GCM Resources Regulatory News (GCM)

GCM Resources plc 

(AIM:GCM)

7th September 2011

Preliminary Results for the twelve months ended 30 June 2011

GCM Resources plc (GCM) is a London based resource exploration and development company. Its principal asset is its undeveloped coal deposit in the Phulbari region of Bangladesh, the development of which is awaiting approval from the Government of Bangladesh.

Key Developments

·; The Bangladesh Government has consulted widely both in Bangladesh and overseas. International development agencies and experts including Non-Resident Bangladeshis have recommended that the country move to developing its domestic coal reserves in order to address its growing energy needs. There now appears to be a widespread consensus amongst the country's politicians and government officials that large scale coal mining should go ahead.

·; GCM has continued to be in discussion with potential development partners, favouring those who can augment the Company's skills in power development, marketing and logistics, a strong political network, experience of developing substantial projects and/or economies of scale with other mining operations. Discussions have also been held with companies who can contribute to the economic development of the Phulbari region.

·; As at 30 June 2011 GCM held cash of £0.5 million (2010: £0.9 million) and listed equity investments of £18.0 million (2010: £21.8 million). As of 6 September 2011 GCM held cash and listed equity investments of £15.6 million.

·; The Group made a profit after tax of £2.3 million for the year to 30 June 2011 (2010: loss of £3.2 million). Evaluation costs relating to the Phulbari Coal Project were £3.0 million for the year to 30 June 2011 (2010: £3.2 million).

·; GCM disposed of its holding in Aura Energy Limited and its interest in the Aura/GCM joint venture for combined cash consideration of £1.7 million and received a cash dividend of £2.2 million from Polo Resources Limited.

The Chief Executive's Statement, Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet and Cash Flow are presented on the following pages.

Chief Executive's Statement

Commitment to the Phulbari Project

GCM Resources plc (GCM) remains fully committed to the Phulbari Coal Project (the Project) in Bangladesh. We continue to believe that the Project can provide a fast, low risk, reliable and economic means of delivering the commercial energy required to bring a step-change in electricity availability for the people of Bangladesh.

Approval Process

The pursuit of approval has been a slow and, at times, frustrating process. We completed the Feasibility Study and submitted the Scheme of Development for the Project to the Government in late 2005 and since that time the construction of the Project has been stalled while we await that approval.

Despite the passage of time, we believe that the Project approval will ultimately be forthcoming. For Bangladesh to continue to develop there needs to be a substantial increase in its electricity generating capacity. As the country's largest proven coal resource and the only domestic coal deposit that has been subject to meaningful evaluation, Phulbari has a unique contribution to make to this process.

We believe that there are compelling arguments to develop the Project and that we have continued to make progress along the road to approval. However, the decision is outside our control and consequently we are unable to predict its timing. Given that the Project has a construction time of 24 months, we are approaching the point where a decision is necessary if there is to be significant progress on Project development in advance of the next parliamentary general election which is scheduled for late 2013.

Progress

Over the last two years, the Government of Bangladesh has considered in some detail the options available to enable the country to achieve the necessary uplift in power generation capacity. They have consulted with experts in the mining and power industries from outside the country, including Non-Resident Bangladeshi's and domestic politicians and government officials. As part of this process, we have facilitated a number of visits to operating mines outside Bangladesh and participated in a number of seminars in the country and overseas. In November 2010, the Parliamentary Standing Committee on Power and Energy concluded that the country should use open pit mining methods to develop its coal reserves. Similarly, the Japan International Co-operation Agency (JICA) has prepared a power system master plan for the Government in which it proposed that the country move to mining its domestic coal reserves with ultimately half its power supply being generated from coal.

It is key to the Project's success that the Company, the Government and the community in Phulbari form an effective partnership. To this end, we have spent considerable time in discussion with the ministers and government officials to better understand their objectives and address their concerns in relation to the Project.

