Financial Results 31 December 2010

RNS Number : 9602E

Central Asia Metals PLC

15 April 2011

 



15 April 2011

CENTRAL ASIA METALS PLC

Financial Results for the year ended 31 December 2010

Central Asia Metals PLC ("CAML" or the "Company"), (AIM:CAML), a mining exploration and development company focused on base and precious metals in Central Asia, announces its financial results for the year ended 31 December 2010.

Highlights:

·      Successful listing on AIM on 30 September 2010 raising $60.3million

·      Cash balances of $47.4million as at 31 December 2010 and no outstanding debt

·      Construction of the SXEW plant at Kounrad commenced in July 2010 and is on schedule for completion and production in Q4 2011

·      Capital expenditure of $4.4million spent at Kounrad with further commitments of $4.3million as at 31 December 2010

·      Licence extension for Alag Bayan to April 2012

·      30 year mining licence awarded for the Ereen gold project

·      Sale of Tochtar completed after year end

Nick Clarke, Chief Executive Officer of CAML, commented:

"We are pleased to report our first year of results as a public listed company, with the highlight of the year being our successful listing on AIM.  The Company has sufficient cash balances to undertake the construction of the Kounrad SX-EW copper plant, which is well advanced and will be completed and in production by the end of 2011.

We look forward to the next financial year as the Company undertakes the development necessary to target initial production at the Kounrad SX-EW copper plant and provide positive cash flow for the company."

Enquiries:

Central Asia Metals Nick Clarke (CEO) / Nigel Robinson (CFO)	[phone]
KPMG Corporate Finance NOMAD: Susan Walker	[phone]
Mirabaud Securities LLP Broker: Peter Krens	[phone]
Pelham Bell Pottinger Charles Vivian / Lorna Spears	[phone]

Chairman and Chief Executive's statement

Dear Shareholders

2010 was a year of transition for the Company as it listed on AIM and also began the process of taking Kounrad beyond the development stage and into commercial production.  The Board were also encouraged by the further rise of metal prices during the year.

Financing

Since the formation of the Company in September 2005, all financing had been raised privately to fund exploration programmes and the development of Group assets.  During 2009, the decision was taken to proceed with an Initial Public Offering (IPO) in 2010 and the process commenced in January 2010 with the appointment of a NOMAD (KPMG) and Corporate Brokers (Mirabaud) to oversee the process and assist in the transaction.

The Company started the financial year with a cash balance of $1.3 million and due to the timeline involved in the IPO process, the decision was taken to raise 'bridging' finance in Q1 2010 through a pre IPO fundraising.  A total of $5.5 million was raised in early May 2010 through a convertible loan note which was converted into equity at the time of the IPO.  

The Company successfully completed the IPO on 30 September 2010 raising $60 million through the issue of 39,735,100 new shares at a price of 96 pence.  As at 31 December, 2010, the Company had cash balances totalling $47.4 million.

Operations   

Key to the success of the IPO was the significant progress that had been made developing the Kounrad SX-EW copper project in Balkhash, Kazakhstan.  Work commenced on the construction of the main commercial plant in July 2010.  This followed the completion of a feasibility study in March 2010 prepared by the Beijing General Research Institute of Mining and Metallurgy and extensive experience gained from operating the SX-EW pilot plant on site since August 2008.

There are estimated to be 733,000 tonnes of contained copper within the oxide and sulphide dumps at Kounrad which should provide sufficient resources on site to enable the plant to produce copper at a rate of 10,000 tonnes per annum for at least the next 30 years, assuming recovery rates of 40%-50% from the leaching process.  In addition to the construction of the commercial production plant, the Company plans to further develop the Kounrad project during 2011 by additional testing of the sulphide waste dumps.

Progress has also been made on the Company's other exploration assets.  During the year, a licence extension at Alag Bayan was granted through to April 2012 and a limited drilling programme is planned for the current year.  Similarly, at Handgait a further survey and drilling programme is scheduled to take place in 2011.  Since the year end, the Company has sold Tochtar and management remains optimistic that Ereen will also be sold before the end of the current financial year.

Commodity Prices

During the year, the gold price rose from $1,121 to $1,405 per oz, the molybdenum price increased from $12.5  to $16.5 per pound  and most importantly for the immediate prospects of the Company, the copper price rose from $6,745 to $9,600 per tonne.

Outlook

The financial year ended 31 December 2010 was pivotal for CAML as it emerged from the economic challenges posed by the global recession of the previous two years.  The Company successfully listed on AIM and raised sufficient capital to develop its core assets.  The delivery of the Kounrad copper plant on time, and on budget, remains the key objective for management in 2011.  The successful completion of Kounrad should create significant positive cash flow for the Company, which would enable it both to accelerate the development of other projects and to provide the potential for the return of cash to shareholders.

Chairman, Nigel Hurst-Brown                                                                                Chief Executive Officer, Nick Clarke

Operating and Financial Review

Central Asia Metals plc ("CAML" or the "Company") has interests in copper, gold and molybdenum mining assets in Kazakhstan and Mongolia. Both of these countries border and enjoy positive relationships with China and Russia. They have stable governments and have benefited from progressive trade policies over the past decade, which have delivered strong economic growth during that period.

