REG - GCM Resources PLC - Interim Results 6 months ended 31 December 2021
25/03/2022 07:16
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RNS Number : 9817F GCM Resources PLC 25 March 2022
25 March 2022
GCM Resources plc
("GCM" or the "Company")
Interim Results for the 6 months ended 31 December 2021
GCM Resources plc (LON: GCM), an AIM quoted mining and energy company, is
pleased to report its interim results for the six months ended 31 December
2021. The Chairman's Statement and the full unaudited interim report are
presented below and will shortly be available at the Company's website
www.gcmplc.com (http://www.gcmplc.com) .
Chairman's Statement
The Company's performance over the six months ending 31 December 2021
continued to be hindered by the effects of the Coronavirus Pandemic.
Bangladesh, unlike most of Europe, did not move from the rolling lock-downs
until late August and the return to "business as usual" has been slow.
Our commitment to delivering a return to shareholders in recognition of their
continued support is unrelenting. We have been continuously reappraising the
best way to present the Phulbari Coal and Power Project ("the Project") so to
maximise alignment with the energy and power needs of the Government and
People of Bangladesh. Prime considerations in this appraisal have included:
· World energy crisis that commenced in 2020;
· Chinese President Xi Jinping delivered a pre-recorded address to
the United Nations General Assembly on 22 September 2021 where he stated China
would step up efforts to assist Developing Countries access "green" and "low
carbon" energy, and that China would not build new coal-fired power projects
abroad. The actual ramifications of these statements are yet to be realised,
given that China itself has stated coal power remains in its energy/power mix
and that the long-term strategy is energy efficiency (more power for less
coal) and a pursuit of "Net Zero Carbon Emissions" also involves carbon
off-setting.
· World energy crisis now exacerbated by turmoil unfolding in
Eastern Europe and timeframe for energy and power markets to return to
normality appear to be extensively protracted;
· Supply chains are under enormous pressure and international
shipping freight rates are skyrocketing;
· In response to the above, countries are trending towards
developing internal natural energy resources to enhance energy security and
control costs;
· Bangladesh's gas reserves have depleted and the country appears
to be exposed to the growing uncertainties and risks of supply and costs in
the highly competitive world energy market.
The Project's core asset is the Phulbari coal deposit which consists of 527
million tonnes (JORC 2004) of high-energy thermal and metallurgical coal,
capable of supporting over 6,600MW power generation for at least 30-years.
The fundamental consideration has always been ensuring the coal mining
operation's economic sustainability. We have explored options with our
international development partners and believe the entire Phulbari Geologic
Basin should be declared an "Energy Park" of national significance for
Bangladesh. It is rich in natural energy resources and power generating
potentials, capable of supporting over 4,500MW Solar Power and over 6,600MW
thermal power, and in parallel producing enormous volumes of valuable
industrial mineral co-products from the overburden material removed to access
the coal.
In the reporting period we have continued to grow our relationship with
development partner Power Construction Corporation of China, Ltd
("PowerChina"). On 23 November 2021, GCM and PowerChina agreed to extend to
6 December 2022 a memorandum of understanding ("MoU") focused on the Phulbari
coal mine development. The aim is to allow PowerChina and GCM to determine
the modality for PowerChina to become a Mine Development Partner. The areas
covered under the MoU include finance of the coal mine development.
GCM is still in discussion with China Nonferrous Metal Industry's Foreign
Engineering and Construction Co., Ltd. ("NFC") to extend involvement in the
Phulbari coal mine development following expiry of the Frame Work Agreement on
12 October 2021.
Beyond the reporting period:
· On 2 March 2022, the Company announced it raised gross proceeds
of £2.13 million through a placing of 25,291,828 shares and a subscription
for 16,171,777 shares at a price of 5.14 pence per share representing a
discount of approximately 36.9% to the closing mid-market share price on 1
March 2022. These funds will be principally be used for Project development
capital and are sufficient to cover operating expenses through to Q2 2023.
