23 Jun 2009 07:00
| AIM: GMA | 23 June 2009 |
GMA Resources plc
("GMA" or the "Company")
Final results for the year ended 31 December 2008
Overview of 2008:
Commencement of production at Amesmessa, moving GMA from an exploration to a gold producing company
Q1 production rose month on month however in Q2 and Q3 production levels suffered as a result of a lack of supply of explosives which only arrived at the beginning of November
Production climbed steadily in the fourth quarter of 2008 and continued to rise in the first three months since period end resulting in record production for first quarter 2009 of 9,829 ounces of gold
successful financing exercises announced together with a debt reorganisation
Initiatives for 2009:
Turning ENOR Spa into a profitable and efficient operation
Commencement of a robust exploration program to include, among other things, core and reverse circulation drilling programs to expand near mine resources
Restart a regional exploration program over the whole concession and begin to classify resources into 43-101 classification
Continued training of Algerian personnel in the mineral classification standard of 43-101 to go forward at a modern world standard
Complete a scoping study to review the various opportunities for expansion to bring highest return to shareholders of ENOR
Further Enquiries:
| GMA Resources Plc | |
| Douglas Perkins | +1 514 806 6788 |
| John East & Partners Limited, a subsidiary of Merchant Securities PLC | |
| Bidhi Bhoma | +44 (0) 20 7628 2200 |
| Conduit PR | |
| Edward Portman/Leesa Peters | +44 (0) 20 7429 6607 |
Chairman's Statement
The past year has been one of great contrasts for GMA, which brought a number of significant achievements as well as challenges on the operational front, underpinned by unprecedented global economical upheaval. A major highlight at the beginning of the year was the successful start-up of our Amesmessa gold mine. This was countered by an erratic supply of explosives critical to the operation, preventing access to high grade ore and resulting in an inability to ramp up production. Severe strengthening of the Algerian Dinar against Sterling has contributed to our losses but successful financing measures have supplied the capital required to achieve steady state production.
During the year the Company achieved several major milestones and achievements.
Operations
Following completion of construction of the mine and authorisation from the Algerian Government to store and use cyanide at Amesmessa, initial leaching commenced in January 2008. The first gold pour in January 2008 was a key milestone for the Company. Senior management have done an excellent job in quickly building up production and must be commended for the hard work put into developing and operating the Amesmessa mine despite the remote and demanding conditions of southern Algeria, compounded by the lack of explosives for the bulk of 2008.
Production got off to a successful start in the first quarter, rising steadily month-on-month with a total of 5,906 ounces of gold produced by the end of March 2008. Thereafter due to the lack of explosives the reliance on 'free dig' ore, saw production levels suffer until the supply of explosives arrived at the beginning of November.
Production climbed steadily in the fourth quarter of 2008 and continued to rise in the first three months of this year, resulting in a record production for first quarter of 9,829 ounces of gold.
We continue to struggle with logistical issues however we trust that our best efforts, as well as those of the Government of Algeria, will see a smoother flow of goods in the near future.
Financing
Despite turmoil in the global markets, the Company was able to raise adequate finance during the year following a reorganisation of debt, two successful financing exercises announced at the end of 2008 and another in April this year to cover both the shortfall in production discussed above, as well as future expenses. These have supplied GMA with adequate funds to cover general working capital expenses as Amesmessa ramps up to meet its required levels of production.
ENOR Spa was successfully refinanced during 2008 by GMA and its partner Sonatrach, allowing it to meet its working capital requirements and fund ongoing exploration and capital programmes.
Board and Management
In February 2008, the Company announced a number of Board and Management changes. Richard Linnell stepped down and I replaced him as Chairman of the Board. As Richard will be retiring at this Annual General Meeting, I am personally very grateful to him for guiding the Company from inception through to the point of successful commercial gold production. We wish him well in his future ventures.
The Board also accepted with regret the resignation from the Board of Dr Robert Danchin, who resigned from his role as Non-Executive Director for personal reasons.
More recently in April 2009, Michel Cormier joined the Company to head up the exploration program in Algeria as GMA's Vice President of Exploration. Michel is a very experienced geologist and, having worked with him previously, I welcome him onto the team.
Thanks
My personal gratitude and that of the Board goes out to Douglas Perkins and his management team, as well as to our trusted partners, Sonatrach and the Algerian Government. Your efforts during the year 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
23 June 2009
Chief Executive Officer's Report
Amesmessa Gold Project
The year under review marked the first year of production from the Company's 52 per cent. owned Amesmessa operation with initial leaching beginning on 6 January 2008. The first gold was poured on 26 January 2008 at a ceremony attended by his Excellency, the Minister of Energy & Mines, Dr. Chakib Khelil and his delegation, which included the Wali of Tamanrasset and other important dignitaries.