Kazakhstan

·      Ninth largest, and the largest landlocked, country in the world, equivalent in size to Western Europe

·      Significant progress made towards developing as a market economy post the breakdown of the former Soviet Union

·      Extensive mineral and metal resources with the mining industry accounting for approximately 27% of GDP

·      Credit risk rating of 'BB' equivalent, comparable to that of Russia and South Africa

·      CAML is currently constructing a SX-EW plant at the former Kounrad copper mine that will have the capacity to deliver 10,000 tonnes per annum of near term, low-cost copper production

·      The Company has had offices in Almaty since 2005 and Balkhash since 2007.  It currently employs 223 people in the country, of which 133 are on the Kounrad construction site

Mongolia

·      Nineteenth largest, and second largest landlocked, country in the world

·      Extensive mineral deposits including copper, coal, molybdenum, tin, tungsten and gold

·      Largest trading partner is China, which accounts for over two-thirds of all exports

·      Agreed $5billion Oyu Tolgoi protocol in 2010 after 5 years negotiations - taking progressive steps towards becoming a free market economy

·      Best performing stock exchange in 2010

·      CAML has exploration opportunities with the potential to deliver substantial value, including Alag Bayan and Handgait

·      The Company has had offices in Mongolia since 2007 and currently employs 14 people in the country

CAML strives to maintain good working relationships with host Governments as well as with its local partners in all its areas of operations.  The Company considers the mining regimes in each country where it operates to be favourable to foreign investment.  All of the Company's exploration licences and permits are current.

The Company recognises that the local communities in the areas that it operates are key stakeholders in the projects and is committed to implementing environmental and safety standards in accordance with best industry practice.

Review of Operations - Kounrad

Overview of Resources

A copper project, located 17 km north of Balkhash in central Kazakhstan, which has been mined since 1936, originally by the State, and more recently by Kazakhmys plc.  In total 2.9Mt of finished copper was produced between 1936 and 2006 and the ore that was mined and not deemed suitable for processing at the time was dumped on the surface close to the open pit.  This open pit is now abandoned but detailed mining and processing records have been maintained relating to the classification and grades of the various waste dumps at the site. These records exist for all the material contained within the dumps and they are classified as either oxide, sulphide or mixed ore. 

Originally the sulphide ores from the open pit were treated by conventional flotation, whilst oxide ores and low-grade sulphide ores were stockpiled around the site.  The dumps can be divided into three main ore-bearing types, namely oxide, sulphide and mixed/waste materials.  The oxide waste is dumped entirely on the eastern margin of the open-pit mine whilst all of the sulphide, and the bulk of the mixed/waste dumps are located in the western area. 

The archives of Balkashmed, the state-owned operator prior to the creation of Kazakhmys plc, contain the results of hundreds of thousands of assays covering the entire period of the waste dump accumulations.  Several estimates of the quantities of residual copper contained in these materials have been calculated, using the archived data, by various  organisations over the past two decades.  Despite inevitable differences and variances, the overall global estimates of contained residual copper metal for Kounrad show good correlation.

It is estimated that there is approximately 733,000 tonnes of contained copper within the dumps.  In addition to the approved oxides, resource estimates have also been made for the sulphide and mixed/waste dumps located in the west of the property.  These resources have not yet been approved by GKZ (Republic of Kazakhstan).

The Company has agreed to undertake a rolling programme of transfer of material to a recognised resource standard (JORC) and expects to have all of the presently estimated sulphide resources quantified by the end of 2011. Thereafter, CAML will transfer other material with the aim of having all presently estimated dump material classified to an acceptable international standard by the end of the first quarter of 2013.

The western sulphide dumps are undergoing active sampling and reserve re-estimation by Sary Kazna LLP.  A programme of evaluation of the western dumps was conducted during 2010 through excavating trenches and pits from the dump surface, removing bulk samples, preparing samples followed by assaying at an approved laboratory.  The results of all this testing are still being assessed but the Company's intention is to upgrade these estimates to reserves by obtaining GKZ (Republic of Kazakhstan) approval and then to extract them. If sufficient further reserves are proven, and approval obtained, there is potential to increase production through construction of a second commercial SX-EW plant with a similar capacity to the first.

Solvent Extraction - Electro Winning (SX-EW) Cathode Copper Facility - 10,000 tonnes per annum

The sub-soil use contract covers an area of 23.5 km² (2,350 hectares) and is valid until 20 August 2034.  In September 2007, CAML began the technical evaluation studies for a dump leach project and was awarded ownership through a joint operating agreement (JOA) following a competitive tender.  CAML entered into the JOA with Sary Arka, a government owned entity, and acquired a 60% interest in the Kounrad Project.   The Kounrad JOA between the two companies led to the incorporation of Kounrad Copper Company LLP (''KCC'') which is the company through which the construction and operation of the commercial SX-EW plant will be managed.  The project is operated as a joint venture with equal votes for each company on major strategic and operating matters as set out in the Kounrad JOA.

A $1.5 million SX-EW demonstration plant was commissioned and installed during the summer of 2008 and has operated successfully through challenging climatic conditions.  The plant is located at oxide dumps on the eastern part of the area.  Test leaching cells of area 1000m² are irrigated at any one time and over the period have indicated a recovery of approximately 50% of the estimated contained copper.  As at 31 December 2010, 390 tonnes of cathode copper had been produced at the pilot plant and provided the added benefit of significant test data for the design studies associated with the main 10,000 tonne per annum SX-EW plant.

Further, laboratory test work on samples taken from sulphide dumps in the area have indicated that a significant amount of natural oxidation has occurred converting primary to secondary sulphides.  This will result in potential leach recoveries approaching 50 %, although in economic assessments, CAML has utilised a lower number of 40% for these materials.

An engineering design study was commissioned with Beijing General Research Institute of Minerals and Metallurgy (BGRIMM) in November 2009 and completed in Spring 2010.  Following a review of information provided by CAML from its own operation and from previous test work, together with their own experience in the design of several SX-EW plants in China, BGRIMM developed a detailed leaching schedule and designed a plant capable of treating a range of flow rates

and solution grades to produce 10,000 tonnes per annum of copper cathodes at a minimum 99.99% quality.

