20 Sep 2010 07:00
OXUS GOLD plc
("Oxus" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2010
HIGHLIGHTS
- AGF increases operating profit by 407% to $3.95 million (2009: $779,000) and reports a profit after exceptional items, interest and tax of $1.05 million (2009: loss of $3.13 million)
- AGF produces 2,579 ounces of gold and 301,949 ounces of silver at a cash operating cost of $403 per gold equivalent ounce, and a total production cost of $585 per gold equivalent ounce
- Oxus signs agreement with Chinese consortium to invest and arrange approximately $185 million, subject to receipt of Chinese Government regulatory approvals
FINANCIAL REVIEW
Results for the six months ended 30 June 2010
The Group reports its unaudited results for the six month period ended 30 June 2010 (the "Period"). Comparatives are for the six month period ended 30 June 2009. These results account for the Group's joint venture, Amantaytau Goldfields ("AGF"), using proportionate consolidation, rather than equity accounting. As a result 50% of AGF's income, expenditure, assets and liabilities have been consolidated, and the comparatives to 30 June 2009 have been restated accordingly.
The Group reports gross revenue for the Period of $4.12 million (2009: $3.19 million). Gross revenue represents 50% of the proceeds received from the export and sale of gold and silver bullion by AGF.
The Group reports a loss for the Period of $2.72 million (0.70 cents per share loss) against a loss of $5.19 million for the six month period ended 30 June 2009 (1.35 cents per share loss). The loss for the Period is after charging a net $0.74 million of exceptional items, net interest costs of $0.72 million and tax of $0.13 million (2009: $2.01 million, $0.74 million and $0.01 million). The tax charge relates to AGF in Uzbekistan.
AGF reports gross revenue for the Period of $8.23 million (2009: $6.39 million), an operating profit for the Period of $3.95 million (2009: $779,000) and a profit after exceptional items, interest and tax of $1.05 million (2009: loss of $3.13 million). 50% of these amounts have been reflected in the Group's results.
Total Group assets decreased to $69.47 million (2009: $78.53 million) including cash and cash equivalents of $7.81 million (2009: $6.20 million).
Corporate Activities
During the Period the Company issued 10,123,425 new ordinary shares, of which 8,164,425 represented capitalised interest on the Company's convertible loan notes and the balance represented capitalised fees and salaries of Directors and senior management. Since the Period end a further 828,836 shares have been issued, representing capitalised fees and salaries. The Company's outstanding share capital currently stands at 397,015,121 shares.
On 6 January 2010 the Company signed a conditional agreement with a consortium of Chinese investors (the "Consortium") to invest and arrange financing in a total aggregate amount of approximately $185 million (the "Financing"). These funds will be used to provide working capital to the Company and to finance and develop AGF's operations in Uzbekistan, including the further development and expansion of open pit heap leach mining operations, the development of one or more underground mines, and an accelerated exploration programme, thereby enabling AGF over the next three to five years to target an increase in annual production to approximately 300,000 ounces of gold, and an increase in AGF's gold reserves from 2.4 million ounces to over 7 million ounces (after allowing for mining depletion).
Under the terms of the Financing the Consortium will invest approximately $85 million by subscription to new ordinary shares in the Company and convertible loan notes. In addition, the Consortium will be granted warrants to subscribe for new ordinary shares in the Company for approximately $20 million in return for an undertaking to arrange a further minimum of $80 million in project finance.
The Consortium consists of Baiyin Non-Ferrous Group Co Ltd, CITIC Construction Co Ltd, and Chang Xin Yuan Su (Tianjin) Equity Fund Management LP. Baiyin and CITIC are ultimately owned and controlled by the Government of the People's Republic of China. Chang Xin is a private equity fund registered in China and managed by Long March Investment Consulting (Beijing) Co Ltd.
Pursuant to the Financing, the Consortium will subscribe for 573,000,000 new ordinary shares in the Company at 6p per share and for $30 million of convertible loan notes, convertible at 7p per share into 267,857,142 new ordinary shares. The notes will earn interest at US LIBOR + 3% per annum. In addition the Consortium will be issued with warrants to subscribe for a further 89,285,714 new ordinary shares at 7p per share, and 62,500,000 new ordinary shares at 10p per share, subject to arranging a further minimum of $80 million in project finance.
