Anglesey half yearly report and management stat...
Anglesey Mining plc
Chairman's Statement and Management Report - November 2012
The half year to the end of September 2012 has been one of mixed fortunes for
the company. Labrador Iron Mines (LIM) reported good operating results and a
strong increase in iron ore production but has been impacted by a very
significant fall in the price of iron ore during August and early September
that severely restricted revenue for that period and resulted in a significant
accounting loss for the September quarter.
At Parys Mountain we have continued to make progress with the completion of the
2012 drilling programme. The new resource estimate is almost ready to be
released and the scoping study is making good progress. Largely as a result of
the loss reported by LIM for its September quarter the group has recorded a
loss of £7.4 million for the half year. Subsequent to the end of the reporting
period LIM raised $C30 million through a share issue. Anglesey subscribed $C1.5
million (£0.9m) to this issue and now holds 19.7% of LIM.
Labrador Iron
The highlights at the Schefferville properties for the six month period to 30th
September 2012 were:
* LIM demonstrated its operational ability to produce, rail and sell up to
250,000 tonnes of iron ore product per month from its James mine since the
April start of the 2012 operating season.
* LIM mined 1.6 million tonnes of ore at 61.5% iron.
* LIM railed 1.2 million tonnes of ore to the Port of Sept-ÃŽles. In October,
LIM reached a major milestone, having railed over two million tonnes to the
Port of Sept-ÃŽles since commencing mining operations in June 2011.
* LIM sold 1.1 million dry tonnes in seven shipments of iron ore.
* LIM responded quickly to challenging market conditions and the sharp
decline in iron ore spot prices in August 2012, focusing on cost reduction
and cash conservation measures.
* LIM enhanced long-term rail and port access securing 5 million tonnes of
ship loading capacity at the new multi-user dock at the Port of Sept-ÃŽles
and participating with CN Rail in a feasibility study for the potential
development of a new multi-user rail line and terminal handling facility.
* LIM completed most of the work of a successful 2012 exploration season with
approximately 13,500 metres of diamond and RC drilling forecast to be
completed by the end of November.
Responding to challenging market conditions
Iron ore spot prices and transaction volumes suffered a sharp decline in August
2012, with spot prices dropping 33% to below US$90 per tonne on a 62% Fe CFR
China basis in early September before recovering to over US$120 per tonne by
late October. LIM undertook a critical review of its operating and capital
spending for the balance of 2012 and implemented the following immediate and
decisive measures:
* Focus on cost reduction and management of cash resources;
* Utilization of the new dry classifying system to produce sinter and lump
ore only;
* All non-committed capital expenditures, mainly relating to the Silver Yards
wet processing plant and the Houston deposits, were deferred to 2013;
* The 2012 exploration programme was reduced to $5.3 million.
James Mine and Silver Yards
The James Mine re-commenced full-scale operations in April 2012 and
consistently achieved its planned mining rate of 28,000 tonnes per day of ore
and waste in the months of June through August until the cutbacks in September
as part of the cost reduction programme. Complementing the ramp up in
production, monthly railway volumes increased almost threefold from the
beginning of the season with up to four train sets in operation.
The ore in the James deposits continues to be soft high grade and lends itself
to simple processing. The higher grade ore encountered in the upper benches
continues as the mine gets deeper and accesses the lower levels. To enhance
productivity and reduce costs, beginning in late August and continuing for the
remainder of 2012, a dry classifying system was utilised to produce lump and
sinter products. The Silver Yards wet processing plant was winterized at the
end of August and not used for the remainder of 2012.
Construction of the Phase 3 expansion of the wet processing plant, designed to
increase plant throughput to 12,000 tonnes per day and to improve mass yield to
above 75%, was substantially complete at the end of August. With the suspension
of capital expenditure programmes relating to the Silver Yards processing
plant, completion and commissioning of the Phase 3 plant expansion, originally
anticipated to take place in August 2012, is now planned for the 2013 operating
season.
