Last checked at 7 Aug 2012 07:00
HALF YEARLY REPORT
7 August 2012
EMED Mining Public Limited (AIM: EMED, TSX: EMD) ("EMED Mining" or "the Company"), the Europe-based minerals development and exploration company, announces its unaudited financial results for the three months ended 30 June 2012 and its unaudited interim results for the half-year ended 30 June 2012.
The full Half Yearly Report (as required by Toronto Stock Exchange reporting standards), including consolidated Financial Statements and the Management Discussion and Analysis relating to the Company, which appear below, are also available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.emed-mining.com.
Highlights
Rio Tinto Copper Mine in Spain - preparations targeting project restart trigger at the end of 2012
·; Funding plans for US$190 million agreed with product customers Goldman Sachs and Yanggu Xianguang Copper
·; Construction management teams mobilised to site and completing execution budgets and schedules
·; Agreements reached with owners of all adjoining lands required for the future mine needs
·; Permitting progress consistent with timetable:
o public commentary completed of environmental plans ("AAU") to be addressed this quarter;
o federal agency review of project plans well advanced and report expected in September 2012
Detva Gold Project - Slovakia
·; Option agreement with neighbouring industrial factory to acquire their property and move their operations
Corporate
Shareholders include Chinese smelter group XGC and Andalucian investment companies Rumbo 5.0 and Inland Trading.
Harry Anagnostaras Adams, Managing Director of EMED Mining, commented:
"Progress has significantly de-risked the Rio Tinto Copper Mine and our target to start production at the end of 2013. This has reinforced our focus on triggering the restart this year - duly permitted, engineered and financed. Our recent agreements with major local landholders add to our excellent support in local communities. We look forward to modernising the environmental and production operations for the long term. We equally look forward to launching an aggressive exploration program aiming to expand mineral resources and ore reserves on the first mine, the Cerro Colorado Open Pit, as well as to validate historical data on other deposits with a view to estimating mineral resources in compliance with today's reporting standards."
Enquiries
EMED Mining Harry Anagnostaras- Adams +357 9945 7843
RFC Ambrian Stuart Laing +61 8 9480 2500
Fox-Davies Capital Simon Leathers +44 203 463 5022
Fairfax I.S. PLC Ewan Leggat/Katy Birkin +44 207 598 5368
Bishopsgate Communications Nick Rome +44 207 562 3350
Proconsul Capital Andreas Curkovic +1 416 577 9927
EMED MINING PUBLIC LIMITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(uNAUDITED)
|
Notes | Three months ended 30 June 2012 € 000's | Three months ended 30 June 2011 € 000's | Six months ended 30 June 2012 € 000's | Six months ended 30 June 2011 € 000's |
| |||||||
Exploration expenses | (255) | (368) | (501) | (694) |
| ||||||||
Care and maintenance expenses | (1,322) | (1,144) | (2,630) | (2,257) |
| ||||||||
Gross loss | (1,577) | (1,512) | (3,131) | (2,951) |
| ||||||||
Administration expenses | (1,156) | (905) | (2,712) | (1,826) |
| ||||||||
Other income | 65 | - | 65 | - |
| ||||||||
Share of results of associates | (70) | (60) | (136) | (131) |
| ||||||||
| |||||||||||||
Net foreign exchange gain/(loss) | 143 | 94 | 44 | (13) |
| ||||||||
Finance income | 5 | 85 | 17 | 96 |
| ||||||||
Finance costs | (129) | (346) | (263) | (697) |
| ||||||||
Loss before tax | (2,719) | (2,644) | (6,116) | (5,522) |
| ||||||||
Tax credit | 584 | 405 | 1,027 | 805 |
| ||||||||
Net loss for the period | (2,135) | (2,239) | (5,089) | (4,717) |
| ||||||||
| |||||||||||||
Loss attributable to: |
| ||||||||||||
Equity holders of the parent | (2,134) | (2,239) | (5,088) | (4,717) |
| ||||||||
Non-controlling interest | (1) | - | (1) | - |
| ||||||||
Net loss for the period | (2,135) | (2,239) | (5,089) | (4,717) |
| ||||||||
| |||||||||||||
Other comprehensive (loss)/income: |
| ||||||||||||
Exchange differences on translating foreign operations |
(63) |
56 |
(28) |
97 |
| ||||||||
Total comprehensive loss for the period |
(2,198) |
(2,183) |
(5,117) |
(4,620) |
| ||||||||
| |||||||||||||
Earnings per share information |
| ||||||||||||
Loss per share (cents) | 4 | (0.21) | (0.31) | (0.55) | (0.67) |
| |||||||
EMED MINING PUBLIC LIMITED
CONDENSED interim CONSOLIDATED STATEMENTs OF FINANCIAL POSITION
(UNaudited)
|
Notes | 30 June 2012 € 000's | 31 Dec 2011 € 000's | ||
ASSETS | |||||
NON-CURRENT ASSETS | |||||
Property, plant and equipment | 5 | 29,555 | 28,363 | ||
Intangible assets | 6 | 9,954 | 8,424 | ||
Deferred tax | 6,839 | 5,812 | |||
Investment in associates | - | 16 | |||
TOTAL NON-CURRENT ASSETS | 46,348 | 42,615 | |||
CURRENT ASSETS | |||||
Available-for-sale financial assets | - | 38 | |||
Trade and other receivables | 7 | 1,411 | 1,358 | ||
Deferred financing expenses | - | - | |||
Cash at bank and in hand | 9,564 | 7,819 | |||
TOTAL CURRENT ASSETS | 10,975 | 9,215 | |||
TOTAL ASSETS | 57,323 | 51,830 | |||
EQUITY AND LIABILITIES | |||||
CAPITAL AND RESERVES | |||||
Share capital | 8 | 2,952 | 2,603 | ||
Share premium | 8 | 101,384 | 89,758 | ||
Share options reserve | 9 | 5,371 | 5,269 | ||
Translation reserve | (175) | (147) | |||
Accumulated losses | (66,536) | (61,448) | |||
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 42,996 | 36,035 | |||
Non-controlling interest | (107) | (106) | |||
TOTAL EQUITY | 42,889 | 35,929 | |||
NON-CURRENT LIABILITIES | |||||
Trade and other payables | 10 | 9,420 | 11,051 | ||
Provision for liabilities and charges | 7 | 7 | |||
TOTAL NON-CURRENT LIABILITIES | 9,427 | 11,058 | |||
CURRENT LIABILITIES | |||||
Trade and other payables | 10 | 5,007 | 4,843 | ||
TOTAL CURRENT LIABILITIES | 5,007 | 4,843 | |||
TOTAL LIABILITIES | 14,434 | 15,901 | |||
TOTAL EQUITY AND LIABILITIES | 57,323 | 51,830 | |||
EMED MINING PUBLIC LIMITED
CONDENSED interim CONSOLIDATED STATEMENTs OF CHANGES IN EQUITY
(UNAUDITED)
Share capital |
Share premium | Share options reserve | Translation reserve | Accumulated losses |
Total | Non -controlling interest | Total | ||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||
| |||||||||
| Balance at 1 Jan 2011 |
2,059 |
79,492 |
5,015 |
(113) |
(51,786) |
34,667 |
(101) |
34,566 |
Total comprehensive loss for the period |
- |
- |
- |
97 |
(4,717) |
(4,620) |
- |
(4,620) | |
Issue of share capital | 100 | 3,460 | - | - | - | 3,560 | - | 3,560 | |
Share issue costs | - | (210) | - | - | - | (210) | - | (210) | |
Recognition of share based payments |
- |
- |
206 |
- |
- |
206 |
- |
206 | |
Balance at 30 June 2011 | 2,159 | 82,742 | 5,221 | (16) | (56,503) | 33,603 | (101) | 33,502 | |
Total comprehensive loss for the period |
- |
- |
- |
(131) |
(4,945) |
(5,076) |
(5) |
(5,081) | |
Issue of share capital | 444 | 7,016 | - | - | - | 7,460 | - | 7,460 | |
Share issue costs | - | - | - | - | - | - | - | - | |
Recognition of share based payments |
- |
- |
48 |
- |
- |
48 |
- |
48 | |
Balance at 31 Dec 2011 | 2,603 | 89,758 | 5,269 | (147) | (61,448) | 36,035 | (106) | 35,929 | |
Total comprehensive loss for the period |
- |
- |
- |
(28) |
(5,088) |
(5,116) |
(1) |
(5,117) | |
Issue of share capital | 349 | 12,114 | - | - | - | 12,463 | - | 12,463 | |
Share issue costs | - | (488) | - | - | - | (488) | - | (488) | |
Recognition of share based payments |
- |
- |
102 |
- |
- |
102 |
- |
102 | |
Balance at 30 June 2012 | 2,952 | 101,384 | 5,371 | (175) | (66,536) | 42,996 | (107) | 42,889 | |
EMED MINING PUBLIC LIMITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES |
| Three months ended 30 June 2012 | Three months ended 30 June 2011 | Six months ended 30 June 2012 | Six months ended 30 June 2011 |
Year ended 31 Dec 2011 | ||||
Notes | € 000's | € 000's | € 000's | € 000's | € 000's | |||||
Loss before tax | (2,719) | (2,644) | (6,116) | (5,522) | (11,400) | |||||
Adjustments for: | ||||||||||
Depreciation of property, plant and equipment | 5 | 29 | 55 | 58 | 79 | 110 | ||||
Share-based payments | 34 | 1 | 102 | 93 | 254 | |||||
Share of loss from associates | 70 | 60 | 136 | 131 | 266 | |||||
Dividends received | (1) | - | (5) | - | (11) | |||||
Interest income | (4) | (79) | (12) | (90) | (213) | |||||
Interest expense | 129 | 388 | 263 | 668 | 1,120 | |||||
Deferred financing expense | - | 71 | - | 142 | 284 | |||||
Foreign exchange loss on financing activities | 79 | 201 | 10 | 36 | 85 | |||||
Foreign exchange (gain)/loss on operating activities |
(143) |
74 |
(44) |
13 |
363 | |||||
Loss before working capital changes |
(2,526) |
(1,873) |
(5,608) |
(4,450) |
(9,142) | |||||
Changes in working capital: | ||||||||||
Trade and other receivables | (171) | 562 | (52) | 85 | (291) | |||||
Trade and other payables | (435) | (525) | (1,460) | (964) | (1,486) | |||||
Cash used in operations | (3,132) | (1,836) | (7,120) | (5,329) | (10,919) | |||||
Interest paid | (129) | (517) | (263) | (668) | (1,120) | |||||
Tax paid | (1) | - | (2) | - | (22) | |||||
Net cash used in operating activities | (3,262) | (2,353) | (7,385) | (5,997) | (12,061) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES |
| |||||||||
Purchase of property, plant and Equipment | 5 |
(1,005) |
(365) |
(1,250) |
(733) |
(2,436) | ||||
Purchase of intangible assets | 6 | (886) | (393) | (1,530) | (771) | (2,663) | ||||
Increase of the investment in the Associate |
- |
- |
(120) |
- |
- | |||||
Sale of available-for-sale investment | - | - | 38 | - | - | |||||
Dividends received | 1 | - | 5 | - | 11 | |||||
Interest received | 4 | 79 | 12 | 90 | 213 | |||||
Net cash used in investing activities | (1,886) | (679) | (2,845) | (1,414) | (4,875) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from issue of share capital | 8 | 684 | 811 | 12,463 | 3,560 | 3,432 | ||||
Listing and issue costs | 8 | (2) | (114) | (488) | (210) | (210) | ||||
Deferred financing expense | - | (142) | - | (142) | - | |||||
Net cash from financing activities | 682 | 555 | 11,975 | 3,208 | 3,222 | |||||
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS |
(4,446) |
(2,477) |
1,745 |
(4,203) |
(13,714) | |||||
Cash and cash equivalents: | ||||||||||
At beginning of the period / year | 14,030 | 19,807 | 7,819 | 21,533 | 21,533 | |||||
At end of the period / year | 9,564 | 17,330 | 9,564 | 17,330 | 7,819 |
1 General information
Country of incorporation
EMED Mining Public Limited (the "Company") was incorporated in Cyprus on 17 September 2004 as a private limited liability company in accordance with the provisions of the Cyprus Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1, Lampousas Street, Nicosia, Cyprus. The Company was listed on AIM of the London Stock Exchange in May 2005 and TSX on 20 December 2010.
