30th Sep 2011 07:00
Interim Results for the six months ended 30 June 2011
("African Minerals" "AML" or "the Company")
1st Half Highlights
·; Capital of $475.6m invested in the project in the first 6 months of 2011
·; Completion of $417.7m of Secured Loan Facility in February 2011
·; $46m equity raised as a result of China Railway Materials Commercial Corporation ("CRM") exercising follow-on rights
·; Board strengthened by addition of Nina Shapiro and Bernard Pryor (from 12 July 2011) as independent non-executive directors
·; Memorandum of Understanding signed with China Communications Construction Company Limited ("CCCC") for port and rail elements of Phase II, with expansion to 45Mtpa
Project Update and Outlook
·; Commissioning and remedial activities in progress for Tonkolili Phase I project, which remains on course to deliver first ore on ship ("FOOS") in Q4 2011
·; Phase I project capacity expanded from 12Mtpa to 15Mtpa with 12Mt production target in 2012
·; Signing offinal agreements for $1.5Bn Shandong Iron and Steel Group investment ("Shandong"), with completion by 31 December 2011, principally subject to regulatory approvals
·; c$90m equipment financing facility completed with The Standard Bank of South Africa Ltd ("Standard Bank")
·; Term sheet agreed and mandate executed with Standard Bank to provide $100m of subordinated stand-by facility, with 8Mt of off take over 3 years
Executive Chairman's Review
In the first half of 2011 the Company continued to expand production capacity and infrastructure, raise further funds and de-risk our medium and long-term growth strategy. We remain on track to achieve our goal of bringing Phase I of the Tonkolili mine into production in the fourth quarter of 2011, which we will ramp up to an increased annual production capacity of 15Mtpa.
Good progress has been made on completion of the port and railway infrastructure and most major works are now complete. The port infrastructure is complete with commissioning under way, and we expect that the railway, following some remedial works, will be operational in the near future. We intend to send a first trial shipment of 40,000 tonnes of ore to Shandong in time to satisfy the closing timetable of their investment.
As announced in August, in order to successfully de-risk these projects prior to the start of the rainy season, the Company redeployed equipment from the mine to support these civil works. As a result the build-up of ore stockpiles was slower than originally anticipated and the Company now expects FY 2011 Direct Shipping Ore ("DSO") sales of 1.2Mt compared to an original estimate of 2.5Mt.
During the construction of Phase I we have continued to de-bottleneck the integrated mine, plant, rail and port system to ensure that we can maximize production. As a result we have increased our planned export capacity to 15Mtpa from 12Mtpa. This expansion, against a largely fixed cost base, will enable us to mitigate cost escalation from increased fuel and other input costs and ensure production costs remain at or below $27.50 per tonne.
Following the achievement of first ore on ship, Phase I development is now expected to be fully commissioned in Q1 2012, with a capacity of 15Mtpa.
The Phase IB wet process plant will ramp up to full capacity by the end of Q2 2012 and the Company expects to mine, market and ship 12Mt of iron ore in 2012 and 15Mtpa from 2013.
As we look towards the commencement of commercial exports, our sales and marketing activity is advancing well. We have had significant interest from many parties for our Phase I direct shipping ore, over and above our existing agreements with CRM and Shandong, and those opportunities are currently being reviewed.
With Phase I now undergoing commissioning, we now look forward to implementing our next phase of expansion.
Expansion
To that end, we have signed agreements with SISG, for their acquisition of a 25% stake in our Tonkolili project for an injection, at the project level, of $1.5Bn and a discounted offtake agreement. That transaction remains subject principally to Chinese regulatory approval, but we anticipate being able to draw down all funds by year end. These funds will allow us to accelerate this next major growth phase of our business.
In May we signed a Memorandum of Understanding with CCCC - one of the major Chinese port and rail construction companies - to carry out the engineering studies required for the major infrastructure components of the expansion, most notably being the establishment of a new, globally significant deep water port facility at Tagrin Point, and the early establishment of a standard gauge, heavy haul railway from Tonkolili to Tagrin Point. Those studies, which now have a scope to support expanded production of 45Mtpa, are currently in progress.
Financials
In February, the Company successfully completed a Secured Loan Facility, raising $417.7m, which completed the original budget funding requirements to construct Phase I. In addition, following the completion of the $307m equity raising in November 2010, CRM confirmed they would exercise their pre-emption rights to maintain its 12.5% shareholding, investing a further $46m.
The cost to completion of our Phase I project escalated by $284m, as a result of a change in scope from 12Mtpa to 15Mtpa capacity ($132m, or just $44 per incremental tonne of capacity), and various other cost escalations ($152m), including costs incurred as a result of activities taken to reduce the impact of rain on the completion of our project.
Taking all of the above into account, on 18 August 2011 we announced that we expect to reach a minimum cash balance of $20m in Q1. Remedial work during commissioning is expected to incur a further $5m, reducing anticipated headroom to $15m.
While AML is confident that it will be able to operate within the expected headroom, the Board believes it was prudent to establish a standby facility to mitigate the potential effects of capital escalation, commissioning and market risks. Accordingly the Company has agreed a term sheet with Standard Bank for the provision of $100m subordinated standby facility.
As part of the subordinated standby facility, Standard Bank and AML will also enter into an off take contract to supply 8Mt of iron ore being 2Mt in the first year, and 3Mtpa in the second and third years, priced in line with Platt's 58%Fe iron ore fines index CFR China.
Health & Safety
In the first half of the year, Contractors and Employees of AML managed to achieve a Lost Time Injury Frequency Rate (LTIFR) of 2.06 injuries per million man hours worked. This compares favourably to our achievement of 2.625 during the full year 2010, and we will continue to strive to maintain this downward trend. However, in the first half of the year a sub-contractor lost his life as a result of an earthmoving incident, and another in a motor vehicle accident. Sadly, in August, another motor vehicle accident resulted in the deaths of three people employed by one of our subcontractors. We extend our heartfelt condolences to the families that suffered tragic loss.
Corporate Governance
African Minerals strongly believes that there is a direct relationship between good corporate governance and the creation of value for shareholders. Furthermore, with equity partners in China, institutional supporters around the world, and the scrutiny afforded by the draw down of the debt facility, the Company is committed to continual improvement in oversight and transparency.During the first half of the year we significantly strengthened our Board of Directors with the addition of Nina Shapiro as Independent Non-Executive Director ('NED'), and in early July Bernie Pryor joined the Board also as an Independent NED, as Mark Ashurst left the Board. This strengthening and adjustment of the Board will continue with an aim to having a majority of independent directors on the Board in due course.As we develop and expand our operations we are cognisant of our responsibility to operate in a manner which is sustainable in the long-term, and are committed to ensuring that our operations have a net positive benefit for the people of Sierra Leone. We aim to operate to global best practice standards in health and safety, community relations and environmental protection. AML has committed itself to aligning operations and strategies towards the ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption set out in the UN Global Compact, and the UK Anti-Bribery Act.We look forward to the remainder of the year, and to making 2011 a transformational year in which African Minerals will become a globally significant producer to the benefit of all of our stakeholders. As Phase I of our project nears commencement of commercial exports, on behalf of the Board, I offer my heartfelt thanks to all of our staff, our contractors, and the Government and People of Sierra Leone.
Frank TimisExecutive Chairman
29 September 2011
Operations review
We have made significant progress during the period on delivering the key drivers of our project which remain: the development of our multigenerational Tonkolili project; working in partnership with our local communities; enhancing governance standards; our people; and the maintenance of a robust financial position.
The Tonkolili ProjectWe remain on track to deliver first ore from Tonkolili onto ship in Q4 2011, just 12 months after commencement of major earthworks, and just 15 months after the receipt of the mining licence for Tonkolili.
