Half-yearly Report

Half-yearly Report

Hambledon Mining PLC

HAMBLEDON MINING PLC

Interim results to 30 June 2010

Hambledon Mining Plc (“Hambledon” or the “Company”), the AIM listed gold mining company based in Kazakhstan, announces today its unaudited interim results for the six months to 30 June 2010. No dividend was declared.

Highlights:

  • Operating profit of £73,000 (loss for 6 months to 30 June 2009: £1,041,000).
  • Gold production from Sekisovskoye was 9,669 ounces (6 months to 30 June 2009: 9,413 ounces) despite severe weather setback in first quarter. Silver production reached 21,339 ounces (6 months to 30 June 2009: 20,447 ounces).
  • Successful initial purchase of third party gold ore .
  • Development of underground deposit continuing.
  • Cash at 30 June 2010 was £1.1m (30 June 2009: £0.1m).
  • Capital expenditure in period was £0.9m.
  • July/August gold production 4,141 ounces.
  • New Chief Executive Officer, Mr Tim Daffern, announced to take over from Nick Bridgen who will remain on the board as a non-executive director.
Enquiries:
 

Hambledon Mining:

  Telephone +44 (0) 207 233 1462
Charles Zorab
 
 

Fairfax I.S. PLC:

Telephone +44 (0) 207 598 5368
Nominated Adviser and Broker
Ewan Leggat

CHAIRMAN’S STATEMENT

I am pleased to report to shareholders for the six months to 30 June 2010

Review of 2010 to date

The extreme weather at the mine in January and February made for a very difficult start to the year. Thereafter, production improved and I am pleased to report another 6 months of progress and an operating profit.

Given the improved weather from the end of March, it is perhaps no surprise that we managed a record quarter thereafter and it is notable that there were no disruptions to the planned smooth running of the mine and plant. It was pleasing to be able to purchase some high grade ore from Beskempir, which is a small but profitable business and we continue to look at other similar opportunities in Kazakhstan.

A rising gold price and lower production costs were beneficial in attaining an operating profit against the losses in the corresponding period to June 2009. We have recently made a significant investment in installing machinery and equipment designed to help maintain operations in all but the most severe conditions. We therefore believe that we are much better equipped to face the harsh winters in Kazakhstan than previously.

We completed the refurbishment of the existing shaft and have commenced the development of the decline which will allow the start of definition drilling for the detailed design of the underground mine

We recently announced that Tim Daffern has been appointed a director and Chief Executive Officer of the Company as Nick Bridgen had indicated his wish to resign the post that he has held for the last 12 years. We are indeed fortunate to have secured Tim’s services as his skill set is admirably suited to the task in hand. At the same time, I wish to pay tribute to Nick for his long and distinguished service to the Company which he developed with great energy and enthusiasm. I am pleased that Nick will remain on the board as a non-executive director.

Outlook

We are now well into the second half of 2010 and it is appropriate to say at this stage that the mine and the plant continue to go well. Although we only have results from 2 months of the third quarter, it looks promising despite a planned mill reline and crusher maintenance which stopped production for several days.

George Eccles
20 September 201020 September 2010

CHIEF EXECUTIVE’S REVIEW

SEKISOVSKOYE

Safety

The Company’s good safety performance during 2010 continued with no significant accidents or incidents reported. Training of personnel through in-house and external safety consultants continues.

Mining

Development of the open pit operation has continued with the maximum surface extension of the main pit having been reached. The central area of the main pit, containing the majority of the ore zones, has been developed to a lower level with significant quantities of waste material remaining on the northern benches. The stripping ratio will remain at high levels until these northern benches can be mined down closer to the pit bottom. Production has recently been restrained by the continued poor availability of the Atlas Copco drill rigs. To enhance the drilling operations a Chinese air track drill rig has been purchased. This machine has only 60 per cent. of the drilling capacity of the existing machines but this additional capacity should allow the higher mining volumes that are required to be achieved. Higher grade ore zones are being encountered in the lower mining benches of the main pit which is resulting in higher plant head grades and allowing increased gold production.

Work on stage 3 of the tailings dam is progressing on schedule. This section of the dam will be required for use in 2011. It is therefore planned to complete the placement of the rock core of the dam wall and the clay capping of this core prior to the onset of winter with the plastic lining being installed in the spring of 2011.

A specialist maintenance manager is to be employed to review the open pit maintenance systems and spare parts inventory and ensure that adequate levels of spares exist prior to the onset of winter. This engineer will also ensure that a correct maintenance regime for the underground equipment is implemented from the start.

Processing

Since the end of the 2009 /10 winter, the processing operations have performed very well with 7,325 ounces of gold produced during May, June and July compared to 6,280 ounces for the same period in 2009. Production in August was constrained by major annual maintenance work carried out on the main 110 000 V, 14 MW transformer as well as a reline of the primary mill and major crusher maintenance. This work limited milled tonnes to 50,850 tonnes for August and gold production to 1,860 ounces.

Export of precious metals from Kazakhstan was interrupted during July and August as a result of the implementation new regulations required by the formation of the Russia, Kazakhstan and Belarus customs union. Although sale proceeds were temporarily delayed, the higher gold price at the time of eventual export and sale resulted in higher revenue for the dore produced during this period.