We believe that there is now widespread recognition amongst the politicians in Bangladesh that the development of the coal sector is necessary for the country to address its energy needs. The Finance Minister and the Energy Ministry have both acknowledged that the Government now has an obligation to communicate the benefits of developing the country's coal resources more widely, particularly to those who live in the Phulbari area. The State Minister Land, who is also a Member of Parliament for the Phulbari area has spoken in Parliament in favour of coal mining in Phulbari. We look forward to working with the Government as it communicates the benefits and impacts of coal mining and enables those potentially affected by the Project to make informed decisions about their future.

Next steps

We continue to be ready to move the Project forward when the Government approves the Project's Scheme of Development.

The economic impact of the Project in the Phulbari region goes well beyond the jobs that the mine itself will create. Mining would give access to valuable co-products including kaolin, silica sand and aggregates as well as fresh water that would support new industries. The development of a reliable power supply would also make the area attractive for manufacturing industries. Anticipating this, we have been in discussions with a number of companies who can support the development of these industries.

The GCM management team has the necessary skills to develop and run a mine such as that envisaged at Phulbari. However we recognise that there would be benefits in developing the Project with a partner that has complementary skills. We therefore continue to have discussions with other organisations which have expertise in power development, marketing and logistics, a strong political network and experience of developing substantial projects in Asia and/or those who can provide access to synergies with other mining operations. The interests of our existing shareholders are always paramount in these discussions.

Opposition to the Project

The Project touches on many sensitive issues including management of the environmental and social impacts of modern large scale mining, resettlement, economic development, inward investment in a developing country, export of a nation's resources and climate change. We do not expect there to be unanimous support for the Project and we respect the rights of all people to express their views about the Project, whether favourable or not. However, while it is relatively easy to advocate the non-development of the Phulbari Project, it is more challenging to propose an alternative, credible and economic means of delivering the electricity that will facilitate the continued economic development of Bangladesh and its people.

By their nature, the impacts of mining projects (both positive and negative) on the lives of people living near them can be substantial and long term and so it is quite right that projects such as the Phulbari Coal Project are subject to scrutiny and challenge. We at GCM accept this and welcome opportunities to explain ourselves and benefit from the experience and expertise of others. Where people misunderstand the impacts of the Project and the steps we are proposing to take to manage these, we seek the opportunity for constructive engagement so that they can better understand both the benefits and the impacts of the Project.

Financial Resources

As at 30 June 2011 GCM held cash of £0.5 million (2010: £0.9 million) and listed equity investments of £18.0 million (2010: £21.8 million).

Financial results

The Group made a profit after tax of £2.3 million for the year to 30 June 2011 (2010: loss of £3.2 million). During the year GCM disposed of its holding in Aura Energy Limited (Aura) for a profit of £0.5 million. GCM also sold its interest in the joint venture projects with Aura in Western Africa for cash consideration of £1.2 million, of which £0.3 million is payable in November 2011. The Group also received a cash dividend from Polo Resources Limited during the period of £2.2 million.

Evaluation costs relating to the Phulbari Coal Project were £3.0 million for the year to 30 June 2011 (2010: £3.2 million).

Our people

GCM values its employees and their contribution to the Company's development and growth. On behalf of the Board I would like to thank all our employees for their hard work, commitment and continued patience over the last twelve months.

On behalf of the Board

Steve Bywater

6 September 2011

Consolidated Income Statement For Year Ended 30 June

Consolidated Statement of Comprehensive Income For Year Ended 30 June

Consolidated Statement of Changes in Equity For Year Ended 30 June

Consolidated Balance Sheet As At 30 June

Consolidated Cash Flow Statement For Year Ended 30 June

The audited financial information for the years ended 30 June 2011 and 30 June 2010 contained in this document do not constitute statutory accounts as defined in the Companies Act 2006. The comparative financial information is based on the statutory accounts for the financial year ended 30 June 2010. Those accounts, upon which the auditors issued an unqualified opinion with an emphasis of matter paragraph, have been delivered to the Registrar of Companies. The financial information for the year ended 30 June 2011 has been extracted from the financial statements of GCM Resources plc which will be delivered to the Registrar of Companies in due course. The auditors have issued an unqualified opinion with a similar emphasis of matter paragraph on the Group's statutory financial statements for the year ended 30 June 2011. The preliminary announcement was approved by the Board of Directors on 6 September 2011.

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