However, during commissioning it has become necessary to perform remedial work on a 350m section of the formation and rail around 13km from the mine, which had slumped. This slump was caused by a change in drainage as a result of the railway, which forced water into a previously unidentified acquifer. The resultant flow weakened the foundation of the rail and formation. Remedial work will involve excavating the slumped area, creating an appropriate drainage, and rebuilding the formation and rail. The remedial work is expected to be completed during October, and will cost an estimated $5m.
Following a review of the operational capacity of the various elements of the Phase I project by SRK (UK) Ltd, AML now believes that the current Tonkolili mining plan will support a production rate of 15Mtpa, up from 12Mtpa. The Phase IB wet process plant, currently under construction, will support a sustained production level of 15Mtpa, whilst the rail and port infrastructure can support a capacity of 16.2Mtpa. As a result, guidance for the quantity of ore to be exported in 2012 has been increased from 10Mt to 12Mt. Full capacity of 15 Mtpa will be achieved by the end of Q2 2012 once the Phase IB wet process facility is commissioned early in the new year.
Community
We continue to work closely with local communities to manage community needs and to ensure communities are fully apprised of our plans and held four Early Works Chiefdom Committee meetings in local Chiefdoms (Makari Gbanti, Buya Romende, Marampa and Maforki) during the period. In addition crop compensation payments of $81,497 were made to 4 Chiefdoms (Buya Romende, Makari Gbanti, Kalansoghia and Kafe Simira) to compensate for crops damaged by our activities. We continued to support local enterprise and awarded a contract to produce 80 security uniforms to a local business group. In addition, in line with our policies on community resettlement, we held several meetings with the affected community at Maparay in advance of the relocation and resettlement processes beginning and successfully relocated Farangbaya village. In addition, during the Period AML awarded 1912 scholarship awards totalling $127,000 across all 10 local chiefdoms.
The company paid $10m in advance taxes in early 2011 in order to assist in the country's infrastructure development programme. We continue to work closely with the Government of Sierra Leone and, in order to foster mutual understanding and transparency have initiated a secondment programme with the Ministry of Finance under which we are hosting their staff in our London office.
The Sierra Leone Environmental Protection Agency ('SLEPA') also completed a full audit of our operations in the period, including site visits. SLEPA has expressed their satisfaction with AML's adherence to the Environmental Management Plan ('EMP').
People
We continued to strengthen our management team and welcomed Peet Kotze to the company in June as VP Mining. Peet brings with him 30 years of mining and processing experience at the highest operational level, principally gained at Sishen Mine - currently the largest in Africa. Peet was promoted to Chief Operating Officer from 1st September.As at the end of June 2011 AML and its contractors employed 6,208 people, 4,771 (77%) of whom were Sierra Leoneans.
Financial ReviewFinancialIn February 2011 the Company successfully completed a Secured Loan Facility for $417.7m and raised a further $46.3m in January 2011as a result of CRM exercising their pre-emption rights following the $307m equity placing in November 2010. These fundraisings gave the company the confidence to state that the project was then fully funded as to the original budget into Phase I production.The project capital, from January 2010 to completion of the current Phase I plan, has increased by $284m from the originally announced $1.1Bn. Of this escalation, $132m is directly attributable to the change of scope in the capacity of the project from 12Mtpa to 15Mtpa. This gives a marginal capital intensity of $44 per tonne of annual production capacity.The balance of $152m over-run represents an escalation of 14% against the original budget and is principally due to the increased cost of de-risking the railway construction, additional earthmoving requirement for a portion of the new rail, marine engineering costs, fuel price escalation, demobilisation and additional costs associated with logistics.The previous guidance on headroom was that the Company would achieve a minimum cash balance of $71m, concurrent with First Ore On Ship. As a result of the capital expenditure increase, and a slower ramp up in production and other forecast updates, together with the additional remedial activity, we are now forecasting a minimum cash balance of $15m in January 2012, concurrent with project completion, which included equipment financing, but not the standby facility.
AML has signed an equipment financing facility with Standard Bank for the provision of circa $90m of equipment finance credit facility. The principal terms of the dollar denominated facility are a term of 5 years from drawdown, with quarterly repayment; secured on assets up to $100m, specifically carved out of the existing Secured Loan Facility for the purpose of equipment financing; . The effective interest rate of this facility, including all commitment and arrangement fees, is under 10%.
The Company has also agreed a term sheet, and mandated Standard Bank to arrange and underwrite a $100m subordinated stand by facility.
The facility, as currently drafted, will remain available until 30 June 2012, and will be subordinated to the current Secured Loan Facility. It is repayable in 5 equal quarterly instalments beginning 30 September 2012. There are no penalties for early repayment.
The effective interest rate of this facility, including all commitment and arrangement fees, is under 11% and the cost reduces by a further 1% post completion.
The loan, as is customary for a facility of this nature, is subject to finalisation of certain aspects including completion of relevant technical, credit and legal due diligence and receipt of relevant approvals. As part of the subordinated loan facility, Standard Bank and AML will also enter into an offtake contract to supply 8Mt of iron ore being 2Mt in the first year, and 3Mtpa in the second and third years, priced in line with Platt's 58%Fe iron ore fines index CFR China.
Indicative terms for both the subordinated facility and the offtake contract have been agreed and the documentation and due diligence process is underway.
Financial result
The Group generated an operating loss for the period of $26.5m, which principally consisted of employee costs and travel of $24.1m, including share based payments of $12.5m.
We generated a taxation credit of $8.9m relating to recognition of deferred tax assets on qualifying capital expenditure in Sierra Leone that are in excess of deferred tax liabilities.
The other comprehensive loss of $5.2m resulted from fair value reductions in the Group's listed investments, the main component of which was in respect of Cape Lambert Resources ($5.1m).
Total comprehensive loss for the period amounted to $22.6m.
Balance sheet
Exploration and evaluation assets increased by $5.1m since December 2010 to $203.2m, resulting from continued feasibility and exploration work on the Tonkolili project as the project ramps up towards commercial production in Q4 2011.
Assets under construction and property, plant and equipment increased by $470.5m since December 2010 to $739.6m, resulting from expenditure on the Tonkolili mine, the construction and reconstruction of the new and existing rail and the reconstruction and upgrade of the Pepel port facility.
The net deferred tax asset has increased by $9.0m since December 2010 to $17.2m and is primarily in respect of tax allowances on qualifying assets in Sierra Leone. This asset has been recognized as the business predicts that profits will be available from future periods to utilize these losses.
In January 2011 $46.3m was raised through an equity placing as a result of CRM exercising their pre-emption rights in relation to the equity placing undertaken in November 2010. In addition the group closed a secured non-revolving credit facility for an amount of $417.7m.
At the end of June 2011 cash and cash equivalents amounted to $342.6m (December 2010: $372.4m).
Prior period adjustments
A number of prior period adjustments have been identified as a result of errors, changes in policy or a review by management as to the most appropriate method of accounting given the current activities of the Group, all these adjustments were fully disclosed in the financial statements for the year ended 31 December 2010. The adjustments recorded relate to the June 2010 effect. In summary the adjustments show an increase in the total comprehensive loss for the period to June 2010 of $1.9m and a total adjustment to equity holders as at June 2010 of $2.8m.