Despite our best efforts to resolve the issues regarding the supply of explosives and key consumables early in the year, delivery of the required stock was delayed until 1 November 2008, severely impacting our production capabilities for the bulk of 2008.
The lack of explosives prevented us from stripping waste which would have allowed us to access higher grade mineralisation. As a result, grades processed were significantly lower than initially expected as we sought 'free dig' ore within the concession for processing. One positive aspect of this process was the discovery of several interesting zones that are discussed in the exploration section below.
We estimate that the issues with delivery of explosives cost ENOR Spa approximately US$15-20 million in cash flow, forcing Sonatrach and GMA to inject $12 million USD into the operating subsidiary in proportion to our equity holdings in the project.
However, since delivery of explosives on November 1, subsequent orders have been on schedule, thus allowing access to higher grade ore. The results of this are reflected in first quarter 2009 gold production of 9,829 ounces, an 86 per cent. increase on the 5,292 ounces produced in the final quarter of 2008.
Mining Operations
During 2008, ore was mined primarily from Amesmessa veins 7, 8, 9, 10, 12, 15, 16 and 18. Due to the lack of access to deposits for a large part of the year some ore was taken from exploration areas of ZITA as free dig ore. Results of mining operations for 2008 are laid out in the following table:
| Ore Category | Quantity Mined (tonnes) | Average Grade (g/t) |
| High Grade | 37,660 | 11.44 |
| Medium Grade (heap leach) | 386,667 | 2.32 |
| Marginal | 162,572 | 0.63 |
| Waste | 5,378,460 | |
| Blast hole drilling meters | 193,301 | |
| Strip Ratio (Waste ÷ Ore) | 9.27 |
Health Safety & Environment
In 2008 ENOR Spa performed regular reporting on workplace accidents and held continuous training sessions for staff. The reduction in the number of accidents in 2008 is indicative of the success of this training.
| Workplace Accident Statistics | 2008 | 2007 |
| Number of accidents | 10 | 18 |
| Number of Lost Day accidents | 103 | 207 |
| Rate of Frequency | 5.55 | 18.08 |
| Seriousness Ranking | 0.057 | 0.18 |
| Accidents Resulting in Death | 0 | 0 |
Environmental Protection continues to be of utmost importance to the Company as well and during 2008 there were no environmental incidents reported. In 2008 The Company continued to classify archaeological sites and fenced off a number of old grave sites. The competent authorities in Algeria were called upon to ensure proper classification was completed and to log sites discovered. The Company continued to maintain the bat caves constructed during 2007 and also takes measures to protect birds and animals in the area.
Gold Sales
Gold sales of 18,291oz were recorded during 2008 (2007: 8,327oz). The revenue from gold sales was equivalent to US$15,940,790 (2007: US$5,675,000) for an average realised price of US$871.51/oz (2007: US$682/oz).
Approximately 1 per cent. of 2008 sales were made in Algeria and 99 per cent. in export markets. Gold prices have remained strong into 2009 with Amesmessa production achieving an average price of $902/oz in the first four months of 2009. During the first four months of 2009 local gold sales picked up substantially. The Company has no gold price hedges in place.
Exploration
Our focus on resolving initial production issues and the lack of necessary funding impeded our ability to instigate a dedicated exploration programme during 2008.
However our search for free dig ore allowed us to open up a number of pits that would not have been looked at otherwise and resulted in the discovery of some extremely encouraging exploration plays. These areas included Zone A1 and 2 north of Amesmessa, Timeg, Bouadjila and In Allerene.
For 2009 we have approved a US$3.0 million dollar exploration budget which will, along with the appointment of Michel Cormier as Vice President of Exploration, add drive and focus to our search. Michel is qualified as a geological engineer and is a member of the Ordre des ingénieurs du Québec and The Canadian Institute of Mines, Metallurgy and Petroleum. He began working within the gold mining and exploration sector in 1977.
Our primary aim is to prove up further resources within the Amesmessa project area to justify the near doubling of the operation's capacity to over 100,000 ounces gold per annum. A scoping study has been initiated on the proposed expansion, including the study of various processing options, which is expected to be complete in late June 2009.
Over the broader ENOR concession, we have begun work on the hypothesis that there is a wider mineral zone running the length of the concession, amenable to large open pit mining. This compares to the narrow high grade vein system thesis we are currently operating within.
