7th Nov 2014 07:00
FRONTIER MINING LTD
("Frontier" or "the Company")
Interim Results for the nine months ended 30 September 2014
Frontier Mining (AIM:FML), the AIM and KASE listed exploration, development and production Company focused on Kazakhstan, is pleased to announce its Interim Results for the nine months ended 30 September 2014, in accordance with the reporting requirements of KASE.
Production highlights:
o 379,155 tonnes of ore mined (as of 30.06.2014: 181,326 tonnes)
o 356,694 tonnes of ore stacked (as of 30.06.2014: 165,947 tonnes)
o 1,130 tonnes of copper cathode sold (as of 30.06.2014: 511 tonnes)
Financial performance:
o Average sales price of US$6,842 per tonne (as of 30.06.2014: US$6,784 per tonne)
o Average cash cost of production, excluding general and administrative costs, of US$4,468 per tonne (as of 30.06.2014: US$4,353 per tonne)
For further details please contact:
Frontier Mining Ltd | Tel: +44 20 7898 9019 |
Yerlan Minavar
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Cairn Financial Advisers LLP (Nomad) | Tel: +44 20 7148 7900 |
Sandy Jamieson
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RFC Ambrian (Broker) | Tel: +44 20 3440 6800 |
John Harrison Stefan Murphy
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Walbrook PR and IR | Tel: +44 20 7933 8780 |
Paul Cornelius |
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Guy McDougall |
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STATEMENT OF FINANCIAL POSITION
USD | 30.09.2014 | 31.12.2013 | |||
Non-current assets | |||||
Exploration and evaluation assets | 194,899,664 | 198,105,513 | |||
Mine development assets | 422,517 | 499,316 | |||
Property, plant and equipment | 47,536,853 | 53,898,801 | |||
Intangible assets | 46,114 | 60,289 | |||
Advances paid for non-current assets | 335,559 | 973,543 | |||
VAT recoverable, non-current portion | 5,543,140 | 6,564,006 | |||
Restricted cash | 420,573 | 437,413 | |||
Total non-current assets | 249,204,420 | 260,538,881 | |||
Current assets | |||||
Inventories | 15,723,751 | 14,084,584 | |||
Trade accounts receivable | 425,334 | 365,022 | |||
Account Receivable from subsidiaries | 17,548,820 | - | |||
VAT recoverable, current portion | 2,052,392 | 945,882 | |||
Advances paid | 1,020,718 | 632,533 | |||
Cash and cash equivalents | 635,136 | 168,770 | |||
Other current assets | 869,850 | 1,081,961 | |||
Total current assets | 38,276,002 | 17,278,752 | |||
Assets of disposable groups held for sale | - | 28,124,121 | |||
TOTAL ASSETS | 287,480,422 | 305,941,754 | |||
EQUITY AND LIABILITIES | |||||
Equity | |||||
Share capital | 18,767,573 | 18,609,140 | |||
Additional paid-in-capital | 191,261,031 | 191,334,243 | |||
Option premium on convertible notes | 120,993 | 120,993 | |||
Translation reserve | 8,843,171 | (39,884) | |||
Accumulated losses | (72,110,563) | (46,388,864) | |||
Total equity | 146,882,206 | 163,635,628 | |||
Non-current liabilities | |||||
Interest bearing and interest free loans and borrowings from third parties, non-current portion | 49,614,472 | 49,614,472 | |||
Interest bearing and interest free loans and borrowings from related parties, non-current portion | 860,000 | 860,000 | |||
Provisions, non-current portion | 3,473,626 | 4,023,410 | |||
Prepaid income | 709,450 | - | |||
Other long-term liabilities | - | - | |||
Deferred tax liability | 36,403,725 | 36,685,854 | |||
Total non-current liabilities | 91,061,273 | 91,183,736 | |||
Current liabilities | |||||
Interest bearing and interest free loans and borrowings from third parties, current portion | 24,713,119 | 29,011,413 | |||
Interest bearing and interest free loans and borrowings from related parties, current portion | 17,016,400 | 13,559,867 | |||
Trade accounts payable | 3,827,626 | 2,192,470 | |||
Provisions, current portion | - | 207,154 | |||
Taxes payable | 1,779,322 | 1,245,069 | |||
Other current liabilities | 2,200,476 | 1,567,264 | |||
Total current liabilities | 49,536,944 | 47,783,237 | |||
Total liabilities | 140,598,217 | 138,966,973 | |||
Liabilities of disposable groups held for sale | - | 3,339,153 | |||
TOTAL EQUITY AND LIABILITIES | 287,480,422 | 305,941,754 | |||
STATEMENT OF COMPREHENSIVE INCOME
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USD | 30.09.2014 | 30.09.2013 |
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Revenue | 7,731,731 | 7 376 798 |
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Cost of sales | (6,783,072) | (5 645 539) |
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Gross profit | 948,659 | 1 731 259 |
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Selling, general and administrative expenses | (2,433,217) | (3 707 148) |
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Finance cost, net | (3,170,905) | (3 442 605) |
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Foreign exchange loss, net | (16,787,257) | (33 321) |
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Impairment | - | (858) |
