Preliminary Results

RNS Number : 7267R

GCM Resources PLC

21 November 2012

 



21^st November 2012

GCM Resources plc

(the "Company" or "GCM") 

(AIM:GCM)

Preliminary Results for the twelve months ended 30 June 2012

GCM Resources plc a London based resource exploration and development company, reports its preliminary results for the twelve months ended 30 June 2012.  GCM has identified a world class coal resource of 572 million tonnes (JORC compliant) at the Phulbari Coal Project (the Project) in North-West Bangladesh, the development of which is awaiting approval from the Government of Bangladesh.

Highlights:

·      The Bangladesh Government has commenced restructuring the country's energy supply towards coal as the major source of power generation.

·      GCM has intensified its efforts in pursuing approval of the Phulbari Coal Project through further engagement with the local community and direct engagement with the Government.

·      The Government has requested the local administration of the Phulbari area to support the Company's activities.

·      It has been reported in the Bangladesh media that the Coal Policy Technical Committee report has endorsed open pit mining at Phulbari.

·      GCM engaged international consultants Environmental Resources Management to review the Environmental and Social Impact Assessment of the Project in light of new IFC Performance Standards.

·      As at 30 June 2012 GCM held cash of £0.4 million (2011: £0.5 million) and liquid equity investments of £7.2 million (2011: £18.0 million).

·      GCM recorded a loss after tax of £3.3 million for the year ended 30 June 2012 (2011: profit of £2.3 million).

The Chairman's Statement, Phulbari Review, Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet and Cash Flow are presented on the following pages.

The Annual Report and Accounts for the year ended 30 June 2012 have been posted on the Company's website (www.gcmplc.com) and will be mailed to shareholders.   Copies are also available on request from the registered office of the Company.

Chairman's Statement

Strategy

The Board of GCM Resources has undertaken a thorough review of the current strategy to gain Project approval. We are focusing on direct engagement with the Government of Bangladesh and demonstrating how the Project can help meet the country's specific energy and power needs, particularly given the country is heading for an election at the end of 2013.  At the same time we have opened up new channels of communication with the local community to ensure they are fully informed on the Project and that we understand and address their concerns.

During meetings with the Government, we have emphasised that coal produced from the Phulbari mine would be considerably cheaper than using imported coal to fuel electricity generation. We have also been discussing the advantages of positioning a large scale power plant at the mine site to simplify power generation and negate the need for expensive and complex coal handling and transportation.

Urgency

We believe it is in the best interests of the people of Bangladesh to utilise the country's coal resources without delay to provide an expansive, reliable supply of electrical power. The Phulbari Coal Project is ready to commence now and first coal could be delivered within 3 - 4 years which would suit the commissioning schedule of a large scale coal-fired power plant. All of the energy alternatives examined by the Bangladesh Government either take significantly longer and / or are prohibitively expensive.    

Approval of the Project will deliver a step-change in electrical power generation. This will enable the country to realise the level of industrial development and ensuing job creation necessary to boost the economy, meet its Millennium Development Goals, and move to 'middle income' status.

Management Changes

I would like to take this opportunity to welcome Gary Lye to the Board. Gary led the Project's exploration and feasibility study and is the CEO of GCM's subsidiary in Bangladesh. Both Gary and Graham Taggart, Finance Director, continue to head up our in-country operations in Bangladesh and lead the direct engagement with the Government.

Steve Bywater stepped down as Chief Executive earlier this year. Following this departure, Steve Dattels and I have taken on a more active role in examining and developing strategic relationships, considering and reviewing the benefits of local partnerships and ensuring that practical and demonstrable progress is being made. Bill McIntosh remains the Technical Director and Greg James the Independent Non-Executive Director.

Financials

The Group recorded a loss after tax of £3.3 million for the year ended 30 June 2012 (2011: profit after tax of £2.3 million). Included in the loss was £3.7 million of non-cash expenses.  GCM received a dividend of £1.5 million during the year and made a profit of £1.1 million on sale of investments.

The value of GCM's listed equity investments have decreased significantly during the year in line with general market conditions for junior miners, and were valued at £7.2 million as at 30 June 2012 (2011: £18.0 million).  Over the next twelve months the Company will be looking to raise funds and reduce costs on non-core activities.

Corporate Responsibility

Underlying everything we do at GCM is our commitment to corporate and social responsibility and the principles of integrity and fairness. This is reinforced by our compliance with the Equator Principles, based on the policies and standards of the World Bank and the International Finance Corporation (IFC). 

