Final Results

RNS Number : 9145F

Bezant Resources PLC

17 November 2015

 



17 November 2015

Bezant Resources Plc

("Bezant" or the "Company")

Final Results for the Year Ended 30 June 2015

Bezant (AIM: BZT), the AIM listed mineral exploration and development company operating in the Philippines and Argentina, announces its audited final results for the year ended 30 June 2015.

Highlights:

Corporate:

·     £0.7m loss after tax (30 June 2014: profit of £3.9m)

·     £1.7m cash at bank at the period end (30 June 2014: £2.4m)

Mankayan Copper-Gold Project, Philippines (the "Mankayan Project" or "Mankayan"):

·     Negotiations continue with potential acquirers and/or joint venture partners in respect of the Mankayan Project, but are being hampered due to the ongoing uncertainty caused by the country's 50 per cent. mining tax proposal which remains unresolved

·     Forthcoming 2016 national elections could result in a potential resolution and greater certainty over the tax regime

·     Independent review and updating of financial model for the Mankayan Project undertaken in November 2014 identified:

o  US$307m potential cost reduction compared with the original 2011 study due to:

§ change in mine design to a decline access plus conveyor decline for material haulage from the previous decline and vertical shaft ore haulage configuration; and

§ improved mine ventilation to avoid the capital and operational costs for a refrigeration plant.

o  Total capital infrastructure costs of approximately US$1bn over the duration of the project at a production rate of 20Mtpa

o  Recommendation for an up to 20Mtpa block caving operation over an estimated 28 year mine life

o  Total estimated costs of US$17.31 per ore tonne, at a production rate of 20Mtpa

Eureka Copper-Gold Project, Argentina:

·     Exploration spend restricted

Post Period End:

·     Option agreement entered into over a private company holding rights to potentially acquire interests in certain near-surface, alluvial gold and platinum mining and exploration licences located in the Choco region of Colombia:

o  Continuation of the Board's strategy to secure global projects with near-term low capex and opex production potential

o  Comprehensive due diligence exercise to be completed on the underlying licence interests ahead of deciding whether to exercise the option

o  If ultimately acquired, the underlying licence interests are expected to provide Bezant with prospective exposure to future low cost platinum production outside of South Africa and its traditional deep vein production models

·     Embarked on new round of discussions with potential private equity groups in respect of the Mankayan Project in addition to the ongoing negotiations with existing parties

Ed Nealon, Non-Executive Chairman of Bezant, commented:

"Whilst we continue to believe that Mankayan is a tier one project, the current capital restrictions in the mining sector combined with significant uncertainty in the Philippines over the adverse tax proposal for mining operations makes progress on realising value from a suitable transaction in the near term extremely challenging. We have, however, as a Board, continued to make significant cost reductions in respect of our operations and retain a strong cash position.

"Post period end we entered into an option over a private company which holds rights to potentially acquire certain prospective Colombian platinum and gold licences, as we seek to secure a potential source of near term cash flow for Bezant. I believe that these licences, located in the Choco region of Colombia, afford an attractive opportunity to potentially generate long-term shareholder value via the creation of a future low cost platinum production operation outside of South Africa.  Whilst platinum group metals' ("PGM") prices are currently depressed, significant pressure on major platinum sources and depleting stock-piles should enable Bezant to realise potentially significant margins from the successful future development of such project areas."

For further information, please contact:

Bezant Resources plc Bernard Olivier Chief Executive Officer Laurence Read Non-Executive Director Strand Hanson Limited (Nomad) James Harris / Matthew Chandler / James Dance Sanlam Securities UK Limited (Broker) Gavin Burnell or visit http://www.bezantresources.com

Tel: [phone] Tel: [phone] Tel: [phone] Tel: [phone]

Chairman's Statement

I am pleased to present the Group's final results for the financial year ended 30 June 2015 and to report on the Company's subsequent on-going activities to the date of this statement.

For the financial year ended 30 June 2015, the Group made a loss before and after tax of £0.7m compared with the previous year's profit before and after tax of £3.9m which was largely due to the non-refundable payments received in relation to the original and extended option over the Mankayan project which subsequently lapsed. During the current reporting period the Board undertook a full corporate review which resulted in the Company reducing its total operating costs by an additional 28 per cent. This review followed significant cost cutting measures introduced during the 2014 financial year. Effective from 31 March 2015, the Company's directors and the group's operational staff also agreed to a 30 per cent. reduction in their respective fees, salaries and benefits. The Group had approximately £1.7m cash at bank at the period end (2014: £2.4m) and maintaining a strong cash position remains a core focus of the Board.