Principal activities
The principal activity of the Company and its subsidiaries (the "Group") is to explore for and develop natural resources, with a focus on base and precious metals in certain belts of mineralisation spanning Europe, the Middle East and Central Asia.
2 Basis of preparation and accounting policies
Basis of preparation
The condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) including International Accounting Standard 34 "Interim Financial Reporting" and using the historical cost convention.
These condensed interim consolidated financial statements ('the statements") are unaudited and include the financial statements of the Company and its subsidiary undertakings. They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Company and the Group for the year ended 31 December 2011. These condensed interim consolidated financial statements do not include all of the disclosures required for annual financial statements, and accordingly, should be read in conjunction with the consolidated financial statements and other information set out in the Company's 31 December 2011 Annual Report. The accounting policies are unchanged from those disclosed in the annual consolidated financial statements.
Going concern
The Directors have formed a judgment at the time of approving the condensed interim consolidated financial statements that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The financial statements have been prepared on a going concern basis, the validity of which depends principally on the discovery of economically viable mineral deposits, obtaining the necessary mining licences and the availability of subsequent funding to extract the resource or alternatively the availability of funding to extend the Company's exploration activities. The financial statements do not include any adjustment that would arise from a failure to complete any of the above. Changes in future conditions could require write downs of the carrying values of property, plant and equipment, intangible assets and/or deferred tax.
Use and revision of accounting estimates
The preparation of the condensed interim consolidated financial statements requires the making of estimations and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Adoption of new and revised International Financial Reporting Standards (IFRSs)
The Group has adopted all the new and revised IFRSs and International Accounting Standards (IAS) which are relevant to its operations and are effective for accounting periods commencing on 1 January 2012. The adoption of these Standards did not have a material effect on the condensed interim consolidated financial statements.
At the date of authorisation of these condensed interim consolidated financial statements some Standards were in issue but not yet effective. The Board of Directors expects that the adoption of these Standards in future periods will not have a material effect on the consolidated financial statements of the Group.
Critical accounting estimates and judgements
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are unchanged from those disclosed in the annual consolidated financial statements.
3 Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of mineral exploration.
Geographical segments
The Group's exploration activities are located in Cyprus, Slovakia and Spain and its administration and management is based in Cyprus.
Three months ended 30 June 2012
Cyprus | Georgia | Slovakia | Europe | Spain | Total | ||
€'000 | €'000 | €'000 | €'000 | €'000 |
| €'000 | |
Operating loss | (745) | (3) | (244) | (13) | (1,663) | (2,668) | |
Financial income | 7 | - | (3) | - | 1 | 5 | |
Foreign exchange gain | 79 | 64 | - | - | - | 143 | |
Financial costs | - | - | - | - | (129) | (129) | |
Operating (loss)/profit for the period | (659) | 61 | (247) | (13) | (1,791) | (2,649) | |
Share of results from associates | (70) | ||||||
Loss before tax | (2,719) | ||||||
Tax credit | 584 | ||||||
Net loss for the period | (2,135) | ||||||
Six months ended 30 June 2012
Cyprus | Georgia | Slovakia | Europe | Spain | Total | ||
€'000 | €'000 | €'000 | €'000 | €'000 |
| €'000 | |
Operating loss | (1,951) | (3) | (494) | (18) | (3,312) | (5,778) | |
Financial income | 12 | - | - | - | 5 | 17 | |
Foreign exchange gain | 16 | 28 | - | - | - | 44 | |
Financial costs | - | - | - | - | (263) | (263) | |
Operating (loss)/profit for the period | (1,923) | 25 | (494) | (18) | (3,570) | (5,980) | |
Share of results from associates | (136) | ||||||
Loss before tax | (6,116) | ||||||
Tax credit | 1,027 | ||||||
Net loss for the period | (5,089) | ||||||
Total assets | 8,555 | 1 | 463 | 51 | 48,253 | 57,323 | |
Total liabilities | 503 | 2 | 8 | 27 | 13,894 | 14,434 | |
Depreciation of fixed assets | 25 | - | 14 | - | 19 | 58 |
Three months ended 30 June 2011
| ||||||||||||||||
Cyprus | Georgia | Slovakia | Europe | Spain | Total |
| ||||||||||
€'000 | €'000 | €'000 | €'000 | €' 000 | €'000 |
| ||||||||||
| ||||||||||||||||
Operating loss | (648) | - | (379) | (174) | (1,216) | (2,417) |
| |||||||||
Financial income | 79 | - | - | - | 6 | 85 |
| |||||||||
Foreign exchange gain/(loss) | 117 | (23) | - | - | - | 94 |
| |||||||||
Financial costs | (196) | - | - | - | (150) | (346) |
| |||||||||
Operating loss for the period | (648) | (23) | (379) | (174) | (1,360) | (2,584) |
| |||||||||
Share of results from associates | (60) |
| ||||||||||||||
Loss before tax | (2,644) |
| ||||||||||||||
Tax credit | 405 |
| ||||||||||||||
Net loss for the period | (2,239) |
| ||||||||||||||
Six months ended 30 June 2011
|
| |||||||||||||||
Cyprus | Georgia | Slovakia | Europe | Spain | Total |
| ||||||||||
€'000 | €'000 | €'000 | €'000 | €' 000 | €'000 |
| ||||||||||
| ||||||||||||||||
Operating loss | (1,340) | - | (543) | (174) | (2,720) | (4,777) |
| |||||||||
Financial income | 90 | - | - | - | 6 | 96 |
| |||||||||
Foreign exchange gain/(loss) | 84 | (97) | - | - | - | (13) |
| |||||||||
Financial costs | (396) | - | - | - | (301) | (697) |
| |||||||||
Operating loss for the period | (1,562) | (97) | (543) | (174) | (3,015) | (5,391) |
| |||||||||
Share of results from associates | (131) |
| ||||||||||||||
Loss before tax | (5,522) |
| ||||||||||||||
Tax credit | 805 |
| ||||||||||||||
(4,717) |
| |||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
Total assets | 17,438 | 1 | 189 | 51 | 39,029 | 56,708 |
| |||||||||
| ||||||||||||||||
Total liabilities | 7,553 | - | 22 | 7 | 15,624 | 23,206 |
| |||||||||
| ||||||||||||||||
Depreciation of fixed assets | 25 | - | 26 | - | 28 | 79 |
| |||||||||
4 Loss per share
The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders of the parent is based on the following data:
Three months ended 30 June 2012 | Three months ended 30 June 2011 | Six months ended 30 June 2012 | Six months ended 30 June 2011 | ||||
€ 000's | € 000's | € 000's | € 000's | ||||
Net loss attributable to equity shareholders | (2,134) | (2,239) | (5,088) | (4,712) | |||
Weighted average number of ordinary shares for the purposes of basic earnings per share ('000s) |
1,016,190 |
722,258 |
919,624 |
700,370 | |||
Basic and fully diluted loss per share (cents) | 0.21 | 0.31 | 0.55 | 0.67 |
The diluted loss per share is the same as the basic loss per share as the exercise of the share options would decrease the basic loss per share, thus being anti-dilutive.
5 Property, plant and equipment
Land and buildings | Plant and machinery | Motor vehicles | Furniture, fixtures and equipment |
Total | ||
€ 000's | € 000's | € 000's | € 000's | € 000's | ||
Cost | ||||||
At 1 January 2011 | 18,243 | 7,759 | 163 | 149 | 26,314 | |
Additions | 68 | 2,183 | 69 | 116 | 2,436 | |
At 31 December 2011 | 18,311 | 9,942 | 232 | 265 | 28,750 | |
Additions | 340 | 839 | - | 71 | 1,250 | |
At 30 June 2012 | 18,651 | 10,781 | 232 | 336 | 30,000 | |
Depreciation | ||||||
At 1 January 2011 | - | 101 | 101 | 75 | 277 | |
Charge for the period | - | 31 | 53 | 26 | 110 | |
At 31 December 2011 | - | 132 | 154 | 101 | 387 | |
Charge for the period | - | 16 | 20 | 22 | 58 | |
At 30 June 2012 | - | 148 | 174 | 123 | 445 | |
Net book value | ||||||
At 30 June 2012 | 18,651 | 10,633 | 58 | 213 | 29,555 | |
At 31 December 2011 | 18,311 | 9,810 | 78 | 164 | 28,363 |
The above fixed assets are located in Cyprus, Spain and Slovakia.