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Income from sale of asset, net | - | 131 587 |
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Other income / (loss), net | (153,085) | 368 659 |
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Profit from operating activities before income tax | (21,595,805) | (4 952 428) |
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Income tax (expense) / benefit, net | - | - |
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Profit/Loss for the period | (21,595,805) | (4 952 428) |
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Gain / (loss) from discontinued operations, net of tax | 8,843,171 | - |
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Effect on currency translation | (4,125,894) | - |
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Total comprehensive income / (loss) for the period | (16,878,528) | (4 952 428) |
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CASH FLOW STATEMENT
USD | 30.09.2014 | 30.09.2013 |
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OPERATING ACTIVITIES |
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(Loss) / gain before income tax | (21,595,805) | (4,952,428) |
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Loss from discontinued operations | (4,125,894) | - |
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Adjustments for non-cash flow items: |
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Depreciation of property, plant and equipment and mine development assets | 1,748,700 | 4,165,644 |
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Amortization of intangible assets | 4,798 | 7,093 |
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Finance costs | 1,971,985 | 5,021,995 |
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Loss from discontinued operations | - | (1,595,840) |
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Gain from released liability due to US Trade and Development Agency | - | - |
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(Gain) / loss from financial liability at fair value through profit or loss | 51,407 | - |
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Loss from disposal of property, plant and equipment | (197,906) | - |
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Accrual of inventory provision | - | - |
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Recovery of impairment loss | - | - |
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Foreign exchange loss, net | 22,584,259 | (331,275) |
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Cash flows from operating activities before changes in working capital | 441,544 | 2,315,187 |
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Change in value added tax receivable | (1,266,061) | (747,088) |
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Change in inventories | (6,647,214) | 1,026,595 |
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Change in trade receivables | (117,083) | (1,353,729) |
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Change in advances and prepaid expenses | (488,287) | 2,244,015 |
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Change in other receivables | 56,283 | 113,302 |
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Change in trade accounts payable | 1,736,259 | (7,167,111) |
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Change in other current liabilities | 718,434 | (34,932) |
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Change in taxes payable | 493,951 | - |
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Change in provision | (207,154) | - |
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Net cash flows from operating activities before income tax and interest paid | (5,279,328) | (3,603,759) |
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Income tax paid | - | - |
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Interest paid | - | (4,377,193) |
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Net cash used in continuing operations | (5,279,328) | (7,980,952) |
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Net cash used in discontinued operations | - | - |
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Net cash used in operating activities | (5,279,328) | (7,980,952) |
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INVESTING ACTIVITIES |
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Increase in exploration and evaluation assets and mining assets | 458,381 | (966,242) |
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Increase in mine development assets | 854 | (2,752,211) |
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Dummy (disposal group) | - | - |
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Purchase of property, plant and equipment | (127,879) | (7,511,088) |
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Purchase of intangible assets | - | 5,386 |