Production for the Quarter and Six Months ended 30 September 2012
(all tonnes are dry metric Quarter ended Six Months ended 30
tonnes) 30 September 2012 September 2012
Tonnes Grade % Fe Tonnes Grade % Fe
Total Ore Mined 961,737 60.8 1,629,930 61.5
Direct Rail Ore portion 569,789 62.4 1,053,233 62.5
Waste Mined 1,533,211 - 2,902,609 -
Ore Processed 643,715 58.2 771,178 57.8
Lump Ore Produced 62,884 60.5 80,612 60.4
Sinter Fines Produced 508,773 61.1 543,484 61.4
Total Product Railed 706,495 62.2 1,238,824 62.4
Tonnes Product Sold 647,643 62.3 1,134,149 62.7
Port Product ending 282,344 62.1 282,344 62.1
inventory
Site Product ending 89,917 60.2 89,917 60.2
inventory
ROM Ore ending inventory 432,143 56.2 432,143 56.2
Exploration
As of the end of September 2012, approximately 9,400 metres of RC and core
diamond drilling had been completed in the 2012 exploration programme. The 2012
budget was reduced to $5.3 million from the $8.6 million originally budgeted
but the programme is still expected to achieve approximately 13,500 metres of
drilling as a result of cost efficiencies and improved productivity.
The drill programmes have focused on Houston, Malcolm, James North, the James
South extension and historic stockpiles near Silver Yards. The main purpose of
this drilling is to generate further technical information for more detailed
mine planning of these deposits. In addition to this drilling, a bulk sampling
programme of some of the historic stockpiles has been initiated together with a
further 1,500 metre diamond drilling programme on the Elizabeth Lake taconite
target to evaluate this type of iron-bearing formation.
LIM outlook
Mining, processing and rail operations for the 2012 season are complete. The
shipping season should shortly be concluded with a tenth shipment for total
sales of 1.6 million dry tonnes, a significant increase from the 386,000 dry
tonnes sold in 2011.
LIM took decisive action in September 2012 in response to dropping iron ore
prices and believes that cost reductions in its operations combined with a
scale-back in production, the deferral of capital expenditures and the
completion of a C$30 million equity financing will ensure a sustainable
position to resume operations in April 2013. Subject to market conditions LIM
is targeting production of 2 million tonnes of iron ore in 2013.
Parys Mountain
The 2012 drilling programme at Parys Mountain which was commenced in January
has been completed with 12 holes totalling in excess of 2,000 metres having
been drilled. The results from all these holes have now been received and have
added significantly to the data base and more importantly to the better
understanding of the geology and the potential location of mineralisation. The
last set of holes drilled about 1,200 metres to the east of the Morris Shaft
have demonstrated the lateral extent of mineralisation. During the period the
Intermine future royalty was bought out in its entirety for 2,000,000 shares
and $C1 million (£0.63m).
Micon has completed a revised ore resource estimate for the entire site and
this will be published shortly. Based on this new resource Micon is close to
completing a scoping study for the development of the White Rock and Engine
zones initially utilising decline access from a location close to the planned
processing plant. On receipt of this study the directors will review all the
options available to progress development of Parys Mountain as a mining
operation.
Financial results
There was a net loss for the period of £7.4 million (2011 - profit - £16.7m)
most of which was in respect of the holding in LIM, the group's associate. The
group has no revenues from the operation of its properties. At the period end
the cash resources of the group were £1.9 million (31 March 2012 - £3.2
million) and at 21 November 2012 they were £0.8 million.
Outlook
The medium term outlook for the group remains dependent upon commodity prices.
The iron ore price fell heavily in August and September but has recovered
somewhat since. It needs to remain close to current levels for LIM to be able
to look forward to a positive restart of production activities in April 2013.
LIM is heavily geared to the price of iron ore and any reasonable move upwards
beyond the current price will have a very positive effect on LIM's
profitability.
