30 Jun 2010 09:30
| AIM: GMA | 30 June 2010 |
GMA Resources plc
("GMA" or the "Company")
Final results for the year ended 31 December 2009
HIGHLIGHTS
·; Increase in gold production by 78% compared to 2008 levels
·; Metallurgical issues acknowledged as the most significant factors to the Company's moderate production levels and underperformance during 2009
·; New strategic plan prepared to achieve significantly improved production
o Change in emphasis from heap leach to CIL gold recovery technology
o Work with mineral processing companies to examine a fast track CIL option
o Objective to process high grade ores to increase gold production by 1,000 ounces per month before end of Q3 2010
·; Exploration programme commenced and focusing on the highest potential mineralised zones
·; £1.6 million fundraising agreed, subject to shareholder and loan stock holder approval
ENQUIRIES:
| GMA Resources Plc | Ken Crichton | +20 (0)10766 6118 |
| Merchant John East Securities Limited (Nomad) | Bidhi Bhoma | +44 (0) 20 7628 2200 |
| Conduit PR | Ed Portman | +44 (0) 20 7429 6607 |
CHAIRMAN'S STATEMENT
The year under review has been another challenging year for your Company in a difficult economic climate and operating environment. This was tempered by the record production from the Amesmessa Gold Mine in the first quarter of the year of 9,829 ounces, which demonstrated the viability of the project and followed the resolution of the explosive supply problem that severely impacted the operations in 2008.
Following the year end, the Company appointed a new Chief Executive Officer on an interim basis, who has implemented several changes to the operations of the Company and we are looking forward to seeing the results of these during 2010.
The major milestones and achievements for the Company during the year were:
- Increase of gold production by 78% in 2009 vs. 2008.
- Increased understanding of the potential of the deposit through studies undertaken by independent consultants.
- Recapitalisation of ENOR Spa by conversion of shareholder advances to ENOR into equity of approximately US$20,000,000.
- Renegotiation of capital lease financing by extending the terms of the leases for mining equipment and also lowering the average interest rate substantially.
Operations
Although the Amesmessa Gold Mine was fully operational throughout the year, production was, however, hampered by problems with the supply of spare parts and due to other logistical issues. The Company has made a big effort in 2010 with the new management to resolve these issues and we look forward to improving production results as the year proceeds.
Health, Safety and the Environment
We take the safety and welfare of our employees very seriously considering the remoteness of the mine site at Amesmessa. We also ensure that we conform to international environmental standards at our operation.
Financing
In January 2009, the Company raised £1.39 million through an issue of convertible loan notes and equity, despite the dire economic climate.
Later in the year, a subscription agreement was signed with Sahara Gold Limited, a wholly owned subsidiary of Ascom Precious Metals Mining S.A.E., to raise a total of £1.9 million in four separate tranches. This resulted in Sahara Gold holding an interest of approximately 9% in the capital of the Company. This strategic alliance with Sahara Gold has been vital in keeping the Company in funds for general working purposes and for the technical assistance they have given the Company.
The Group has entered into a further subscription agreement with Sahara Gold, the details of which are set out in the Chief Executive Officer's Report.
Board
At the Annual General Meeting in July 2009, the Board accepted the resignation of Mr Richard Linnell as a Director of the Company. On 28 February 2010, Mr Douglas Perkins resigned as a Director and as the Chief Executive Officer and was replaced by Mr Ken Crichton who was appointed Interim Chief Executive Officer.
On behalf of the Board I would like to thank our management team as well as our partners, Sonatrach and the Algerian Government. The combined efforts of all our stakeholders in the face of a tough operating and corporate environment will go a long way in ensuring the long term future for ENOR Spa and a prosperous gold mining industry in Algeria. Thank you all for your respective contributions.
David Netherway
Chairman
CHIEF EXECUTIVE OFFICER'S REPORT
It is my pleasure to provide you with an overview on the Company's operating and financial results for the year ended 31 December 2009.
Amesmessa Gold Project
The year under review marked the second year of production from the Company's 52% owned Amesmessa operation.
Gold Sales
Gold Sales of 33,992 oz were recorded during 2009 (2008: 18,291 oz). The revenue from gold sales was equivalent to US$32,619,856.67 (2008: US$15,940,790) for an average realised price of US$959.63 per oz (2008: US$871.51).
