Interim Results

11th Nov 2009 07:00



Avocet Mining PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009

Production of 56,297 ounces, up on previous periods (H1 last year 55,778 ounces)

Net cash generated by operations of US$12.6m

Profit before tax and exceptional items of US$3.4m

Exceptional impairment of remaining US$8.0m Penjom deferred stripping cost 

Wega Mining acquisition to more than double annual production above 200,000 ounces

Inata commissioning commenced - on track for first gold before end January 2010

Announcement of intention to apply for Oslo Stock Exchange listing

	6 months ended 30 September 2009	6 months ended 30 September 2008	Year ended 31 March 2009
Total gold production (ounces)	56,297	55,778	109,919
Net cash generated from operations (US$000)	12,557	13,711	23,659
Average realised gold price (US$/oz)	946	880	870
Cash production costs (US$/oz)	702	514	551
before deferred stripping adjustment	595	595	602
deferred stripping adjustment	107	(81)	(51)
(Loss)/profit before tax for the period (US$000)	(4,532)	30,906	33,879
before exceptionals	3,425	11,786	15,004
exceptional1	(7,957)	19,120	18,875
(Loss)/profit  for the period (US$000)	(3,064)	22,462	24,232
(Loss)/earnings per share (US cents)	(2.55)	18.61	20.32
before exceptionals	1.11	7.04	8.91

Commenting on the interim results, Jonathan Henry, Chief Executive Officer, stated:

"Avocet is making progress in its strategy of becoming a mid-tier gold producer, with our assets in South East Asia continuing to deliver strong operating cash flow. Following the commencement and ramp up of production at Inata in Burkina Faso, Avocet is set to become the largest gold producer listed on AIM, producing in excess of 200,000 ounces per annum."

Exceptionals in six months ended 30 September 2009 represents the impairment of capitalised deferred stripping costs. See note 5, p16

Avocet Mining PLC has announced that it will change its year end from 31 March to 31 December with effect from 31 December 2009. The Company will provide an unaudited financial quarterly report for the 3 months ended 31 March 2010 and for each quarter thereafter.

A copy of a corporate presentation to be made today at the Company's interim results presentation is available on the Company's website www.avocet.co.uk.

In addition, a presentation to analysts by Jonathan Henry, CEO, and Mike Norris, Finance Director, will be held at 9:30 am (UK time) today at the offices of Buchanan Communication, 45 Moorfields, London EC2Y 9AE.

A conference call and webcast will be hosted simultaneous with the analyst presentation. Participants may join the call by dialing the following numbers, approximately 10 minutes before its start.

From UK (Toll Free): 0808 109 1498

From Norway (Toll Free): 800 164 90

From United States of America (Toll Free): 1866 793 4279

Participant Pass Code: 622190#

A live audio webcast will be available on:

http://mediaserve.buchanan.uk.com/2009/avocet111109/registration.asp

A replay of the webcast will be available on the same link from 11:00 am (UK time) on 11 November 2009.

A presentation by Jonathan Henry and Mike Norris will also be held at 12:00 pm (CET) on Thursday 12 November 2009 at the offices of Arctic Securities, Haakon VII gt 6, N-0123 Oslo.

For further information please contact:
Avocet Mining PLC	Buchanan Communications	Ambrian Partners Limited	J.P. Morgan Cazenove	Arctic Securities	First Securities
	Financial PR Consultants	NOMAD and Joint Broker	Lead Broker	Financial Adviser	Financial Adviser
Jonathan Henry, CEO Mike Norris, FD Hans-Arne L'orange, EVP Investor Relations & Business Development	Bobby Morse Katharine Sutton	Richard Brown Richard Greenfield	Michael Wentworth-Stanley Anish Patel	Arne Wenger Kim Galtung Døsvik	Stein Hansen Eirik Lilledahl
+44 20 7907 9000	+44 20 7466 5000	+44 20 7634 4700	+44 20 7588 2828	+47 21013100	+47 2323 8000
www.avocet.co.uk	www.buchanan.uk.com	www.ambrian.com	www.jpmorgancazenove.com	www.arcticsec.no	www.first.no

Notes to Editors

Avocet Mining PLC ("Avocet" or "the Company") is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). On 15 October 2009, the Company announced its decision to apply for a listing on the Oslo Stock Exchange ("OSE") in addition to its existing admission to trading on AIM. The Company's principal activities are gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom gold mine, the country's largest gold producer), Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi) and Burkina Faso (as 90 per cent owner of the Inata gold project currently in the latter stages of construction and commissioning). The Company has a number of other advanced exploration projects in South East Asia and West Africa.

Background to operations

Penjom is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots exploration in an area of historic alluvial mining. The mine is located in Pahang State, approximately 120 km north of the country's capital, Kuala Lumpur. The mine was commissioned in December 1996 with reserves of 223,000 ounces. Successful resource development means Penjom has produced over one million ounces of gold to date and still has nearly one million ounces of resource. Over the last two years Penjom has expanded its mining and plant capacity with plant throughput increasing from 570,000 to over 700,000 tonnes per annum to compensate for decreasing mined grades. 

North Lanut in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 270,000 ounces since it was commissioned in 2004. Avocet purchased an 80 per cent interest in PT Avocet Bolaang Mongondow, an Indonesian company holding a 6th generation Contract of Work ("CoW"), from Newmont Mining Corporation in 2002. North Lanut is located within the CoW, which includes exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. An Indonesian company, PT Lebong Tandai, owns the remaining 20 per cent. The Company has a number of other advanced development and exploration projects in Indonesia.

