21st Apr 2008 07:00
Alexander Mining PLC21 April 2008 Alexander Mining plc 21 April 2007 Preliminary Results for the year ended 31 December 2007 Alexander Mining plc ("Alexander", the "Company"), the AIM-listed mining andmineral processing technologies company, announces its preliminary results forthe year ended 31 December 2007. Key points: • Metals market conditions and outlook remain favourable• MetaLeach Limited formed to commercialise proprietary new mineral processing technologies, AmmLeach(R) and HyperLeachTM• MetaLeach Limited is in discussion with over 35 companies, of which seven have committed to testwork programmes.• Strong cash position of £8.4m at 31 December 2007• Bankable feasibility study on Leon copper project in northwest Argentina nearing completion Chairman's Statement I am pleased to report to you on the Company's progress during the past year. Although not without its challenges, it has been a year of significant progress.Whilst we have maintained a concerted effort to advance our projects in South America, the most important development has been the creation of MetaLeach Limited, a new business to commercialise our innovative and exciting proprietary mineral processing technology. During the last twelve months the extraordinary bull market for the mining sector has continued. Notwithstanding the global credit crisis and extreme market volatility around falling world equity markets, the phenomenon of the booming industrialisation of China and India has, so far, been unaffected. As such, demand for base metals has remained strong. Precious metals prices have also risen sharply, reflecting their 'safe haven' status and more mundane supply fundamentals, such as electricity supply outages in South Africa. Although blessed with a bull market, the mining industry has found it hard to keep up with supply as the lead time from discovery to production for new mines has increased. This is because of increased country risk problems, encompassing title, permitting, fiscal regime; more rigorous environmental standards; manpower shortages of both professional and skilled manual labour; and long key equipment lead times. Moreover, whilst record metal prices have increased revenue significantly, margins have been eroded as capital and operating costs have risen sharply too. It is against this backdrop that the launch of our wholly owned MetaLeach business is fortuitous. We believe that the desire to embrace new technologies in the international mining industry is keen and will intensify. MetaLeach is focused on hydrometallurgical solutions that add value at the mine site. We believe that technological breakthrough in mineral processing, and hydrometallurgy in particular, is one of the most promising avenues left for mining companies to significantly reduce operating costs. Our proprietary AmmLeach(R) and HyperLeachTM technologies, with provisional patents filed, have potential applications for the recovery of many base metals from a range of ores, especially for deposits where the mineralogy means that conventional treatment methods are uneconomic. Because Alexander's technology business has been developed as a spin off from the mineral processing testwork at its Leon copper project in northwest Argentina, the costs incurred in establishing the business have been low. Moreover, the future development costs as it is advanced towards commercialisation should be modest. As shareholders will be aware, since Alexander's shares were admitted to trading on AIM in 2005, the Company has focused its activities in Latin America,specifically Argentina. In addition to our strong cash position, the Company's most important asset is its Leon project. Integral to proceeding with the mine development as originally envisaged is the arrangement of a bank loan facility. For this purpose, Standard Bank plc was appointed in September 2007 as the exclusive Arranger and Underwriter, subject to due diligence, negotiation and execution of a detailed term sheet for the Leon project. Until recently the Company had found support for its activities at both the local and national levels. However, with the change in local and national governments and the introduction in late last year of a 5-10% export duty on existing mines there has been severe damage to both the prevailing fiscal regime and investors' country and investment risk assessment. Notwithstanding the change in legislation, the Company is committed to completing a Bankable Feasibility Study. However, with these recent developments, it is taking longer than initially envisaged. Whilst we believe that we will be able to finalise the outstanding technical and related aspects of the feasibility study in the next few months, it will be a financing and development decision prerequisite that there is complete clarity and confidence in the prevailing fiscal regime for mining companies in the country. Of course, these uncertainties are not specific to Alexander. Indeed several mining