Approximately 15% of 2009 sales were made in Algeria and 85% in export markets. It is expected that these percentages will change dramatically in 2010 as a gold refinery in Algeria increases production capability.
The company has no gold price hedges in place
.
Mining Operations
During 2009, all mining occurred from veins contained within the Amesmessa area. Combined high grade and heap leach ore tonnages mined were on budget for 2009 and the combined grade mined was 4.4 g/t versus a budget of 4.2 g/t. Poor blast hole drill availability primarily contributed to the reduced waste tonnage for the 2009 which was 76% of plan giving an overall strip ratio of 9.1.
| Key Performance Indicators | Unit | Actual 2009 | Budget 2009 |
| High Grade Ore Tonnes ex-Mine | dmt | 60,720 | 41,719 |
| High Grade Ore Grade ex-Mine | g/t Au | 12.27 | 11.61 |
| High Grade Ore kg Au | kg Au | 744.85 | 484.37 |
| Heap Leach Ore Tonnes ex-Mine | dmt | 604,620 | 632,311 |
| Heap Leach Ore Tonnes ex-Mine | g/t Au | 2.68 | 3.63 |
| Heap Leach Ore kg Au | kg Au | 1,618.5 | 2,296.7 |
| Marginal Ore Tonnes ex-Mine | dmt | 133,620 | 142,184 |
| Marginal Ore Grade ex-Mine | g/t Au | 0.61 | 0.66 |
| Waste Tonnes Mined | dmt | 5,912,490 | 7,621,052 |
| Strip Ratio |
| 9.1 | 11.5 |
| Blasthole Drilling | mlinear | 216,516 | 329,299 |
Heap Leach Operations
Although the grade of the ore crushed and stacked on the heap leach was better than budget, poor crusher availability in the 4th Quarter impacted gold production for 2009. However the major concern for the operation was that the actual gold recovery was 45% for 2009 versus the budget of 67%. This was the key operational issue that impacted most heavily on performance in 2009.
| Key Performance Indicators | Unit | Actual 2009 | Budget 2009 |
| Ore Crushed Heap Leach | dmt | 507,134 | 648,000 |
| Ore Stacked to Heap Leach Pad | dmt | 508,728 | 648,000 |
| Crushed Ore Grade | g/t Au | 4.45 | 4.16 |
| Gold Stacked Heap Leach | oz Au | 72,858 | 86,584 |
| Total Gold Production ENOR | oz Au | 32,508 | 57,822 |
| Recovery | % | 45% | 67% |
Currently there remains 63,814 oz of gold available for retreatment in the existing heap leach stockpiles. During 2010 efforts have commenced to develop a plan to build a facility to recover this gold.
Exploration
During 2009, a regional review of the potential of the Amesmessa-Tirek Concession was conducted. The work was initially done by the Australian mapping specialist firm Earthscan, who have developed particular expertise in identifying alteration zones using the satellite imagery known as Aster. Their review identified 76 alteration zones predominately on the Amesmessa-Tirek main shear zone running the length of the concession. Earthscan identified a number of new alteration zones also running in parallel with part of the existing shear zone highlighting the opportunity for a far wider mineralization zone than previously thought. There were additional isolated alteration zones identified also away from the known shear zone.
Each of these alteration zones has subsequently been investigated and the most prospective are currently being geochemically tested through a soil sampling program to be followed by a drilling program.
Southern Geophysical Ltd was engaged to complete the interpretation of a previously flown aeromagnetic survey over the Amesmessa-Tirek concession. This interpretation identified a number of further anomalies with some overlying or running in parallel with the alteration zones identified by Earthscan.
ENOR Spa's reverse circulation (RC) drill rig arrived in Algeria in April 2010 and is currently at the Amesmessa site. As announced in June 2010, an initial drilling program focusing on the highest potential mineralized zones has commenced.
Health Safety and Environment
In 2009 ENOR Spa, through its onsite Health Safety and Environment professionals, was involved in regular auditing of all aspects of the Operations and Exploration activities. A number of initiatives were put in place to improve the overall Health and Safety of the employees and particular emphasis was placed on improved traffic flow, signage and road delineation.
Although the "Rate of Frequency" of incidents increased in 2009 from 2008, the result was encouraging when compared with the number of new indigenous employees who commenced during 2009 and adapted well to their new industrial environment.
| Workplace Accident Statistic | 2009 | 2008 |
| Number of Accidents | 36 | 10 |
| Number of Days Lost to Accidents | 56 | 103 |
| Frequency Rate | 7.97 | 5.55 |
| Accidents Resulting in Death | 0 | 0 |
Environmental protection continues to be a primary goal of ENOR and during 2009, no environmental incidents were reported.