The Inata gold project in Burkina Faso, West Africa, was purchased by Avocet as a result of the acquisition of Wega Mining ASA ("Wega Mining") which was completed in June 2009. Inata is currently in the latter stages of construction and commissioning, with first gold production expected before the end of January 2010, and full steady state production in 2011. Inata is expected to produce greater than 120,000 ounces of gold per annum over an initial 7 year mine life. Other assets acquired from Wega Mining include exploration licences in Burkina Faso, Guinea and Mali (the most advanced being the Tri-K gold exploration project in Guinea with a resource of 667,000 ounces), a 58.1 per cent interest in TSX Venture Exchange listed Merit Mining Corp and a 35.6 per cent interest in base metals company, Metallica Mining ASA.

CHAIRMAN'S STATEMENT

On 24 June Avocet completed the acquisition of Wega Mining, a transaction that should transform the Company and move it towards mid-tier status once the Inata project in Burkina Faso comes onstream. Average annual gold production at Inata is expected to exceed 120,000 ounces over the operation's initial seven year mine life. Good progress is being made on the construction and commissioning of the project and first gold is expected before the end of January 2010. This acquisition provides a clear path to the strategic growth that the Company has targeted, both in the Inata project itself and in several very promising exploration prospects in West Africa which will boost the Company's organic development pipeline and complement the Company's existing asset base in South East Asia. Global economic conditions have continued to be weak, although hopes of a return to economic growth have been buoyed recently by news that some major economies have moved out of recession. The uncertain economic environment, allied with a weakening US dollar, has benefited the Company by maintaining gold prices at historical highs during the half year with record levels being seen since the period end. Net cash from operations of US$12.6 million was generated for the period. Since 30 September, the Company has successfully drawn down additional funds from facilities with both Macquarie Bank Limited and Standard Chartered Bank. The Company has sufficient cash to bring Inata to positive cash flow, and should continue to benefit from gold prices currently around US$1,100/oz.  

Outlook

Management's immediate priority is the successful commissioning, first gold pour and production ramp up to steady state at Inata. Progress is also anticipated over the coming months in our exploration and project portfolio. This will include evaluating the potential for life of mine extensions at the Company's Malaysian mine, Penjom, and at its Indonesian mine, North Lanut. Looking further ahead, the Company will continue to seek business opportunities in South East Asia and West Africa as part of its strategy of achieving a long term balance of growth through acquisitions and organic exploration and development. On 15 October 2009 the Company announced its intention to list on the Oslo Børs by the end of March 2010 or shortly thereafter, which will help further develop the Nordic investor base, to the benefit of all shareholders. I would like to thank all our employees for their dedication and commitment. The significant changes in the Company over the last six months suggest that the coming months will be an exciting time for us all as the Company becomes a mid-tier gold producer.

Nigel McNair Scott

11 November 2009

CHIEF EXECUTIVE'S STATEMENT AND OPERATIONAL REVIEW Significant progress has been made during the last six months in integrating Wega Mining entities into the Avocet Group, and the Company has been strengthened in many ways by the addition of its new employees and an enlarged management team. As a result, the Company can now look forward to a future with annual gold output in excess of 200,000 ounces once Inata reaches full production. Avocet will also be operating in two gold regions, with its existing assets in South East Asia now complemented by a presence in West Africa, a highly prospective mining area where regulatory and legal conditions are favourable to external investors.

Gold production and cash costs

Gold production from the Company's two operating mines of 56,297 ounces was one per cent above the first half of the previous year and four per cent above the second half, principally due to a stronger performance at North Lanut. At Penjom, gold production has remained in line with the second half of the previous year, with grades continuing to remain lower than indicated in the published resource model. North Lanut gold production in the first six months exceeded the level achieved in previous periods, with the increase reflecting a number of improvement initiatives in mining and leach pad management. Before adjustment for deferred stripping at Penjom, the Company's average cash cost of US$595/oz was unchanged from last year. Improved leach pad performance and operating efficiencies resulted in a fall in cash costs at North Lanut, which compensated for an increase at Penjom caused by higher volumes mined and increased maintenance charges. A lower stripping ratio at Penjom resulted in a US$6.0 million reversal of deferred stripping costs, compared with a deferral of US$4.6 million in the previous year. The adjustment therefore added US$107/oz to the Company's total cash cost in the period, compared with a reduction of US$81/oz last year.

Penjom, Malaysia

	6 months ended 30 September 2009	6 months ended 30 September 2008	Year ended 31 March  2009
Production statistics:
Ore mined (tonnes)	620,000	265,000	699,000
Waste mined (tonnes)	8,560,000	8,260,000	16,939,000
Ore and waste mined (tonnes)	9,180,000	8,525,000	17,638,000
Ore processed (tonnes)	365,000	370,000	718,900
Average ore head grade (g/t)	3.36	3.48	3.47
Recovery	81%	88%	86%
Gold produced (ozs)	32,065	36,522	68,902
Cash costs (US$/oz):
- mining	393	321	349
- processing	169	161	167
- royalties and overheads	103	94	94
Total before deferred stripping	665	576	610
- deferred stripping	188	(125)	(82)
Total cash costs	853	451	528

Following an extensive stripping programme over the last two years, mining during the period focused on the new areas of Janik and Manik as well as the main Kalampong pit. Ore tonnes mined were more than double last year, when mining focused on waste stripping. New areas known as Manik West and Janik West are now being developed. Gold production of 32,065 ounces was 12 per cent below the first half of last year, due to lower grades and reduced recoveries, including the impact of more active carbon in the ore. Before adjustments for deferred stripping, cash costs at Penjom were US$665/oz, 15 per cent above the corresponding period last year. The increase reflects eight per cent more tonnes mined, higher mobile maintenance costs and lower gold production, which together more than offset lower fuel costs. A higher proportion of ore tonnes mined and a low strip ratio resulted in a reversal of deferred stripping costs equivalent to US$188/oz. Work progressed during the period on a revised resource model at Penjom following a period of underperformance of mine production against the previous model, particularly with regard to grade where the mine has been underperforming by over 40 per cent. Since November 2008 over 67,000 metres of resource definition and infill drilling have allowed for a review of Penjom's structural geological controls with the goal of forming a more predictive resource model. Additional drilling continues to identify extensions to the orebody both at depth and along strike. The complex structurally controlled nature of the mineralisation at Penjom means that the resource model does not yet provide sufficient certainty to support a revised resource report. Gold production in the next two quarters is expected to continue at approximately 5,000 ounces per month, with the exception of October when production was lower as the result of a planned shutdown for a mill liner change.

