REG - GCM Resources PLC - Interim Results 6 months ended 31 December 2022
22/03/2023 07:15
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RNS Number : 7651T GCM Resources PLC 22 March 2023
22 March 2023
GCM Resources plc
("GCM" or the "Company")
Interim Results for the 6 months ended 31 December 2022
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
2022. 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 environment under which we operated in the six months ending 31 December
was dominated by growing negative economic impacts of the Ukraine conflict
and, in the latter part of the reporting period, the emergence of a changing
political landscape as the Bangladesh Government and Opposition parties
launched campaigns ahead of the national election, stated for early 2024.
The Bangladesh Government demonstrates commitment to coal being in its
long-term energy mix with 11,755MW coal-fired power plants commissioned or in
the pipeline. It has also committed to implement the latest HELE power plants
(High Efficiency, Low Emissions), based on Ultra-Supercritical boiler
technology resulting in smaller environmental footprints as less coal is
consumed with reduced carbon dioxide emissions to produce the same electricity
as conventional power plants. Progress has been substantial, with
Ultra-Supercritical Power Plants commissioned at Payra 1,320MW in 2019-20;
Rampal first unit (660MW) in November 2022 and the second 660MW unit scheduled
for first half 2023; Banshkhali 1,320MW (2x660MW) scheduled for 2023; and
Matarbari 1,200MW (2x600MW) scheduled for 2024.
The Phulbari Coal and Power Project ("the Project") can support some 6,600MW
of Ultra-Supercritical power generation. The Project Proposal is built around
supplying some or all coal production to existing (and planned) coal-fired
plants and also provides for the option of installing up to 4,000MW new
capacity at the Phulbari coal mine site (which ultimately would provide the
lowest cost coal based power for Bangladesh).
Our Development Partner, Power Construction Corporation of China Ltd.
("PowerChina"), earlier reiterated their commitment to developing mine-mouth
new capacity (RNS Number: 5488E, 11 March 2022). In this reporting period,
PowerChina further demonstrated their overall Project support through the
extension of an MOU focussed on coal mine development (RNS Number: 2978J, 12
December 2022). The intention is to arrive at a partnership covering finance,
project development and on-going mine management.
The Project's Proposal has been refined through discussions and presentations
at senior level of Government and during this process our Bangladesh team were
supported by PowerChina. A significant enhancement is the inclusion of a
large-scale Solar Power Park (over 2GW possible) within the confines of the
Project area, to be operated in parallel with the mining operations. The Solar
Power Park would be installed in stages and it's planned that the power would
be supplied to both the national grid and mining operation, also enabling the
mine to become a "Net Zero Carbon Green Mine".
Beyond the reporting period, the Company entered into a Joint Development
Agreement ("JDA") with PowerChina and Dyani Corporation for development of the
proposed Solar Power Park (RNS Number: 0138M, 9 January 2023). The JDA is
comprehensive covering financing, construction and operation of the Solar
Power Park.
Bangladesh is on a trajectory to move from being a Least Developed Country
("LDC") to a Developing Country in 2026. Key to such a transition is a
vibrant, growing economy. The way forward unfortunately has been made more
difficult by the inflationary and supply-chain pressures (principally for
energy) brought on by the protracted Ukraine conflict. Like many other
net-energy-importing countries, Bangladesh has found itself in a position of
not only facing persistent high inflation but also a 30% drop in both the
value of its Taka currency against the US Dollar and its foreign currency
reserves over the past year. This has impacted the ability to maintain energy
supplies, particularly coal and LNG.
There is growing awareness both within the Bangladesh Government and Civil
Society that an over-dependence on imported energy to power places the
Country's industrial and economic development in an unnecessary high risk
situation, and that the strategy should involve a balance between domestic and
imported energy supply. The State Minister for the Ministry of Power, Energy,
and Mineral Resources spoke openly for domestic coal supply in November 2022
when he was responding to questions by one of the MP's covering the Project
area. The State Minister emphasised that open pit coal extraction was only
possible in the Phulbari Coal Basin. More recently, Bangladesh's significant
power companies and business identities have called for the Government to move
on developing its domestic coal and gas potential to provide the Country with
higher energy security and more sustainable energy costs.
The Project's Proposal address the concerns of over dependency on imported
fuels and provides compelling list of benefits, including government
participation, consistency in coal price and large-scale supply and billions
of dollars foreign exchange savings. The Company is working closely with its
consultant lobbyists to gain approval for moving Project forward and finally
realise the enormous benefits for the Government and peoples of Bangladesh and
our shareholders.
