TIDMGCM
RNS Number : 3789U
GCM Resources PLC
29 March 2019
29(th) March 2019
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Interim Results for the six months ended 31 December 2018
GCM Resources plc, an AIM quoted mining and energy company, is
pleased to report its interim results for the six months ended 31
December 2018. The Chairman's Statement and the full unaudited
interim report are presented below, and will shortly be available
at the Company's website www.gcmplc.com.
Chairman's Statement
I'm delighted to report to our shareholders on the Company's
performance for the six months ended 31 December 2018. It has been
a busy period for the Company and I am pleased with the progress
made. We have continued to pursue our strategy of developing a
holistic power solution, incorporating the Company's mine proposal
as a captive mine with its entire thermal coal production being fed
to mine-mouth power plants.
Using the latest highly energy efficient ultra-supercritical
thermal power plant technology, the proposed mine would be able to
support 6,000MW of thermal power production, which has the
potential to be the cheapest power for Bangladesh. Given the scale
of this Project, the power generation has been incorporated as
three separate power plant projects being developed in phases to
suit the mine's ramp up to its planned 15 million tonnes full
production.
The new contract with Dyani Corporation (Consultant), agreed in
October 2018, paved the way for rapid progress in developing
further relationships with Chinese State-owned enterprises during
the period. The Company aggressively pursued a relationship with
Power Construction Corporation of China Ltd (PowerChina) and a
technical pre-feasibility study (PFS) was completed by PowerChina
on 6 November 2018 which provided a high-level technical
examination on developing water-cooled ultra-supercritical thermal
power plants at the proposed mine site, generating 4,000MW.
Three weeks after the PFS was finalised, a memorandum of
understanding was agreed with PowerChina, which outlined the
framework of the relationship between the two parties as well as
assigning broad roles and responsibilities.
On 17 January of this year, both GCM and PowerChina agreed a
definitive Engineering, Procurement and Construction Contract (EPC
Contract) and a Joint Venture Agreement (First JV Agreement) for 2
x 1,000MW ultra-supercritical thermal power plants (Phase 1). A
second Joint Venture Agreement (Second JV Agreement) was signed on
15 March 2019 with PowerChina for the final 2 x 1,000MW
ultra-supercritical thermal power plants (Phase 2).
Under the terms of the First JV Agreement and Second JV
Agreement, the parties have agreed that subject to a valuation of
the power plants and investment appraisal, the Company will be
entitled to an 80% interest in the Power Plant, with PowerChina
receiving the remaining 20%.
The current status of the strategic relationships can be
summarised as follows:
Partner Agreements
Mine The Company is in advanced discussions
with a large international coal mining
company.
--------------------------------------------
First 2,000MW power CGGC Joint Development Framework
plant Agreement (announced 9 March
2018) and Contract Framework
Agreement (announced 21 March
2018).
----------- -------------------------------
Second 2,000MW power POWERCHINA First JV Agreement and EPC
plant Contract (both announced
17 January 2019).
----------- -------------------------------
Third 2,000MW power POWERCHINA Second JV Agreement entered
plant into on 15 March 2019. EPC
Contract to be confirmed
----------- -------------------------------
With the power plant agreements in place, CGGC 2000MW and
PowerChina 4,000MW, the proposed captive mine's full thermal coal
production will be marketed through appropriate coal off-take
agreements.
On behalf to the Company, I would like to express my gratitude
to the Consultant for assisting GCM in developing the strategic
relationships to date. It is important to recognise the strength of
the partners obtained, and the credibility that they bring to the
Company's proposals. In 2018, PowerChina ranked 182nd among the
Fortune Global 500, and is recognised as 6th among the world's 250
largest global contractors, according to Engineering News-Report.
In addition, under the respective Joint Venture Agreement with GCM,
PowerChina is seeking to include the Company's proposal in the Belt
and Road Initiative managed by the Government of the People's
Republic of China.
In conjunction with its strategic partners, the Company has been
working tirelessly to finalise a formal proposal to the Government
of Bangladesh for their consideration. I am pleased to see the
recently reported public comments by a number of ministers in
favour of domestic coal development.
Financials
GCM incurred a loss after tax of GBP1,844,000 for the six months
ended 31 December 2018 (31 December 2017: loss after tax of
GBP1,902,000). The most significant expenditure during the period
was pre-development expenditure while administrative expenses for
the six months ended 31 December 2018 were GBP335,000 (31 December
2017: GBP290,000) and capitalised Project expenditure for the
period was GBP275,000 (31 December 2017: GBP183,000).
During the period, GCM agreed an extension in the short-term
loan facility with Polo Resources Limited, the Company's second
largest shareholder. The short-term loan facility has been
increased by GBP1.2 million in exchange for permitting the
outstanding loan balance and accrued interest to be repaid by
issuing new ordinary shares in the Company at a conversion price of
11 pence per share. The loan facility continues to attract an
interest rate of 12% per annum and may be repaid in shares as
mentioned, or in cash, with Polo Resources Limited giving 90 days'
notice.
