Last checked at 29 Nov 2011 07:00
Anglesey Mining plc
Half yearly report 2011
Chairman's statement and management report - November 2011
We are very pleased to be able to report further significant progress at the33% owned Labrador Iron Mines (LIM) operations in the period since the lastreport to shareholders. Stripping and mining operations have proceeded well,the processing plant frequently exceeded its design throughput and the firstshipment of iron ore left the port of Sept-Isles bound for China on 3 October2011. The substantial group profit of £16.7 million for the period is largelydue to the success of the investment in LIM. Meanwhile at Parys Mountain weplan to start a drilling and geophysical programme in the immediate future asthe first step in a fresh approach to this property.
Labrador Iron
The highlights at the Schefferville properties for the period ended 30 September 2011 were:
* 723,000 tonnes of ore mined and trucked to Silver Yards during the half
year including 212,000 tonnes of direct railable ore (DRO) at an average
grade of 65% iron * James mining operations operated ahead of schedule * Silver Yards processing plant throughput exceeded 8,000 tonnes per day * A second phase processing plant expansion was completed increasing recoveries by the production of high quality sinter fines * A second train has increased the tonnage carried on the railway to Sept-Iles.
Details of production to date are shown in the following table:
Quarter ended 30 Half year ended September 2011 30 September 2011 Tonnes Grade Tonnes Grade % % Fe Fe Ore Mined 612,596 60.2 722,980 59.9 Including 177,863 65.3 212,069 65.1DRO Waste Mined 1,536,368 2,262,050 Plant Feed 310,107 57.4 328,210 57.3 Lump Ore 52,179 64.8 60,435 64.7 Sinter 112,951 63.0 119,587 63.0Fines Total 208,461 65.1 213,945 65.1Railed The first ship carrying 167,167 wet tonnes of direct railable ore at a grade of64.8% Fe departed from the port of Sept-Iles on 3 October 2011 bound for Chinaand the second shipment departed on 2 November carrying 172,743 wet tonnes ofsinter fines at a grade of 64.9% Fe, also destined for China. LIM expects athird similar sized shipment to depart at the end of November, and possiblyanother smaller shipment to depart in December.
James Mine Operations
Mining at the James Mine commenced in June 2011 and is continuing to operatewell. To the end of September, a total of 723,000 tonnes of ore had been minedand trucked to the Silver Yards area ahead of processing or transport to theport. The grade of the James ore in the upper benches of the mine continues tobe generally in excess of expectations. Of the total production to the end ofSeptember, some 212,000 tonnes was DRO at an average grade of around 65% ironof which 175,000 tonnes had been railed directly to Sept-Iles without furtherprocessing.Ore mining operations at the James Mine will continue through the remainder of2011 at an average rate of approximately 16,000 tonnes per day and, dependingupon the weather, it is expected that a total of about 1.6 million tonnes willhave been mined by the end of December with about 3 million tonnes of wastemined in the same period. Ore mining operations are expected to continue duringthe winter months, but at a reduced rate.
Silver Yards processing
Following commissioning and start-up in June 2011 the Silver Yards processingplant gradually improved its performance and frequently achieved over 8,000tonnes per day in September and October. The completion of a second phaseexpansion of the Silver Yards plant during the second quarter was designedspecifically for fine material and has resulted in an improved throughput andrecovery rate.The Silver Yards plant was shut down for the season in early November as wetprocessing is not planned in winter conditions. Further plant modification andinstallation of additional equipment as part of the phase three expansion iscontinuing and is designed to increase Silver Yards' production capacity toabout 2 million tonnes per year. It is expected that the planned plantexpansion will be in place by mid-2012.It is also estimated that, subject to weather conditions, approximately 600,000tonnes of saleable product will be railed to Sept-Iles for calendar 2011 andwill all be sold to the Iron Ore Company of Canada (IOC). In addition to theseshipments, it is expected that a further 600,000 tonnes of iron ore will beheld in inventory at Silver Yards and be available for treatment and shippingin 2012, including about 200,000 tonnes of DRO.