Bezant has continued active discussions with various parties regarding the potential sale or joint venture of its Mankayan copper-gold project in the Philippines. As previously reported, such sales process has been and continues to be hampered by the uncertainty caused by the mining tax proposal made to the Philippines Government in 2014, by a civil service body, recommending an increase to a 50 per cent. levy. Both the Company and the third parties with whom we are currently in negotiations await the results of the forthcoming Philippine presidential election scheduled for May 2016 and the anticipated clarification thereafter on the tax proposal.

During the reporting period, to further advance our discussions with third parties in respect of Mankayan, we commissioned two independent review reports from GHD Group Pty. Limited and Mining Plus Pty. Limited ("Mining Plus") to update the historic 2011 conceptual study. The purpose of the independent reviews was, inter alia, to:

·     review the project's conceptual design details and assumptions in the context of recent trends in porphyry copper/gold ore mining and processing;

·     update the capital and operating cost estimates and incorporate any improved design elements;

·     identify possible areas for achieving cost savings; and

·     update the historic financial model to incorporate the revised cost estimates, as well as reflecting current metals prices. 

The updated financial model prepared by Mining Plus identified US$307 million of potential cost reductions compared with the original 2011 study whilst also recommending an up to 20 million tonnes per annum ("Mtpa") block caving operation over an estimated 28 year mine life. At the then prevailing metals prices (US$3.00 per pound of copper and US$1,250 per ounce of gold) and a 20Mtpa production rate the project had an estimated post-tax internal rate of return of 21 per cent. The independent financial and technical reviews identified significant cost savings and considerably improved the economics for the conceptual copper-gold project.

In summary, Mankayan is a massive copper porphyry project capable of sustaining significant, economic, long term production. It represents in essence a 'cornerstone' asset for any entity wishing to gain exposure to a tier 1 global copper-gold resource, however its size and the block caving model requires significant capital expenditure to be deployed before production can commence. Whilst negotiations continue in respect of the Mankayan Project, the Board continues to pursue its strategy to secure near term cash flow from global assets where the application of the Board's proven exploration and development track record can deliver future production and generate long-term shareholder value.

It was initially envisaged that our Eureka copper-gold project in Argentina could be developed as its mineralisation has the potential for a near surface production model. However, the current political situation within Argentina remains uncertain and therefore the good standing of the project is being maintained with minimum exploration expenditure commitments.

On 16 November 2015, post the reporting period end and further to an extensive review of potentially attractive additional portfolio assets capable of sustainable economic development, the Company announced that it had entered into an option agreement to potentially acquire the entire issued share capital of Leeward Islands Exploration LLC ("Leeward"), a private company holding rights over certain licences in Colombia. Leeward, via one of its subsidiaries, holds options to acquire a 100 per cent. interest in licences (FKJ-083, HCA-082 and HGE-082) covering 2,659ha and, pending the successful outcome of an existing licence application, a 70 per cent. interest in a licence covering 91ha, all such licences having prospectivity for platinum and gold and being located in the Choco Department of Colombia. 

The decision on whether to exercise the option over Leeward will be made following a period of comprehensive due diligence which will be directed and supervised by the Company and funded by a US$350,000 working capital loan which was made available to Leeward by Bezant on 13  November 2015. 

I have personally spent considerable time assessing these licences over the course of the last few months and believe that the licence areas are situated in one of the world's most significant and largely undeveloped platinum regions, being the source where platinum was first discovered in 1748. The Board has significant past experience of successfully developing world-class platinum group metal ("PGM") production sources.

I believe that the licences in the Choco Department potentially afford an attractive opportunity to generate long-term shareholder value via the creation of a low cost platinum production operation outside of South Africa.  Whilst PGM prices are currently depressed, significant pressure on major platinum sources and depleting stock-piles should enable Bezant to realise potentially significant margins from the successful future development of such an operation.

I would like to thank all of our shareholders for their continued loyalty and support in a very challenging global environment for natural resource companies and we will endeavour to progress our project portfolio in the year ahead.

Mr Edward Nealon

Non-Executive Chairman

17 November 2015

Review of Operations and Activities

1.  Philippines - Mankayan Copper-Gold Porphyry Project

The Group's Mineral and Production Sharing Agreement covers a total of 534 hectares in the Guinaoang area of the Philippines (the "Mankayan Project"). The Mankayan Project is located in the Mankayan-Lepanto mining district, an area of porphyry copper belts in the Philippines, and is similar to several other deposits that have already been developed by third parties, such as the St Thomas deposit near Baguio City. The project site is situated adjacent to the copper-gold mine owned and run by Lepanto Consolidated Mining Company. The Mankayan-Lepanto area has been mined for centuries and is readily accessible by both road and air.

