REG - Central Asia Metals - Interim Results <Origin Href="QuoteRef">CAML.L</Origin> - Part 1
RNS Number : 5043RCentral Asia Metals PLC22 September 201722 September 2017
Central Asia Metals plc
(the "Group", the "Company" or "CAML")
Interim Results for the Six Months Ended 30 June 2017
Central Asia Metals plc (AIM: CAML) is pleased to announce its unaudited interim results for the six months ended 30 June 2017 ("H1 2017" or the "Period").
The Company is also pleased to declare an interim dividend of 6.5 pence per ordinary share (H1 2016: 5.5 pence), which equates to 24% of Kounrad gross revenue for the period.
H1 2017 Operational Highlights
Copper production of 7,027 tonnes, an increase of 2% vs. H1 2016 (6,908 tonnes)
Copper sales of 6,870 tonnes, an increase of 8% vs. H1 2016 (6,355 tonnes)
Leaching of Western Dumps underway, 1,300 tonnes of copper recovered
No Lost Time Injuries ("LTIs"), LTI free man hours now exceed 1.7 million
H1 2017 Financial Highlights
Gross revenue of $38.6 million (H1 2016: $30.9 million)
Average copper price achieved of $5,659 per tonne (H1 2016: $4,903 per tonne)
C1 cash cost of $0.45 per pound (H1 2016: $0.40 per pound)
EBITDA of $24.0 million (H1 2016: $17.4 million), margin of 62% (H1 2016: 56%)
Profit before tax up 36% to $20.4 million (H1 2016: $15.0 million)
EPS from continuing operations of 13.50 cents per share (H1 2016: 9.57 cents per share)
Interim dividend of 6.5 pence per share to be paid on 27 October 2017 (H1 2016: 5.5 pence)
Group cash balance of $41.7 million as at 30 June 2017 (31 December 2016: $40.4 million), with no debt
Outlook
On course to achieve 2017 copper production guidance of between 13,000 and 14,000 tonnes
40% of 2017 copper production to come from Western Dumps with increasing percentage of Western Dump copper production from 2018 onwards
Future Kounrad annual sustaining capex of only c.$2 million
2017 budget of $1.8 million for Shuak drilling and wider exploration programme
Post period end
Acquisition of Lynx Resources, a Macedonian zinc and lead producer, and associated equity issue, announced separately today
Nick Clarke, Executive Chairman, commented:
"I am pleased to report another strong set of financial results, demonstrating that Kounrad continues to be a highly profitable and cash generative operation. Our copper price received for the period was approximately $0.34 per pound higher than that received in H1 2016, whilst our C1 cash cost increased by only $0.05 per pound, leading to an increased EBITDA margin for the period of 62%.
"The 6.5p dividend that we have today declared represents 24% of our gross revenue from Kounrad and is in line with our historic policy. Once this dividend is paid, we will have returned in excess of $100 million to our shareholders in dividends and share buy-backs since we commenced production at Kounrad in 2012.
"We are particularly proud of our achievements in terms of corporate social responsibility (CSR) and are pleased that our copper is produced safely, with no lost time injuries reported during the six month period, and with minimal impact to the environment in which we operate.
"We are delighted to have announced separately today our intended acquisition of Lion and we look forward to becoming the operators of the Simba zinc-lead mine in the near future. The Board believes that this acquisition is an excellent fit for CAML as, like Kounrad, Simba is a low cost operation that should enable us to continue to pay the sector leading dividends for which we have become known, whilst providing us with commodity, operational and geographical diversification."
For further information please visit www.centralasiametals.com. (The content of the CAML website should not be considered to form part of or be incorporated into this announcement)
Enquiries:
Central Asia Metals
Nick Clarke, Executive Chairman
Nigel Robinson, CFO
Louise Wrathall, Investor Relations
+44 (0)20 7898 9001
Peel Hunt (Nominated Adviser & Joint Broker)
Matthew Armitt
Ross Allister
+44 (0)20 7418 8900
Mirabaud Securities (Joint Broker)
Peter Krens
+44 (0)20 7878 3362
Blytheweigh
Tim Blythe
Camilla Horsfall
+44 (0)20 7138 3205
+44 (0) 20 7138 3224
Analyst presentation conference call
An analyst presentation on the Company's interim results hosted by management will take place at 09:30 (BST) on Friday 22 September 2017 at the offices of Peel Hunt (Moor House, 120 London Wall, London EC2Y 5ET) and will be accompanied by a live conference call.
The accompanying presentation slides will be available on the Company's website: https://www.centralasiametals.com/investors/proposed-acquisition/ .The conference call can be accessed by dialling 0808 109 0700 (from the UK) or +44 20 3003 2666 (from all other locations) and quoting 'Central Asia Metals'.
Executive Chairman Review
The Board of CAML is pleased to declare an interim dividend of 6.5 pence per ordinary share, which represents 24% of Kounrad gross revenue for the reporting period and is in line with the stated policy. This is to be paid on 27 October 2017.
H1 2017 has been another period of solid production, broadly in line with that of H1 2016. However, the copper price has been much stronger during this period and the company has received an average copper price of $5,659 per tonne, 15% higher than that of H1 2016. This, coupled with 8% higher sales volumes, has led to a 25% increase in gross revenue during the six month period. With only a $0.05 per pound C1 cash cost increase, associated primarily with the commencement of production of the Western Dumps, Kounrad's production costs remain amongst the lowest in the world. The Kazakh Tenge, which weakened in August 2015, has remained broadly stable since and, importantly, there has been little in-country inflation encountered by the Company. This has meant that CAML's profitability has increased significantly.