North Lanut, Indonesia

	6 months ended 30 September 2009	6 months ended 30 September 2008	Year ended 31 March 2009
Production statistics:
Ore mined (tonnes)	723,000	741,000	1,310,000
Waste mined (tonnes)	1,010,000	525,000	1,595,000
Ore and waste mined (tonnes)	1,733,000	1,266,000	2,905,000
Ore leached (tonnes)	653,000	818,000	1,338,000
Average ore head grade (g/t)	1.78	2.14	2.10
Recovery	65%	34%	45%
Gold produced (ozs)	24,232	19,256	41,017
Cash costs (US$/oz):
- mining	273	274	272
- processing	124	214	175
- royalties and overheads	106	145	141
Total cash costs	503	633	588

Tonnes of material mined increased significantly at North Lanut as activity moved to the new Rasik and Effendi area in addition to the existing Riska pit. Mining benefited from unusually dry weather, which also allowed progress to be made in a number of infrastructure projects, including new waste dumps, cleaning of sediment ponds, and realignment of haul roads. North Lanut's gold production at 24,232 ounces was 26 per cent up on the prior year. Ore tonnes leached were reduced in order to allow longer leach times and improve gold recovery. The new leach pad commissioned in March 2009 allowed greater segregation of cells and treatment of different ore types more tailored to their metallurgical and mineralogical properties. Other improvements in the leaching process included improved piping and pumping to allow an increase in active irrigation areas, and increased gold stripping capacity. During the period ore was sourced from the Riska pit and from the new Rasik pit. As expected, a higher proportion of material from Rasik meant that grades were lower than previously seen, but the more oxide nature of ore from this deposit, which leaches more easily, meant that the impact of lower grades was more than compensated by higher recoveries. Cash costs of US$503/oz were 21 per cent below the previous year, reflecting lower fuel costs, greater efficiencies in reagent usage, and higher gold production. Monthly production is expected to continue at a rate of approximately 4,000 ounces .

Inata project, Burkina Faso

Work over the last few months has included rectification of certain deficiencies in the design and construction of the project identified by Avocet after extensive investigation. The additional work and time delay has increased the project's capital cost by US$30 million to a total of approximately US$200 million.

The Inata project is now close to the end of construction activities and the emphasis has steadily transitioned to commissioning. The following key milestones have been achieved:

7 October 2009	-	Generators commissioned, supplying electrical power to entire site
15 October 2009	-	Raw water available from Gomde Barrage to plant water tank
15 October 2009	-	Crusher circuit commissioned
28 October 2009	-	Elution & reagent circuit commissioned
31 October 2009	-	Water available to the carbon-in-leach circuit

The most likely date for first gold pour is January 2010. An earlier date may be achievable if all remaining construction and commissioning tasks proceed without any further delays.

Exploration

Exploration activities in South East Asia and West Africa will accelerate over the next six months following a period of evaluation and reprioritisation of the Company's enlarged exploration portfolio as part of the post Wega Mining acquisition integration. In South East Asia this has led to the prioritisation of the Doup and Seruyung projects in Indonesia, where previous drilling has confirmed the resource potential of both projects. Following conversion of exploration licences to the IUP system under the New Mining Law in Indonesia, additional work will be undertaken on certain of the Company's projects in Indonesia with a view to progressing towards feasibility. In West Africa, priority projects include the Koulekoun-Kodieran-Kodianfara (Tri-K) block in Guinea, and satellite deposits in the Belahouro District that are close to Inata and could be treated through its processing plant. 

Financial results

The Company recorded a profit before tax and exceptional items of US$3.4 million, compared to US$11.8 million in the corresponding period last year. The deferred stripping adjustment in the period resulted in a charge of US$6.0 million, compared to a credit of US$4.6 million in the corresponding period for the prior year. As the grades and recoveries achieved from Penjom ore mined have been significantly lower than estimated at the time when the stripping costs were first deferred, the decision has been made to impair the remaining US$8.0 million deferred stripping balance at 30 September 2009, as an exceptional charge. No adjustments for deferred stripping will occur in future. The Company therefore reports a loss for the period of US$3.1 million, after tax and exceptional items, compared with a profit of US$22.5 million for the prior year, which benefited from post tax exceptional gains of US$13.5 million. The Company's cash decreased by US$33.5 million in the period, from US$72.4 million at 1 April 2009 to US$38.9 million at 30 September 2009. The decrease included a net outflow of US$21.4 million associated with the Wega Mining acquisition and capital expenditure of US$21.2 million in respect of the Inata project, as well as a US$5.0 million partial draw down of the Company's facility with Standard Chartered Bank. Capital investment amounted to US$3.0 million in capital expenditure at Penjom and North Lanut, US$3.0 million in resource development, and US$2.5 million in greenfield exploration activity. Since the period end the Company has drawn down a further US$29.2 million funds from its banking facilities and has sufficient cash to fund Inata through to positive cash flow, before accounting for additional cash flow from existing operations. The Company currently has US$54 million of cash and net debt of US$40 million. The increase in net assets from US$191.8 million at 1 April 2009 to US$283.7 million at 30 September 2009 principally reflects the Wega Mining acquisition for total consideration of US$109.1 million. Avocet's policy is to sell into the spot market to the greatest extent possible. As part of the Inata project facility restructure with Macquarie Bank Limited announced on 28 October, Avocet was required to hedge a further 50,000 ounces at US$1,056/oz in addition to the 350,000 ounces of forward gold sales at prices US$958/oz inherited on the Wega Mining acquisition. Avocet's Burkina Faso subsidiary therefore has 400,000 ounces hedged at an average price of US$970/oz, for delivery commencing in September 2010. All Inata sales until that date will be at spot prices and the hedge accounts for approximately 45 per cent of Inata's life of mine production based on the current statement of reserves. The Company has announced that it will adopt a December year end with effect from 31 December 2009, and will therefore report its preliminary, audited results in mid-March 2010 for the nine month period ended 31 December 2009 .