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Account Receivable from sale of assets | 12,150,000 | - |
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Gain / (loss) from discontinued operations | (4,125,894) | - |
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Proceeds from sale of property, plant and equipment | - | 1,726,569 |
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Decrease in advances for non-current assets | 486,574 | 4,617,259 |
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Increase in restricted cash deposit | (51,189) | (50,564) |
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Net cash used in investing activities | 8,790,847 | (4,930,891) |
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FINANCING ACTIVITIES |
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Proceeds from loans from related parties | - | - |
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Proceeds from loans from third parties | - | - |
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Proceeds from bank loans | 709,450 | 12,616,937 |
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Proceeds from issue of notes payable | - | 440,745 |
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Repayment of loans from related parties | (24,603) | - |
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Repayment of bank loans | - | - |
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Repayment of notes payable | (3,730,000) | - |
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Net cash generated by financing activities | (3,045,153) | 13,057,682 |
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- |
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Net increase in cash and cash equivalents | 466,366 | 145,839 |
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Cash and cash equivalents at the beginning of the period | 168,770 | 2,184,083 |
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Included in disposal group | - | - |
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Cash and cash equivalents at the end of the period | 635,136 | 2,329,922 |
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STATEMENT OF CHANGES IN EQUITY
In US Dollars | Share capital | Additional paid-in-capital | Accumulated loss | Translation reserve | Option premium to convertible notes | Total |
As at January 1, 2013 | 18,609,140 | 191,334,243 | (60,042,983) | - | 120,993 | 150,021,393 |
Loss for the period | - | (4,952,428) | (4,649,221) | |||
Other comprehensive income | - | - | ||||
Total comprehensive loss for the period | - | - | (4,952,428) | - | - | (4,952,428) |
Issue of convertible note | - | - | ||||
Income tax effect | 187,550 | - | 187,550 | |||
As at September 30, 2013 | 18,609,140 | 191,334,243 | (64,807,861) | - | 120,993 | 145,256,515 |
Loss for the period | 18,418,997 | 18,418,997 | ||||
Other comprehensive income | (39,884) | (39,884) | ||||
Total comprehensive loss for the period | - | - | 18,418,997 | (39,884) | - | 18,379,113 |
Issue of convertible note | - | - | ||||
Income tax effect | - | - | ||||
As at December 31, 2013 | 18,609,140 | 191,334,243 | (46,388,864) | (39,884) | 120,993 | 163,635,628 |
Loss for the period | (25,721,699) | 8,883,055 | (16,838,644) | |||
Other comprehensive income | - | |||||
Total comprehensive loss for the period | - | - | (25,721,699) | 8,883,055 | - | (16,838,644) |
Additional issue of shares | 158,433 | 158,433 | ||||
Share premium | (73,212) | (73,212) | ||||
Income tax effect | - | |||||
As at September 30, 2014 | 18,767,573 | 191,261,031 | (72,110,563) | 8,843,171 | 120,993 | 146,882,205 |
NOTES TO THE ACCOUNTS
1. BACKGROUND
FRONTIER MINING LTD. ("FRONTIER" or the "Company") was incorporated under the laws of the state of Delaware on August 5, 1998 for the purpose of exploring, and if warranted, developing gold and copper deposits in the Republic of Kazakhstan. Group's principal activities are the exploration, mining and processing of copper ores.
As of September 30, 2014 the Group owns the following subsidiaries (thereafter together - the "Group"):
Entity (location) | Nature of business | Effective ownership interest |
U.S. Megatech, Inc., British Virgin Islands, subsidiary of the Company | Holding Company | 100% |
KazCopper LLP, The Republic of Kazakhstan, subsidiary of U.S. Megatech Inc. | Exploration and development of the Benkala license and South Benkala area. | 100% |
Kazakhstan Chemical Company LLP, The Republic of Kazakhstan, subsidiary of the Company | Supply and transportation of chemicals | 100% |
Baltemir LLP, Republic of Kazakhstan, subsidiary of the Company | Dormant | 100% |
During the 9 months of 2014, FRONTIER has completed the process of closing its inactive subsidiaries, including Frontier Mining Finance BV, Frontier Mining Antilles NV and Frontier Mining Co-operative (registered in the Netherlands. The number of employees of the Group as of September 30, 2014 was 468 people (2013: 449 employees).