6 Intangible assets
| ||||||||||
Permits of Rio Tinto Mine | Acquisition of mineral rights |
Goodwill |
Total |
| ||||||
€'000 | €'000 | €'000 | €'000 |
| ||||||
Cost |
| |||||||||
At 1 January 2011 | 5,761 | 310 | 10,023 | 16,094 |
| |||||
Additions | 2,663 | - | - | 2,663 |
| |||||
At 31 December 2011 | 8,424 | 310 | 10,023 | 18,757 |
| |||||
Additions | 1,530 | - | - | 1,530 |
| |||||
At 30 June 2012 | 9,954 | 310 | 10,023 | 20,287 |
| |||||
| ||||||||||
Provision for impairment |
| |||||||||
On 1 January 2011 | - | 310 | 10,023 | 10,333 |
| |||||
Provision for the year | - | - | - | - |
| |||||
At 31 December 2011 | - | 310 | 10,023 | 10,333 |
| |||||
Provision for the period | - | - | - | - |
| |||||
At 30 June 2012 | - | 310 | 10,023 | 10,333 |
| |||||
Closing net book amount |
| |||||||||
At 30 June 2012 | 9,954 | - | - | 9,954 |
| |||||
At 31 December 2011 |
8,424 |
- |
- |
8,424 |
| |||||
Proyecto Rio Tinto ("Rio Tinto Copper Mine")
In September 2008, the Group moved to 100% ownership of EMED Tartessus (and thus full ownership of the Rio Tinto Copper Mine) by acquiring the remaining 49% of the issued capital of EMED Tartessus. The cost of the acquisition was the issuance of 39,140,000 Ordinary Shares to Astor Management AG (formerly MRI Group) at a deemed issue price of 21p per Ordinary Share and a deferred cash settlement of €52,999,999 (including certain loans owed to members of the Astor Group which were incurred in relation to the operation of the Rio Tinto Copper Mine amounting to €9,116,617) to be paid by the Group over six or seven years. This consideration is payable once the authorisation from the Junta de Andalucía to restart mining activities in the Rio Tinto Copper Mine has been granted and project finance and shareholder approval has been obtained.
In consideration for agreeing to pay the deferred cash settlement over 6 years among other things, the Company agreed to potentially pay further deferred consideration of up to €15,900,000 in regular instalments over the deferred consideration payment period depending upon the price of copper. Any such additional payment will only be made if, during the relevant period, the average price of copper per tonne is $6,613.86 or more ($3.00/lb).
The funds required to make these payments, should EMED proceed with the restart of the Rio Tinto Project, would be sourced from senior project debt and from project cash flow.
Carrying Value of Intangible Assets
The ultimate recoverability of balances carried forward in relation to areas of interest or all such assets including intangibles is dependent on successful development, and commercial exploitation or, alternatively sale of the respective areas. The Company conducts impairment testing on an annual basis unless indicators of impairment are present at the reporting date.
In considering the carrying value of the assets at the Rio Tinto Copper Project, including the intangible assets and any impairment thereof, the Company assessed the carrying values having regard to (a) the current recovery value (less costs to sell) and (b) the net present value of potential cash flows from operations. In both cases, the estimated net realisable values exceeded current carrying values and thus no impairment has been recognised.
Regua Tungsten Deposit in Portugal
In September 2010, Iberian Resources Portugal Minerais Unipessoal LDA granted the Company an option to acquire a 100% interest in all of the assets held by it in respect of the Regua Tungsten Deposit in Portugal. As consideration for the grant of the option, the Company issued 2,500,000 Ordinary Shares at a deemed issue price of £0.105.
On 4 January 2012 the Company announced that it allowed to lapse on 31 December 2011 its option over the exploration permit covering the Regua Tungsten Deposit. This decision reflects the results of the evaluation conducted during the period since September 2010. All expenditure on the Regua Tungsten Deposit was impaired.
7 Trade and other receivables
30 June 2012 € 000's | 31 Dec 2011 € 000's | ||
Receivables from associates | 73 | 145 | |
Deposits and prepayments | 612 | 648 | |
VAT | 726 | 565 | |
1,411 | 1,358 |
8 Share capital and share premium
Authorised | Number of shares 000's | Share Capital € 000's | Share premium € 000's |
Total € 000's | ||||||
Ordinary shares of GBP0.0025 each | 1,400,000 | 3,500 | - | 3,500 | ||||||
Issued and fully paid | ||||||||||
Balance at 1 January 2012 | 856,452 | 2,603 | 89,758 | 92,361 | ||||||
Issue Date | Price (GBP) | |||||||||
7 Jan 12 | 0.073 | Interest | a) | 1,540 | 5 | 132 | 137 | |||
21 Feb 12 | 0.086 | Warrants exercised | b) | 1,800 | 5 | 180 | 185 | |||
16 Mar 12 | 0.087 | Warrants exercised | c) | 500 | 1 | 50 | 51 | |||
19 Mar 12 | 0.090 | Share placement | d) | 105,378 | 317 | 11,089 | 11,406 | |||
25 Apr 12 | 0.041 | Options exercised | e) e | 250 | 1 | 12 | 13 | |||
20 Jun 12 | 0.084 | Warrants exercised | f) | 6,435 | 20 | 651 | 671 | |||
Share issue costs | - | - | (488) | (488) | ||||||
Balance at 30 June 2012 | 972,355 | 2,952 | 101,384 | 104,336 | ||||||
Authorised capital
On 12 March 2012, the Company held an extraordinary general meeting of shareholders of the Company at which shareholders approved an increase to the authorized share capital of the Company to £3,500,000 comprised of 1,400,000,000 Ordinary Shares of £0.0025 each.
Issued capital
2012
a) On 7 January 2012, 1,540,081 shares at GBP 0.0025 were issued at a price of GBP 0.073. Upon the issue an amount of €132,256 was credited to the Company's share premium reserve.
b) On 21 February 2012, 1,799,900 shares at GBP 0.0025 were issued upon exercise of warrants at a price of GBP 0.086. Upon the issue an amount of €179,604 was credited to the Company's share premium reserve.
c) On 16 March 2012, 500,000 shares at GBP 0.0025 were issued upon exercise of warrants at a price of GBP 0.087. Upon the issue an amount of €50,581 was credited to the Company's share premium reserve.
d) On 19 March 2012, 105,378,519 shares at GBP 0.0025 were issued at a price of GBP 0.090 (refer below). Upon the issue an amount of €11,089,179 was credited to the Company's share premium reserve.
e) On 25 April 2012, 250,000 shares at GBP 0.0025 were issued upon exercise of options at a price of GBP 0.041. Upon the issue an amount of €11,881 was credited to the Company's share premium reserve.
f) On 20 June 2012, 6,434,999 shares at GBP 0.0025 were issued upon exercise of warrants at a price of GBP 0.084. Upon the issue an amount of €651,427 was credited to the Company's share premium reserve.
In March 2012 the Company completed a private placement with Yanggu Xiangguang Copper Co. Ltd ("XGC"), a cornerstone copper offtake customer, for an aggregate funding package of US$30 million (intended as to half in the form of share capital and half in the form of a future standby debt facility) in exchange for an approximate 10% ordinary equity position in the Company (on a fully-diluted basis) and the grant of limited off-take rights over the Rio Tinto Copper Mine's copper production. XGC provided US$15 million equity by way of a subscription for 105,378,159 new ordinary shares in the Company at a price of 9 pence per share. XGC has also agreed to provide or arrange a US$15 million subordinated debt facility as required by the providers of senior debt finance (who will be providing the senior debt for the purposes of the restart of operations of the Rio Tinto Copper Mine). The Company's subsidiary, EMED Marketing Limited has granted XGC off-take rights over 25% of current reported copper reserves, at market prices.
Warrants
The Company has issued warrants to advisers to the Group. Warrants, noted below, expire five or one and a half years after the grant date and are exercisable at the exercise price.
2012
No warrants were issued in the six months ended 30 June 2012.
Details of share warrants outstanding as at 30 June 2012:
| Number of share warrants 000's | |
Outstanding warrants at 1 January 2012: | 11,513 | |
- cancelled/expired during the reporting period | - | |
- exercised during the reporting period | (8,734) | |
Outstanding warrants at 30 June 2012 | 2,779 |
9 Share options reserve
| 30 June 2012 €'000 | 31 Dec 2011 €'000 | |
Opening balance | 5,269 | 5,015 | |
Recognition of share based payment | 102 | 254 | |
Closing balance | 5,371 | 5,269 |
| Number of share options 000's | |
Outstanding options at 1 January 2012: | 76,351 | |
- granted during the reporting period | 1,000 | |
- cancelled/expired during the reporting period | (4,430) | |
- exercised during the reporting period | (250) | |
Outstanding options at 30 June 2012 | 72,671 |
2012
On 21 April 2012, an option was granted to subscribe at any time until 20 April 2017 for an aggregate total of 1,000,000 Ordinary Shares at an exercise price per Ordinary Share of 10.5 pence. These options expire five years after the date of issue, vest in equal instalments from the date of grant of administrative standing over the lesser of three years or the time remaining to the expiry of the option.
For the six months ended 30 June 2012, the impact of share-based payments was a net charge to income of €102,000 (31 December 2011: €254,000) and €488,000 share issue costs charged to share premium (31 December 2011: €210,000). At 30 June 2012, the equity reserve recognised for share based payments amounted to €5.37 million (31 December 2011: €5.27 million).
10 Trade and other payables
30 June 2012 € 000's | 31 Dec 2011 € 000's | ||
Non-current Trade and other payables | |||
Other payables (see below) | 9,420 | 11,051 | |
Current Trade and other payables | |||
Trade payables and accruals | 1,812 | 2,030 | |
Other payables (see below) | 3,195 | 2,813 | |
5,007 | 4,843 |
On 25 May 2010, EMED Tartessus S.L recognised a debt with the Social Security's General Treasury in Spain amounting to €16.9 million and incurred by a previous owner, to stop the execution process by public auction of certain land initiated by that entity. On 30 June 2012, the balance of this debt amounts to €12.6 million. Of the non-current element of the debt, €9.4 million is payable within 1-3 years.
11 Acquisition of subsidiaries
There were no acquisitions in the six months ended 30 June 2012.
12 Related party transactions
The following transactions were carried out with related parties:
Compensation of key management personnel
The total remuneration of the Directors and other key management personnel was as follows:
Three months ended 30 June 2012 | Three months ended 30 June 2011 | Six months ended 30 June 2012 | Six months ended 30 June 2011 | ||||
€ 000's | € 000's | € 000's | € 000's | ||||
Directors' fees | 94 | 135 | 357 | 269 | |||
Directors' other benefits | 26 | 24 | 270 | 70 | |||
Share option-based benefits to directors | 20 | - | 20 | 37 | |||
Key management personnel fees | 159 | 129 | 316 | 265 | |||
Share option-based and other benefits to key management personnel |
70 |
33 |
227 |
100 | |||
369 | 321 | 1,190 | 741 |
Share-based benefits
The directors and key management personnel have been granted options as set out in Note 9.
Transactions with KEFI Minerals Plc
The Company has an ongoing service agreement with KEFI Minerals Plc for provision of management and other professional services.