LIM 2011 exploration programme
The 2011 LIM exploration program has progressed successfully and is now windingdown. Three rigs were in operation and by the end of September about 8,200metres had been drilled on a number of deposits with the Houston deposit beingthe main focus. It is expected that about 11,500 metres of reverse circulationdrilling will be completed before the onset of winter. Exploration supportprograms including 650 metres of trenching, 65 test pits and air-bornegeophysics will also be completed during the current season.
LIM 2012 Outlook
Mining will continue at the James North and James South deposits in the year 2012, with a planned total ore mined of between 2.0 and 2.5 million tonnes, together with about 3.5 million tonnes of waste.
Subject to final operating plan and budget approval, it is now expected thatbetween 1.8 and 2.0 million tonnes of ore, including material from stockpiles,will be treated in 2012 and this is expected to yield up to 1.5 million tonnesof saleable product. In addition, it is expected that about 500,000 tonnes ofdirect railable ore from both the 2011 stockpile and from 2012 miningoperations will also be available in 2012, for a total production target ofover 2.0 million tonnes of iron ore to be shipped and sold in 2012. A thirdtrain will be introduced in 2012 to enable this production of iron ore to berailed to the port of Sept-Iles.
LIM has signed a MOU with the Sept-Iles Port Authority for the use of the Pointe-aux-Basques terminal for handling and ship loading of LIM's iron ore however these arrangements for 2012 and future years remain subject to evaluation and finalization.
Iron ore produced in 2011 is being sold to IOC and delivered to Asian marketsand re-sold by IOC's marketing organization on the spot market. LIM continuesto review its options for marketing its iron ore production for 2012 andsubsequent years and is evaluating the optimum route to achieve these sales,while still maintaining maximum flexibility and independence. LIM has not yetconcluded any agreements for the sale of any iron ore beyond 2011.
Parys Mountain
Towards the end of the period a review of the Parys Mountain project commencedand a drilling programme to expand and assist this review is planned tocommence in the immediate future; this will target areas close to the shaftwhich could form part of a small mine chiefly focussed in the White Rock area.This concept was the subject of a scoping study prepared by Micon Consultantsin June 2007. The directors believe that the outlook for zinc and lead pricesis positive over the next few years and that work to further develop the WhiteRock area as an early route to the full development of the project isjustified.
Financial results
LIM's fundraising of C$121 million in April 2011 resulted in the reduction ofour stake in that company from 41% to 33%, and the operation of accountingstandards means that this dilution is treated for accounting purposes as a`deemed disposal' or partial sale; because of the low LIM cost base we haverecorded a profit on this non-cash transaction of £19.6 million in the period(2010 - nil). After taking into account operating expenses and other itemsthere was a net profit for the period of £16.7 million (2010 - loss - £0.76million) despite a significant increase in administrative and start-up expensesattributable to LIM. The group's UK administrative expenses excluding LIMincreased to £213,422 from £161,955 in the comparable period of 2010. There areno seasonal effects in these results.The group has no revenues from the operation of its properties. At the periodend the cash resources of the group were £3.4 million (31 March 2011 - £3.7million) and LIM had in excess of C$37.9 million or £23.5 million (31 March2011 - C$7.5 million or £4.8 million).