GMA has decided to review all existing data and to put all data in a Canadian 43-101 format for mineral classification and reporting. One of the main reasons we chose this standard is that it is recognized worldwide and a valuable tool for future expansion and potential financing related to project expansion. It is also available completely in French which will aid us in the training aspects of bringing Algerian geological staff up to world standards. We have plans to work with the Government to perform training sessions for prospective mining and geology students at the new mining school established by the State at Tamanrasset.
Financial Results
The Company reported a loss attributable to the GMA shareholders of £6,509,000 or 1.81p per share for 2008. This compares with a loss of £4,246,000 or 1.2p per share in 2007. Factors driving the increased loss include the production shortfall in 2008 and the foreign exchange losses incurred due to the weakened position of Sterling vs the Algerian Dinar in 2008.
Financings and Liquidity
In July 2008, the Company raised £955,080 in equity financing from the placing of 13,644,000 new Ordinary Shares. In December 2008, the Company announced its intention, subject to shareholder approval, to raise a further £1.39 million through the sale of 10,526,000 shares, and to place £1.19 million in 15 per cent. convertible loan stock 2011 to raise £1.39 million before expenses.
At a general meeting of the Company held 22 January 2009, the issue of both instruments was approved as well as the reduction of the conversion price of previously issued 2009 loan stock from 15 pence to 5 pence and to defer its maturity date from 30 June 2009 to 31 December 2010.
On 6 April 2009 the Company issued the remaining £310,000 of Loan Stock 2011 to existing shareholders of the Company. At the same time, the Company received conversion notices in respect the Loan Stock 2011 issued. Under the terms of the instrument, holders of Loan Stock 2011 have the right at any time to convert their Loan Stock 2011 into new ordinary shares in the capital of the Company at an effective conversion price of 2.25 pence per ordinary share.
On 5 May 2009, 34,000,000 new shares were issued raising £1.02 million before expenses.
Outlook
In April 2009, administrative problems at the Algerian ports delayed the delivery of key supplies to site, resulting in a break of the five month streak of monthly production increases at Amesmessa. We plan to work closely with our Algerian partners on the project to resolve this process speedily. That turned around in May with the announcement of record production from the mine of 3,447 ounces of gold for the month.
In the first quarter of 2009 we dismantled an idle crushing circuit at the inactive Tirek operation and redeployed it to support operations in Amesmessa. This should add 500 tonnes per day to the 1,750 tonnes per day design capacity of the existing crushing circuit at Amesmessa and therefore help to recoup some of the crushing capacity lost in the first four months of the year. The former Tirek crushing circuit involves a two stage crushing process and will have a separate agglomeration circuit.
As detailed above, GMA's priority over the coming months is to resolve the delay in delivery of key supplies by working with Sonatrach and the Algerian Government to streamline the delivery pipeline.
Beyond that, other important initiatives for 2009 include:
- turning ENOR Spa into a profitable and efficient operation;
- commencement of a robust exploration program to include, among other things, core and reverse circulation drilling programs to expand near mine resources;
- to complete a scoping study to review the various opportunities for expansion to bring highest NPV and IRR to shareholders in ENOR;
- restart a regional exploration program over the whole concession and begin to classify resources into 43-101 classification for the whole concession and to assist in future expansion plans going forward.
GMA believes that these initiatives are key to maximizing value for shareholders and we are committed to achieving this goal.
