30 Jun 2014 07:00
FRONTIER MINING LTD
("Frontier" or "the Company")
Final Results for the year ended 31 December 2013
Frontier Mining Ltd (AIM: FML), the AIM and KASE listed production, exploration and development company focused on Kazakhstan, today announces its audited final results for the year ended 31 December 2013.
Corporate Highlights
· Extension of loan facility with Sberbank Kazakhstan (US$35 million) by 34 months to October 2018 and the grace period for principal repayments until September 2014, reducing cash outflow repayments by US$7 million in 2013
o Additional loan and credit facility to the value of US$17.9 million
· Commencement of dealings in the Company's shares on the Kazakhstan Stock Exchange ("KASE")
Operational Highlights
· Shipment of copper cathode commenced in H1 2013
· 1,702 tonnes of copper cathode produced in the year
o Average preliminary cash cost of $3,956 per tonne
o Average sales price of $7,034 per tonne
o Revenue from sales of $10.4 million for 2013
o Revenue was sufficient to cover production costs and Company overheads
· Staff headcount reduced by 27%
· Electricity supply for 2014 secured at 20% cost reduction
· Exploration work carried out during the year: more than 6,100 meters of drilling and 19,061 m3 of trenching
· Appointment of Adam Moroney, independent degree-qualified consultant with 20 years of
SX/EW management and heap leach research experience, as an adviser to the Company
Financial Highlights
· Revenue $10.4 million (2012: $5.4 million)
· Profit \ (Loss) Before Tax of $(5.4) million (2012: $(9.5) million loss before revaluation gain and income tax )
· Earnings \ (Loss) per Share of $0.01 (2012: $(0.01) loss)
· Net Asset Value of $163.6 million (2012: $150.0 million)
Post-Period Highlights
· Sale of the Company's 100% owned subsidiary FML Kazakhstan LLP, owner of the Naimanjal licence area, for a cash consideration of US$30 million to UNION TRANSNATIONALE MINIERE S.A. subject to regulatory approvals in the Republic of Kazakhstan. The Naimanjal licence area in North East Kazakhstan has four commercial discoveries, including Baitemir, Yubileiny and Beschoku
o All proceeds from the sale are expected to be used for repayment of maturing debt of the Company and financing capital expenditures for the ramp up of copper production at Benkala to maximum levels
Yerlan Aliyev, Chairman and CEO, commented:
"The year of 2013 was a year when the Company faced many challenges. Available resources did not allow us to provide the plant with solution to produce copper at expected volumes, and while battling with financial issues, the Company continued optimizing technological parameters of operations in challenging weather conditions. Management continued searching for new strategic or financial investor within the legal framework of subsoil users in the Republic of Kazakhstan.
Following the sale of the Naimanjal licence area, we now intend to focus entirely on stabilizing operations at Benkala and developing the South Benkala resource. Resolving of the pressing financing matters will allow us to optimize copper cathode production at the Benkala SX-EW plant, paving the way towards increased production in the near future.
We look forward to the challenges of 2014."
For further details please contact:
Frontier Mining Ltd | Yerlan Minavar | +44 (0) 20 7898 9019 |
Cairn Financial Advisers (NOMAD) | Sandy Jamieson | +44 (0) 20 7148 7900 |
RFC Ambrian (Broker) | John Harrison | +44 (0) 20 3440 6800 |
Walbrook (PR/IR) | Paul Cornelius Guy McDougall | +44 (0) 20 7933 8780 |
Notes to Editor
Frontier Mining Ltd is a copper company with production, development and exploration operations in Kazakhstan.
The Company's main activity is at Benkala, an open pit copper mine and SX-EW production facility, located on the Urals copper gold ore belt in North West Kazakhstan. Frontier has a 100% interest in Benkala through its subsidiary KazCopper LLP.
Frontier maintains an administrative and technical office in Almaty, the former capital city of Kazakhstan and the main business centre in the South East.
Frontier Mining's shares are traded on the AIM market of the London Stock Exchange, and on the Kazakhstan Stock Exchange.
Chairman and Chief Executive Officer's Statement
The year of 2013 was a year when the Company faced many challenges. Available resources did not allow us to provide the plant with solution to produce copper at expected volumes, and while battling with financial issues, the Company continued optimizing technological parameters of operations in challenging weather conditions. Management continued searching for new strategic or financial investor within the legal framework of subsoil users in the Republic of Kazakhstan.
During 2013 we made important improvements in efficiency, which included a significantly reduced headcount of 27% and a 20% reduction in energy cost secured for 2014. Shipment of copper cathode commenced in June and we had, by the end of the year, produced a total of 1,702 tonnes. We achieved an average preliminary cash cost of $3,956 per tonne against an average sales price of $7,034 per tonne. In all, we generated in excess of $10 million from sales, which was sufficient to cover production costs and Company overheads.