Three months ended 30 June 2012 | Three months ended 30 June 2011 | Six months ended 30 June 2012 | Six months ended 30 June 2011 | ||||
€ 000's | € 000's | € 000's | € 000's | ||||
Transactions with KEFI Minerals Plc | 62 | 30 | 62 | 57 |
13 Contingent liabilities
In 2010, EMED Tartessus was notified that the Andalucían Water Authority ("AWA") had opened a file following allegations by third parties of unauthorized industrial discharges from the Tailings Management Facility ("TMF") at the Rio Tinto Copper Mine in the winter months of 2010. In December 2011 the judicial claims were dismissed by the appeals Court.
However, it is expected that the file will be re-opened to deal with the purported environmental damages from the winter months of 2011. The original sanction proposed was potentially a fine of €450,000 and damages of €1.2M and the authorities have signalled the possibility of revised sanctions of approximately €12 million.
It is improbable that any fine or sanction will be imposed once the file, if re-opened, reaches its conclusion in approximately 3-5 years, and in any event the Company would only be responsible for payment of that amount proportional to its ownership of the TMF, this being 33% at the time of the alleged events. Nonetheless, the Company believes that all charges will be dismissed in due course given the circumstances and the clear recognition of those circumstances in the complete dismissal of all judicial charges. The status of this matter at 31 March 2012 has not changed significantly from that disclosed in the annual consolidated financial statements for the year ended 31 December 2011.
14 Commitments
There are no minimum exploration requirements at the Rio Tinto Copper Mine. However, the Group is obliged to pay municipal taxes which currently are approximately €88,000 per year in Spain and the Group is required to maintain the Rio Tinto site in compliance with all applicable regulatory requirements.
There are minimum exploration expenditure requirements for the Slovakia tenements. Tenements are granted for 4 years and over this period a minimum of 70% of the budget proposed by the Group must be spent in order to extend the tenement life for another 2 periods (4 and 2 years, respectively). The first year minimum spend is 10% of the individual tenement budget.
Currently the official exploration budget across the Slovakian tenements, according to the exploration programs submitted to the competent Ministry of Environment, is approx. €3.9 million in total (the total proposed expenditure for the period 2009 to 2015 for all 6 tenements). 70% of the proposed budget is €2.7 million, which represents the minimum financial obligation for potential extensions of current lease holdings. For 2012, only two tenements will complete the first year of the initial 4 year exploration period and thus the minimum 10% required expenditure is approx. €47,000. Moreover there are annual tenement rental fees in the order of €90,000 per year. EMED has met its obligations to date and the exploration program for Slovakia will more than fulfil these commitments. All annual technical and financial reports have been submitted in time and approved straightforwardly.
In Cyprus, there are no exploration commitments required and tenement rentals are approximately €36,000 per annum.
15 Events after the reporting period
On 9th July 2012, the Company announced that it entered into a Sale and Purchase Agreement ("SPA") with Rumbo 5-Cero, S.L. ("Rumbo"), part of an established diversified Andalucían investment group, in relation to the €10 million purchase of certain land plots (covering part of the tailings dams) (the "Land") owned by Rumbo adjoining the Rio Tinto Copper Mine (the "Mine"). The acquisition of the Land was required in order to restart production at the Mine.
The consideration of €10 million (plus applicable taxes), is satisfied as follows:
·; €1 million which was paid in cash on execution of the SPA;
·; €3.5 million payable in cash on closing of the Land acquisition being not later than 28 September 2012; and
·; €5.5 million to be satisfied by the allotment of 48,549,234 new ordinary shares of 0.25p each in EMED Mining at 9.14 pence per share on Closing.
In addition, the parties intend to enter into a 50/50 joint venture - of which EMED Mining will be the operator - to test and potentially exploit certain tailings and waste dumps.
The Company also announced on 9th July 2012 that Yanggu Xiangguang Copper Co. Ltd ("XGC") had conditionally agreed to subscribe for 32,247,662 new ordinary shares of 0.25 pence each of the Company at a price of 10 pence per share for aggregate proceeds of US$5 million. These funds will be partly applied in funding the cash consideration for the acquisition of the Land.
On 3 August 2012, the Company announced that it had entered into an SPA with Inland Trading 2006, S.L. ("Inland"), for the €5 million purchase of the last land plot (the "Land Plot") required for planned operations of the Mine. This Land Plot covers part of the Mine's main tailings dam wall and satisfies all of the project's needs for tailings deposition from proposed operations along with the potential expansion thereof in the shorter term.
The consideration is satisfied as follows:
·; €1 million which was paid in cash on execution of the SPA;
·; €1.5 million payable in cash in eight equal instalments over a period of 24 months; and
·; €2.5 million to be satisfied by the allotment of 18,511,675 new ordinary shares of 0.25p each at 10.61 pence per share.
In addition, EMED has been granted options by Inland and Construcciones Zeitung, S.L. ("Zeitung") to acquire additional plots of land in the surrounding district (the "Option Lands"), exercisable within four years at an aggregate price of €9 million. The Option Lands are of interest to the Company because of the scale of potential expansion in the longer term.
These arrangements secure all the land required for the Mine and its potential expansion of both mine life and annual output.
There were no other material events after the reporting period, which have a bearing on the understanding of the condensed interim consolidated financial statements.
Management's Responsibility for Financial Reporting
The accompanying condensed interim unaudited consolidated financial statements of EMED Mining Public Limited were prepared by management in accordance with International Financial Reporting Standards ("IFRS"). Management acknowledges responsibility for the preparation and presentation of the condensed interim unaudited consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company's circumstances. The significant accounting policies of the Company are summarised in Note 2 to the condensed interim unaudited consolidated financial statements.
Management has established systems of Internal Control over the Financial Reporting ("ICFR"), process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced. There was no change in the Company's ICFR that occurred during the period beginning on 1 January 2012 and ended on 30 June 2012 that has materially affected, or is reasonably likely to materially affect, the Company's ICFR.
The Board of Directors is responsible for reviewing and approving the condensed interim unaudited consolidated financial statements and for ensuring that management fulfils its financial reporting responsibilities. An Audit and Financial Risk Management Committee assists the Board of Directors in fulfilling this responsibility. The members of the Audit and Financial Risk Management Committee are not officers of the Company. The Audit and Financial Risk Management Committee meets with management to review the internal controls over the financial reporting process, the consolidated financial statements and the auditors' report. The Audit and Financial Risk Management Committee also reviews the Annual Report to ensure that the financial information reported therein is consistent with the information presented in the consolidated financial statements. The Audit and Financial Risk Management Committee reports its findings to the Board of Directors for its consideration in approving the condensed interim unaudited consolidated financial statements for issuance to the shareholders.
Management recognises its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, as defined in National Instrument 52-109-Certification of Disclosure in Issuer's Annual and Interim Fillings ("NI 52-109") of the Canadian Securities Regulators, and for maintaining proper standards of conduct for its activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2012
This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited condensed interim consolidated financial statements and related notes thereto of EMED Mining Public Limited (the "Company" or "EMED Mining") and its subsidiaries (the "Group" or "EMED") for the three and six months ended 30 June 2012. The unaudited condensed interim consolidated financial statements and related notes on which the MD&A are based have been prepared in accordance with the International Financial Reporting Standards ("IFRS"). The Company's presentation currency is the Euro.
This report which is dated 7 August 2012 and the Company's other public filings, including its most recent Annual Information Form, can be viewed via the SEDAR website (www.sedar.com).
Cautionary Statements Regarding Forward Looking Statements
This MD&A contains "forward‑looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company, and the Group and its projects, the future price of metals, the estimation of ore reserves and mineral resources, the conversion of mineral resource estimates to ore reserve estimates, the realization of ore reserve estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcomes of pending litigation and/or regulatory matters. Often, but not always, forward‑looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate" or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Accordingly, readers should not place undue reliance on forward‑looking statements.
Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and are based on facts and assumptions that management considers reasonable. The material assumptions upon which such forward-looking statements are based include, among others, that: the grant of Administrative Standing (as defined herein) will be obtained; all other regulatory approvals and authorizations from the Andalucía Government and departmental ministries will be obtained; additional lands needed to develop and commence operations at the Rio Tinto Copper Mine project will be successfully expropriated or commercial settlements with landowners will be reached; requisite shareholder approval for project restart will be obtained; definitive documentation for project financing will be completed; regulatory and political views regarding the Rio Tinto Copper Mine project will remain positive and unchanged; the demand for copper will develop as anticipated; that the price of copper will remain at levels that render the Rio Tinto Copper Mine economic; the mineral resource and reserve estimates as disclosed in the Rio Tinto Technical Report (as defined herein) will be realized; and that there are no material unanticipated variations in the production, capital cost and economic estimates as disclosed in the Rio Tinto Technical Report.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. Such factors include, among others: general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of metals; the future cost of capital to the Company; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in the section entitled "Risk Factors" in the Company's Annual Information Form for the year ended 31 December 2011 (the "AIF") available under the Company's profile on SEDAR at www.sedar.com.
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‑looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward‑looking statements contained herein are made as of the date of this AIF and the Company disclaims any obligation to update any forward‑looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. There can be no assurance that forward‑looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Reconciliation Note between JORC and CIM Standards
This MD&A may contain disclosure of mineral resources and ore reserves using the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia, as amended ("JORC"). While the technical disclosure on the Company's material properties in this MD&A has been prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") of the Canadian Securities Administrators, the estimates of mineral resources and ore reserves are disclosed using the categories under JORC. There is no material difference between JORC and The Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards for Mineral Resources and Mineral Reserves" adopted by the CIM Council on 11 December 2005.
History and Strategy
EMED Mining (AIM:EMED, TSX:EMD) is committed to the development of metal production operations in Europe, with an initial focus on copper and gold.
The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation in the European region.
In Spain, the Group's Rio Tinto Copper Mine provides an excellent opportunity to bring a large copper mine back into production at a relatively low total cost as it already has an established open-pit mine, processing plant and other infrastructure.
In Slovakia, the Biely Vrch deposit at the Group's Detva Gold Project is a potential greenfields development of an open-pit gold mine.
EMED Mining has earlier-stage activities in Cyprus, and via 15.1%-owned associate KEFI Minerals Plc, an indirect interest in an early-stage exploration joint venture in the Kingdom of Saudi Arabia where it was recently granted its first exploration licenses.
EMED Mining is managed by a well-qualified, multi-cultural team drawn initially from Australia and the United States of America and now predominantly comprised of European citizens. The main priority for the short term is to safely and efficiently start copper production at the Rio Tinto Copper Mine once EMED Mining has completed the regulatory approval process, financed the start-up and obtained shareholder approval.
Overview of Operations
The Company was listed on AIM in May 2005 and was listed on the TSX in December 2010. The Group has, and continues to be, dependent on cash generated from equity financings to fund its activities. These proceeds have been used for maintenance and development activities in Spain, exploration activities in several countries and the administration and maintenance of the Group's operations in compliance with all regulatory requirements.