The plant design has taken the extremes of climate into consideration, to ensure operability throughout the winter period. BGRIMM has assumed recovery levels of 50%, 45%. and 40% respectively for the three ore types (oxide, mixed and sulphide) resulting in the projected recovery of almost 324,000 tonnes of copper (gross) over the project life.

The eastern waste dumps are assumed to recover approximately 121,000 tonnes during a 12-year period, with the western waste dumps producing the balance of 203,000 tonnes. These figures are based on the assumption of GKZ (Republic of Kazakhstan) approval for the full amount of the estimated volumes of material in the sulphide and mixed/waste dumps at Kounrad. 

The results of the feasibility study indicated an estimated capital cost to construct the SX-EW plant of approximately $47 million and cash operating costs below $1,000 per tonne of copper produced. This is considered to be in the lowest decile of global copper producers and make the economics of Kounrad compelling.

Construction Progress

Construction commenced on site during summer 2010 and continued throughout the winter months.  Since listing on AIM in September 2010, significant progress has been made towards the construction of the facility.  Site works undertaken during the winter period, including the commissioning of a winterised concrete mixing plant, have ensured that the project schedule remains on course for completion by the end of 2011.

Detailed engineering design is fully completed and the vast majority of the plant, equipment and steel orders have been placed with first deliveries to site expected mid-April 2011.  The bulk of the equipment has been sourced from China and Kazakhstan with key specialised items being imported from Germany, USA and Chile.  Site earthworks have been completed and 40% of the mass concrete has been placed with all concrete works expected to be completed by end May 2011.  All the solution ponds have been excavated and lined and the collector trench excavations and lining are well advanced.

Access to the site from the national rail system has been completed with the commissioning of 900m of rail line and sidings and power for the facility will be provided by a new 4.5km overhead power line from an existing main sub-station.

In addition to the construction of the commercial production plant, planned further developments for the Kounrad project include additional testing of the sulphide and waste dumps throughout 2011.  In April 2011, the pilot plant will be moved to operate in the western sulphide dumps in order to gain more experience of the leaching processes in these dumps.

Review of Operations - Mongolia

Alag Bayan

The 39.4km² Alag Bayan licence (3,941 hectares) is located in the middle of Mongolia's prolific copper-gold porphyry mineralisation trend, 100km from the Oyu Tolgoi copper/gold deposit and 80km from the Tsagaan Subarga copper deposit. The property is held under an extended exploration licence which expires in April 2012 and is 70% owned by Bayan Resources LLC, a subsidiary company of CAML.

A surface outcrop of copper mineralisation exists in the central portion of the licence area and has been investigated by a series of exploration programmes. Its continuation at depth has been revealed and economic studies, based on the open-pit mining of a small scale deposit, have been undertaken.  Such areas, characterised by their relatively high geophysical IP anomalies, were found in the immediate vicinity of a shallow intrusive body in the licence area, so that sulphide mineralisation may occur in association with this geological environment.

Based on the results of previous geological and geophysical (induced polarisation and magnetic) surveys and trench sampling undertaken throughout the licence area, a diamond drilling programme was conducted by CAML in 2009 to confirm the further potential of the area and identify the geological setting and anomalies of interest. The initial stages of this geological investigation have identified a near-surface copper target resource.

In August 2009 CAML entered into a services and option agreement with GoviEx Mongolia LLC (''GoviEx'') pursuant to which GoviEx agreed to provide high resolution geophysical survey services within the Alag Bayan exploration area. As part consideration for these services, CAML agreed a call option for GoviEx to purchase a 19.99%. interest in the asset at a fixed price of $650,000. 

The call option for GoviEx has recently been extended as part of the agreement for additional IP testing work currently being performed. It is exercisable by GoviEx at the later of (a) 2 years from the delivery of GoviEx's report, or (b) when CAML has spent at least $5 million in exploration costs in relation to Alag Bayan. Should GoviEx exercise its call option, it is obliged to contribute pro rata to all ongoing capital funding requirements for the asset.

On the basis of the first IP survey, in 2009 CAML conducted a deep hole drilling campaign designed to test the anomalies identified in the survey.  A total of 6,300m were drilled consisting of 5 holes ranging in depth from 1,000m to 1,800m.  The drilling campaign was completed in December 2009 and the results combined with the details recorded by the IP survey were sufficiently robust to enable an application for a mining licence during 2010. 

In April 2010 the licence application for Alag Bayan was completed and an extension was granted to April 2012.  It is understood that the state approved reserves at this stage of exploration were confirmed as 1,987,415 tonnes of ore which contained a copper grade of 0.8006%.  This equates to 15,911 tonnes of contained copper.

Management believe that the licence area has the potential to host deeper-seated porphyry-style targets that warrant further attention.   A review by Wardell Armstrong International Limited (WAI) of the results of the surveys performed to date, and particular,  the work undertaken by GoviEx suggests that the target anomalies identified, whilst deep-seated, are attractive given the analogy to the Oyu Tolgoi gold-rich porphyry deposit.   Following analysis of the second IP Survey results mentioned above in March 2011, an additional drilling programme of two 2,000 metre holes will commence in May 2011. 

Handgait

A molybdenum deposit located in the Bulgan province 500 km northwest of Ulaan Baatar near the Russian border.  CAML holds 80% of the Handgait project through its local subsidiary, Mon Resources LLC.  The exploration licence covers an area of 17.91km² in northern Mongolia, adjoining the Russian border. The licence area hosts a significant molybdenum resource which has undergone extensive exploration using soil geochemistry, detailed geophysics, and a substantial core drilling programme to delineate preliminary resources.

