2nd Jun 2016 09:46
LONDON (Alliance News) - North River Resources PLC Thursday said it will need to raise funds in the short term in order to progress resource drilling at its flagship project and to keep the company ticking over whilst it waits to be awarded the all-important mining permit.
The miner is currently focused on re-opening its brownfield Namib project in Nambia which is prospective for lead and zinc.
With no revenue coming through as of yet, the company saw its pretax loss in 2015 widen to GBP9.8 million from the GBP3.3 million loss booked in the previous year after booking a large amount of impairments in the year totalling GBP6.7 million.
North River Resources did not book any impairments in 2014 and the ones reported on Thursday mainly relate to its copper assets in West Africa to take the fall in copper prices into account, resulting in a GBP2.0 million impairment being placed against the EPL 3257 concession and a GBP4.7 million impairment being booked against the EPL 3258 concession.
Although North River Resources managed to cut its exploration and evaluation expenditure in the year to GBP1.1 million from GBP2.2 million, those savings were completely swallowed up by the rise in administrative costs in the year to GBP1.9 million from GBP1.1 million.
The company raised USD4.0 million by conducting an open offer and by issuing convertible loan notes to Greenstone Resources back in September, but said its cash balance has slowly declined from GBP1.9 million at the start of 2015 to GBP1.4 million at the end of the year - adding that balance has dropped further to only GBP330,578 at the end of May 2016.
Unsurprisingly, the company needs cash to keep going and in order to continue developing its assets. North River Resources said it has "possible" exploration expenditure totalling GBP600,000 throughout 2016, whilst the total capital cost for the life of its flagship project is expected to be around USD27.8 million, or GBP19.4 million.
"The company will nonetheless need to undertake a working capital fundraising in the short term, in order to continue to fund the work programme over a longer period than envisaged at the time of the placing and open offer completed in October 2015, and we are in the process of evaluating funding options and the structure under which funds may be raised," said Chairman Rob Beddows.
Looking at the fundraising conducted last year, North River saw a big shortfall in the amount of shares that were taken up under its open offer - raising only a fraction of what it wanted - causing it to issue convertible loan notes worth USD3.1 million to Greenstone under the underwriting facility to make up for the poor uptake.
Notably, the price of the shares offered under that fundraising was 0.2 pence - substantially higher than North River's current share price.
North River shares were down 5.6% to 0.118 pence per share on Thursday, and since the start of September, prior to the previous fundraising being launched, the company has seen its share price drop by over 38%.
Greenstone is comfortably the biggest shareholder in the company with a 29.99% stake - with the second largest shareholder holding a considerably smaller stake of 12.13%.
North River is currently awaiting to be awarded a mining licence for the Namib project but is focused on resource drilling in the meantime to extend the potential life of the mine. Currently, Namib would only be able to operate for around three-and-a-half years, meaning new resources need to be found to extend the mine life further.
"While good progress was made on the project workstreams, the mining licence for the Namib project remains outstanding. The uncertainty around timing and conditions to be attached to the issue of the licence has been a source of frustration for the company and its shareholders and has led to repeated changes in the pre-construction work programme and has made longer term planning for taking the project forward to an investment decision very difficult," said the company.
Authorities have confirmed there are no technical issues with the company's permit application, but the miner said it still remains cautious about the timeframe and "extent to which agreement can be reached".
"In light of the uncertain timeframe for securing the mining licence and gaining clarity on the implications of the proposed broad based economic empowerment legislation, we are focusing our immediate efforts in two areas: completing the resource expansion drilling campaign and progressing the mining licence application," said Beddows.
By Joshua Warner; [email protected]; @JoshAlliance
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