Corporate Social Responsibility
The introduction of water wells regularly spaced along the pipe-line to the mine site has contributed greatly to the local nomadic population providing them with a reliable source of drinking water for their herds in a harsh desert environment.
The Amesmessa Mine Camp also provides some medical assistance to these communities and regularly provides medical evacuations to the hospital in the nearest major city of Tamanrasset.
Financial Results
The Company reported a loss attributable to the GMA shareholders of £5,221,000 or 1.27p per share for 2009. This compares with a loss of £6,509,000 or 1.81p per share in 2008. The factors driving the 2009 loss were the heap leach recoveries not meeting initial expectations and a shortage of spare parts.
Fundraising and Going Concern
The Company stated in a trading update announcement in April 2010 that it had sufficient cash to meet its operating obligations until the end of June 2010. On 30 June 2010, ASCOM Precious Metals Mining, via its wholly owned subsidiary Sahara Gold Limited, and Ken Crichton the Interim Chief Executive Officer entered into a subscription agreement to subscribe for an aggregate of 128 million new ordinary shares (Sahara Gold 120 million and Ken Crichton 8 million new ordinary shares) at 1.25p per share, raising £1.6 million for the company, subject to the bond holders rolling up principal and interest payments for a two year period until December 2012. The bond holders have agreed to this in writing and a circular containing appropriate resolutions to be approved by both bondholders and shareholders has been posted today.
Based on a review of cash flow forecasts for the next 12 months, management estimates that the net proceeds of the subscription will be sufficient for the Company to remain a going concern until June 2011.
The completion of the subscription and the amendment to the terms of the Company's existing loan stock remain conditional only on shareholder and bondholder consent and for this reason the Board has continued to adopt the going concern basis of accounting in preparing the annual financial statements
Although the Board believes the risk of consent not being given is remote there remains a material uncertainty at the date of approval of these financial statements which may cast significant doubt upon the Company's ability to continue as a going concern.
The Challenge for Amesmessa
Although this second year provided a number of continuing challenges in respect to logistics, the one key fact that has become apparent is that gold recovery from the heap leach process is well below what was anticipated.
| Year | Tonnes to Heap Leach | Grade to Heap Leach | Gold to Heap Leach (oz) | Gold Produced (oz) | Recovery from Heap Leach | Gold Remaining in Heap Leach (oz) |
| 2008 | 424,300 | 3.13 g/t | 42,702 | 18,291 | 43% | 24,411 |
| 2009 | 507,100 | 4.41 g/t | 71,911 | 32,508 | 45% | 39,403 |
| Total | 931,400 | 3.82 g/t | 114,613 | 50,799 | 44% | 63,814 |
First quarter of 2010 has resulted in a similar gold recovery rate of 45%.
During 2009 and early 2010, Ausenco (an Australian engineering and mineral processing company) were engaged to assist in the evaluation of the heap leach operation. During this period, a review of the existing metallurgical test work was completed. This historical test work was then supported by a new program of test work to better understand metallurgical characteristics of the Amesmessa ore from near surface ore to ore at depth (25m). The test work encompassed the quartz veins and surrounding mineralized zones. This test work confirmed that the gold recovery achieved by the existing heap leach operation to date was to be expected over the life of the operation due to the nature of the ore.
Importantly, however, the test work also highlighted that a carbon in leach (CIL) pilot plant process facility could be expected to improve gold recoveries significantly as was demonstrated by the Tirek CIL when it was working prior to decommissioning in 2007.
To improve gold recovery, GMA is actively looking at ways to replace the existing heap leach operation with a partial CIL circuit in the short term and still use the existing Amesmessa crushing facility. Conceptually this CIL plant would process the ore from the mine but be sized with sufficient capacity to begin retreating the existing heap leach stockpiles to also recover the gold remaining in the stockpiles.
The long term the goal of GMA is to build a large CIL facility sized to match the expected potential of the Amesmessa-Tirek Concession.
Objectives for 2010
·; The former Tirek CIL plant has been relocated to Amesmessa with the key objective to process high grade ores to increase gold production by 1,000 oz per month. This should be ready in Third Quarter 2010.