Winterisation of the crushing facility continues with a majority of the conveyors already enclosed and the major support structures for enclosing the jaw, cones and screens in place. A new feeder is to be installed to eliminate the winter problems associated with the existing unit. Extensive modifications to the areas surrounding the process plant including drainage will also improve winter operations.

Ongoing automation of the process plant continues to generate cost savings as well as improvements in operational efficiency.

Agreement was reached with TOO Odak to purchase 2 parcels of 10,000 MT of gold ore from Beskempir. These were successfully completed and both generated significant profits. An additional agreement has been signed for the purchase of gold concentrate from an alluvial plant nearby in Ridder. An initial 14 tonnes of 82 grammes per tonne concentrate was purchased. Although this only involves small tonnages, the gold grade of the concentrate is very high and will improve the overall profitability of the operation.

Underground Project

Refurbishment of the shaft to the 320 level has been completed with site set-up for the diamond drilling programme now underway. A second diamond drill rig has been purchased that will arrive on site in October. Changes implemented by the government of Kazakhstan to the way that mining companies are allowed to purchase capital equipment resulted in unexpected delays in the ordering of this machine. A new government controlled system requires a mandated tender process to be undertaken through an official government web site.

Development of the surface decline is progressing but was delayed in August when a rock fall at the decline face resulted in a seven day delay. Ground conditions have been much softer than expected with the face being advanced by free digging. It was only in early September that the rock has become sufficiently hard to require drilling and blasting. The mining contractor is to mobilise a small drilling jumbo in late September. This will allow longer holes to be drilled and a more rapid advance of the heading to be achieved. Current ground conditions require the installation of steel arch sets at 1 metre spacing.

EXPLORATION

A submission has been made to the government of Kazakhstan for a new exploration lease which lies within trucking distance of the Sekisovskoye plant. The area encompassed within this lease has a known resource approved under the Soviet resource classification system. If the lease is granted, a drilling programme to define the resource to JORC standards will be developed in early 2011.

OGNEVKA

The Ognevka processing facility remained on care and maintenance during the first half of 2010.

FINANCIAL

Sekisovskoye produced 9,669 ounces of gold in the 6 months to 30 June 2010 which were sold at an average of £748 per ounce. There were no other material items of revenue. Cash costs for April, May and June were an average of £581 per ounce. The cash cost figures for the first 3 months of the year are not meaningful due to the very low production. Sekisovskoye’s administration costs were £0.8 million and capital expenditure was £0.9 million in the six months to 30 June 2010. The main items of capital expenditure were underground development, tailings dam construction and winterization and of the plant.

Ognevka was on care and maintenance throughout the 6 months to 30 June 2010 and its result was not material to the Group’s result for the six months.

Corporate administration costs in the 6 months to 30 June 2010 were £0.6 million. These were mainly directors and other staff salaries, professional fees and the cost of maintaining the Group’s listing on London’s Alternative Investment Market including investor relations.

The Group prepares its financial statements in pounds sterling but the functional currency of the companies in Kazakhstan is the Kazakhstan tenge (“KZT”). The rates used to convert Kazakhstan tenge and United States dollars into pounds sterling in these financial statements are as follows:

 

30 June 2010

 

31 December 2009

£1 = US$ 1.51 1.59
£1 = KZT 226.07 240.15
US$1 = KZT 150.00

150.00

The pound sterling depreciated by approximately 6 per cent. against the Kazakhstan tenge in the 6 months. This resulted in a currency translation gain on the group’s net investment in Kazakhstan of £1.2 million which has been taken to reserves.

Condensed group income statement

Six months ended 30 June 2010

 
  Note   Six months to

30 June 2010

(unaudited)

£000

  Six months to

30 June 2009

(unaudited)

£000

  Year ended

31 December 2009

(audited)

£000

   
Revenue 7,224 5,667 12,810
Cost of sales (5,666)   (5,300)   (10,042)
 
Gross profit 1,558 367 2,768
 
Administrative expenses (1,485)   (1,408)   (2,726)
 
Operating profit / (loss) 73 (1,041) 42
 
Investment revenues 3 - 3
Other (losses) /gains (135) 75 (41)
Finance costs (120)   (109)   (249)
 
Loss before taxation (179) (1,075) (245)
 
Taxation (125)   (250)   292
 
(Loss) / profit attributable to equity shareholders 3 (304)   (1,325)   47
 
(Loss) / profit per ordinary share
Basic 4 (0.06)p   (0.28)р   0.01p
Diluted 4 (0.06)p   (0.28)р   0.01p
 

All results are derived from continuing activities.

