12th Jul 2006 07:00
Avocet Mining PLC12 July 2006 12 July 2006 Avocet Mining PLC PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2006 The Board of Avocet Mining PLC ("Avocet" or "the Company"), the Central andSouth East Asian gold production and exploration company, is pleased to announceits preliminary results for the year ended 31 March 2006. Nigel McNair Scott, the Company's chairman commented on the results: "Avocet has made significant progress during the period under review: we haveincreased gold production through bringing a third gold mine on stream, raisedour reserve and resource base significantly, and lengthened the life of mine atPenjom. The Company is now entering the next phase of its development whichincludes a further growth in production, increasing the reserve base andbringing new projects into production over the next few years." HIGHLIGHTS • Turnover up 27% at US$90.5 million • Operating cash flow up 17% at US$19.9 million • Gold production from three mines up 21% at 208,530 ounces • Penjom life of mine production increased by 41% to 558,250 ounces • ZGC resources at Jilau up 38% to 2,756,200 ounces • Group gold reserves up 62% to 2.0m ounces • Group gold resources up 17% to 7.2m ounces • US$50m raised to further Company's expansion plans HEADLINE NUMBERS ------------------------- -------- -------- -------- -------- -------- Year to Year to Year to Year to Year to 31 March 31 March 31 March 31 March 31 March 2002 2003 2004 2005 2006 ------------------------- -------- -------- -------- -------- -------- US$'000 US$'000 US$'000 US$'000 US$'000Turnover 36,500 48,547 68,844 71,060 90,493Operating cash flow 5,718 9,876 23,036 17,092 19,942Gross profit 4,010 6,788 17,064 18,559 18,182Pre-tax profit/(loss) (15,671) 3,647 15,592 15,803 16,246Profit/(loss) after taxand minority interests (15,662) 2,157 11,280 11,686 11,160Basic earnings/(loss) per (23.84c) 3.03c 12.20c 11.26c 10.62cshare -------- -------- -------- -------- ---------------------------------Gold produced (ozs) 107,340 134,580 179,930 172,938 208,530Total cash cost(US$/oz) 225 219 232 278 300------------------------- -------- -------- -------- -------- -------- ________________________________________________________________________________For further information please contact: Avocet Mining PLC Jonathan Henry (Chief Executive Buchanan Communicationsand interim Finance Director) Bobby Morse, Director020 7907 9000 Ben Willey, Associate Directorwww.avocet.co.uk Tel: 020 7466 5000 www.buchanan.uk.comEvolution Securities Limited Rob Collins - 020 7071 4311 Grant Thornton (UK) LLPPhilip Secrett - 0870 991 2578 Notes to Editors Avocet is a mining company listed on the AIM market of the London StockExchange. The Company's principal activities are gold mining and exploration inMalaysia (as 100% owner of the Penjom mine, the country's largest goldproducer), Tajikistan (as 75% owner and operator of ZGC, Tajikistan's principalgold mine), and Indonesia (as 80% owner of the North Lanut gold mine in NorthSulawesi). The Company has a number of advanced mining and exploration projectsin Asia and owns 26% of Dynasty Gold Corporation, a Canadian listed explorationcompany active in Western China. CHAIRMAN'S STATEMENT Avocet achieved record gold production in a year that has seen surging commodityprices and a resurgence in the mining industry. Our three mines in Malaysia,Indonesia and Tajikistan produced a total of 208,530 ounces of gold and ourexploration efforts increased the Group's resources to over seven millionounces. Following our third mine going into production last year, we are nowaiming for a fourth mine, at Bakan in Indonesia, to commence production within24 months. Supported by the positive outlook for the gold price and with theCompany beginning to benefit from growing economies of scale, Avocet remains oncourse to continue its rapid growth. With a diversified portfolio of high quality production and exploration assetsAvocet is on track in its strategy to become a one million ounce-a-year goldproducer with a ten year reserve base. After more than six years of successfully turning Avocet into a significant goldproducer, John Catchpole has decided to resign as Chief Executive and from theboard for personal reasons. I am pleased that John has agreed to remain as anexternal consultant to the Company. The board would like to thank him for hisyears of hard work and dedication. Jonathan Henry will take over the role ofChief Executive and I feel that Jonathan's period as Finance Director, a