· On 11 March 2022, the Company announced extension of the joint
venture agreements with PowerChina covering phased development of some 4,000MW
of power generation, for a further two years to 15 March 2024. GCM and
PowerChina have reinforced their belief that the High-Efficiency,
Low-Emissions Coal-Fired Power Generation planned under these Joint Venture
Agreements should remain an attractive option available to the Bangladesh
Government. This translates to more power for less coal consumed (higher
energy efficiency with reduced emissions) and increasing energy and power
security for Bangladesh as it continues to develop its economy and at the same
time move towards "Net Zero Emission" targets over the coming decades.
Financials
GCM incurred a lower loss after tax of £763,000 for the six months ended 31
December 2021 (31 December 2020: loss after tax of £1,091,000). The most
significant expenditure during the period was pre-development expenditure,
while administrative expenses for the six months ended 31 December 2021 were
£352,000 (31 December 2020: £329,000) and capitalised project expenditure
for the period was £273,000 (31 December 2020: £234,000).
On 2 March 2022, the Company announced it had secured Gross Funding proceeds
of £2.13 million through a placing and subscription of new ordinary shares
(See Note 7 for details). This funding provides the Company with sufficient
funds to cover its corporate and project operating expenses through to Q2
2023. The Company has at the date of this report drawn down £3.2 million of
the total short-term loan facility of £3.5 million with Polo Resources Ltd,
the terms of the facility are detailed in Note 5 of the interim report.
Over the next 12 months, the Company will seek to further strengthen GCM's
financial position and provide future funding, and the directors remain
confident that sufficient funding will be obtained as and when required. As
such, the financial statements have been prepared on a going concern basis.
Please refer to the accounting policy note on going concern (Note 1 to the
Financial Statements) for further information.
Outlook
The World energy crisis is intensifying and given Bangladesh has become
largely reliant on imported fuels, its economy is growingly exposed to the
vagaries of energy supply competition and price escalations. All nations are
now turning inward to maximise recovery of their own naturally occurring
energy resources to off-set this crisis and somehow insulate their
economies. GCM and its main development partner working to demonstrate the
importance of the Project and the development of the 'Energy Park' for the
Government and people of Bangladesh.
I would like to thank our shareholders and stakeholders for their continued
commitment and support for GCM and our commitment to deliver returns on your
investment.
Mohd Najib Bin Abdul Aziz
Non-Executive Chairman
Interim Consolidated Income Statement
6 months ended 31 December 2021 6 months ended 31 December 2020 Year ended
unaudited unaudited 30 June
£000 £000 2021
audited
£000
Operating expenses
Pre-development expenditure (174) (587) (809)
Exploration and evaluation costs 5 (7) 35
Administrative expenses (352) (329) (717)
Operating loss (521) (923) (1,491)
Finance costs (242) (168) (383)
Loss before tax (763) (1,091) (1,874)
Taxation - - -
Loss and total comprehensive income for the period (763) (1,091) (1,874)
Earnings per share
Basic loss per share (pence) (0.6p) (0.9p) (1.5p)
Diluted loss per share (pence) (0.6p) (0.9p) (1.5p)
Interim Consolidated Statement of Changes in Equity
Share capital Share premium account Share based payments not settled Accumulated losses Total
£000
£000
£000 £000
£000
Balance at 1 July 2020 11,256 53,534 1,706 (29,079) 37,417
Total comprehensive loss - - - (1,874) (1,874)
Share issuances 792 2,155 (1,938) - 1,009
Share issuance costs - (78) - - (78)
Shares to be issued - - 809 - 809
Share based payments - - 6 - 6
Balance at 30 June 2021 12,048 55,611 583 (30,953) 37,289
Total comprehensive loss - - - (763) (763)
Share issuances - - - - -
Shares to be issued - - 174 - 174
Share based payments - - 15 - 15
Balance at 31 December 2021 (unaudited) 12,048 55,611 772 (31,716) 36,715
Balance at 1 July 2020 11,256 53,534 1,706 (29,079) 37,417
Total comprehensive loss - - - (1,091) (1,091)
Share issuances 602 675 (1,277) - -
Shares to be issued - - 587 - 587
Share based payments - - 5 - 5
Balance at 31 December 2020 (unaudited) 11,858 54,209 1,021 (30,170) 36,918
Interim Consolidated Balance Sheet