Financials
GCM incurred a lower loss after tax of £693,000 for the six months ended 31
December 2022 (31 December 2021: loss after tax of £763,000). The most
significant expenditure during the period was pre-development expenditure,
while administrative expenses for the six months ended 31 December 2022 were
£368,000 (31 December 2021: £352,000) and capitalised project expenditure
for the period was £277,000 (31 December 2021: £273,000).
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.
The Company will need to raise further funds by early in Q3 of this year. The
Company aims to strengthen GCM's financial position and provide future funding
by raising further funds by end of June 2023, and although there can be no
certainty provided 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
In its World Energy Outlook in October 2022, the International Energy Agency
("IEA") said: "The world is in the midst of the first truly global energy
crisis". It went on to reference "concerns over global energy security,
fuelling the transition to clean energy for the climate and the
interconnection between the energy crisis and food security". The fact remains
for LDC's, such as Bangladesh, the current range of renewable energy systems
are not suitable for baseload power which LDC's struggle to provide. For the
foreseeable future, fossil fuels (principally coal and gas) will dominate
power generation in LDC's as well as in Developing Countries such as China and
India.
While Bangladesh remains in a "net-energy-importing" situation, it is highly
likely its economy will be disadvantaged by ongoing supply constraints and
high prices. Extracting its own domestic energy resources, including moving
forward with the Project, will go a long way to reducing the exposure to the
long-term vagaries of the international energy market.
The Company is grateful for the patience and continued support from its
shareholders and stakeholders and I assure you that we working diligently to
move the Project forward and deliver returns on your investment.
Mohd Najib Bin Abdul Aziz
Non-Executive Chairman
Interim Consolidated Income Statement
6 months ended 31 December 2022 6 months ended 31 December 2021 Year ended
unaudited unaudited 30 June
£000 £000 2022
audited
£000
Operating expenses
Pre-development expenditure (90) (174) (414)
Exploration and evaluation costs 7 5 (35)
Administrative expenses (368) (352) (750)
Operating loss (451) (521) (1,199)
Finance costs (242) (242) (480)
Loss before tax (693) (763) (1,679)
Taxation - - -
Loss and total comprehensive income for the period (693) (763) (1,679)
Earnings per share
Basic loss per share (pence) (0.4p) (0.6p) (1.1p)
Diluted loss per share (pence) (0.4p) (0.6p) (1.1p)
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 2021 12,048 55,611 772 (30,953) 37,289
Total comprehensive loss - - - (1,679) (1,679)
Share issuances 447 2,089 (372) - 2,161
Share issuance costs - (121) - - (121)
Shares to be issued - - 414 - 414
Share based payments - - 17 - 17
Balance at 30 June 2022 12,495 57,576 642 (32,632) 38,081
Total comprehensive loss - - - (693) (693)
Share issuances - - - - -
Shares to be issued - - 90 - 90
Share based payments - - 1 - 1
Balance at 31 December 2022 (unaudited) 12,495 57,576 733 (33,325) 37,479
Balance at 1 July 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
Interim Consolidated Balance Sheet
31 December 2022 31 December 2021 30 June
unaudited unaudited 2022
Notes £000 £000 audited
£000
Current assets
Cash and cash equivalents 740 116 961
Receivables 43 48 436
Total current assets 783 164 1,397
Non-current assets
Property, plant and equipment 1 6 3
Right of use assets 5 37 19
Intangible assets 3 43,005 42,452 42,742
Receivables - - -
Total non-current assets 43,011 42,495 42,764
Total assets 43,794 42,659 44,161
Current liabilities
Payables 4 (1,375) (1,457) (1,369)
Lease liabilities (15) (31) (27)
Borrowings 5 - - -
Total current liabilities (1,390) (1,488) (1,396)
Non-current liabilities
Lease liabilities - (11) (1)
Borrowings (4,925) (4,445) (4,683)
Total non-current liabilities (4,925) (4,456) (4,684)
Total liabilities (6,315) (5,944) (6,080)
Net assets 37,479 36,715 38,081
Equity
Share capital 6 12,445 12,048 12,495
Share premium account 6 57,576 55,611 57,576
Other reserves 733 772 642
Accumulated losses (33,325) (31,716) (32,632)
Total equity 37,479 36,715 38,081
Interim Consolidated Statement of Cash Flows
6 months ended 31 December 2022 6 months ended 31 December 2021 Year ended
unaudited unaudited 30 June
£000 £000 2022
audited
£000
Cash flows used in operating activities
Loss before tax (693) (763) (1,679)
Adjusted for:
Non-cash pre-development expenditure 90 174 414
Non-cash finance costs 242 242 480
Other non-cash expenses - - 30
(361) (347) (755)
Movements in working capital:
(Increase) in operating receivables (7) (34) (23)
Increase/(decrease) in operating payables 25 35 (68)
Cash used in operations (343) (346) (846)
Net cash used in operating activities (343) (346) (846)
Cash flows from investing activities
Payments for intangible assets (278) (255) (520)
Payments for property, plant and equipment - - -
Net cash generated from investing activities (278) (255) (520)
Cash flows from financing activities
Issue of ordinary share capital 400 - 1,731
Share issue costs - - (121)
Proceeds from borrowing - - -
Interest paid - - -
Net cash from financing activities 400 - 1,610
Total (decrease)/increase in cash and cash equivalents (221) (601) 244
Cash and cash equivalents at the start of the period 961 717 717
Cash and cash equivalents at the end of the period 740 116 961
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 21 March 2023.