The Company's shareholders approved the terms of the Financing at an EGM held on 26 January 2010. On 8 June 2010 the Company signed an amendment to the conditional agreement such that the Financing is conditional only upon the receipt of the customary regulatory approvals from the Chinese Government and admission of the new ordinary shares to trading on AIM by 31 December 2010. Application for the approvals has been submitted by the Consortium and the approval process is currently progressing as anticipated. The Company and the Consortium also took the decision to utilise part of the Financing, if appropriate, for further acquisitions and joint ventures in order to expand the Group's precious metals operations beyond Central Asia.
Prior to investing the Financing into the expansion of AGF, the Group intends to sign a Foreign Investment Agreement ("FIA") with the Uzbek Government setting out various tax, fiscal, licensing and other matters in respect of the AGF joint venture. A draft FIA has been submitted to the relevant Uzbek Government ministries and agencies and comments are being received and discussed as to its final format and content. The Group is also finalising the feasibility study in accordance with Uzbek standards for the underground project at AGF, Uzbek Government approval of which will be required prior to signing the FIA.
At the EGM on 26 January 2010 the Company's shareholders also approved a 1:7 share consolidation, subject to the Financing closing by 31 December 2010.
In May 2008 the Company issued convertible loan notes in the principal amount of $18.5 million. These notes were convertible into ordinary shares of the Company at 37p per share, earned interest at 8% per annum and were repayable, if not converted, in May 2010. In January 2010 the notes were restructured such that they are now convertible at 12p per share, earn interest at UK LIBOR + 3% per annum, and the repayment date has been extended to May 2013. If all the notes are converted the maximum number of new ordinary shares that would be issued is 96,354,166. The noteholders have the option to revert back to the original terms of the notes if the Financing, or an alternative financing in a minimum amount of $80 million, does not occur by 31 December 2010.
At 31 December 2009 the Company owed Nedbank $2.5 million against a $20 million corporate loan facility. During the Period Nedbank has agreed to convert this amount into ordinary shares of the Company, at 6p per share, subject to the Financing closing by 31 December 2010. If the balance of the loan facility is converted the maximum number of new ordinary shares that would be issued is 30,224,865.
The Directors continue to undertake a number of measures in order to preserve cash until such time as the Group's operations are fully funded. These measures include a continued reduction in the size of the board, and all Directors and most senior management (including those at AGF) continuing to be paid approximately 20% of their salaries or fees in shares, rather than cash. Further cost reduction measures will be pursued wherever appropriate.
At 10 September 2010, the Group's cash resources stood at approximately $6.6 million.
The Directors' assumption that the Financing will be completed by 31 December 2010 is integral to the Group meeting its forecast cash flows over the next 12 months. Should the Financing not occur by 31 December 2010 there may be insufficient cash flow for the Group to manage its day to day operations without seeking and relying on further financing, which may or may not be available. After making suitable enquiries, and based on the latest available information regarding the likely timing of the Financing, the Directors have formed a judgment that there is a reasonable expectation that the Group has, or will have, adequate resources to enable the Group to remain a going concern and to significantly expand its operations. Accordingly, the Directors continue to adopt the going concern basis in preparing these unaudited interim financial statements.
REVIEW OF AGF'S OPERATIONS
All figures relating to AGF are 50% attributable to Oxus.
Stacking at the Nukrakon (formerly Vysokovoltnoye) heap leach operation continued throughout the Period, initially utilising previously mined and stockpiled ore. Mining of open pit oxides recommenced at Nukrakon in early May 2010, mining higher grade material from the Orezone No 7 pits. During May and June 2010 a total of 98,800 tonnes of ore were mined containing 0.87 grammes per tonne ("g/t") of gold and 98.4 g/t of silver. During the Period 147,176 tonnes of ore were stacked on the heap leach pads containing an average head grade of 0.87 g/t gold and 81.23 g/t silver.