Douglas PerkinsChief Executive Officer23 June 2009
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
| Notes | Year ended 31 December 2008 | Year ended 31 December 2007 | |
| £'000s | £'000s | ||
| Continuing operations | |||
| Revenue | 7,798 | 2,923 | |
| Cost of sales | (10,929) | (6,193) | |
| Gross loss | (3,131) | (3,270) | |
| Administrative costs | (1,022) | (1,195) | |
| Operating loss | (4,153) | (4,465) | |
| Finance income | 52 | 180 | |
| Finance costs | (2,408) | (1,703) | |
| Loss before tax | (6,509) | (5,988) | |
| Income tax expense | 3 | - | - |
| Loss for the period | (6,509) | (5,988) | |
| Attributable to: | |||
| Equity holders of the parent undertaking | (6,509) | (4,246) | |
| Minority interest | - | (1,742) | |
| (6,509) | (5,988) | ||
| Loss per share | |||
| Basic and diluted loss per share - total and continuing | 4 | (1.81p) | (1.2p) |
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
| Notes | 31 December 2008 | 31 December 2007 | |
| £'000 | £'000 | ||
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 23 | 29 | |
| Property, plant and equipment | 45,942 | 34,115 | |
| 45,965 | 34,144 | ||
| Current assets | |||
| Inventories | 14,644 | 5,423 | |
| Trade and other receivables | 9,787 | 5,633 | |
| Cash and cash equivalents | 1,052 | 5,381 | |
| 25,483 | 16,437 | ||
| Total assets | 71,448 | 50,581 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 14,368 | 7,376 | |
| Short-term borrowings | 3,065 | 851 | |
| Short-term finance lease | 7,834 | 4,125 | |
| Loan from minority shareholder | - | 9,381 | |
| 25,267 | 21,733 | ||
| Non-current liabilities | |||
| Long-term borrowing | 8,402 | 4,204 | |
| Long-term finance lease | 2,009 | 3,460 | |
| Unsecured convertible loan stock | 5,441 | 5,353 | |
| Loan from minority shareholder | 19,738 | 3,334 | |
| Total non-current liabilities | 35,590 | 16,351 | |
| Total liabilities | 60,857 | 38,084 | |
| Net assets | 10,591 | 12,497 | |
| EQUITY | |||
| Equity attributable to equity holders of the parent undertaking | |||
| Share capital | 3,680 | 3,544 | |
| Share premium account | 24,597 | 23,810 | |
| Other reserves - share based payments | 448 | 330 | |
| Other reserves | 923 | 923 | |
| Cumulative currency translation reserve | 2,648 | (914) | |
| Retained earnings | (21,705) | (15,196) | |
| 10,591 | 12,497 | ||
| Minority interest | - | - | |
| Total equity | 10,591 | 12,497 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008
| Share capital | Share premium account | Share based payment | Other reserves | Cumulative currency translation reserve | Retained earnings | Total | Minority interest | Total equity | |
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| Balance at 1 January 2007 | 3,171 | 20,469 | 106 | - | (710) | (10,950) | 12,086 | 1,676 | 13,762 |
| Changes in equity for 2007 | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | - | (204) | - | (204) | 66 | (138) |
| Net income recognised directly in equity | - | - | - | - | (204) | - | (204) | 66 | (138) |
| Loss for the period | - | - | - | - | - | (4,246) | (4,246) | (1,742) | (5,988) |
| Total recognised income and expense for the period | - | - | - | - | (204) | (4,246) | (4,450) | (1,676) | (6,126) |
| Issue of share capital | 373 | 3,727 | - | - | - | - | 4,100 | - | 4,100 |
| Share issue costs | - | (386) | - | - | - | - | (386) | - | (386) |
| Share based payment charges | - | - | 224 | - | - | - | 224 | - | 224 |
| Equity element of unsecured convertible loan stock | - | - | - | 923 | - | - | 923 | - | 923 |
| Balance at 31 December 2007 | 3,544 | 23,810 | 330 | 923 | (914) | (15,196) | 12,497 | - | 12,497 |
| Share capital | Share premium account | Share based payment | Other reserves | Cumulative currency translation reserve | Retained earnings | Total | Minority interest | Total equity | |
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| Balance as at 1 January 2008 | 3,544 | 23,810 | 330 | 923 | (914) | (15,196) | 12,497 | - | 12,497 |
| Changes in equity for 2008 | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | - | 3,562 | - | 3,562 | - | 3,562 |
| Net income recognised directly in equity | - | - | - | - | 3,562 | - | 3,562 | - | 3,562 |
| Loss for the period | - | - | - | - | - | (6,509) | (6,509) | - | (6,509) |
| Total recognised income and expense for the period | - | - | - | - | 3,562 | (6,509) | (2,947) | - | (2,947) |
| Issue of share capital | 136 | 819 | - | - | - | - | 955 | - | 955 |
| Share issue costs | - | (32) | - | - | - | - | (32) | - | (32) |
| Share based payment charges | - | - | 118 | - | - | - | 118 | - | 118 |
| Balance as at 31 December 2008 | 3,680 | 24,597 | 448 | 923 | 2,648 | (21,705) | 10,591 | - | 10,591 |
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
| Year ended 31 December 2008 | Year ended 31 December 2007 | ||
| £'000s | £'000s | ||
| Cash flows from operating activities | |||
| Loss after taxation | (6,509) | (5,988) | |
| Adjustments for: | |||
| Depreciation, amortisation, plant and equipment and intangibles | 3,205 | 3,916 | |
| Share based payments | 118 | 224 | |
| Investment income | (52) | (180) | |
| Interest expense | 2,408 | 1,703 | |
| Increase in trade and other receivables | (4,154) | (3,042) | |
| Increase in inventories | (9,221) | (3,631) | |
| Increase in trade and other payables | 6,992 | 3,375 | |
| Cash generated from operations | (7,213) | (3,623) | |
| Interest paid | (1,176) | (268) | |
| Net cash used in operating activities | (8,389) | (3,891) | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (5,008) | (15,478) | |
| Purchase of intangible asset | - | (11) | |
| Interest received | 52 | 180 | |
| Net cash used in investing activities | (4,956) | (15,309) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of share capital | 923 | 3,714 | |
| Repayment of bank borrowings | (285) | (135) | |
| Increase in/(Payment of) finance lease liabilities | 1,399 | (51) | |
| Proceeds from issue of unsecured convertible | |||
| loan stock | - | 5,700 | |
| Loan from minority shareholder | 7,023 | 4,865 | |
| Proceeds from bank borrowings | 6,412 | 3,592 | |
| Net cash from financing activities | 15,472 | 17,685 | |
| Net increase/(decrease) in cash and cash equivalents | 2,127 | (1,515) | |
| Foreign exchange movements | (6,456) | (548) | |
| Cash and cash equivalents at beginning of period | 5,381 | 7,444 | |
| Cash and cash equivalents at end of period | 1,052 | 5,381 | |
NOTES TO THE PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
1. BASIS OF PREPARATION
These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union ("adopted IFRSs").