During 2008 CAML completed a drilling programme of 78 holes (12,241 metres) and 16,735 assays were sampled with indications from the work performed of a 42,000 tonne molybdenum resource and a further potential of 280,000 tonnes in the Handgait area.  The Group considered that sufficient work had been performed to apply for the conversion of the exploration licence to a mining licence. 

The mining licence application was submitted in December 2008 to the Mongolian State Minerals Commission.  Following several reviews, CAML was issued with a mining licence on 9 July 2009, covering an area of 1,791 hectares for an initial period of 30 years to 9 July 2039 and with the possibility of a further two 20-year extension periods.   Since early 2009 the property has been managed on a care and maintenance basis and no additional exploration work was performed due to the very sharp drop in molybdenum prices in late 2008 from approximately $34 per lb to a low of approximately $7 per lb.

Whilst CAML management have received several expressions of interest in the property, they are not considering a disposal at this stage of exploration.  The near term focus of the Company is to conduct limited additional drilling of approximately 1,500m in the Handgait area in 2011 in order to further prove up the resources.  The price of molybdenum has recovered since 2008 and is now around $18 per lb.

Review of Operations - Assets held for sale

Ereen

This is a gold exploration project located between Centerra's Boroo mine and the Gatsurst project in the Selenge province of Mongolia approximately 140 km north of Ulaan Baatar.  In May 2007, CAML acquired its interest in the Ereen Project through the acquisition of an 85% share of Zuun Mod UUL LLC, a Mongolian company.

Geophysical investigations and core drilling have demonstrated the occurrence of metasomatic gold mineralisation associated with the veins and a potential 700,000 oz gold resource.  At the end of 2008, the Company completed a drilling programme of 44 holes (9,881m) and a total of 6,709 assays.  In 2009 a further drilling programme of 1,792metres was conducted on the site in order to obtain further geological data and enable the conversion of the exploration licences associated with the project to be converted into 30 year mining licences.  This was successfully achieved in April 2010. 

Following on from a strategic review of the Company's assets in 2009, a decision was taken to sell the Ereen project.  A number of parties have expressed a strong interest in the Ereen project since that time and the Board has concluded that should a sale not be achieved in the near future on acceptable terms, consideration may be given to  further develop the asset and firm up on the resource estimate by additional drilling.

Tochtar

The mine is located in northwest Kazakhstan near the Russian border.  CAML acquired an initial 65% stake in 2006 and then increased its shareholding to 75% in January 2007.  The mine was managed and operated by CAML between 2007 and 2008 producing approximately 5,000 ounces of gold during that time.  As part of the strategic review of the Group's assets, it was decided to sell Tochtar after due consideration of the significant capital requirements associated with further development of the project and the difficult geological conditions.

The asset was sold to Wildorf Holdings LLP on 18 February 2011 following on from lengthy negotiations.  The sale is conditional upon State approval under Article 71.

Financial Objectives

CAML's key financial objective in 2010 was to raise sufficient equity finance to enable the Group to further develop the Kounrad asset, construct the SX-EW facility and bring the plant into production by the end of 2011.  This was successfully achieved by raising $60 million through the IPO in September 2010.

The key objective for 2011 is to complete the construction of the SX-EW plant at Kounrad by the end of the year, produce a minimum of 200 tonnes of cathode copper and ensure that the project is completed within the $47 million capital budget.

Operating Environment, principal risks and uncertainties

The principal risks currently identified in the Group as a whole are as follows:

Kounrad Project Risks

Construction

Success in the near term depends to a significant extent on the time taken and cost required to construct and operate the commercial SX-EW plant at Kounrad.  Delays or cost overruns could adversely affect the Company's current capital cost estimates and the point at which a revenue stream will be generated from the sale of cathode copper.  Such a delay or cost overrun would impact on the Company's liquidity and potentially require additional funds to be raised to complete the construction project.

Production

The decision to develop the plant is based on the results of a feasibility study which has derived estimates of expected project economic returns.  These estimates are based on various assumptions relating to future copper prices, anticipated tonnage, grades and metallurgical characteristics of ore to be processed, anticipated recovery rates and projected capital expenditures on constructing the plant and the associated cash operating costs.

Joint Operating agreement

Operations at Kounrad are governed by a Joint Operating Agreement (JOA) between CAML's subsidiary, Sary Kazna LLP and its partner on the project, Sary Arka, a local Kazakh government entity.  Although the Company has a 60% interest in the subsoil use rights under the Kounrad Contract, and is the operator, both the Company and Sary Arka have an equal vote in respect of certain matters to be decided under the Kounrad JOA. If the joint venture partners are unable to reach an agreement on key matters there is a risk of a material adverse impact on the Company's interest in the Kounrad project.

Political Risk

The Company operates in areas of the world that are subject to political risk due to the impact of changing legislation on the operating and exploration environments that are imposed and changed by the ruling parties within the countries.  The Company manages this risk by complying with all the relevant legislation and working at maintaining close ties with government contacts within the countries.  Whilst current indications are that suitably favourable conditions for business will continue for the foreseeable future, the risk remains that the legal, economic and political background in the countries in which the Company operates could change for the worse.

Licences and Permitting Risk

The risks associated with gaining and maintaining appropriate permits and licences to construct and subsequently operate a copper production facility in Kazakhstan are recognised by the Company. The Directors believe they have sufficient experience gained within the country and the appropriate in-country personnel to manage this risk.  All of the Company's mining licences are valid and the Company ensures that it complies with all the local regulatory requirements to ensure their continued validity.