Looking to the future

Considerable effort is still needed to ensure a successful commissioning and ramp up of Inata, and management and employees remain focused on this goal. Nonetheless, it is important to recognise that the Company is poised to become a mid-tier gold producer, once success at Inata confirms the transformation the Company has gone through. I would like to take this opportunity to thank all our employees for their efforts so far in 2009, and to thank them for their continued support and commitment in helping to build a larger, more successful organisation for the future. Jonathan Henry 11 November 2009

Avocet Mining PLC

 

Condensed consolidated income statement		6 months ended 30 September 2009	6 months ended 30 September 2008		Year ended 31 March 2009
		US$000	US$000		US$000
	note	Unaudited	Unaudited		Audited
Revenue		54,197	50,638	97,042
Cost of sales	3	(47,879)	(36,656)	(77,596)
Gross profit		6,318	13,982	19,446
Administrative expenses		(2,639)	(2,451)	(4,889)
Share based payments		(518)	(916)	(1,500)
Deferred strip impairment	5	(7,957)	-	-
Exploration impairment	5	-	(7,981)	(8,225)
Operating (loss)/ profit		(4,796)	2,634	4,832
Profit on disposal of property plant and equipment	5	-	2,333	2,332
Finance items
Gain on gold collar not qualifying for hedge accounting	5	-	24,768	24,768
Exchange losses		(205)	(328)	(439)
Finance income		478	1,501	2,388
Finance expense		(9)	(2)	(2)
(Loss)/profit before taxation		(4,532)	30,906	33,879
Analysed as: Profit before taxation and exceptional items	4	3,425	11,786	15,004
Exceptional items	5	(7,957)	19,120	18,875
(Loss)/profit before taxation		(4,532)	30,906	33,879
Taxation		1,468	(8,444)	(9,647)
(Loss)/profit for the period		(3,064)	22,462	24,232
Attributable to:
Equity shareholders of the parent company		(4,105)	22,438	24,524
Minority interests		1,041	24	(292)
		(3,064)	22,462	24,232
(Loss)/earnings per share
Basic (cents per share)	6	(2.55)	18.61	20.32
Diluted (cents per share)	6	(2.55)	18.32	20.15

 

 

 

Avocet Mining PLC

Condensed consolidated balance sheet
		30 September 2009	30 September 2008	31 March 2009
		US$000	US$000	US$000
	note	Unaudited	Unaudited		Audited
Assets
Non-current assets
Goodwill		9,899	8,678		9,899
Intangible assets	7	37,437	26,621		32,422
Property, plant and equipment	8	274,774	68,933		70,904
Other financial assets	9	9,269	6,259		7,239
Deferred tax		6,962	12,631		6,482
		338,341	123,122		126,946
Current assets
Inventories		19,351	18,186		18,267
Trade and other receivables		16,442	11,552		10,541
Cash and bank balances		38,858	79,211		72,418
		74,651	108,949		101,226
Current liabilities
Trade and other payables		45,260	19,947		16,678
Current tax liabilities		1,057	3,799		16
		46,317	23,746		16,694
Non-current liabilities
Other financial liabilities	10	64,462	-		-
Deferred tax liabilities		2,598	2,080		4,417
Other liabilities	11	15,869	15,812		15,287
		82,929	17,892		19,704
Net assets		283,746	190,433		191,774
Equity
Capital and reserves
Issued capital		15,903	9,867		9,904
Share premium		142,778	52,834		53,400
Other reserves		8,157	9,804		9,556
Retained earnings		109,717	112,239		113,541
Total equity attributable to the parent company		276,555	184,744		186,401
Minority interests		7,191	5,689		5,373
Total equity		283,746	190,433		191,774

 

Avocet Mining PLC

Condensed consolidated statement of comprehensive income
	6 months ended 30 September 2009	6 months ended 30 September 2008	Year ended 31 March 2009
	US$000	US$000	US$000
	Unaudited	Unaudited	Audited
(Loss)/profit for the financial period	(3,064)	22,462	24,232
Exchange differences on translation of foreign operations	(1,783)	(367)	183
Revaluation of other financial assets	4	(3,301)	(4,117)
Total comprehensive (expense)/income for the period	(4,843)	18,794	20,298
Attributable to:
Equity holders of the parent	(5,884)	18,770	20,590
Minority interest	1,041	24	(292)
	(4,843)	18,794	20,298

