GCM Resources Regulatory News (GCM)

21st November 2012

GCM Resources plc

(the "Company" or "GCM") 

(AIM:GCM)

Preliminary Results for the twelve months ended 30 June 2012

GCM Resources plc a London based resource exploration and development company, reports its preliminary results for the twelve months ended 30 June 2012. GCM has identified a world class coal resource of 572 million tonnes (JORC compliant) at the Phulbari Coal Project (the Project) in North-West Bangladesh, the development of which is awaiting approval from the Government of Bangladesh.

Highlights:

·; The Bangladesh Government has commenced restructuring the country's energy supply towards coal as the major source of power generation.

·; GCM has intensified its efforts in pursuing approval of the Phulbari Coal Project through further engagement with the local community and direct engagement with the Government.

·; The Government has requested the local administration of the Phulbari area to support the Company's activities.

·; It has been reported in the Bangladesh media that the Coal Policy Technical Committee report has endorsed open pit mining at Phulbari.

·; GCM engaged international consultants Environmental Resources Management to review the Environmental and Social Impact Assessment of the Project in light of new IFC Performance Standards.

·; As at 30 June 2012 GCM held cash of £0.4 million (2011: £0.5 million) and liquid equity investments of £7.2 million (2011: £18.0 million).

·; GCM recorded a loss after tax of £3.3 million for the year ended 30 June 2012 (2011: profit of £2.3 million).

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

The Annual Report and Accounts for the year ended 30 June 2012 have been posted on the Company's website (www.gcmplc.com) and will be mailed to shareholders. Copies are also available on request from the registered office of the Company.

Chairman's Statement

Strategy

The Board of GCM Resources has undertaken a thorough review of the current strategy to gain Project approval. We are focusing on direct engagement with the Government of Bangladesh and demonstrating how the Project can help meet the country's specific energy and power needs, particularly given the country is heading for an election at the end of 2013. At the same time we have opened up new channels of communication with the local community to ensure they are fully informed on the Project and that we understand and address their concerns.

During meetings with the Government, we have emphasised that coal produced from the Phulbari mine would be considerably cheaper than using imported coal to fuel electricity generation. We have also been discussing the advantages of positioning a large scale power plant at the mine site to simplify power generation and negate the need for expensive and complex coal handling and transportation.

Urgency

We believe it is in the best interests of the people of Bangladesh to utilise the country's coal resources without delay to provide an expansive, reliable supply of electrical power. The Phulbari Coal Project is ready to commence now and first coal could be delivered within 3 - 4 years which would suit the commissioning schedule of a large scale coal-fired power plant. All of the energy alternatives examined by the Bangladesh Government either take significantly longer and / or are prohibitively expensive.

Approval of the Project will deliver a step-change in electrical power generation. This will enable the country to realise the level of industrial development and ensuing job creation necessary to boost the economy, meet its Millennium Development Goals, and move to 'middle income' status.

Management Changes

I would like to take this opportunity to welcome Gary Lye to the Board. Gary led the Project's exploration and feasibility study and is the CEO of GCM's subsidiary in Bangladesh. Both Gary and Graham Taggart, Finance Director, continue to head up our in-country operations in Bangladesh and lead the direct engagement with the Government.

Steve Bywater stepped down as Chief Executive earlier this year. Following this departure, Steve Dattels and I have taken on a more active role in examining and developing strategic relationships, considering and reviewing the benefits of local partnerships and ensuring that practical and demonstrable progress is being made. Bill McIntosh remains the Technical Director and Greg James the Independent Non-Executive Director.

Financials

The Group recorded a loss after tax of £3.3 million for the year ended 30 June 2012 (2011: profit after tax of £2.3 million). Included in the loss was £3.7 million of non-cash expenses. GCM received a dividend of £1.5 million during the year and made a profit of £1.1 million on sale of investments.

The value of GCM's listed equity investments have decreased significantly during the year in line with general market conditions for junior miners, and were valued at £7.2 million as at 30 June 2012 (2011: £18.0 million). Over the next twelve months the Company will be looking to raise funds and reduce costs on non-core activities.