·; Use the recently purchased Mercedes truck fleet (March 2010) to move from the existing deep but nearby Amesmessa mining areas into areas of higher grade and near surface material to reduce mining costs.
·; The RC drilling program and target areas identified from historical work, the recent Earthscan and aeromagnetic work aiming to find high grade, low strip ratio resources in the immediate short term and then commence a systematic drilling program across the Concession.
·; Work with mineral processing companies to investigate a fast track CIL option targeting existing mine ore and retreating heap leach ore from the existing stockpiles.
Kenneth Crichton
Interim Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Notes | Year ended 31 December 2009 | Year ended 31 December 2008 |
|
|
| £'000s | £'000s |
|
|
|
|
|
|
|
|
|
|
| Revenue |
| 20,361 | 7,798 |
| Cost of sales |
| (25,383) | (10,929) |
|
|
|
|
|
| Gross loss |
| (5,022) | (3,131) |
|
|
|
|
|
| Administrative costs |
| (1,523) | (1,022) |
|
|
|
|
|
| Operating loss |
| (6,545) | (4,153) |
|
|
|
|
|
| Finance costs | 3 | (2,077) | (2,408) |
| Finance income | 3 | - | 52 |
|
|
|
|
|
| Loss before income tax | 2 | (8,622) | (6,509) |
|
|
|
|
|
| Income tax expense | 4 | - | - |
|
|
|
|
|
| Loss for the year |
| (8,622) | (6,509) |
|
|
|
|
|
| Other comprehensive income: |
|
|
|
|
|
|
|
|
| Exchange differences on translating foreign operations |
|
(1,618) |
3,561 |
|
|
|
|
|
| Total comprehensive loss for the year |
| (10,240) | (2,948) |
|
|
|
|
|
| Loss for the year attributable to: |
|
|
|
| Equity holders of the parent undertaking |
| (5,221) | (6,509) |
| Minority interest | 6 | (3,401) | - |
|
|
|
|
|
|
|
| (8,622) | (6,509) |
| Total comprehensive loss attributable to: |
|
|
|
| Equity holders of the parent undertaking |
| (6,839) | (2,948) |
| Minority interest | 6 | (3,401) | - |
|
|
|
|
|
|
|
| (10,240) | (2,948) |
| Loss per share |
|
|
|
| Basic and fully diluted loss per share | 5 | (1.27p) | (1.81p) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009
|
| Notes | 31 December 2009 | 31 December 2008 | 31 December 2007 |
|
|
| £'000 | £'000 | £'000 |
| ASSETS |
|
|
|
|
| Non-current |
|
|
|
|
| Intangible assets |
| 13 | 23 | 29 |
| Property, plant and equipment |
| 36,906 | 45,942 | 34,115 |
|
|
|
|
|
|
| Non-current assets |
| 36,919 | 45,965 | 34,144 |
|
|
|
|
|
|
| Current |
|
|
|
|
| Inventories |
| 16,422 | 14,644 | 5,423 |
| Trade and other receivables |
| 7,169 | 9,787 | 5,633 |
| Cash and cash equivalents |
| 1,324 | 1,052 | 5,381 |
|
Current assets |
|
24,915 |
25,483 |
16,437 |
|
|
|
|
|
|
| Total assets |
| 61,834 | 71,448 | 50,581 |
|
|
|
|
|
|
| EQUITY |
|
|
|
|
| Equity attributable to owners of the parent: |
|
|
|
|
| Share capital |
| 4,477 | 3,680 | 3,544 |
| Share premium account |
| 26,116 | 24,597 | 23,810 |
| Share based payments reserve |
| 318 | 448 | 330 |
| Loan stock reserve |
| 1,235 | 923 | 923 |
| Currency translation reserve |
| 1,030 | 2,648 | (914) |
| Retained earnings |
| (26,789) | (21,705) | (15,196) |
|
|
|
|
|
|
|
|
| 6,387 | 10,591 | 12,497 |
| Minority interest | 6 | 14,220 | - | - |
|
|
|
|
|
|
| Total equity |
| 20,607 | 10,591 | 12,497 |
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
| Non-current |
|
|
|
|
| Long-term borrowings |
| 7,951 | 8,402 | 4,204 |
| Long-term finance leases |
| 1,638 | 2,009 | 3,460 |
| Unsecured convertible loan stock |
| 795 | 5,441 | 5,353 |
| Loan from minority shareholder |
| - | 19,738 | 3,334 |
|
|
|
|
|
|
| Non-current liabilities |
| 10,384 | 35,590 | 16,351 |
|
|
|
|
|
|
| Current |
|
|
|
|
| Trade and other payables |
| 15,065 | 14,368 | 7,376 |
| Short-term borrowings |
| 2,660 | 3,065 | 851 |
| Short-term finance leases |
| 7,925 | 7,834 | 4,125 |
| Unsecured convertible loan stock |
| 5,193 | - | - |
| Loan from minority shareholder |
| - | - | 9,381 |
|
Current liabilities |
|
30,843 |
25,267 |
21,733 |
|
|
|
|
|
|
| Total liabilities |
| 41,227 | 60,857 | 38,084 |
|
|
|
|
|
|
| Total equity and liabilities |
| 61,834 | 71,448 | 50,581 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Share capital
| Share premium account | Share based payment reserve | Loan stock reserve | Currency translation reserve | Retained earnings | Total | Minority interest | Total equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 1 January 2008 | 3,544 | 23,810 | 330 | 923 | (914) | (15,196) | 12,497 | - | 12,497 |