Outlook
After a number of years in which the group has concentrated its efforts largelyon LIM we are now expanding our review of Parys Mountain with the aim offorming a clear view on the best way to move its development forward. Whilstthere is considerable financial uncertainty in the world, the price of copperwhich represents the major potential revenue from Parys Mountain, remains firm,and there is a continuing consensus that prices for zinc and lead, which arelikely to provide revenues in the early years of the mine, is positive over themedium term.LIM has taken a major step during the last six months as it has moved intoproduction and is planning a major increase in the sale of iron ore products in2012 and beyond. The price of iron ore, after a very steady summer, has becomesomewhat erratic as both miners and Chinese steel mills reassess theirpositions. The directors remain confident that LIM will perform well in 2012and continue to provide a fundamental basis for the continuing well-being ofthe group.John F KearneyChairman28 November 2011
Condensed consolidated income statement
Notes Unaudited Unaudited six six months months ended 30 ended 30 September September 2011 2010 All operations are £ £ continuing Revenue - - Expenses (213,422) (161,955) Share of loss of 11 (2,635,673) (407,016) associate Gains on deemed 11 19,607,503 17,279 disposals in associate Investment income 20,566 5,394 Finance costs (56,059) (59,860) Foreign exchange (67,700) (149,974) loss Profit/(loss) 16,655,215 (756,132) before tax Tax 9 - - Profit/(loss) for 16,655,215 (756,132) the period All attributable to equity holders of the company Profit/(loss) per 7 share Basic - pence per 10.5 p (0.5)p share Diluted - pence 9.9 p (0.5)p per share Consolidated statement of comprehensive income Profit/(loss) for 16,655,215 (756,132) the period Other comprehensive income: Exchange (595,891) (1,213,105) difference on translation of foreign holding Total 16,059,324 (1,969,237) comprehensive (loss)/income for the period All attributable to equity holders of the company
Condensed consolidated statement of financial position
Unaudited Unaudited 30 30 September September 2011 2010 Notes £ £ Assets Non-current assets Mineral property 10 13,943,350 13,820,570 development Property, plant 204,687 204,687 and equipment Interest in 11 37,728,004 20,330,748 associate Deposit 121,406 121,540 51,997,447 34,477,545 Current assets Other receivables 20,257 17,563 Cash and cash 3,360,890 2,395,421 equivalents 3,381,147 2,412,984 Total assets 55,378,594 36,890,529 Liabilities Current liabilities Trade and other (772,862) (791,780) payables (772,862) (791,780) Net current 2,608,285 1,621,204 assets Non-current liabilities Loan (2,133,420) (2,020,207) Long term (42,000) (42,000) provision (2,175,420) (2,062,207) Total liabilities (2,948,282) (2,853,987) Net assets 52,430,312 34,036,542 Equity Share capital 7,094,914 7,042,414 Share premium 9,627,971 8,097,973 Currency 3,025,106 2,768,165 translation reserve Retained earnings 32,682,321 16,127,990 Total 52,430,312 34,036,542shareholders' equity All attributable to equity holders of the company
Condensed consolidated statement of cash flows
Notes Unaudited Unaudited six months six ended 30 months September ended 30 2011 September 2010 £ £ Operating activities Profit/(loss) for the 16,655,215 (756,132) period Adjustments for non-cash items: Investment revenue (20,566) (5,394) Share of loss of 11 2,635,673 407,016 associate
Gain on deemed disposal 11 (19,607,503) (17,279)
in associate Foreign exchange loss 67,700 149,974 (213,422) (161,955) Movements in working capital Decrease/(increase) in 2,212 (9,236) receivables (Decrease) in payables (18,286) (26,089) Net cash used in (229,496) (197,280) operating activities Investing activities Investment revenue 20,306 4,428 Mineral property (42,757) (27,827) development
Net cash used in investing (22,451) (23,399) activities
Financing activities Net proceeds from issue 9,290 - of shares Loan received - Net cash generated from 9,290 - financing activities Net decrease in cash (242,657) (220,679) and cash equivalents Cash and cash equivalents at 3,671,247 2,766,074 start of period Foreign exchange (67,700) (149,974) movement Cash and cash 3,360,890 2,395,421 equivalents at end of period
Condensed consolidated statement of changes in group equity
All attributable to equity holders of the company
Share Share Currency Retained Total capital premium translation earnings £ £ £ reserve £ £ Equity at 31 March 7,092,414 9,621,181 3,620,997 15,748,173 36,082,7652011 - audited Total comprehensive income for the period: Profit for the - - - 16,655,215 16,655,215period Exchange movement on - - (595,891) - (595,891)foreign holdings Total comprehensive - - (595,891) 16,655,215 16,059,324income for the period: Shares issued for 2,500 12,812 - - 15,312cash in respect of option exercises Share issue costs - (6,022) - - (6,022) Equity-settled - - - 278,933 278,933benefits credit: - associate Equity at 30 7,094,914 9,627,971 3,025,106 32,682,321 52,430,312September 2011 - unaudited Comparative period Equity at 1 April 7,042,414 8,097,973 3,981,270 16,818,846 35,940,5032010 - audited Total comprehensive income for the period: (Loss) for the - - - (756,132) (756,132)period Exchange movement on - - (1,213,105) - (1,213,105)foreign holdings Total comprehensive - - (1,213,105) (756,132) (1,969,237)income for the period: Equity-settled - - - 65,276 65,276benefits credit: - associate
