TIDMHMB
HAMBLEDON MINING PLC
Interim results to 30 June 2012
14 September 2012
Hambledon Mining Plc ("Hambledon" or the "Company"), the AIM
quoted gold mining company based in Kazakhstan, announces its
unaudited results for the six months to 30 June 2012.
Highlights:
-- Gold production from Sekisovskoye was 10,710 ounces (six months to 30
June 2011: 9,769 ounces).
-- Operating loss was $ 2.1m (six months to 30 June 2011: $2.3m).
-- Cash costs for gold production were $1,262 per ounce including royalty
payments;
-- $10m loan drawn from European Bank for Reconstruction and Development
(EBRD)
-- $11.5m net of costs raised from placing to institutions and EBRD.
-- Gross cash of $10.6m at 30 June 2012 and net cash after borrowing of
$0.6m (31 December 2011: $1.8m and $0.8m respectively).
-- Capital expenditure in the period was $4.8m.
-- Sabine Anderson appointed as new non-executive director.
-- The acquisition of Akmola Gold is still awaiting a waiver from the
Kazakhstan authorities.
Enquiries:
Hambledon Mining: Telephone +44 (0) 207233 1462
Charles Zorab
Fairfax I.S. PLC: Telephone +44 (0)207 598 5368
Nominated Adviser and Broker
Ewan Leggat/Katy Birkin
Tavistock Communications: Telephone +44 (0) 207 920 3150
Ed Portman/Jos Simson
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders for the six months to 30
June 2012.
Review of 2012 to date
The period under review has been challenging for your Company
both within Kazakhstan and from a mining perspective. The
operations were certainly buffeted by the tailings dam leak at the
end of 2011 and the consequent drain of our cash resources from
fines, penalties and rehabilitation work which could have been
better spent elsewhere. Nevertheless, we have faced up to these
challenges and these results are still marginally better than the
corresponding period last year. The fall-out from the tailings dam
leak has also taken up an incredible amount of management time and
it is a credit to the Sekisovskoye management that it has coped as
well as it has. Indeed, from an operational point of view, there
has been much to cheer as the open pit grades have been edging
higher and we completed the removal early in the period of the
excess overburden of waste ore that impacted on costs and limited
throughput last year.
We remain determined to improve the recoveries from the plant
which hover below the 80% level and this is one of the key factors
that will improve our operational and financial performance in the
second half of this year.
Directorate changes
We were delighted to welcome to the board Sabine Anderson in
July as a non-executive director. She brings a wealth of talent
from her background as a mining engineer working for a wide range
of mining companies and as a mining consultant.
Outlook
We recently announced a re-think in the underground development
at Sekisovskoye. This has been in reaction to different influences
on the Company - operational, administrative, regulatory and
financial. We now look forward to a period of consolidation and a
build-up of our capital resources which will allow us to move
forward not only with Sekisovskoye but our other projects as
well.
George Eccles
14 September 2012
CHIEF EXECUTIVE'S REVIEW
SEKISOVSKOYE
Mining
Mining operations in the first half of 2012 performed well and
according to plans. The completion of the removal of excess waste
in 2011 meant that the waste to ore ratio this year has improved
from 7:1 to 4:1. All open pit waste was trucked to the tailings dam
construction areas where the waste material is used to construct
foundations and embankments for the dams.
Improvements to open pit blasting have been implemented which
have improved fragmentation and therefore improved excavator
productivity. In addition, the purchase of an additional road
grader has seen the haul road surface improved and average haul
speeds increased to complement the higher excavator
productivity.
Changes in the dewatering systems have reduced the amount of
water in the floor of the open pit, thereby reducing maintenance
costs for the mine vehicles and lowering the inventory of mining
consumables.
The combination of these improvements has reduced the cost per
tonne of ore mined from $2.5 in 2011 to around $2.0 currently,
despite significant inflation in wages, fuel and consumables.
Processing
Plant throughput in the first half was curtailed by the lack of
tailings storage capacity caused by the leak and consequent
decommissioning of the third tailings dam as further described
below.
The recovery of gold in the process plant at 79% was well below
the historical performance of the plant, caused by the treatment of
the harder primary ores now being mined which not only reduce
recovery but also result in increased wear and tear of the plant
and the quantity of consumables used.