By the end of August 2010 a total of 201,875 tonnes of ore have been mined, containing 1.05 g/t gold and 77.1 g/t silver, and 215,068 tonnes of ore stacked, containing 0.91 g/t gold and 85.32 g/t silver.
During the Period AGF produced 2,579 ounces of gold and 301,949 ounces of silver at a cash operating cost of $403 per gold equivalent ounce, and a total production cost of $585 per gold equivalent ounce. AGF sold 2,362 ounces of gold and 314,302 ounces of silver for gross revenue of $8.23 million. Production and sales are ahead of planned output due to improved irrigation of previously stacked ore. During July and August 2010 AGF produced a further 794 ounces of gold and 167,677 ounces of silver and sold a further 1,183 ounces of gold and 126,696 ounces of silver for gross revenue of $3.84 million.
This steady performance is expected to continue for the remainder of 2010. In addition AGF management is investigating with the Almalyk refinery the possibility of treating slag from the Nukrakon smelting furnace in order to release further metal for AGF. Operating efficiencies continue to improve and further cost cutting is being examined in order to extend the life of the existing orezones.
AGF reports an operating profit for the Period of $3.95 million (2009: $779,000) and a profit after exceptional items, interest and tax of $1.05 million (2009: loss of $3.13 million).
Future Open Pit Oxide Operations
Mining and stacking at Nukrakon is expected to continue at a rate of 35,000 tonnes per month from the Orezone No 7 pits. Stringent cost and grade control measures are in force in order to maximise the economic life. In September 2010 a feasibility study commenced in order to assess the economic viability of exploiting the resources in Orezone No 4 and adjacent orezones. Early completion of scheduled exploration drilling is also being considered in order to support this study and the related operational plans.
Mining at the Sarybatyr deposit is provisionally planned to commence during the second quarter of 2011, subject to the approval by the Uzbek authorities of the appropriate feasibility study and the issuance of the mining licence. Recent trenching has been carried out to verify orezone extensions. It is intended that the ore will be stacked and processed at the Nukrakon heap leach operation, 4.5 kms from Sarybatyr. The Sarybatyr deposit has a Proven and Probable Oxide Reserve of 1.61 million tonnes at an average grade of 1.88 g/t gold. Following mining of Nukrakon Orezone No 4 and Sarybatyr, a further five deposits in the immediate vicinity (Central Karasai, Western Karasai, Tunshuktau, Yasaul and Taskazgan) can potentially be mined and processed at the Nukrakon operation following completion of appropriate studies and issuance of appropriate permits. This one million tonne per annum operation is expected to produce a total of 340,000 ounces of gold equivalent over a twelve year period.
In parallel to the Nukrakon operation, a second one million tonne per annum heap leach plant remains under consideration for commissioning at Asaukak during 2011. This operation could produce a further 250,000 ounces of gold over a ten year period from the existing stockpile of Asaukak ore (1.32 million tonnes at 0.64 g/t, containing 27,000 ounces of gold) and subsequent mining of surrounding deposits, to include Aksai, Northern Asaukak, Sredinny, North Eastern and Northern Daugystau.
Underground Sulphide Project
In May 2009 Wardell Armstrong International ("WAI") completed an addendum to a 2008 bankable feasibility study in respect of a lower capital cost first phase of AGF's underground sulphide project. The addendum included the Severny deposit, part of the Centralny deposit, and sulphide tailings arising from transitional and sulphide ore previously processed through the carbon-in-pulp ("CIP") plant as part of AGF's open pit oxide operations. This study envisaged an initial 450,000 tonnes per annum ("tpa") operation at a capital cost of approximately $73 million, utilising less than 50% of the JORC classified Proven and Probable reserves and producing an average of 100,000 ounces of gold per annum, until expanded to process a larger tonnage.
In September 2010 WAI updated the addendum to expand production from 450,000 tpa to 750,000 tpa, and to exploit the full reserve base. This brings the production tonnage into line with a preliminary feasibility study already approved by the Uzbek Government. The September 2010 report will be used to prepare the final version of the feasibility study in accordance with Uzbek standards for subsequent approval by the Uzbek Government and development of the project. First production from the underground mine can be anticipated within 18 months of final Uzbek Government approval.