31 December 2021 31 December 2020 30 June
unaudited unaudited 2021
Notes £000 £000 audited
£000
Current assets
Cash and cash equivalents 116 48 717
Receivables 48 35 13
Total current assets 164 83 730
Non-current assets
Property, plant and equipment 6 10 8
Right of use assets 37 19 59
Intangible assets 3 42,452 41,861 42,179
Receivables - - -
Total non-current assets 42,495 41,890 42,246
Total assets 42,659 41,973 42,976
Current liabilities
Payables 4 (1,457) (1,284) (1,422)
Lease liabilities (31) (26) (40)
Borrowings 5 - (3,737) -
Total current liabilities (1,488) (5,047) (1,462)
Non-current liabilities
Lease liabilities (11) (8) (22)
Borrowings (4,445) - (4,203)
Total non-current liabilities (4,456) (8) (4,225)
Total liabilities (5,944) (5,055) (5,687)
Net assets 36,715 36,918 37,289
Equity
Share capital 6 12,048 11,858 12,048
Share premium account 6 55,611 54,209 55,611
Other reserves 772 1,021 583
Accumulated losses (31,716) (30,170) (30,953)
Total equity 36,715 36,918 37,289
Interim Consolidated Statement of Cash Flows
6 months ended 31 December 2021 6 months ended 31 December 2020 Year ended
unaudited unaudited 30 June
£000 £000 2021
audited
£000
Cash flows used in operating activities
Loss before tax (763) (1,091) (1,874)
Adjusted for:
Non-cash pre-development expenditure 174 587 809
Non-cash finance costs 242 168 383
Other non-cash expenses - - -
(347) (336) (682)
Movements in working capital:
(Increase)/decrease in operating receivables (34) (19) 2
Increase in operating payables 35 212 354
Cash used in operations (346) (143) (326)
Net cash used in operating activities (346) (143) (326)
Cash flows from investing activities
Payments for intangible assets (255) (228) (557)
Payments for property, plant and equipment - - -
Net cash generated from investing activities (255) (228) (557)
Cash flows from financing activities
Issue of ordinary share capital - - 1,009
Share issue costs - - (78)
Proceeds from borrowing - 350 600
Interest paid - - -
Net cash from financing activities - 350 1,531
Total (decrease)/increase in cash and cash equivalents (601) (21) 648
Cash and cash equivalents at the start of the period 717 69 69
Cash and cash equivalents at the end of the period 116 48 717
Notes to the Interim Condensed Consolidated Financial Statements
1. Accounting policies
GCM Resources plc (GCM) is domiciled in England and Wales, was incorporated as
a Public Limited Company on 26 September 2003 and admitted to the London Stock
Exchange Alternative Investment Market (AIM) on 19 April 2004.
This unaudited interim report was authorised for issue by the Board of
Directors on 24 March 2022.
Basis of preparation
The annual consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as they apply to the
financial statements of the Group for the year ended 30 June 2021 and applied
in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the six months
ended 31 December 2021 have been prepared using the same policies and methods
of computation as applied in the financial statements for the year ended 30
June 2021. The financial information contained herein does not constitute
statutory accounts within the meaning of Section 435 of the Companies Act 2006
and is unaudited. The figures for the year ended 30 June 2021 have been
extracted from the statutory accounts for that year. Those accounts have
been delivered to the Registrar of Companies and contained an unqualified
auditors' report which included an emphasis of matter concerning significant
doubt over the ability for the Group to continue as a going concern and did
not include a statement under section 498(2)(a) or (b), or section 498(3) of
the Companies Act 2006.
Political and economic risks - carrying value of intangible asset
The principal asset is in Bangladesh and accordingly subject to the political,
judicial, fiscal, social and economic risks associated with operating in that
country.
The Group's principal project relates to thermal coal and semi-soft coking
coal, the markets for which are subject to international and regional supply
and demand factors, and consequently future performance will be subject to
variations in the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the Government of
Bangladesh which gives it the right to explore, develop and mine in respect of
the licence areas. The Group holds a mining lease and exploration licences in
the Phulbari area covering the prospective mine site. The mining lease has a
30-year term from 2004 and may be renewed for further periods of 10 years
each, at GCM's option.
