21st Mar 2005 07:03
Aricom PLC21 March 2005 THIS INFORMATION IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THEUNITED STATES Aricom plc Preliminary Results for the Period ended 31 December 2004 London, March 21 2005. Aricom plc ("Aricom" or the "Group"), the titaniumdioxide company with operations in Russia, today announces its financial resultsfor the period between the formation of the company and 31 December 2004. Operational highlights: • Completion in November 2004 of pre-feasibility studies on mining and beneficiation operations at Kuranakh in relation to the proposed production of ilmenite and titanomagnetite concentrates. • 35.4 million tonnes of C2 reserves and an aggregate of approximately 80 million tonnes of P1 and P2 resources of ilmenite-titanomagnetite ore indicated by Dalgeofizika under the Russian classification system and confirmed by Wardell Armstrong International, sufficient for over 50 years of production at planned extraction rates. • Confirmation of the economic presence of iron ore, in the form of titanomagnetite, with an estimated cost of production of US$13 per tonne based on target extraction rates of 2.2 million tonnes per year of ilmenite-titanomagnetite ore. • Conditional offtake agreements signed in January 2005 with China National Gold Corporation for the sale of a minimum of 3,300,000 tonnes of titanomagnetite concentrate over 5 years and a minimum of 360,000 tonnes of ilmenite concentrate over 1.5 years once the mine comes on stream. • Indications of the presence of gold and zircon at the Kuranakh deposit. • Successful completion of a placing of 38.25m shares at 28p raising approximately US$20m (approximately US$18m net of expenses) in March 2005 to complete a full technical and economic feasibility study for the mining project at Kuranakh and undertake initial preparatory works in relation to the initial development of mining and beneficiation operations at Olekma and Kuranakh. Financial highlights: • Group turnover of US$3.2m represented by turnover at Chemelt, Aricom's TiO2 trading company based in Moscow, which posted a 50% year-on-year increase in sales since acquisition • Group operating loss of US$4.3m • Basic and diluted loss per share of US$0.06 • Capital expenditure and expenditure on acquisitions for the period was US$5.4m • Group net debt at period end was US$2.7m • Group shareholder funds at period end were US$2.3m • Group net assets at period end were US$2.8m Sir Malcolm Field, Chairman said: "It is gratifying to look back and see the progress we have made during theperiod in initiating the first stage of Aricom's strategy, the mining andbeneficiation operations. Following our successful fundraising in the firstquarter of 2005, we are now working on the physical infrastructure at the minesite. This year, we also expect to initiate the second stage of our project, thedevelopment of the TiO2 processing plant. We are confident that we have theright people and the financial resources to advance rapidly with our plans forthis year. Raw materials markets are enjoying solid growth and we are seeing strong demandfor the iron ore and ilmenite concentrate to be produced at the mine. Existingproducers of iron ore have recently been successful in negotiating priceincreases in excess of 70%. It is also a good time for the TiO2 market in Russiaand China, where demand for the product continues to grow. Given these marketconditions and outlook, we are more confident than ever in Aricom's ability topioneer a successful mining and TiO2 business in Russia and capitalise on theclear market opportunity." Enquiries: Tom Swithenbank/ Sir Malcolm FieldAricom PLC 020 7201 8939 Tom Randell/David Simonson Merlin 020 7653 6620 Statement of the Chairman, Sir Malcolm Field Strategy In November 2004, we announced that following extensive research studies duringthe year we were able to confirm the market opportunity described in the AIMAdmission Document published in December 2003 and also the potential for us tobecome a vertically integrated TiO2 producer. The future strategic direction for Aricom is to be implemented in two stages: • The construction and development of the mining operation at Kuranakh and the beneficiation plant at Olekma. • The construction of a processing plant to produce 70,000-80,000 tonnes per annum of TiO2 pigment. When both of these stages are completed we should be able to exploit thebenefits of being a vertically integrated TiO2 producer. Market Positioning Aricom's market positioning is to become a low-cost vertically integratedproducer of high-quality TiO2, serving the high-growth markets of Russia andChina. We have been very encouraged by the planning and development work we haveundertaken so far on the mining programme. We are enthusiastic about thepotential of our future mining operations to provide us with good-qualityilmenite ore and iron ore, in the form of titanomagnetite, for processing orsale. The presence of titanomagnetite has substantially changed the economics ofthe mining project, with indicated returns exceeding management's originalexpectations. We are very enthusiastic about the prospects for the mine as aprofitable and cash-generative business, particularly given the recentlyannounced price increases in excess of 70% for existing iron ore producers. Our plan for the mining project