Environmental Risk

Risks to the environment are taken seriously by the Company together with high standards for protecting its staff on site and all potential visitors to its sites.  The Company has obtained all requisite environmental permits and licences for its operations and the Directors are aware that they must maintain high environmental standards across all the Company's activities.

Financial Risks

The Company is exposed to a number of financial risks and details of those considered significant by the Directors and the management actions and policies undertaken to mitigate such risks are contained in note 3.

Financial Review

Balance Sheet

The total assets of the Group as at 31 December 2010 amounted to $76.5 million (2009: $20.2m).  The main increase over the year was the increase in net cash to $47.4 miliion (2009: $1.3m) due to the IPO fund raising and the funds raised earlier in the year on the convertible loan notes.  Over the course of the year the Group raised a total of $65.8 million, $60.3 million at the IPO and $5.5 million in convertible loan notes all of which were converted into equity at the IPO.  The Group had no debt as at 31 December 2010.

Property, Plant and Equipment increased to $6.5 million (2009: $2.1m) as construction commenced on the Kounrad SX-EW plant in Kazakhstan.  Intangible assets increased to $13.0 million (2009: $11.5m) primarily reflecting the revaluation of Mongolian intangible assets caused by the appreciation of the Mongolian currency as the Group had no significant activity in the exploration projects over the course of the year.

Assets held for sale also increased to $4.7 million (2009:$2.6m) primarily due to the revaluation of Ereen assets caused by the appreciation of the Mongolian currency and the revaluation of Tochtar to a fair value of $325,000.  Tochtar was sold in February 2011 as explained in Note 18.

During the year and as part of the conversion to a plc, CAML underwent a capital reduction scheme to enable the accumulated losses of previous years to be offset by the transfer of the share premium account.  A total of $54.4 million was transferred from the Share Premium account to distributable reserves as part of this process.  As at 31 December 2010 the distributable reserves of the Company were $33.6 million (2009: losses of $18.6m).

Income Statement

The consolidated net loss after taxation of the Group in respect of the year ended 31 December 2010 amounted to $5.8 million (2009; $15.0million).  This is a marked improvement on the net loss before taxation in 2009 although there were some significant charges in both years which make comparisons difficult. 

Revenue of $1.4 million (2009: $1.1 million) was all generated from the sales of cathode copper produced by the pilot plant with a total of 225 tonnes being sold at an average price of $6,426 per tonne. 

Overall ongoing costs were similar year on year at $5.7 million (2009: $5.6 million) with employment expenses being maintained at a comparable level during the year at $2.7 million (2009:$2.7 million).  Costs associated with share based incentive schemes for staff were higher at $1.8 million (2009: $0.8 million).  

The following exceptional one off charges were incurred during the year:

·      A $1.0 million charge for land rates at Kounrad dating back to April 2009.  This charge was imposed on the Group by the local Kazakhstan land authority following a review of the land rates

·      Foreign currency exchange rate gains of $2.7 million (2009: loss of $6.2 million) were primarily due to the strengthening of the Mongolian Tugrik (MNT) over the year against the US Dollar (13.5%)

·      The main increase in general expenditure over the year was the fees associated with the fund raising and Listing on AIM which totalled $6.2 million (2009: Nil).   $4.4 million of these costs were charged to equity through the Share Premium account ( see note 12) and $1.8 million were charge against the income statement

·      Write downs based on the impairment review of the group's asset portfolio were assessed as Nil (2009: $4.0 million)

Consolidated Statements of Financial Position at 31 December 2010

		Group		Company
Assets	Note	2010	2009	2010	2009
		$	$	$	$
Non-Current Assets
Property, Plant and Equipment	2	6,493,765	2,089,040	3,747	23,893
Intangible Assets	3	12,976,149	11,542,686	1,154,238	1,175,636
Investments		-	-	258,853	295,853
Trade and Other Receivables		3,035,133	603,488	50,435,937	33,663,353
		22,505,047	14,235,214	51,852,775	35,158,735
Current Assets
Inventory		363,766	275,986	-	-
Trade and Other Receivables		1,457,858	742,296	560,198	388,280
Cash and Cash Equivalents	4	47,365,658	1,325,088	44,733,243	1,194,527
		49,187,282	2,343,370	45,293,441	1,582,807
Assets of the disposal group classified as held for sale	6	4,870,205	3,646,307	100,000	110,000
		54,057,487	5,989,677	45,393,441	1,692,807
Total assets		76,562,534	20,224,891	97,246,217	36,851,542
Equity attributable to owners of the parent
Ordinary Shares	5	861,659	389,461	861,659	389,461
Share Premium	5	61,431,533	53,460,880	61,431,533	53,460,880
Treasury Shares	5	(2,303,803)	(1,723,416)	(2,303,803)	(1,723,416)
Other Reserves		7,065,143	5,044,551	3,278,603	1,496,277
Retained Earnings		7,675,575	(40,927,071)	33,557,903	(18,571,501)
Total Equity		74,730,107	16,244,405	96,825,895	35,051,701
Liabilities
Non-Current Liabilities
Trade and Other Payables		250,562	-	57,864	32,160
Provision for Liabilities and Charges		433,921	441,257	-	-
		684,483	441,257	57,864	32,160
Current Liabilities
Trade and Other Payables		948,339	1,460,604	362,458	767,681
Borrowings		-	1,000,000	-	1,000,000
		948,339	2,460,604	362,458	1,767,681
Liabilities of disposal group classified as held for sale		199,605	1,078,625	-	-
		1,147,944	3,539,229	362,458	1,767,681
Total Liabilities		1,832,427	3,980,486	420,322	1,799,841
Total Equity and Liabilities		76,562,534	20,224,891	97,246,217	36,851,542