Base metal prices, particularly for copper, have been fairly robust recently
and show no serious signs of retreating. Zinc, which would be the primary
source of revenue from the initial White Rock production at Parys, is forecast
to be in short supply as concentrate within the European market in the coming
two to three years. Should this position develop then it will be opportune for
the early development of Parys Mountain.
John F Kearney
Chairman
23 November 2012
Anglesey Mining plc - Group
Condensed consolidated income statement
Notes Unaudited Unaudited
six months six months
ended 30 ended 30
September September
2012 2011
All operations are continuing £ £
Revenue - -
Expenses (201,885) (213,422)
Share of loss of associate 11 (7,039,697) (2,635,673)
(Losses)/gains on deemed 11 (133,913) 19,607,503
disposals in associate
Investment income 27,075 20,566
Finance costs (57,456) (56,059)
Foreign exchange profit/(loss) 8,887 (67,700)
(Loss)/profit before tax (7,396,989) 16,655,215
Tax 9 - -
(Loss)/profit for the period (7,396,989) 16,655,215
(Loss)/profit per share 7
Basic - pence per share (4.6)p 10.5 p
Diluted - pence per share (4.6)p 9.9 p
Condensed consolidated statement of comprehensive income
(Loss)/profit for the period (7,396,989) 16,655,215
Other comprehensive income:
Exchange difference on 42,465 (595,891)
translation of foreign holding
Total comprehensive (loss)/income (7,354,524) 16,059,324
for the period
All attributable to equity holders of the company
Condensed consolidated statement of financial position
Notes Unaudited 30 Audited 31
September March 2012
2012
£ £
Assets
Non-current assets
Mineral property development 10 14,626,441 14,255,818
Property, plant and equipment 204,687 204,687
Interest in associate 11 34,394,705 41,240,859
Deposit 121,935 121,685
49,347,768 55,823,049
Current assets
Other receivables 62,771 64,991
Cash and cash equivalents 1,890,637 3,150,644
1,953,408 3,215,635
Total assets 51,301,176 59,038,684
Liabilities
Current liabilities
Trade and other payables (80,812) (1,040,961)
(80,812) (1,040,961)
Net current assets 1,872,596 2,174,674
Non-current liabilities
Loan (2,248,716) (2,191,260)
Long term provision (42,000) (42,000)
(2,290,716) (2,233,260)
Total liabilities (2,371,528) (3,274,221)
Net assets 48,929,648 55,764,463
Equity
Share capital 12 7,116,914 7,096,914
Share premium 9,848,949 9,634,231
Currency translation reserve 3,283,635 3,241,170
Retained earnings 28,680,150 35,792,148
Total shareholders' equity 48,929,648 55,764,463
All attributable to equity holders of the company
Condensed consolidated statement of cash flows
Notes Unaudited Unaudited
six months six months
ended 30 ended 30
September September
2012 2011
£ £
Operating activities
(Loss)/profit for the period (7,396,989) 16,655,215
Adjustments for non-cash items:
Investment revenue (27,075) (20,566)
Finance costs 57,456 56,059
Share of loss of associate 11 7,039,697 2,635,673
Loss/(gain) on deemed disposal 11 133,913 (19,607,503)
in associate
Foreign exchange movement (8,887) 67,700
(201,885) (213,422)
Movements in working capital
Decrease in receivables 2,221 2,212
Decrease in payables (50,682) (18,286)
Net cash used in operating (250,346) (229,496)
activities
Investing activities
Investment revenue 26,825 20,306
Mineral property development (1,280,091) (42,757)
Net cash used in investing activities (1,253,266) (22,451)
Financing activities
Net proceeds from issue of 234,718 9,290
shares
Loan received -
Net cash generated from financing activities 234,718 9,290
Net decrease in cash (1,268,894) (242,657)
and cash equivalents
Cash and cash equivalents at start 3,150,644 3,671,247
of period
Foreign exchange movement 8,887 (67,700)
Cash and cash equivalents at end of 1,890,637 3,360,890
period
Condensed consolidated statement of changes in group equity
Share Share Currency Retained Total
capital premium translation earnings £
£ £ reserve £ £
Equity at 1 April 2012 - 7,096,914 9,634,231 3,241,170 35,792,148 55,764,463
audited
Total comprehensive
income for the period:
Loss for the period - - - (7,396,989) (7,396,989)