Avocet Mining PLC

Condensed consolidated statement of changes in equity

	Share capital	Share premium	Other reserve	Retained earnings	Minority interest	Total equity
	US$000	US$000	US$000	US$000	US$000	US$000
At 31 March 2008 (Audited)	9,867	52,834	11,454	88,390	5,665	168,210
Profit for the period	-	-	-	22,438	24	22,462
Exchange differences on translation of foreign operations	-	-	(367)	-	-	(367)
Revaluation of other financial assets	-	-	(3,301)	-	-	(3,301)
Total recognised income and expense for the year	-	-	(3,668)	22,438	24	18,794
Share based payments	-	-	-	916	-	916
Profit on issue from treasury shares	-	-	-	495	-	495
Issue treasury shares	-	-	2,134	-	-	2,134
Investment in own shares	-	-	(116)	-	-	(116)
At 30 September 2008 (Unaudited)	9,867	52,834	9,804	112,239	5,689	190,433
Profit/(loss) for the period	-	-	-	2,086	(316)	1,770
Exchange differences on translation of foreign operations	-	-	550	-	-	550
Revaluation of other financial assets	-	-	(816)	-	-	(816)
Total recognised income and expense for the year	-	-	(266)	2,086	(316)	1,504
Share based payments	-	-	-	(786)	-	(786)
Issue of shares	37	566	-	-	-	603
Profit on issue from treasury shares	-	-	-	2	-	2
Movement on investments in treasury shares and own shares	-	-	18	-	-	18
At 31 March 2009 (Audited)	9,904	53,400	9,556	113,541	5,373	191,774
(Loss)/profit for the period	-	-	-	(4,105)	1,041	(3,064)
Exchange differences on translation of foreign operations	-	-	(1,783)	-	-	(1,783)
Revaluation of other financial assets	-	-	4	-	-	4
Total recognised income and expense for the year	-	-	(1,779)	(4,105)	1,041	(4,843)
Share based payments	-	-	-	518	-	518
Issue of shares	5,999	89,378	-	-	-	95,377
Minority interest acquired as part of Wega Mining acquisition	-	-	-	-	777	777
Loss on issue from treasury shares	-	-	-	(237)	-	(237)
Movement on investments in treasury shares and own shares	-	-	380	-	-	380
At 30 September 2009 (Unaudited)	15,903	142,778	8,157	109,717	7,191	283,746

Avocet Mining PLC

Condensed consolidated cash flow statement
		6 months ended 30 September 2009		6 months ended 30 September 2008		Year ended 31 March 2009
		US$000		US$000		US$000
	note	Unaudited		Unaudited		Audited
Cash flows from operating activities
(Loss)/profit for the period		(3,064)		22,462		24,232
Adjusted for:
Depreciation of non-current assets	8	6,392		4,797		9,871
Exploration impairment	5	-		7,981		8,225
Deferred strip adjustment		6,032		-		-
Deferred strip impairment	5	7,957		-		-
Share based payment		518		916		1,500
Provisions		287		364		124
Taxation in the income statement		(1,468)		8,444		9,647
Non operating items in the income statement	12	(264)		(28,272)		(29,047)
		16,390		16,692		24,552
Movements in working capital:
Increase in inventory		(1,082)		(835)		(917)
Decrease/(increase) in trade and other receivables		(2,204)		(4,456)		1,463
Increase/(decrease) in trade and other payables		(547)		2,310		(1,439)
Net cash generated by operations		12,557		13,711		23,659
Interest received		478		1,501		2,388
Interest paid		(9)		(2)		(2)
Income tax paid		-		(11,851)		(16,023)
Net cash generated by operating activities		13,026		3,359		10,022
Cash flows from investing activities
Payments for property plant and equipment	8	(24,262)		(15,787)		(22,848)
Deferred consideration		(879)		(947)		(1,627)
Exploration and evaluation expenses	7	(5,479)		(8,323)		(13,764)
Net cash movement from purchase of subsidiary	13	(21,392)		-		-
Net cash used in investing activities		(52,012)		(25,057)		(38,239)
Cash flows from financing activities
Proceeds from issue of equity shares		-		162		-
Gold collar contract close		-		(20,831)		(20,832)
Treasury and EBT shares purchased		-		(553)		(553)
Loan financing	10	5,000		-		-
Capital repayments on finance leases		-		(137)		(137)
Net cash generated from/(used in) financing activities		5,000		(21,359)		(21,522)
Net decrease in cash and cash equivalents		(33,986)		(43,057)		(49,739)
Exchange gains/(losses)		426		(328)		(439)
Total decrease in cash and cash equivalents		(33,560)		(43,385)		(50,178)
Cash and cash equivalents at the start of the period		72,418		122,596		122,596
Cash and cash equivalents at the end of the period		38,858		79,211		72,418

Notes to the consolidated financial statements

1. Basis of preparation

The Company adopted IFRS with effect from 1 April 2007 and prepared its annual consolidated financial statements under IFRS for the year ended 31 March 2008, the first annual reporting date for which the Company was required to apply IFRS. The unaudited interim consolidated financial statements which are for the six month period ended 30 September 2009, have therefore been prepared in accordance with the recognition and measurement principles of reporting standards that are either already in issue, as adopted by the European Union (EU) and effective at 31 December 2009, or are expected to be adopted and effective at 31 December 2009.

The interim consolidated financial statements do not include all of the information required for full annual financial statements. The interim financial information has not been audited but it has been reviewed under the International Standard on Review Engagements (UK and Ireland) 2410 of the Auditing Practices Board. The financial information set out in this interim report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The Company's statutory financial statements for the year ended 31 March 2009 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985.

The accounting policies applied are consistent with those applied in the financial statements for the year ended 31 March 2009 except for the adoption of IAS 1 Presentation of Financial Statements (revised 2007).