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2007 and 2008, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The Auditors have reported on those accounts; their reports were unqualified and did not contain statements under the Companies Act 1985, sections 237(2) or (3).
2. GOING CONCERN
The financial statements have been prepared on the going concern basis and do not include any adjustment that would result from the inability of the Group to raise additional funding, if needed.
The Group incurred losses in 2008 and 2007. While the Group anticipates becoming cash flow positive within the next year, the nature of the Group's business is such that there can be considerable unpredictable variation in the timing and magnitude of cash flows. Bearing this in mind, the Group has prepared cash flow projections. On the basis of these projections, the Directors consider that the Group will continue to operate within currently available funds including those from future fundraising. However, the margin of facilities over requirements is not large. While the Company has received several expressions of interest in providing additional debt and/or equity finance, there can be no certainty that an issue of shares would be successful or that the Group would be able to raise additional debt. Nevertheless, the Directors consider it appropriate to prepare the financial statements on the going concern basis.
During 2009, in difficult market conditions, the Group has raised £1.5 million by issue of 15 per cent. interest rate convertible loan stock 2011. Conversion is at 2.25p per share. In addition the Company has also raised £1.2 million through placing 44.5 million ordinary shares. At present the Company has cash of approximately £1.6 million. Further information is given in the Chairman's statement and Chief Executive Officer's Report and in note 14 on liquidity risk.
3. TAX ON LOSS ON ORDINARY ACTIVITIES
There is no tax charge in the year due to losses incurred by the Group, which are not currently being recognised as an asset due to uncertainty over the recoverability of such losses in the foreseeable future.
| | 2008 | 2007 |
| | £’000s | £’000s |
| | | |
| Loss before tax | (6,509) | (5,988) |
| | | |
| Loss before tax multiplied by the standard rate of corporation tax in the UK of 30% | (1,953) | (1,796) |
| | | |
| Effect of: | | |
| Expenses not deductible for tax | - | 43 |
| Overseas losses outside the scope of tax | 1,953 | 1,753 |
| | | |
| Total tax charge for year | - | - |
| | | |
4. LOSS PER SHARE
Year ended 31 December 2008
| Loss | Weighted average number of shares | Per share amount | |
| £'000 | '000 | Pence | |
| Loss for the year attributable to the equity holders of the parent entity | (6,509) | ||
| Weighted average number of shares | 360,217 | ||
| Basic and diluted loss per share | (1.81p) | ||
Year ended 31 December 2007
| Loss | Weighted average number of shares | Per share amount | |
| £'000 | '000 | Pence | |
| Loss for the year attributable to the equity holders of the parent entity | (4,246) | ||
| Weighted average number of shares | 351,312 | ||
| Basic and diluted loss per share | (1.21p) | ||
5. MINORITY INTEREST / RELATED PARTY TRANSACTIONS
The minority interest represents a holding of 48 per cent. of the shares in the subsidiary Company, ENOR spa, by "Sonatrach", the Algerian state oil Company.
| 2008 | 2007 | |
| £'000 | £'000 | |
| Minority interest at 1 January 2008 | - | 1,676 |
| Exchange differences | - | 66 |
| Minority interest in net loss of subsidiary undertaking | - | (1,742) |
| At 31 December 2008 | - | - |
6. DIVIDEND
The Directors cannot recommend the payment of a dividend (2007: £nil).
7. COPIES OF THE REPORT & ACCOUNTS