role hehas occupied since October 2002, makes him a natural successor to John. Sincethen Jonathan has been closely involved in the operations and strategicdirection of the Company. We are currently interviewing potential candidates totake over the Finance Director's position. Meanwhile, Jonathan will serve inthis position on an interim basis. Additionally I welcome Mike Donoghue to theboard as a non-executive director. With over 30 years of experience in themining industry, Mike brings a wealth of corporate and project experience to theboard. We have also appointed Eric Vesel to the position of Chief OperatingOfficer, following a number of years in senior positions with the Company, mostrecently as Regional Director for South-East Asia. It is a pleasure for me to report on our results for the year to 31 March 2006together with an update on the Company's progress. The Gold Market The gold price started the year on a steady basis, trading between US$415/oz andUS$450/oz. However, by September 2005 circumstances had changed and since thenwe have seen one of the most volatile periods in the history of the spot goldprice. Since the end of the year the price has traded as high as US$730/oz andmarket commentators believe it may test that level again before long. Whereas in2005 we saw the price trade in very close alignment to the US dollar, thiscongruence has been broken for most of 2006 as the gold price moved steadilyupward as it, and other commodities, became a focus for many hedge funds andother investors. In January 2006, with gold trading at US$550/oz, we were able to take advantageof the high volatility in the gold market to reduce, by 18,000 ounces, theCompany's sales' commitment under a US$300/oz obligation, retain the Company'sleverage to a higher gold price and protect the Company from any potential dropin the price below US$450/oz over the next three years. In order to achieve thiswe purchased put options for 10,000 ounces per month at US$450/oz over a 36month period from April 2006 to March 2009 and sold call options for 10,000ounces per month at US$700/oz over the same period. This transaction was enteredinto for zero cash consideration and no margin calls apply. With currentvolatility in the gold market at historically high levels we are reviewing thepossibility to restructure this position even more favourably. Financial Results Turnover increased 27 per cent to US$90.5 million reflecting a six per centincrease, to US$437/oz, in the average realised price of all gold sales from theGroup's three operations. Gold sales increased 22 per cent to 207,995 ounces forthe year. Sales were achieved at a price eight per cent below the average spotprice for the year of US$477/oz as the Group liquidated 48,000 ounces of a hedgeposition at an average price of US$302/oz. I am pleased to add that thisposition has now been fully liquidated following a further 12,000 ounces ofsales at an average price of US$313/oz since the year-end. Although the gold price and gold sales increased during the year, gross profitwas flat as higher consumable prices had an adverse effect on costs andtherefore the gross margin was reduced to 20 per cent compared to 26 per centfor the previous year. On average, cash costs for the Group were US$300/oz forthe year. Cash costs at Penjom, in Malaysia, and ZGC, in Tajikistan, were up 19per cent (US$242/oz) and 44 per cent (US$634/oz) respectively whereas at NorthLanut, in Indonesia, cash costs were down 60 per cent (US$201/oz). Costs at ZGCincreased on account of the large amount of waste stripping in the Jilau Pit,which was expensed. The decrease in cash costs at North Lanut was a reflectionof the mine reaching steady state production in the early part of the year. Thetotal cost of gold sold by the Group was up eight per cent to US$344/oz,inclusive of US$40/oz for depreciation and US$4/oz for the amortisation ofPenjom's historical waste stripping costs, which have been deferred. With sales into the gold hedge and higher operating costs, operating profitdecreased seven per cent to US$14.9 million. Operating cash flow increased by 17per cent to US$19.9 million mainly as a result of a full year's production atNorth Lanut. The Group's underlying pre-tax profit for the year was US$13.8 million. Thereported figure increased to US$16.2 million. This included a gain of US$1.0million on the release of an historical closure provision taken at the time theGroup closed its tungsten operations in California, USA. It also includes aUS$1.4 million gain on the