Exchange difference on - - 42,465 - 42,465
translation of foreign
holdings
Total comprehensive - - 42,465 (7,396,989) (7,354,524)
income for the period:
Shares issued 20,000 220,000 - - 240,000
to discharge a liability
Share issue costs - (5,282) - - (5,282)
Equity-settled benefits - - - 284,991 284,991
credit:
- associate
Equity at 30 September 7,116,914 9,848,949 3,283,635 28,680,150 48,929,648
2012 - unaudited
Comparative period
Equity at 1 April 2011 - 7,092,414 9,621,181 3,620,997 15,748,173 36,082,765
audited
Total comprehensive
income for the period:
Profit for the period - - - 16,655,215 16,655,215
Exchange difference on - - (595,891) - (595,891)
translation of foreign
holdings
Total comprehensive - - (595,891) 16,655,215 16,059,324
income for the period:
Shares issued for cash 2,500 12,812 - - 15,312
in respect of option
exercises
Share issue costs - (6,022) - - (6,022)
Equity-settled benefits - - - 278,933 278,933
credit:
- associate
Equity at 30 September 7,094,914 9,627,971 3,025,106 32,682,321 52,430,312
2011 - unaudited
All attributable to equity holders of the company
Notes to the accounts
1. Basis of preparation
This half-yearly financial report comprises the condensed consolidated
financial statements of the group for the six months ended 30 September 2012.
It has been prepared in accordance with the Disclosure and Transparency Rules
of the UK Financial Services Authority, the requirements of IAS 34 - Interim
financial reporting (as adopted by the European Union) and using the going
concern basis (and the directors are not aware of any events or circumstances
which would make this inappropriate). It was approved by the board of directors
on 23 November 2012. It does not constitute financial statements within the
meaning of section 434 of the Companies Act 2006 and does not include all of
the information and disclosures required for annual financial statements. It
should be read in conjunction with the annual report and financial statements
for the year ended 31 March 2012 which is available on request from the company
or may be viewed at www.angleseymining.co.uk.
The financial information contained in this report in respect of the year ended
31 March 2012 has been extracted from the report and financial statements for
that year which have been filed with the Registrar of Companies. The report of
the auditors on those accounts did not contain a statement under section 498(2)
or (3) of the Companies Act 2006 and was not qualified. The half-yearly results
for the current and comparative periods are unaudited.
2. Significant accounting policies
The accounting policies applied in these condensed consolidated financial
statements are consistent with those set out in the annual report and financial
statements for the year ended 31 March 2012. The following amendments to
interpretations were effective in the current period and have been adopted:
IFRS 7 Financial Instruments: Amendments enhancing disclosure about transfers
of financial assets; Issued - October 2010; Effective - Annual period beginning
on or after 1 July 2011
IAS 12 Income Taxes: Limited scope amendments (recovery of underlying assets);
Issued - December 2010; Effective - Annual periods beginning on or after 1
January 2012
The adoption of these amendments and new interpretations has not resulted in a
change to the accounting policies nor had a material effect on the financial
performance and position of the group. In preparing these financial statements
any accounting assumptions and estimates made by management were consistent
with those applied to the aforesaid annual report and financial statements.
3. Risks and uncertainties
The principal risks and uncertainties set out in the group's annual report and
financial statements for the year ended 31 March 2012 remain the same for this
half-yearly financial report and can be summarised as: development risks in
respect of mineral properties, especially in respect of permitting and metal
prices; liquidity risks during development; and foreign exchange risks. More
information is to be found in the 2012 annual report - see note 1.