The Mankayan deposit was discovered in the early 1970s and since then has been extensively drilled, with four historical programmes being completed covering more than 45,000 metres of diamond drilling over 48 holes. From late 2007 to mid 2009, the Company completed a 9,778 metre drill programme over 9 holes along the full strike length of the deposit in order to expand upon, and test the validity of, the historical drilling results and to provide samples for density and metallurgical testwork.

During 2010, both the new and verified historical drilling data was incorporated into a maiden independent JORC Ore Reserve and Mineable Inventory Statement and conceptual study for the Mankayan Project released in January 2011 (the "Study"). The Study was based on Probable Ore Reserves of 189 million tonnes at 0.46 per cent. copper and 0.49g/t gold resulting in total Recoverable Metal Reserves of 811,000 tonnes of copper and 2,210,000 ounces of gold. The total Mining Inventory is approximately 390 million tonnes of ore at an average grade of 0.38 per cent. copper and 0.42g/t gold, equating to approximately 1.4 million tonnes of copper and 3.9 million ounces of gold, the latter relating to all of the indicated and inferred material incorporated by the mine design.

The Study further calculated that approximately 95,000 metres of operating development and 2.5 million metres of longhole drilling would be undertaken during the project's development. The total capital infrastructure costs over the project's life was calculated at approximately US$1.2 billion, with a total revenue per tonne of US$33.72 and total costs per tonne of US$21.01.

On 24 September 2014, the Company announced the findings of a high level independent review report, undertaken by GHD Group Pty. Limited ("GHD"), in respect of the historic 2011 conceptual study completed by TWP Australia Pty. Limited ("TWP") and Mining Plus Pty. Limited ("Mining Plus") on the Mankayan Project. GHD's reporting scope was, inter alia, to review the project's conceptual design details and assumptions in the context of recent trends in porphyry copper-gold ore mining and processing.  In addition, capital and operating cost estimates were to be considered and updated to reflect current local costs in the Philippines and to incorporate likely opportunities for any improved design elements identified. Its report utilised the unit rates from Philex Mining Corporation's well established Padcal mine at Padcal, Tuba, Benguet to indicate capital estimates and was supported by carrying out peer analysis on other major block caving mines both in the Philippines and Australia.

GHD's review identified, outlined and recommended two key changes to the development plans with the potential for significant associated cost savings. The revisions reflect recent developments in high-tonnage underground mining and can be summarised as follows:

·   a change from vertical shaft ore haulage to conveyor decline haulage; and

·   improved mine ventilation to avoid the capital and operational costs for a refrigeration plant.

In addition, the Company separately commissioned Mining Plus to provide a supplementary review report focused, inter alia, on identifying other possible areas for achieving cost savings and, specifically, to provide an update to its historic financial model to incorporate the revised cost estimates and possible savings identified by GHD's report, as well as reflecting more current metals prices.

On 5 November 2014, the Company announced the key findings from Mining Plus' supplementary review and updated financial model, which are briefly summarised below:

·   US$307 million potential cost reduction compared with the original 2011 study

o Change in mine design to a decline access plus conveyor decline for material haulage from the previous decline and shaft haulage configuration

·   Recommendation for an up to 20Mtpa block caving operation over an estimated 28 year mine life

·   At the then current metals prices (US$3.00 per pound of copper and US$1,250 per ounce of gold) and a production rate of 20Mtpa, the project model returned an estimated:

o post-tax NPV of approximately US$739 million at an 8 per cent. discount rate

o total post-tax net cash flow of approximately US$3.7 billion

o post-tax IRR of 21 per cent.

·   Total estimated costs of US$17.31 per ore tonne, at a production rate of 20Mtpa, inclusive of all royalties, taxes, capital costs, equipment ownership, operating and processing costs, and administrative and technical services costs

·   Total capital infrastructure costs of approximately US$1 billion over the duration of the project at a production rate of 20Mtpa

·   Additional studies recommended to further investigate production levels in excess of 20Mtpa and optimisation of the mine design

2.  Argentina - Eureka Copper-Gold Project

The Eureka project comprises a package of 11 highly prospective copper and gold licences. The 11 licences are located north-west of Jujuy near to the Argentine border with Bolivia and cover, in aggregate, an area in excess of approximately 5,500 hectares, accessible via a series of gravel roads. Historic exploration activities have been conducted on the project area since the 1980s by Minera Penoles, Codelco and Mantos Blancos, with unaudited unclassified estimates in the order of, in aggregate, up to approximately 62 million tonnes grading at 1 per cent. copper and approximately 52,000 ounces of gold as credits. The copper oxide mineralisation occurs in loosely consolidated conglomerates and is the focus of the project's economic potential.  Bezant believes that gaining an understanding of the geological model to assess the economic viability of delineating a JORC standard resource at Eureka can be accomplished with low levels of exploration expenditure. 