Consolidated Income Statement for the year ended 31 December 2010

		Group
	Note	2010	2009
Continuing operations		$	$
Revenue		1,446,035	1,140,979
Cost of Sales	7	(1,397,944)	(1,116,343)
Gross Profit/(Loss)		48,091	24,636
Other Income / (Loss)		-	1,089,062
General and administrative expenses, including:
- Impairment of Inventory, including write back of previous years		-	(95,056)
- Exchange rate differences		2,758,649	(6,207,184)
- Other General & Administrative Expenses	7	(8,586,582)	(9,327,613)
Total General and administrative expenses		(5,827,933)	(15,629,853)
Other Expenses		-	(95,040)
Finance Income		44,122	24,293
Finance Costs		(107,808)	(414,804)
Loss before Income Tax		(5,843,528)	(15,001,706)
Income Tax		-	-
Loss for the period		(5,843,528)	(15,001,706)
Loss Attributable to:
- Owners of the parent		(5,843,528)	(15,001,706)
Loss per share attributable to the equity holders of the company during the period		-	-
Basic loss per share		$0.11	$0.46

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company income statement and statement of comprehensive income.  The Company's loss in 2010 is $2,316,770 (2009: $10,341,705).

Consolidated Statement of Changes in Equity for the year ended 31 December 2010

Group	Share capital	Share Premium	Treasury Shares	Other Reserves	Retained Earnings	Total
	$	$	$	$	$	$
At 31 December 2008	292,208	46,944,935	-	829,229	(25,925,365)	22,141,007
Total comprehensive income	-	-	-	3,391,045	(15,001,706)	(11,610,661)
Transactions with owners
Issue of Shares	71,906	4,817,704	-	-	-	4,889,610
Issue of Share Options	-	-	-	805,677	-	805,677
EBT shares granted	25,347	1,698,241	(1,723,416)	18,600	-	18,772
Total transactions with owners	97,253	6,515,945	(1,723,416)	824,277	-	5,714,059
At 31 December 2009	389,461	53,460,880	(1,723,416)	5,044,551	(40,927,071)	16,244,405
Total comprehensive income	-	-	-	238,266	(5,843,528)	(5,605,262)
Transactions with owners
Gold Loan conversion into shares	14,706	985,294	-	-	-	1,000,000
EBT Shares issued correction	-	-	(172)	-	-	(172)
Capital reduction	-	(54,446,174)	-	-	54,446,174	-
EBT Shares granted	8,533	571,682	(580,215)	846,102	-	846,102
Issue of Share Options	-	-	-	936,224	-	936,224
Convertible loan	51,608	5,403,392	-	-	-	5,455,000
Initial Public Offering	397,351	59,872,849	-	-	-	60,270,200
Share Issue Costs	-	(4,416,390)	-	-	-	(4,416,390)
Total transactions with owners	472,198	7,970,653	(580,387)	1,782,326	54,446,174	64,090,964
At 31 December 2010	861,659	61,431,533	(2,303,803)	7,065,143	7,675,575	74,730,107

Consolidated Statement of Cash flows for the year ended 31 December 2010

		Group		Company
		As at 31 December		As at 31 December
		$	$	$	$
	Note	2010	2009	2010	2009
Cash Flows from Operating Activities
Cash Generated from operations		(7,572,932)	(3,625,224)	(1,007,797)	1,472,716
Interest Paid		(107,808)	(36)	(3,915)	(36)
Net Cash Generated from Operating Activities		(7,680,740)	(3,625,260)	(1,011,712)	1,472,680
Cash Flows from Investing Activities
Sale of subsidiaries, net of cash disposed off		-	(409)	-	-
Purchases of Property, Plant and Equipment		(495,108)	(361,106)	(1,206)	-
Investment Property under construction		(4,397,589)	-	-	-
Proceeds from sale of Property, Plant and Equipment		-	6,505	-	-
Purchase / Transfer of Intangible Assets		(6,187)	(264,549)	(47,000)	(5,731)
Exploration Costs Capitalised		(321,871)	(3,957,210)	-	-
Loans to JV Partners / Subsidiaries		-	-	(14,341,518)	(9,550,092)
Interest Received		44,122	13,163	40,711	12,031
Net Cash used in Investing Activities		(5,176,633)	(4,563,606)	(14,349,013)	(9,543,792)
Cash Flows from Financing Activities
Proceeds from Issuance of Ordinary Shares		65,725,200	6,613,198	65,725,200	6,613,198
Purchase of treasury shares		(580,388)	(1,723,416)	(580,388)	(1,723,416)
Share Issue Costs		(6,192,030)	-	(6,192,030)	-
Net Cash used in Financing Activity		58,952,782	4,889,782	58,952,782	4,889,782
Effect of foreign exchange rates on cash and cash equivalents		(60,227)	-	(53,340)	-
Net (Decrease) / Increase in Cash and Cash Equivalents		46,035,182	(3,299,084)	43,538,716	(3,181,330)
Cash and Cash Equivalents at the Beginning of the Year		1,330,476	4,629,560	1,194,527	4,375,857
Cash and Cash Equivalents at the End of the Year		47,365,658	1,330,476	44,733,243	1,194,527

Notes

1.     Basis of Preparation

CAML is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK.  This financial information is abridged and does not contain the Group's full financial statements for the years ended 31 December 2009 and 2010.

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU, IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.