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 2022 and applied
in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the six months
ended 31 December 2022 have been prepared using the same policies and methods
of computation as applied in the financial statements for the year ended 30
June 2022. 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 2022 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 (the
"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 believe that the Phulbari Coal and Power Project
(the "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. This includes the option to supply coal to
both the Government's commissioned and in the pipeline power plants, which
total 11,755MW. The Government is seeking to grow its economy and deliver
electricity at prices that will ensure competitiveness of its industries. The
Group's strategy of developing the Phulbari coal deposit as a captive,
large-scale, open pit mining operation supporting some 6,600MW of highly
energy-efficient Ultra-Supercritical power generation will enable cheaper
coal-fired electricity than imported coal options. This evolving strategy has
been enhanced to include installation of a large-scale Solar Power Park (up to
2,500MW) within the Project area, to be installed within the first two years
of gaining land access; operating the Phulbari coal mine as a "Net Zero
Carbon" or "Green Mine"; and participation modalities for Government.
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 £43,005,000 as at
31 December 2022.
.
Going concern
As at 31 December 2022, the Group had £740,000 in cash and £601,000 in net
current liabilities. The directors and management have prepared a cash flow
forecast to March 2024, 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 intends to explore
alternative funding options over the second quarter of 2023, with the aim to
complete and secure the necessary third-party funding by the end of June 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 £277,000. 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 2022 31 December 2021 30 June
unaudited unaudited 2022
£000 £000 audited
£000
Trade payables 581 663 575
Related party accrued payable 794 794 794
Transaction costs payable - - -
1,375 1,457 1,369
The related party accrued payable of £794,000 at 31 December 2022 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 2022 31 December 2021 30 June
unaudited unaudited 2022
£000 £000 audited
£000
Short-term loan facility from related party 4,925 4,445 4,683
4,925 4,445 4,683
GCM is party to a £3,500,000 short-term loan facility with its largest
shareholder, Polo Resources Limited ("Polo"). As at 31 December 2022, the
Company owed £4,925,000, comprising £3,200,000 loan balance and accrued
finance costs on borrowings of £1,725,000.
The Company on 1 March 2022, as part of the completed placing and
subscriptions, amended the terms of the loan facility, such that 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
The Company on 26 March 2021, as part of the completed 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. 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
remained unchanged.
6. Share issues
There were no shares issued during the period.
7. Post-balance sheet events
On 9 January 2023, the Company announced that it had agreed a Joint
Development Agreement ("JDA") with PowerChina International Group
Limited ("POWERCHINA"), and Dyani Corporation Ltd ("DYANI") in relation to
a proposed new greenfield solar project called the Dinajpur Solar Power
Project ("SOLAR PROJECT") which would be an adjunct project in conjunction
with the Phulbari Coal and Power Project ("the Project"). The JDA has a term
of 12-months and does not at this stage commit any of the parties to expend
any specified sums. It is the intention that it will be superseded, in due
course, by a more detailed working arrangement between the parties, but may be
terminated earlier under certain prescribed conditions.
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. 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 can support some 6,600MW. GCM requires approval from the
Government of Bangladesh in order to develop the Project. The Company has a
strategy of linking the Company's mine proposal to supplying coal to the
Government of Bangladesh's existing and in the pipeline coal-fired power
plants and / or power plants developed development partners. Together with
credible, internationally recognised strategic development partners, GCM aims
to deliver a practical power solution to provide the cheapest coal-fired
electricity in the country, in a manner amenable to the Government of
Bangladesh.
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