16 Sep 2009 07:00
Oxus Gold plc
("Oxus" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2009
FINANCIAL REVIEW
The Group reports its results for the six month period ended 30 June 2009 (the "Period"). Comparatives are for the six month period ended 30 June 2008.
The Group reports gross revenue, excluding attributable joint venture income, of $488,000 for the Period (2008: $1.65 million). Gross revenue primarily represents the recharge of exploration, evaluation and administrative costs which are borne by the Group and shown as Group costs, but relate directly to the Amantaytau Goldfields ("AGF") joint venture. Group revenue does not include any revenue from the sale of gold and silver since AGF, being a joint venture, is accounted for using the equity method and only the Group's 50% share of profits or losses arising from the joint venture is reflected in the consolidated income statement.
The AGF joint venture contributed an attributable loss of $1.56 million for the Period (2008: $460,000 profit), which includes $1.69 million of exceptional costs arising from a restructuring of the joint venture's operating cost base.
Total Group earnings for the Period showed a loss after taxation of $5.18 million (1.35 cents per share loss) against a profit of $1.84 million (0.50 cents per share profit) in 2008.
Total assets decreased to $67.53 million (31 December 2008: $75.65 million; 30 June 2008: $92.53 million) including cash and cash equivalents of $6.18 million (2008: $17.31 million).
During the Period the Company issued 2,165,742 ordinary shares in respect of capitalised fees and salaries relating to directors and senior management of the Group. The total number of ordinary shares in issue at 30 June 2009 was 383,605,427. Since the period end, a further 1,025,573 ordinary shares have been issued in respect of capitalised fees and salaries and there are currently 384,631,000 ordinary shares in issue.
At 30 June 2009 the Group's loan facility from Nedbank had reduced to $3.75 million. The amount outstanding on the loan at 11 September 2009 was $2.50 million.
The Group continues to take measures to preserve cash until such time as further funding is obtained and to address the items referred to by the auditors as an emphasis of matter relating to going concern in the audited accounts to 31 December 2008.
Overheads have been cut wherever possible and directors and senior management have all accepted reduced salaries and are paid a portion of those salaries in shares of the Company, rather than cash. AGF's operations have also been placed onto a temporary 'care and maintenance' basis whilst the outstanding stockpile of silver doré is being refined and sold, following which the existing open pit heap leach operations will be recommenced. AGF is expected to refine approximately 18.2 tonnes of stockpiled silver doré over the period to 31 December 2009, to recover in the order of 15,860 ounces of gold equivalent. A further approximately 4,775 ounces of gold equivalent is expected to be made available to AGF during this period as a result of the release of metal previously locked-up in the refinery's furnace.
AGF is also making applications to the Uzbek Government to recover some $9.6 million of VAT, taxes and customs duties which it considers to be repayable or to have been overpaid, and to obtain confirmation that the reclassification of gold exporting businesses from 'zero-rated' to 'exempt' for VAT purposes with effect from 1 January 2009 does not apply to AGF due to the protections afforded to Oxus as a foreign investor pursuant to the Uzbek Foreign Investment Laws. In this regard, AGF has continued to file VAT returns during 2009 on the basis of a 'zero-rated' business.
Negotiations with a major Chinese contracting and financing group in respect of the financing of AGF's underground sulphide mine continue to progress and first underground production is still targeted to take place during H2 2011, subject to the availability of finance.
During the Period the Group received net repayments on its shareholder loans to AGF of $1.43 million. At 11 September 2009 the Group's cash resources stood at approximately $6 million.
Discussions are also ongoing with holders of the Company's $18.5 million 8% unsecured convertible loan notes, due May 2010, with a view to extending the maturity date on such notes. The majority of the note holders are significant shareholders in the Company.
The Company is grateful to its strategic shareholder, Zeromax GmbH, for making available an Uzbek Soum 7 billion (approximately $4.7 million) interest free working capital facility to AGF in April 2009.
REVIEW OF OPERATIONS
All figures relating to AGF are 50% attributable to Oxus.
During the six month period to 30 June 2009 AGF produced 3,612 ounces of gold and 111,586 ounces of silver, and sold 5,232 ounces of gold and 133,066 ounces of silver for gross revenue of $6.39 million.
AGF reports an operating profit, before exceptional items, of $249,000 for the Period (2008: $920,000). After exceptional restructuring costs AGF reports a loss of $3.12 million (2008: $920,000 profit).