The Company has been in discussions with a number of parties
interested in providing equity financing to GCM. Over the next six
months the Company will seek new investment to strengthen GCM's
financial position and provide future funding. Until such time,
there remains a material uncertainty which may cast doubt as to the
Group's ability to continue as a going concern. The directors
remain confident that sufficient funding will be obtained as and
when required. As such the financial statements have been prepared
on a going concern basis. Please refer to the accounting policy
note on going concern (page 8) for further information.
Outlook
Over the coming months, the GCM team is looking forward to
progressing negotiations with a large international coal mining
company to partner with the Company in mine development, to work
with its partners to finalise the submission to the Government, and
then consult with the Government to finalise an agreeable
proposition which is amenable to all parties.
The Company's strategy is to deliver a breakthrough long-term
sustainable project for the Government and people of Bangladesh,
providing the lowest cost electricity in the country by combining
the Company's coal mine proposal with mine mouth power plants
generating 6,000MW and at the same time ensuring quantifiable
social, environmental and economic benefits.
I would like to thank our shareholders for their ongoing
confidence and support. I would also like to thank our staff for
their dedication and hard work.
Datuk Michael Tang PJN
Executive Chairman
Interim Consolidated Income Statement
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2018
2018 2017 audited
unaudited unaudited GBP000
GBP000 GBP000
Operating expenses
Pre-development
expenditure (1,427) (1,527) (4,515)
Exploration and
evaluation costs (14) (22) (44)
Administrative expenses (335) (290) (601)
------------------------------- ----------- ----------- -----------
Operating loss (1,776) (1,839) (5,160)
Finance costs (68) (63) (191)
------------------------------- ----------- ----------- -----------
Loss before tax (1,844) (1,902) (5,351)
Taxation - - -
Loss and total comprehensive
income for the period (1,844) (1,902) (5,351)
------------------------------- ----------- ----------- -----------
Earnings per share
Basic loss per share (pence) (1.9p) (2.3p) (6.1p)
Diluted loss per share (pence) (1.9p) (2.3p) (6.1p)
Interim Consolidated Statement of Changes in Equity
Share Share Share Accumulated Total
capital premium based losses
account payments
not settled
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 July 2017 7,815 46,165 618 (16,189) 38,409
Total comprehensive
loss - - - (5,351) (5,351)
Share issuances 1,996 4,319 - - 6,315
Share based payments - - 7 - 7
Balance at 30 June 2018 9,811 50,484 625 (21,540) 39,380
Total comprehensive
loss - - - (1,844) (1,844)
Share issuances 10 8 - - 18
Share based payments - - 4 - 4
Balance at 31 December
2018 (unaudited) 9,821 50,492 629 (23,384) 37,558
------------------------- --------- --------- ------------- ------------ --------
Balance at 1 July 2017 7,815 46,165 618 (16,189) 38,409
Total comprehensive
loss - - - (1,902) (1,902)
Share issuances 1,003 2,265 - - 3,268
Share based payments - - 4 - 4
Balance at 31 December
2017 (unaudited) 8,818 48,430 622 (18,091) 39,779
-------------------------- ------ ------- ---- --------- --------
Interim Consolidated Balance Sheet
31 December 31 December 30 June
2018 2017 2018
Notes unaudited unaudited audited
GBP000 GBP000 GBP000
Current assets
Cash and cash equivalents 168 1,507 446
Receivables 65 40 37
--------------------------- -------- ------------- ------------ ---------
Total current assets 233 1,547 483
Non-current assets
Property, plant
and equipment 20 24 23
Intangible assets 3 40,912 40,362 40,637
Receivables - - -
Total non-current
assets 40,932 40,386 40,660
Total assets 41,165 41,933 41,143
--------------------------- -------- ------------- ------------ ---------
Current liabilities
Payables 4 (1,960) (940) (484)
Borrowings 5 (1,647) (1,214) (1,279)
--------------------------- -------- ------------- ------------ ---------
Total current liabilities (3,607) (2,154) (1,763)
Total liabilities (3,607) (2,154) (1,763)
--------------------------- -------- ------------- ------------ ---------
Net assets 37,558 39,779 39,380
--------------------------- -------- ------------- ------------ ---------
Equity
Share capital 6 9,821 8,818 9,811
Share premium account 6 50,492 48,430 50,484
Other reserves 629 622 625
Accumulated losses (23,384) (18,091) (21,540)
----------------------- --------- --------- ---------
Total equity 37,558 39,779 39,380
----------------------- --------- --------- ---------
Datuk Michael Tang PJN
Chairman
Interim Consolidated Statement of Cash Flows
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2018
2018 2017 audited
unaudited unaudited GBP000
GBP000 GBP000
----------------------------------------- -----------
Cash flows used in operating
activities
Loss before tax (1,844) (1,902) (5,351)
Adjusted for:
Non-cash pre-development expenditure 1,427 1,527 4,515
Non-cash finance costs 68 63 191
Other non-cash expenses - - -
----------------------------------------- ----------- ----------- -----------
(349) (312) (645)
Movements in working
capital:
(Increase)/decrease in operating