Functional and presentation currencies
The presentation currency of the Group consolidated financial statements is US Dollar. The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates. Transactions in currencies other than the functional currency are initially recorded at the functional currency rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange at the balance sheet date. Exchange gains and losses on settlement of foreign currency transactions translated at the rate prevailing at the date of the transactions, or the translation of monetary assets and liabilities at period end exchange rates, are taken to the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are translated to the functional currency at the foreign exchange rate at the date of the transaction.
The functional currency of the Company is the US Dollar as the majority of the operating activities are conducted in US Dollars.
The functional currency of exploration and service entities operating in Kazakhstan (KazCopper LLP and Kazakhstan Chemical Company LLP) is the Kazakhstan Tenge (KZT).
All balance sheet items were recalculated according to the exchange rate as on the reporting date, revenue/expenditure items were recalculated at the average exchange rate.
At the reporting date, the exchange rate of the National Bank of Kazakhstan was used:
Exchange rate | 30.09.2014 | 31.12.2013 |
At the reporting date | 181.90 | 153.61 |
Average exchange rate | 178.35 | 152.13 |
2. SHORT-TERM AND LONG-TERM ASSETS (US dollars)
ASSETS | 30.09.2014 | 31.12.2013 | |
Non-current assets | |||
Exploration and evaluation assets | 194,899,664 | 198,105,513 | |
Mine development assets | 422,517 | 499,316 | |
Property, plant and equipment | 47,536,853 | 53,898,801 | |
Intangible assets | 46,114 | 60,289 | |
Advances paid for non-current assets | 335,559 | 973,543 | |
VAT recoverable, non-current portion | 5,543,140 | 6,564,006 | |
Restricted cash | 420,573 | 437,413 | |
Total non-current assets | 249,204,420 | 260,538,881 | |
Current assets | |||
Inventories | 15,723,751 | 14,084,584 | |
Trade accounts receivable | 425,334 | 365,022 | |
Account Receivable | 17,548,820 | - | |
VAT recoverable, current portion | 2,052,392 | 945,882 | |
Advances paid | 1,020,718 | 632,533 | |
Cash and cash equivalents | 635,136 | 168,770 | |
Other current assets | 869,850 | 1,081,961 | |
Total current assets | 38,276,002 | 17,278,752 | |
Assets of disposable groups held for sale | - | 28,124,121 | |
TOTAL ASSETS | 287,480,422 | 305,941,754 |
2.1 Exploration and evaluation assets
The exploration and evaluation expenses as of September 30, 2014 amounted to 194.9 million US dollars, these costs are associated with the exploration of Benkala and South Benkala deposits. According to IAS 23 «Borrowing costs» loans received directly to finance qualified assets are allowed to capitalize. During exploration of Benkala FRONTIER received loans from RedKite, New Technologies LLP, Nursultan Nazarbayev Educational Fund SF, Central Asian Educational Services S.A., Nikfar Holding Limited, Casterwal Invest Ltd., Aliyev Y., and Riverhouse Consults Limited. All interests related to above loans are capitalized and included to the cost of the asset. Interests related to Sberbank JSC loans are treated as operating expenses.
2.2 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
The initial cost of other property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use.
Capital work in progress is carried at cost, less any recognised impairment loss. Construction cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the accounting policy. Such items of the property assets are classified to the appropriate category of property, plant and equipment at the time of completion and readiness for its intended use.
Devaluation of Kazakhstan Tenge in February 2014 had a significant impact on outstanding balance of assets, which caused a revaluation of the assets by more than 6 million US dollars.
2.3 VAT recoverable
Outstanding balance of VAT had not changed since 31.12.2013. Difference which is reflected in the balance is due to an increase in the KZT/USD foreign exchange rate.
Title | 30.09.2014 | 31.12.2013 |
VAT recoverable, non-current portion | 5,543,140 | 6,564,006 |
2.4 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost, including an appropriate portion of fixed and variable overhead expenses, is assigned to inventories by the method most applicable to the particular class of inventory. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Increased amount of inventories at reporting date is due to increased amount of agglomerate and ore in reserves.
