SRX.L Regulatory News (SRX)

25 Sep 2007 07:03

Titanium Resources Group Ltd25 September 2007 Titanium Resources Group Limited Interim Results 25 September 2007: Titanium Resources Group ("TRG" or "the Group") announcesinterim results for the six months ended 30 June 2007 ("the Period"). Highlights • Sales of USD 34.7 million during the Period (USD 14.9 million H1 2006, USD 51.3 million Year to December 2006) • EBITDA of USD 2.8 million (before placing costs) • Loss after tax of USD 5.6 million • Net assets of USD 248 million at the end of the Period (USD 176 million H1 2006, USD 219 million Year to December 2006) • Successful placing of 27,077,000 shares raised USD 34.7 million (before expenses) as announced in May 2007 • 42,005 tonnes of rutile produced in the Period (23,281 tonnes H1 2006, 73,802 tonnes Year to December 2006) • 46,253 tonnes of rutile shipped in the Period (18,072 tonnes H1 2006, 61,891 tonnes Year to December 2006) • 656,603 tonnes of bauxite produced in the Period (442,141 tonnes H1 2006, 1,072,159 Year to December 2006) • 590,555 tonnes of bauxite shipped in the Period (579,869 tonnes H1 2006, 1,021,869 tonnes Year to December 2006). • Production negatively impacted by power supply problems • Dredge D2 on schedule for commission in Q4 2007 • New Government of Sierra Leone now in place • Robust outlook for bauxite and rutile markets Commenting on the results, TRG Chief Executive Len Comerford said: "The first six months of 2007 have seen progress on many of the Group'sdevelopment projects and on updating and improving mine planning and modellingsystems at Sierra Rutile. The introduction of new IT programmes and associatedtraining programmes for staff has resulted in operational efficiencies as aresult of improved interpretation of exploration and mining data and minesequencing. The considerable activity related to the capital expenditure and drillingprogrammes in rutile and bauxite means that at an operational level the Group isbusier than at any time in its history. We have a number of challenges inmeeting targets for the next six months but our experience in African miningmakes many of these familiar to our team. In addition, there are a number of strategic developments in our market which webelieve the Group is well placed to benefit from as the industrial mineralsmarket consolidates. Demand for our products remains strong and the expecteddoubling of capacity in rutile should leave the Group in a strong position toplay a role in this process." Enquiries: Len Comerford Chief ExecutiveWalter Kansteiner, ChairmanTitanium Resources GroupTelephone: +44 20 7321 0000www.titaniumresources.com Michael Oke / Andy MillsAura FinancialTelephone: +44 20 7321 0000 David Nabarro / John WilkesNabarro Wells & Co. LimitedTelephone: +44 20 7710 7400 Chief Executive's Review The first six months of 2007 have seen progress on many of the Group'sdevelopment projects. The Group reported earnings before interest, tax,depreciation, amortisation (EBITDA) and before placement costs of USD 2.8million and a loss after tax of USD 5.6 million for the Period, largely as aresult of continued high fuel costs combined with production shortfalls inrutile caused by failures at our temporary power plants. The Group is well placed to fund its capital expenditure programme following asuccessful placing of 27,077,000 common shares primarily to existingshareholders in May 2007, raising USD 34.7 million (before expenses). Considerable progress has also been made on updating and improving mine planningand modelling systems at our subsidiary company, Sierra Rutile. Theintroduction of new IT programmes and associated training programmes for staffhas resulted in operational efficiencies as a result of improved interpretationof exploration and mining data and mine sequencing. We shipped 46,253 tonnes of rutile, which was only 2.5% below our shippingschedule for the Period. In the Period we also shipped 590,555 tonnes ofbauxite. Exploration during the half year has been concentrated in and around current orplanned future mining areas within the Group's mining licences, with work at ourTurners' Peninsular project expected to recommence shortly. Sierra Rutile The first six months of the year were characterised by an