DIRECTORS' RESPONSIBILITY STATEMENTS |
The Interim Report complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce a half-yearly financial report. The Interim Report is the responsibility of, and has been approved by, the Directors.We confirm that to the best of our knowledge:- the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';- the Interim Report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and- the Interim Report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R. |
The Directors are also responsible for the maintenance and integrity of the African Minerals Limited website.For and on behalf of the Board
Miguel PerryChief Financial Officer
29 September 2011 |
INDEPENDENT REVIEW REPORT |
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IntroductionWe have been engaged by the Company to review the condensed set of financial statements in the Interim Report for the six months ended 30 June 2011 which comprises the Interim Consolidated Statement of Comprehensive Income, Interim Consolidated Statement of Financial Position, Interim Consolidated Statement of Cash Flow, Interim Consolidated Statement of Changes in Equity, and related notes 1 to 13. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.Directors' responsibilitiesThe Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.Our responsibilityOur responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Interim Report based on our review. |
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Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.Emphasis of matter In forming our opinion on the condensed set of financial statements, we have considered the adequacy of the disclosure made in note 2 to the condensed set of financial statements concerning the Group's ability to continue as a going concern. The conditions as explained in note 2 to the condensed set of financial statements indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The condensed set of financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.
Ernst & Young LLPLondon
29 September 2011 |
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INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
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(Unaudited) |
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(Unaudited) | (Restated) | (Audited) Year Ended 31 December |
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Six Months Ended 30 June | Six Months |
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Ended 30 June |
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2011 | 2010 | 2010 |
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Notes | US$ 000's | US$ 000's | US$ 000's |
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(Note 3) |
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Net operating expenses | 4 | (26,496) | (22,621) | (47,432) |
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Impairment | 8 | - | (3,859) | (4,453) |
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Operating loss | (26,496) | (26,480) | (51,885) |
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Loss on disposal of available for sale investments | - | (278) | (2,277) |
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Dividend income | 5 | - | 7,347 | 7,347 |
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Interest income | 177 | 27 | 318 |
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Loss from continuing operations | (26,319) | (19,384) | (46,497) |
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Taxation | 10 | 8,922 | - | 10,345 |
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Loss after taxation from continuing operations | (17,397) | (19,384) | (36,152) |
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Discontinued operations |
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Profit for the period | - | 82 | 173 |
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- | 82 | 173 |
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Loss for the period | (17,397) | (19,302) | (35,979) |
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Other comprehensive (loss)/income |
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Fair value movement on available for sale investments | (5,317) | (14,072) | 13,786 |
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Deferred taxation on available for sale investments | 94 | - | (2,113) |
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(5,223) | (14,072) | 11,673 |
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Total comprehensive loss for the period | (22,620) | (33,374) | (24,306) |
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Attributable to equity holders of the parent | (22,620) | (33,374) | (24,306) |
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Basic loss per share - cents | 6 | (5.32) | (8.34) | (13.98) |
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Basic loss per share continuing activities - cents | 6 | (5.32) | (8.37) | (14.05) |
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Basic earnings per share discontinuing activities - cents | 6 | - | 0.03 | 0.07 |
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Diluted loss per share - cents | 6 | (5.32) | (8.34) | (13.98) |
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Diluted loss per share continuing activities - cents | 6 | (5.32) | (8.37) | (14.05) |
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Diluted earnings per share discontinuing activities - cents | 6 | - | 0.03 | 0.07 |
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| INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
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| (Unaudited) |
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| (Unaudited) | (Restated) | (Audited) | ||||||||
| 30 June | 30 June | 31 December | ||||||||
| 2011 | 2010 | 2010 | ||||||||
| Notes | US$ 000's | US$ 000's | US$ 000's | |||||||
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| Non-current assets | (Note 3) | |||||||||
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| Exploration and evaluation assets | 8 | 203,188 | 111,554 | 198,115 | ||||||
| Assets under construction and property, plant & equipment | 9 | 739,633 | 82,474 | 269,133 | ||||||
| Available for sale investments | 70,779 | 49,611 | 76,096 | |||||||
| Deposits | 3,910 | 3,910 | 3,910 | |||||||
| Deferred tax assets | 10 | 17,248 | - | 8,232 | ||||||
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| Total non-current assets | 1,034,758 | 247,549 | 555,486 | |||||||
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| Current assets | ||||||||||
| Cash and cash equivalents | 7 | 342,629 | 336,089 | 372,364 | ||||||
| Other receivables | 9,357 | 11,492 | 422 | |||||||
| Inventories | 1,376 | 1,190 | 1,277 | |||||||
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| 353,362 | 348,771 | 374,063 | ||||||||
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| Total assets | 1,388,120 | 596,320 | 929,549 | |||||||
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| Equity | ||||||||||
| Share capital | 3,280 | 2,725 | 3,176 | |||||||
| Share premium account | 1,034,090 | 671,303 | 966,931 | |||||||
| Equity reserves | 68,421 | 12,954 | 20,269 | |||||||
| Fair value reserve | 16,169 | (14,072) | 21,392 | |||||||
| Accumulated deficit | (156,762) | (116,290) | (139,365) | |||||||
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| Attributable to equity holders | 965,198 | 556,620 | 872,403 | |||||||
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| Total equity | 965,198 | 556,620 | 872,403 | |||||||
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| Non-current liabilities | ||||||||||
| Borrowings | 11 | 217,316 | - | - | ||||||
| Other non-current liabilities | 1,131 | 773 | 736 | |||||||
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| Total non-current liabilities | 218,447 | 773 | 736 | |||||||
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| Current liabilities | ||||||||||
| Trade and other payables | 50,783 | 38,927 | 52,331 | |||||||
| Borrowings | 11 | 152,838 | - | - | ||||||
| Tax payable | 854 | - | 4,079 | |||||||
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| Total current liabilities | 204,475 | 38,927 | 56,410 | |||||||
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| Total liabilities | 422,922 | 39,700 | 57,146 | |||||||
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| Total equity and liabilities | 1,388,120 | 596,320 | 929,549 | |||||||
| For and on behalf of the Board
Miguel Perry Chief Financial Officer
29 September 2011 | ||||||||||
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW |
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(Unaudited) |
