Financial Report - 31 December 2016

Metminco Limited (ASX: MNC; AIM: MNC) is pleased to announce that it has today released its Financial Report for the year ended 31 December 2016.

A summary of the Financial Report is set out below. The full report can be accessed from the below link: 

 http://www.rns-pdf.londonstockexchange.com/rns/2832B_-2017-4-3.pdf

FINANCIAL SUMMARY

Overview

During 2016 Metminco Limited ("Metminco" or the "Company") achieved two major milestones in relation to its strategy to become a gold producer in the near term whilst maintaining a longer term interest in gold and copper within South America, in particular Colombia, Peru and Chile.

The Company acquired the Quinchia Gold Portfolio and then completed a Scoping Study demonstrating the robust economics for the potential development of the Miraflores Project (part of the Quichia Gold Portfolio) into a gold producing asset. The Quinchia Gold Portfolio, which is located in Colombia's Middle Cauca Belt, and has a NI 43-101 estimated Mineral Resource of 2.8 million ounces of gold and contains a number of gold deposits and significant exploration and development targets including Miraflores, Tesorito, Chuscal and Dosquebradas.

In Peru the Company secured funding of up to US$45 million to advance the Los Calatos Project toward completion of a bankable feasibility study. The development prospects of the Los Calatos copper molybdenum project, located in Southern Peru near three large operating copper-molybdenum mines, namely Cuajone, Toquepala and Cerro Verde, have been significantly enhanced by the agreement with CD Capital Natural Resources Fund III LP (CD Capital) to fund the completion of the Pre-feasibility and Feasibility Studies.

As a result of achieving of these milestones the Company reported a Consolidated Group after tax loss for the year ended 31 December 2016. The loss of A$124,100,870 (2015: loss of $49,070,767), included a loss of A$121,540,173 on the loss of control of the Group's investment in Los Calatos Holding Limited (LCH) as determined by reference to the see-through value of the CD Capital Transaction (refer below) in accordance with applicable accounting standards.

As well the Company incurred expenditure in relation to transitioning the Company towards being a gold producer in the near term whilst retaining a significant interest in copper through its Los Calatos Project and its wholly owned Chilean assets. Care and maintenance and legal costs at the Company's Chilean projects, Mollacas, Vallecillo and Loica and discontinued licences in Colombia were written off (A$407,300). As well the Company incurred normal overhead costs associated with corporate governance, compliance, and maintenance of ASX and AIM listings.

Strategy

Metminco's growth strategy is to become a gold producer in the near term whilst maintaining a longer term interest in gold and copper within South America, in particular Colombia, Peru and Chile. To this effect, the Company purchased the Quinchia Gold Portfolio in Colombia in June 2016 which includes the Miraflores, Dosquebradas, Tesorito and Chuscal projects.

The Company seeks to deliver growth in long term shareholder value by progressing the following objectives:

· Advance the feasibility study on the Miraflores Project with an expected completion date for the feasibility study The Miraflores Project is expected to produce 50,000 oz Au per annum over a life of mine of 9 years. Current estimate for commencement of construction is during the second quarter of 2018.

· Enhance anticipated future gold production from the Miraflores Project through exploration and development of high potential prospects in the Quinchia Gold Portfolio.

· With CD Capital, advance the Los Calatos Project through pre-feasibility and feasibility studies realising significant value for shareholders in this world class asset and taking advantage of strong copper fundamentals.

Metminco retains a 100% interest in a portfolio of gold, copper and other base metal projects that are located within well-constrained metallogenic belts associated with the Andean Cordillera in Chile which have the potential to contribute significantly to shareholder value in the future.

Acquisition of Miraflores Compania

The Company completed the acquisition of Miraflores Compania from RMB Australia Pty Ltd (RMB) late June 2016 by the issue of 350 million Shares (at a deemed price of A$0.5 cents per Share) and reimbursement of approximately A$165,000 in Miraflores Compania's operating costs from date of signing the binding term sheet to 30 April 2016. Miraflores Compania is the owner of the Quinchia Gold Portfolio more fully described above.

As a result of the issue of the 350,000,000 Shares, RMB became a substantial shareholder of Metminco, holding 400,000,000 Shares.

Under the purchase agreement, Metminco will make cash payments to RMB as follows:

(i) Payment of A$1.3 million (A$1 million initial payment plus A$0.3 million in reimbursement of operating expenditure prior to completion) on 20 June 2017;

(ii) Second payment of A$1.0 million on 20 June 2018;

(iii) Third payment of A$3.0 million on the earlier of a decision to mine at the Quinchia Gold Portfolio; or on 20 June 2019;

(iv) Fourth payment of A$2.0 million on the earlier of a decision to mine at the Quinchia Gold Portfolio; or 20 June 2020; and

(v) A maximum of A$7 million in royalty payments to RMB from operating cashflows.

The timing of consideration for the acquisition, which is in total approximately A$16.5 million with minimal payable upfront, is structured to allow Metminco to focus on the development of the Miraflores Project and the drilling of the Tesorito target.

CD Capital Transaction

The Company entered into a subscription agreement with CD Capital whereby CD Capital committed an equity investment of up to US$45 million in relation to the Los Calatos Project. The equity contribution will be applied in 3 tranches over the next 3 - 4 years to complete the planned Pre-feasibility and Feasibility Studies on the Los Calatos Project.

In late October 2016 CD Capital subscribed for US$16 million worth of new shares in Los Calatos Holding Ltd (LCH) equivalent to 51% of the company (Tranche 1). Under the subscription agreement CD Capital will have the option to subscribe for additional shares in LCH over two additional Tranches of US$14.5 million each, which, subject to being exercised in full would increase CD Capital ownership of LCH to 65% after Tranche 2 and 70% after Tranche 3.

Cash Position and Funding

During the year ended 31 December 2016, Metminco's cash position decreased from approximately A$0.9 million to A$0.1 million, excluding the Company's share of LCH cash reserves (A$9.6 million) due to expenditure being greater than capital raisings of approximately A$2.8 million after costs.

Expenditure for the year was focused on completion of the Scoping Study and preparatory work for the planned Miraflores Feasibility Study including an updated JORC 2012 Mineral Resource estimate, analysis of development options, a gap analysis on the requirements to complete a Feasibility Study and the preparation of a preliminary mine plan and schedule.

Share Consolidation

Following the completion of the security consolidation on 4 January 2017 the Company had on issue 90,280,468 fully paid Shares and 100,000 unlisted options to acquire one share at A$1.51 per Share on or before 1 August 2017.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2016 

 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2016

 CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2016

William Howe

Managing Director