We continued our exploration programs for the large part of year, with more than 6,100 meters of drilling and 19,061 m3 of trenching completed. As shareholders will know however, we subsequently announced, in March 2014, the sale of the Naimanjal licence area for US$30 million, which is subject to the consent of the Kazakhstan Ministry of Industry and New Technologies. The licence area included the Baitemir, Beschoku and Yubileiny discoveries and the sale represented the end of our exploration activities on these sites. All proceeds from the sale are expected to be used for repayment of the Company's maturing debt and financing capital expenditures for the acceleration of copper production at Benkala to optimum levels. Whilst the Naimanjal zone was viewed as a good future prospect for our Company, we now intend to focus entirely on optimising operations at Benkala and developing the South Benkala resource.
Adam Moroney, an independent consultant with 20 years of SX/EW and heap leach experience joined our team in 2013. Mr. Moroney has added great insight to our stacking strategy and capabilities. After a series of tests and trials proposed and overseen by Mr Moroney, leach pad stacking height at pad 3 has increased significantly. As at 31 December 2013, pad 4 was being stacked with forced aeration circuit installed to ensure stable leach kinetics.
In terms of corporate matters, recent sale of Naimanjal will enable us to finance working capital shortages and pay back maturing debt as planned. During 2013, we also extended our loan facility with Sberbank Kazakhstan (US$35 million) by 34 months to October 2018 and the grace period for principal repayments until September 2014, reducing cash outflow repayments by US$7 million in 2013.
As announced on 20 August 2013, FML is subject to litigation involving Sokol Holdings Inc., and its owners, Brian Savage and Tom Sinclair ("Plaintiff") by Dorsey & Whitney LLP ("Defendant"). The judgment obtained in this litigation was subject to an appeal by Sokol Holdings Inc, which has been rejected. Whilst the Board of FML does not believe the Company should bear any costs of this litigation, as a named party, it is jointly and severally liable for the final sum awarded to the defendant.
Frontier Mining is now dual listed on the Kazakhstan Stock Exchange, satisfying the demands of the regulatory requirements of the National Bank of Kazakhstan rules. Dealings in the Company's shares on the Kazakhstan Stock Exchange commenced on 5 March 2014. The costs of listing the Company and maintaining the listing were and are minimal. Following the sale of the Naimanjal licence area, we now intend to focus entirely on stabilising operations at Benkala and developing the South Benkala resource. The proceeds of the Naimanjal transaction will allow us to optimise copper cathode production at the Benkala SX-EW plant, paving the way towards increased production in the near future.
We look forward to the challenges of 2014.
Yerlan Aliyev
Chairman of the Board
Financial Review
During 2013 1702 tonnes of copper cathode were produced, which was in line with forecast for the period. $17.9 million of financing received from Sberbank, as well as $10.4 million of revenue from copper cathode sale allowed the Company to continue its operations and investment activities.
For the year ended 31 December 2013, the Company received net income of $13.6 million (after gains from discounted operations) compared with net loss of $11.3 million for 2012.
Revenue and cost of sales increased in line with copper cathode sale increase, while gross profit increased more than 10 times when compared to 2012. In 2013 selling, general and administrative expenses increased by 9.7% compared to 2012, mainly due to reduction of administrative expenses related to Frontier Mining Ltd.
Financing costs in 2013 decreased by 39.4% compared to 2012 due to capitalization of interest on loans used for exploration activities. Other income includes income received from sale of wagons and other assets.
Compared to 2012, outflow of cash for operating activities in 2013 decreased by $6.2 million, mainly due to increase of revenue from copper cathode sale. Increase of cash spent on operating activities in 2012 was due to commencement of production, thus increased operating expenses.
In 2013 the Company re-considered the status of the Benkala mine due to the necessity to perform further feasibility studies and other exploration works to gain a deeper understanding of the ore reserves on the mine and transferred its assets related to Benkala mine from mining assets to exploration and evaluation assets, which stood at $198.1 million as at 31 December 2013. Net asset value as at 31 December 2013 was $163.6 million.