The ore is expected to be processed using bio-oxidation technology and the existing CIP plant at AGF will be modified to accept the sulphide ore. Overall plant recoveries are expected to be 88% except for the tailings where a recovery of 56% has been assumed.
The JORC classified Measured and Indicated Mineral Resource base for the Amantaytau Severny and Centralny sulphides is recognised to total 13.5 million tonnes at 6.89 g/t containing 2.99 million ounces of gold (Amantaytau Severny alone contains 2.31 million ounces of gold). JORC classified Proven and Probable Ore Reserves have been estimated for stoping blocks within a 3.5 g/t cut-off at Severny and a 2.0 g/t cut-off at Centralny, totalling 8.96 million tonnes at 6.99 g/t gold containing 2.01 million ounces of gold. Significant potential exists to increase the resource base for the underground sulphide project, and this is the current exploration priority.
Exploration
A five year exploration programme has commenced, the objective being to accelerate the conversion of mineral resources to reserves and in so doing accelerate the preparation of further deposits for production, as well as to define new resources. AGF is targeting an increase in JORC classified gold reserves from the current 2.4 million ounces to over 7 million ounces (after allowing for mining depletion) as a result of the proposed programme. The total exploration potential (JORC and Soviet classified) at AGF is currently identified as approximately 24 million ounces of gold and 480 million ounces of silver.
The total budget for the five year programme is approximately $22 million, of which $2.5 million has been committed from current cash resources to be spent during 2010.
As of the end of July 2010, over 9,100m of trenching (163 trenches) have been carried out at Sarybatyr, Yasaul, Taskazgan and Nukrakon, of which over 5,500m have been mapped and sampled. This is already more than the 8,250m of trenching originally scheduled for 2010. The more significant trench intersections were tabulated in the Company's announcement of 23 August 2010.
A new Atlas Copco Explorac 220 reverse circulation ("RC") drill rig has been delivered to the AGF mine and has been commissioned by Atlas Copco. Having undertaken deep drill hole preparation at the Severny underground deposit and pre-production drilling at Sarybatyr, the rig will move down to drill the Nukrakon orebody 4 oxides. Drilling results for Sarybatyr will be published once the independently verified assays have been returned.
Oxus has appointed Foraco International ("Foraco"), a major international drilling company, to manage its drilling operations at AGF. Staff of Foraco were present during the Explorac RC rig commissioning, and have been preparing for both the RC and deep hole core drilling programmes. Foraco are supervising drilling operations fulltime, as well as helping with the training of local staff.
A substantial consignment of core drilling equipment has also been purchased from Atlas Copco and shipped to the AGF mine, in advance of the deep hole drilling programme at Severny. Foraco has started drilling the first of seven deep holes at Severny, using AGF's CS14 coring rig. This is targeting the interval below the existing Severny reserves between 500m and 900m depth below surface. Previous Soviet drilling included one single deep intersection 860m below surface, which intersected an average of 51.6 g/t gold over 8m (estimated true width 1.73m). The existing JORC Ore Reserve for Amantaytau Severny of 1.68 million ounces, is contained within a Measured and Indicated Mineral Resource of 2.31 million ounces (between 100m and 400m depth below surface, ie an average of 7,700 ounces per vertical metre). Assuming the ounces per vertical metre is consistent, Oxus considers the total resource potential down to 860m below surface, to be around 5.8 million ounces, which would justify a considerable increase in the mine production rate if confirmed by drilling.
Deep hole SCDH-5 is currently being drilled by Foraco using the CS14 rig. The hole is now well into bedrock at over 200m depth, having drilled through over 100m of poorly consolidated Mesozoic sediments and the Centralny fault. The mineralized intersection in this hole is targeted at about 890m depth, and at the current rate of drilling is expected to be reached in mid October. On completion of hole SCDH-5, it is proposed to drill two further wedged deflections, out of this hole, before moving onto the next hole.
Oxus and AGF have also taken the decision to establish a Geographic Information System ("GIS") together with a comprehensive mineral resource database for AGF's exploration area and contained deposits and occurrences. Oxus has appointed Aurum Exploration Services ("Aurum"), of Kells in Ireland, to provide Oxus with GIS specialists and geological staff. MapInfo and Discover 3D software are already installed on site, and Aurum are working alongside and training local AGF staff.