companies, including some of the world's largest, have started legal action to prevent the Government from continuing with the new export duties.Although there is uncertainty about the fiscal regime for mining companies, the pre-tax economics of the Leon project remain robust, and with development of its AmmLeach(R) process, the economic value of any mining operation at Leon is magnified beyond absolute project investment returns. This is due to the benefit that it brings to the efforts in marketing the AmmLeach(R) process to the mining industry by demonstrating a commercial operation using the technology. Accordingly, the Company is taking a pragmatic view on its options for the scale, and associated financing requirements, of a mine at Leon. Management will maintain a prudent approach by tightly controlling costs and conserving our significant cash position. Further updates will be made in due course. Outlook Whilst the last year has seen positive progress on several fronts, the delays have been frustrating, compounded especially by the situation in Argentina. However, the Company still has a healthy amount of cash with which to further its activities and we will focus on our promising new mineral processing technologies to grow. The MetaLeach business holds great potential for significant commercial success in the world mining industry and we will work hard to make the most of it. I would like to take this opportunity to thank the Company's employees and directors for their hard work and commitment during the last year. We have had some changes to the non-executive directors on the board and I would like to thank those that stepped down after several years' service, Messrs Lewis, Ashcroft and Norwood, for their much appreciated efforts and welcome Emil Morfett who has joined the board. Matt SutcliffeExecutive Chairman Operations Update MetaLeach Limited The Company is strongly focused on commercialisation and revenue generation for its MetaLeach business. It is in discussion with over 35 companies and confidentiality agreements with several majors and juniors have been signed.Negotiations are in progress about potential specific projects/deposits amenableto processing with AmmLeach(R) and HyperLeachTM technologies. Seven companies have committed to carry out initial phase metallurgical testwork programmes. This testwork will be carried out to a specification determined by MetaLeach in an independent testing laboratory covered by a confidentiality agreement. In addition, the Company intends to maximise the potential of its technology by identifying and securing equity interests in its own right in amenable deposits. Argentina Operations As announced on 26 February, 2008, following the introduction by the ArgentinaGovernment in late last year of a 5-10% export duty on existing mines, it willbe a Leon project financing and development decision prerequisite that there iscomplete clarity and confidence in the prevailing fiscal regime for miningcompanies in the country. Accordingly, management is maintaining a prudentapproach by tightly controlling costs and conserving the company's significantcash position whilst it completes the Leon project bankable feasibility studyover the next few months. Leon Copper Project Resource estimate Further to the JORC compliant resource estimate by independent geological consultants, ACA Howe, which was announced last year, in order to promote some of the inferred resources to the indicated category a further drilling programme was carried out on the El Cobre deposit and a new resource has been estimated by ACA Howe, as set out in the table below. Leon Project Resource Estimate In Situ Metal Tonnes,Mt Copper,% Silver,g/t Copper,t Silver,MozEl Cobre DepositIndicated Oxide Resource 2.54 0.88 20.42 22,370 1.67Inferred Oxide Resource 0.36 0.47 9.04 1,700 0.10Total Oxide Resource 2.90 0.83 19.02 24,070 1.77 El Plomo DepositIndicated Oxide Resource 2.90 0.46 17.63 13,330 1.65Inferred Oxide Resource 0.86 0.44 15.75 3,750 0.43Total Oxide Resource 3.76 0.45 17.20 17,080 2.08 TotalIndicated Oxide Resource 5.44 0.66 18.98 35,700 3.32Inferred Oxide Resource 1.22 0.45 13.51 5,450 0.53Total Oxide Resource 6.66 0.62 17.98 41,150 3.85 NB: Using a 0.2% copper lower cut-off grade; totals may be subject to rounding errors. Using a 0.2% copper lower cut-off grade, this gives a total oxide resource of 6.66Mt at 0.62% copper and 17.98g/t silver (an in situ contained metal amount of 41,150t copper and 3.85Moz silver), compared to the previous estimate of 6.43Mt at 0.64% copper and 17.86 g/t silver (an in situ contained metal amount of 41,100t copper and 3.69Moz silver). Exploration After a review of progress made, and an evaluation of geological potential,management has decided, in the context of the current fiscal uncertainty inArgentina, to suspend any further exploration activity in Argentina. A thoroughreview of the Company's exploration properties will be carried out, with thoseof insufficient merit being relinquished. The