In addition to the Company's strong financial performance, it is important to note that these results have been delivered with safety front of mind, and the team at Kounrad have now worked over 1.7 million man hours without recording a lost time injury.
Q2 2017 was an important period of transition, as the Kounrad team began irrigating the Western Dumps. By the end of the quarter, approximately 1,300 tonnes of copper had been recovered from this material. The leaching process has been in line with our expectations and test work and, in the month of June, copper production from the Western Dumps represented c.40% of total metal recovered.
During the winter period, the Shuak exploration team undertook desk studies reviewing all historic data and, in doing so, designed the 2017 exploration programme. Together with partners, Aksu-Esil, CAML has now commenced field based work, with a TEM-FAST electromagnetic geophysics survey nearing completion and geological mapping underway. A diamond drilling programme of approximately 4,700 metres has recently commenced, together with an initial 7,000 metre core hydrotransport (CHT) drilling campaign. In total, 22,000 metres of drilling are planned for 2017 at a cost of c.$1.8 million.
CAML does not intend to develop the Copper Bay project and, in August 2017, the Board made the decision to dispose of its holding in that company and will commence the sales process during Q4 2017.
Operating Review
Kounrad
Operations
CAML is pleased to report a period of strong operational performance at Kounrad, with copper cathode production for the first six months of 2017 broadly in line with that of 2016 at 7,027 tonnes. This ensures that the company is on course to achieve its full year production guidance of between 13,000 tonnes and 14,000 tonnes of copper cathode.
H1 2017 copper cathode sales of 6,870 tonnes represent an increase of 8% on H1 2016. The copper was sold predominantly through CAML's offtake partner, Traxys, and the technical quality of the copper cathode remains high at 99.998% and continues to meet the requirements of CAML's customers.
On the Eastern Dumps, the majority of leaching during H1 2017 was from Dump 5, with some additional leaching undertaken on Dump 7. As of 30 June 2017, CAML estimates that there is a further 19,500 tonnes of copper to be recovered from the Eastern Dumps during the next three years. The new sprinkling irrigation system, which has been designed to enable CAML to recover copper resources from within the slope areas of the dumps, became operational on Dump 9-10 in July 2017.
In April 2017, the Company began irrigating the Western Dumps. Leaching began on Dumps 16 and 22, in an area known as the Initial Leach Area ("ILA") and, by the end of the quarter, approximately 1,300 tonnes of copper had been recovered from this material. Copper recovery from the Western Dumps has been in line with expectations in terms of timing and copper grade within the pregnant leach solution ("PLS").
Utilisation of the SX-EW facility remains at high levels, with an average of 99.4% achieved during the reported period.
Corporate and Social Responsibility ("CSR")
In H1 2017, CAML recorded zero Lost Time Injuries ("LTI") with the total LTI free man hours worked exceeding 1.7 million by the end of the period. During the reporting period, CAML maintained a strong focus on health and safety with a wide variety of training courses for all employees and contractors as well as further development of its health and safety management systems, particularly for the new Western Dumps operation.
In conjunction with SRK Consulting, a further programme of environmental and hydrogeological site investigations commenced in H1 2017 focussing on the northern part of the Western Dumps, outside the ILA. The studies focussed on bedrock drilling programmes to determine the geological structure and groundwater flow horizons for leaching operations in the coming years. A number of boreholes will be drilled throughout 2017, and these will be utilised as long term monitoring boreholes.
Several routine state inspections relating to health and safety and environmental aspects of the operations were undertaken during the period, with the outcome being that CAML adheres to all relevant regulations at Kounrad.
The Company continues to actively engage with the local community, with the focus remaining on health and education, particularly with regards to children, and charitable organisations based in Kounrad and Balkhash.
Shuak
Throughout the winter, the team at Shuak has reviewed historic exploration work and available data ahead of commencing field based work in Q2 2017. Together with partners, Aksu-Esil, CAML has been undertaking geological mapping and is nearing completion of a TEM-FAST electromagnetic geophysics programme, which has been designed primarily to ascertain the depth and extent of the saprolite weathering horizon.
The 2017 diamond drilling programme of approximately 4,700 metres has recently commenced, together with an initial 7,000 metre core hydrotransport (CHT) drilling campaign, which is likely to be increased by another 10,000 metres this year. Priority areas for both work programmes are Mongol V and Mongol North. In total, 22,000 metres of drilling are planned for 2017, as well as some trenching of other target areas. During August 2017, CAML became the registered owner of the Shuak sub soil user contract.
The Company remains focused on the near surface copper oxide resource potential of the licence area, and believes that in the future it could be possible to develop another SX-EW style of processing operation at Shuak, similar to that at Kounrad. In addition, the company also intends to explore the primary copper porphyry target at depth.
Copper Bay
During the reported period, CAML undertook some additional engineering studies with the intention of improving the economics of the Copper Bay project. While some capital expenditure savings were identified and there is the potential to optimise the project further in the future, the Board decided that these findings were not sufficiently material to warrant developing Copper Bay in the near term. In August 2017, the CAML Board therefore made the decision to sell the project and, consequently, a sales process will commence during Q4 2017.