The Eureka Project was originally identified by Bezant as being a potential low cost source of copper for a future mine developer. In addition to mineralisation being encountered near surface, metallurgical test work performed by the Company has provided a strong indication that the copper mineralisation in the project area is suitable for an inexpensive acid heap leaching process. 

3.  Colombia - Potential Licence Interests in the Choco Region

On 16 November 2015, the Company announced that it had entered into an option agreement to potentially acquire Leeward Islands Exploration LLC ("Leeward"), a private company holding rights over certain licences located in the Choco region in Colombia. Leeward, via one of its subsidiaries, holds options to acquire a 100 per cent. interest in licences (FKJ-083, HCA-082 and HGE-082) covering 2,659ha and, pending the successful outcome of an existing licence application, a 70 per cent. interest in a licence covering 91ha, all such licences having prospectivity for platinum and gold and being located in the Choco Department of Colombia.

Bezant will now complete a period of comprehensive due diligence on the licences concerned, following which a decision will be made as to whether to exercise the option over Leeward. The Company's ultimate objective is to potentially develop a future gold and platinum production project capable of sustained economically robust operations on one or more of the licence areas.

Bezant has also provided an operational loan facility of up to US$350,000 to Leeward for the purpose of assisting Leeward in making certain of the staged payments in respect of the underlying options and generally maintaining the good standing of the Leeward group and the licences during the due diligence process and option exercise period (the "Bezant Loan Facility"). The Bezant Loan Facility can be drawn down in tranches or multiples of US$50,000 and the agreement provides that Bezant will have absolute control over the application of the amounts drawn down by Leeward. 

Bezant's Board has a track record of successfully developing PGM projects outside of standard reef models, including at Aquarius Platinum plc and Sylvania Platinum Limited. The Board's ultimate objective is to potentially achieve low capex and opex platinum and gold production.

Dr. Bernard Olivier

Chief Executive Officer

17 November 2015

Group Statement of Comprehensive Income

For the year ended 30 June 2015

								2015		2014
				Notes				£'000		£'000
	Continuing operations
	Group revenue						-			-
	Cost of sales						-			-
	Gross profit/(loss)						-			-
	Option income		2				-			5,169
	Administrative expenses						(561)			(1,186)
	Group operating (loss)/profit						(561)			3,983
	Interest receivable						2			2
	Share of Associates' loss						(124)			(108)
	(Loss)/profit before taxation						(683)			3,877
	Taxation						-			-
	(Loss)/profit for the year						(683)			3,877
	Attributable to: Equity holders of the Company						(683)			3,877
	Other comprehensive income:
	Foreign currency reserve movement						192			(261)
	Total comprehensive (loss)/income for the year attributable to equity holders of the Company						(491)			3,616
	(Loss)/earnings per share (pence)
	Basic		3				(0.82)			4.67
	Diluted		3				(0.82)			4.48

Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

 

	Share Capital £'000	Share Premium £'000	Other Reserves £'000	Accumulated Losses £'000	Total Equity £'000
Balance at 1 July 2014	166	31,053	357	(16,787)	14,789
Current year loss	-	-	-	(683)	(683)
Foreign currency reserve	-	-	192	-	192
Total comprehensive loss for the year	-	-	192	(683)	(491)
Balance at 30 June 2015	166	31,053	549	(17,470)	14,298

	Share Capital £'000	Share Premium £'000	Other Reserves £'000	Accumulated Losses £'000	Total Equity £'000
Balance at 1 July 2013	166	31,053	618	(20,664)	11,173
Prior year profit	-	-	-	3,877	3,877
Foreign currency reserve	-	-	(261)	-	(261)
Total comprehensive income for the year	-	-	(261)	3,877	3,616
Balance at 30 June 2014	166	31,053	357	(16,787)	14,789