In January this year the IFC released an update of its Performance Standards on Social and Environmental and Access to Information Policy.  To ensure continued compliance GCM engaged international consultants Environmental Resources Management (ERM) to review the Project's Environmental and Social Impact Assessment in light of these new standards and work has commenced to address the gaps identified.

Conclusion

The immediate energy and power needs of the people and Government of Bangladesh can be met by mining Phulbari coal and constructing a coal-fired power plant at the mine.  Our Project is the country's best option. We remain focused on achieving Project approval however the timing remains in the hands of the Government of Bangladesh.

We have taken steps to ensure our development plans remain current so that we are well positioned to develop the Project once approval is received.

Gerard Holden

Chairman

Phulbari Review

Acceptance of Coal

GCM has long been advocating the use of coal for power generation in Bangladesh.  We have maintained that utilising Bangladesh's own coal is the fastest and most economically sustainable means of alleviating the energy and power crisis faced by the country.

The Government of Bangladesh now accepts coal fired power plants as integral to the country's future power generation.  The Government's Power System Master Plan (supported by the Japan International Cooperation Agency and released in January 2011) places significant reliance on coal in the expansion of Bangladesh's power sector to meet anticipated demand.  According to this Plan, 50% of electricity will be generated from coal by 2030 (19,000MW). 

Currently the installed capacity of coal-fired power plants in Bangladesh is 250MW.  The step-change from 250MW to 19,000MW in 18 years translates to an enormous increase in demand for high quality thermal coal.  The Project will contribute significantly to meeting this need.

Restructuring the Power Industry

The Government has commenced the long process of restructuring the electricity industry towards coal fired power plants.  During the last 12 months the Government has either awarded contracts or been in discussions for the development of coal-fired power plants to generate about 5,000MW.  Approximately 15 million tonnes of high quality thermal coal would be needed to supply these power plants every year.

These contracts have not been without issues, and the requirement that coal should be sourced from outside the country continues to create challenges.  As the life of a coal fired power plant is at a minimum 25 years, in order for it to be viable a reliable source of coal must be contracted under a long term coal supply agreement.  It would also require adequate coal handling and robust transport facilities which do not currently exist in Bangladesh.  Domestic coal is best placed to supply these coal fired power plants and enable the Government to deliver the increase in power generation set out in its Power Sector Master Plan.

Advocacy

Following the strategic review undertaken by the Board earlier in the year, GCM has intensified its efforts to achieve Project approval. Our message to the Government has particularly focused on the key role that the Project would play in meeting the demand for Bangladesh's power generation.

Not only could the Phulbari mine support up to 4,000MW of power generation, the power produced using domestic coal would also be considerably cheaper than that using imported coal.   Furthermore, installing a large scale coal-fired power plant at the mine will greatly reduce the need for expensive shipping, coal handling, transportation and associated infrastructure.

We have also been stressing the associated benefits of utilising the Phulbari coal resource, including: the estimated 17,000 jobs that would be created, the US$8 billion revenue the Government is expected to receive over the life of the Project, the anticipated increase in the country's gross domestic product by 1% as a direct result of the Project, and the development of North-West Bangladesh including new industries established from the Phulbari mine's co-products.

In meetings with the Government we explained the potential impacts of the mine and the management plans in place to minimise them.  We discussed the importance we place on establishing and sustaining a social licence and reiterated our commitment to developing the mine in accordance with the highest international and national social and environmental standards.  We stressed that the Project's Scheme of Development and Feasibility Study is based on 230 separate detailed study reports.  Of these, 27 specifically deal with Water Management which is a key success factor for the Project and the Government of Bangladesh.

Outlook

Our aim is to receive Project approval and then to commence mine development and the associated community programmes as soon as possible.  However, approval of the Project remains in the hands of the Government.

As the Government searches for solutions to the country's power crisis the Phulbari coal deposit has become far too important to the people of Bangladesh for it to remain unutilised.

Gary Lye

Executive Director

Consolidated Financial Statements

Consolidated Income Statement

For year ended 30 June

		2012	2011
		£000	£000
Operating expenses
Exploration and evaluation costs		(596)	(241)
Share based payments		(744)	(2)
Administrative expenses		(1,582)	(1,464)
Operating (loss)		(2,922)	(1,707)
Exceptional items		258	1,696
Finance revenue		1,498	2,256
(Loss)/profit before tax		(1,166)	2,245
Taxation		(2,138)	43
(Loss)/profit for the year		(3,304)	2,288
(Loss)/profit per share
Basic (pence per share)		(6.5p)	4.5p
Diluted (pence per share)		(6.5p)	4.2p

 