Equity at 30 7,042,414 8,097,973 2,768,165 16,127,990 34,036,542
September 2010 - unaudited Notes to the accounts1. Basis of preparationThis half-yearly financial report comprises the condensed consolidatedfinancial statements of the group for the six months ended 30 September 2011.It has been prepared in accordance with the Disclosure and Transparency Rulesof the UK Financial Services Authority; the requirements of IAS 34 - Interimfinancial reporting (as adopted by the European Union) and using the goingconcern basis (and the directors are not aware of any events or circumstanceswhich would make this inappropriate). It was approved by the board of directorson 28 November 2011. It does not constitute financial statements within themeaning of section 434 of the Companies Act 2006 and does not include all ofthe information and disclosures required for annual financial statements. Itshould be read in conjunction with the annual report and financial statementsfor the year ended 31 March 2011 which is available on request from the companyor may be viewed at www.angleseymining.co.uk.The financial information contained in this report in respect of the year ended31 March 2011 has been extracted from the report and financial statements forthat year which have been filed with the Registrar of Companies. The report ofthe auditors on those accounts did not contain a statement under section 498(2)or (3) of the Companies Act 2006 and was not qualified. It included a referencein respect of the valuation of the Parys Mountain property to which theauditors drew attention by way of emphasis of matter. The half-yearly resultsfor the current and comparative periods are unaudited.
2. Significant accounting policies
The accounting policies applied in these condensed consolidated financialstatements are consistent with those set out in the annual report and financialstatements for the year ended 31 March 2011. The following amendments toaccounting standards and new interpretations were effective in the currentperiod: IAS 24 `Related Party Disclosure' (amendment) - Revised definition ofrelated parties and disclosure exemptions for government-controlled entities;IFRIC 14 (amendment) - Prepayments of a minimum funding requirement;Improvements to IFRS (May 2010); and IFRIC 19 'Extinguishing financialliabilities with equity instruments'.The adoption of these amendments and new interpretations has not resulted in achange to the accounting policies nor had a material effect on the financialperformance and position of the group. In preparing these financial statementsany accounting assumptions and estimates made by management were consistentwith those applied to the aforesaid annual report and financial statements.
3. Risks and uncertainties
The principal risks and uncertainties set out in the group's annual report andfinancial statements for the year ended 31 March 2011 remain the same for thishalf-yearly financial report and can be summarised as: development risks inrespect of mineral properties, especially in respect of the granting ofpermissions and variations in metal prices; liquidity risks during development;and foreign exchange risks. More information on these principal risks is to befound in the 2011 annual report which may viewed at www.anglesey mining.co.uk.
4. Statement of directors' responsibilities
The directors confirm to the best of their knowledge that: (a) the condensedconsolidated financial statements have been prepared in accordance with lAS 34as adopted by the European Union; and (b) the interim management reportincludes a fair review of the information required by the FSA's Disclosure andTransparency Rules (4.2.7 R and 4.2.8 R). This report and financial statementswere approved by the board on 28 November 2011 and authorised for issue onbehalf of the board by Bill Hooley, Chief Executive Officer and IanCuthbertson, Finance Director.
5. Activities
The group is engaged in mineral property development and has no turnover. There are no minority interests or exceptional items.
6. Equity settled employee benefits
IFRS 2 "Share-based Payment" requires the recognition of equity settled share-based payments at fair value at the date of grant. The fair value of any options expensed in these statements, where applicable, is determined by a Black-Scholes option pricing model using a volatility factor of 71% and an option life of 3 years as the significant assumptions.