2. Acquisition of Wega Mining 

On 24 June 2009, the Company acquired 100 per cent of Wega Mining, a Norwegian company listed on the Oslo Børs, for consideration totalling US$109.1 million in shares and cash. The assets and liabilities at the date of acquisition, an estimate of the fair value of those assets and liabilities, and the total consideration paid, are set out in the following table: 

	Book amount		Reclassification of assets		Fair value adjustment (provisional)		Fair value (provisional)
	US$000		US$000		US$000		US$000
Non-current intangible assets	129,430		(33,426)		(96,004)		-
Non-current tangible assets	166,563		33,426		-		199,989
Other non-current assets	1,823		-		-		1,823
Current assets	3,789		-		-		3,789
Cash	17,292		-		-		17,292
Current liabilities	(27,849)		-		-		(27,849)
Loans	(55,800)		-		-		(55,800)
Loans with Avocet Mining PLC	(25,000)		-		-		(25,000)
Other non-current liabilities	(4,404)		-		-		(4,404)
Minority interest	(777)		-		-		(777)
	205,067		-		(96,004)		109,063
Satisfied by:
Share-for-share offer								95,378
Cash settlements								9,288
Transaction costs								4,397
								109,063

The reclassification of assets represents the recategorisation of pre-acquisition costs (permits, licences and mineral reserves) relating to the Inata gold project as non-current tangible assets, in line with other Inata project costs.  

The fair value adjustment has been estimated as the difference between the total consideration and the book value of Wega Mining's assets. The effect of the adjustment is to write down the residual intangible assets in Wega Mining's books at acquisition, which largely consist of mineral reserves, licences and other excess purchase consideration that had arisen from historic transactions. Under IFRS 3, a company has until 12 months after the date of acquisition to complete the fair value exercise.

3. Cost of sales

	6 months ended 30 September 2009	6 months ended  30 September 2008	Year ended 31 March 2009
	US$000	US$000	US$000
Mining	19,204	17,010	35,216
Processing	8,429	9,975	18,686
Overheads	3,574	3,770	7,727
Royalties	2,295	2,453	4,551
Cash costs before deferred stripping	33,502	33,208	66,180
Deferred stripping adjustment	6,032	(4,552)	(5,636)
Total cash costs	39,534	28,656	60,544
Changes in inventory	(666)	786	1,183
Other cost of sales	2,619	2,417	5,998
Depreciation and amortisation	6,392	4,797	9,871
Total cost of sales	47,879	36,656	77,596
Total cost of sales - excluding deferred stripping adjustment	41,847	41,208	83,232

4. Profit before tax and exceptional items

Profit before tax and exceptional items is calculated as follows:

	6 months ended 30 September 2009	6 months ended  30 September 2008	Year ended  31 March 2009
	US$000	US$000	US$000
Operating (loss)/profit	(4,796)	2,634	4,832
Add back: impairment of capitalised deferred stripping costs	7,957	-	-
Add back: exploration impairment	-	7,981	8,225
Exchange losses	(205)	(328)	(439)
Net finance income	469	1,499	2,386
	3,425	11,786	15,004

5.  Exceptional items

	6 months  ended 30 September 2009	6 months ended  30 September 2008	Year ended  31 March 2009
	US$000	US$000	US$000
Impairment of capitalised deferred stripping costs	(7,957)	-	-
Profit on gold collar mark-to-market	-	24,768	24,768
Profit on disposal of property plant and equipment	-	2,333	2,332
Exploration impairment	-	(7,981)	(8,225)
Exceptional (loss)/profit before taxation	(7,957)	19,120	18,875
Taxation	2,069	(5,599)	(5,530)
Exceptional (loss)/profit after taxation	(5,888)	13,521	13,345
Minority interests	-	424	424
Attributable to equity shareholders of the parent company	(5,888)	13,945	13,769

Impairment of capitalised deferred stripping cost

At 30 September 2009, the Company held US$8.0 million on the balance sheet in respect of costs at Penjom that had been capitalised from previous periods in accordance with the Company's accounting policy for deferred stripping. These costs were incurred during a major expansion of the Penjom open pit during which the waste stripping ratio was significantly in excess of the life of mine ratio. The benefit of this stripping was expected to arise in later years when higher volumes of ore would be available as a result of the high waste stripping programme. Accordingly, US$14.0 million of excess cost of stripping, being the amount in excess of the life of mine average stripping ratio, was deferred in the years of high waste stripping, to be amortised in the income statement when mining took place of the ore made available by the stripping, on the basis of the higher volumes of ore mined. Between April and September 2009, US$6.0 million was amortised in the income statement due to higher ore volumes. However, the grades and recoveries achieved from the ore mined have been significantly lower than estimated at the time when the stripping costs were deferred. The Company has therefore determined that the remaining US$8.0 million of deferred stripping costs at 30 September 2009 should be impaired in the income statement as an exceptional item.

Profit on gold collar mark-to-market

As at 31 March 2008, the Company had sold call options as part of a gold collar position, which was subsequently closed out during August and September 2008, however the decrease in the gold price up to this period resulted in a pre-tax profit of US$24.8 million. 

As at 30 September 2009, the Company held forward sales totaling 350,000 ounces. However, these are deemed to be outside the scope of IAS 39, on the basis that they are for own use, as gold sales will be delivered into these contracts in future periods.

Profit on disposal of property plant and equipment

Profit on disposals during H1 FY2009 related to the sale of a ball mill to Monument Mining Limited.

Exploration impairment 

Following evaluation of the exploration portfolio during H1 FY2009, the decision was made to impair US$8.0 million of deferred exploration expenditure.

6. Earnings per share

Total earnings per share are analysed in the table below for continuing and discontinued operations. The table below also shows earnings per share before exceptionals.