receivables (30) 4 10
Increase/(decrease) in operating
payables 51 (106) (515)
------------------------------------------ ----------- ----------- -----------
Cash used in operations (328) (414) (1,150)
Net cash used in operating activities (328) (414) (1,150)
Cash flows from investing activities
Payments for intangible
assets (268) (209) (470)
Payments for property, plant
and equipment - - (1)
------------------------------------------ ----------- ----------- -----------
Net cash generated from investing
activities (268) (209) (471)
Cash flows from financing activities
Issue of ordinary
share capital 18 2,000 2,000
Share issue costs - (200) (200)
Proceeds from borrowing 300 150 150
Interest paid - - (63)
Net cash from financing activities 318 1,950 1,887
Total (decrease)/increase in
cash and cash equivalents (278) 1,327 266
Cash and cash equivalents at
the start of the period 446 180 180
------------------------------------------ ----------- ----------- -----------
Cash and cash equivalents at
the end of the period 168 1,507 446
------------------------------------------ ----------- ----------- -----------
Notes to the Interim Condensed Consolidated Financial
Statements
1. Accounting policies
GCM Resources plc (GCM) is domiciled in England and Wales, was
incorporated as a Public Limited Company on 26 September 2003 and
admitted to the London Stock Exchange Alternative Investment Market
(AIM) on 19 April 2004.
This unaudited interim report was authorised for issue by the
Directors on 29 March 2019, and the Interim Consolidated Balance
Sheet was signed on the Board's behalf by Datuk Michael Tang
PJN.
Basis of preparation
The annual consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union as they apply to the
financial statements of the Group for the year ended 30 June 2018
and applied in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the
six months ended 31 December 2018 have been prepared using the same
policies and methods of computation as applied in the financial
statements for the year ended 30 June 2018. The financial
information contained herein does not constitute statutory accounts
within the meaning of Section 435 of the Companies Act 2006 and is
unaudited. The figures for the year ended 30 June 2018 have been
extracted from the statutory accounts for that year. Those accounts
have been delivered to the Registrar of Companies and contained an
unqualified auditors' report which included an emphasis of matter
concerning significant doubt over the ability for the Group to
continue as a going concern and did not include a statement under
section 498(2)(a) or (b), or section 498(3) of the Companies Act
2006.
Political and economic risks - carrying value of intangible
asset
The principal asset is in Bangladesh and accordingly subject to
the political, judicial, fiscal, social and economic risks
associated with operating in that country.
The Group's principal project relates to thermal coal and
semi-soft coking coal, the markets for which are subject to
international and regional supply and demand factors, and
consequently future performance will be subject to variations in
the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the
Government of Bangladesh which gives it the right to explore,
develop and mine in respect of the licence areas. The Group holds a
mining lease and exploration licences in the Phulbari area covering
the prospective mine site. The mining lease has a 30-year term from
2004 and may be renewed for further periods of 10 years each, at
GCM's option.
In accordance with the terms of the Contract, GCM submitted a
combined Feasibility Study and Scheme of Development report on 2
October 2005 to the Government of Bangladesh. Approval of the
Scheme of Development from the Government of Bangladesh is
necessary to proceed with development of the mine. GCM continues to
await approval.
The Group has received no notification from the Government of
Bangladesh (Government) of any changes to the terms of the
Contract. GCM has received legal opinion that the Contract is
enforceable under Bangladesh and International law, and will
consequently continue to endeavour to receive approval for
development.
Accordingly, the Directors are confident that the Phulbari Coal
and Power Project (Project) will ultimately receive approval,
although the timing of approval remains in the hands of the
Government. To enhance the prospects of the Project, GCM has
engaged in a strategy to align the Project with the needs and
objectives of the Government. The Government seeks to rapidly
expand the country's power generation, including the increase in
coal fired power generation from the current 250MW to approximately
20,000MW. The Group's strategy is to combine the planned coal mine
with 6,000MW power plants in conjunction with large Chinese
State-owned engineering enterprises.
Until approval of the Scheme of Development from the Government
of Bangladesh is received there is continued uncertainty over the
recoverability of the intangible mining assets. The Directors
consider that it is appropriate to continue to record the
intangible mining assets at cost, however if for whatever reason
the Scheme of Development is not ultimately approved the Group
would impair all of its intangible mining assets, totalling
GBP40,912,000 as at 31 December 2018.