Full financial statements for the year ended 31 December 2009 have been filed with the Registrar of Companies. Financial statements for the year ended 31 December 2010 were approved by the Board of Directors on 14 April 2011 and will be presented to the shareholders at the forthcoming Annual General Meeting.

2.     Property, Plant and Equipment

Group	Mining Property	Construction in progress	Plant and  Equipment	Motor Vehicles & Office Equipment	Total
	$		$	$	$
Cost
At 1 January 2009	1,185,578	-	2,099,266	1,650,342	4,935,186
Additions	236,422	-	63,994	60,690	361,106
Disposals	(1,422)	-	(34,546)	(283,672)	(319,640)
Assets held for sale (note 18)	(674,600)	-	(522,921)	(222,553)	(1,420,074)
Translation difference	(199,595)	-	(388,070)	(261,195)	(848,860)
At 31 December 2009	546,383	-	1,217,723	943,612	2,707,718
Additions	-	4,396,211	446,991	48,117	4,891,319
Disposals	-	-	-	(30,244)	(30,244)
Translation difference	33,024	1,378	4,678	52,001	91,082
At 31 December 2010	579,407	4,397,589	1,669,392	1,013,486	7,659,874
Depreciation
At 1 January 2009	187,968	-	320,697	282,860	791,525
Provided during the year	118,624	-	251,922	253,672	624,218
Disposals	(318)	-	(686)	(38,499)	(39,503)
Assets held for sale (note 18)	(222,522)	-	(296,322)	(102,856)	(621,700)
Translation difference	(33,730)	-	(60,396)	(41,736)	(135,862)
At 31 December 2009	50,022	-	215,215	353,441	618,678
Provided during the year	23,765	-	336,081	184,863	544,709
Disposals	-	-	-	(29,718)	(29,718)
Translation difference	5,946	-	2,352	24,142	32,440
At 31 December 2010	79,733	-	553,648	532,728	1,166,109
NBV at 31 December 2009	496,361	-	1,002,508	590,171	2,089,040
NBV at 31  December 2010	499,674	4,397,589	1,115,744	480,758	6,493,765

During the year the Group commenced construction of a commercial 10,000 tonne per annum SX-EW plant which resulted in additions during the year of the capitalized construction in progress of $4,397,589.  The Company had $3,747 of office equipment at Net Book value as at 31 December 2010 (2009: $23,893).

3.     Intangible Assets

Group	Deferred Exploration and Evaluation costs	Mining Licences and Permits	Software	Total
	$	$	$	$
Cost
At 1 January 2009	11,203,367	3,629,437	82,904	14,915,708
Additions	4,279,610	264,707	158	4,544,475
Disposals	(1,202,141)	(154,301)	(875)	(1,357,317)
Assets held for sale (note 18)	(3,872,896)	(751,663)	(1,027)	(4,625,586)
Translation Difference	(1,454,794)	(422,161)	(3,821)	(1,880,776)
At 31 December 2009	8,953,146	2,566,019	77,339	11,596,504
Additions	321,871	3,634	2,553	328,058
Disposals	-	(6,276)	(277)	(6,553)
Translation Difference	1,151,349	459	96	1,151,904
At 31 December 2010	10,426,366	2,563,836	79,711	13,069,913
Amortisation
At 1 January 2009	-	5,197	6,225	11,422
Provided during the year	-	2,988	42,696	45,684
Assets held for sale (note 18)	-	(2,771)	(517)	(3,288)
At 31 December 2009	-	5,414	48,404	53,818
Provided during the year	7,642	9,142	23,133	39,917
Translation Difference	-	26	3	29
At 31 December 2010	7,642	14,582	71,540	93,764
NBV at 31 December 2009	8,953,146	2,560,605	28,935	11,542,686
NBV at 31  December 2010	10,418,724	2,549,254	8,171	12,976,149

Amortisation of mining licences and permits is charged to the appropriate project.  Amortisation of software is all charged to general and administrative costs.

The Company had $1,154,238 of intangible assets as at 31 December 2010 (2009: $1,175,636).

4.     Cash and Cash Equivalents

93.9% of the Group's cash and cash equivalents at the year end are held at a AAA-rated bank (88.7%: 2009).

	Group		Company
	31 Dec 10	31 Dec 09	31 Dec 10	31 Dec 09
	$	$	$	$
Total Cash at bank and on hand	40,097,333	558,555	37,466,142	427,994
Short term deposits:
Short term deposits - USD	7,267,101	766,533	7,267,101	766,533
Short term deposits - KZT	1,224	-	-	-
	47,365,658	1,325,088	44,733,243	1,194,527
Cash at bank and on hand included in the assets held for disposal line (note 18)	9,693	5,388	-	-
Total Cash and Cash Equivalent	47,375,351	1,330,476	44,733,243	1,194,527

5.     Share Capital and Premium

	Number of Shares	Ordinary shares	Share premium	Treasury Shares	Total
	No	$	$	$	$
At 1 January 2009	29,220,866	292,208	46,944,935	-	47,237,143
Proceeds from shares issued	7,190,601	71,906	4,817,704	-	4,889,610
EBT Shares issued	2,534,688	25,347	1,698,241	(1,723,416)	172
At 31 December 2009	38,946,155	389,461	53,460,880	(1,723,416)	52,126,925
Capital reduction	-	-	(54,446,174)	-	(54,446,174)
EBT Shares issued correction	-	-	-	(172)	(172)
EBT shares granted	853,258	8,533	571,682	(580,215)	-
Gold Loan conversion into shares	1,470,588	14,706	985,294	-	1,000,000
Convertible loan	5,160,833	51,608	5,403,392	-	5,455,000
Initial Public Offering	39,735,100	397,351	59,872,849	-	60,270,200
Share Issue costs	-	-	(4,416,390)	-	(4,416,390)
At 31 December 2010	86,165,934	861,659	61,431,533	(2,303,803)	59,989,389

The total authorised number of ordinary shares as at 31 December 2010 is 100 million shares (2009: 100 million shares) with a par value of $0.01 per share (2009: $0.01). All issued shares are fully paid.