The ownership of the Company has evolved over this period and consists of substantial international mining investment specialists including the following:
·; The Board and senior management who come from Australia, Canada, the United States of America and Europe and including mining engineers, metallurgical engineers, financiers and management specialists with extensive experience in project development and operations;
·; Resource Capital Fund IV L.P. ("RCF"), the world's largest group of mine development investment funds, based in the United States of America and with offices in Australia and Canada;
·; Yanggu Xiangguang Copper Co. Ltd ("XGC"), a large copper smelting group based in China which has agreed to be a cornerstone customer and project financier for the Rio Tinto Copper Mine;
·; RBC Asset Management, a leading Canadian funds management company;
·; Rand Merchant Bank ("RMB"), a large South African mining bank with specialist mine investment teams based in Australia, United Kingdom and the United States of America;
·; Astor Management AG, a large Swiss-based metals and commodities investments group; and
·; Standard Life, a leading provider of long term savings and investments.
EMED Mining is currently focused on copper at the Rio Tinto Copper Mine in Spain and gold at the Detva Gold Project in Slovakia. Development will be contingent upon the Company's ability to access additional funding through a combination of debt and equity. The general liquidity of the capital markets therefore, which is in turn dependent on the outlook for prices of copper, gold and other commodities, is a major contributing factor to the successful completion of the Group's plans. In addition, the Group is in the process of obtaining the requisite government approvals for the restart of the Rio Tinto Mine and has negotiated preliminary arrangements with XGC and Goldman Sachs International to potentially provide $190 million in funding for the project restart.
Mineral Exploration and Development Property Interests
Spain - Rio Tinto Copper Mine
EMED Mining, via its wholly-owned subsidiary EMED Tartessus, owns 100% of the Rio Tinto Copper Mine in Andalucía, Spain. The Group is the owner of the mine, the mineral rights and the processing plant and is complying with all regulatory requirements to be awarded Administrative Standing (or "Titularidad Administrativa") along with the operating project and the environmental plans, so that the project can proceed.
As detailed in a NI 43-101 Technical Report, key anticipated production parameters for the Rio Tinto Copper Mine are:
·; Ramp-up to a 9 million tonne per annum ("tpa") throughput over a two-year period;
·; Open-pit mine with average waste-to-ore strip ratio of ~ 1.1 to 1;
·; Contained copper-in-concentrate averaging ~37,000 tpa;
·; Average cash costs of C1 =~ US$1.37/lb (cash operating costs ) and C3 ~= US$1.57/lb (total costs including operating, capital and closure costs);
·; Measured and Indicated Resources = 203 million tonnes at 0.46% copper, containing 933,000 tonnes of copper (inclusive of Ore Reserves);
·; Ore Reserves = 123 million tonnes at 0.49% copper, containing 606,000 tonnes of copper;
·; Mine life > 14 years.
·; Project cost estimates will require refinement when permitting conditions are finalised and after detailed engineering is duly completed and procurement arranged.
·; Revised costs will need to reflect the following:
§ the expanded restoration footprint agreed with the Andalucian Government and the scheduling of consequential environmental works,
§ anticipated revisions in equipment specifications or prices,
§ foreign exchange movements,
§ the refined scheduling of plant repairs, improvements and modernisation, and
§ working capital buffers.
It is also anticipated that the following project features will also be revised in due course after exploration drilling has been conducted:
·; Ore Reserves (Proven and Probable - 123 million tonnes at 0.49% copper, containing 606,000 tonnes of copper) are currently based on a cut-off grade of 0.2% copper which was derived using a copper price of $2.00/lb ($4,400/tonne). In due course, this needs re-optimisation in light of the planned drilling within the open pit;
·; Mineral Resources (Measured plus Indicated - 203 million tonnes at 0.46% copper, containing 933,000 tonnes of copper) which was derived using a copper price of $3.00/lb ($6,600/tonne) for the Cerro Colorado open pit. This needs updating in light of the planned drilling of the open pit and the underground deposits on the property.
Steps to Restart Copper Production
Mining activities are the responsibility of the Autonomous Communities of Spain (i.e. individual states, which in the case of Rio Tinto is Andalucía) and the provincial government within those states (for Rio Tinto, this is the province of Huelva). Therefore, for the Rio Tinto Mine, the Huelva Provincial division of the Ministry of Economy, Innovation and Science ("CEIC") of the Junta de Andalucia (the "Andalucian Government") is the substantive regulatory body that has the authority to approve Administrative Standing (administrative approval of the transmission of the mineral rights held by EMED since 2007) and operating licenses for the project. This is the case except for explosive permits which are governed by the Central Government of Spain.
Approvals are also required from:
(i) The Huelva Provincial Division of the Ministry of Environment ("Environment") which specifically are the:
1. Unified Environmental Authorisation ("AAU") (which includes the Environmental Impact Statement ('EIS') and final restoration plan amongst other environmental permits); and
2. Concession required for public domain water, and
________________________________________________________________________________________
Note 1 : Behre Dolbear International Ltd report entitled "Amended and Restated NI 43-101 Technical Report on Reopening the Rio Tinto Copper Mine, Huelva Province, Spain" dated November 17, 2010, which is available under EMED Mining's corporate profile at www.sedar.com.
(ii) The Huelva Provincial Delegation of the Ministry of Culture ("Culture") as various project lands are listed as cultural heritage sites.
The steps to restarting production at the Rio Tinto Copper Mine are briefly summarised as follows:
·; Receipt of Administrative Standing and operating licences from CEIC. In this regard:
o Detailed engineering being completed now that the authorities have informally agreed all permitting conditions;
·; Approvals from Environment and Culture. In this regard:
o The AAU, which has an 8-month approval timeframe, extendable to a maximum of 10 months, was resubmitted in February 2012. As required by administrative procedure, the Company´s AAU was submitted for public review for a 30-day period in June 2012 which concluded on July 24 2012. Once all review processes have finalised, the Company expects to receive it´s AAU authorisation.
o The technical team has expanded the water management and environmental plans to reflect the enlarged land footprint and the Government's new river management policies.
o The relevant water concession application remains in process.
o The Company received conditional approval from Culture in December 2010 which must now be updated to take into account the expanded restoration footprint.
·; Once Administrative Standing is received, the Company can:
o Commence personnel training programs;
o Commence the drilling programs for extending mine life;
o Commence site preparation activities so that the full project can proceed;
o Proceed toward formal approval of the final project details to allow project execution and exploitation;
o If not already received, proceed toward formal approval of the final environmental management and restoration plans;
o Obtain final shareholder and financier approvals so the restart project execution programs can proceed;
o Proceed toward formal access to all lands required for the project operation for long term, if not already accessed via commercial settlements (refer "Events after the reporting period");
o Trigger the twelve-month restart project execution programs, upon arrangement of unfettered land access;
o Proceed with the appointment and induction of the workforce and contractors;
o Obtain construction permits and operating licences to be issued as project execution proceeds and commissioning is carried out;
o Proceed with the six-month ramp up to start rate of processing 5 million tpa of ore followed by an eighteen-month ramp-up of production to the base case rate of processing 9 million tpa of ore and 37,000 tpa copper-in-concentrate; and
o Concurrently assess project extension or expansion opportunities, based largely on the results of drilling in the vicinity of the existing open pit and underground mines.
The restart is expected to be straightforward from an operational perspective, with an established infrastructure and processing facility that can be readily restarted, albeit with aspects to be updated to incorporate mining industry improvements that have been developed over the past 20 years.
Slovakia - Detva Gold Project
EMED is advancing its 100%-owned Biely Vrch gold deposit, which is a potential greenfields development of an open pit gold mine. Biely Vrch gold deposit contains Indicated Resources of 461,000 ounces (17.7 million tonnes at 0.81g/t gold) and Inferred Resources of 596,000 ounces (24.0 million tonnes at 0.77g/t gold).
A revised Scoping Study completed by AMC Consultants (UK) Ltd in June 2010 confirmed the attractive economics of developing a mine at Biely Vrch based on a gold price of US$800/ounce (currently >US$1,600/ounce). The envisaged project has the following parameters:
·; Initial capital cost of ~US$64 million including the acquisition of additional lands;
·; 3 million tonne per annum, heap-leach operation;
·; Open-pit mine with average waste-to-ore strip ratio of 0.84 to 1;
·; Mine plan tonnage of 27.5 million tonnes at 0.86g/t gold, containing 756,000 ounces of gold;
·; Overall gold recoveries averaging 81%; and
·; Annual gold production of 60,000 ounces at an average C1 cash cost of ±US$530/ounce.
The Scoping Study is preliminary in nature and includes Inferred Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as ore reserves, and there is no certainty that the preliminary assessment will be realised. The capital cost noted above is a preliminary estimate derived in May 2010. Since that time, a number of changes to costs, commodity prices, and geotechnical data have suggested that updating of the Scoping Study would be beneficial. In fact, the Biely Vrch project is in a transitional phase from Scoping Study to Pre-Feasibility Study, and a series of additional technical works, such as further metallurgical testing, geotechnical and mining engineering are being considered by EMED.
Detva Gold Project Permitting
The Group has been granted Protective Deposit Status over the Biely Vrch gold deposit and an application for a Mining Lease Area has been made. Thirty eight state, regional and local regulatory bodies have consented to the Company being granted its Mining Lease Area. A non-opposition resolution was also signed by the local Landowners Co-operative in the Mining Lease Area over Biely Vrch.
EMED is working towards reaching various agreements with local parties directly impacted by the potential development. However, there has been recent opposition by anti-mining lobby groups and a series of community briefings and consultations are being conducted in the local towns and villages on a regular basis with direct participation by the Group Managing Director and Slovakian Managing Director.
In response to public consultations, the Company has voluntarily commissioned and published a Preliminary Social Impact Study and a Preliminary Economic/Technical Study and will invite input from local communities and action groups. Community and other stakeholder communications and consultations will be the primary focus for 2012 and priorities will be re-assessed as practical possibilities are developed.
On 10 May 2012, EMED reached agreement with Slavia Tools Company, owner of the factory directly adjacent to the Biely Vrch Gold Deposit, whereby the EMED will finance Slavia Tools with €340,000 for detailed relocation planning studies and, if within ten years, the development of Biely Vrch is triggered by EMED, the Company will have the right, exercisable at its own discretion, to proceed to fund construction of new premises for Slavia Tools and acquire the old premises for a maximum cost of €11 million. Consultation meetings with the owners of other properties in the vicinity of the contemplated project development continue.
On 12 July 2012, EMED Slovakia has presented its plans on the development of Biely Vrch Gold Project to the Committee for Land Planning and Environmental Protection in Central Slovakia.