In accordance with the terms of the Contract, GCM submitted a combined
Feasibility Study and Scheme of Development report on 2 October 2005 to the
Government of Bangladesh. Approval of the Scheme of Development from the
Government of Bangladesh is necessary to proceed with development of the mine.
GCM continues to await approval.
The Group has received no notification from the Government of Bangladesh
(Government) of any changes to the terms of the Contract. GCM has received
legal opinion that the Contract is enforceable under Bangladesh and
International law, and will consequently continue to endeavour to receive
approval for development.
Accordingly, the Directors are confident that the Phulbari Coal and Power
Project (Project) will ultimately receive approval, although the timing of
approval remains in the hands of the Government. To enhance the prospects of
the Project, GCM has engaged in a strategy to align the Project with the needs
and objectives of the Government. The Government seeks to rapidly expand the
country's power generation, including the increase in coal fired power
generation from the current 250MW to approximately 20,000MW. The Group's
strategy is to work with the Government of Bangladesh and its international
development partners to develop the planned coal mine together with power
plants and supply chains to utilise the full coal production which can support
over 6,600MW power generation.
Until approval of the Scheme of Development from the Government of Bangladesh
is received there is continued uncertainty over the recoverability of the
intangible mining assets. The Directors consider that it is appropriate to
continue to record the intangible mining assets at cost, however if for
whatever reason the Scheme of Development is not ultimately approved the Group
would impair all of its intangible mining assets, totalling £42,452,000 as at
31 December 2021.
Going concern
As at 31 December 2021, the Group had £116,000 in cash and £1,324,000 in net
current liabilities. The directors and management have prepared a cash flow
forecast to March 2023, which showed that the Group would require further
funds to cover operating costs to advance the Phulbari Coal and Power Project
and meet its liabilities as and when they fall due. Based on the current
forecast, additional funding would need to be either raised from third parties
or drawn down under the £3.5million loan facility with Polo Resources Limited
("Polo Loan Facility"), which currently has £300,000 available to, in order
to meet current operating cost projections.
The Company on 2 March 2022, announced it had secured Gross Funding proceeds
of £2.13million through a placing and subscription of new ordinary shares
(See Note 7 for details). This funding provides the Company with sufficient
funds to cover its corporate and project operating expenses through to Q2
2023.
In forming the conclusion that it is appropriate to prepare the condensed
consolidated financial statements on a going concern basis the Directors have
made the following assumptions that are relevant to the next twelve months:
- In the event that the Polo Loan Facility becomes
payable, sufficient funding can be obtained; and
- In the event that operating expenditure increases
significantly as a result of successful progress with regards to the Phulbari
Coal and Power Project, sufficient funding can be obtained.
Upon achieving approval of the Phulbari Coal and Power Project, significant
additional financial resources will be required to proceed to development.
2. Segment analysis
The Group operates in one segment being the exploration and evaluation of
energy related projects. The only significant project within this segment is
the Phulbari Coal and Power Project in Bangladesh.
3. Intangibles
During the period intangibles increased by £273,000. The increase is due to
capitalised mining exploration and evaluation expenditure relating to the
Phulbari Coal and Power Project in Bangladesh.
4. Payables
31 December 2021 31 December 2020 30 June
unaudited unaudited 2021
£000 £000 audited
£000
Trade payables 663 590 579
Related party accrued payable 794 694 843
Transaction costs payable - - -
1,457 1,284 1,422
The related party accrued payable of £794,000 at 31 December 2021 relates to
accrued fees owing to the management services company of the Executive
Chairman of the Company, Datuk Michael Tang PJN.