|
|
|
|
|
|
|
|
|
|
|
| Issue of share capital | 136 | 819 | - | - | - | - | 955 | - | 955 |
| Share issue costs | - | (32) | - | - | - | - | (32) | - | (32) |
| Share based payment charges | - | - | 118 | - | - | - | 118 | - | 118 |
|
|
|
|
|
|
|
|
|
|
|
| Transactions with owners | 136 | 787 | 118 | - | - | - | 1,041 | - | 1,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | - | - | - | (6,509) | (6,509) |
| (6,509) |
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income: |
|
|
|
|
|
|
|
|
|
| Exchange differences on translation of foreign operations | - | - | - | - | 3,562 | - | 3,562 | - | 3,562 |
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | - | - | - | - | 3,562 | (6,509) | (2,947) | - | (2,947) |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2008 | 3,680 | 24,597 | 448 | 923 | 2,648 | (21,705) | 10,591 | - | 10,591 |
|
|
|
|
|
|
|
|
|
|
|
|
| Share capital
| Share premium account | Share based payment reserve | Loan stock reserve | Currency translation reserve | Retained earnings | Total | Minority interest | Total equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 1 January 2009 | 3,680 | 24,597 | 448 | 923 | 2,648 | (21,705) | 10,591 | - | 10,591 |
|
|
|
|
|
|
|
|
|
|
|
| Issue of share capital | 797 | 1,693 | - | - | - | - | 2,490 | - | 2,490 |
| Share issue costs | - | (174) | - | - | - | - | (174) | - | (174) |
| Share based payment charges | - | - | 7 | - | - | - | 7 | - | 7 |
| Forfeiture of share options | - | - | (137) | - | - | 137 | - | - | - |
| Loan note issue | - | - | - | 312 | - | - | 312 | - | 312 |
| Capitalisation of loan from minority shareholder | - | - |
- |
- |
- |
- |
- |
17,621 |
17,621 |
|
|
|
|
|
|
|
|
|
|
|
| Transactions with owners | 797 | 1,519 | (130) | 312 | - | 137 | 2,635 | 17,621 | 20,256 |
|
|
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | - | - | - | (5,221) | (5,221) | (3,401) | (8,622) |
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income: |
|
|
|
|
|
|
|
|
|
| Exchange differences on translation of foreign operations | - | - | - | - | (1,618) | - | (1,618) | - | (1,618) |
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | - | - | - | - | (1,618) | (5,221) | (6,839) | (3,401) | (10,240) |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2009 | 4,477 | 26,116 | 318 | 1,235 | 1,030 | (26,789) | 6,387 | 14,220 | 20,607 |
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Year ended 31 December 2009 | Year ended 31 December 2008 |
|
| £'000s | £'000s |
|
|
|
|
| Operating activities |
|
|
| Loss before tax | (8,622) | (6,509) |
| Adjustments | 10,262 | (372) |
| Net changes in working capital | (1,518) | (6,383) |
|
|
|
|
| Cash flows from operating activities | 122 | (13,264) |
|
|
|
|
| Investing activities |
|
|
| Purchase of intangible assets | (8) | - |
| Purchase of property, plant and equipment | (691) | (5,008) |
| Proceeds from the disposal of property, plant and equipment | 38 | - |
| Interest received | - | 52 |
|
|
|
|
| Cash flows from investing activities | (661) | (4,956) |
|
|
|
|
| Financing activities |
|
|
| Net proceeds from issue of share capital | 2,316 | 923 |
| Repayment of bank borrowings | (342) | (285) |
| Payment of loan interest | (1,091) | (1,176) |
| Proceeds from finance lease agreement | 281 | 1,399 |
| Payments on finance lease | (1,452) |
|
| Proceeds from issue of unsecured convertible loan stock |
1,190 |
- |
| Interest paid on loan stock | (735) |
|
| Proceeds of loan from minority shareholder | - | 7,023 |
| Proceeds from bank borrowings | 723 | 6,412 |
|
|
|
|
| Net cash from financing activities | 890 | 14,296 |
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents | 351 | (3,924) |
| Foreign exchange differences | (79) | (405) |
| Cash and cash equivalents at beginning of period | 1,052 | 5,381 |
|
|
|
|
| Cash and cash equivalents at end of period. | 1,324 | 1,052 |
|
|
|
|
NOTES TO THE PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
1. Basis of Preparation
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2009, 2008 or 2007, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting. The Auditors have reported on the 2009 accounts; their report was modified by an emphasis of matter in respect of going concern, the circumstances of which are described below.