Condensed group statement of comprehensive income

Six month ended 30 June 2010

           
Six months to

30 June 2010

(unaudited)

£000

  Six months to

30 June 2009

(unaudited)

£000

  Year ended

31 December 2009

(audited)

£000

(Loss) / profit for the period (304)   (1,325)   47
 

Currency translation differences on foreign currency net investments

1,179 (4,183) (4,608)
         

Total comprehensive profit / (loss) for the period attributable to equity shareholders

875   (5,508)   (4,561)

Condensed group balance sheet

30 June 2010

     
30 June 2010

(unaudited)

£000

  30 June 2009

(unaudited)

£000

  31 December 2009

(audited)

£000

Non-current assets
Property, plant and equipment 15,339 16,204 15,376
Restricted cash 80   39   41
15,419   16,243   15,417
Current assets
Inventories 6,684 2,882 4,980
Trade and other receivables 2,372 1,468 1,833
Cash and cash equivalents 1,056   77   1,462
10,112   4,427   8,275
         
Total assets 25,531   20,670   23,692
 
Current liabilities
Trade and other payables (1,834) (1,455) (1,425)
Provisions (155) (141) (176)
Borrowings (524)   (503)   -
(2,513)   (2,099)   (1,601)
         
Net current assets 7,599   2,328   6,674
 
Non-current liabilities
Trade and other payables (470) (629) (470)
Deferred taxation (137) (811) (137)
Provisions (1,581)   (983)   (1,595)
(2,188)   (2,423)   (2,202)
         
Total liabilities (4,701)   (4,522)   (3,803)
         
Net assets 20,830   16,148   19,889
 
Equity
Called-up share capital 516 469 516
Share premium 33,996 31,317 33,996
Merger reserve (148) (148) (148)
Other reserves 290 236 253
Currency translation reserve 138 (480) (1,041)
Accumulated losses (13,962)   (15,246)   (13,687)
Total equity 20,830   16,148   19,889

Condensed group cash flow statement

Six months ended 30 June 2010

     
Six months to

30 June 2010

(unaudited)

£000

  Six months to

30 June 2009

(unaudited)

£000

  Year ended

31 December 2009

(audited)

£000

 
Net cash inflow from operating activities 5   366   779
 
Investing activities
Interest received 3 - 3

Proceeds on disposal of property, plant and equipment

35 - 104
Purchase of property, plant and equipment (924) (858) (2,354)
Restricted cash (39)   (16)   (18)
 
Net cash used in investing activities (925)   (874)   (2,265)
 
Financing activities
Proceeds on issue of shares - - 2,726
Drawdown / (repayment) of bank loans 524   147   (356)
 
Net cash inflow from financing activities 524   147   2,370
 

(Decrease) / increase in cash and cash equivalents

(396)   (361)   884
 

Cash and cash equivalents at beginning of the period

1,462 513 513
 
Effect of foreign exchange rate changes (8)   (75)   65
 

Cash and cash equivalents at end of the period

1,056   77   1,462

Notes to the interim condensed group financial statements
Six months ended 30 June 2010

1 General information

These interim group financial statements are for the six months ended 30 June 2010 and are unaudited. The information for the year ended 31 December 2009 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The financial information for the year ended 31 December 2009 has been extracted from the statutory accounts of Hambledon Mining plc (“the Group”) for that year that were prepared under United Kingdom Law and International Financial Reporting Standards (IFRS) adopted by use by the European Union. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors’ report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under Section 498(2) or (3) of the Companies Act 2006.

2 Accounting policies

The interim group financial statements have been prepared using the accounting policies set out in the statutory accounts for Hambledon Mining plc for the year ended 31 December 2009. These accounting policies comply with International Financial Reporting Standards (IFRS) adopted by use by the European Union

3 Dividend

The directors do not recommend the payment of a dividend.

4 (Loss) / profit per ordinary share

The calculation of basic and diluted earnings per share is based upon the retained (loss) / profit for the financial period.

The weighted average number of ordinary shares for calculating the basic (loss) / profit per share and diluted (loss) / profit per share after adjusting for the effects of all dilutive potential ordinary shares are as follows:

  Six months to

30 June 2010

(unaudited)

  Six months to

30 June 2009

(unaudited)

  Year ended

31 December 2009

(audited)

 
Basic and diluted 516,089,233   469,189,233   481,267,589

5 Approval of interim group financial statements

The interim group financial statements for the six months to 30 June 2010 were approved by the directors on 20 September 2010.

Company Information

 

Directors

  George Eccles

Non-executive chairman

 
Nicholas John Bridgen

Chief executive

 
Neil Stevenson

Technical director

 
Christopher Thomas

Non-executive director

 
Baurzhan Yerkeyev

Executive director

 

Secretary

William Roy Morgan B.Sc. ACA
 

Registered Office

Daws House
33-35 Daws Lane
London NW7 4SD
Telephone +44 (0) 870 111 8778
 

Web

www.hambledon-mining.com

 

Kazakhstan Office

10 Novostroyevskaya
Sekisovskoye Village
Kazakhstan
Telephone: +7 (0) 72331 27927
Fax: +7 (0) 72331 27933
 

Nominated Advisor and Broker

Fairfax I.S. PLC

 

46 Berkeley Square
Mayfair
London W1J 5AT
Telephone: +44 (0) 207 598 5368
 

Investor relations

Charles Zorab
Telephone: +44 (0) 207 233 1462
 

Registrars

Neville Registrars
18 Laurel Lane
Halesowen
West Midlands B63 3DA
Telephone: +44 (0) 121 585 1131

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