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(Unaudited) | (Restated) | (Audited) |
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30 June | 30 June | 31 December |
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2011 | 2010 | 2010 |
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Notes | US$ 000's | US$ 000's | US$ 000's |
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Cash flows from operating activities |
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Loss before tax from continuing operations | (26,319) | (19,384) | (46,497) |
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Profit before tax from discontinued operations | - | 82 | 173 |
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(26,319) | (19,302) | (46,324) |
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Adjustments to add/(deduct) non-cash items: |
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Depreciation of property, plant & equipment | 122 | 22 | 95 |
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Impairment of exploration and evaluation assets | - | 3,859 | 4,453 |
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Loss on disposal of available for sale investments | - | 278 | 2,277 |
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Unrealised foreign exchange (gain)/loss | 4 | (2,733) | 6,808 | 11,191 |
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Share based payments | 12,483 | 3,443 | 11,309 |
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Dividends received | - | (7,347) | (7,347) |
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Interest received | (177) | (27) | (318) |
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(16,624) | (12,266) | (24,664) |
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Operating loss before working capital changes |
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(Increase)/decrease in inventories | (99) | 397 | 310 |
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(Increase)/decrease in receivables | (8,935) | 3,760 | (256) |
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Increase in provisions | 395 | 43 | 6 |
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(Decrease)/increase in trade and other payables | (3,257) | 26,764 | 46,210 |
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Net cash flow from operating activities | (28,520) | 18,698 | 21,606 |
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Cash flows from investing activities |
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Dividends received | 5 | - | 7,347 | 7,347 |
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Interest received | 177 | 27 | 318 |
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Proceeds of sales of property, plant & equipment | - | - | 62 |
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Expenditure for exploration and evaluation assets | 8 | (5,073) | (21,683) | (110,544) |
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Payments to purchase property, plant & equipment | 9 | (433,763) | (76,011) | (264,958) |
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Proceeds of sales of available for sale investments | - | 199 | 1,621 |
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Payments to acquire available for sale investments | - | (1,252) | (1,252) |
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Net cash outflow from investing activities | (438,659) | (91,373) | (367,406) |
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Cash flows from financing activities |
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Proceeds of ordinary shares issued | 6 | 46,345 | 337,124 | 650,894 |
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Proceeds of exercise of options and warrants | 6 | 1,106 | 1,802 | 1,815 |
| ||||||
Proceeds from borrowings | 11 | 416,200 | - | - |
| ||||||
Interest paid and costs of financing | (28,940) | - | - |
| |||||||
| |||||||||||
Net cash inflow from financing activities | 434,711 | 338,926 | 652,709 |
| |||||||
| |||||||||||
| |||||||||||
Net (decrease)/increase in cash and cash equivalents | (32,468) | 266,251 | 306,909 |
| |||||||
| |||||||||||
Net foreign exchange difference | 2,733 | (6,808) | (11,191) |
| |||||||
| |||||||||||
Cash and cash equivalents at beginning of period | 372,364 | 76,646 | 76,646 |
| |||||||
| |||||||||||
Cash and cash equivalents at end of period (restated) | 342,629 | 336,089 | 372,364 |
| |||||||
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
| ||||||||
| |||||||||
Attributable to equity holders of the parent | |||||||||
| |||||||||
For the financial year 2010, six months ended 30 June 2011 and six months ended 30 June 2010 |
| ||||||||
Share |
| ||||||||
Share | premium | Equity | Fair value | Accumulated |
| ||||
capital | account | reserves | reserves | deficit | Total |
| |||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's |
| |||
| |||||||||
As at 1 January 2010 | 2,136 | 310,002 | 14,221 | 6,960 | (103,386) | 229,933 |
| ||
Loss after taxation | - | - | - | - | (35,979) | (35,979) |
| ||
Deferred taxation on available for sale investments | - | - | - | (2,113) | - | (2,113) |
| ||
Fair value movements on available for sale investments | - | - | - | 13,786 | - | 13,786 |
| ||
Other comprehensive income | - | - | - | 11,673 | (35,979) | (24,306) |
| ||
Reserves transfer for available for sale investments | - | - | - | 2,759 | - | 2,759 |
| ||
Allotments during the year | 1,040 | 681,818 | - | - | - | 682,858 |
| ||
Transaction cost - equity issues | - | (30,120) | - | - | - | (30,120) |
| ||
Share-based payments | - | - | 11,309 | - | - | 11,309 |
| ||
Reserves transfer - performance shares | - | 809 | (839) | - | - | (30) |
| ||
Reserves transfer - options | - | 4,368 | (4,368) | - | - | - |
| ||
Reserves transfer - warrants | - | 54 | (54) | - | - | - |
| ||
As at 31 December 2010 (Audited) | 3,176 | 966,931 | 20,269 | 21,392 | (139,365) | 872,403 |
| ||
| |||||||||
As at 1 January 2011 | 3,176 | 966,931 | 20,269 | 21,392 | (139,365) | 872,403 |
| ||
Loss after taxation | - | - | - | - | (17,397) | (17,397) |
| ||
Deferred taxation on available for sale investments | - | - | - | 94 | - | 94 |
| ||
Fair value movements on available for sale investments | - | - | - | (5,317) | - | (5,317) |
| ||
Other comprehensive income | - | - | - | (5,223) | (17,397) | (22,620) |
| ||
Allotments during the period | 104 | 64,454 | 38,374 | - | - | 102,932 |
| ||
Share-based payments | - | - | 12,483 | - | - | 12,483 |
| ||
Reserves transfer - options | - | 2,635 | (2,635) | - | - | - |
| ||
Reserves transfer - warrants | - | 70 | (70) | - | - | - |
| ||
As at 30 June 2011 (Unaudited) | 3,280 | 1,034,090 | 68,421 | 16,169 | (156,762) | 965,198 |
| ||
| |||||||||
For the six months ended 30 June 2010 (Restated) | Share |
| |||||||
Share | premium | Equity | Fair value | Accumulated |
| ||||
capital | account | reserves | reserves | deficit | Total |
| |||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's |
| |||
| |||||||||
As at 1 January 2010 | 2,136 | 310,002 | 14,221 | 6,960 | (103,386) | 229,933 |
| ||
Loss after taxation | - | - | - | - | (19,302) | (19,302) |
| ||
Fair value movements on available for sale investments | - | - | - | (14,072) | - | (14,072) |
| ||
Other comprehensive income | - | - | - | (14,072) | (19,302) | (33,374) |
| ||
Allotments during the period | 589 | 374,447 | - | - | - | 375,036 |
| ||
Transaction cost - equity issues | - | (16,912) | - | - | - | (16,912) |
| ||
Share-based payments | - | - | 3,444 | - | - | 3,444 |
| ||
Reserves transfer - performance shares | - | 809 | (839) | - | - | (30) |
| ||
Reserves transfer - options | - | 2,848 | (2,848) | - | - | - |
| ||
Reserves transfer - warrants | - | 54 | (54) | - | - | - |
| ||
As at 30 June 2010 (Unaudited) (Refer to Note 3) | 2,725 | 671,248 | 13,924 | (7,112) | (122,688) | 558,097 |
| ||
| |||||||||
AFRICAN MINERALS LIMITED |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
1. ACCOUNTING POLICIES |
Basis of preparationThe unaudited condensed set of financial statements for the six months ended 30 June 2011 has been prepared in accordance with International Accounting Standard ('IAS') 34 Interim Financial Reporting. The unaudited condensed set of financial statements does not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements.The unaudited condensed set of financial statements for the six months ended 30 June 2011 do not constitute statutory accounts and have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2010.The financial information for the year ended 31 December 2010 has been extracted from the statutory accounts for that period. The auditor's report for the year ended 31 December 2010 was unqualified. |