Changes in the mineral processing plant to cope with the harder
ores are in progress. The seventh CIL tank has been installed and
will be commissioned early in the fourth quarter of this year. The
installation of process instrumentation is well advanced, and a new
cyclone tower and crushing screens are also envisaged for the
fourth quarter.
These CIL and crushing plant improvements, along with the
optimisation of the new cyclones to improve the classification of
the ground ores, should enable the Company to improve its gold
recovery from 79% to 80% in the short term and to higher levels in
2013.
Tailings dam No. 3 (TD3)
The remedial works for TD3 are well advanced with all foundation
works complete and the lining of the dam approximately 75%
complete. It is expected that completion of the dam will be during
late September with approval to commence using the dam issued by
the authorities in mid-October, 2012.
Once the tailings dam is in operation there will be no
restriction on mineral processing throughput as there will be
adequate storage capacity for the processing plant effluent.
As announced on 29 August 2012, Hambledon and its Kazakh legal
advisers consider the resolution of the Court on 16 August 2012 to
be both unlawful and unjustified since they violate the legal and
procedural norms of the Republic of Kazakhstan. The Company has
prepared an appeal against this resolution to a higher level court,
the Regional Court of East Kazakhstan. In the event that the
hearing of this appeal is not satisfactory, Sekisovskoye Mining
Company LLP retains the right to appeal to various higher
intermediary Kazakhstan courts including the Supreme Court of
Kazakhstan.
Hambledon continues to have confidence that the amount of the
fines and penalties which the Company has already paid are
unjustifiable and the Company continues its appeal process with the
aim of obtaining at least partial repayment of the fines paid to
the Kazakh Government.
The issue is unlikely to be resolved before the end of the
year.
Underground project
The underground mine has produced 21,405 tonnes of ores at a
grade of 2.68g/t Au during the first six months of operation. This
tonnage includes both ore and marginal low grade waste mined during
the development process.
The Company has recently started work on test bulk mining and
the results so far of this mining programme have shown that bulk
mining is practicable and planned grades are close to actual grades
mined. However, further development of the underground mine
requires the construction of substantial infrastructure. At the
same time other capital expenditures, together with the fines
recently paid in respect of the failure of the tailings dam in Q1
2012, impose a considerable funding burden on the Company.
Furthermore, the regulatory process for developing the underground
mine is bureaucratic and convoluted, with recent changes to this
process requiring significant additional technical studies and
submission of plans which will be based on the final results of the
initial on-going bulk mining test programme.
For these reasons, the Company has decided that instead of
continuing the mining of the ore zones concurrently with
progressing the next stage of feasibility study, underground
production should be paused following extraction of the currently
accessible zones. The on-going programme of diamond drilling will
continue so that the geological knowledge of the underground mine
is continuously developed and the future development of underground
mining optimised. It is envisaged that underground mining will
resume in H2 2013.
In the meantime, the Company intends to build up its cash
resources by deferring the proposed underground capital expenditure
programme. The cash generation from the on-going open pit
operations is expected to increase markedly in 2013 as a result of
the scheduled reduction of the stripping ratio of waste to ore, the
completion of the remedial works to tailings dam 3 and the ability
to dump waste rock from the main pit into the depleted North pit,
reducing the average waste haulage distance from around 5km to 500
metres for a period of approximately 16 months.
This more cautious approach to the mine development will ensure
that the business builds up its capital from internally generated
cash flow from continuing mining operations, has sufficient time to
optimise the underground development and ensure full compliance
with the Kazakhstan administrative approval processes for
underground mining.
The Company has revised its forecast for gold production in Q4
2012 and hence its overall 2012 forecast is reduced to 21,000oz Au.
This figure takes into consideration the reduction in underground
mining volumes and the restraint on gold production caused by the
tailings dam remediation works.
Safety and training
The Company's sound safety performance during 2012 continued
with no significant accidents or incidents reported. Training of
personnel through in-house and external trainers continues with a
focus of improved maintenance of mining machinery and plant
equipment.
The implementation of the ISO 180001 programme for safety
management supports the on-going safety systems and has enabled a
reduction in minor injuries.
Environmental
No significant incidents were reported during the period. With
the construction of the fourth tailings dam well advanced,
significant quantities of good quality topsoil and clay have being
stockpiled in readiness for rehabilitation works of the overall
tailings dam complex.