as a stand-alone operation should provide goodreturns to investors and will be an important source of competitive advantage toour TiO2 processing business. The presence of gold and zircon, albeit not yetquantified, could offer another potential source of revenue. The key foundations for the establishment of a vertically integrated low-costproducer of high quality TiO2 are being put in place and will be developedfurther in 2005. They cover the mine located at Olekma and close to the Chineseborder, the favourable findings from our geological studies regarding ourproducts, the expected location of our TiO2 processing plant at Tynda and thefurther development of our fast-growing, wholly-owned marketing and distributioncompany, Chemelt. We have yet to finalise arrangements with a technology licence provider for ourprocessing plant but I am pleased to report we are continuing our discussionswith a number of very interested parties and expect to conclude a deal over thecourse of the year. We remain confident in our assumption of continuing strong economic growth inboth the Russian and Chinese markets and accompanying increasing demand for ourproducts. Anglo-Russian Partnership The strong links with Peter Hambro Mining and its considerable experience andoperational success in the far east of Russia is helping Aricom to establish astrong Anglo-Russian partnership which is essential for our future success. We continue to build a strong management team in both the UK and Russia. Duringthe year we were delighted to welcome to the Board, Mr Yuri Makarov, who isresponsible for developing and managing our mining operation. Future Investment Since the year end we have completed a successful fundraising of approximatelyUS$20m (approximately US$18m net of expenses). This will enable us to fund thenext stages of development of the mine and beneficiation operations at Kuranakhand Olekma. The completion of this work is intended to be funded by furtherequity and debt financing to be sought later this year. Sir Malcolm FieldChairman This announcement shall not constitute or form any part of an offer orinvitation to subscribe for, underwrite or otherwise acquire, or anysolicitation of any offer to purchase or subscribe for, securities including inthe United States. This announcement does not constitute an offer of securities for sale in theUnited States of America. Neither this announcement nor any copy of it may betaken or distributed in the United States of America or distributed orpublished, directly or indirectly, in the United States of America. Any failureto comply with this restriction may constitute a violation of US securities law.The securities referred to herein have not been and will not be registered underthe US Securities Act of 1933, as amended (the "Securities Act"), and may not beoffered or sold in the United Sates to or for the benefit of US persons unlessthey are registered under the Securities Act or pursuant to an availableexemption therefrom. No public offering of securities is being made in theUnited States. Canaccord, which is regulated by The Financial Services Authority, is actingsolely for the Company in relation to the Placing. Canaccord is not acting for,or responsible to, any person other than the Company for providing theprotections afforded to customers of Canaccord. Aricom plcConsolidated Profit and Loss AccountFor the period ended 31 December 2004(expressed in US $'000s) Note 2004 $'000 Turnover 3,199Cost of sales (3,003) ---------Gross profit 196Selling expenses (162)Administrative expenses (2,776)Other operating expenses, net (1,556) ---------Operating loss (4,298)Net interest receivable 27 ---------Loss on ordinary activities before taxation (4,271)Taxation (9) ---------Loss on ordinary activities after taxation (4,280)Minority interest 26 ---------Loss on ordinary activities after taxation and minority interest (4,254) --------- Basic and diluted loss per ordinary share 8 ($ 0.06)Proforma basic loss per ordinary share 8 ($ 0.04) There are no recognised gains or losses other than those included in the profitand loss account. The above results all relate to continuing operations. Aside from certainmanagement and administrative functions all operations were acquired in theperiod. Aricom plcConsolidated Balance SheetAt 31 December 2004(expressed in US $'000s) Note 2004 $'000Fixed assetsTangible assets 5,435 --------- Current assetsStock 572Debtors: due within one year 492Debtors: due after more than one year 297Cash at bank and in hand 1,157 --------- 2,518Creditors: amounts falling due within one year (1,753) ---------Net current assets 765 Total assets less current liabilities 6,200 Creditors: amounts falling due after one year (3,400) ---------Net assets 2,800 --------- Capital and reservesCalled up equity share capital 169Share premium 6,403Profit and loss account (4,254) ---------Equity shareholders' funds 7 2,318Minority interests 482 ---------Total capital employed 2,800 --------- Aricom plcConsolidated Cash Flow StatementFor the period ended 31 December 2004(expressed in US $'000s) Note 2004 $'000 Net cash outflow from operating activities 3 (3,915)Returns on investments and servicing of financeInterest received 67Interest paid (283) --------- (216) --------- Taxation - Capital expenditure and financial investmentPurchase of tangible