Going concernRefer to Note 2. |
Changes in accounting policies |
The accounting policies adopted in the preparation of the unaudited condensed set of financial statements is consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2010, except for the adoption of the following new amendments to existing standards as of 1 January 2011:- IAS 24 Related Party Disclosures- IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)- IFRIC 19 Extinguishing Financial Liabilities with Equity InstrumentsThe adoption of these amendments has no impact on Group earnings or equity in the current or prior periods. |
BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between proceeds (net of transaction costs) and redemption value is capitalised and transferred to assets under construction over the period of the borrowings using the effective interest method (effective interest rate of 28.18%). This fair value implies a rate of return of 28% on the debt component of the Facility. This rate of return reflects the significant risks attaching to the Facility from the Lenders' perspective. |
Fees paid on establishment of loan facilities are recognised as transaction costs of the loan. The commitment fee comprised new common shares and warrants (see below). |
Warrants |
Non-market based vesting conditions are taken into account in estimating the number of awards likely to vest. Fully-paid shares are valued at market value at the date of issue. The grant date fair value of warrants granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the warrants. The amount recognised as an expense is adjusted to reflect the actual number of warrants for which the related service and non-market vesting conditions are met. To calculate the fair value of the warrants, the Black-Scholes pricing model has been used. |
Segment reportingThe Group is managed as a single entity which is developing a mine and related infrastructure in order to meet commercial production in Q4 2011. In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment which are disclosed in the Statement of Comprehensive Income for the Group.The Group does not have any significant non-current assets that are located in the country of domicile of the Group. The majority of the non-current assets are located in Sierra Leone. |
2. GOING CONCERN |
The Group has prepared a detailed cash flow forecast through to December 2012 that supports the conclusion of the Directors that it will be able to operate as a going concern. The cash flow forecasts are dependent on:- The Group bringing Phase 1 of the Tonkolili iron ore project into production which encompasses completing construction / refurbishment of the mine, railway and port facilities to achieve first ore shipments in Q4 2011 with sales in the quarter of 1.2mt. - The commissioning of plant 1B, the main ore crushing facility at the mine, by the end of January 2012 which will have annual capacity of 15mt. - The costs to complete are not significantly higher than those forecasted.In the event the Group is unable to achieve these milestones, it may have to seek additional sources of financing and the Directors have several options by which this can be raised.In the event the first ore on ship is delayed beyond 28 February 2012 or monthly production is below specified volumes as of this date, the Group would be in default of its debt covenants. In this event, the Group may seek to renegotiate the terms of the debt facility or seek alternative financing.The Directors have concluded that the matters discussed above represent material uncertainties that may cast significant doubt over the Group's ability to continue as a going concern. Nevertheless, the Directors after making enquiries and considering these material uncertainties are confident that the Group will continue to have adequate resources to continue in operation for the foreseeable future. For this reason, the condensed set of financial statements of the Group has been prepared on a going concern basis.Accordingly, the condensed set of financial statements does not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group was unable to continue as a going concern. |
| ||||||||||||||||||||||||||||
3. CHANGE IN ACCOUNTING POLICY, RECLASSIFICATION AND PRIOR PERIOD ADJUSTMENTS | ||||||||||||||||||||||||||||
Previously | ||||||||||||||||||||||||||||
Statement of comprehensive income | reported | (Restated) | ||||||||||||||||||||||||||
30 June | 30 June | |||||||||||||||||||||||||||
2010 | Adjustment | 2010 | ||||||||||||||||||||||||||
Adjustment | US$ 000's | US$ 000's | US$ 000's | |||||||||||||||||||||||||
Capitalisation policy change | 3 | - | (7,155) | (7,155) | ||||||||||||||||||||||||
Depreciation capitalisation | 6 | - | 400 | 400 | ||||||||||||||||||||||||
Share issue | 7 | - | (1,256) | (1,256) | ||||||||||||||||||||||||
Available for sale investments | 8 | - | 14,072 | 14,072 | ||||||||||||||||||||||||
Performance shares | 10 | - | 823 | 823 | ||||||||||||||||||||||||
Available for sale investments | 12 | - | 5,597 | 5,597 | ||||||||||||||||||||||||
Net operating expenses | (35,102) | 12,481 | (22,621) | |||||||||||||||||||||||||
Impairment | (3,859) | - | (3,859) | |||||||||||||||||||||||||
Operating loss | (38,961) | 12,481 | (26,480) | |||||||||||||||||||||||||
Loss on disposal of available for sale investments | 12 | - | (278) | (278) | ||||||||||||||||||||||||
Dividend income | 7,347 | - | 7,347 | |||||||||||||||||||||||||
Interest income | 27 | - | 27 | |||||||||||||||||||||||||
Loss before taxation from combined operations | (31,587) | 12,203 | (19,384) | |||||||||||||||||||||||||
Taxation | - | - | - | |||||||||||||||||||||||||
Loss after taxation from continuing operations | (31,587) | 12,203 | (19,384) | |||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||
Profit for the period | 82 | - | 82 | |||||||||||||||||||||||||
82 | - | 82 | ||||||||||||||||||||||||||
Loss for the period | (31,505) | 12,203 | (19,302) | |||||||||||||||||||||||||
Other comprehensive income | 8 | - | (14,072) | (14,072) | ||||||||||||||||||||||||
Total comprehensive loss for the period | (31,505) | (1,869) | (33,374) | |||||||||||||||||||||||||
Attributable to equity holders of the parent | (31,505) | (1,869) | (33,374) | |||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||
1. Relates to impairment of property, plant and equipment in 2008 for assets not deemed functional of $1,391,000. | ||||||||||||||||||||||||||||
2. Reclassification of short term investments to cash and cash equivalents as these investments meet the definition of cash equivalents. | ||||||||||||||||||||||||||||
3. Relates to $7,155,000 employee and overhead costs which were previously reported capitalised under exploration and evaluation assets and should have been expensed. | ||||||||||||||||||||||||||||
4. Relates to reclassification of exploration and evaluation expenditure to assets under the course of construction as the related assets were still under construction as at the balance sheet date. The related amount as at 30 June 2010 was $3,002,000. 5. Relates to reclassification of deposits from current deposits to non-current deposits. 6. Relates to capitalisation of plant, property and equipment depreciation, which was not booked in line with the Group's capitalisation policy. This has been transferred to exploration and evaluation assets. 7. Relates to a correction for foreign exchange on a share issue in the six month period to 30 June 2010 which was incorrectly booked at the foreign exchange rate at the date of cash receipt. The correcting entry is calculated from the foreign exchange rate at the date the transaction occurred. 8. Relates to change in investments previously recorded at fair value through Statement of Comprehensive Income to available for sale investments. Changes in available for sale investments previously recorded in the Consolidated Statement of Comprehensive Income are restated through Other Comprehensive Income in the fair value reserves. As at 30 June 2010 loss of $14,072,000. 9. Relates to a correction regarding exercised shares of $2,849,000 that were incorrectly credited to reserves, the correcting entry credits the share premium account. 10. Relates to a correction of performance shares which were a) calculated incorrectly, previously reporting a charge of $823,000 which should not have been charged and b) incorrectly credited to share premium ($800,000), share capital ($30,000) and debited to equity reserves ($7,000). 11. Relates to a revision to the previous amount of share-based payment charge in the Statement of Comprehensive Income. 12. Relates to a correction for fair value of available for sale investments of total $5,657,000 previously recorded through operating expenses.