	6 months ended  30 September 2009		6 months ended  30 September 2008	Year ended  31 March 2009
Weighted average number of shares:
number of shares with voting rights	160,696,958		120,582,104	120,696,804
effect of share options in issue	125,324		1,873,876	1,015,604
total used in calculation of diluted earnings per share	160,822,282		122,455,980	121,712,408
	US$000		US$000	US$000
Earnings per share
(Loss)/profit after tax and exceptional items	(3,064)		22,462	24,232
Less/(add back) minority interests	(1,041)		(24)	292
(Loss)/profit for the period attributable to equity shareholders of the parent	(4,105)		22,438	24,524
Earnings per share
Basic (cents)	(2.55)		18.61	20.32
Diluted (cents)	(2.55)		18.32	20.15
Earnings per share before exceptionals
(Loss)/profit after tax and minorities	(4,105)		22,438	24,524
Adjustments:
Add back impairment of capitalised deferred stripping costs	7,957		-	-
Deduct deferred tax on impairment of capitalised deferred stripping costs	(2,069)		-	-
Deduct profits on disposal of property, plant and equipment	-		(2,333)	(2,332)
Deduct gain on gold collar	-		(24,768)	(24,768)
Add/(less) deferred tax on gold collar	-		6,935	6,935
Add back Exploration Impairment	-		7,981	8,225
Less deferred tax on exploration impairment	-		(1,336)	(1,405)
Less minorities on exploration impairment	-		(424)	(424)
Profit before exceptions after tax and minorities	1,783		8,493	10,755
Earnings per share
Basic (cents per share)	1.11		7.04	8.91
Diluted (cents per share)	1.11		6.94	8.84

7. Intangible assets

Intangible assets represent deferred exploration expenditure. 

8.  Property, plant and equipment

	Mining property and plant				Office equipment
Six months ended  30 September 2009	Malaysia	Indonesia	W Africa	UK	UK	Total
	US$000	US$000	US$000	US$000	US$000	US$000
Cost
At 1 April 2009	102,605	48,452	-	-	211	151,268
Acquisitions	-	-	199,957	-	32	199,989
Additions	1,216	1,809	21,228	-	9	24,262
Deferred stripping adjustment	(6,032)	-	-	-	-	(6,032)
Impairment of deferred stripping	(7,957)	-	-	-	-	(7,957)
At 30 September 2009	89,832	50,261	221,185	-	252	361,530
Depreciation
At 1 April 2009	56,475	23,717	-	-	172	80,364
Charge for the year	2,919	3,465	-	-	8	6,392
At 30 September 2009	59,394	27,182	-	-	180	86,756
Net book value  At 30 September 2009	30,438	23,079	221,185	-	72	274,774
At 31 March 2009	46,130	24,735	-	-	39	70,904

9. Other financial assets

Other financial assets represent the fair value of the Company's interest in Dynasty Gold Corporation and Monument Mining Limited.

10. Other financial liabilities

Other financial liabilities of US$64.5 million include a project finance facility of US$55.8 million from Macquarie Bank Limited relating to the Inata gold project, US$5.0 million drawn down from a corporate facility with Standard Chartered Bank, and US$3.7 million in respect of convertible loans issued by Merit Mining Corporation, acquired as part of the Wega Mining group.

11.  Other liabilities

Other liabilities include a US$8.6 million mine closure provision representing management's best estimate of the cost of mine closure at its mining operations in Malaysia and Indonesia. The charge to the income statement in respect of closure provisions, which is included within depreciation, for the six months ended 30 September 2009 was US$1.0 million (2008: US$0.7 million) and is calculated on each operation's life of mine.

12. Non-operating items in the income statement

	6 monthsended  30 September 2009	6 months ended 30 September 2008	Year ended  31 March 2009
	US$000	US$000	US$000
Profit on disposal of property, plant and equipment	-	(2,333)	(2,332)
Gain on gold collar not qualifying for hedge accounting	-	(24,768)	(24,768)
Exchange losses	205	328	439
Finance income	(478)	(1,501)	(2,388)
Finance expense	9	2	2
	(264)	(28,272)	(29,047)

13. Net cash movement from purchase of subsidiary

	US$000
Cash settlements in acquisition of Wega Mining	(9,288)
Transaction costs	(4,397)
Convertible loan to Wega Mining prior to acquisition	(25,000)
Cash balance in Wega Mining at acquisition date	17,292
	(21,393)

14. Segmental reporting

September 2009			notes	UK (Head office)	Malaysia	Indonesia	West Africa (acq'n)	Total
Income Statement				US$000	US$000	US$000	US$000	US$000
Revenue				-	30,390	23,807	-	54,197
Cost of sales				(1,211)	(31,812)	(14,856)	-	(47,879)
Cash production costs	Mining			-	(12,597)	(6,607)	-	(19,204)
	Processing			-	(5,423)	(3,006)	-	(8,429)
	Overheads			-	(1,170)	(2,404)	-	(3,574)
	Royalties			-	(2,125)	(170)	-	(2,295)
Before deferred strip adjustment				-	(21,315)	(12,187)	-	(33,502)
	Deferred strip			-	(6,032)	-	-	(6,032)
After deferred strip adjustment				-	(27,347)	(12,187)	-	(39,534)
Changes in inventory				-	(128)	794	-	666
Other cost of sales			(a)	(1,203)	(1,418)	2	-	(2,619)
Depreciation & amortisation			(b)	(8)	(2,919)	(3,465)	-	(6,392)
Gross (loss)/profit				(1,211)	(1,422)	8,951	-	6,318
Administrative expenses and share based payments				(3,157)	-	-	-	(3,157)
Deferred strip impairment				-	(7,957)	-	-	(7,957)
Operating (loss)/profit				(4,368)	(9,379)	8,951	-	(4,796)
Profit on disposal of discontinued operations				-	-	-	-	-
Net finance items				356	34	(126)	-	264
Profit before taxation				(4,012)	(9,345)	8,825	-	(4,532)
Analysed as:
Profit before tax and exceptionals				(4,012)	(1,388)	8,825	-	3,425
Exceptionals - profit on disposals, gold collar MTM				-	(7,957)	-		(7,957)
				(4,012)	(9,345)	8,825	-	(4,532)
Taxation				1,213	2,098	(1,843)	-	1,468
(Loss)/profit for the period				(2,799)	(7,247)	6,982	-	(3,064)
Attributable to:
Equity shareholders of parent company				(2,799)	(7,247)	5,941	-	(4,105)
Minority interests				-	-	1,041	-	1,041
Balance Sheet
Non-current assets				29,504	38,241	49,883	220,713	338,341
Inventories				-	9,009	10,340	2	19,351
Trade and other receivables				1,667	1,466	9,727	3,582	16,442
Cash and bank balances				15,148	9,205	10,569	3,936	38,858
Total assets				46,319	57,921	80,519	228,233	412,992
Current liabilities				(5,722)	(8,157)	(6,003)	(26,435)	(46,317)
Non-current liabilities				(7,706)	(4,018)	(11,001)	(60,204)	(82,929)
Total liabilities				(13,428)	(12,175)	(17,004)	(86,639)	(129,246)
Net assets				32,891	45,746	63,515	141,594	283,746
Cash Flow Statement
Profit/(loss) for the period				(2,799)	(7,247)	6,982	-	(3,064)
Adjustments for non-cash items		(c)		(1,043)	14,778	5,719	-	19,454
Movements in working capital				(1,422)	(895)	(1,516)	-	(3,833)
Net cash generated from operations				(5,264)	6,636	11,185	-	12,557
Net interest (paid)/received				447	17	5	-	469
Tax paid				-	-	-	-	-
Purchase of property, plant and equipment				(9)	(1,216)	(1,809)	(21,228)	(24,262)
Deferred exploration expenditure				(502)	(2,157)	(2,168)	(652)	(5,479)
Other cash movements			(d)	(35,357)	(5,129)	(2,175)	25,816	(16,845)
Total increase in cash and cash equivalents				(40,685)	(1,849)	5,038	3,936	(33,560)