sale on an investment in Primary Metals Inc., aCanadian listed tungsten producer. The profit after taxation and minorityinterests was down five per cent to US$11.2 million due to a higher tax chargeand lower minority interest. Earnings were 10.6 cents per share. The Group's capital expenditure reduced to US$13.4 million, with US$5.3 millionspent on Group exploration, and the rest spent equally on capital improvementsat North Lanut and ZGC, apart from a small capital outlay at Penjom. Year-endcash balances rose to US$12.9 million and have been boosted further since theyear-end following the raising of just over US$50 million through the issue ofnew equity at 200p per share. The Group had limited debt at year-end; US$1.4million from lease finance in Indonesia, and has a revolving credit facility ofUS$10 million with Macquarie Bank of Australia which remains un-drawn and a US$5million overdraft facility from Barclays Bank which also remains un-drawn at theyear-end. Operations, Projects and Joint Ventures Malaysia Penjom had another excellent year, with 117,680 ounces produced and an increasein the mine life by a further 41 per cent. Penjom now has a larger resource andreserve base than at any time in its history. Although unit production costsdecreased on a tonnage basis both in the mine and plant, unit cash costsincreased to US$242/oz, mainly on account of an increase in tonnage mined, up 39per cent, compared to the previous year. This is a direct result of the higherwaste-to-ore ratios and accelerated stripping required by the expanded life ofmine plan. Penjom, like all mines globally, has not been immune to the high costinflation in key consumables, such as diesel, steel and other chemical productsused in the mining industry. Whilst our industry benefits from high commodityprices for the end product we sell, there will continue to be cost pressures onall our mines while the current period of historically high commodity pricesexists. Cash costs at Penjom were also adversely affected by the appreciation inthe Malaysian ringgit against the US dollar following the removal of thecurrency peg in July 2005. Additionally from 1 January 2006 the local stategovernment changed the royalty rate from a percentage of the gazetted goldprice, previously documented at US$220/oz, to the spot price, thereby increasingthe local royalty payable. Whilst these pressures have had a detrimental effect on costs, this has morethan been compensated for by the excellent exploration success we have had atPenjom. In October 2005 we remodelled the orebody to incorporate the drillingresults from the previous 12 months drilling campaign. This allowed us to reporta substantially larger resource in November 2005. As at 31 March 2006 the Penjomresource stood at 7,399,000 tonnes at 3.94 g/t for a contained total of 937,100ounces, an increase of 37 per cent, following depletion of 131,000 ounces, fromthat reported a year ago. The new mine plan contains 558,250 ounces of gold(3,511,000 tonnes at 4.95 g/t including 160,350 ounces of inferred resources),of which 136,000 ounces are contained in ore stockpiles. During the year we drilled 24,400 metres of reverse circulation and diamonddrilling. A further round of exploration drilling has commenced in order tobring current resources into the mine plan and continue to explore extensions tothe north, south and at depth, where the orebody remains open. During the yearresources have been added at a cost of discovery of less than US$5 per ounce. Elsewhere in Malaysia we completed almost 1,000 metres of scout reversecirculation drilling at a target known as Panau, located to the north-west ofPenjom and just north of our Buffalo Reef prospect. This programme intersectedsignificant mineralisation at depth with a best result of 27m at 1.04 g/t Au,including 2m at 9.53 g/t Au. This has justified further work at this prospectduring the current year. Indonesia At the start of the year we brought in an experienced operational managementteam to operate the North Lanut mine which was commissioned in October 2004.Gold production for the year was 54,520 ounces and cash operating costs wereUS$201/oz for the full year. This gave the mine an operating cash flow ofUS$13.4 million for its first full year of operation. Given that the mine'scapital cost was approximately US$15 million, this amounts to an extremely rapidpayback. The mine is now operating at design capacity with recovery rates fromthe dump leach running at 75 per cent. Heavy rainfall throughout the year had