Nurumbetova Marzhan
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2013
US Dollars | Notes | 2013 | 2012 |
Revenue | 24 | 10,411,431 | 5,372,018 |
Cost of sales | 25 | (8,763,228) | (5,208,375) |
Gross profit | 1,648,203 | 163,643 | |
Selling, general and administrative expenses | 26 | (5,011,954) | (4,568,351) |
Finance costs, net | 27 | (3,036,150) | (5,016,401) |
Foreign exchange loss, net | (821,053) | (61,249) | |
Other income / (loss), net | 28 | 1,833,393 | (16,311) |
Loss before income tax | (5,387,561) | (9,498,669) | |
Income tax (expense) / benefit | 19 | (1,814,036) | 75,814 |
Loss for the year from continued operations | (7,201,597) | (9,422,855) | |
Discontinued operations: | |||
Gain / (loss) from discontinued operations, net of tax | 8 | 20,855,716 | (1,854,392) |
Gain / (loss) for the year from discontinued operations | 20,855,716 | (1,854,392) | |
Gain / (loss) for the year | 13,654,119 | (11,277,247) | |
Other comprehensive loss: | |||
Items that will be reclassified subsequently to profit or loss | |||
Effect from currency translation | 4 | (39,884) | - |
Total other comprehensive loss, net of tax | (39,884) | - | |
Total comprehensive income / (loss) for the year | 13,614,235 | (11,277,247) | |
Income / (loss) per share - basic and diluted | |||
Loss from continuing operations | 23 | (0.00) | (0.01) |
Income / (loss) from discontinued operations | 0.01 | (0.00) | |
0.01 | (0.01) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2013
US Dollars | Notes | December 31, 2013 | December 31, 2012 |
Assets | |||
Non-current assets | |||
Exploration and evaluation assets | 9 | 198,105,513 | 9,081,401 |
Mine development assets | 10 | 499,316 | 187,669,319 |
Property, plant and equipment | 11 | 53,898,801 | 55,590,086 |
Intangible assets | 60,289 | 76,280 | |
Advances paid for non-current assets | 12 | 973,543 | 5,969,272 |
Restricted cash deposit | 13 | 437,413 | 389,593 |
VAT recoverable, non-current portion | 3 | 6,564,006 | 5,488,048 |
Total non-current assets | 260,538,881 | 264,263,999 | |
Current assets | |||
Inventories | 14 | 14,084,584 | 9,766,274 |
Trade accounts receivable | 365,022 | 183,759 | |
VAT recoverable, current portion | 3 | 945,882 | 1,000,218 |
Advances paid | 12 | 632,533 | 5,246,718 |
Other current assets | 1,081,961 | 277,842 | |
Cash and cash equivalents | 15 | 168,770 | 2,184,083 |
Total current assets | 17,278,752 | 18,658,894 | |
Assets of disposable groups held for sale | 8 | 28,124,121 | - |
Total assets | 305,941,754 | 282,922,893 | |
Equity and liabilities | |||
Share capital | 16 | 18,609,140 | 18,609,140 |
Additional paid in capital | 191,334,243 | 191,334,243 | |
Option premium on convertible notes | 120,993 | 120,993 | |
Accumulated losses | (46,388,864) | (60,042,983) | |
Translation reserve | 4 | (39,884) | - |
Total equity | 163,635,628 | 150,021,393 | |
Non-current liabilities | |||
Interest bearing and interest free loans and borrowings from third parties, non current portion | 17 | 49,614,472 | 36,733,794 |
Interest bearing and interest free loans and borrowings from related parties, non current portion | 17 | 860,000 | 13,840,902 |
Provisions, non-current portion | 18 | 4,023,410 | 3,943,420 |
Due to the US Trade and Development Agency | - | 340,000 | |
Deferred tax liability | 19 | 36,685,854 | 34,871,818 |
Total non-current liabilities | 91,183,736 | 89,729,934 | |
Current liabilities | |||
Trade accounts payable | 20 | 2,192,470 | 10,041,126 |
Interest bearing and interest free loans and borrowings from third parties, current portion | 17 | 29,011,413 | 22,015,900 |
Interest bearing and interest free loans and borrowings from related parties, current portion | 17 | 13,559,867 | 4,354,165 |
Provisions, current portion | 18 | 207,154 | 3,252,233 |
Taxes payable | 21 | 1,245,069 | 2,531,273 |
Other current liabilities | 22 | 1,567,264 | 976,869 |
Total current liabilities | 47,783,237 | 43,171,566 | |
Liabilities of disposable groups held for sale | 8 | 3,339,153 | - |
Total liabilities | 142,306,126 | 132,901,500 | |
Total equity and liabilities | 305,941,754 | 282,922,893 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2012
(expressed in US dollars)
US Dollars | Notes | Share capital | Additional paid-in capital | Accumulated loss | Currency translation reserve | Option premium on convertible notes | Total |
As of January 1, 2012 | 18,609,140 | 191,334,243 | (48,765,736) | - | 25,926 | 161,203,573 | |