Financial Review
Overview
CAML has reported a strong set of financial results, with increased revenue and EBITDA compared to H1 2016 due to a combination of higher copper prices achieved and higher sales volumes. Continued cost control has enabled the Kounrad project to continue producing copper at costs well within the lowest industry quartile.
The Group generated H1 2017 EBITDA of $24.0 million (H1 2016: $17.4 million), representing an increase of 38% from the prior corresponding period, and an EBITDA margin of 62% (H1 2016: 56%).
Income statement
Group profit after tax from continuing operations increased by 42% to $15.0 million (H1 2016: $10.6 million), primarily as a result of higher revenue. Earnings per share from continuing operations increased to 13.50 cents (H1 2016: 9.57 cents).
Revenue
A total of 6,813 tonnes (H1 2016: 6,250 tonnes) of copper cathode from Kounrad were sold as part of the Company's off-take arrangements with Traxys and a further 57 tonnes (H1 2016: 105 tonnes) were sold locally. Total Kounrad copper sales were 6,870 tonnes (H1 2016: 6,355 tonnes), representing an 8% increase in volumes.
While copper cathode sales volumes have increased when compared to H1 2016, Group revenue also benefitted from a 15% increase in the average copper price received, which was $5,659 per tonne in H1 2017 (H1 2016: $4,903 per tonne). This generated gross revenue for the Group of $38.6 million (H1 2016: $30.9 million).
CAML's off-take arrangement with metals trader, Traxys, has been fixed through to 31 December 2018 and the commitment is for a minimum of 90% of the Kounrad copper cathode production. The Group reports both a gross revenue and a net revenue line, which reflects the offset of the off-takers fixed fee from the price of the copper achieved. During H1 2017 the fixed fee was $1.3 million (H1 2016: $1.2 million).
Cost of sales
Cost of sales for the period was $10.4 million (H1 2016: $8.3 million). The increase is due to higher sales volumes, higher depreciation charges following the completion of the Kounrad Stage 2 Expansion and higher mineral extraction tax ("MET"). Depreciation and amortisation charges during the period were $3.3 million (H1 2016: $2.2 million). MET for the period was $2.3 million (H1 2016: $1.8 million) and is charged by the Kazakhstan authorities at the rate of 5.7% on the value of metal recovered during the period.
During the period, the Kazakhstan Tenge appreciated slightly against the US Dollar which also resulted in some increase in the cost base. The average exchange rate for the period was 318 KZT/USD (H1 2016: 346 KZT/USD), resulting in the Kazakhstan Tenge being worth an average 9% more in US Dollar terms in H1 2017 compared to H1 2016. Approximately 60% of the total cost base in Kazakhstan is denominated in Tenge (70% of C1 cash costs).
C1 cash cost of production
C1 cash cost of production is a standard metric used in the copper mining industry to allow comparison across the sector. In line with the Wood Mackenzie approach, CAML calculates C1 by including all direct costs of production at Kounrad (reagents, power, production labour and materials) as well as local administrative expenses, and distribution and selling costs. Local taxes including MET and depreciation and amortisation charges are excluded from C1 and reported within the fully inclusive unit cost of production.
Kounrad's C1 cash cost of production remains firmly in the lowest quartile of the industry cost curve for copper production at $0.45 per pound (H1 2016: $0.40 per pound). Production from the Western Dumps commenced in April 2017 and this resulted in slightly higher electricity consumption and additional labour costs to manage the Western Dumps operations during the period. Over the coming years, the proportion of copper that Kounrad produces from the Eastern Dumps will fall as production from the Western Dumps gradually increases. This will result in slightly higher electricity consumption and additional labour to manage the Western Dumps operations.
The Group's fully inclusive unit cost for the period was $1.08 per pound (H1 2016: $0.97 per pound). This includes depreciation and amortisation charges, local taxes including MET and corporate overheads associated with the Kounrad project. The 11% increase in the fully inclusive unit cost is due to the increased C1 cash cost, higher depreciation and amortisation charges, and larger MET obligations as explained above.
Administrative expenses
During the period, administrative expenses were $6.1 million (H1 2016: $5.9 million). The Group recognised a share based payment charge of $1.2 million (H1 2016: $1.4 million) in relation to the Company's Share Option Schemes.
Discontinued operations
In December 2016, CAML Mongolia BV signed an agreement with a third party to sell its entire interest in Monresources LLC for a cash consideration of $100 with deferred consideration dependent on the outcome of future events. Confirmation of the transfer of shares to the third party was received in February 2017. Following unsuccessful attempts to dispose of the Ereen project, CAML has taken the decision to exit its position in Zuunmod UUL LLC. It is envisaged that this process will be completed by the end of 2017. The Group continues to hold for sale the assets it owns in Mongolia in this financial period although these assets were fully written off in prior periods.
Balance sheet
During the period, there were additions to property, plant and equipment of $1.2 million (H1 2016: $9.6 million). The additions were a combination of Kounrad sustaining capital expenditure as well as costs incurred to finalise the commissioning of the Kounrad Stage 2 Expansion at the Western Dumps. Capital expenditure is significantly reduced from the prior period due to finalisation of the Stage 2 Expansion in early 2017. This expansion was completed approximately 30% below the original $19.5 million budget, due to a combination of cost savings associated with the weaker local currency and engineering efficiencies.