On 22 December 2009, the Company issued 2,534,688 ordinary shares as part of the Employee Benefit Trust, details of which are contained in note 14.  The shares were issued to the Trust in line with the Joint Ownership Agreements and as at 31 December 2009 an amount of $172 was reflected as a debtor.  This amount was paid into the Company's bank account in early January 2010. On 3 September 2010 the Company issued an additional 853,258 ordinary shares to the Employee Benefit Trust.

On 14 February 2010 the Company converted the $1 million gold loan into 1,470,588 ordinary shares at the share price of $0.68.

In May 2010 the Company issued convertible loan notes to the value of $5.4 million (gross). Following the successful IPO on 30 September 2010 the convertible note was converted to 5,160,833 ordinary shares. The Company recognized $51,608 increase in share capital and $5,403,392 increase in share premium.

Costs related directly to the new issue of shares have been deducted from equity.  Attributable IPO costs are allocated between the share premium account and income statement in proportion to the number of new shares issued compared to the existing number of shares. Other costs attributable to the Listing have been expensed.  During 2010, $1,775,640 was expensed and $4,416,390 was deducted from equity.

6.  Assets held for sale

The assets and liabilities related to the following companies have been presented as held for sale:

Tochtar

In February 2011 CAML completed the disposal of its Tochtar subsidiary to Wildorf  Holdings LLP.  The original agreement for the sale was dated 23 November 2010 but a late amendment to this agreement had to be made for the imposition by the Kazakhstan Government of a back dated charge for historical exploration costs associated with the asset.  This charge necessitated a renegotiation of the terms and conditions of the sale and resulted in the purchaser accepting the responsibility for the liability offset by a reduced cash consideration to CAML.

The Company received a gross consideration of $825,000 for the sale of 100% of Tochtar after allowing for the above liability which the purchasers agreed to settle.  The deal remains contingent upon achieving Article 71 clearance in Kazakhstan which is the Kazakhstan Government's pre-emption right appertaining to all entities which possess a sub-soil user licence.

Once this clearance has been obtained, CAML will settle the payment of the outstanding balance to the minority shareholders who own 25%.  A provision of $500,000 has been set aside to allow for this settlement based on early stage negotiations.

As a consequence of the above transaction, Tochtar was recognised in the accounts at 31 December 2010 at a fair value of $325,000.

Ereen

This gold exploration project is located between Centerra's Boroo mine and the Gatsurst project in the Selenge province approximately 140 km north of Ulaan Baatar, Mongolia.   During 2009 a drilling programme of 1,792m was conducted on the site in order to obtain further geological data and thereby enable the conversion of the exploration licences associated with the project to be converted into 30 year mining licences.  This was successfully achieved in April 2010. 

A decision was taken to actively sell the mine during 2009 and in March 2010 an offer was accepted on the asset.  Despite completing the due diligence in June 2010, a final agreement on the sale of the asset has still not been concluded.

In February 2011 the Company has signed an agreement with Frontier LLC, which will assist in marketing and disposal of Ereen.

(a) Assets of disposal group classified as held for sale
	31-Dec-10	31 Dec 09
	$	$
Intangible assets	4,425,908	3,509,957
Property plant and equipment	110,176	128,062
Cash and cash equivalents	6,857	5,388
Trade and other receivables	2,264	2,900
Total	4,545,205	3,646,307

Investment carried directly in the Company's accounts relating to the Ereen project at 31 December 2010 is $100,000.

(b) Liabilities of disposal group classified as held for sale	31-Dec-10	31 Dec 09
	$	$
Provisions	197,445	728,428
Trade and other payables	2,160	350,197
Total	199,605	1,078,625

7. Expenses by nature

Cost of sales

Group	31 Dec 10	31 Dec 09
	$	$
Employee benefit expense	725,707	363,155
Depreciation and amortisation	321,982	195,575
Inventory	166,533	172,253
Other	183,722	385,360
	1,397,944	1,116,343

General and administrative expenses

Group	31 Dec 10	31 Dec 09
	$	$
IPO fees	1,775,640	-
Employee benefit expense	1,789,163	1,963,294
Share based payments	1,782,326	824,277
Land fee	1,050,430	1,349
Accounting and audit	419,153	338,798
Depreciation and amortisation	398,866	351,339
Office rent	362,374	201,191
Travel and fuel costs	277,982	248,068
Legal costs	222,692	165,321
Taxes and duties	189,971	56,700
Telecommunications and IT	159,885	158,724
Consulting & Other services	137,923	263,693
Marketing	112,072	1,676
Public group expenses	81,106	-
Inventory	74,468	384,009
Employee accommodation	42,153	162,142
Office costs	39,611	42,785
Other expenses	117,965	163,406
	9,033,780	5,326,772
Write off - assets related to Tochtar	(949,882)	1,554,083
Write off - Tarbagatai licence	-	233,234
Write off - Kenes loan	-	1,211,409
Write off - Sary Arka loan	-	943,015
Write off - MSM license	2,684	-
VAT write off	-	59,100
Amount payable to Minority shareholders	500,000	-
	8,586,582	9,327,613

 

END

 

 

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