The Group's consolidated financial statements are for the year ended 31 December 2009. They have been prepared in accordance with the accounting policies set out below.
The Group prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).
The consolidated financial statements have been prepared under the historical cost basis. They are presented in UK Sterling and are rounded to the nearest thousand (£'000) except where otherwise noted.
Going concern
The Company stated in a trading update announcement in April 2010 that it had sufficient cash to meet its operating obligations until the end of June 2010. On 28 June 2010, ASCOM Precious Metals Mining, via its wholly owned subsidiary Sahara Gold Limited, and Ken Crichton the Interim Chief Executive Officer entered into a subscription agreement to subscribe for an aggregate of 128 million new ordinary shares (Sahara Gold 120 million and Ken Crichton 8 million new ordinary shares) at 1.25p per share, raising £1.6 million for the company, subject to the bond holders rolling up principal and interest payments for a two year period until December 2012. The bond holders have agreed to this in writing and a circular containing appropriate resolutions to be approved by both bondholders and shareholders has been posted today.
Based on a review of cash flow forecasts for the next 12 months, management estimates that the net proceeds of the subscription will be sufficient for the Company to remain a going concern until June 2011.
The completion of the subscription and the amendment to the terms of the Company's existing loan stock remain conditional only on shareholder and bondholder consent and for this reason the Board has continued to adopt the going concern basis of accounting in preparing the annual financial statements
Although the Board believes the risk of consent not being given is remote there remains a material uncertainty at the date of approval of these financial statements which may cast significant doubt upon the Company's ability to continue as a going concern.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the Notes to the financial statements. The key areas where judgements and / or estimation have been made are summarised below:
1. Technical feasibility and commercial viability of extracting a mineral resource: In gold mining the accepted industry practice for determining commercial viability is when approximately 70 per cent. of design capacity has been achieved for a period of at least two months. This was achieved in January 2009 at which point the 'assets under construction' were reclassified as 'mining assets' and amortization commenced from that date.
2. Asset Impairment: The Group has assessed the carrying value of property, plant, and equipment on the assumption that adequate funding will be secured by the Group to meet its obligations for the next 12 months, as further described on Page 23. The directors have concluded that no provision for impairment is required.
3. VAT receivable: Recovery of VAT receivable by the Company's subsidiary in Algeria has been assessed with reference to the expected future gold sales subject to output VAT and the expected levels of input VAT. It has been assumed that gold sales subject to output VAT will be 20% of the total sales in the next year and that there will no significant capital expenditure incurring input VAT. An impairment of £3,055,000 has been made on this basis. See note 10.
4. Equipment leases: The Group has reviewed the criteria specified in IAS 17 and has concluded that the equipment leases in ENOR qualify as capital leases rather than operating leases. During 2009, the terms of these leases were revised by the Algerian lessor and the lease liabilities revised accordingly. See note 12.
5. Work in progress: the value of gold-bearing ore loaded onto the heap leach pads has been estimated with reference to the quantity of gold that the Group expects to be able to recover, of approximately 51,000 ounces, and with reference to an estimate of the future long-term gold price of US$825 together with an estimate of the costs to extract the gold from the ore. It has been also been assumed that recovery of the gold will be at least 85% of the available gold content which would be achieved using a carbon-in-leach plant which the group expects to acquire during the next year.