A further $0.4 million (H1 2016: $0.8 million) was capitalised in relation to exploration and evaluation costs incurred on the Copper Bay project.
As at 30 June 2017, current trade and other receivables were $1.0 million (31 December 2016: $0.9 million) and non-current trade and other receivables were $2.7 million (31 December 2016: $2.7 million).
During the period, the Kazakhstan authorities refunded to CAML $0.5 million of outstanding VAT. As at 30 June 2017, a total of $2.7 million (31 December 2016: $2.8 million) of VAT receivable was still owed to the Group. A further amount of $0.1 million was refunded in July 2017 and has been classified as a current receivable as at 30 June 2017. The Group is working closely with its advisors to recover the remaining VAT, a portion of which will be recovered through local sales of copper cathode to effectively offset VAT liabilities.
As at 30 June 2017, current trade and other payables were $4.8 million (31 December 2016: $6.0 million) and the Group has no debt.
The Group had cash of $41.7 million on 30 June 2017 (31 December 2016: $40.4 million).
Cash flows
The continued strong operational performance of the Kounrad project and the associated low costs of production resulted in robust cash flows for the Group during the period, with cash generated from operations increasing to $17.4 million (H1 2016: $13.8 million). During the period, $13.5 million (H1 2016: $12.5 million) was returned to shareholders as dividends.
$5.8 million of Kazakhstan corporate income tax was paid during the period (H1 2016: $3.6 million). Payments made during H1 2017 included $4.8 million towards the 2017 corporate income tax liability and $1.0 million of 2016 corporate income tax paid in April 2017.
Importantly, after completing the Stage 2 Expansion capital expenditure programme, CAML has no additional major capital programmes at Kounrad, with only annual sustaining capital expenditure at a cost of approximately $2.0 million expected going forward.
Dividend
The Company's current dividend policy is that it will return a minimum of 20% of the gross revenues generated from the Kounrad project to shareholders.
The CAML Board has declared an interim dividend for the period of 6.5 pence per ordinary share. The interim dividend equates to approximately 24% of the gross revenue for the period and will be payable on 27 October 2017 to shareholders registered on 6 October 2017.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union.
On behalf of the Board
Nigel Robinson
Chief Financial Officer
Independent review report to Central Asia Metals plc
Report on the Interim Results for the six months ended 30 June 2017
Our conclusion
We have reviewed Central Asia Metals plc's Interim Results for the Six months Ended June 2017 (the "interim financial statements") in the half-yearly report of Central Asia Metals plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.
What we have reviewed
The interim financial statements comprise:
the condensed interim balance sheet as at 30 June 2017;
the condensed interim income statement and condensed statement of comprehensive income for the period then
ended;
the condensed interim statement of cash flows for the period then ended;
the condensed interim statement of changes in equity for the period then ended; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.
As disclosed in the notes to the interim financial statements, the financial reporting framework that has been applied in the preparation of the interim financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half-yearly report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.
Our responsibility is to express a conclusion on the interim financial statements in the half-yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
22 September 2017
a) The maintenance and integrity of the Central Asia Metals plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
CONDENSED INTERIM INCOME STATEMENT (unaudited)
for the six months period ended 30 June 2017
Six months ended
30-Jun-17
30-Jun-16
Note
$'000
$'000
Continuing operations
Revenue
37,320
29,728
Presented as:
Gross revenue
38,580
30,884
Less: off-take buyer's fees
(1,260)
(1,156)
Revenue
37,320
29,728
Cost of sales
(10,374)
(8,309)
Gross profit
26,946
21,419
Distribution and selling costs
(140)
(341)
Administrative expenses
(6,140)
(5,911)
Other income
106
72
Foreign exchange rate loss
(342)
(246)
Operating profit
20,430
14,993
Finance income
80
39
Finance costs
(92)
(71)
Profit before income tax
20,418
14,961
Income tax
6
(5,411)
(4,331)
Profit for the period from continuing operations
15,007
10,630
Discontinued operations
Profit/(loss) for the period from discontinued operations
80
(77)
Profit for the period
15,087
10,553
Profit attributable to:
- Non-controlling interests
(49)
(46)
- Owners of the parent
15,136
10,599
5
15,087
10,553
Earnings/(loss) per share from continuing and discontinued operations attributable to owners of the parent during the period (expressed in cents per share)
$
cents
$ cents
Basic earnings/(loss) per share
From continuing operations
7
13.50
9.57
From discontinued operations
0.07
(0.07)
From profit for the period
13.57
9.50
Diluted earnings/(loss) per share
From continuing operations
7
13.14
9.35