unexpected shortfallin rutile production as a result of power failures during the ongoing transitionto our new heavy fuel oil ("HFO") power plant. This disruption led to the dredgebeing offline and rutile production was approximately 15% lower than expected.Total rutile production for the Period was 42,005 tonnes (23,281 tonnes H12006), while ilmenite production was 6,408 tonnes (4,177 tonnes H1 2006). The failure of the temporary generators during the period also led to higheroperating costs than were anticipated. The temporary units are now operationalagain, but the Company has also reconditioned the original diesel power plant toensure a back-up power supply for rutile production. Investigations arecontinuing with the suppliers of the temporary units to establish the cause oftheir failure. The HFO generators are now being assembled at the mine site despite some delaysin shipping and we now anticipate that they will be operational in mid 2008. Construction of the second dredge (D2) at Sierra Rutile is proceeding well, withthe project on schedule to be commissioned in the 4th quarter of this year. Thesecond dredge is expected to double the Group's rutile production capacity toapproximately 200,000 tonnes per annum and we expect to begin shipping thematerial produced in Q1 2008. D2 will be considerably more technologicallyadvanced than D1 and will enable us to monitor production levels and carry outdiagnostic and repair work remotely. Construction of the third dredge has commenced since the arrival of the entiredredge superstructure at the mine site. This dredge has the capacity to producea further 40,000 tonnes per annum and is expected to commence production in mid2008. The upgrading of the mineral separation plant is on schedule to increase totalprocessing capacity for rutile production to 300,000 tonnes per annum. Thisproject should be sufficiently advanced to process the material which isanticipated from our two initial dredges (D1 and D2) in January 2008. The markets for each of Sierra Rutile's industrial mineral products (rutile,ilmenite and zircon) remain strong and the premium quality of the depositunderpins the Company's price position. Our marketing department has achievedthe sales targets for standard grade rutile and ilmenite in line with thisyear's production to date, and has maintained the stockholding positionsrequired to meet our customers' shipping schedules. Sales of industrial graderutile continue to be developed through an increasing number of both direct anddistributor sales. Currently, the marketing department is negotiating sales contracts for allproducts with new and existing customers, taking into account our anticipatedforward production schedules. Given the high demand for our products, thedepartment fully expects to meet its sales targets for the foreseeable future. Exploration work will recommence shortly on the Group's large Turners'Peninsular concession (1,742 km2), following the end of the rainy season.Preparation work for access for drill rigs into the area is currently beingcarried out. Very preliminary drilling using a mechanical banka rig hasconfirmed the presence of heavy mineral bearing sands in the western part of thePeninsular - this was based on visual field panning results undertaken prior tothe onset of the rains in June 2007. Specific mineralogical analysis of thesesamples is currently in progress. Sierra Minerals During the period, the mine produced 656,603 tonnes of bauxite (442,141 tonnes,H1 2006) and shipped 590,555 tonnes from Nitti (579,869 tonnes, H1 2006).Bauxite production has been impressive due to an increase in both quantity andgrade. The costs of the operations at the Bauxite mine have increased to some extentdue to rising fuel costs. A burner running on HFO has been ordered to bring thedryer cost in line with the budget. In June of this year, we commenced a major drilling campaign near to the currentbauxite mining operations - but which is not within current mining plans. Thisis progressing well. Financial Turnover of USD 34.7 million was significantly higher than in the first half of2006, reflecting the fact that dredge D1 was operating for a longer period.Total capital expenditure for the Period was USD 35.7 million, with theconversion to HFO power, continued development of Dredge D2, and expansion ofthe mineral separation plant representing the majority of expenditure.Conversion to HFO is expected to halve fuel costs, which currently represent 37%of operating costs. Gross profit margin for the Period was lower than expected. This was partly as aresult of continued high fuel costs combined with production shortfalls inrutile caused by failures at our temporary power plants. It was further impactedby increased mining and shipping costs amounting to approximately USD 4 million.EBITDA before placement fees for the period stood at USD 2.8 million.