KEFI Minerals Plc
KEFI Minerals Plc is a gold and copper exploration company with projects mainly in the Kingdom of Saudi Arabia. It commenced trading on AIM in December 2006. EMED Mining contributed initial assets and currently has a 15.07% shareholding (30 June 2012 - 16.56%).
In Saudi Arabia, KEFI Minerals Plc has a joint venture with leading Saudi construction and investment group ARTAR. This joint venture has a number of exploration license applications pending in Saudi Arabia.
Selected Financial Data
The table below summarises selected consolidated financial information for the Group's unaudited interim condensed consolidated financial statements for the three and six months ended 30 June 2012 and 30 June 2011, and the audited consolidated financial statements for the year ended 31 December 2011.
Three months ended 30 June 2012 (€ 000's) |
Three months ended 30 June 2011 (€ 000's) | Six months ended 30 June 2012 (€ 000's) | Six months ended 30 June 2011 (€ 000's) | Year ended 31 Dec 2011 (€ 000's) | |
Exploration expenses | (255) | (368) | (501) | (694) | (1,427) |
Care and maintenance expenses | (1,322) | (1,144) | (2,630) | (2,257) | (4,449) |
Administration expenses | (1,156) | (905) | (2,712) | (1,826) | (3,832 |
Other income | 65 | - | 65 | - | 117 |
Net foreign exchange gain/(loss) | 143 | 94 | 44 | (13) | (363) |
Net finance costs | (124) | (261) | (246) | (601) | (1,180) |
Share of results of associates | (70) | (60) | (136) | (131) | (266) |
Tax | 584 | 405 | 1,027 | 805 | 1,733 |
Loss for the period | (2,135) | (2,239) | (5,089) | (4,717) | (9,667) |
Basic and fully diluted loss per share (cents) | (0.21) | (0.31) | (0.55) | (0.67) | (1.4) |
Total assets | 57,323 | 56,708 | 57,323 | 56,708 | 51,830 |
Total liabilities | 14,434 | 23,206 | 14,434 | 23,206 | 15,901 |
Three months ended 30 June 2012 compared to the three months ended 30 June 2011
EMED Mining recorded a consolidated loss of €2.1 million (or (0.21) cents per share) for the three months ended 30 June 2012, compared with a consolidated loss of €2.2 million (or (0.31) cents per share) for the three months ended 30 June 2011, a decrease of €0.1 million. There was no significant change in the results in the period.
During the three months ended 30 June 2012, the Group expended €1.3 million on care and maintenance at the Rio Tinto Copper Mine (30 June 2011: €1.1 million). The increase in expenditure relates to higher activity at Rio Tinto Copper Mine.
Other operating expenditure for the three months ended 30 June 2012 was €1.1 million (30 June 2011: €0.9 million) and includes corporate costs, as well as, costs associated with a listed public company such as shareholder communications, on-going listing costs, head office salaries and travel. These costs have increased due to increased legal fees associated with the various financings/placements of the Company.
Net finance costs for the three months ended 30 June 2012 were €0.12 million (30 June 2011: €0.26 million). The decrease in finance costs is largely due to interest paid in 2011 on the Convertible Loan which was converted on 31 December 2011.
The foreign exchange gain of €0.1 million incurred during the reporting period is due to the translation of foreign denominated assets and liabilities into Euros. During the second quarter of 2012, €0.03 million was charged to the statement of comprehensive income as a result of the options vested (30 June 2011: €nil).
Six months ended 30 June 2012 compared to the six months ended 30 June 2011
EMED Mining recorded a consolidated loss of €5.1 million (or (0.55) cents per share) for the six months ended 30 June 2012, compared with a consolidated loss of €4.7 million (or (0.67) cents per share) for the six months ended 30 June 2011, an increase of €0.4 million. This small overall increase is mainly due to an increase in other operating expenses, in particular legal fees in connection with the financing in March 2012 and management incentive payments.
During the six months ended 30 June 2012, the Group expended €2.6 million on care and maintenance at the Rio Tinto Copper Mine (30 June 2011: €2.3 million). The increase in expenditure relates to higher activity at Rio Tinto.
Other operating expenditure for the six months ended 30 June 2012 was €2.6 million (30 June 2011: €1.8 million) and includes corporate costs, as well as, costs associated with a listed public company such as shareholder communications, on-going listing costs, head office salaries and travel. These costs have increased as explained above.
Net finance costs for the six months ended 30 June 2012 were €0.2 million (30 June 2011: €0.6 million). The decrease in finance costs is largely due to interest paid in 2011 on the Convertible Loan which was converted on 31 December 2011.
The foreign exchange gain of €0.04 million incurred during the reporting period is due to the translation of foreign denominated assets and liabilities into Euros.
During the first six months of 2012, €0.07 million was charged to the statement of comprehensive income as a result of the options vested in the first six months of 2012 (30 June 2011: €0.09 million). As at 30 June 2012, the Share Option Reserve amounted to €5.4 million (30 June 2011: €5.2 million).
Total assets were €57.3 million as at 30 June 2012 compared to €56.7 million as at 30 June 2011, an increase of €0.6 million. The Group's significant assets are its mineral properties and mining plant, property and equipment at the Rio Tinto Copper Mine. There was no significant change in the total assets of the Group.
Receivables as at 30 June 2012 of €1.4 million are amounts receivable in respect of VAT due from authorities in Cyprus and Spain of €0.7 million and deposits and other prepayments of €0.7 million. As at 30 June 2011, receivables were €0.9 million (VAT: €0.3 million).
Current Liabilities were €5 million as at 30 June 2012 compared to €10.3 million as at 30 June 2011, a decrease of €5.3 million. This decrease is due to the conversion of the Convertible Loan on 31 December 2011.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Currently enacted tax rates are used in the determination of deferred tax. Deferred tax assets relating to the benefit of losses carried forward are only recognised to the extent that it is probable that future taxable profit will be available to apply against these losses. As at 30 June 2012, the Group's deferred tax asset stood at €6.8 million (30 June 2011: €4.8 million).
Six months ended 30 June 2012 compared to year ended 31 December 2011
Total assets were €57.3 million as at 30 June 2012 compared to €51.8 million as at 31 December 2011, an increase of €5.5 million. The Group's significant assets are its mineral properties and mining plant, property and equipment at the Rio Tinto Copper Mine. The increase in assets is mainly due to the increase in plant, property and equipment, intangible assets and cash reserves. The decrease in liabilities is mainly due to the continuing repayment of the social security debt in Spain. Cash as at 30 June 2012 was €9.6m, compared to €7.8m as at 31 December 2011 (refer to Financing Activities section for more details).
Summary of Quarterly Results
As at and for the 3 months ended 30 Sep 2010 (€ 000's) | As at and for the 3 months ended 31 Dec 2010 (€ 000's) | As at and for the 3 months ended 31 Mar 2011 (€ 000's) | As at and for the 3 months ended 30 Jun 2011 (€ 000's) | As at and for the 3 months ended 30 Sep 2011 (€ 000's) |
As at and for the 3 months ended 31 Dec 2011 (€ 000's) |
As at and for the 3 months ended 31 Mar 2012 (€ 000's) |
As at and for the 3 months ended 30 June 2012 (€ 000's) | |
Exploration expenses | (309) | (380) | (326) | (368) | (411) | (322) | (246) | (255) |
Care and maintenance expenses | (926) | (714) | (1,113) | (1,144) | (1,520) | (672) | (1,308) | (1,322) |
Share-based benefits | - | (137) | (206) | - | - | (48) | (68) | (34) |
Other operating expenses | (938) | (1,873) | (730) | (942) | (1,019) | (887) | (1,488) | (1,122) |
Other income | 4 | 58 | - | 57 | - | 60 | - | 65 |
Net foreign exchange gain/(loss) | 170 | (169) | (107) | 94 | (166) | (184) | (99) | 143 |
Net finance costs | (365) | (339) | (340) | (261) | (272) | (307) | (122) | (124) |
Impairment of intangible assets | - | (310) | - | - | - | - | - | - |
Share of results of associates | 29 | (59) | (56) | (75) | (71) | (64) | (66) | (70) |
Tax | 279 | 507 | 400 | 405 | 558 | 370 | 443 | 584 |
Loss for the period | (2,056) | (3,416) | (2,478) | (2,234) | (2,901) | (2,054) | (2,954) | (2,135) |
Basic and fully diluted loss per share (cents) |
(0.48) |
(0.74) |
(0.36) |
(0.32) |
(0.41) |
(0.28) |
(0.34) |
(0.21) |
The Group recorded a consolidated loss of €2.1 million for the three months ended 30 June 2012, compared with a consolidated loss of €2.9 million for the three months ended 31 March 2012. The reduction in the loss in the three months ended 30 June 2012 is due to lower other operating expenses, which are mainly corporate expenses and a net foreign exchange gain, compared to a net foreign exchange loss for the previous quarter.
During the three months ended 30 June 2012, the Group expended €0.3 million on exploration expenditure (31 March 2012: €0.2 million). The increase in exploration expenditure during the quarter ended 30 September 2011 was due to exploration expenses incurred in Portugal on the Regua tungsten deposit. In December 2011, the Company allowed the option to acquire the Regua tungsten deposit in Portugal to lapse.
During the quarter ended 30 June 2012, the Group incurred expenditure on care and maintenance at the Rio Tinto Copper Mine of €1.3 million (31 March 2012: €1.3 million). These expenses have increased since the year end as a result of the increased level of activity at Rio Tinto.
Other operating expenditure for the three months ended 30 June 2012 was €1.1 million (31 March 2012: €1.5 million). These costs represent corporate costs including all costs associated with a listed public company such as shareholder communications, on-going listing costs, head office salaries and travel.
Net finance costs for the three months ended 30 June 2012 were €0.1 million (31 March 2012: €0.1 million).
Financing Activities
Statement of Cash Flows Summary
| As at and for the 6 months ended 30 June 2012 (€ 000's) | As at and for the 6 months ended 30 June 2011 (€ 000's) | As at and for the 12 months ended 31 Dec 2011 (€ 000's) |
|
Cash flows used in operating activities | (7,385) | (5,997) | (12,061) | |
Cash flows used in investing activities | (2,845) | (1,414) | (4,875) | |
Cash flows from financing activities | 11,975 | 3,208 | 3,222 | |
Net increase/(decrease) in cash and cash equivalent | 1,745 | (4,203) | (13,174) |
In 2012, cash flows used in operating activities increased mainly due to increased payments to the social security department in Spain and increased expenditure in the first two quarters of 2012.
In 2012 and 2011, cash flows used in investing activities were mainly due to additions in intangibles and in property plant and equipment.