This correction is comprised of:
| ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Consolidated statement of financial position | Previously |
| |||||||||||||||||||||||||
| reported | (Restated) |
| |||||||||||||||||||||||||
| 30 June | 30 June |
| |||||||||||||||||||||||||
| 2010 | Adjustment | 2010 |
| ||||||||||||||||||||||||
| Adjustment | US$ 000's | US$ 000's | US$ 000's |
| |||||||||||||||||||||||
| Non-current assets |
| ||||||||||||||||||||||||||
| Exploration and evaluation assets | 3 | 121,312 | (7,156) | 114,156 |
| ||||||||||||||||||||||
| Assets under construction transfer | 4 | - | (3,002) | (3,002) |
| ||||||||||||||||||||||
| Depreciation capitalisation | 6 | - | 400 | 400 |
| ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| 121,312 | (9,758) | 111,554 |
| ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Assets under construction and property, plant & equipment | 1 | 80,863 | (1,391) | 79,472 |
| ||||||||||||||||||||||
| 4 | - | 3,002 | 3,002 |
| |||||||||||||||||||||||
| 80,863 | 1,611 | 82,474 |
| ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Available for sale investments | 12 | 44,291 | 5,320 | 49,611 |
| ||||||||||||||||||||||
| Deposits | 5 | - | 3,910 | 3,910 |
| ||||||||||||||||||||||
| Total non-current assets | 246,466 | 1,083 | 247,549 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Current assets |
| ||||||||||||||||||||||||||
| Cash and cash equivalents | 2 | 6,089 | 330,000 | 336,089 |
| ||||||||||||||||||||||
| Short term investments | 2 | 330,000 | (330,000) | - |
| ||||||||||||||||||||||
| Other receivables | 5 | 15,402 | (3,910) | 11,492 |
| ||||||||||||||||||||||
| Inventories | 1,190 | - | 1,190 |
| |||||||||||||||||||||||
| 352,681 | (3,910) | 348,771 |
| ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total current assets | 352,681 | (3,910) | 348,771 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total assets | 599,147 | (2,827) | 596,320 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Equity |
| ||||||||||||||||||||||||||
| Share capital | 2,725 | - | 2,725 |
| |||||||||||||||||||||||
| Share premium account | 667,188 | 4,115 | 671,303 |
| |||||||||||||||||||||||
| Equity reserves | 13,787 | (833) | 12,954 |
| |||||||||||||||||||||||
| Fair value reserve | - | (14,072) | (14,072) |
| |||||||||||||||||||||||
| Accumulated deficit | (124,253) | 7,963 | (116,290) |
| |||||||||||||||||||||||
| Attributable to equity holders | 559,447 | (2,827) | 556,620 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total equity | 559,447 | (2,827) | 556,620 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Non-current liabilities |
| ||||||||||||||||||||||||||
| Other non-current liabilities | 773 | - | 773 |
| |||||||||||||||||||||||
| Total non-current liabilities | 773 | - | 773 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Current liabilities |
| ||||||||||||||||||||||||||
| Trade and other payables | 38,927 | - | 38,927 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| 38,927 | - | 38,927 |
| ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total current liabilities | 38,927 | - | 38,927 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total liabilities | 39,700 | - | 39,700 |
| |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
| Total equity and liabilities | 599,147 | (2,827) | 596,320 |
| |||||||||||||||||||||||
| |||||||||||||||||
|
| ||||||||||||||||
| |||||||||||||||||
Consolidated statement of changes in equity | |||||||||||||||||
The following illustrates the impact of the restatements on shareholders' equity: | |||||||||||||||||
(Restated) | (Restated) | ||||||||||||||||
Share | Share | (Restated) | (Restated) | (Restated) | |||||||||||||
capital | premium | Equity | Fair value | Accumulated | |||||||||||||
account | account | reserves | reserves | deficit | |||||||||||||
Adjustment | US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | ||||||||||||
Pre 2010 Adjustments | |||||||||||||||||
Impairment of property, plant and equipment pre 2010 | 1 | - | - | - | - | (1,391) | |||||||||||
Adjustments as at 1 January 2010 to 30 June 2010 | |||||||||||||||||
Share issue foreign exchange loss | 7 | - | 1,256 | - | - | - | |||||||||||
Performance share correction | 10 | (30) | (800) | 7 | - | - | |||||||||||
Share option correction | 11 | 30 | 810 | (840) | - | - | |||||||||||
Reserves transfer - options | 9 | - | 2,849 | - | - | (2,849) | |||||||||||
Loss for the period | - | - | - | - | 12,203 | ||||||||||||
Other comprehensive income | 8 | - | - | - | (14,072) | - | |||||||||||
Restated equity 30 June 2010 | - | 4,115 | (833) | (14,072) | 7,963 | ||||||||||||
Reconciliation of Note 3 to Interim Statement of Changes in Equity as at 30 June 2010 | |||||||||||||||||
Equity as per 30 June restated Note 3 balance sheet | 2,725 | 671,303 | 12,954 | (14,072) | (116,290) | ||||||||||||
Pre 2010 Adjustments reported in Annual Report 2010 | - | (55) | 970 | 6,960 | (6,398) | ||||||||||||
Restated equity adjusted for pre 2010 adjustments | 2,725 | 671,248 | 13,924 | (7,112) | (122,688) | ||||||||||||
(Unaudited) | |||||||||||||||||
4. NET OPERATING EXPENSES | (Unaudited) | (Restated) | (Audited) | ||||||||||||||
30 June | 30 June | 31 December | |||||||||||||||
2011 | 2010 | 2010 | |||||||||||||||
US$ 000's | US$ 000's | US$ 000's | |||||||||||||||
From continuing operations | |||||||||||||||||
Depreciation of plant, property and equipment | 122 | 22 | 95 | ||||||||||||||
Wages and salaries | 6,592 | 4,060 | 12,404 | ||||||||||||||
Share-based payments | 12,483 | 3,443 | 11,309 | ||||||||||||||
Foreign exchange differences | (2,733) | 6,808 | 11,191 | ||||||||||||||
Travel | 4,931 | 4,944 | 7,973 | ||||||||||||||
Advertising and public relations | 487 | 1,334 | 2,092 | ||||||||||||||
Professional services | 3,321 | 1,830 | 2,161 | ||||||||||||||
Other operating charges | 1,293 | 180 | 207 | ||||||||||||||
26,496 | 22,621 | 47,432 | |||||||||||||||
5. DIVIDEND INCOME | |||||||||||||||||
Dividend income in 2010 was $7,347,000, received from the available for sale investment in Cape Lambert Resources. Cape Lambert Resources did not declare a dividend in 2011. | |||||||||||||||||
| |||||||||||||||||
6. LOSS PER SHARE | (Unaudited) | ||||||||||||||||||||||||
(Unaudited) | (Restated) | (Audited) 31 December 2010 | |||||||||||||||||||||||
30 June | 30 June | ||||||||||||||||||||||||
2011 | 2010 | ||||||||||||||||||||||||
US$ 000's | US$ 000's | US$ 000's | |||||||||||||||||||||||
Loss for the period | (17,397) | (19,302) | (35,979) | ||||||||||||||||||||||
Continuing operations | (17,397) | (19,384) | (36,152) | ||||||||||||||||||||||
Discontinued operations | - | 82 | 173 | ||||||||||||||||||||||
Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. | |||||||||||||||||||||||||
Shares | Shares | Shares | |||||||||||||||||||||||
Basic weighted average number of common shares in issue | 326,409,399 | 231,403,129 | 257,185,914 | ||||||||||||||||||||||
Basic loss per share - cents | (5.32) | (8.34) | (13.98) | ||||||||||||||||||||||
Basic loss per share continuing activities - cents | (5.32) | (8.37) | (14.05) | ||||||||||||||||||||||
Basic earnings per share discontinuing activities - cents | - | 0.03 | 0.07 | ||||||||||||||||||||||
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Where there is a basic loss per share, the dilutive impact is ignored. | |||||||||||||||||||||||||
Shares | Shares | Shares | |||||||||||||||||||||||
Basic weighted average number of common shares in issue | 326,409,399 | 231,403,129 | 257,185,914 | ||||||||||||||||||||||
Adjustment for share options | 947,998 | 2,190,149 | 2,626,518 | ||||||||||||||||||||||
327,357,397 | 233,593,278 | 259,812,432 | |||||||||||||||||||||||
Diluted loss per share - cents | (5.32) | (8.34) | (13.98) | ||||||||||||||||||||||
Diluted loss per share continuing activities - cents | (5.32) | (8.37) | (14.05) | ||||||||||||||||||||||
Diluted earnings per share discontinuing activities - cents | - | 0.03 | 0.07 | ||||||||||||||||||||||
During the six months to 30 June 2011: | |||||||||||||||||||||||||
New shares | |||||||||||||||||||||||||
6,991,450 new common shares were issued to China Railway Materials Commercial Corporation for consideration of $46,345,000. | |||||||||||||||||||||||||
2,348,399 new common shares valued at $17,107,000 were issued as part of the commitment fee paid to lenders for the secured non-revolving credit facility (refer to Note 11). | |||||||||||||||||||||||||
No shares were repurchased during the period. | |||||||||||||||||||||||||
Share options | |||||||||||||||||||||||||
947,998 new common shares were issued for consideration of $942,000 on the exercise of share options. |
| ||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||
133,334 new common shares were issued for consideration of $164,000 on the exercise of share warrants. |
| ||||||||||||||||||||||||
Total | |||||||||||||||||||||||||
10,421,181 shares were issued for consideration of $64,558,000. Consideration for the shares issued as commitment fee of $17,107,000 (as above) are included within the proceeds from borrowings of $416,200,000 as per the Statement of Cash Flows, resulting in net consideration of ordinary shares issued of $47,451,000. |
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| |||||||||||||||||||||||||
7. CASH AND CASH EQUIVALENTS | |||||||||||||||||||||||||
$176,097,000 of the $342,629,000 total cash and cash equivalents balance is restricted as at 30 June 2011. Under the secured non-revolving credit facility agreement, the restricted amount can only be used to fund project development costs (refer to Note 11 for facility details). |
| ||||||||||||||||||||||||
8. EXPLORATION AND EVALUATION ASSETS | |||||||||||||||||||||||||
During the six months ended 30 June 2011, the Group acquired exploration and evaluation assets with a cost of $5,073,000 (30 June 2010: $21,683,000; 31 December 2010: $110,554,000). There were no disposals of exploration and evaluation assets (30 June 2010: $nil; 31 December 2010: $nil).