Work is now underway to complete the excavation of the north
zone of the open pit, which will then be used as a storage area for
open pit waste and therefore an important milestone in ensuring the
site rehabilitation is undertaken as appropriate during normal
operations.
The business was audited by an accredited International Cyanide
Management Institute (ICMI) auditor who found the business to
comply with all international standards for the storage and
handling of cyanide. A number of minor improvements have been
agreed, to be implemented before the next audit and accreditation
of the company to the ICMI standard.
Community
The Company has made strenuous efforts to rebuild its
relationships with the local village. The results of this effort
have been rewarded with a resumption of excellent community
relations which have been enhanced with recent media coverage of
the Company's business. This media coverage showed to the people of
Kazakhstan that despite the minor leak from tailings dam, the
Company has met all obligations to the authorities, has an enviable
employment record and makes a positive contribution to the economy
in the Sekisovskoye region.
The Company has completed the construction in the local region
of a playing field for school children, assisted with local village
beautification and street lighting, provided an excavator for
municipal drainage works, provided a new and expanded village water
reticulation system and recently completed a village community
centre with gymnasium, mothers' room and teenager activity
room.
The Company plans to continue to support community projects to
benefit the local municipality and enhance life for all who work
for the Company and live within the environs of the business.
AKMOLA GOLD
The acquisition of Akmola Gold LLP is progressing slowly. The
Company has continued to respond to numerous queries from the
authorities and, having resubmitted various documents with required
changes, is hopeful that a waiver of the government's right to
pre-emption will be issued later this year, clearing the way for
completion of the acquisition.
At this stage, no work has commenced onsite and, with the
approach of winter, no work is scheduled to take place until Q2,
2013.
FINANCIAL
Sekisovskoye poured 10,710 ounces of gold in the six months to
30 June 2012. Due to the time lag in shipping and selling gold to
the refiner, a total of 10,532 ounces was sold in the period at an
average price of $1,656 per ounce. Sales of silver totalled
$354,000. Total revenue for the six months to 30 June 2012 was
$18.2m (30 June 2011: $12.8m). There were no other material sources
of revenue.
The cash cost per ounce of gold (including royalty payments) was
$1,262. This was higher thanthe average cost in the six months
ended 30 June 2011 due to lower recoveries, tailings dam
construction and high cost, 'selective' underground mining, as well
as inflation in prices of consumables for mining and processing. In
the six month period to 30 June 2012, the waste to ore stripping
ratio was 4:1 and gold recovery was 79 per cent. The Group's
accounting policy is to directly expense stripping costs to cost of
sales where the stripping ratio exceeds the long term waste to ore
ratio included in the Sekisovskoye mine plan. As the stripping
ratio was below this in the period, there were no stripping costs
directly expensed in the period. The cost of sales included $2.3
million in respect of underground mining costs.
Sekisovskoye's administration costs in the period were $1.1
million and capital expenditure was $4.8 million. The main item of
capital expenditure in the period was the development of the
underground mine.
At 1 January 2012, the Group had a provision in its balance
sheet for $7.4 million which was established in the year ended 31
December 2011 in respect of the leak from a tailings dam in October
2011. Expenditure of $4.8 million was incurred in the period in
respect of repairs, fines and penalties and social obligations.
This was charged against the provision, with $2.6m remaining to
cover further costs in the second half of the year.
Corporate administration costs in the six months to 30 June 2012
were $1.5 million. These comprised directors' and other staff
salaries, professional fees and the cost of maintaining the Group's
quote on the AIM market, including investor relations. They also
included $0.3 million of consultancy for management support of the
Sekisovskoye operation.
The Group has loaned funds to Akmola Gold to finance its
business affairs whilst the Company completes its acquisition and,
as at 30 June 2012, this loan stood at $1.7 million. This loan
together with other acquisition related costs of $1.5 million has
been included within debtors in the Group balance sheet at 30 June
2012.
The Group was financed by a secured $2 million working capital
facility from a local bank in Kazakhstan at the start of 2012.
During the period, a $15 million secured facility was obtained from
the European Bank of Reconstruction and Development ("EBRD").