Consolidated Statement of Comprehensive Income

For year ended 30 June

		2012	2011
		£000	£000
(Loss)/profit for the year		(3,304)	2,288
Other comprehensive income
Net gain/(loss) on revaluation of available-for-sale financial assets		(8,646)	(2,830)
Transfer to income statement: sale of available-for-sale financial assets		(1,107)	(497)
Transfer to income statement: impairment of available-for-sale financial assets		849	-
Income tax relating to components of other comprehensive income		2,354	1,149
Total comprehensive (loss)/income		(9,854)	110

 

Consolidated Statement of Changes in Equity         

For year ended 30 June

	Share capital	Share premium account	Share based payments not settled	Net movement in available-for-sale investments	Accumulated losses	Total
	£000	£000	£000	£000	£000	£000
Balance at 1 July 2010	5,103	44,184	1,344	10,218	(9,930)	50,919
Total comprehensive income	-	-	-	(2,178)	2,288	110
Shares issued during the year	2	33	-	-	-	35
Share based payments	-	-	461	-	2	463
Balance at 30 June 2011	5,105	44,217	1,805	8,040	(7,640)	51,527
Total comprehensive loss	-	-	-	(6,550)	(3,304)	(9,854)
Shares issued during the year	5	29	-	-	-	34
Share based payments	-	-	(489)	-	744	255
Balance at 30 June 2012	5,110	44,246	1,316	1,490	(10,200)	41,962

Consolidated Balance Sheet

As at 30 June

		2012	2011
		£000	£000
Current assets
Cash and cash equivalents		353	547
Receivables		303	685
Total current assets		656	1,232
Non-current assets
Property, plant and equipment		66	79
Intangible assets		34,458	32,788
Financial assets		7,228	18,000
Total non-current assets		41,752	50,867
Total assets		42,408	52,099
Current liabilities
Payables		(446)	(356)
Total current liabilities		(446)	(356)
Non-current liabilities
Deferred tax liabilities		-	(216)
Total non-current liabilities		-	(216)
Total liabilities		(446)	(572)
Net assets		41,962	51,527
Equity
Share capital		5,110	5,105
Share premium account		44,246	44,217
Other reserves		2,806	9,845
Accumulated losses		(10,200)	(7,640)
Total equity		41,962	51,527

 

Consolidated Cash Flow Statement

For year ended 30 June

		2012	2011
		£000	£000
Cash flows used in operating activities
(Loss)/profit before tax		(1,166)	2,245
Adjusted for:
Exceptional items		(258)	(1,696)
Finance revenue		(1,498)	(2,256)
Share based payments		744	2
Other non-cash expenses		270	5
		(1,908)	(1,700)
Movements in working capital:
		69	36
		49	(49)
Cash used in operations		(1,790)	(1,713)
Interest received		2	12
Net cash used in operating activities		(1,788)	(1,701)
Cash flows from/(used in) investing activities
Payments for property, plant and equipment		(7)	(6)
Proceeds from sale of property, plant and equipment		-	9
Payments for intangible assets		(2,368)	(2,776)
Proceeds from sale of subsidiary		-	891
Proceeds from sale of investments		2,439	960
Dividends received		1,496	2,244
Net cash generated from/(used in) investing activities		1,560	1,322
Cash flows from financing activities
Issue of ordinary share capital		34	35
Net cash from financing activities		34	35
Total decrease in cash and cash equivalents		(194)	(344)
Cash and cash equivalents at the start of the year		547	891
Cash and cash equivalents at the end of the year		353	547

 

The audited financial information for the years ended 30 June 2012 and 30 June 2011 contained in this document do not constitute statutory accounts as defined in the Companies Act 2006. The comparative financial information is based on the statutory accounts for the financial year ended 30 June 2011. Those accounts, upon which the auditors issued an unqualified opinion with an emphasis of matter paragraph, have been delivered to the Registrar of Companies. The financial information for the year ended 30 June 2012 has been extracted from the financial statements of GCM Resources plc which will be delivered to the Registrar of Companies in due course. The auditors have issued an unqualified opinion with emphasis of matter paragraphs on the Group's statutory financial statements for the year ended 30 June 2012. The preliminary announcement was approved by the Board of Directors on 21 November 2012.

For further information:

GCM Resources plc Gerard Holden Non-Executive Chairman  [phone] Graham Taggart Finance Director [phone]	Pelham Bell Pottinger Lorna Spears / Joanna Boon [phone]
J.P. Morgan Cazenove Nominated Adviser Michael Wentworth-Stanley [phone]	Investec Investment Banking Chris Sim [phone]

GCM Resources plc
Tel: [phone], Fax: [phone]
[e-mail]; www.gcmplc.com

 

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