Company's exploration efforts will be reviewed once the Leon Bankable Feasibility Study has been completed and in the light of the then prevailing Argentina mining investment climate. Qualified person Angus Innes, Alexander's Head of Latin American Exploration, has reviewed andapproved this news release as the Company's qualified person. Angus Innes holds a degree in geology from the University of Witwatersrand inSouth Africa and has over 30 years' experience in exploration and mininggeology. Prior to joining the Company in 2005, he was, for six years, aconsulting geologist to mining companies in South America. He has also worked as Exploration Manager for Billiton in Argentina and Bolivia. Before moving toSouth America, Angus was employed as a Senior Geologist for Gencor in SouthAfrica in the Witwatersrand Sedimentary Basin. He has extensive exploration andmine geology experience in sedimentary hosted and hydrothermal copper depositsin South Africa and Namibia. For further information please contact: Martin Rosser Matt SutcliffeChief Executive Officer Executive ChairmanMobile: + 44 (0) 7770 865 341 Mobile: +44 (0) 7887 930 758 Alexander Mining plc1st Floor35 PiccadillyLondonW1J 0DWTel: +44 (0) 20 7292 1300Fax: +44 (0) 20 7292 1313 Email: [email protected]: www.alexandermining.com Nominated Adviser and Broker John Prior/Alasdair YounieArbuthnot Securities Limited,Arbuthnot House,20 Ropemaker Street,London, EC2Y 9ARTel: +44 (0) 20 7012 2000 Public/Media Relations Tim BlackstoneBritton Financial PR,62 Britton StreetLondonEC1M 5UYTel: +44 (0) 20 7251 2544Mobile: +44 (0) 7957 140 416 Preliminary financial information for the year ended 31 December 2007 Consolidated income statementfor the year ended 31 December 2007 2007 2006 £'000 £'000Continuing operationsRevenue - -Cost of sales - - ----- -----Gross profit - -Administrative expenses (2,122) (2,510)Exploration and development expenses (1,351) (931)Research and development expenses (410) - ----- -----Operating loss (3,883) (3,441) Investment income 593 784Finance costs (144) (669) ----- -----Loss before tax (3,434) (3,326)Income taxes (58) (20) ----- -----Loss for the year (3,492) (3,346) ===== =====Basic and diluted loss per share (pence) (2.60)p (2.49)p ----- ----- Consolidated Balance Sheetas at 31 December 2007 2007 2006 £'000 £'000AssetsProperty, plant & equipment 178 167Intangible assets 6,857 4,260Available for sale investments 122 151 ------ -----Total non-current assets 7,157 4,578 ------ ----- Other receivables and prepayments 153 222Cash and cash equivalents 8,442 13,998 ------ ------Total current assets 8,595 14,220 ------ ------Total assets 15,752 18,798 ====== ====== EquityIssued share capital 13,453 13,453Share premium 11,850 11,850Merger reserve (2,487) (2,487)Share option reserve 1,005 833Translation reserve (357) (399)Fair value reserve 22 51Retained losses (8,370) (4,878) ------ ------Total equity 15,116 18,423 ------ ------LiabilitiesCurrent liabilitiesTrade and other payables 597 375 ------ ------Non-current liabilitiesProvisions 39 - ------ ------ Total Liabilities 636 375 ------ ------ Total equity and liabilities 15,752 18,798 ====== ====== Consolidated statement of recognised income and expensefor the year ended 31 December 2007 2007 2006 £'000 £'000 Exchange differences on translation of foreign operations 42 (399)(Loss)/gain on available for sale investments (29) 51Loss for the period (3,492) (3,346) ----- -----Total recognised income and expense for the period (3,479) (3,694) ===== ===== All recognised income and expense is attributable to the equity holders of theparent. Consolidated Cash Flow Statementfor the year ended 31 December 2007 2007 2006 £'000 £'000 Cash flows from operating activitiesOperating loss (3,883) (3,441)Depreciation and amortisation charge 51 42(Increase)/decrease in other receivables and prepayments (20) 210 Increase in trade and other payables 228 172Share option charge 172 496Intangible fixed assets written-off or provided for 1,351 931Income taxes paid (75) (3) ------ ------Net cash outflow from operating activities (2,176) (1,593) Cash flows from investing activitiesInterest received 682 887Interest paid (19) -Acquisition of property, plant and equipment (238) (84)Acquisition of intangible assets (3,768) (3,512) ------ ------Net cash outflow from investing activities (3,343) (2,709) ------ ------ Net decrease in cash and cash equivalents (5,519) (4,302)Cash and cash equivalents at beginning of period 13,998 19,000Exchange differences (37) (700) ------ ------Cash and cash equivalents at end of period 8,442 13,998 ====== ====== Notes 1. Financial statements The financial information set out in this preliminary announcement does notconstitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 for the year ended 31 December 2007 or for the year ended 31 December 2006, but is derived from those accounts. The financial statements for 2007 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these accounts, their report was unqualified and did not contain statements under the CompaniesAct 1985, s237 (2) or (3). 