7. Earnings per share
Earnings per share are computed by dividing the profit attributable to ordinaryshareholders of £16,655,215 (2010 loss £756,132), by 158,401,220 (2010 -153,158,051) - the weighted average number of ordinary shares in issue duringthe period or by 167,973,969 (2010 - 153,058,051) the weighted average numberof dilutive shares which includes those potentially issuable in respect ofshare options. Where there are losses the effect of outstanding share optionsis anti-dilutive.8. Operating segmentsThere are no revenues. The cost of all activities charged in the incomestatement relates to exploration and development of mining properties which isthe group's principal activity . The group's assets and liabilities and incomestatement are analysed as follows by geographical location, which is the basisof internal management reporting. Unaudited six months ended 30 Unaudited six months ended September 2011 30 September 2010 UK Canada - Total UK Canada - Total associate associate £ £ £ £ £ £ Expenses 213,422 - 213,422 161,955 - 161,955 Share of - 2,635,673 2,635,673 - 407,016 407,016loss in associate Gain on - (19,607,503) (19,607,503) - (17,279) (17,279)deemed disposals Investment (20,566) - (20,566) (5,394) - (5,394)income Finance 56,059 - 56,059 59,860 - 59,860costs Exchange 67,700 - 67,700 149,974 - 149,974rate loss (Profit)/ 316,615 (16,971,830) (16,655,215) 366,395 389,737 756,132loss for the year Unaudited 30 September 2011 Audited 31 March 2011 UK Canada - Total UK Canada - Total associate associate £ £ £ £ £ £ Assets 17,650,590 37,728,004 55,378,594 17,920,142 21,073,132 38,993,274 Liabilities (2,948,282) - (2,948,282) (2,910,509) - (2,910,509) Net 14,702,308 37,728,004 52,430,312 15,009,633 21,073,132 36,082,765assets 9. Deferred tax
There is an unrecognised deferred tax asset of £1.5 million (31 March 2011 - £1.5m) which, in view of the group's trading results, is not considered to berecoverable in the short term. There are also capital allowances, includingmineral extraction allowances, exceeding £11 million (unchanged from 31 March2011) unclaimed and available. Because the recoverability of any taxationrelative to these amounts from future operations is uncertain, no deferred taxasset is reflected in the condensed financial statements.10. Development expenditureMineral development expenditure incurred by the group is carried in thecondensed consolidated financial statements at cost, less an impairmentprovision if appropriate. The recovery of this expenditure is dependent uponthe successful development and operation of the Parys Mountain project which isitself conditional on finance being available to fund such development. Duringthe period expenditure of £42,757 was incurred (six months to 30 September 2010- £27,827). There have been no indicators of impairment during the period.
11. Interest in associate
At 30 September 2011 the group had a 32.9% (31 March 2011 - 40.0%) interest inLabrador Iron Mines Holdings Limited (LIM), a company registered in Ontario,Canada, which is independently managed and is accounted for in these financialstatements as an associate company. LIM is the 100% owner and operator of aseries of iron ore properties in Labrador and Quebec, some of which wereformerly held and initially explored by the group. The change in the group'spercentage holding over the period results from the issue of shares by LIM inrespect of a fund raising in April 2011 and the exercise of options andwarrants. The fully diluted interest of the group in LIM was 31.6% ( 2010 -39%). At 21 November 2011 the published fair value of the group's investment inLIM was £62 million based on a share price of C$5.62 per LIM common share atthat date. At 30 September 2011 the share price was C$5.79 .
The changes in the group's interest in LIM are:
Unaudited Unaudited Audited 31 30 30 March 2011 September September 2011 2010 £ £ £ Values in group financial statements: Value brought 21,073,132 21,868,314 21,868,314 forward from previous period Group's share of (2,635,673) (407,016) (1,104,453) (losses), adjusted to eliminate any fair value uplift and related taxation in associate's accounts Group's share of 278,933 65,276 374,984 equity-settled benefits included in (losses) above and now added back
Profit on deemed 19,607,503 17,279 294,560
disposals following LIM share issues
Exchange rate (595,891) (1,213,105) (360,273)
movement
Amount carried in 37,728,004 20,330,748 21,073,132
the group accounts - being the value of group's share of net assets of the associate without any fair value adjustment in respect of mineral properties
12. Events after the reporting period
None.
13. Related party transactions
None.
For further information, please contact:
Bill Hooley, Chief Executive +44 (0) 1492 541981;
Ian Cuthbertson, Finance Director +44 (0) 1248 361333;
Samantha Harrison / Shaun Whyte, Ambrian Partners Limited +44 (0) 2076 344700;
Emily Fenton / Jos Simson,
Tavistock Communications +44 (0) 20 7920 3155 / +44 (0) 7788 554035.
XLON