4. Statement of directors' responsibilities
The directors confirm to the best of their knowledge that: (a) the condensed
consolidated financial statements have been prepared in accordance with lAS 34
as adopted by the European Union; and (b) the interim management report
includes a fair review of the information required by the FSA's Disclosure and
Transparency Rules (4.2.7 R and 4.2.8 R). This report and financial statements
were approved by the board on 23 November 2012 and authorised for issue on
behalf of the board by Bill Hooley, Chief Executive Officer and Ian
Cuthbertson, Finance Director.
5. Activities
The group is engaged in mineral property development and currently has no
turnover. There are no minority interests or exceptional items.
6. Results for the period
The interim results may be subject to seasonal effects in the Labrador
operations.
7. Earnings per share
The loss per share is computed by dividing the loss attributable to ordinary
shareholders of £7.4 million (2011 profit £16.7m), by 159,328,270 (2011 -
158,401,220) - the weighted average number of ordinary shares in issue during
the period. Where there are losses the effect of outstanding share options is
not dilutive.
8. Business and geographical segments
There are no revenues. The cost of all activities charged in the income
statement relates to exploration and development of mining properties. The
group's income statement and assets and liabilities are analysed as follows by
geographical location, which is the basis of internal management reporting.
Unaudited six months ended 30 Unaudited six months
September 2012 ended 30 September 2011
UK Canada - Total UK Canada - Total
associate associate
£ £ £ £ £ £
Expenses (201,885) - (201,885) (213,422) - (213,422)
Share of loss - (7,039,697) (7,039,697) - (2,635,673) (2,635,673)
in associate
(Loss)/gain on - (133,913) (133,913) - 19,607,503 19,607,503
deemed
disposals
Investment 27,075 - 27,075 20,566 - 20,566
income
Finance costs (57,456) - (57,456) (56,059) - (56,059)
Exchange rate 8,887 - 8,887 (67,700) - (67,700)
movements
Loss/profit (223,379) (7,173,610) (7,396,989) (316,615) 16,971,830 16,655,215
for the period
Unaudited 30 September 2012 Audited 31 March 2012
UK Canada - Total UK Canada - Total
associate associate
£ £ £ £ £ £
Assets 16,906,471 34,394,705 51,301,176 17,797,825 41,240,859 59,038,684
Liabilities (2,371,528) - (2,371,528) (3,274,221) - (3,274,221)
Net assets 14,534,943 34,394,705 48,929,648 14,523,604 41,240,859 55,764,463
9. Deferred tax
There is an unrecognised deferred tax asset of £1.2 million (31 March 2012 - £
1.2m) which, in view of the group's trading results, is not considered to be
recoverable in the short term. There are also capital allowances, including
mineral extraction allowances, exceeding £11 million (unchanged from 31 March
2012) unclaimed and available. No deferred tax asset is recognised in the
condensed financial statements.
10. Mineral property development
Mineral development costs incurred by the group are carried in the condensed
consolidated financial statements at cost, less an impairment provision if
appropriate. The recovery of mineral development costs is dependent upon the
successful development and operation of the Parys Mountain project which is
itself conditional on finance being available to fund such development. During
the period expenditure of £370,623 was incurred (six months to 30 September
2011 - £42,757), a significant increase due to drilling and other activities in
2012 and the cost of buying out Intermine Limited's royalty. Intermine was paid
C$1 million in cash (£630,000) and issued with 2,000,000 ordinary shares with a
market value of 12 pence each in the company to discharge all amounts due and
to cancel entirely its net profits royalty agreement. There have been no
indicators of impairment during the period.