Inventories | 30.09.2014 | 31.12.2013 |
Materials | 4,299,086 | 5,668,882 |
Construction in progress | 10,475,094 | 6,936,000 |
Finished products | 896,233 | 1,302,630 |
Other materials | 53,339 | 177,072 |
Total | 15,723,751 | 14,084,584 |
2.5 Cash and cash equivalents
Cash includes cash on hand and cash on current accounts in banks.
30.09.2014 | 31.12.2013 | |
Cash on current bank accounts | 628,286 | 46,448 |
Cash in transit in GBP | - | 95,170 |
Cash on hand | 6,850 | 27,152 |
Total | 635,136 | 168,770 |
2.5.1 Restricted Cash
Cash deposits with banks are made pursuant to requirements of the Group's subsoil use contracts. The Group accumulates such cash deposits restoration provisions related to obligations to restore and make the mines safe after use and the estimated costs of cleaning up any chemical leakage.
3. EQUITY AND LIABILITIES (US dollars)
US Dollars | Number of shares and outstanding | Nominal amount | Additional paid in capital | Total |
September 30, 2013 | 1,860,913,973 | 18,609,140 | 191,334,243 | 209,943,383 |
December 31, 2013 | 1,860,913,973 | 18,609,140 | 191,334,243 | 209,943,383 |
September 30, 2014 | 1,876,757,268 | 18,767,573 | 191,261,031 | 210,028,604 |
In September 2014, the Company announced that it has issued 15,843,295 new ordinary shares of a nominal value of US$0.01 each as incentive payments to senior management of FRONTIER.
3.1 Current and non-current liabilities
Borrowings
US Dollars | 30.09.2014 | 31.12.2013 |
Non-current portion: | ||
From third parties | 49,614,472 | 49,614,472 |
From related parties | 860,000 | 860,000 |
50,474,472 | 50,474,472 | |
Current portion: | ||
From third parties | 24,713,119 | 29,011,413 |
From related parties | 17,016,400 | 13,559,867 |
41,729,519 | 42,571,280 | |
Total | 92,203,991 | 93,045,752 |
3.2 Trade accounts payable
US dollars | 30.09.2014 | 31.12.2013 |
Trade account payable due to third parties | 3,827,626 | 2,192,470 |
3,827,626 | 2,192,470 | |
US dollars | 30.09.2014 | 31.12.2013 |
KZT | 3,223,485 | 1,772,982 |
USD | 237,298 | 271,748 |
EUR | 210,957 | 75,666 |
GBP | 98,217 | 68,389 |
RUB | 57,669 | 3,685 |
Total | 3,827,626 | 2,192,470 |
4. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (US dollars)
4.1 Revenue
30.09.2014 | 30.09.2013 | |
Revenue | 7,731,731 | 7,376,798 |
4.2 Cost of sales
30.09.2014 | 30.09.2013 | |
Cost of sales | (6,783,072) | (5,645,539) |
4.3 Selling, general and administrative expenses
30.09.2014 | 30.09.2013 | |
Selling, general and administrative expenses | (2,433,217) | (3,707,148) |
4.4 Financial and other operating expenses
30.09.2014 | 30.09.2013 | |
Finance cost | (3,170,905) | (3,442,605) |
Forex gain / (loss), net | (16,787,257) | (33,321) |
Impairment | - | (858) |
Income from sale of asset, net | - | 131,587 |
Other operating income / (expenses), net | (153,085) | 368,659 |
Profit from operating activities before income tax | (21,595,805) | (4,952,428) |
Income tax benefit / (expense), net | - | - |
Profit / (loss) for the period | (21,595,805) | (4,952,428) |
Effect on currency translation | 8,843,171 | - |
Gain / (loss) from discontinued operations | (4,125,894) | - |
Total comprehensive income | (16,878,528) | (4,952,428) |
Devaluation of Kazakhstan Tenge in February 2014 had a significant impact on foreign exchange loss during the 9 months of 2014.
Related Shares:
FML.L