The carbon-in-pulp ("CIP") plant operation was shut down in January 2009 as planned. AGF has decided not to process the Sarybatyr open pit oxide ore through this plant as metallurgical test work and an economic analysis demonstrated that this deposit will be more profitably processed by heap leaching. The CIP plant will not operate again until it is converted into a bio-oxidisation plant to treat the underground sulphide ore. In order to reduce costs the associated labour force, other than that required to carry out care and maintenance, has been retrenched on a temporary basis.
Stacking at the Vysokovoltnoye heap leach operation was also stopped in early January, although the heaps were irrigated until March 2009. The decision to temporarily cease operations was taken due to the delays being experienced with the in-country Almalyk refinery, which was unable to refine the required tonnage in accordance with its contractual commitments. At 30 June 2009 a total of 18.2 tonnes of silver doré was stockpiled at AGF, representing 568,000 ounces of silver and 6,700 ounces of gold, with a total sales value of approximately $15.7 million at current metal prices.
A new refining contract, with improved commercial terms, has now been signed with the Almalyk refinery and the first four tonnes of stockpiled silver doré were sent for refining in late July, with the first refined metal being sold in London in late August 2009. Almalyk has committed to refine and return for sale the rest of the stockpile over the period to 31 December 2009, and also to refine and return for sale 56,750 ounces of silver and 3,860 ounces of gold which has been locked-up in the refinery's furnace since the end of 2007. This metal has a sales value of approximately $4.4 million at current metal prices.
Future Open Pit Oxide Operations
It is currently planned to recommence open pit oxide mining in early 2010 and to continue heap leaching until 2022, producing an estimated 590,000 ounces of gold equivalent over this period, excluding any expansions arising as a result of exploration activities.
Initially the Vysokovoltnoye plant will process the Sarybatyr ore, followed by the balance of the Vysokovoltnoye deposit, and then a further six deposits in the immediate vicinity. The feasibility study for the Sarybatyr deposit has been approved by the State Committee for Geology and submitted to the Cabinet of Ministers in order to obtain the appropriate mining permit. This operation is expected to produce a total of 340,000 ounces of gold equivalent over the twelve year period. In parallel to the Vysokovoltnoye operation, a second heap leach plant is planned to be commissioned at Asaukak in Q4 2010, to recover a further 250,000 ounces of gold over a ten year period from the existing stockpile of Asaukak ore and subsequent mining of surrounding deposits.
Underground Sulphide Project
As previously reported, Wardell Armstrong International ("WAI") completed a bankable feasibility study ("BFS") in June 2008 in respect of AGF's underground sulphide reserves at Severny and Centralny. This BFS was subsequently updated in November 2008 to include additional reserve ounces and envisaged a 750,000 tonnes per annum operation (increasing to 1.2 million tonnes per annum) over an initial mine life of eight years, at a capital cost of approximately $170 million, and producing an average of 230,000 ounces of gold per annum.
In May 2009, WAI completed an addendum to the BFS in respect of a lower capital cost first phase of the underground sulphide project, which also includes AGF's sulphide tailings arising from transitional and sulphide ore previously processed through the CIP plant as part of AGF's open pit oxide operation. This study envisages an initial 450,000 tonnes per annum operation at a capital cost of approximately $73 million, and producing an average of 100,000 ounces of gold per annum, until expanded to process a larger tonnage.
OTHER ACTIVITY
Board of Directors
On 31 January 2009 Jonathan Kipps, Finance Director and Company Secretary, resigned as a director of the Company. On 1 February 2009 Jyoti Chandhok, a chartered management accountant, was appointed Company Secretary, Richard Shead, non-executive Chairman, assumed the role of executive Chairman, and James McBurney joined the board as a non-executive director. James McBurney has over twenty years' experience in the banking sector and has held senior positions at a number of global financial institutions.
On 1 July 2009 Richard Wilkins vacated the role of Chief Executive Officer and assumed the role of Finance Director. The executive therefore now consists of Richard Shead as executive Chairman, John Donald as Chief Operating Officer, and Richard Wilkins as Finance Director.
Financial Advisers
On 1 January 2009 Fox-Davies Capital Limited was appointed as joint broker alongside Fairfax I.S. PLC. Fairfax is also the Company's nominated adviser.