Impairment during the six months ended 30 June 2011 was $nil (30 June 2010: $3,859,000; 31 December 2010: $4,453,000). The impairment for 2010 relates to deferred exploration expenditure $3,859,000 deemed unrecoverable and software deemed unrecoverable of $594,000. | |||||||||||||||||||||||||
9. ASSETS UNDER CONSTRUCTION AND PROPERTY, PLANT AND EQUIPMENT | |||||||||||||||||||||||||
During the six months ended 30 June 2011, the Group acquired property, plant and equipment with a cost of $433,641,000 (30 June 2010: $75,989,000; 31 December 2010: $264,863,000). There were also borrowing costs capitalised of $36,859,000 (refer to Note 11). There were no disposals of property, plant and equipment (30 June 2010: $nil; 31 December 2010: $62,000). | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
10. TAXATION |
| ||||||||||||||||||||||||
(Unaudited) |
| ||||||||||||||||||||||||
(Unaudited) | (Restated) | (Audited) |
| ||||||||||||||||||||||
30 June | 30 June | 31 December |
| ||||||||||||||||||||||
2011 | 2010 | 2010 |
| ||||||||||||||||||||||
US$ 000's | US$ 000's | US$ 000's |
| ||||||||||||||||||||||
| |||||||||||||||||||||||||
Deferred tax | 8,922 | - | 10,345 |
| |||||||||||||||||||||
| |||||||||||||||||||||||||
Tax credit for the period | 8,922 | - | 10,345 |
| |||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Loss on ordinary activities before tax | (26,319) | (19,302) | (46,324) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||||||
Loss before tax multiplied by the standard UK Corporation tax rate of 27% (2010: 28%) |
|
|
|
| |||||||||||||||||||||
7,106 | 5,405 | 12,971 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||||||
Effects of: |
|
|
|
| |||||||||||||||||||||
Change to the UK corporation tax rate | (310) |
| - | - |
| ||||||||||||||||||||
Recognition of deferred tax on losses brought forward | 2,041 |
| - | 3,708 |
| ||||||||||||||||||||
Tax losses unrecognised | - |
| (5,405) | - |
| ||||||||||||||||||||
Effect of overseas tax rate | 420 |
| - | (1,629) |
| ||||||||||||||||||||
Adjustments in respect of prior periods | (335) |
| - | - |
| ||||||||||||||||||||
Expenses not deductible for tax purposes | - |
| - | (4,705) |
| ||||||||||||||||||||
|
| ||||||||||||||||||||||||
Total taxation credit for the period | 8,922 | - | 10,345 |
| |||||||||||||||||||||
|
| ||||||||||||||||||||||||
|
| ||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||
Deferred taxation |
|
| |||||||||||||||||||||||
Property, plant & equipment | Tax losses |
| Other temporary differences | Total |
| ||||||||||||||||||||
Deferred tax assets | US$ 000's | US$ 000's |
| US$ 000's | US$ 000's |
| |||||||||||||||||||
|
| ||||||||||||||||||||||||
At 1 January 2011 | 5,123 | 76,124 | 213 | 81,460 |
| ||||||||||||||||||||
(Debited)/credited to the income statement | (676) | 76,125 | 1,769 | 77,218 |
| ||||||||||||||||||||
Effect of change in tax rates | - | (310) | - | (310) |
| ||||||||||||||||||||
As at 30 June 2011 | 4,447 | 151,939 | 1,982 | 158,368 |
| ||||||||||||||||||||
|
| ||||||||||||||||||||||||
Property, plant & equipment | Investments |
| Other temporary differences | Total |
| ||||||||||||||||||||
Deferred tax liabilities | US$ 000's | US$ 000's |
| US$ 000's | US$ 000's |
| |||||||||||||||||||
|
| ||||||||||||||||||||||||
At 1 January 2011 | 67,506 | 2,032 | 3,690 | 73,228 |
| ||||||||||||||||||||
Charged to the income statement | 67,986 | - | - | 67,986 |
| ||||||||||||||||||||
Credited to other comprehensive income | - | (94) | - | (94) |
| ||||||||||||||||||||
As at 30 June 2011 | 135,492 | 1,938 | 3,690 | 141,120 |
| ||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Net deferred tax asset |
| ||||||||||||||||||||||||
As at 1 January 2011 |
| 8,232 |
| ||||||||||||||||||||||
Interim credit recognised in statement of comprehensive income | 8,922 |
| |||||||||||||||||||||||
Interim credit recognised in other comprehensive income | 94 |
| |||||||||||||||||||||||
Total interim taxation credit |
| 9,016 |
| ||||||||||||||||||||||
As at 30 June 2011 |
| 17,248 |
| ||||||||||||||||||||||
11. BORROWINGS | ||||||||
| (Unaudited) | |||||||
| (Unaudited) | (Restated) | (Audited) | |||||
|
| 30 June | 30 June | 31 December | ||||
| 2011 | 2010 | 2010 | |||||
| US$ 000's | US$ 000's | US$ 000's | |||||
|
|
| ||||||
Non-current | 217,316 |
| - | - | ||||
Current | 152,838 |
| - | - | ||||
| ||||||||
Bank borrowings | 370,154 |
| - | - | ||||
Bank borrowings comprise a secured non-revolving credit facility which was established on 4 February 2011 for an amount of $417.7m denominated in US Dollars. As at 30 June 2011 $416.2m had been received at bank and $176.1m restricted cash was available, this has since been fully drawn down.
| ||||||||
The principal terms of the facility are as follows: | ||||||||
- Two year term (capital repayments commencing from 30 April 2012); | ||||||||
- An interest rate of 11.5% per annum, and a commitment fee (details of the commitment fee below); | ||||||||
- Repayment by the Company at any time (repayments during the first year incur a prepayment fee being 6% of the amount repaid). If the facility remains outstanding on the first anniversary of drawing, the Company shall pay a bonus equal to 3% of the outstanding balance of the facility either in cash or common shares at the Company's election; and | ||||||||
- Secured over the principal assets of the Group. | ||||||||
The commitment fee paid to lenders comprised 2,348,399 new common shares and 10,442,500 warrants which were issued on 4 February 2011.
| ||||||||
The warrants are convertible into new common shares in the Company at 425 pence per share at the discretion of the warrant holder over a life of five years.