From discontinued operations
0.07
(0.07)
From profit for the period
13.21
9.28
CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the six months period ended 30 June 2017
Six months ended
30-Jun-17
$'000
30-Jun-16
$'000
Profit for the period
15,087
10,553
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
3,443
405
Other comprehensive income for the period, net of tax
3,443
405
Total comprehensive income for the period
18,530
10,958
Attributable to:
- Non-controlling interests
(49)
(46)
- Owners of the parents
18,579
11,004
Total comprehensive income for the period
18,530
10,958
Total comprehensive income/(expense) attributable to equity shareholders arises from:
- Continuing operations
18,450
11,035
- Discontinued operations
80
(77)
18,530
10,958
CONDENSED INTERIM BALANCE SHEET
as at 30 June 2017
Unaudited
Audited
Unaudited
30-Jun-17
31-Dec-16
30-Jun-16
Note
$'000
$'000
$'000
Assets
Non-current assets
Property, plant and equipment
8
50,361
50,324
49,145
Intangible assets
9
41,761
40,759
40,178
Other non-current receivables
11
2,653
2,738
2,127
94,775
93,821
91,450
Current assets
Inventories
10
4,406
3,319
4,110
Trade and other receivables
11
975
919
3,131
Restricted cash
122
118
94
Cash and cash equivalents
41,580
40,258
30,107
47,083
44,614
37,442
Assets of the disposal group classified as held for sale
-
45
72
47,083
44,659
37,514
Total assets
141,858
138,480
128,964
Equity attributable to owners of the parent
Ordinary shares
1,121
1,121
1,121
Treasury shares
(7,780)
(7,780)
(7,810)
Currency translation reserve
(83,992)
(87,435)
(88,064)
Retained earnings:
At 1 January
215,479
209,120
209,120
Profit for the period attributable to the owners
15,136
26,270
10,599
Other changes in retained earnings
(13,602)
(19,911)
(13,479)
217,013
215,479
206,240
126,362
121,385
111,487
Non-controlling interests
42
91
218
Total equity
126,404
121,476
111,705
Liabilities
Non-current liabilities
Deferred income tax liability
12
8,661
8,541
10,258
Provision for other liabilities and charges
2,023
2,087
2,398
10,684
10,628
12,656
Current liabilities
Trade and other payables
4,770
6,020
4,166
4,770
6,020
4,166
Liabilities of disposal group classified as held for sale
-
356
437
4,770
6,376
4,603
Total liabilities
15,454
17,004
17,259
Total equity and liabilities
141,858
138,480
128,964
CONDENSED INTERIM STATEMENT OF CHANGES OF EQUITY (unaudited)
for the six months period ended 30 June 2017
Ordinary Shares
Treasury Shares
Currency translation reserve
Retained Earnings
Total
Non-controlling interest
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
At 31 December 2016
1,121
(7,780)
(87,435)
215,479
121,385
91
121,476
Profit/(loss) for the period
-
-
-
15,136
15,136
(49)
15,087
Other comprehensive income - currency translation differences
-
-
3,443
-
3,443
-
3,443
Total comprehensive income
-
-
3,443
15,136
18,579
(49)
18,530
Transactions with owners
Share based payments
-
-
-
1,235
1,235
-
1,235
Disposal of Monresources LLC
-
-
-
161
161
-
161
Exercise of options
-
-
-
(1,492)
(1,492)
-
(1,492)
Dividends
-
-
-
(13,506)
(13,506)
-
(13,506)
Total transactions with owners, recognised directly in equity
-
-
-
(13,602)
(13,602)
-
(13,602)
At 30 June 2017
1,121
(7,780)
(83,992)
217,013
126,362
42
126,404
Ordinary Shares
Treasury Shares
Currency translation reserve
Retained Earnings
Total
Non-controlling interest
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
At 31 December 2015
1,121
(7,810)
(88,469)
209,120
113,962
264
114,226
Profit/(loss) for the period
-
-
-
10,599
10,599
(46)
10,553
Other comprehensive income - currency translation differences
-
-
405
-
405
-
405
Total comprehensive income
-
-
405
10,599
11,004
(46)
10,958
Transactions with owners
Share based payments
-
-
-
1,392
1,392
-
1,392
Exercise of options
-
-
-
(2,349)
(2,349)
-
(2,349)
Dividends
-
-
-
(12,522)
(12,522)
-
(12,522)
Total transactions with owners, recognised directly in equity
-
-
-
(13,479)
(13,479)
-
(13,479)
At 30 June 2016
1,121
(7,810)
(88,064)
206,240
111,487
218
111,705
CONDENSED INTERIM STATEMENT OF CASH FLOWS (unaudited)
for the six months period ended 30 June 2017
Six months ended
30-Jun-17
30-Jun-16
Note
$'000
$'000
Cash flows from operating activities
Cash generated from operations
13
23,122
17,395
Corporate income tax paid
(5,765)
(3,602)
Interest paid
(4)
(2)
Net cash generated from operating activities
17,353
13,791
Cash flows from investing activities
Purchases of property, plant and equipment
8
(1,177)
(9,596)
Purchase of intangible assets
9
(447)
(780)
Proceeds from sale of property, plant and equipment
76
-
Interest received
80
39
Restricted cash (increase)/ decrease
(4)
400
Net cash used in investing activities
(1,472)
(9,937)
Cash flows from financing activities
Dividend paid to owners of the parent
(13,506)
(12,522)
Settlement on exercise of share options
(1,492)
(2,349)
Net cash used in financing activity
(14,998)
(14,871)
Effect of foreign exchange gains/(losses) on cash and cash equivalents
440
(390)
Net increase/(decrease) in cash and cash equivalents
1,323
(11,407)
Cash and cash equivalents at 1 January
40,258
41,524
Cash and cash equivalents at 30 June
41,581
30,117
Cash and cash equivalents at 30 June 2017 includes cash at bank on hand included in assets held for sale of nil (30 June 2016: $10,000).
NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months period ended 30 June 2017
1. General information
Central Asia Metals plc ("CAML" or the "Company") and its subsidiaries (the "Group") are a mining and exploration organisation with operations primarily in Kazakhstan and a parent holding company based in the United Kingdom ("UK").
The Group's principal business activity is the production of copper cathode at its Kounrad operations in Kazakhstan. The Group also owns a 75% shareholding in the Copper Bay tailings project in Chile. During the period, the Group also held for sale two exploration projects in Mongolia and in February 2017 the Group disposed of its interest in one of the projects.
CAML is a public limited company, which is listed on the AIM market of the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Masters House, 107 Hammersmith Road, London, W14 0QH. The Company's registered number is 5559627.
The condensed consolidated interim financial information incorporate the results of Central Asia Metals plc and its subsidiary undertakings as at 30 June 2017 and was approved by the Directors for issue on 7 September 2017. These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the board of directors on 4 April 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
These condensed interim financial statements have been reviewed, not audited.
2. Basis of preparation
The condensed interim financial information for the six months ended 30 June 2017 has been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRS.
3. Accounting policies
The accounting policies, methods of computation and presentation used in the preparation of the interim financial information are the same as those used in the Group's audited financial statements for the year ended 31 December 2016.
Going concern
After review of the Group's operations, financial position and forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the unaudited interim financial information.
4. Estimates
The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this condensed interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.
5. Segmental information
The Board is the Group's chief operating decision-maker. Management have determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Board considers the business from a mining project perspective.
The Group has business segments consisting of an SX-EW copper plant at Kounrad in Kazakhstan, the Shuak exploration project in Kazakhstan and the Copper Bay exploration project in Chile. The Group operations are controlled from a head office in London, UK but this does not represent a separate business segment.
The Board assesses the performance of the Kounrad project based on a number of key operational and financial measures which relate to copper production output, revenues from the sales of copper and the overall costs of producing the copper.
The segments results for the period ended 30 June 2017 are as follows:
Unaudited
Shuak
Kounrad
Copper Bay
Unallocated
Total
Gross revenue
$'000
$'000
$'000
$'000
$'000
-
38,580
-
38,580
Off-take buyers' fees
-
(1,260)
-
(1,260)
Revenue
-
37,320
-
37,320
Kounrad EBITDA
-
29,323
-
-
29,323
Shuak administrative expenses
(96)
-
-
-
(96)
Copper Bay administrative expenses
-
-
(328)
-
(328)
Unallocated costs including corporate
-
-
-
(4,897)
(4,897)
Group continuing operations EBITDA
(96)
29,323
(328)
(4,897)
24,002
Depreciation and amortisation
-
(3,273)
-
(63)
(3,336)
Foreign exchange rate (loss)/gain
(3)
(251)
31
(119)
(342)
Other income
-
106
-
-
106
Finance income
-
4
-
76
80
Finance costs
(2)
(88)
-
(2)
(92)
Profit before income tax
(101)
25,821
(297)
(5,005)
20,418
Income tax
(5,411)
Profit for the period after taxation from continuing operations
15,007
Profit from discontinued operations
80
Profit for the period
15,087
CAML signed the framework agreement to acquire the Shuak copper-gold exploration project in November 2016 and the comparative segmental results for the six month period ended 30 June 2016 do not include the results of the Shuak project. The segments results for the period ended 30 June 2016 are as follows:
Unaudited
Kounrad
Copper Bay
Unallocated
Total
Gross revenue
$'000
$'000
$'000
$'000
30,884
-
-
30,884
Off-take buyers' fees
(1,156)
-
-
(1,156)
Revenue
29,728
-
-
29,728
Kounrad EBITDA
22,168
-
-
22,168
Copper Bay administrative expenses
-
(449)
-
(449)
Unallocated costs including corporate
-
-
(4,303)
(4,303)
Group continuing operations EBITDA
22,168
(449)
(4,303)
17,416
Depreciation and amortisation
(2,207)
-
(42)
(2,249)
Foreign exchange rate gain/(loss)
31
62
(339)
(246)
Other income
72
-
-
72
Finance income
5
-
34
39
Finance costs
(71)
-
-
(71)
Profit before income tax
19,998
(387)
(4,650)
14,961
Income tax
(4,331)
-
-
(4,331)
Profit for the period after taxation from continuing operations
15,667
(387)
(4,650)
10,630
Loss from discontinued operations
(77)
Profit for the period
10,553
Group segmental assets and liabilities for the six months ended 30 June 2017 are as follows:
Segmental Assets
Segmental Liabilities
30-Jun-17
31-Dec-16
30-Jun-17
31-Dec-16
$'000
$'000
$'000
$'000
Shuak
305
-
(30)
-
Kounrad
97,554
98,275
(13,551)
(13,700)
Copper Bay
4,539
4,766
(164)
(259)
Assets held for sale
-
45
-
(356)
Unallocated including corporate
39,460
35,394
(1,709)
(2,689)
Total
141,858
138,480
(15,454)
(17,004)
6. Income tax
Six months ended
30-Jun-17
30-Jun-16
$'000
$'000
Current tax on profits for the year
5,608
4,331
Deferred tax credit (note 12)
(197)
-
Income tax expense
5,411
4,331
Corporate income tax is calculated at 19.5% (H1 2016: 20%) of the assessable profit for the year for the UK parent company and 20% for the operating subsidiaries in Kazakhstan (H1 2016: 20%).