5. Borrowings
31 December 2021 31 December 2020 30 June
unaudited unaudited 2021
£000 £000 audited
£000
Short-term loan facility from related party 4,445 3,737 4,203
4,445 3,737 4,203
GCM is party to a £3,500,000 short-term loan facility with its largest
shareholder, Polo Resources Limited ("Polo"). As at 31 December 2021, the
Company owed £4,445,000, comprising £3,200,000 loan balance and accrued
finance costs on borrowings of £1,245,000. The Company on 26 March 2021, as
part of the completed equity placing, extended and amended the terms of the
loan facility provided by Polo Resources Limited (the "Facility") of which, as
was announced on 7 January 2021, there is £300,000 of the initial £3.5
million facility remaining undrawn as at the date of this report. The lender
has agreed that it will not serve a repayment request on the Company for 5
years from the date of the agreement replacing the previous provision that it
was payable on demand with 90 days' notice. The Company and Polo Resources
Limited have agreed an increase in the interest rate from 12% to 15% per annum
rising by 1.5% on the third anniversary and by a subsequent 1.5% on each
anniversary thereafter. Furthermore, the lender may request conversion by the
issuance of new ordinary shares in the Company at 7.5 pence per share (being
the Issue Price) subject to any necessary regulatory approvals. The Company
may elect to repay all or part of the outstanding loan at any time giving 60
days' notice and with the agreement of Polo Resources Limited. Any share issue
to the Lender is conditional upon the Lender's interest, together with the
interest of any parties with which it is in concert, remaining below 30% of
the Company's issued capital. All other principal terms of the loan facility
remain unchanged. As noted below, on 2 March 2022, the Company agreed to
amend the issue price of the shares from 7.5p to 5.14p as part of Polo's
participation in the subscription and fund raising on that date, all other
terms as above remained unchanged.
6. Share issues
There were no shares issued during the period.
7. Post-balance sheet events
On 2 March 2022, the Company announced that the Company had raised gross
proceeds of £2.13million through a placing (the "Placing") of 25,291,828
shares and a subscription for 16,171,777 shares (the "Subscription") of new
ordinary 1p shares in the Company ("Fundraising Shares") at a price of 5.14
pence per share ("the Placing Price"), representing a discount of
approximately 36.9% to the closing mid-market share price on 1 March 2022
(being the last business day prior to this announcement).
· The Company raised gross proceeds of approximately £1,300,000 by
means of a placing (the "Placing") of 25,291,828 new Ordinary Shares (the
"Placing Shares") at the Placing Price through ETX Capital, which is the
trading name of Monecor (London) Limited. ETX Capital is acting as broker in
connection with the Placing.
· The Company also announced that it had appointed ETX Capital as
joint broker, as part of the Placing.
· An issue of 16,171,777 new ordinary shares of 1p each in the
capital of the Company (the "Subscription Shares") to certain individuals
including Polo Resources Ltd at the Issue Price to raise £830,000 (the
"Subscription") at an issue price of 5.14p ("the issue price").
· The Company as part of the proposed subscription, agreed to amend
the terms of the loan facility provided by Polo Resources Limited (the
"Facility") of which, as announced on 26 March 2021, there is £300,000 of the
initial £3.5 million facility remaining undrawn. The lender may request
conversion by the issuance of new ordinary shares in the Company at 5.14 pence
per share (being the Issue Price) subject to any necessary regulatory
approvals. All other terms of the agreement remained unchanged.
On 11 March 2022, the Company announced that further to the announcement of 19
January 2021, it had completed the extension of the joint venture agreements
announced on 17 January 2019 and 13 January 2020 ("First JV Agreement") and 15
March 2019 ("Second JV Agreement") with Power Construction Corporation of
China ("PowerChina"). The joint venture agreements which were both due to
expire on 15 March 2021 have both been extend for a further two years to 15
March 2024.
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
For further information:
GCM Resources plc WH Ireland Ltd
Keith Fulton James Joyce
Finance Director Andrew de Andrade
+44 (0) 20 7290 1630 +44 (0) 20 7220 1666
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com (http://www.gcmplc.com)
About GCM Resources
GCM Resources plc (LON:GCM), the AIM listed mining and energy company, has
identified a high-quality coal resource of 572 million tonnes (JORC 2004
compliant) at the Phulbari Coal and Power Project (the "Project") in
north-west Bangladesh.
Utilising the latest highly energy efficient power generating technology, the
Phulbari coal mine is capable of supporting over 6,000MW power generation. GCM
is awaiting approval from the Government of Bangladesh to develop the Project.
The Company, together with credible, internationally recognised strategic
partners, has a strategy of positioning its proposed coal to supply power
plants at the mine-mouth and other coal-fired power projects in Bangladesh.
GCM aims to deliver a practical power solution to provide the cheapest
electricity in the country, in a manner amenable to the Government of
Bangladesh.
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