In 2012, the Group obtained €11.9 million from share issues (2011: €3.2 million).
On 3 May 2010, the Company completed a private placement of 83,571,429 Ordinary Shares at a price of GBP0.105 per Ordinary Share. The total proceeds received from the private placement were approximately €10.1 million.
On 20 December 2010 in conjunction with the TSX listing, EMED Mining raised a total of C$32.7 million (GBP20.5 million) via an Initial Public Offering in Canada and a concurrent Private Placement in the UK.
In January 2011, and as a result of a subsequent exercise of the over-allotment option granted to the Company's Canadian Agents, on its Canadian Initial Public Offering, C$2.4 million (GBP1.5 million) was raised.
On 28 December 2011, under the secured convertible loan agreement, both RCF and RMB exercised their right to convert the outstanding principal amount of the Convertible Loan Facility (see below) amounting to US$8.5 million into new ordinary shares at the conversion price of 4.13 pence per ordinary share. A total of 145,504,558 new ordinary shares were issued to RCF and to RMB. Accordingly, the outstanding principal amount owing under the Loan Agreement of US$8.5 million was satisfied in full by the issue of these shares.
In March 2012 the Company completed a private placement with Yanggu Xiangguang Copper Co. Ltd ("XGC"), a cornerstone copper offtake customer, for an aggregate funding package of US$30 million (intended as to half in the form of share capital and half in the form of a future standby debt facility) in exchange for a 10% ordinary equity position in EMED Mining (on a fully-diluted basis) and the grant of limited off-take rights over the Rio Tinto Mine's copper production. XGC provided US$15 million equity by way of a subscription for 105,378,159 new ordinary shares in the Company at a price of 9 pence per share. XGC has also agreed to provide or arrange a US$15 million subordinated debt facility as required by the providers of senior debt finance (who will be providing the senior debt for the purposes of the restart of operations of the Rio Tinto Mine). The Company's subsidiary, EMED Marketing Limited ("EMED Marketing") has granted XGC off-take rights over 25% of current reported copper reserves, at market prices. These equity raisings are summarised in the table below:
Financing Activities- continued
Number of Ordinary Shares Issued |
Issue Price | Gross Proceeds (C$ million) | Gross Proceeds(GBP million)
| Gross Proceeds(€ million)
| |
UK Placement - May 2010 | 83,571,429 | GBP 0.105 | 14.0 | 8.8 | 10.1 |
Canadian IPO - December 2010
| 180,970,000 | C$ 0.135 | 24.6 | 15.4 | 18.3 |
UK Placement - December 2010
| 60,126,386 | GBP 0.085 | 8.1 | 5.1 | 6.0 |
Canadian Option - January 2011 | 18,145,500 | C$ 0.135 | 2.4 | 1.5 | 1.8 |
XGC placement - March 2012 | 105,378,159 | GBP 0.090 | 15.2 | 9.5 | 11.4 |
Total | 448,191,474 | 64.3 | 40.3 | 47.6 |
Note: Currency conversion based on an exchange rate of C$1.00 = GBP0.6268.
The proceeds from the above financings, and in the case of the proceeds from the TSX initial public offering, were and will continue to be applied as previously disclosed by the Company without material variation.
Liquidity
The Group is currently in the exploration and development stage and as such does not generate revenue from operations. It is the Group's goal to reach producer status and generate revenues that will significantly enhance the value of the Group and reduce the need for equity type funding to maintain its liquidity.
In liquidity terms, the financing needed to achieve such objectives is typically accessed in two steps. Step one is accessing equity based finance and step two is arranging finance from non-equity based external sources such as traditional project finance and off-take facilities.
Financial and commodity markets have shown volatility in recent times due to uncertainty. Nonetheless, the outlook for both copper and gold has remained positive. It is important to recognise that, while the Group is still reliant on equity funding, the commissioning of one of the Group's projects, and in particular the Rio Tinto Copper Mine would move EMED into the producer category quite quickly, given the anticipated short start-up time once governmental approvals have been obtained.
Upon the grant of the relevant government approvals, the Group will commence the restart at the Rio Tinto Copper Mine and will need to secure additional project financing (see Mineral, Exploration and Development Property Interests - Funding).
Contractual Obligations
The following table lists as of 30 June 2012 information with respect to the Group's known contractual obligations:
Contractual obligations |
Total (€ 000's) | Less than 1 year (€ 000's) |
1 - 3 years (€ 000's) |
4 - 5 years (€ 000's) |
After 5 years (€ 000's) |
Debt with department of social security (Spain) |
12,615 |
3,195 |
9,420 |
- |
- |
Total contractual obligations | 12,615 | 3,195 | 9,420 | - | - |
Contingent contractual obligations | |||||
Acquisition of the remaining 49% of the Rio Tinto Copper Mine |
53,000 |
8,833 |
17,666 |
26,501 |
- |
The following table lists as of 31 December 2011 information with respect to the Group's known contractual obligations:
Contractual obligations |
Total (€ 000's) | Less than 1 year (€ 000's) |
1 - 3 years (€ 000's) |
4 - 5 years (€ 000's) |
After 5 years (€ 000's) |
| |||||||||||
| |||||||||||||||||
Debt with department of social security (Spain) |
13,864 |
2,813 |
8,635 |
2,416 |
- |
| |||||||||||
Total contractual obligations | 13,864 | 2,813 | 8,635 | 2,416 | - |
| |||||||||||
Contingent contractual obligations |
| ||||||||||||||||
Acquisition of the remaining 49% of the Rio Tinto Copper Mine |
53,000 |
8,833 |
17,666 |
26,501 |
- | ||||||||||||
Astor Management AG ("Astor") (formerly MRI) Acquisition Agreement
In September 2008, the Group moved to 100% ownership of EMED Tartessus (and thus full ownership of the Rio Tinto Copper Mine) by acquiring the remaining 49% of the issued capital of EMED Tartessus. The cost of the acquisition was the issuance of 39,140,000 Ordinary Shares to Astor at a deemed issue price of 21p per Ordinary Share and a deferred cash settlement of €52,999,999 (including certain loans owed to members of the Astor Group which were incurred in relation to the operation of the Rio Tinto Copper Mine amounting to €9,116,617) to be paid by the Group over six or seven years. This consideration is payable once the authorisation from the Junta de Andalucía to restart mining activities in the Rio Tinto Copper Mine has been granted and project finance and shareholder approval has been obtained.
In consideration for agreeing to pay the deferred cash settlement over 6 years and for Astors's consent to the arrangements that were entered into in connection with the Convertible Loan Facility (now repaid), the Company agreed to potentially pay further deferred consideration of up to €15,900,000 in regular instalments over the deferred consideration payment period depending upon the price of copper. Any such additional payment will only be made if, during the relevant period, the average price of copper per tonne is $6,613.86 or more ($3.00/lb).
The funds required to make these payments, should EMED proceed with the restart of the Rio Tinto Project, would be sourced from senior project debt and from project cash flow.
Convertible Loan Facility
On 4 March 2009, the Company entered into a Convertible Loan Facility of US$8.5 million with RCF and RMB to provide funds for the Rio Tinto Copper Mine in Spain, the gold project in Slovakia and for general working capital purposes.
On 28 December 2011, RCF and RMB exercised their right to convert the amounts owed to them under the secured convertible loan agreement dated 4 March 2009 into new ordinary shares at a price of 4.13 pence per share. Accordingly, the outstanding principal amount owing under the loan agreement of US$8.5 million was satisfied in full by the issue of shares.
Interest was paid in shares at the election of the Company or the Lenders. The price of shares was based upon the volume weighted average market price at the time of the payment. Interest during 2011 of US$531,482 was paid by the issue of 4,340,285 new ordinary shares.
Settlement Agreement with the Department of Social Security
In 2010, EMED Tartessus entered into a Settlement Agreement with the Department of Social Security for extinguishing the liens against its principal landholdings of the Rio Tinto Copper Mine upon repayment of the outstanding debt in the amount of €16.9 million. EMED Tartessus has paid €4.3 million to 30 June 2012, in accordance with the agreed repayment schedule.
Contingent liabilities
In 2010, EMED Tartessus was notified that the Andalucían Water Authority ("AWA") had opened a file following allegations by third parties of unauthorized industrial discharges from the Tailings Management Facility ("TMF") at the Rio Tinto Copper Mine in the winter months of 2010. In December 2011 the judicial claims were dismissed by the appeals Court.
However, it is expected that the file will be re-opened to deal with the purported environmental damages from the winter months of 2011. The original sanction proposed was potentially a fine of €450,000 and damages of €1.2M and the authorities have signalled the possibility of revised sanctions of approximately €12 million.
It is improbable that any fine or sanction will be imposed once the file, if re-opened, reaches its conclusion in approximately 3-5 years, and in any event the Company would only be responsible for payment of that amount proportional to its then ownership of the TMF, this being 33% at the time of the alleged events. Nonetheless, the Company believes that all charges will be dismissed in due course given the circumstances and the clear recognition of those circumstances in the complete dismissal of all judicial charges. The status of this matter at 30 June 2012 has not changed significantly from that disclosed in the annual consolidated financial statements for the year ended 31 December 2011.
Commitments
There are no minimum exploration requirements at the Rio Tinto Copper Mine. However, the Group is obliged to pay municipal taxes which currently are approximately €88,000 per year in Spain and the Group is required to maintain the Rio Tinto site in compliance with all applicable regulatory requirements.
There are minimum exploration expenditure requirements for the Slovakia tenements. Tenements are granted for 4 years and over this period a minimum of 70% of the budget proposed by the Group must be spent in order to extend the tenement life for another 2 periods (4 and 2 years, respectively). The first year minimum spend is 10% of the individual tenement budget. Currently the official exploration budget across the Slovakian tenements, according to the exploration programs submitted to the competent Ministry of Environment, is approx. €3.9 million in total (the total proposed expenditure for the period 2009 to 2015 for all 6 tenements). 70% of the proposed budget is €2.7 million, which represents the minimum financial obligation for potential extensions of current lease holdings. For 2012, only two tenements will complete the first year of the initial 4 year exploration period and thus the minimum 10% required expenditure is approx. €47,000. Moreover there are annual tenement rental fees in the order of €90,000 per year. EMED has met its obligations to date and the exploration program for Slovakia will more than fulfil these commitments. All annual technical and financial reports have been submitted in time and approved straightforwardly.
In Cyprus, there are no exploration commitments required and tenement rentals are approximately €36,000 per annum.
Off-Balance Sheet Arrangements
The Group has no off-balance sheet arrangements.