Contact details:
Oxus Gold plc
Tel: +44 (0)20 7907 2000
Richard Shead
Richard Wilkins
John Donald
Fairfax I.S. PLC
Ewan Leggat
Tel: + 44(0)20 7598 5368
Conduit PR.
Ed Portman
Tel: + 44 (0)20 7429 6607 or + 44 (0)773 336 3501
| Consolidated income statement | |||||
| Six months ended 30 June | Six months ended 30 June | Eighteen months ended 31 December | |||
| 2009 | 2008 | 2008 | |||
| Note | $000 | $000 | $000 | ||
| Unaudited | Unaudited | Audited | |||
| Revenue | 488 | 1,655 | 5,278 | ||
| Exploration & evaluation costs | (272) | - | (3,657) | ||
| Gross profit | 216 | 1,655 | 1,621 | ||
| Administrative expenses | (2,769) | (4,379) | (12,000) | ||
| Share-based payments | (245) | (406) | - | ||
| Foreign exchange loss | (93) | - | - | ||
| Exceptional costs and revenues: | |||||
| (Loss)/gain on sale of investments | - | (195) | 1,336 | ||
| Net Jerooy arbitration costs | - | 4,922 | 3,339 | ||
| Costs relating to the settlement of the Eurogold dispute | - | (292) | (8,357) | ||
| Impairment of Khandiza mining property | - | - | (28,456) | ||
| Impairment of goodwill in Marakand Minerals | - | - | (1,487) | ||
| Impairment in carrying value of joint venture | - | - | (8,548) | ||
| Revaluation gain on available-for-sale investments | - | 68 | - | ||
| Other legal costs | (256) | (203) | - | ||
| Operating (loss)/profit | (3,147) | 1,170 | (52,552) | ||
| Share of (loss)/profit from joint ventures | 5 | (1,564) | 460 | (2,272) | |
| Financial income | 499 | 808 | 2,932 | ||
| Financial expense | (973) | (602) | (2,496) | ||
| Net financial expense | (474) | 206 | 436 | ||
| (Loss)/profit before tax | (5,185) | 1,836 | (54,388) | ||
| Taxation | - | 2 | - | ||
| (Loss)/profit for the period | (5,185) | 1,838 | (54,388) | ||
| Basic (loss)/profit per share - US cents | 6 | (1.35) | 0.50 | (14.57) |
| Fully Diluted | 6 | (1.35) | 0.47 | (14.57) |
All amounts relate to continuing operations.
| Consolidated statement of financial position | 30 June | 30 June | 31 December | |
| 2009 | 2008 | 2008 | ||
| Note | $000 | $000 | $000 | |
| Unaudited | Unaudited | Audited | ||
| Non-current assets | ||||
| Property, plant and equipment | 357 | 418 | 328 | |
| Exploration and mining development properties | 7 | 687 | 11,989 | 687 |
| Investment in joint venture | 8 | 43,984 | 37,723 | 46,981 |
| Available-for-sale investments at cost | 895 | 895 | 895 | |
| 45,923 | 51,025 | 48,891 | ||
| Current assets | ||||
| Trade and other receivables | 10 | 15,434 | 24,195 | 16,883 |
| Cash and cash equivalents | 6,177 | 17,308 | 9,873 | |
| 21,611 | 41,503 | 26,756 | ||
| Total assets | 67,534 | 92,528 | 75,647 | |
| Equity and liabilities | ||||
| Equity attributable to ordinary shareholders | ||||
| Share capital | 6,457 | 6,482 | 6,425 | |
| Share premium | 113,227 | 112,977 | 113,040 | |
| Capital reserve | 22,822 | 22,260 | 22,566 | |
| Merger reserve | 34,929 | 34,929 | 34,929 | |
| Retained earnings | (143,851) | (125,453) | (138,666) | |
| Total equity attributable to ordinary shareholders | 33,584 | 51,195 | 38,294 | |
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | - | 21,357 | 17,834 | |
| Current liabilities | ||||
| Interest-bearing loans and borrowings | 3,750 | 5,000 | 6,407 | |
| Convertible loan notes | 9 | 18,009 | - | - |
| AGF Phase 2 project development fund | 8 | 10,866 | 10,866 | 10,866 |
| Current tax liabilities | - | 2 | 2 | |
| Trade and other payables | 1,325 | 4,108 | 2,244 | |
| 33,950 | 19,976 | 19,519 | ||
| Total equity and liabilities | 67,534 | 92,528 | 75,647 |
| Consolidated statement of cash flows | Six months ended 30 June | Six months ended 30 June | Eighteen months ended 31 December | |
| 2009 | 2008 | 2008 | ||
| $000 | $000 | $000 | ||
| Unaudited | Unaudited | Audited | ||
| Cash flows from operating activities | ||||
| Loss before tax | (5,185) | 1,838 | (54,388) | |
| Adjustments for: | ||||
| Loss/(income) attributable to joint venture | 1,564 | (460) | 2,272 | |
| Depreciation, depletion and amortization | 15 | 91 | 283 | |
