
69,440 56,949
================== ============= ============
Work in progress includes ore in stockpiles and gold in circuit,
while finished goods represents gold in transit or undergoing
refinement, prior to sale.
12. Trade and other receivables
31 December
30 June 2013 2012
Unaudited Audited
US$000 US$000
Payments in advance to suppliers 6,631 9,524
VAT 18,606 14,766
Prepayments 2,377 834
27,614 25,124
================================== ============= ============
13. Cash and cash equivalents
Included in US$17.7 million cash and cash equivalents at 30 June
2013 is US$13.4 million of restricted cash (31 December 2012:
US$38.4 million), representing a minimum account balance held in
Macquarie Bank Limited of US$12.0 million, a condition of the Inata
project finance facility, and US$1.4 million (31 December 2012:
US$1.4 million) relating to amounts held on restricted deposit in
Burkina Faso for the purposes of environmental rehabilitation work,
as required by the terms of the Inata mining licence.
In relation to the minimum account balance held in Macquarie
Bank Limited of US$12.0 million, there are no restrictions on the
use of funds above the minimum amount by SMB. Restrictions apply to
the other companies in the Group regarding access to the surplus
funds above the US$12.0m, as set out per the press release on 25
March 2013.
14. Other financial liabilities
30 June 31 December
2013 2012
Unaudited Audited
US$000 US$000
Current liabilities
Warrant on company equity 131 -
Interest bearing debt 15,000 5,000
Finance lease liabilities 895 1,105
Forward contracts - held for 11,492 -
trading
Total current other financial
liabilities 27,518 6,105
=============================== =========== ============
30 June 31 December
2013 2012
Unaudited Audited
US$000 US$000
Non-current liabilities
Finance lease liabilities 2,113 2,434
Forward contracts - held for trading 24,326 -
Total non-current other financial liabilities 26,439 2,434
=============================================== =========== ============
Interest bearing debt
Interest bearing debt includes the remaining balance under the
Macquarie Inata project finance facility of US$5.0 million (31
December 2012: US$5.0 million) and the Elliott Lender loan of
US$10.0 million (31 December 2012: US$nil).
As announced on in the press release on 25 March 2013, the
remaining balance of US$5.0 million under the Macquarie Inata
project finance facility, previously due on 31 March 2013, was
re-negotiated as part of the hedge restructure and is now due by 30
September 2013.
The Elliott facility of is payable 30 December 2013. The
facility is US$15.0 million, as at 30 June 2013 US$10.0 million had
been drawn down.
Warrants over Company shares
During the quarter, 4 million warrants over shares in Avocet
Mining PLC were issued to the Elliott Lender as consideration for
the loan facility. The warrants have been treated as a financial
instrument rather than a share based payment on the basis that the
warrants were issued as part of the loan and not as a result of
services provided. Furthermore, the warrants have been considered
to be a liability rather than equity, on the basis that the
exercise price is quoted in GBP, and therefore the cash payment
from Elliott would not be fixed when accounted for by the Company,
whose functional currency is USD.
These warrants have a strike price of GBP 0.40 and expires three
years from issuance on 28 May 2013. The warrants have been valued
using a Black-Scholes model based on the 30 June 2013 closing share
price of GBP 0.0681.
Forward contracts
On 25 March 2013, Avocet announced a restructure of the
Macquarie forward contracts for delivery of gold bullion. The
partial settlement of the contract means that the remaining forward
contracts no longer qualifying for the 'own use exemption' and are
therefore now within the scope of IAS 39 financial instruments.
Under IAS 39 the forward contracts are classified as a financial
liability designated at fair value through profit or loss (FVTPL)
as they meet the requirements to be classified as
held-for-trading.
The fair value of the forward contracts were assessed to be
US$35.8 million based on a closing spot rate of US$1,192 per ounce,
analysed between current (US$11.5 million) and non-current (US$24.3
million) in accordance with the schedule delivery of forward sold
ounces.