(H1 2006loss of USD 956,000). Interest costs increased to USD 2.2 million as a result of an adverse exchangerate movement of USD 1.1 million impacting upon the EURO denominated EU loan. Total capital expenditure for the Period was USD 35.7 million, with theconversion to HFO power, continued development of Dredge D2, and expansion ofthe mineral separation plant representing the majority of expenditure.Conversion to HFO is expected to halve fuel costs, which currently represent 37%of operating costs. During the first half of the year, USD 34.7 million (before expenses) was raisedby the placing of new shares to finance TRG's capital projects (slightly lowerthan the figure of USD 35.2 million as announced on 8 May 2007 due to exchangerate differences). Following the issue of new shares, TRG's gearing now standsat 14%. Debt at the period end stood at USD 39.4 million which was made upentirely of the EU loan. Outlook The considerable activity related to the capital expenditure and drillingprogrammes in rutile and bauxite means that at an operational level the Group isbusier than at any time in its history. We have a number of challenges inmeeting targets for the next six months but our experience in African miningmakes many of these familiar to our team. In addition, there are a number of strategic developments in our market which webelieve the Group is well placed to benefit from as the industrial mineralsmarket consolidates. Demand for our products remains strong and the expecteddoubling of capacity in rutile should leave the Group in a strong position toplay a role in this process. After the end of the Period, Sierra Leone successfully held Parliamentary andPresidential elections and a transfer of power is underway. This marks afurther landmark in the development of Sierra Leone and we look forward toworking with the new Government as they implement their programme. The information pertaining to exploration has been prepared by Mr C. P. Mortimer(BSc (Hons Geology), MSc, DUC, MAusIMM) who is a member of The AustralasianInstitute of Mining and Metallurgy and a full time employee of TitaniumResources Group. Mr Mortimer has sufficient experience which is relevant to thisstyle of mineralisation and type of deposit under consideration to qualify as aCompetent Person as defined in the 2004 Edition of the "Australasian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves' (the JORCCode). Mr C. P. Mortimer consents in writing to the inclusion in this report ofthe matters based on information in the form and context in which it appears. TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEET - JUNE 30, 2007 June 30, June 30, December 31, 2007 2006 2006 USD'000 USD'000 USD'000ASSETSNon-current assetsProperty, plant and equipment 125,029 74,494 92,665Intangible assets 13,099 12,962 13,115Non -current receivables 753 1,393 753Deferred tax assets 86,373 50,304 86,373 225,254 139,153 192,906 Current assetsInventories 14,642 12,232 15,054Trade and other receivables 20,862 13,523 14,275Cash and cash equivalents 47,341 62,425 52,393 82,845 88,180 81,722 Total assets 308,099 227,333 274,628 EQUITY AND LIABILITIESCapital and reservesShare capital 232,818 194,951 198,160Revenue reserve/(deficit) 15,263 (18,757) 20,869Equity holders' interest 248,081 176,194 219,029 LIABILITIESNon-current liabilitiesBorrowings 39,382 32,040 36,856Provision for liabilities andcharges 2,150 2,150 2,150 41,532 34,190 39,006 Current liabilitiesTrade and other payables 18,264 16,938 16,464Current tax liabilities 215 10 85Borrowings 7 1 44 18,486 16,949 16,593Total liabilities 60,018 51,139 55,599Total equity and liabilities 