Simultaneously, the working capital facility with the local bank
was cancelled. The Group had drawn down $10 million of the EBRD
facility at 30 June 2012. The loan from EBRD is included in the
Group's balance sheet at 30 June 2012 at its fair value of $9.6
million. This is the amount of the loan offset by the costs of
obtaining the loan which will be amortised to profit and loss over
the life of the loan.
The Group raised $11.5 million net of costs through a placing in
February 2012 and from an equity subscription by EBRD in the
period. As part of its equity investment, EBRD were also granted
warrants over 30 million ordinary shares of the Group. The warrants
are exercisable at any time before the earlier of (i) 21 February
2014 and (ii) if the closing price per ordinary share exceeds
6.5325 pence for a period of 20 consecutive trading days during
that two year period. The exercise price of the warrants is 4.875
pence per ordinary share. A reserve has been included in the
balance sheet for the fair value of the warrants which has been
calculated using the Black Scholes method. The share premium on the
issue of the ordinary shares to EBRD has been reduced by the amount
of the warrant reserve.
The Group prepares its financial statements in United States
dollars but the functional currency of the companies in Kazakhstan
is the Kazakhstan tenge ("KZT") and the functional currency of the
companies in the United Kingdom is pounds sterling. The rates used
to convert Kazakhstan tenge and pounds sterling into United States
dollars in these financial statements are as follows:
6 months ended Year ended 6 months ended
30 June 2012 31 December 2011 30 June 2011
Closing Average Closing Average Closing Average
US$ = GBP 1.56 1.57 1.54 1.60 1.60 1.62
US$ = KZT 147.00 148.16 145.58 146.65 146.12 146.05
GBP = KZT 233.37 233.65 224.96 235.22 234.08 236.04
Condensed group income statement
Six months ended 30 June 2012
Note Six months to Six months to Year ended
30 June 2012 30 June 2011 31 December 2011
(unaudited) restated* (audited)
$000 (unaudited) $000
$000
Continuing
operations
Revenue 18,195 12,844 33,325
Cost of sales (16,957) (12,543) (29,892)
Gross profit 1,238 301 3,433
Administrative (3,352) (2,613) (5,886)
expenses
- - (7,757)
Tailings
dam leak
Operating loss (2,114) (2,312) (10,210)
Investment 10 10 25
revenues
Other gains 88 207 (77)
/ (losses)
Finance costs (141) (137) (317)
Loss before (2,157) (2,232) (10,579)
taxation
Taxation(charge) (69) (108) 1,157
/ benefit
Loss (2,226) (2,340) (9,422)
from continuing
operations
Discontinued
operations
Profit for - - 1,500
the period
Loss attributable 4 (2,226) (2,340) (7,922)
to
equity
shareholders
Loss per
ordinary
share
Continuing
operations
Basic 5 (0.25)c (0.10)c (1.37)c
Diluted 5 (0.25)c (0.10)c (1.37)c
From continuing
and
discontinued
operations
Basic 5 (0.25)c (0.10)c (1.15)c
Diluted 5 (0.25)c (0.10)c (1.15)c
* see note 3
Condensed group statement of comprehensive income
Six months ended 30 June 2012
Six months to Six months to Year ended
30 June 2012 30 June 2011 31 December 2011
(unaudited) restated* (audited)
$000 (unaudited) $000
$000
(Loss) for the period (2,226) (2,340) (7,922)
Currency translation
differences
on foreign
currency net 480 1,596 98
investments
Total comprehensive
(loss)
for the period
attributable (1,746) (744) (7,824)
to equity
shareholders
* see note 3
Condensed group balance sheet
30 June 2012
30 June 2012 30 June 2011 31 December 2011
(unaudited) restated* (audited)
$000 (unaudited) $000
$000
Non-current assets
Property, plant 34,130 28,520 31,793
and equipment
Inventories 4,881 6,066 4,177
Trade and other - - 399
receivables
978 - 978
Deferred tax asset
Restricted cash 333 246 239
40,322 34,832 37,586
Current assets
Inventories 11,898 10,390 11,061
Trade and other 9,738 5,702 8,404
receivables
Cash and cash 10,586 6,510 1,763
equivalents
32,222 22,602 21,228
Total assets 72,544 57,434 58,814
Current liabilities
Trade and other payables (6,088) (5,475) (5,994)
Other financial (282) (278) (282)
liabilities
Provisions (2,883) (275) (7,640)
Borrowings - - (1,000)
(9,253) (6,028) (14,916)
Net current assets 22,969 16,574 6,312
Non-current liabilities
Other financial (1,388) (1,585) (1,501)
liabilities
Deferred taxation - (508) -
Provisions (1,460) (1,330) (1,400)
Borrowings (9,610) - -
(12,458) (3,423) (2,901)
Total liabilities (21,711) (9,451) (17,817)
Net assets 50,833 47,983 40,997
* see note 3.