Deferred tax assets have not been recognised on tax losses primarily at the parent company and Copper Bay subsidiaries as it remains uncertain whether these entities will have sufficient taxable profits in the future to utilise these losses.
7. Earnings per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of Ordinary Shares in issue during the period excluding Ordinary Shares purchased by the Company and held as treasury shares.
(a) Basic
Six months ended
30-Jun-17
30-Jun-16
$'000
$'000
Profit from continuing operations attributable to owners of the parent
15,056
10,676
Profit/(loss) from discontinued operations attributable to owners of the parent
80
(77)
Total
15,136
10,599
Weighted average number of Ordinary Shares in issue
111,558,091
111,558,091
Earnings/(loss) per share from continuing and discontinued operations attributable to owners of the parent during the period (expressed in $ cents per share)
$ cents
$ cents
From continuing operations
13.50
9.57
From discontinued operations
0.07
(0.07)
From profit for the period
13.57
9.50
The diluted earnings/(loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding after assuming the conversion of all outstanding granted share options.
(b) Diluted
Six months ended
30-Jun-17
30-Jun-16
$'000
$'000
Profit from continuing operations attributable to owners of the parent
15,056
10,676
Profit/(loss) from discontinued operations attributable to owners of the parent
80
(77)
Total
15,136
10,599
Weighted average number of ordinary shares in issue
111,558,091
111,558,091
Adjusted for:
- Share Options
3,033,290
2,643,025
Weighted average number of ordinary shares for diluted earnings per share
114,591,381
114,201,116
Diluted earnings per share
$ cents
$ cents
From continuing operations
13.14
9.35
From discontinued operations
0.07
(0.07)
From profit for the period
13.21
9.28
8. Property, plant and equipment
Construction
in progress
Plant and equipment
Mining assets
Motor vehicles and office equipment
Total
Group
$'000
$'000
$'000
$'000
$'000
Cost
At 1 January 2016
2,003
49,408
1,601
1,301
54,313
Additions
11,572
557
-
202
12,331
Disposals
-
(246)
-
(3)
(249)
Change in estimate - asset retirement obligation
-
(22)
-
-
(22)
Transfers
(10,443)
10,427
-
16
-
Exchange differences
67
985
30
26
1,108
At 31 December 2016
3,199
61,109
1,631
1,542
67,481
Additions
1,030
22
-
125
1,177
Disposals
-
(104)
-
(21)
(125)
Change in estimate - asset retirement obligation
-
(230)
-
-
(230)
Transfers
(2,331)
2,310
-
21
-
Exchange differences
137
1,812
60
50
2,059
At 30 June 2017
2,035
64,919
1,691
1,717
70,362
Accumulated depreciation
At 1 January 2016
-
12,953
62
498
13,513
Provided during the year
-
3,445
38
155
3,638
Disposals
-
(246)
-
(3)
(249)
Exchange differences
-
213
-
42
255
At 31 December 2016
-
16,365
100
692
17,157
Provided during the period
-
2,476
20
90
2,586
Disposals
-
(102)
-
(18)
(120)
Exchange differences
-
356
4
18
378
At 30 June 2017
-
19,095
124
782
20,001
Net book value at 31 December 2016
3,199
44,744
1,531
850
50,324
Net book value at 30 June 2017
2,035
45,824
1,567
935
50,361
The reduction in estimate in relation to the asset retirement obligation of $230,000 (2016: $22,000) is due to a combination of adjusting the provision recognised at the net present value of future expected costs using an inflation rate of 5.56% (2016: 6.02%) and discount rate of 8.07% (2016: 8.07%) representing the risk-free rate (pre-tax) for Kazakhstan as well as updating the provision for management's best estimate of the costs that will be incurred based on current contractual and regulatory requirements and the estimated useful life of mine to 2034.
9. Intangible assets
Goodwill
Exploration and evaluation costs
Mining
licences and permits
Computer software
Total
Group
$'000
$'000
$'000
$'000
$'000
Cost
At 1 January 2016
10,106
2,039
30,631
38
42,814
Additions
-
1,561
14
19
1,594
Exchange differences
187
-
306
1
494
At 31 December 2016
10,293
3,600
30,951
58
44,902
Additions
-
438
-
9
447
Exchange differences
379
-
1,083
-
1,462
At 30 June 2017
10,672
4,038
32,034
67
46,811
Accumulated amortisation
At 1 January 2016
-
-
2,524
23
2,547
Provided during the year
-
-
1,554
9
1,563
Exchange differences
-
30
3
33
At 31 December 2016
-
-
4,108
35
4,143
Provided during the period
-
-
823
2
825
Exchange differences
-
-
82
-
82
At 30 June 2017
-
-
5,013
37
5,050
Net book value at 31 December 2016
10,293
3,600
26,843
23
40,759
Net book value at 30 June 2017
10,672
4,038
27,021
30
41,761
Copper Bay project
The Group has reviewed the indicators for impairment under IFRS 6 Exploration and Evaluation of Mineral Resources and has not identified any indicators of impairment.