Going concern
As at 31 December 2018 the Group's financial resources were
GBP168,000 as well as GBP900,000 unutilised short-term loan
facility, whilst current cash liabilities were GBP2,120,000
(non-cash current liabilities of GBP1,487,000). The unutilised
portion of the loan facility is to be drawn down in three quarterly
instalments.
In order to support its operating expenses for a period of at
least 12 months and discharge its current liabilities as and when
they fall due, the Company will need to obtain further financial
resources through debt or equity financing. The Company has been in
discussions with a number of parties interested in providing equity
investment. The Directors are confident that the necessary
financial resources will be raised as and when required. The
financial statements continue to be prepared on a going concern
basis. However, until such time that sufficient funds are raised,
there remains a material uncertainty which may cast doubt as to the
Group's ability to continue as a going concern.
Upon achieving approval of the Phulbari Coal and Power Project,
significant additional financial resources will be required to
proceed to development.
2. Segment analysis
The Group operates in one segment being the exploration and
evaluation of energy related projects. The only significant project
within this segment is the Phulbari Coal and Power Project in
Bangladesh.
3. Intangibles
During the period intangibles increased by GBP275,000 (December
2017: increase of GBP183,000). The increase is due to capitalised
mining exploration and evaluation expenditure relating to the
Phulbari Coal and Power Project in Bangladesh.
4. Payables
31 December 31 December 30 June
2018 2017 2018
unaudited unaudited audited
GBP000 GBP000 GBP000
-----------------------
Trade payables 1,711 319 309
Related party accrued
payable 99 471 25
Transaction costs
payable 150 150 150
1,960 940 484
----------------------- ------------- ------------ ---------
The trade payables of GBP1,711,00 at 31 December 2018 includes
GBP1,487,000 non-cash costs relating to power plant pre-development
expenditure, which will be settled by the issuance of new ordinary
shares in the Company.
The related party accrued payable of GBP99,000 at 31 December
2018 relates to accrued fees owing to the management services
company of the Executive Chairman of the Company, Datuk Michael
Tang PJN.
5. Borrowings
31 December 31 December 30 June
2018 2017 2018
unaudited unaudited audited
GBP000 GBP000 GBP000
Short-term loan facility from
related party 1,647 1,214 1,279
1,647 1,214 1,279
------------------------------- ------------- ------------ ---------
GCM is party to a GBP2,300,000 short-term loan facility with its
second largest shareholder, Polo Resources Limited. As at 31
December 2018 the Company owed GBP1,647,000, comprising
GBP1,400,000 loan balance and accrued finance costs on borrowings
of GBP247,000. The principle terms of the short-term loan are 12%
per annum interest rate on the loan balance and repayment within 90
days upon request. Alternatively, the lender may request repayment
by the issuance of new ordinary shares in the Company at 11 pence
per share. The Company may elect to repay at any time giving 60
days' notice.
6. Share issues
On 6 December 2018 100,000 shares were awarded to Mr Nik Raof
Daud (17.9 pence per share), in appreciation of his services as
non-executive director.
7. Post-balance sheet events
Consultancy success fees
The Company and its strategic partner Power Construction
Corporation of China Ltd (PowerChina) signed a definitive
Engineering, Procurement and Construction Contract and a Joint
Venture Agreement for 2 x 1,000MW ultra-supercritical thermal power
plants (PowerChina Agreements).
In accordance with the terms of a consulting agreement, a
success fee equal to 6% of the issued capital of the Company is due
to the consultant for the achievement of the PowerChina Agreements.
The fee is payable by the issuance of shares within five business
days of the Agreements being executed. In accordance with the with
International Accounting Standard IAS 10 Events After the Reporting
Period the financial statements contained in this December 2018
Interim Report have not been adjusted to reflect this.
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
For further information:
GCM Resources plc Strand Hanson Limited
James Hobson Nominated Adviser and Broker
Finance Director Stuart Faulkner
+44 (0) 20 7290 1630 Rory Murphy
James Dance
+44 (0) 20 7409 3494
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com
About GCM Resources
GCM Resources plc (LON:GCM), the AIM listed mining and energy
company, has identified a high quality coal resource of 572 million
tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project
(the Project) in north-west Bangladesh.
Utilising the latest highly energy efficient power generating
technology the Phulbari coal mine is capable of supporting power
plants of up to 6,000MW. GCM is awaiting approval from the
Government of Bangladesh to develop the Project. The Company has a
strategy of combining the Company's mine proposal with up to
6,000MW of power generation, together with credible,
internationally recognised strategic partners. GCM aims to deliver
a practical power solution to provide the cheapest electricity in
the country, in a manner amenable to the Government of
Bangladesh.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR CKFDPPBKDANB
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