Issue of convertible note | - | - | - | - | 118,833 | 118,833 | |
Income tax effect | - | - | - | - | (23,766) | (23,766) | |
- | - | - | - | 95,067 | 95,067 | ||
Loss for the year | - | - | (11,277,247) | - | - | (11,277,247) | |
Other comprehensive income | - | - | - | - | - | - | |
Total comprehensive loss for the year | - | - | (11,277,247) | - | - | (11,277,247) | |
As of December 31, 2012 | 18,609,140 | 191,334,243 | (60,042,983) | - | 120,993 | 150,021,393 | |
Profit for the year | - | - | 13,654,119 | - | - | 13,654,119 | |
Other comprehensive loss | 4 | - | - | - | (39,884) | - | (39,884) |
Total comprehensive loss for the year | - | - | 13,654,119 | (39,884) | - | 13,614,235 | |
As of Dec 31 2013 | 18,609,140 | 191,334,243 | (46,388,864) | (39,884) | 120,993 | 163,635,628 |
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2013
US Dollars | Notes | 2013 | 2012 |
OPERATING ACTIVITIES: | |||
Loss before income tax | (5,387,561) | (9,498,669) | |
Adjustments for non-cash flow items: | |||
Depreciation of property, plant and equipment and mine development assets | 2,086,227 | 4,773,119 | |
Amortization of intangible assets | 15,991 | 15,588 | |
Finance costs | 7,626,676 | 5,016,401 | |
Gain from released liability due to US Trade and Development Agency | (340,000) | - | |
Change in bad debt provision for non-current assets | - | 319,264 | |
(Gain) / loss from financial liability at fair value through profit or loss | - | (37,595) | |
Loss from disposal of property, plant and equipment | (80,944) | - | |
Change in provision for value added tax receivable | - | (11,125) | |
Accrual of inventory provision | 14 | 656,750 | - |
Recovery of impairment loss | (1,245,251) | - | |
Foreign exchange loss, net | 2,002,464 | - | |
Cash flows from operating activities before changes in working capital | 5,334,352 | 576,983 | |
Change in value added tax receivable | (1,021,622) | (2,574,399) | |
Change in inventories | (8,090,579) | (9,532,131) | |
Change in trade receivables | (181,263) | (145,983) | |
Change in advances and prepaid expenses | 4,614,185 | (5,246,718) | |
Change in other receivables | (804,119) | (236,005) | |
Change in trade accounts payable | (6,238,003) | 281,011 | |
Change in other current liabilities | 590,395 | (140,752) | |
Change in taxes payable | (1,286,204) | 1,816,013 | |
Change in provision | 135,788 | - | |
Net cash flows from operating activities before income tax and interest paid | (6,947,070) | (15,201,981) | |
Interest paid | (6,420,793) | (4,410,974) | |
Income tax paid | - | - | |
Net cash used in continuing operations | (13,367,863) | (19,612,955) | |
Net cash used in discontinued operations | (31) | - | |
Net cash used in operating activities | (13,367,894) | (19,612,955) | |
INVESTING ACTIVITIES: | |||
Increase in exploration and evaluation assets and mining assets | (3,734,458) | (4,189,599) | |
Purchase of property, plant and equipment | (463,159) | (17,376,455) | |
Purchase of intangible assets | - | (79,528) | |
Proceeds from sale of property, plant and equipment | 2,275,903 | 418,386 | |
Decrease in advances for non-current assets | 12 | 4,995,729 | 3,532,117 |
Increase in restricted cash deposit | 13 | (47,820) | (27,546) |
Net cash used in investing activities | 3,026,195 | (17,722,625) | |
FINANCING ACTIVITIES: | |||
Proceeds from loans from related parties | 233,681 | 8,945,384 | |
Proceeds from loans from third parties | 6,650,000 | - | |
Proceeds from bank loans | 14,286,800 | 25,043,954 | |
Proceeds from issue of notes payable | - | 6,600,000 | |
Repayment of loans from related parties | (6,087,147) | (1,909,830) | |
Repayment of bank loans | (2,187,000) | - | |
Repayment of convertible note to related party | - | (210,595) | |
Repayment of notes payable | (4,570,000) | (450,000) | |
Net cash generated by financing activities | 8,326,334 | 38,018,913 | |
Net (decrease)/increase in cash and cash equivalents | (2,015,365) | 683,333 | |
Cash and cash equivalents at the beginning of the year | 2,184,083 | 1,500,750 | |
Included in disposal group | 52 | - | |
Cash and cash equivalents at the end of the year | 15 | 168,770 | 2,184,083 |
A copy of the Consolidated Financial Statements with Independent auditors' report are being sent to shareholders and are available on the Company's website, www.frontiermining.kz.
http://www.rns-pdf.londonstockexchange.com/rns/8366K_1-2014-6-29.pdf