In accordance with Uzbek law AGF has the exclusive rights to explore and mine within a 192 sq km project territory, subject to the relevant operating permits. AGF has applied for specific exploration licences within the territory based on the detailed exploration work schedules for each of the deposits included in the overall programme. Work is currently being undertaken with the approval of the Uzbek State Committee for Geology and Mineral Resources pending the issuance of those licences.
OTHER ACTIVITY
Amantaytau Goldfields / Oxus Gold Scholarship Foundation
Oxus Gold plc has created and is sponsoring the AGF / Oxus Gold Scholarship Foundation in cooperation with Westminster International University in Tashkent ("WIUT"). The Patron of the Foundation is His Royal Highness Prince Michael of Kent GCVO.
The Foundation has been established to award scholarships to support undergraduate and postgraduate studies at WIUT for selected students from the Navoi Province of Uzbekistan, where AGF has its mining operations. In October 2009 the Foundation's first scholar graduated. The Foundation has also opened a Regional Learning Centre in Zarafshan, the local town to AGF's operations, in order to teach English, maths and other subjects to local students and to improve the English language teaching skills of the local teachers. WIUT is managing the Learning Centre on AGF's behalf. The first courses commenced in April 2010 and to date approximately 60 students have enrolled.
WIUT was established in 2002 and is unique in the Central Asian region in that the degrees that it awards are fully internationally accredited since the University is a validated institution of the University of Westminster in London. The degrees are therefore the same as those in London. WIUT currently has over 800 students from Uzbekistan and neighbouring countries, studying a variety of business and economic subjects.
BOARD OF DIRECTORS
John Donald, Chief Operating Officer, retired on 31 March 2010 but has agreed to consult for the Group until 31 December 2010. The position of Chief Operating Officer will remain vacant pending completion of the Financing. The board would like to express its gratitude to John Donald for his services to the Group.
On 1 April 2010 Richard Wilkins, Finance Director, assumed the role of Company Secretary.
COMPETENT PERSON
The resources and reserves stated in this interim report have been reviewed and approved by the following Competent Person:
William J Charter, BSc, CGeol, FGS, CEng, MIMM
William Charter has over 30 years' experience in both exploration and mining. He started working in Central Asia with the Oxus Group in 1996, and is currently Chief Geologist of Oxus Gold plc.
For further information please visit www.oxusgold.co.uk or contact:
Oxus Gold plc
Richard Shead (Chairman) Tel: +44 (0) 207 907 2000
Richard Wilkins (Finance Director)
Fairfax I.S. PLC
Ewan Leggat / Laura Littley Tel: +44 (0) 207 598 5368
Conduit PR Ltd
Ed Portman / Leesa Peters Tel: +44 (0) 207 429 6607
CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010
| Condensed consolidated Income Statement |
| |||
|
|
| Six months ended 30 June | Six months ended 30 June | Year ended 31 December |
|
|
| 2010 | 2009 | 2009 |
|
|
| $000 | $000 | $000 |
|
| Note | Unaudited | Unaudited | Audited |
|
|
|
|
|
|
| Revenue |
| 4,115 | 3,193 | 13,265 |
| Cost of sales |
| (1,682) | (1,755) | (4,654) |
|
|
|
|
|
|
| Gross profit |
| 2,433 | 1,438 | 8,611 |
|
|
|
|
|
|
| Administrative expenses |
| (2,642) | (3,373) | (7,847) |
| Share-based payments |
| (102) | (245) | (896) |
| Other operating income |
| - | 109 | 261 |
| Other operating expenses |
|
|
|
|
| Other operating expenses |
| (824) | (255) | (1,726) |
| Exceptional items: |
|
|
|
|
| Gain on sale of investments | 4 | 1,075 | - | 138 |
| Litigation expenses | 5 | (1,101) | - | - |
| AGF restructuring costs and penalties |
| (712) | (2,065) | (2,645) |
|
|
|
|
|
|
| Total operating expenses |
| (4,306) | (5,829) | (12,715) |
|
|
|
|
|
|
| Operating loss |
| (1,873) | (4,391) | (4,104) |
|
|
|
|
|
|
| Financial income |
| 170 | 499 | 511 |
| Financial expense |
| (886) | (1,236) | (1,931) |
|
|
|
|
|
|
| Loss before tax |
| (2,589) | (5,128) | (5,524) |
|
|
|
|
|
|
| Taxation |
| (134) | (57) | (320) |
|
|
|
|
|
|
| Loss for the period |
| (2,723) | (5,185) | (5,844) |
| Basic loss per share (US cents) | 6 | 0.70 | 1.35 | 1.52 |
|
|
|
|
|
|
| Diluted loss per share (US cents) | 6 | 0.70 | 1.35 | 1.52 |
All amounts relate to continuing operations.