| Impairment of Goodwill | - | - | 4,739 | |
| Impairment of mining properties and investments | - | - | 34,188 | |
| Interest paid | - | 602 | 2,234 | |
| Equity-settled share-based payment expenses | 256 | 1,586 | 964 | |
| Non-cash movements on investments -Mark to Market | - | 5,023 | - | |
| Amortisation of loan issue costs | - | - | 262 | |
| Revaluation gain on investments | - | (1,326) | (1,336) | |
| Other reserve movements | - | - | 566 | |
| Cash flows from operating activities before changes in working capital and provisions | (3,350) | 7,354 | (10,216) | |
| Increase in amounts due from joint venture | - | - | (2,830) | |
| (Increase)/decrease in trade and other receivables | 91 | (2,584) | 2,160 | |
| Increase( decrease) in trade and other payables | (32) | (7,529) | (4,310) | |
| Cash absorbed by operating activities | (3,291) | (2,759) | (15,196) | |
| Cash flows from investing activities | ||||
| Investment in plant and equipment | (46) | - | (3) | |
| Return on investment/(investment in) joint venture | 1,433 | - | (4,408) | |
| Sale of available-for-sale investments | - | - | 6,273 | |
| Costs of acquisition of Marakand Minerals Limited minority interest | - | - | (501) | |
| Net cash from investing activities | 1,387 | - | 1,361 | |
| Cash flows from financing activities | ||||
| Proceeds from the issue of share capital | - | 5,607 | 5,670 | |
| Proceeds from the issue of convertible loan notes | 1,357 | 15,000 | 17,000 | |
| Cost of issue of convertible loan notes | - | - | (817) | |
| Repayment of bank borrowings | (2,500) | (2,500) | (7,500) | |
| Proceeds from sale of warrants | - | - | 448 | |
| Issue of shares in lieu of cash salary | 222 | - | - | |
| Interest paid | (871) | (399) | (1,974) | |
| Net cash from financing activities | (1,792) | 17,708 | 12,827 | |
| Net increase/(decrease) in cash and cash equivalents | (3,696) | 14,949 | (1,008) | |
| Cash and cash equivalents at beginning of period | 9,873 | 2,359 | 10,881 | |
| Cash and cash equivalents at end of period | 6,177 | 17,308 | 9,873 | |
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 2009 ("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 eighteen month period to 31 December 2008. 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 eighteen month period ended 31 December 2008, on which the auditors' opinion 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.
The comparative figures presented are for the six months ended 30 June 2008.
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. Segmental analysis
The Group operated in the period in one segment, the mining and production of gold and other precious metals, and in one principal geographic area: Uzbekistan. No significant operating activities took place in other countries during the Period.
5. Share of profit / ( loss) from joint ventures
The Group's joint venture operations are conducted through Amantaytau Goldfields AO ("AGF"). The information disclosed below shows the amounts attributable to the Group and has been extracted from the unaudited financial statements for AGF.
| Six months ended 30 June | Six months ended 30 June | Eighteen months ended 31 December | ||
| 2009 | 2008 | 2008 | ||
| $000 | $000 | $000 | ||
| Revenue | 3,193 | 16,898 | 43,290 | |
| Operating profit / (loss) before exceptional costs | 125 | 651 | (617) | |
| Exceptional costs | (1,689) | - | (1,453) | |
| Operating (loss)/profit | (1,564) | 651 | (2,070) | |
| Taxation | - | (191) | (202) | |
| (Loss)/profit after tax | (1,564) | 460 | (2,272) |
6. Loss per share
The calculation of the basic loss per share for the six month period to 30 June 2009 is based upon the net loss after tax and minority interests attributable to ordinary shareholders of $5,184,530 (30 June 2008: a profit after tax of $1,838,421; 31 December 2008: a loss after tax of $54,388,000) and a weighted average number of shares in issue for the six month period of 382,800,886 (30 June 2008: 366,763,448; 31 December 2008: 373,257,305).