6. Depreciation of mining assets: Depreciation of mining assets has been estimated based on gold production for the period, after achieving the point of commercial production (refer point 1 above) of 29,210 ounces and the estimated inferred gold reserves available to the group of 992,155 ounces.
2. Loss before income tax
Loss before income tax is stated after charging:
|
|
| 2009 | 2008 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| Amortisation of intangible assets |
| 16 | 13 |
| Depreciation - owned assets |
| 2,535 | 1,077 |
| Depreciation - assets held under finance leases |
| 2,372 | 2,115 |
| Operating lease payments |
| - | 69 |
| Realised foreign exchange losses |
| 100 | 374 |
| Nominated adviser fees |
| 13 | - |
| Impairment of VAT receivable |
| 3,055 | - |
|
Services provided by the Group's auditor and network firms |
|
|
|
| Fees payable to the Company's auditors for the audit of the parent Company accounts |
| 120 | 59 |
| Non-audit fees - taxation services |
| - | 16 |
| Nominated adviser fees |
| - | 14 |
|
|
|
|
|
3. Finance income and finance costs
|
|
| 2009 | 2008 |
|
|
| £'000 | £'000 |
| Finance income |
|
|
|
| Interest receivable on cash deposits |
| - | (52) |
| Finance costs |
|
|
|
| Finance charges on finance lease agreements |
| 582 | 759 |
| Interest on bank loans and overdrafts |
| 1,091 | 647 |
| Interest on unsecured convertible loan stock |
| 404 | 1,002 |
|
|
|
2,077 | 2,408 |
4. Income tax expense
There is no tax charge in the year due to losses incurred by the Group, which are not currently being recognised as a deferred tax asset due to uncertainty over the recoverability of such losses in the foreseeable future.
|
|
| 2009 | 2008 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| Loss before tax |
| (8,622) | (6,509) |
|
|
|
|
|
| Loss before tax multiplied by the standard rate of corporation tax in the UK of 28% (2008 : 30%) |
| (2,414) | (1,953) |
|
|
|
|
|
| Effect of: |
|
|
|
| Overseas losses outside the scope of tax |
| 2,414 | 1,953 |
|
Total tax charge for year |
| - | - |
The main trading subsidiary ENOR spa, based in Algeria is exempt from local corporation tax until 1 July 2011 and so any profits or losses are non-taxable.
5. Loss per share
|
| 2009 | 2008 |
| Basic and fully diluted loss per share |
|
|
| Loss for the year attributable to the equity holders of the parent entity (£'000) | 5,221 | 6,509 |
|
|
|
|
| Weighted average number of shares in issue ('000) | 412,253 | 360,271 |
|
|
|
|
| Loss per share | 1.27p | 1.81p |
|
|
|
|
6. Minority interests/related party transactions
The minority interests represents a holding of 48 per cent. of the shares in the subsidiary Company, ENOR spa, by "Sonatrach", the Algerian state oil Company. The Company has adopted the revised IAS 27 early and has recognised separately the share of losses incurred by the minority shareholders as at 31 December 2009. During the year, the loan from the minority shareholder was reclassified as a separate component of equity as, in the opinion of the Directors, there is no obligation for the Group to repay the balance in the foreseeable future.
Other than the balances disclosed elsewhere in these financial statements, there were no significant related party transactions during the year.
Movements on the balance with minority shareholders are given below :
|
|
| 2009 | 2008 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| At 1 January 2009 |
| - | - |
| Share of net loss of subsidiary undertaking |
| (3,401) | - |
| Reclassification of shareholder loan |
| 17,621 |
|
|
At 31 December 2009 |
| 14,220 | - |
7. Events after the balance sheet date
On 13 January 2010, the Company raised £479,662 for the Company (before expenses) by way of a subscription for 10,659,156 ordinary shares in the capital of the Company and a further £479,662 on 17 February 2010 for a similar share issue.
8. Dividends
The Directors do not recommend the payment of a dividend.
9. Availability of Report and Accounts
Hard copies of the accounts have been posted to shareholders and are available from the Company's registered office, One America Square, Crosswall, London EC3N 2SG, and are available to download from the Company's website www.gmaresources.co.uk.