fixed assets (2,508) Acquisitions and disposalsPurchase of subsidiary undertakings (2,617)Cash acquired with subsidiaries 24 ---------Net cash outflow on acquisitions and disposals (2,593) --------- Cash outflow before financing (9,232) FinancingReceipts from borrowings 3,597Gross receipts from issuing ordinary and preference shares 7,827Preference shares redeemed (88)Share issue costs (1,167) ---------Net cash inflow from financing activities 10,169 ---------Increase in cash at bank and in hand 4 937 --------- Aricom plcReconciliation of net cash flow to movement in debtFor the period ended 31 December 2004 2004 $'000Increase in cash 937Increase in debt (3,597) ---------Increase in net debt resulting from cashflows (2,660)Loans acquired with subsidiaries (302)Foreign exchange movements 220 ---------Increase in net debt for the period (2,742)Net debt at beginning of period - ---------Net debt at end of period (2,742) ========= Notes to the financial informationFor the period ended 31 December 2004 1. Financial information The financial information has been prepared in accordance with generallyaccepted accounting principles in the UK. The accounting policies applied inpreparing the financial information are consistent with those adopted anddisclosed in the Group's statutory accounts for the period ended 31 December2004. The financial information set out above does not constitute the Group'sstatutory accounts for the period ended 31 December 2004 but is derived from theGroup's statutory accounts, for that period. The auditors' report on thestatutory accounts for the period ending 31 December 2004 was unqualified anddid not contain statements under section 237(2) of the Companies Act 1985(regarding adequacy of accounting records and returns) or under section 237(3)(regarding provision of necessary information and explanations). 2. DividendsThere is no current intention to pay a dividend. In due course, the Board ofDirectors will consider the payment of dividends, if and when it is in aposition to do so. 3. Reconciliation of operating loss to net cash outflow from operating activities 2004 $'000 Operating loss (4,298)Depreciation charges 21Write down of fixed assets 4Increase in debtors (349)Increase in creditors 1,231Increase in stock (524) ----------- Net cash outflow from operating activities (3,915) ----------- 4. Analysis of change in net debt Opening Cashflow Acquisition Foreign Closing Balance (excluding exchange Balance cash) movement $'000 $'000 $'000 $'000 $'000Cash at bankand in hand - 937 - 220 1,157Debt dueafter morethan one year - (3,400) - - (3,400)Debt duewithin one year - (197) (302) - (499) --------- --------- ---------- --------- --------- - (2,660) (302) 220 (2,742) ========= ========= ========== ========= ========= 5. Currency of financial statements The currency rates used in the preparation of the financial information set outherein are as follows: Closing Average ------- -------Russian Roubles : US $ 27.7487 28.5714US $ : Pound Sterling 1.9160 1.79546US $ : Euro 1.3538 1.22675 6. Post balance sheet events After the period end the Company raised further capital through a placing of 38,250,000 shares at 28p to provide the Company with sufficient funds to continue the development of its plans. In February 2005, OOO Aricom signed conditional offtake agreements with China National Gold Corporation. The agreements provides for OOO Aricom to supply to China National Gold Corporation a total of at least 360,000 tonnes of ilmenite concentrate over one and a half years and at least 3,300,000 tonnes of titanomagnetite concentrate over five years starting in 2007. On 5 March 2005, OOO Olekminsky Rudnik, a subsidiary, entered into finance leasing arrangements with Expo-leasing, a branch of Expobank. The capital value of the lease amounts to US$2.5m. On 17 March 2005 the Group reduced the balance of the loan outstanding to PeterHambro Mining plc to US$10. The balance as at 31 December 2004 was US$3.4m. The US$6m loan facility with Peter Hambro Mining plc remains in place and expires on 31 December 2008. 7. Combined statement of reserves and reconciliation of movement in shareholders' funds Share Capital Share Premium Profit and Total loss account $'000 $'000 $'000 $'000At 12 September 2003 - - - -Loss for theperiod - - (4,254) (4,254)Issue of sharecapital 169 7,570 - 7,739Share issuecosts incurredin the period - (1,167) - (1,167) -------- ---------- ---------- ---------At 31 December2004 169 6,403 (4,254) 2,318 ======== ========== ========== ========= 8. Loss per ordinary sharea) Basic and diluted loss per ordinary share Loss for the year ($'000) (4,254)Weighted average number of ordinary shares 75,632,851Basic and diluted loss per ordinary share ($0.06) Basic and diluted EPS are the same because the only outstanding share optionsare anti-dilutive as the Group has made a loss. b) Proforma loss per ordinary share Loss for the year ($'000) (4,254)Proforma weighted average number of ordinary shares 94,910,351Proforma loss per ordinary share ($0.04) The Group did not trade until it listed on 31 December 2003. The proformaweighted average has been calculated as if the period began on 31 December 2003and not the date of the Company's formation. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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