308,099 227,333 274,628 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIESCONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED JUNE 30, 2007 6 months 6 months to to Year Ended June 30, June 30, December 31, 2007 2006 2006 USD'000 USD'000 USD'000 Sales 34,740 14,888 51,304Cost of sales (25,004) (6,366) (29,764)Gross profit 9,736 8,522 21,540Other income 1,208 1,340 2,812Administrative and marketingexpenses (10,593) (10,818) (16,069)Other expenses (3,391) (3,020) (5,866) (3,040) (3,976) 2,417Exceptional item - - (2,200)Finance costs (2,227) (1,204) (1,694)Loss before taxation (5,267) (5,180) (1,477)Taxation (339) - 35,923(Loss)/profit for the period/yearattributable to equityholders of the group (5,606) (5,180) 34,446(Loss)/earning per share (USD)- basic (0.03) (0.06) 0.16- diluted (0.03) (0.06) 0.15 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED JUNE 30, 2007 Revenue Share reserve/ capital (deficit) Total USD'000 USD'000 USD'000 Balance at January 1, 2007 198,160 20,869 219,029Issue of share capital 34,658 - 34,658Loss for the period - (5,606) (5,606)Balance at June 30, 2007 232,818 15,263 248,081 Balance at July 1, 2006 194,951 (18,757) 176,194Issue of share capital 3,209 - 3,209Profit for the period - 39,626 39,626Balance at December 31, 2006 198,160 20,869 219,029 Balance at January 1, 2006 194,951 (13,577) 181,374Loss for the period - (5,180) (5,180)Balance at June 30, 2006 194,951 (18,757) 176,194 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIESCONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED JUNE 30, 2007 6 months 6 months to to Year Ended June 30, June 30, December 31, 2007 2006 2006 USD'000 USD'000 USD'000 Operating activitiesCash (absorbed in)/generated fromoperations (4,881) (2,315) 7,308Interest received 1,192 1,295 2,542Interest paid (35) - (60)Tax paid (209) - (71)Net cash (used in)/generated fromoperating activities (3,933) (1,020) 9,719 Investing activitiesPurchase of property, plant and equipment (35,736) (16,212) (37,215)Purchase of intangible assets (4) - (167)Loans and advance granted - (26) (26)Investments in financial assets - - (2,200)Net cash used in investing activities (35,740) (16,238) (39,608) Financial activitiesIssue of common shares 34,658 - -Proceeds from long term borrowings - - 2,556Net cash used in investing activities 34,658 - 2,556 Net decrease in cash and cash equivalents (5,015) (17,258) (27,333) Movement in cash and cash equivalentsAt January 1, 52,349 79,682 79,682Decrease (5,015) (17,258) (27,333)At June 30/ December 31, 47,334 62,424 52,349 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED JUNE 30, 2007 1. GENERAL INFORMATION Titanium Resources Group Ltd (TRG) is a limited liability company incorporatedand domiciled in the British Virgin Islands. The address of its registeredoffice is P.O. Box 173, Kingston Chambers, Road Town, British Virgin Islands. 2. BASIS OF PREPARATION The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFSR). The financial statements are preparedunder the historical cost convention. The interim financial statements for the half year ended June 30, 2007 areunaudited. The accounting policies used in the preparation of the interimunaudited financial statements are consistent with those used in the annualfinancial statements for the year ended December 31, 2006. The interim financialstatements comply with IAS 34. 3. EARNINGS/(LOSS) PER SHARE 6 months 6 months to to Year Ended June 30, June 30, December 31, 2007 2006 2006 USD'000 USD'000 USD'000 (a) Basic (loss)/earnings per share (Loss)/Profit attributed to equity holders of the Group (thousand) (5,606) (5,180) 34,466 Weighted average number of common shares 220,480,961 82,397,742 212,513,731in issue including options vested Basic (loss)/earnings per share (0.03) (0.06) 0.16 (b) Diluted (loss)/earnings per share (Loss)/Profit attributable to equity holders of the Group used to determine diluted (loss)/ earnings per share(thousand) (5,606) (5,180) 34,446 Number of shares Weighted average number of common shares 220,480,961 82,397,742 212,513,731in issue including options vestedAdjustments for unvested share options 3,264,985 3,389,985 3,264,985Weighted average number of common shares 223,745,946 85,787,727 215,778,716for diluted (loss)/ earnings per share including options vested and unvestedDiluted (loss)/earnings per share (0.03) (0.06) 0.15 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED JUNE 30, 2007 4. CAPITAL COMMITMENTS As at As at As at June 30, 2007 June 30, 2006 Dec. 2007 USD'000 USD'000 USD'000 Property, plant and equipment acquisition contracted for at the balance sheet date but not yet incurred: 15,800 3,900 37,720 (a) Sierra Rutile Limited, a subsidiary of Titanium Resources Group Ltd, enteredinto the above capital commitments. 