30 June 2013 30 June 2012 30 June 2013 30 June 2012
(3 months) (3 months) (6 months) (6 months)
Unaudited Unaudited Unaudited Unaudited
======================= ============= ============= ============= =============
US$000 US$000 US$000 US$000
At 1 January/1 April 96,632 - - -
Recognition - - 96,632 -
Fair value adjustment (60,815) - (60,815) -
======================= ============= ============= ============= =============
At 30 June 35,817 - 35,817 -
======================= ============= ============= ============= =============
Finance lease liabilities
Also included within other financial liabilities are liabilities
in respect of assets held under finance lease, US$0.9 million of
which is included within current financial liabilities, and US$2.1
million is included within non-current financial liabilities.
15. Deferred tax
30 June 31 December
2013 2012
US$000 US$000
-------------------------- ------- -----------
Liabilities
At 1 January 37 14,566
Income statement movement (37) (14,529)
At 30 June/31 December - 37
-------------------------- ------- -----------
At 31 December 2012 the Group had deferred tax liabilities of
less than US$0.1 million (31 December 2011: US$14.6 million) in
relation to continuing operations. This liability relates to
temporary differences on the Inata mine development costs and
property, plant, and equipment. The reduction in the liability
during 2012 reflects the impairment of mining assets, net of
additions to mining property and plant during the year and of tax
allowances on capital items used in the period.
16. Related party transactions
The table below sets out charges in the three month period and
balances at 31 March 2013 between the Company (Avocet Mining PLC)
and Group companies that were not wholly owned, in respect of
management fees and interest on loans. There were no other related
party transactions in the period requiring disclosure.
Avocet Mining PLC Wega Mining AS
========================== ============================ =================================
Charged in Balance at Charged in six Balance at
six months 30 June 2013 months 30 June 2013
to 30 June to 30 June 2013
2013
========================== ============ ============== ================= ==============
US$000 US$000 US$000 US$000
Société des
Mines de Bélahouro
SA (90%) 380 139,165 2,468 111,204
========================== ============ ============== ================= ==============
Compensation paid to key management of the Group during the
first half of 2013 was US$2.0 million, including pension
contributions of US$0.06 million. A share based payment expense of
US$0.4 million was recognised in the six months till June 2013 in
respect of awards made under the Performance Share Plan, the
details of which were reported in the announcement made on 13 March
2012. No dividends were received by Directors during the period in
respect of shares held in the Company.
During 2013 the Company entered into a US$15.0 million loan
agreement with Manchester Securities Corp. ("the Elliott Lender"),
an affiliate of Avocet's largest shareholder, Elliott Management.
Under the UK listing rules, the Elliott Lender and Elliott
Management are related parties to the Company. US$5.0m was drawn
down in March 2013 under the initial facility in accordance with
the loan agreement. The terms of the initial facility, which is
unsecured are considered to be normal commercial terms. The
availability of the second facility under the agreement, which is
secured, was approved by the shareholders at a GM held on 28 May
2013. The amounts owing on the initial facility was subsequently
transferred to the second facility and a further US$5.0m was drawn
down on the facility. Attached to the second facility is a warrant
for 4 million ordinary shares of the Company, further details are
provided in note 14.
17. Contingent liabilities
Burkina Faso tax claim
As disclosed in note 13 of the Company's financial statements
for the year ended 31 December 2012, during 2012, Société des Mines
de Bélahouro SA ('SMB', the subsidiary in Burkina Faso which
operates the Inata mine) underwent a tax audit in respect of the
fiscal years 2009, 2010, and 2011. The initial assessment of this
tax audit, which was undertaken by the tax department of the
Burkina Faso government, was that a total of US$25.5 million was
due in taxes and penalties. Approximately US$16 million of the
claim relates to SMB's gold hedge, with the tax audit claiming that
SMB's taxable profits should be increased to reflect deemed revenue
on hedged sales calculated at spot prices instead of the lower
hedge price that was actually received. At the time of the year end
financial statements SMB and its tax advisers viewed this and the
treatment of other matters as an incorrect interpretation of the
Burkina Faso tax code and expected that with the exception of some
minor items which were settled without delay, the claim amount
would be rescinded on review and discussion with the Burkina Faso
Director General of Taxes.