| Condensed consolidated balance sheet |
| 30 June | 30 June | 31 December |
|
|
| 2010 | 2009 | 2009 |
|
|
| $000 | $000 | $000 |
|
| Note | Unaudited | Unaudited | Audited |
|
|
|
|
|
|
| Non-current assets |
|
|
|
|
|
|
|
|
|
|
| Intangible assets |
| 23,711 | 22,977 | 22,808 |
| Property, plant and equipment |
| 16,783 | 17,801 | 17,142 |
| Loans due from joint venture |
| 7,265 | 12,870 | 8,975 |
| Total non-current assets |
| 47,759 | 53,648 | 48,925 |
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
|
|
| Trade and other receivables |
| 9,867 | 10,304 | 9,018 |
| Inventory |
| 4,041 | 7,484 | 4,246 |
| Available-for-sale investments | 4 | - | 895 | 643 |
| Cash and cash equivalents |
| 7,806 | 6,196 | 9,629 |
| Total current assets |
| 21,714 | 24,879 | 23,536 |
|
|
|
|
|
|
| Total assets |
| 69,473 | 78,527 | 72,461 |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
| Loans and borrowings | 7 | 2,232 | 24,120 | 22,653 |
| AGF Phase 2 project development fund | 8 | 9,866 | 10,866 | 9,866 |
| Trade and other payables |
| 3,468 | 9,827 | 5,191 |
| Total current liabilities |
| 15,566 | 44,813 | 37,710 |
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
| Loans and borrowings | 7 | 18,570 | 73 | 478 |
| Deferred tax liability |
| 275 | 57 | 166 |
| Total non-current liabilities |
| 18,845 | 130 | 644 |
|
|
|
|
|
|
| Total net assets |
| 35,062 | 33,584 | 34,107 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Share capital |
| 6,621 | 6,457 | 6,497 |
| Share premium |
| 114,565 | 113,227 | 113,517 |
| Capital reserve |
| 26,180 | 22,822 | 23,479 |
| Merger reserve |
| 34,929 | 34,929 | 34,929 |
| Other comprehensive income |
| - | - | 195 |
| Retained deficit |
| (147,233) | (143,851) | (144,510) |
| Total equity |
| 35,062 | 33,584 | 34,107 |
|
|
|
|
|
|
| Condensed consolidated statement of cash flows |
| Six months ended 30 June | Six months ended 30 June | Year ended 31 December |
|
|
| 2010 | 2009 | 2009 |
|
|
| $000 | $000 | $000 |
|
|
| Unaudited | Unaudited | Audited |
| Cash flows from operating activities |
|
|
|
|
| Loss before tax for the year |
| (2,589) | (5,128) | (5,524) |
|
|
|
|
|
|
| Adjustments for: |
|
|
|
|
| Depreciation and amortisation |
| 558 | 727 | 1,671 |
| Finance costs |
| 886 | 1,236 | 1,931 |
| Equity-settled share-based payment expense |
| 102 | 256 | 913 |
| Gain on sale of investments |
| (1,075) | - | (138) |
| Loss on restructuring of convertible loan notes |
| 112 | - | - |
| Provision for doubtful debts |
| - | - | 47 |
| Provision for obsolete inventory |
| - | - | 330 |
| Loss on disposal of property, plant and equipment |
| - | - | 15 |
| Other reserve movements |
| 385 | 222 | 549 |
| Cash flows from operating activities before changes in working capital and provisions |
| (1,621) | (2,687) | (206) |
|
|
|
|
|
|
| Decrease / (increase) in amounts due from joint venture |
| 1,710 | 598 | 4,493 |
| Decrease / (increase) in accounts receivable |
| (849) | 1,195 | 2,433 |
| Decrease / (increase) in inventories |
| 205 | 646 | 3,555 |
| (Decrease) / increase in trade and other payables |
| (1,648) | 333 | (3,745) |
| Cash flows from operating activities after changes in working capital and provisions |
| (2,203) | 85 | 6,530 |
|
|
|
|
|
|
| Income tax paid |
| - | - | (146) |
| Interest paid |
| (41) | (871) | (1,944) |
|
|
|
|
|
|
| Net cash generated by (used in) operating activities |
| (2,244) | (786) | 4,440 |
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
| Purchase of property, plant and equipment |