Transactions with Related Parties
The following transactions are carried out with related parties:
1. Compensation of key management personnel, which includes directors and certain senior managers.
2. Transaction with KEFI Minerals Plc ("KEFI"). EMED Mining has a 16.56% (as at 30 June 2012) interest in KEFI and an ongoing service agreement to provide management and other professional services. The cost of providing this service to KEFI has been GBP 0.1 million per annum, which has been recharged to KEFI.
Both transactions are measured at cost and both have ongoing contractual relationships.
As at and for the 3 months ended 31 Mar 2011 (€ 000's) | As at and for the 3 months ended 30 Jun 2011 (€ 000's) | As at and for the 3 months ended 30 Sep 2011 (€ 000's) |
As at and for the 3 months ended 31 Dec 2011 (€ 000's) |
As at and for the 3 months ended 31 Mar 2012 (€ 000's) |
As at and for the 3 months ended 31 Jun 2012 (€ 000's) | |
Compensation - Directors and Key Management Personnel | 420 | 321 | 393 | 342 | 821 | 369 |
Service charges to KEFI | 28 | 29 | 28 | 29 | - | 65 |
Financial Risk Management Policies
The Group's financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, and leases. The Group is exposed to interest rate risk, commodity price risk, liquidity risk and currency risk arising from the financial instruments that it may hold. The risk management policies employed by the Group are discussed below.
Treasury risk management
The Board reviews credit risk policies and future cash flow requirements as required. The Board's overall risk management strategy seeks to assist the consolidated group in meeting its financial targets, whilst minimising potential adverse effects on financial performance. The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk.
Interest rate risk
The Group's exposure to the risks of changes in market interest rates relates primarily to the Group's short-term deposits with a floating interest rate. These financial assets with variable rates expose the Group to cash flow interest rate risk. All other financial assets and liabilities in the form of receivables and payables are non-interest bearing.
Commodity price risk
The Group does not currently derive revenue from sale of products; therefore the effect on profit and equity as a result of changes in the price risk is not considered material. However the fair value of the mineral projects and the ability of EMED to develop the Rio Tinto Copper Mine will be impacted by commodity price changes (predominantly copper and gold) and could impact future revenues once operational. Management monitors current and projected commodity prices.
Liquidity risk
The Group manages liquidity risk by monitoring forecast cash requirements. The Group's operations require it to raise capital on an on-going basis to fund its planned exploration program and to commercialise its tenement assets. If the Group does not raise capital in the short term, it can continue as a going concern by reducing planned but not committed exploration expenditure until funding is available and/or entering into joint venture arrangements where exploration is funded by the joint venture partner.
Credit risk
Credit risk is managed on a Group basis and refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group as well as through deposits with financial institutions. The Group has adopted a policy of only dealing with credit worthy counterparties obtaining sufficient collateral or other security where appropriate as a means of mitigating the risk of financial loss from defaults and only banks and financial institutions with an investment grade credit rating are utilised. The maximum exposure to credit risk, excluding the value of any collateral or other security, at the reporting date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the consolidated financial statements. The credit risk on liquid funds and financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
Foreign currency risk
The Group has exploration activities in Spain, Slovakia and Cyprus. During the six month period to 30 June 2012 most funds are held in Euro, some deposits are held in Canadian Dollars, US Dollars and GBP for working capital purposes. The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the group's measurement currency. The Group is mainly exposed to Euros and the Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The Group's current policy is not to enter into any currency hedging transactions.
Fair value estimation
The Directors and management consider that the carrying amount of financial assets and financial liabilities recorded in the consolidated financial statements approximates their fair values.
Critical Accounting Estimates
The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods, if the revision affects both current and future periods.
EMED takes a conservative approach in its accounting policy towards exploration expenditure and to goodwill on acquisition. All such expenditures are written off on acquisition or when incurred pending the Board's decision to commence project development.
The Group has three major accounting estimates:
(1) Deferred Tax relating to the Rio Tinto Copper Mine in Spain. The carry forward tax losses for the Group as at 30 June 2012 were €66.5 million of which €27.4 million (deferred tax value of €6.8 million) was attributable to EMED Tartessus and the Rio Tinto Copper Project. It is only these tax losses that have been recognized by the group as this is the only project where the Group has a reasonable expectation of utilizing such losses.
(2) Capitalisation of expenses at the Rio Tinto Copper Mine in Spain. The value of the assets located in Spain relate directly to the ability of the Group to obtain a mining license and restart mining operations. Should the Group not be able to do either, adjustments to the carrying value of assets (tangible and intangible) will have to be made. The value of the adjustments cannot be estimated at present; and
(3) IFRS 2 "Share Based Payments" requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition of liabilities for cash settled share based payments at the current fair value at each balance sheet date. The fair value is measured using the Black Scholes pricing model. The inputs used in the model are based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations.
30 June 2012 (€ 000's) | 30 June 2011 (€ 000's) | 31 Dec 2011 (€ 000's) | |
Property, plant and equipment | 29,555 | 26,709 | 28,363 |
Intangible assets | 9,954 | 6,532 | 8,424 |
Deferred tax | 6,840 | 4,824 | 5,812 |
Share options reserve | 5,371 | 5,221 | 5,269 |
Changes in Accounting Policies
The Group has not changed any accounting policy since the year ended 31 December 2011.
Financial Instruments and Other Instruments
The Group's financial assets and liabilities consist of cash and cash equivalents, investments, receivables, accounts payable and accrued liabilities, some of which are denominated in British pounds, Canadian dollars, Euros and U.S. dollars.
The Group is at risk of financial gain or loss as a result of foreign exchange movements against the Euro. The Group minimises its foreign exchange risk by maintaining low account balances in currencies other than the Euro. The Group does not currently have major commitments to acquire assets in foreign currencies and historically has incurred the majority of its exploration costs in Euro.
Events after the reporting period
On 9th July 2012, the Company announced that it entered into a Sale and Purchase Agreement ("SPA") with Rumbo 5-Cero, S.L. ("Rumbo"), part of an established diversified Andalucían investment group, in relation to the €10 million purchase of certain land plots (covering part of the tailings dams) (the "Land") owned by Rumbo adjoining the Rio Tinto Copper Mine (the "Mine"). The acquisition of the Land was required in order to restart production at the Mine.
The consideration of €10 million (plus applicable taxes), is satisfied as follows:
·; €1 million which was paid in cash on execution of the SPA;
·; €3.5 million payable in cash on closing of the Land acquisition being not later than 28 September 2012 ("Closing"); and
·; €5.5 million to be satisfied by the allotment of 48,549,234 new ordinary shares of 0.25p each in EMED Mining at 9.14 pence per share on Closing.
In addition, the parties intend to enter into a 50/50 joint venture - of which EMED Mining will be the operator - to test and potentially exploit certain tailings and waste dumps.
The Company also announced on 9th July 2012 that Yanggu Xiangguang Copper Co. Ltd ("XGC") had conditionally agreed to subscribe for 32,247,662 new ordinary shares of 0.25 pence each of the Company at a price of 10 pence per share for aggregate proceeds of US$5 million. These funds will be partly applied in funding the cash consideration for the acquisition of the Land.
On 3 August 2012, the Company announced that it had entered into an SPA with Inland Trading 2006, S.L. ("Inland"), for the €5 million purchase of the last land plot (the "Land Plot") required for planned operations of the Mine. This Land Plot covers part of the Mine's main tailings dam wall and satisfies all of the project's needs for tailings deposition from proposed operations along with the potential expansion thereof in the shorter term.
The consideration is satisfied as follows:
·; €1 million which was paid in cash on execution of the SPA;
·; €1.5 million payable in cash in eight equal instalments over a period of 24 months; and
·; €2.5 million to be satisfied by the allotment of 18,511,675 new ordinary shares of 0.25p each in at 10.61 pence per share.
In addition, EMED Mining has been granted options by Inland and Construcciones Zeitung, S.L. ("Zeitung") to acquire additional plots of land in the surrounding district (the "Option Lands"), exercisable within four years at an aggregate price of €9 million. The Option Lands are of interest to the Company because of the scale of potential expansion in the longer term.
These arrangements secure all the land required for the Mine and its potential expansion of both mine life and annual output.
Outstanding Share Data
The Company's authorised share capital consists of 1,400,000,000 Ordinary Shares of 0.25p each. As at 30 June 2012, the Company had the following shares outstanding and commitments to issue shares:
Number of shares | |
Ordinary Shares | 972,355,347 |
Warrants | 2,779,067 |
Options | 72,671,064 |
Fully diluted | 1,047,805,478 |
Since 30 June 2012 the following share issues have been announced but at the date of this report were awaiting approval from the TSX
·; Rumbo: 48,549,234 shares, subject to completion by 28 September
·; XGC: 32,247,662 shares, subject to Chinese regulatory
·; Inland Trading: 18,511,675 shares
Subject to completion of these transactions, the Company will have the following shares outstanding and commitments to issue shares:
Number of shares | |
Ordinary Shares | 1,071,663,918 |
Warrants | 2,779,067 |
Options | 72,671,064 |
Fully diluted | 1,147,114,049 |
Internal Controls Risks
Management has established systems of Internal Control over the Financial Reporting ("ICFR"), process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced. There was no change in the Group's ICFR that occurred during the period beginning on 1 January 2012 and ended on 30 June 2012 that has materially affected, or is reasonably likely to materially affect, the Group's ICFR.
Additional Information
Additional information relating to the Company, including the Company's AIF is available under the Company's profile on SEDAR at www.sedar.com.
CORPORATE INFORMATION
Directors Ronald Beevor Chairman Aristidis (Harry) Anagnostaras-Adams Managing Director/ CEO
John Leach Finance Director/CFO Roger Davey Director Ashwath Mehra Director José Sierra López Director Robert Francis Director Jasper Bertisen Director Senior Management William Enrico Chief Operating Officer, Spain Demetrios Constantinides Deputy Chairman, Slovakia
Rob Williams Group Development Manager
Ron Cunneen Group Chief Geologist
Registered Office 1 Lampousas Street, Nicosia, Cyprus
Stock Exchange Listings Toronto Stock Exchange TSX Code: EMD
London Stock Exchange AIM: EMED
| Further Information on EMED Mining
Visit: www.emed-mining.com Mail: 1 Lampousas Street, Nicosia. Cyprus
T: +357 2244 2705 F: +357 2242 1956
To be notified by email of future announcements, visit the website www.emed-mining.com and subscribe to EMED Mining email list.
Shareholder Enquiries The main registrar for the Ordinary Shares is Cymain Registrars Ltd., 26 Vyronos Avenue, 1096 Nicosia, Cyprus. The custodian of the depositary interest facility is Computershare Investor Services PLC (UK), The Pavilions, Bridgwater Road, Bristol BS13 8AE, United Kingdom. The Canadian sub-registrar and transfer agent for the Ordinary Shares is Computershare Investor Services Inc., 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1.
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