| ||||||||
The fair value of the common shares was based on the agreed price of 450 pence and the warrants were valued at 227 pence using a Black-Scholes pricing model. | ||||||||
Key assumptions and variables used in the valuation included: | ||||||||
- The spot share price used was £5.13 being the last available closing price prior to the valuation date (4 February 2011); | ||||||||
- The risk free rate used was a yield of a 5 year UK Government Bond as at the valuation date over the life of the warrants; | ||||||||
- A nil% dividend yield; | ||||||||
- Volatility of 40% (sensitivity analysis performed on volatilities of 40%, 45% and 50%, independent valuers' conclusion deemed volatility of 40% appropriate); | ||||||||
- American type Option; options can be exercised at any point up until expiry; and | ||||||||
- Warrants are freely transferable (with the exception of to "Restricted Purchasers") prior to the exercise of the subscription rights. | ||||||||
Effective interest of $36,859,000 (at a rate of 28.18% and including financing costs of $10,389,000) have been capitalised as a borrowing cost and transferred to assets under construction. | ||||||||
12. POST BALANCE SHEET EVENTS | ||||||||
1. On 29 July 2011, the Company executed an agreement with Shandong Iron & Steel Group Co., Ltd. ("SISG") to invest US$1.5bn in the Tonkolili Project companies.
|
| |||||||
The principal terms of the agreement are:- SISG will invest US$1.5bn ("the Investment") in return for a 25% shareholding in the subsidiaries holding the project assets. These subsidiaries are Tonkolili Iron Ore (SL) Ltd, African Railway & Port Services (SL) Limited ("ARPS") and African Power (SL) Limited. - The consideration will be paid in full on closing. - Closing of SISG's investment will be conditional on receipt of, amongst other things, Chinese governmental and regulatory approvals and industrial scale product testing of the Phase I iron ore. - SISG will have the right to appoint two out of five directors to the board of each project company (with the exception of ARPS, where SISG has the right to appoint two out of seven directors with the additional two board seats to be reserved for the Government of Sierra Leone) and one director to the board of AML, and will have other typical minority governance rights at the project company level. - SISG has an option to acquire up to 25% of annual iron ore production from each of the three production phases, by reference to benchmark prices. - There will be a separate iron ore off-take arrangement for a total of 2Mtpa of Phase I production, and an incremental 8Mtpa of Phase 2 production after Phase II is commissioned, at a discount to benchmark prices. From the date of commencement of production of Phase III, the off-take quantity will include 5Mtpa hematite fines and 5Mtpa magnetite concentrate, save that when there are no more hematite fines for production in the project, SISG shall receive 10Mtpa magnetite concentrate for the remainder of the life of the project, at a discount to benchmark prices.
- Discounts to be applied to the off-take arrangement range from zero to 15% depending on the benchmark iron ore price. - The Company guarantees that the project subsidiaries will sell 10 million tons of iron ore, and reach an annual production rate of 12 million tons, during 2012. Should this guarantee not be met, the investment is secured on the target companies' project assets.
|
| |||||||
2. On 29 September 2011, the Company completed c$90m equipment financing facility with Standard Bank of South Africa Limited ("Standard Bank")The principal terms of the facility are: - Term of 5 years from drawdown, with quarterly repayment - Secured on assets up to US$100m, specifically carved out of the existing Secured Loan Facility for the purpose of equipment financing - Fully amortising asset-secured loan for mining equipment and rolling stock - Political Risk Insurance to cover general political risk in Sierra Leone - First repayment is after a six month deferment period
- Effective interest rate of this facility circa 10% (including commitment and arrangement fees).
3. On 29 September 2011, the Company agreed a term sheet, and mandated Standard Bank to arrange and underwrite a $100m subordinated stand by facility.
The principal terms of the facility, currently drafted are:
- The facility will remain available until 30 June 2012, and will be subordinated to the current Secured Loan Facility.
- Repayable in 5 equal quarterly instalments beginning 30 September 2012. There are no penalties for early repayment.
- The effective interest rate of this facility, including all commitment and arrangement fees, is under 11% and the cost reduces by a further 1% post completion.
- The loan is subject to finalisation of certain aspects including completion of relevant technical, credit and legal due diligence and receipt of relevant approvals. As part of the subordinated loan facility, Standard Bank and AML will also enter into an offtake contract to supply 8Mt of iron ore being 2Mt in the first year, and 3Mtpa in the second and third years, priced in line with Platt's 58%Fe iron ore fines index CFR China.
Indicative terms for both the subordinated facility and the offtake contract have been agreed and the documentation and due diligence process is underway.
|
| |||||||
13. RELATED PARTY TRANSACTIONS |
| |||||||||||||||||||
1. |
| |||||||||||||||||||
Sales | Accounts receivable | Purchases | Accounts payable | Borrowings |
| |||||||||||||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's |
| |||||||||||||||
African Petroleum Corporation |
| |||||||||||||||||||
Six months to 30 June 2011 | 408 | 408 | 93 | 93 | - |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | - | - |
| ||||||||||||||
Six months to 30 June 2010 (restated) | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
International Petroleum |
| |||||||||||||||||||
Six months to 30 June 2011 | 102 | 102 | - | - | - |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | - | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
China Railway Materials Commercial Corporation |
| |||||||||||||||||||
Six months to 30 June 2011 | - | - | 45,363 | 10,051 | - |
| ||||||||||||||
Year to 31 December 2010 | - | - | 17,428 | 13,341 | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
Dundee Resources Limited |
| |||||||||||||||||||
Six months to 30 June 2011 | - | - | 2 | - | - |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | 1 | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
Dundee Corporation |
| |||||||||||||||||||
Six months to 30 June 2011 | - | - | - | - | 26,000 |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | - | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
Corona Gold Corporation |
| |||||||||||||||||||
Six months to 30 June 2011 | - | - | - | - | 5,000 |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | - | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
Pan African |
| |||||||||||||||||||
Six months to 30 June 2011 | 138 | 138 | - | - | - |
| ||||||||||||||
Year to 31 December 2010 | - | - | - | - | - |
| ||||||||||||||
Six months to 30 June 2010 | - | - | - | - | - |
| ||||||||||||||
| ||||||||||||||||||||
| African Petroleum Corporation (formally Eastern Petroleum Corporation) is a company of which Frank Timis is a Director and has an ownership interest. Transactions relate to jet rental expenses from African Petroleum and office rental expenses charged to African Petroleum. Frank Timis is the Executive Chairman of African Minerals Limited. | |||||||||||||||||||
| International Petroleum is a company of which Frank Timis is a Director and in which he has an ownership interest. Transactions relate to recharge of office rental. | |||||||||||||||||||
| ||||||||||||||||||||
| China Railway Materials Commercial Corporation is a Group shareholder. Transactions relate to materials purchased for railways and ore cars. | |||||||||||||||||||
| Dundee Resources Limited is a firm of which Murray John is a Director. Transactions relate to fees incurred under the $417.7m secured non-revolving credit facility, which was provided by Dundee Resources Limited and Sprott Secured Lending Limited (refer to Note 11). Murray John is a Director of African Minerals Limited. | |||||||||||||||||||
| ||||||||||||||||||||
| Dundee Corporation and Corona Gold Corporation are firms of which Murray John is a Director. Transactions relate to debt raised as part of the $417.7m credit facility (refer to Note 11). Interest shall accrue on the principal amount of the Term Facility from the date of advance of the principal amount of the Term Facility into the Escrow Account at the rate of 11.50% per annum, compounded monthly (effective annual rate of 12.13%). | |||||||||||||||||||
| ||||||||||||||||||||
| Pan African is a company of which Frank Timis is a Majority shareholder. Transactions relate to employee services provided. | |||||||||||||||||||
| ||||||||||||||||||||
| All the above transactions have been approved by the Board and have been carried out on an arm's length basis. | |||||||||||||||||||
|
| |||||||||||||||||||
| 2. | |||||||||||||||||||
| Miguel Perry provided $500,000 as part of the $417.7m secured non-revolving credit facility. Miguel Perry is the Chief Financial Officer and Director of African Minerals Limited. | |||||||||||||||||||
Related Shares:
AMI.L