Consolidated Balance Sheet

As at 30 June 2015

			2015	2014
			£'000	£'000
ASSETS
Non-current assets
Plant and equipment			61	71
Investments			7,753	7,457
Exploration and evaluation assets			4,788	4,791
Total non-current assets			12,602	12,319
Current assets
Trade and other receivables			74	66
Cash and cash equivalents			1,679	2,435
Total current assets			1,753	2,501
TOTAL ASSETS			14,355	14,820
LIABILITIES
Current liabilities
Trade and other payables			57	31
Total current liabilities			57	31
NET ASSETS			14,298	14,789
EQUITY
Share capital			166	166
Share premium			31,053	31,053
Share-based payment reserve			265	265
Foreign exchange reserve			284	92
Retained losses			(17,470)	(16,787)
SHAREHOLDERS' EQUITY			14,298	14,789

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

			2015	2014
	Note		£'000	£'000
Net cash outflow from operating activities	5		(726)	(1,007)
Cash flows from investing activities
Interest received			2	2
Other income			29	43
Loans to associates and subsidiaries			(225)	-
			(194)	45
Decrease in cash			(920)	(962)
Cash and cash equivalents at beginning of year			2,435	3,826
Foreign exchange movement			164	(429)
Cash and cash equivalents at end of year			1,679	2,435

Notes to the financial information

For the year ended 30 June 2015

1.

Basis of Preparation The audited financial information set out above, which incorporates the financial information of the Company and its subsidiary undertakings (the "Group"), has been prepared using the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") including IFRS 6 'Exploration for and Evaluation of Mineral Resources', as adopted by the European Union ("EU") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.   The audited financial information contained in this announcement does not constitute the Company's full financial statements for the year ended 30 June 2015 or 2014, but is derived from those financial statements, approved by the board of directors. The auditors' report on the 2015 financial statements was unqualified and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.  The full audited financial statements for the year ended 30 June 2015 will be delivered to the Registrar of Companies and filed at Companies House following the Company's forthcoming annual general meeting.

2.	Option income
		2015	2014
		£'000	£'000
	Option income from lapsing of Gold Fields' option	-	5,169
	On 21 January 2014, the Group received a formal notification from Gold Fields Netherlands Services BV that it would not be exercising its exclusive option over the Group's Mankayan copper-gold project in the Philippines.  Accordingly, the deferred income was recognised in the 2014 Income Statement.

3.

(Loss)/earnings per share

The basic and diluted (loss)/earnings per share have been calculated using the loss for the 12 months ended 30 June 2015 of £683,000 (2014: profit of £3,877,000). The basic (loss)/earnings per share was calculated using a weighted average number of shares in issue of 82,939,525 (2014: 82,939,525). The diluted (loss)/earnings per share has been calculated using a weighted average number of shares in issue and to be issued of 85,337,325 (2014: 86,581,417). The diluted loss per share and the basic loss per share for 2015 are recorded as the same amount, as conversion of share options decreases the basic loss per share, thus being anti-dilutive.

4.	Reconciliation of movements in shareholders' funds
		2015	2014
		£'000	£'000
	(Loss)/profit for the year	(683)	3,877
	Currency translation differences on foreign currency operations	192	(261)
	Opening shareholders' funds	14,789	11,173
	Closing shareholders' funds	14,298	14,789

5.	Reconciliation of operating (loss)/profit to net cash outflow from operating activities
		2015	2014
		£'000	£'000
	Operating (loss)/profit	(561)	3,983
	Depreciation and amortisation	10	16
	VAT refunds received	(29)	(43)
	Foreign exchange gain	(164)	303
	Option income	-	(5,169)
	(Increase)/decrease in debtors	(8)	11
	(Decrease)/increase in creditors	26	(108)
	Net cash outflow from operating activities	(726)	(1,007)

6.

Availability of Annual Report and Financial Statements

Copies of the Company's full Annual Report and Financial Statements are expected to be posted today to those shareholders who have elected to receive hardcopy shareholder communications from the Company and, once posted, will also be made available to download from the Company's website at www.bezantresources.com. The Annual Report and Financial Statements will also be made available for inspection at the Company's registered office during normal business hours on any weekday. Bezant Resources Plc is registered in England and Wales with registered number 02918391. The registered office is at Level 6, Quadrant House, 4 Thomas More Square, London E1W 1YW.

7.	Annual General Meeting
	The Company's next Annual General Meeting ("AGM") will be held at 11.00 a.m. on Friday, 11 December 2015 and a formal Notice of AGM and proxy form have today been posted to those shareholders who have elected to receive hard copy shareholder communications from the Company and can also be downloaded from the Company's website at www.bezantresources.com.

 

END

 

 

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