anadverse impact on the operation: however we are learning to operate under suchconditions. Meanwhile full environmental compliance was achieved throughout theyear. Although drilling at the Effendi deposit had positive results and has furtherincreased the mine life at North Lanut, the main initiative on the property wasexploration in the Bakan district. Whereas the remaining resource at North Lanutis 558,100 ounces, of which 280,800 ounces is contained in the latest life ofmine plan including 47,200 ounces of inferred resource, Bakan has the potentialto host a much larger deposit and we are now confident that a mine will bedeveloped on the property within a two year timeframe. At Bakan we have recently announced the results of exploration drilling atDurian and Osela and an inferred resource of 18.2 million tonnes at 0.9 g/t Aucontaining 533,000 ounces of gold. Potential remains for small, high-grademineralised pods within Main Ridge and at the Camp and Gunung Botak prospects.Main Ridge itself represents a very large, low-grade resource that may addsignificant tonnes above 0.3 g/t Au, the economic ore cut-off grade currentlyused at North Lanut. Elsewhere on the Mongondow Contract of Work ("CoW") we havea number of excellent exploration targets where further work has been deferredin favour of resource development at Bakan. Elsewhere in Indonesia, where we have been actively evaluating other potentialprojects, we finalised the first phase of drilling on the Idenburg property. TheIdenburg CoW includes exploration and mining rights over 108,600 hectares in thePapua Province of the island of New Guinea. We have spent US$1.7 million of aUS$2.5 million earn-in that will give us a 51 per cent interest in the project.We drilled ten holes (1,400 metres) at Sua and intersected several shallowNW-dipping mineralised horizons as announced in November 2005 (best: 7.5m at16.0 g/t Au). Further drilling has been delayed by severe flooding that haswashed out roads and bridges in the province. We expect drilling to recommencelater in the year. In South Sulawesi we have staked prospective ground and are undertaking surfaceexploration work. Work to date has identified several medium to high-gradeorogenic quartz lodes in the margin of a monzonite intrusion. Soil samplingidentified a significant multi-element anomaly that has the potential to becomea drill target. Tajikistan The main focus for the year at ZGC in Tajikistan was on stripping waste from theJilau Pit, which now combines the previously named Jilau Main and Jilau Northpits. This is required in order to access areas that contain 83 per cent of thelatest, expanded resource and higher grade ores that will constitute themajority of gold production from the existing carbon-in-leach (CIL) plant. As we get to the main orebody in Jilau the amount of ore being mined hasincreased so that the plant is becoming less reliant on the low grade stockpilesthat have constituted its main feed over the last two years. Higher grade ore inthe Jilau Pit is soon to be mined, as indicated by the resource model. As webegin to see the effects of the capital investment program that commenced inlate 2004, total mining tonnages were up 18 per cent year-on-year. Movingforward it will be necessary to bring the plant back to its nameplate capacityin order to optimise production. This will require further investment as themove to treating fresh ore has shown the need for further CIL plant upgradeswith throughput down 12 per cent and recovery down seven per cent from theprevious year. During the year we completed the construction of dump leach facilities to treatlow grade material at Jilau. This was completed on schedule and well belowbudget. The first gold pour from these facilities occurred in September 2005.Dump leach production will now constitute an important, although currentlysmall, part of total gold production as we work to bring recoveries up to thedesign criteria of over 50 per cent. Incremental production from the dump leachof 3,090 ounces for the year was achieved at a cash cost of well below US$200/oz. ZGC's total gold production for the year was below expectations at 36,330 ounceswith a total cash cost of US$634/oz, with diesel and steel milling ballsaccounting for 22 per cent of this. Of this total cost approximately US$200/ozis attributable to the stripping of waste from the Jilau Pit high wall. Metallurgical testwork on the Taror and Chore underground mining projects, witha combined resource base of just under three million ounces, is ongoing