Similar audits and outcomes were experienced by all other
foreign-owned gold mining companies in Burkina Faso.
Following a meeting with the Director General of Taxes in June
2013, the decision was communicated to SMB on 2 July 2013 that
US$22 million of taxes and penalties would be claimed from SMB,
including the US$16 million in respect of the hedge sales, and that
the Company's arguments had therefore been rejected.
SMB's strong objection to this verdict was communicated to the
government. SMB and its advisers continue to believe that the claim
represents incorrect application and interpretation of the Burkina
Faso tax code in respect of the hedge and other matters, and
therefore no amount has been provided in the financial statements.
However, as the meeting with the Burkina Faso Director General of
Taxes did not result in the claim being rescinded as previously
expected, the Company believes it is appropriate to disclose the
tax claim as a contingent liability in the Q2 financial
statements.
PT Lebong Tandai claim
Note 32 to the financial statements for the year ended 31
December 2012 contains a description of the Indonesian civil cases
being brought by PT Lebong Tandai against Avocet and other parties,
and the reader is therefore referred to the Company's Annual Report
for 2012 for further details. The Company is not aware of any
change in circumstances and as any financial settlement is
considered to be remote, this matter does not constitute a
contingent liability.
18. Unaudited quarterly income statement for continuing
operations
Quarter ended Year ended
Quarter Half year
31 March ended end 31 December
30 June 30 June
2013 2013 2013 2012
(Unaudited) (Unaudited) (Unaudited) (Audited)
=============================== ============== ============= ============= =============
US$000 US$000 US$000 US$000
Revenue 40,885 39,603 80,488 204,110
Cost of sales (36,749) (44,375) (81,124) (168,694)
Cash production costs:
- mining (16,495) (18,193) (34,688) (55,659)
- processing (10,970) (11,606) (22,576) (41,772)
- overheads (4,983) (5,861) (10,844) (21,762)
- royalties (3,171) (3,023) (6,194) (15,945)
=============================== ============== ============= ============= =============
(35,619) (38,683) (74,302) (135,138)
Changes in inventory 4,074 5,109 9,183 10,202
Expensed exploration
and other cost of sales (128) (2,701) (2,829) (15,762)
Depreciation and amortisation (5,076) (8,100) (13,176) (27,996)
Gross profit/(loss) 4,136 (4,772) (636) 35,416
=============================== ============== ============= ============= =============
Administrative expenses (2,135) (2,419) (4,554) (13,002)
Share based payments (329) (65) (394) (2,067)
Impairment of mining
and exploration assets (316) (73,300) (73,616) (135,300)
Reversal of impairment
of mining assets 72,200 - 72,200 -
Profit/(loss) from operations 73,556 (80,556) (7,000) (114,953)
=============================== ============== ============= ============= =============
Loss on recognition of
forward contracts (96,632) - (96,632) -
Restructure of forward
contracts (20,225) - (20,225) -
Change in fair value
of forward contract - 60,815 60,815 -
Net finance costs (1,491) (1,166) (2,657) (2,072)
(Loss)/profit before
taxation (44,792) (20,907) (65,699) (117,025)
=============================== ============== ============= ============= =============
Analysed as:
Profit before taxation
and exceptional items 181 (8,422) (8,241) 18,275
Exceptional items (44,973) (12,485) (57,458) (135,300)
=============================== ============== ============= ============= =============
Loss before taxation (44,792) (20,907) (65,699) (117,025)
Taxation 37 - 37 14,529
Loss for the period (44,755) (20,907) (65,662) (102,496)
=============================== ============== ============= ============= =============
Attributable to:
Equity shareholders of
the parent company (40,416) (18,885) (59,301) (92,685)
Non-controlling interest (4,339) (2,022) (6,361) (9,811)
=============================== ============== ============= ============= =============
(44,755) (20,907) (65,662) (102,496)
=============================== ============== ============= ============= =============
EBITDA (1) 6,748 844 7,592 48,343
=============================== ============== ============= ============= =============
(1) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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