Corporate Responsibility

Underlying everything we do at GCM is our commitment to corporate and social responsibility and the principles of integrity and fairness. This is reinforced by our compliance with the Equator Principles, based on the policies and standards of the World Bank and the International Finance Corporation (IFC).

In January this year the IFC released an update of its Performance Standards on Social and Environmental and Access to Information Policy. To ensure continued compliance GCM engaged international consultants Environmental Resources Management (ERM) to review the Project's Environmental and Social Impact Assessment in light of these new standards and work has commenced to address the gaps identified.

Conclusion

The immediate energy and power needs of the people and Government of Bangladesh can be met by mining Phulbari coal and constructing a coal-fired power plant at the mine. Our Project is the country's best option. We remain focused on achieving Project approval however the timing remains in the hands of the Government of Bangladesh.

We have taken steps to ensure our development plans remain current so that we are well positioned to develop the Project once approval is received.

Gerard Holden

Chairman

Phulbari Review

Acceptance of Coal

GCM has long been advocating the use of coal for power generation in Bangladesh. We have maintained that utilising Bangladesh's own coal is the fastest and most economically sustainable means of alleviating the energy and power crisis faced by the country.

The Government of Bangladesh now accepts coal fired power plants as integral to the country's future power generation. The Government's Power System Master Plan (supported by the Japan International Cooperation Agency and released in January 2011) places significant reliance on coal in the expansion of Bangladesh's power sector to meet anticipated demand. According to this Plan, 50% of electricity will be generated from coal by 2030 (19,000MW).

Currently the installed capacity of coal-fired power plants in Bangladesh is 250MW. The step-change from 250MW to 19,000MW in 18 years translates to an enormous increase in demand for high quality thermal coal. The Project will contribute significantly to meeting this need.

Restructuring the Power Industry

The Government has commenced the long process of restructuring the electricity industry towards coal fired power plants. During the last 12 months the Government has either awarded contracts or been in discussions for the development of coal-fired power plants to generate about 5,000MW. Approximately 15 million tonnes of high quality thermal coal would be needed to supply these power plants every year.

These contracts have not been without issues, and the requirement that coal should be sourced from outside the country continues to create challenges. As the life of a coal fired power plant is at a minimum 25 years, in order for it to be viable a reliable source of coal must be contracted under a long term coal supply agreement. It would also require adequate coal handling and robust transport facilities which do not currently exist in Bangladesh. Domestic coal is best placed to supply these coal fired power plants and enable the Government to deliver the increase in power generation set out in its Power Sector Master Plan.

Advocacy

Following the strategic review undertaken by the Board earlier in the year, GCM has intensified its efforts to achieve Project approval. Our message to the Government has particularly focused on the key role that the Project would play in meeting the demand for Bangladesh's power generation.

Not only could the Phulbari mine support up to 4,000MW of power generation, the power produced using domestic coal would also be considerably cheaper than that using imported coal. Furthermore, installing a large scale coal-fired power plant at the mine will greatly reduce the need for expensive shipping, coal handling, transportation and associated infrastructure.

We have also been stressing the associated benefits of utilising the Phulbari coal resource, including: the estimated 17,000 jobs that would be created, the US$8 billion revenue the Government is expected to receive over the life of the Project, the anticipated increase in the country's gross domestic product by 1% as a direct result of the Project, and the development of North-West Bangladesh including new industries established from the Phulbari mine's co-products.

In meetings with the Government we explained the potential impacts of the mine and the management plans in place to minimise them. We discussed the importance we place on establishing and sustaining a social licence and reiterated our commitment to developing the mine in accordance with the highest international and national social and environmental standards. We stressed that the Project's Scheme of Development and Feasibility Study is based on 230 separate detailed study reports. Of these, 27 specifically deal with Water Management which is a key success factor for the Project and the Government of Bangladesh.

Outlook

Our aim is to receive Project approval and then to commence mine development and the associated community programmes as soon as possible. However, approval of the Project remains in the hands of the Government.

As the Government searches for solutions to the country's power crisis the Phulbari coal deposit has become far too important to the people of Bangladesh for it to remain unutilised.

Gary Lye

Executive Director

Consolidated Financial Statements

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

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