Condensed group balance sheet
30 June 2012
(continued)
30 June 2012 30 June 2011 31 December 2011
(unaudited) restated* (audited)
$000 (unaudited) $000
$000
Equity
Called-up share capital 1,682 1,310 1,310
Share premium 87,587 76,914 76,914
Warrant reserve 488 - -
Merger reserve (282) (282) (282)
Other reserves 586 682 535
Currency translation (6,344) (5,323) (6,821)
reserve
Accumulated losses (32,884) (25,318) (30,659)
Total equity 50,833 47,983 40,997
* see note 3
Condensed group cash flow statement
Six months ended 30 June 2012
Six months to Six months to Year ended
30 June 2012 30 June 2011 31 December 2011
(unaudited) restated* (audited)
$000 (unaudited) $000
$000
Net cash (outflow) (6,557) (1,389) 2,729
/ inflow
from operating
activities
Investing activities
Interest received 10 10 25
Proceeds on disposal
of
property, plant and
equipment 50 11 18
Purchase of property, (4,836) (6,832) (13,426)
plant and equipment
- - (399)
Prepayment for
non-current (228) - (1,462)
assets
(53) - (1,452)
Akmola Gold advances
Akmola Gold prepayment
of fees
Restricted cash (94) (81) (78)
Net cash used (5,151) (6,892) (16,774)
in investing
activities
Financing activities
Proceeds on issue 11,533 13,849 13,849
of shares
(1,000) - -
Repayment of bank loan
Drawdown of bank loans 10,000 - 1,000
Net cash inflow from 20,533 13,849 14,849
financing activities
Increase / (decrease)
in cash and
cash equivalents 8,825 5,568 (804)
Cash and cash
equivalents
at beginning of 1,763 959 959
the period
Effect of foreign (2) (17) -
exchange
rate movements
Cash and cash
equivalents
at end
of the period 10,586 6,510 1,763
* see note 3
Notes to the interim condensed group financial statements
Six months ended 30 June 2012
1General information
These interim group financial statements are for the six months
ended 30 June 2012 and are unaudited. The information for the year
ended 31 December 2011 does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006.
The financial information for the year ended 31 December 2011has
been extracted from the statutory accounts of Hambledon Mining plc
("the Group") for that year that were prepared under United Kingdom
Law and International Financial Reporting Standards (IFRS) adopted
by use by the European Union. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. The
auditors' report on those accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain any
statement under Section 498(2) or (3) of the Companies Act
2006.
2Accounting policies
The interim group financial statements have been prepared using
the accounting policies set out in the statutory accounts for
Hambledon Mining plc for the year ended 31 December 2011. These
accounting policies comply with International Financial Reporting
Standards (IFRS) adopted by use by the European Union.
3Restatement of comparatives
Prior to the year ended 31 December 2011, the Group prepared its
financial statements in United Kingdom pounds. For the year ended
31 December 2011, the Group prepared its financial statements using
United States dollars as the presentational currency instead of
United Kingdom pounds as in previous years. Accordingly the
comparative information for the 6 months ended 30 June 2011 has
been restated into United States dollars.
4Dividend
The directors do not recommend the payment of a dividend.
5(Loss) / profit per ordinary share
The calculation of basic and diluted earnings per share from
continuing and discontinued operations is based upon the retained
(loss) /profit for the financial period.
The weighted average number of ordinary shares for calculating
the basic (loss)/ profit per share and diluted (loss) / profit per
share after adjusting for the effects of all dilutive potential
ordinary shares relating to share options are as follows:
Six months to Six months to Year ended
30 June 2012 30 June 2011 31 December 2011
(unaudited) (unaudited) (audited)
Basic and diluted 898,221,596 630,382,153 687,365,165
6Approval of interim group financial statements
The interim group financial statements for the six months to 30
June 2012 were approved by the directors on 14 September 2012.
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