10. Inventories
30-Jun-17 $'000
31 Dec 16
$'000
Raw materials
3,781
2,962
Finished goods
625
357
4,406
3,319
11. Trade and other receivables
30-Jun-17
31-Dec-16
Current receivables
$'000
$'000
Trade receivables
22
-
Prepayments
443
347
VAT receivable
357
548
Other receivable
153
24
975
919
Non-current receivables
Prepayments
73
368
VAT receivable
2,580
2,370
2,653
2,738
As at 30 June 2017, the total Group VAT receivable was $2,937,000 (31 December 2016: $2,918,000) which included an amount of $2,725,000 (31 December 2016: $2,838,000) of VAT owed to the Group by the Kazakhstan authorities. During the six month period ended 30 June 2017, the authorities refunded $545,000 and a further amount of $145,000 was refunded from the authorities in July 2017 and has been classified as current trade and other receivables as at 30 June 2017. The Group is working closely with its advisors to recover the remaining VAT, a portion of which will be recovered through local sales of copper cathode to effectively offset VAT liabilities.
12. Deferred income tax liability
The movements in the Group's deferred tax assets and liabilities which are expected to be recovered or settled more than 12 months after the reporting period are as follows:
At 1
January 2017
$'000
Currency
translation
differences
$'000
Credit to income
statement
$'000
At 30
June 2017
$'000
Other timing differences
(82)
-
-
(82)
Deferred tax liability on fair value adjustment on Kounrad Transaction
(8,459)
(317)
197
(8,579)
Deferred tax liability, net
(8,541)
(317)
197
(8,661)
A taxable temporary difference arose as a result of the Kounrad Transaction, where the carrying amount of the assets acquired were increased to fair value at the date of acquisition but the tax base remained at cost. The deferred tax liability arising from this taxable temporary difference has been reduced by $197,000 to reflect the tax consequences of depreciating and amortising the recognised fair values of the assets during the period.
At 1
January 2016
$'000
Currency translation
differences
$'000
Credit to income
statement
$'000
At 30
June 2016
$'000
Other timing differences
(134)
(18)
-
(152)
Deferred tax liability on fair value adjustment on Kounrad Transaction
(10,106)
-
-
(10,106)
Deferred tax liability, net
-
(10,258)
Where the realisation of deferred tax assets is dependent on future profits, the Group recognises losses carried forward and other deferred tax assets only to the extent that the realisation of the related tax benefit through future taxable profits is probable.
13. Cash generated from operations
Six months ended
30-Jun-17
30-Jun-16
$'000
$'000
Profit before income tax including discontinued operations
20,498
14,884
Adjustments for:
Depreciation
2,511
1,361
Amortisation
825
888
Gain on disposal of property, plant and equipment
(71)
-
Foreign exchange loss
373
246
Share based payments
1,235
1,392
Finance income
(80)
(39)
Finance costs
92
71
Charges in working capital:
Inventories
(1,085)
(1,079)
Trade and other receivables
41
1,640
Trade and other payables
(1,217)
(1,969)
Cash generated from operations
23,122
17,395
14. Commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
30-Jun-17
30-Jun-16
$'000
$'000
Property, plant and equipment
-
309
Other
283
1,269
Total
283
1,578
The reduction in commitments from the prior period is due to the completion of the Kounrad Stage 2 Expansion.
15. Dividend per share
An interim dividend of 6.5 pence per ordinary share (2016: 5.5 pence per share) was declared by the CAML Board on 22 September 2017.
16. Related party transactions
During the six month period ended 30 June 2017, the Group had no transactions with related parties with the exception of the Company's subsidiaries.
Mr Kenges Rakishev became a major shareholder of CAML on 23 May 2014 following completion of the Kounrad Transaction. He was appointed to the CAML Board on 9 December 2013 following the completion of the first part of the transaction. Consequently, Kenges Rakishev is considered a related party in any dealings he has with the Group. As part of the obligations on Kenges Rakishev for completing the Kounrad Transaction, he signed a relationship agreement with CAML setting out the terms of the relationship between himself and the Group.
In June 2017, Kenges Rakishev sold his 86.09% interest in JSC Kazkommertsbank ("KKB") to JSC Halyk Bank and resigned as Chairman of KKB in July 2017. The Group uses the facilities of KKB and JSC Halyk Bank within Kazakhstan for its normal day-to-day banking.
Kenges Rakishev is a Director of JSC Insurance Company. The Group incurs insurance premiums with JSC Insurance Company and has made an insurance claim under which a syndicate of insurers, including JSC Insurance Company, have a potential liability.
During the period, the Group paid consultancy fees of $37,500 to Nurlan Zhakupov, a Non-Executive Director of the company, under a consultancy agreement in terms of which Mr Zhakupov provides services over and above his normal duties.
17. Events after the reporting period
Kazakhstan VAT recoverability
As at 30 June 2017 a total of $2,725,000 (31 December 2016: $2,838,000) of VAT receivable was still owed to the Group by the Kazakhstan authorities. A portion of this amount totalling $145,000 was refunded from the authorities in July 2017 and has been classified as current trade and other receivables as at 30 June 2017.
Shuak project
During August 2017, CAML became the registered owner of the Shuak sub soil user contract.
Copper Bay project
Given that CAML does not intend to develop the Copper Bay project in current market conditions, in August 2017, the CAML Board made the decision to dispose of its holding in that company and will commence the sales process during Q4 2017.
Project Lion
Acquisition of Lynx Resources, a Macedonian zinc and lead producer, and associated equity issue, announced separately today.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR LFFSLARILFID
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