2. Summary of significant accounting policies a) Basis of preparation The financial statements have been prepared for the first time in accordancewith International Financial Reporting Standards (IFRS) as adopted by theEuropean Union, and with those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. The Group has adopted IFRS with effect from 1January 2007. The directors have elected a transition date of 1 January 2006 asthis is the start date for which the Group has presented full comparative information under IFRS in the 2007 Annual Report and Accounts. In preparing itsopening IFRS balance sheet, the Group has adjusted amounts reported previouslyin financial statements prepared in accordance with its previous basis ofaccounting (UK GAAP). The financial statements have been prepared on a going concern basis. Theconsolidated financial statements incorporate the financial statements of theCompany and entities controlled by the Company (its subsidiaries) made up to 31December each year. Control is recognised where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. b) Intangible fixed assets Deferred exploration and evaluation costs All costs incurred prior to obtaining the legal right to undertake explorationand evaluation activities on a project are written-off as incurred. Costsassociated with large scale early stage exploration activity to identifyspecific targets for detailed exploration and evaluation work are recognised inthe income statement as incurred. Exploration and evaluation costs arising following the acquisition of anexploration licence are capitalised on a project-by-project basis, pendingdetermination of the technical feasibility and commercial viability of theproject. Costs incurred include appropriate technical and administrativeoverheads. Deferred exploration costs are carried at historical cost less anyimpairment losses recognised. If an exploration project is successful, the related expenditures will betransferred to mining assets and amortised over the estimated life of the orereserves on a unit of production basis. The recoverability of deferred exploration and evaluation costs is dependentupon the discovery of economically recoverable ore reserves, the ability of theGroup to obtain the necessary financing to complete the development of orereserves and future profitable production or proceeds from the disposal thereof. c) Research and development expenditure Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied toa plan or design for the production of new or substantially improved productsand processes, is capitalised if the product or process is technically andcommercially feasible and the Group has sufficient resources to completedevelopment. The expenditure capitalised includes the cost of materials, directlabour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulatedamortisation and impairment losses. Amortisation is charged to the incomestatement on a straight-line basis over the estimated useful lives as follows: • patents and trademarks 10 - 20 years• capitalised development costs 5 - 10 years 3. DividendsThe directors do not recommend the payment of a dividend (2006: nil) 4. Intangible fixed assets 2007 2006 £'000 £'000Deferred exploration costsAt beginning of period 4,260 2,123Additions 3,978 3,233Written-off1 (1,316) (610)Provision2 (35) (321)Exchange difference (30) (165) ----- -----At end of period 6,857 4,260 ===== ===== 1 Deferred exploration costs at the Group's Trinidad and Arbol Solo projects were written-off during the year because exploration results did not suggest the presence of economic mineralisation. Costs associated with the Leon Regional exploration programme were written-off during the year because the programme did not result in the discovery of specific mineral targets considered to be of economic interest. In addition, some further costs incurred for the Group's Sulcha project (which was written-off during 2006) were written-off in 2007. All deferred exploration costs written-off in the year are included in the income statement within exploration and development expenses. 2 During 2007 a provision has been made against some further costs associated with the Group's Rachaite project, which was fully provided for at 31 December 2006, pending the outcome of ongoing joint venture negotiations. All deferred exploration costs provided for in the year are included in the income statement within exploration and development expenses. Annual Report The Annual Report will be sent to all shareholders on or around 8 May 2008.Additional copies will be made available to the public, free of charge, from the Company's registered office at 35 Piccadilly, London W1J 0DW. Annual General Meeting The Company's Annual General Meeting will be held on 4 June 2008 at 10.00 a.m.at the Chesterfield Mayfair, 35 Charles Street, Mayfair, London W1J 5EB. 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