5. SHARE CAPITAL Number of Common shares shares USD'000 At December 14, 2004 - -Issued in exchange for 100% holding in Global Aluminium Limited and Titanium Fields Resources Ltd 100,000,000 100,000Proceeds from other new issues 107,201,553 91,493Share option scheme:- Employee - value of service provided 2,989,985 2,634- Professional services 936,007 824 At December 31, 2005 & June 30, 2006 211,127,545 194,951 Share option scheme:- Employee - value of service provided 3,389,985 3,209 At December 31, 2006 214,517,530 198,160 Proceeds from new issues (See note below) 27,077,000 34,658 At June 30, 2007 241,594,530 232,818 (a) Share options - Employees Share options were granted to directors and to selected employees. The exerciseprice of the granted options were equal to 47 p each, being the market price ofthe shares on the date of placement on the AIM market of the London StockExchange. One third of the options vested immediately, that is on 15 August2005, one third vested on the first anniversary of the date of grant, that is on15 August 2006 and the remaining third will vest on the second anniversary ofthe date of grant. The options will lapse and may not in any event be exercisedlater than the day before the fifth anniversary of the date of grant. Certain employees and directors, who joined the company after the above shareoptions grant date, were also granted share options at exercise prices of 52.5 pand 77.75 p each, varying on the vesting date. The intervals between the vestingdates are the same as the above, that is, one third immediately and theremaining two third within the next two years. Exercise of these options are not subject to performance-related conditions. (b) Share options - Professional services In consideration of services given to TRG by Nabarro Wells & Co Ltd, (NWCF LLP),TRG granted to NWCF LLP an option to subscribe for 936,007 common shares of nopar value at a subscription price of 47p each. (c) Placement of common shares At the beginning of May 2007, TRG made a new placement of 27,077,000 commonshares. The placing with institutional investors at a price of 65 pence pershare raised £ 17,600,050 (USD 34.7 million) before expenses. (d) Reconciliation of number of shares Number of Common shares shares USD'000 Issued shares 234,278,553 226,151 Options vested but not yet exercised 7,315,977 6,667 Total shares used for basic EPS calculation 241,594,530 232,818 TITANIUM RESOURCES GROUP LTD AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED JUNE 30, 2007 6. OTHER EXPENSES 6 months to June 6 months to June Year ended 30, 2007 30, 2006 December 31, 2006 USD'000 USD'000 USD'000 Other expenses include: - Depreciation 3,373 2,997 5,829 - Amortisation 18 23 37 3,391 3,020 5,866 7. CASH AND CASH EQUIVALENTS 6 months to June 6 months to June Year ended 30, 2007 30, 2006 December 31, 2006 USD'000 USD'000 USD'000 Cash at Bank and Short Term Bank Deposits 47,341 62,425 52,394 Bank Overdraft (7) (1) (44)Consolidation Adjustment on Disposal of 0.4% shares in Subsidiary - (1) Cash and Cash Equivalents 47,334 62,424 52,349 Certain statements contained in this announcement, including estimates ofproduction capacity and production as well as other statements about anticipatedfuture events or results, are forward-looking statements. The forward-lookingstatements that are contained in this announcement involve a number of risks anduncertainties. As a consequence, actual results might differ materially fromresults forecast or suggested in these forward-looking statements. Accordingly,readers are cautioned that events or circumstances could cause results to differmaterially from those predicted. This information is provided by RNS The company news service from the London Stock Exchange