Other cost of sales represents costs not directly related to production;

Includes amounts in respect of the amortisation of closure provisions at Penjom and North Lanut, respectively;

Adjustments for non-cash items include depreciation, impairment, share based payments, movement in provision, taxation in the income statement and non-operating items in the income statement; 

Other cash movements include deferred consideration paid, cash flows from financing activities, and exchange losses.

September 2008		notes	UK (head office)	Malaysia	Indonesia	Total
Income Statement			US$000	US$000	US$000	US$000
Revenue			-	33,360	17,278	50,638
Cost of sales			978	(23,677)	(13,957)	(36,656)
Cash production costs	Mining		-	(11,747)	(5,263)	(17,010)
	Processing		-	(5,854)	(4,121)	(9,975)
	Overheads		-	(1,116)	(2,654)	(3,770)
	Royalties		-	(2,318)	(135)	(2,453)
Before deferred strip adjustment			-	(21,035)	(12,173)	(33,208)
	Deferred stripping		-	4,552	-	4,552
After deferred strip adjustment			-	(16,483)	(12,173)	(28,656)
Changes in inventory			-	(1,792)	1,006	(786)
Other cost of sales		(e)	984	(2,236)	(1,165)	(2,417)
Depreciation & amortisation		(f)	(6)	(3,166)	(1,625)	(4,797)
Gross profit			978	9,683	3,321	13,982
Administrative expenses and share based payments			(3,367)	-	-	(3,367)
Exploration impairment			(5,209)	-	(2,772)	(7,981)
Operating (loss)/profit			(7,598)	9,683	549	2,634
Profit on disposal of property, plant & equipment			2,333	-	-	2,333
Net finance items - gold collar mark-to-market			24,768	-	-	24,768
- other			1,662	174	(665)	1,171
Profit before taxation			21,165	9,857	(116)	30,906
Analysed as:
Profit before tax and exceptionals			(727)	9,857	2,656	11,786
Exceptionals - exploration impairment, profit on  disposals, gold collar MTM			21,892	-	(2,772)	19,120
			21,165	9,857	(116)	30,906
Taxation			(4,398)	(3,148)	(898)	(8,444)
Profit/(loss) for the period			16,767	6,709	(1,014)	22,462
Attributable to:
Equity shareholders of parent company			16,767	6,709	(1,038)	22,438
Minority interests			-	-	24	24
Balance Sheet
Non-current assets			25,905	54,212	43,005	123,122
Inventories			-	7,161	11,025	18,186
Trade and other receivables			590	1,813	9,149	11,552
Cash and bank balances			64,915	8,131	6,165	79,211
Total assets			91,410	71,317	69,344	232,071
Current liabilities			3,038	12,202	8,506	23,746
Non-current liabilities			2,508	4,839	10,545	17,892
Total liabilities			5,546	17,041	19,051	41,638
Net assets			85,864	54,276	50,293	190,433
Cash Flow Statement
Profit/(loss) for the period			16,767	6,709	(1,014)	22,462
Adjustments for non-cash items		(g)	(17,871)	6,141	5,960	(5,770)
Movements in working capital			384	(5,220)	1,855	(2,981)
Net cash generated from operations			(720)	7,630	6,801	13,711
Net interest (paid)/received			1,789	185	(475)	1,499
Tax paid			-	(1,779)	(10,072)	(11,851)
Purchase of property, plant and equipment			(37)	(8,687)	(7,063)	(15,787)
Deferred exploration expenditure			(99)	(1,144)	(7,080)	(8,323)
Other cash movements		(h)	(22,634)	-	-	(22,634)
Total decrease in cash and cash equivalents			(21,701)	(3,795)	(17,889)	(43,385)

 

e. Other cost of sales represents costs not directly related to production;

f. Includes amounts in respect of the amortisation of closure provisions at Penjom and North Lanut, respectively;

g. Adjustments for non-cash items include depreciation, exploration impairment, share based payments, movement in provision, taxation in the income statement and non- operating items in the income statement; 

h. Other cash movements include deferred consideration paid, cash flows from financing activities, and exchange losses.

ENDIR CKKKNOBDDKDD

---

Related Shares:

AVM.L