at twoindependent laboratories in South Africa and Australia, as well as the Company'sown laboratory at Penjom. During the year we saw great success in our exploration efforts at ZGC. Resourcegrowth was enhanced by a reduction of the cut-off grade to 0.3 g/t Au, by virtueof the successful commissioning of dump leach operations. This grade reductionaccounted for less than half of the 763,100 ounce increase in resources at theJilau and Khirskhona open pits. At the end of the year these pits had a combined2,756,200 ounces of contained gold. From this we were able to increase theplanned mine production by 54 per cent to 1,630,400 ounces of contained gold,including 301,200 ounces of inferred resources. These much larger resource andreserve numbers merit scoping work, which we have commenced, for the expansionof production to optimal levels which may be much higher than our current,revised forecast of 75,000 ounces per year within three years. Exploration at Jilau has given us considerable confidence in the potential toexpand further the resource base in the vicinity of the current deposits. TheJilau Pit is open at depth and Khirskhona remains open to the south and west. We also undertook surface exploration work at the Saursai area, located close toJilau, during the year. This work identified several low to medium grade zonesof sheeted quartz veins (best: 24m at 1.59 g/t Au) through trenching. We havealways said that the Russian resources on ZGC's area of interest, which total inexcess of ten million ounces, have the ability to add significant growth to ourbusiness in Tajikistan. Saursai is one of those areas identified in Soviet timesthat may have a similar style and size of mineralisation to Jilau. China In November 2005 we announced the purchase of shares in Dynasty Gold Corporation("Dynasty"). We now hold a 26 per cent interest in this Canadian listed company.These shares have recently traded up to 40 cents Canadian, with our purchaseprice being approximately 10 cents Canadian. We have the rights to have furthershares issued to us at no additional cash cost, once certain milestones are metby Dynasty. Dynasty has three large blocks of land in Western China. Two of these haverecently been joint ventured to AngloGold Ashanti and the third, Hatu, has beenjoint ventured to us. Under the terms of the recently signed joint ventureagreement we have the rights to acquire up to 36 per cent of Dynasty's potential80 per cent interest in Hatu following expenditure of US$1.8 million. We alsohave a right of first refusal to all other assets Dynasty may acquire inXinjiang Province, the large, western most province of China that lies on theprolific Tien Shan gold belt, where some of the world's largest deposits arelocated, including our Tajikistan properties. Our main focus is on the Qi-2deposit where we are undertaking step out drilling to expand the resource andfinalise metallurgical testwork, with a view to moving the project tofeasibility. Qi-2 is the most advanced project on the tenement and has anindependently verified inferred resource of 16,855,400 tonnes at 1.68 g/t Au(912,600 ounces gold) using a cut-off grade of 1.0 g/t. Group Resources and Reserves Gross Net Attributable (1) -------------------- ------------------------- ---------------------Category Tonnes Grade Metal Tonnes Grade Metal (g/t Au) (ounces) (g/t Au) (ounces) -------------------- ----------- -------- ---------- --------- ------- --------Ore Reserves--------------MalaysiaProved 1,635,000 3.76 197,400 1,635,000 3.76 197,400Probable 1,003,000 6.22 200,500 1,003,000 6.22 200,500 TajikistanProvedProbable 41,693,000 0.99 1,329,200 31,269,750 0.99 996,900 IndonesiaProved 568,000 2.33 42,600 454,400 2.33 34,080Probable 3,594,000 1.65 191,000 2,875,200 1.65 152,800 Reserves 1,960,700 1,581,680 Change from 31 March 2005 (2) 847,100 62% Mineral Resources (excluding reserves)--------------------------------------MalaysiaMeasured 80,000 1.91 4,900 80,000 1.91 4,900Indicated 1,684,000 3.06 165,900 1,684,000 3.06 165,900Inferred 4,267,000 3.36 460,900 4,267,000 3.36 460,900TajikistanMeasuredIndicated 25,854,000 3.39 2,815,000 19,390,500 3.39 2,111,250Inferred 42,929,000 1.01 1,395,000 32,196,750 1.01 1,046,250IndonesiaMeasured 73,000 2.73 6,400 58,400 2.73 5,120Indicated 4,251,000 0.86 117,900 3,400,800 0.86 94,320Inferred 5,284,000 1.18 200,200 4,227,200 1.18 160,160 Resources 5,166,200 4,048,800-------------------- ----------- -------- ---------- --------- ------- --------Total 7,126,900 