| (54) | (93) | (189) |
| Investment in exploration and evaluation of mineral deposits |
| (1,048) | (363) | (395) |
| Sale of available-for-sale investments |
| 1,523 | - | 585 |
| Net cash generated by (used in) investing activities |
| 421 | (456) | 1 |
|
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
|
| Repayment of bank borrowings |
| - | (2,500) | (4,750) |
| Net cash generated by (used in) financing activities |
| - | (2,500) | (4,750) |
|
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| (1,823) | (3,742) | (309) |
| Cash and cash equivalents at beginning of period |
| 9,629 | 9,938 | 9,938 |
| Cash and cash equivalents at end of period |
| 7,806 | 6,196 | 9,629 |
SELECTED NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010
1. Corporate information
Oxus Gold plc ("the Company") is a company incorporated in England.
2. Basis of preparation
These condensed interim financial statements of the Company and its subsidiaries ("the Group") for the six months ended 30 June 2010 (the period) have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest audited financial statements for the year ended 31 December 2009. These condensed interim financial statements have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2009. The auditors' opinion on these Statutory Accounts was unqualified but did contain an emphasis of matter in respect of the Group's ability to continue as a going concern. While the financial figures included within this half-yearly report have been computed in accordance with IFRSs applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as set out in IAS34.
Prior to the year ended 31 December 2009, the Group used the equity method to account for its interest in joint ventures. During 2009, the Group changed its accounting policy for accounting for its interest in the Amantaytau Goldfields ("AGF") joint venture, so as to apply proportionate consolidation. In the board's view, proportionate consolidation provides a reliable and more relevant presentation of the Group results and its operating activity than the equity method. Therefore, the Group decided to make a voluntary change in the accounting policy and the new accounting policy was applied retrospectively.
Comparatives for the six month period ended 30 June 2009 have been restated to reflect this change in accounting policy.
3. Total Comprehensive income
There are no additional items of income and expense which are not included within the profit and loss for the period.
4. Gain on sale of investments
In April 2010 the Group sold the balance of its investment in Tethys Petroleum Limited for gross proceeds of $1,523,000 and a gain on sale of $1,075,000.
5. Litigation expenses
A former director, William Trew, sued the Company for £175,000 plus interest alleged to be outstanding under the terms of a settlement agreement governing his resignation in December 2007. In addition, MAED Limited, a Company in which Mr. Trew has a material beneficial interest, brought a claim against the Company for an amount of $374,000 plus interest, alleging that it was entitled to an early completion bonus under a contract relating to the construction of a plant at AGF during 2003 and 2004. The Company was vigorously defending these claims but in March 2010 reached an amicable arrangement with Mr. Trew and MAED Limited to settle. As a result there is no further dispute between the parties.
The costs associated with the litigation, including settlement, comprised $1,101,000 and are disclosed separately as an exceptional item.