11. Interest in associate
At 30 September 2012 the group had a 26% (31 March 2012 - 26%) interest in
Labrador Iron Mines Holdings Limited (LIM), a company registered in Ontario,
Canada, which is independently managed and is accounted for in these financial
statements as an associate company. LIM is the 100% owner and operator of a
series of iron ore properties in Labrador and Quebec, some of which were
formerly held and initially explored by the group. The fully diluted interest
of the group in LIM was 25% (31 March 2012 - 25%). At 21 November 2012 the
published fair value of the group's investment in LIM was £9.1 million based on
a share price of C$0.75 per LIM common share at that date. The changes in the
group's interest in LIM are:
Unaudited 30 Audited 31
September 2012 March 2012
Values in group financial statements: £ £
Value brought forward from previous period 41,240,859 21,073,132
Group's share of losses of associate (7,039,697) (3,484,140)
Group's share of equity-settled benefits 284,991 657,420
included in losses above and now added
back
(Loss)/profit on deemed disposals (133,913) 23,374,274
following
LIM share issues
Exchange rate movement 42,465 (379,827)
Amount carried in the group accounts - 34,394,705 41,240,859
being the value of group's share of net
assets of the associate without any fair
value adjustment in respect of mineral
properties
12. Share capital
Ordinary shares of 1p Deferred shares of 4p Total
Issued and Nominal Number Nominal Number Nominal
fully paid value £ value £ value £
At 31 March 2011 1,581,581 158,158,051 5,510,833 137,770,835 7,092,414
Issued 5 April 2,500 250,000 - - 2,500
2011
Issued 22 March 2,000 200,000 - - 2,000
2012
At 31 March 2012 1,586,081 158,608,051 5,510,833 137,770,835 7,096,914
Issued 11 July 20,000 2,000,000 - - 20,000
2012
At 30 September 1,606,081 160,608,051 5,510,833 137,770,835 7,116,914
2012
On 11 July 2012, 2,000,000 shares were issued to Intermine Limited - see note
10.
13. Events after the reporting period
In November 2012 LIM issued 30 million shares in respect of a fund raising. The
group contributed C$1.5 million to this financing resulting in an increase in
its holding of LIM shares from 17,789,100 to 19,289,100. Following this issue
the group's holding is 19.7%.
14. Related party transactions
None.
About Labrador Iron Mines Holdings Limited
Labrador Iron Mines (LIM) is Canada's newest iron ore producer with a portfolio
of direct shipping (DSO) iron ore operations and projects located in the
prolific Labrador Trough. Initial production commenced at the James Mine in
June 2011. The first full production season commenced in April 2012, with nine
cape-size shipments totalling approximately 1,456,000 dry tonnes of iron ore
sold in the seven months ended October 31, 2012.
The James Mine is connected by a direct rail link to the Port of Sept-Iles,
Québec. The project also benefits from established infrastructure including the
town, airport, hydro power and railway service. Starting with the James Mine
and leading to the development of the expanding Houston flagship project, LIM's
objective is to provide shareholders with long-term value with a plan to
increase production towards 5 million tonnes per year from a portfolio of 20
iron ore deposits in Labrador and Quebec, all within 50 kilometres of the town
of Schefferville.
LIM is currently the only independently-owned Canadian iron ore producer listed
on the Toronto Stock Exchange and trades under the symbol LIM. For further
information see www.labradorironmines.ca.
About Anglesey Mining plc
Anglesey now holds 19.7% of Toronto-listed Labrador Iron Mines Holdings Limited
which is producing iron ore from its James deposit, one of LIM's twenty direct
shipping iron ore deposits in western Labrador and north-eastern Quebec.
Anglesey is also carrying out development and exploration work at its 100%
owned Parys Mountain zinc-copper-lead deposit in North Wales, UK.
For further information, please contact:
Bill Hooley, Chief Executive +44 (0)1492 541981;
Ian Cuthbertson, Finance Director +44 (0)1248 361333;
Samantha Harrison / Klara Kaczmarek: RFC Ambrian +44 (0)20 3440 6800;
Emily Fenton / Jos Simson: Tavistock Communications +44 (0)20 7920 3155
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