5,630,480-------------------- ----------- -------- ---------- --------- ------- --------Change from 31 March 2005 (2) 1,080,100 17%-------------------- ----------- -------- ---------- --------- ------- -------- (1) Numbers are net of depletion of material mined during the year (2) Numbers based on the Group's ownership of 100% of Penjom, 80% of North Lanutand 75% of ZGC The mineral resource includes 2.8 million ounces attributed to ZGC's Taror andChore projects and does not include over 10 million ounces of gold categorisedunder the Russian system as C and P resources in a number of deposits at ZGCwhich we have yet to evaluate. The majority of the year-on-year increase comesfrom Penjom and ZGC. From the current balance of mineral resources for Penjom, North Lanut and ZGC'sexisting operations at Jilau, the Group's latest mining and processing plans aresummarised below. It should be noted that we have assumed a gold price of US$450/oz in forecasting our production plans. Group Life-of-Mine Production at a US$450/oz(1) (ounces) Forecast at 31 March 2005 (2) 1,758,700Depleted during the year 246,600Additions 957,350Forecast at 31 March 2006 2,469,450Including:Proven & Probable Reserves 1,960,700Inferred Resources 508,750 (1) Includes minority interests and excludes processing losses. (2) Forecast from 31 March 2005 was based on a US$400/oz gold price. All references to resources and exploration results have been approved forrelease by Peter Flindell, BSc (Hons) MAusIMM, Chief Geologist for Avocet, whohas more than 20 years experience in the field of activity concerned and is aCompetent Person as defined by the Australian JORC Code (2004). All referencesto resources and reserves are made under the JORC standard. Peter Flindell hasconsented to the inclusion of the material in the form and context in which itappears. Outlook The volatility in the gold price is likely to continue for the foreseeablefuture. This may allow us to increase the price of our US$450/oz put positionsto further underpin our business for the next few years. Any appreciable rise inthe gold price will add further value to the business as we expand production. Our operational assets in South-East Asia have delivered strong cash flowthroughout the year, and this is expected to continue. In Central Asia we havemade progress in our endeavours to turn around ZGC. We have dipped a toe intoChina and believe there could be excellent opportunities there and meanwhile itwill strengthen our familiarity with the country. We believe Dynasty's Hatuproject presents such an opportunity. We have assembled an excellent pipeline of exploration projects at variousstages of advancement and therefore will step up expenditure in the current yearto close to US$10 million to advance some of these projects and continue toextend the mine lives of our existing operations. At Penjom we have invested in new trucks to replace the contractor fleet. Thishas been possible due to increased gold reserves and the fast payback from usinglarger and more fuel efficient trucks. The new mine plan has given Penjom theability to produce over 100,000 ounces for the next four to five years.Continued exploration success is likely and therefore we have increased ourexploration spend from last year's US$1.3 million to US$2 million this currentyear: the majority to be spent in and around Penjom where we will explore theextensions to the north and south and at depth. This program will include atotal drilling budget of 32,000 metres of reverse circulation drilling and 2,400metres of deep diamond drilling. Penjom's gold production for the first quarterof this financial year is estimated to be 24,700 ounces. At the Panau prospectwe plan to drill 12,000 metres of scout reverse circulation drilling during theyear. The North Lanut mine has performed within expectations; the additionalproperties we acquired with North Lanut have greatly exceeded our expectations.A year ago I expressed the view that North Lanut would be the first of a numberof ventures in Indonesia. With the exceptional drilling results we have had atBakan and the current impetus to have a new mine in operation there within twoyears, my belief in the excellent prospects of our expanding interests inIndonesia is even stronger. North Lanut's gold production for the first quarterof this year is estimated to be 10,250 ounces. At ZGC we expect to mine and process higher grade resources from the Jilau Pit,and therefore we are forecasting an increase in production and a marked decreasein unit cash costs during the