6. Loss per share
The calculation of the basic loss per share for the six month period ended 30 June 2010 is based on the following data:
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| Six months ended 30 June | Six months ended 30 June | Year ended 31 December |
|
| 2010 | 2009 | 2009 |
|
| $000 | $000 | $000 |
|
|
|
|
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| Basic and diluted loss per ordinary share (US cents) | 0.70 | 1.35 | 1.52 |
|
|
|
|
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| Loss for the period attributable to equity shareholders | 2,723,000 | 5,185,000 | 5,844,000 |
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|
|
|
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| Weighted average number of ordinary shares | 389,965,303 | 382,800,886 | 384,052,405 |
Impact of change in accounting policy
The change in Group's accounting policy during the year is described in detail in note 1. The change in accounting policy had no impact on the reported net loss.
7. Loans and borrowings
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| 30 June | 30 June | 31 December |
|
| 2010 | 2009 | 2009 |
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| $000 | $000 | $000 |
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|
|
|
|
| Borrowing at amortised cost |
|
|
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| Convertible loan notes | 16,070 | 18,009 | 17,820 |
| Nedbank corporate loan facility | 2,500 | 3,750 | 2,500 |
| Group share of joint venture borrowings | 2,232 | 2,434 | 2,811 |
| Total borrowings | 20,802 | 24,193 | 23,131 |
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|
|
|
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| Amount due for settlement within 12 months | 2,232 | 24,120 | 22,653 |
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|
|
|
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| Amount due for settlement after 12 months | 18,570 | 73 | 478 |
In January 2010, the Company completed a restructuring of its 8% unsecured convertible loan notes, convertible at £0.37 per share, due May 2010 (Notes), such that they are now convertible at £0.12 per share, earn interest at UK LIBOR + 3% per annum, and the repayment date has been extended to May 2013. As a result of the restructuring, if all the Notes are converted, a total of 96,354,166 new ordinary shares in the Company would be issued. The noteholders have the option to revert to the original terms of the Notes if the proposed financing with the Chinese Consortium, or an alternative financing in a minimum amount of $80 million, does not occur by 31 December 2010.
The terms of the Notes subsequent to the restructuring are substantially different and therefore the modification of the terms has been accounted for as an extinguishment of the original liability and recognition of a new liability resulting in a loss of $112,000 recognised in these interim financial statements. An additional amount of $2,600,000 has been recognised in capital reserve representing the fair value of the element of the convertible loan notes allocated to the option to convert. The carrying amount of the loan notes at 30 June 2010 is $16,070,000 recorded at amortised cost.
The Company has a $20 million corporate loan facility with Nedbank Limited. The loan is being repaid over four years from drawdown and has an interest rate of 2.75% above 3 month LIBOR. The loan is secured on the Group's shares in, and loans to, AGF, and other subsidiary company shares and loans. The losses incurred by the Group have resulted in a breach of the loan covenants, in particular the interest cover and debt service cover covenants, agreed with Nedbank at the inception of the loan. At 30 June 2010, $2.5 million remained outstanding against the loan and is classified as a non-current liability, which amount Nedbank agreed in April 2010 to capitalise into a maximum of 30,224,865 shares, subject to the proposed financing with the Chinese Consortium closing by 31 December 2010.
8. AGF Phase 2 Project Development Fund
|
| 30 June | 30 June | 31 December |
|
| 2010 | 2009 | 2009 |
|
| $000 | $000 | $000 |
|
|
|
|
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| AGF Phase 2 Project Development Fund | 9,866 | 10,866 | 9,866 |
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|
At 30 June 2010 the Phase 2 Project Development Fund was $9.87 million (30 June 2009: $10.87 million). The Fund, payable to the Uzbekistan Government for access to mineral rights, was created in July 2004.
The Company originally committed to transfer the monies to the Fund over the period to May 2008. Discussions are ongoing with the Uzbek Government with a view to determining new payment terms, including the terms of a contingent liability to penalty interest equivalent to 5% per annum from 1 November 2008 on overdue amounts in accordance with the original agreement signed between the Company and the Ministry of Finance of Uzbekistan in July 2004. The Company continues to recognise the Fund as a current liability and paid $1.0 million to the Uzbek Government during 2009. The Group no longer enters into any form of hedging arrangement in respect of gold prices.
9. Approval of interim group financial statements
The interim group condensed financial statements for the six months to 30 June 2010 were approved by the board on 17 September 2010.