| Six months ended 30 June | Six months ended 30 June | Eighteen months ended 31 December | |
| 2009 | 2008 | 2008 | |
| $000 | $000 | $000 | |
| Basic (loss)/profit per share | (1.35) | 0.50 | (14.57) |
| (Loss)/profit) attributable to equity shareholders | ($5,184,530) | $1,838,421 | $54,388,000 |
| Weighted average number of shares in issue | 382,800,886 | 366,763,448 | 373,257,305 |
Diluted (loss)/profit per share
The diluted loss per share is the same as the basic loss per share for the six month period to 30 June 2009 and for the eighteen month period to 31 December 2008 as the effect is anti-dilutive. The diluted profit per share for the six month period ended 30 June 2008 is $0.47.
| 7. | Exploration and mining development properties | Uzbekistan | Uzbekistan | Uzbekistan | Total |
| Amantaytau | Aristantau | Khandiza | |||
| And | |||||
| Balpantau | |||||
| Group | Group | Group | Group | ||
| $000 | $000 | $000 | $000 | ||
| Cost | |||||
| At 1 July 2007 | 11,302 | 687 | 28,456 | 40,445 | |
| Impairment of mining rights | (436) | - | (28,456) | (28,892) | |
| Transfer to interests in Joint venture | (10,866) | - | - | (10,866) | |
| At 31 December 2008 and 30 June 2009 | - | 687 | - | 687 |
8. Investment in joint venture
| 30 June | 30 June | 30 June | ||
| 2009 | 2009 | 2009 | ||
| $000 | $000 | $000 | ||
| Investment | Loans | Total | ||
| At 1 July 2007 | 20,000 | 22,527 | 42,527 | |
| Group's share of profits/(losses) | (2,272) | - | (2,272) | |
| Adjustments to carrying value of investment | (8,548) | - | (8,548) | |
| Amounts advanced | - | 4,408 | 4,408 | |
| Expenditure transferred from exploration and mining development properties (AGF phase 2 project development fund) | 10,866 | - | 10,866 | |
| At 31 December 2008 | 20,046 | 26,935 | 46,981 | |
| Group's share of (losses)/profits | (1,564) | - | (1,564) | |
|
| Amounts repaid | - | (1,433) | (1,433) |
| At 30 June 2009 | 18,482 | 25,502 | 43,984 |
At 30 June 2009 the AGF phase 2 project development fund was $10,866,379 (2008 - $10,866,379). AGF signed a hedge gold off-take agreement with various lending banks in April 2003. As a result AGF sold gold at prices below the market price of gold. The fund represents the Uzbek Government's share of the lost revenue to be settled by the Company.
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 deferred payment terms. The Company continues to recognize the fund as a current liability. The Group no longer enters into any form of hedging arrangement in respect of gold prices.
9. Convertible loan notes
On 14 May 2008 the Company completed a placement of 8.0% unsecured convertible loan notes in units of $250,000 each at par, due May 2010 (the "Notes") for gross proceeds of $18.5 million. The Notes are convertible into new ordinary shares of the Company at a price of 37 pence per share converted at a fixed exchange rate in accordance with the terms of the contract. At the holder's option, the Notes may be converted on the earlier of a written request from the holder to convert, or first drawdown on the project finance facility to construct the underground sulphides project at AGF. The Notes will be redeemed on 14 May 2010 if not converted. If all the Notes are converted, the maximum number of new shares that would be issued is 26,315,789. An amount of $566,000 has been recognized in equity representing the fair-value of the element of the convertible loan notes allocated to the option to convert.
10. Trade and other receivables
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| $000 | $000 | $000 | |
| Trade debtors | 92 | 489 | 91 |
| Amounts due from joint venture | 14,892 | 19,108 | 15,064 |
| Amounts due from related parties | - | 3,500 | 1,356 |
| Other debtors | 82 | 1,000 | 90 |
| Prepayments | 369 | 98 | 282 |
| 15,434 | 24,195 | 16,883 |