current year. While ZGC turned a small profit inMay 2006, we need to see this on a sustainable basis before we can safely saythat we have turned the corner. With regard to the other projects at ZGC, positive testwork on Taror and Chore'smetallurgy will allow us to advance these projects. Meanwhile, Saursai hasbecome an exciting new exploration project and further good surface goldshowings will allow us to embark on a drilling campaign here to outlineresources on this project. We have a budget of US$1.5 million for exploration inthe current year at ZGC, the majority of which will be spent in and around theJilau and Khirskhona deposits where the objectives are to improve reservedefinition and increase resources for what could be a significant expansion ofproduction. ZGC's gold production for the first quarter of this year isestimated to be 9,100 ounces. As you will see in the notice of the Annual General Meeting, as we did lastyear, we are asking shareholders to give the Company the flexibility to operatein a dynamic environment. The resolutions are similar to those approved lastyear, which grant the Company the ability to issue up to 100 per cent of itsissued share capital for acquisitions and to issue one third of its issued sharecapital for cash through a private placement. Although it is not the directors'current intention to avail of these facilities we wish to have the ability tomove expeditiously should such an opportunity arise. Our industry is now highlycompetitive for high calibre professionals to fill the wide and varied positionswe need to have occupied. In order to allow us greater flexibility to retain andemploy these people we are asking shareholders to approve a number of changes tothe share option scheme and to agree on a annual share bonus scheme for seniorexecutives. To be involved in a company with the team of people we have at Avocet is apleasure. We remain committed to upholding the highest standards forshareholders and creating the maximum value possible. Without the extensive andbroad ranging skills of the Avocet team that we have on board this would not bepossible. They have done, and continue to do, an excellent job for which theydeserve my and your thanks. The future at Avocet looks exciting; I encourage youto continue to share the excitement. Nigel McNair Scott CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006 note 2006 2005 US$000 US$000 Turnover 90,493 71,060 Cost of sales (72,311) (52,501)-------------------------------- ------ -------- --------Gross profit 18,182 18,559-------------------------------- ------ -------- --------Administrative expenses (3,280) (2,623)-------------------------------- ------ -------- --------Operating profit 14,902 15,936-------------------------------- ------ -------- --------Profit on disposal of fixed asset investments 2 1,423 -Net interest and similar charges (79) (133)-------------------------------- ------ -------- --------Profit on ordinary activities before taxation 16,246 15,803Tax on profit on ordinary activities (5,750) (5,601)-------------------------------- ------ -------- --------Profit on ordinary activities after taxation 10,496 10,202 Equity minority interest 664 1,484-------------------------------- ------ -------- --------Profit for the financial year retained 11,160 11,686-------------------------------- ------ -------- ---------------------------------------- ------ -------- --------Earnings per share 1 10.62c 11.26c-------------------------------- ------ -------- ---------------------------------------- ------ -------- --------Diluted earnings per share 1 10.45c 11.06c-------------------------------- ------ -------- -------- CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2006 2006 2005 US$000 US$000Fixed assets Positive goodwill 4,395 637Negative goodwill (1,424) (1,501)--------------------- -------- ------- 2,971 (864)Other intangible assets 6,521 3,644Tangible assets 37,670 35,770Investments 1,937 ---------------------- -------- ------- 49,099 38,550--------------------- -------- -------Current assetsStocks 23,783 19,563Debtors due within one year 3,073 3,392Debtors due after more than one year 1,773 2,685Cash at bank and in hand 12,918 12,079--------------------- -------- ------- 41,547 37,719--------------------- -------- -------Creditors: amounts falling due in less than one year (12,526) (14,808)--------------------- -------- -------Net current assets 29,021 22,911--------------------- -------- -------Total assets less current liabilities 78,120 61,461Creditors: amounts falling due in after more than one year (793) -Provisions for liabilities (6,748) (2,453)--------------------- -------- ------- 70,579 59,008--------------------- -------- -------Capital and reservesCalled up share capital 8,445 41,389Share premium account 133 43,258Other reserves 17,909 17,909Investment in own shares (732) (713)Profit and loss account 43,826 (44,497)--------------------- -------- -------Equity shareholders' funds 69,581 57,346Equity minority interests 998 1,662--------------------- -------- ------- 70,579 59,008--------------------- -------- ------- CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 2006 2005 US$000 US$000Net cash inflow from operating activities 19,942 17,092------------------------------- -------- --------Returns on investment and servicing of financeInterest received 228 311Interest paid (181) (411)------------------------------- -------- --------Net cash inflow/(outflow) from returns on investment 47 (100)and servicing of finance------------------------------- -------- --------Taxation (6,254) (5,219)------------------------------- -------- --------Capital expenditure and financial investmentPurchase of tangible fixed assets (6,365) (12,785)Deferred exploration costs (5,268) (4,395)------------------------------- -------- --------Net cash outflow from capital expenditure (11,633) (17,180)and financial investment------------------------------- -------- -------- Acquisitions and disposalsSale of investments 1,423 367Purchase of investments (1,937) (476)Deferred consideration (812) -Net cash movement from sale of subsidiary undertakings - (22)------------------------------- -------- --------Net cash outflow from disposals/acquisitions (1,326) (131)------------------------------- -------- -------- FinancingProceeds from issue of ordinary shares 935 367Investment in own shares (307) (311)Repayments of borrowings - (6,020)Capital repayments on finance leases (440) (23)------------------------------- -------- --------Net cash inflow/(outflow) from financing 188 (5,987)------------------------------- -------- --------Increase/(decrease) in cash 964 (11,525)------------------------------- -------- -------- CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES AND RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 MARCH 2006 2006 2005 US$000 US$000Consolidated statement of total recognised gains and losses Profit for the financial year 11,160 11,686Exchange translation adjustments 159 43--------------------------------- -------- --------Total recognised gains and losses 11,319 11,729--------------------------------- -------- --------Reconciliation of movements in Group shareholders' fundsTotal recognised gains and losses 11,319 11,729New capital subscribed 935 367Investment in own shares (19) (270)--------------------------------- -------- --------Net change in shareholders' funds 12,235 11,826Opening shareholders' funds 57,346 45,520--------------------------------- -------- --------Closing shareholders' funds 69,581 57,346--------------------------------- -------- -------- Notes to the Financial Statements 1. Earnings per ordinary share The calculation is based on profits of US$11,160,000 (2005: US$11,686,000) andon a weighted average number of shares in issue of 105,064,092 (2005:103,828,577). The fully diluted calculation of earnings per share is based on profits ofUS$11,160,000 (2005: US$11,686,000) and 106,749,575 shares (2005: 105,639,036shares). 2. Profit on disposal of fixed asset investments In the year to 31 March 2006 the Company exercised 500,000 warrants at Can$0.11that it held in Primary Metals Inc. (PMI), a Canadian tungsten producer listedon the TSX Venture Exchange. It subsequently sold the shares resulting in a netprofit after costs of US$1,423,000. The warrants were part of the agreemententered into at the time of the sale of the majority of the Group's tungstenassets to PMI in September 2002. 3. Financial Information The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The consolidated balance sheet at 31 March 2006 and the consolidated profit andloss account, consolidated cash flow statement and other primary statements andassociated notes for the year then ended have been extracted from the Group's2006 statutory financial statements (which have not yet been filed withCompanies House) upon which the auditors opinion is unqualified, and does notinclude any statement under Section 237 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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