Final Results (8554P)

TIDMFLOR

RNS Number : 8554P

Fluormin PLC

10 October 2011

10 October 2011 07:00

Fluormin Plc

("Fluormin", the "Company" or the "Group")

Results for Year Ended June 2011

LONDON, UK -- Fluormin Plc (AIM: FLOR) is pleased to announce its results for the twelve months ended 30 June 2011, and completion of its transformation into a fluorspar producer.

Operational and Financial Highlights

-- Agreement to acquire controlling interest in Sallies Limited ("Sallies"), a South African producer of fluorspar;

-- Agreement to acquire 20 per cent interest in Kenya Fluorspar Company Limited ("KFC") - a producer of fluorspar in Kenya;

-- Successful financings totalling approx. GBP7,500,000;

-- Formation of trading company, FluorOne Trading Limited, in conjunction with Jeff Kofsky, marketing director and leading trader of fluorspar.

Recent Activity

-- Admission of Company to AIM as Fluormin plc;

-- Completion of Sallies and KFC acquisitions;

-- Disposal of non-core Tunisian base metal assets for US$10.2 million to subsidiaries of Glencore International AG and securing of off-take agreements on these assets;

-- Repayment of US$500,000 shareholder loan by KFC;

-- Successful financing of approx. GBP4.5 million at GBP1.05 per share;

-- Current cash position of approx. US$20 million

Review of 2011 Financial Results

The Group incurred a net loss of GBP2,796,000 and GBP914,000 for the years ended 30 June 2011 and 2010, respectively. As the acquisition of a controlling interest in Sallies was post balance, the Company did not have producing operations in these fiscal periods and incurred expenses in respect of its transformation from a base metals explorer to a fluorspar producer. In connection with this transformation, the Company's earnings were impacted by employment related costs of GBP814,000.

The information contained in this announcement an does not constitute the Group's statutory accounts as defined in section 434 of the Companies Act 2006 but is derived from those accounts. The statutory accounts for the year ended 31 June 2011 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting notice of which will be sent to shareholders shortly. The auditors have reported on those accounts and their report was unqualified, with no matters by way of emphasis, and did not contain statements under section 498(2) of the Companies Act 2006 (regarding adequacy of accounting records and returns) or under section 498(3) (regarding provision of necessary information and explanations).

Enquiries:

 
 Fluormin plc 
 Al Gourley, Chief Executive 
  Officer                         (44)020-7556-0940, agourley@fluormin.com 
 Westhouse Securities 
 Martin Davison                                          (44)020 7601 6100 
 Tim Feather                                              44)020 7601 6100 
 Tavistock Communications 
 Lydia Eades                     (44)020 7290 3150, leades@tavistock.co.uk 
 Jos Simson                     (44)020 7290 3150, jsimson@tavistock.co.uk

For further information please visit www.fluormin.com.

About Fluormin Plc

Fluormin plc is a producer of acid grade fluorspar, an industrial mineral widely used in the chemical and aluminum industries for the making of products such as hydrochloro-fluorocarbons (e.g. freon gas) and aluminum fluorite.

Fluorspar is sold in two common grades - acid grade and metallurgical grade, also known as acidspar and metspar. The major uses of fluorspar are in the production of hydrofluoric acid or hydrogen fluoride (HF) (acidspar), aluminium production (acidspar) and steelmaking (metspar). As with rare earths, China is a major factor in the fluorspar market, as it dominates the production and consumption of fluorspar and has been the leading supplier of fluorspar for 20 years. In the last decade, China has decreased its exports of fluorspar from approximately 0.85 mtpa to no more than 0.5 mtpa. It is expected that - as China continues to build HF plants and downstream value-added products - its exports may decrease further. In the last 12 months, Europe and the United States have both placed fluorspar on their list of critical minerals.

The Group's principal asset is the Witkop fluorspar mine, which is controlled by Fluormin through a 63 per cent interest in Sallies Limited. The capacity of the mine is 140,000 tpa and it has been operating for decades with substantial resources and reserves. Fluormin also has production exposure through its 20% holding in Kenya Fluorspar Company Limited (KFC), which operates a mine at Kimwarer, Kenya. The mine will produce in excess of 100,000 tonnes of fluorspar in 2011.

The Group's other key assets include its interest in FluorOne Trading Limited, a trading business established by the Company to trade fluorspar (including non-Group product), fluorspar off-take agreements with subsidiaries of Glencore International AG (Glencore) in respect of the Bou Jabour and Fej Lahdoum base metal projects, which are advanced exploration projects under active exploration and development by Glencore, and the Zriba-Guebli project (and former fluorspar mine) in Tunisia.

Forward Looking Information

Some of the statements contained in this news release include "forward looking statements" that express expectations as to future events or results. Forward looking statements involve a number of risks and uncertainties and the Company cannot give assurance that such statements will prove to be correct.

Chairman's Letter

The year ended 30 June 2011, and subsequently to the date of this report, witnessed a major transformation of Fluormin in terms of its Operations, Finance, Management and prospects.

Management

On the Management front, the Company was pleased to secure the commitment of Al Gourley and Mark Bolton to join the Company as co-CEOs, effective from September and November, 2011, respectively. Both have substantial experience in mining finance and resource M&A transactions and will be key to executing the Company's growth plans.

The Board was strengthened during and after the reporting period by the appointments of Jeff Kofsky and Sean Murray, both having substantial experience in the industrial minerals industry. I joined the Board and assumed the role of Chairman in January 2011.

We want to thank Richard Linnell and Dunbar Dales, who resigned from the Board on 15 June 2011 and 6 August 2011, respectively, for their efforts over the past two years.

Operations

Operationally, the Company holds the controlling stake in a producing mine in South Africa (Sallies), a minority stake in a producing mine in Kenya (KFC), and exploration and off-take agreements in Tunisia. Most of these assets were acquired after the year-end, although the agreements that facilitated these transactions were announced as early as December 2010.

In South Africa, the Company holds a 63% interest (its original interest having been diluted through conversion of certain debt into equity) in Sallies, which is a substantial world-class producer of acid grade fluorspar. Sallies recommenced mining operations with financial assistance from the Company in March 2011. Sallies is expected to generate substantial cash flow for the Company during the financial year ending June 2012, as fluorspar prices have increased quite dramatically during the reporting period from approximately US$300 to over US$400 FOB China.

In Kenya, the Company holds a 20% interest in KFC, also a substantial producer of acid grade fluorspar. KFC benefits from very low operating costs and has generated sufficient cash flow following the world financial crisis to repay shareholder loans, including a shareholder loan from the Company for US$0.5 million, the final payment of which was made on 07 October 2011. KFC expects to have a substantial cash balance in excess of working capital requirements by the end of the current calendar year.

The Company also successfully disposed of its Tunisian base metals exploration properties, Bou Jabour and Fej Lahdoum, subsequent to the year end. The Company retains an indirect interest in these base metal assets through fluorspar off-take agreements, which the Company believes could lead to a very low cost source of fluorspar supply in the future.

Financial

The Group made a consolidated loss for the year ended 30 June 2011 of GBP2.8 million (2010 - GBP914,000). Most of the loss arose from professional fees incurred in the relisting of the Company and the various acquisitions and restructurings undertaken, as well as the expensing of options used to attract and retain the present management and members of the Board.

The Company raised in excess of GBP18 million during the financial year, and subsequently and up to the date of this report, through a combination of asset disposals and fundraisings. The Company expects to use some of its cash holdings to complete the acquisition of the minority shareholdings and debenture holdings it does not presently hold in Sallies. This is expected to cost in the order of US$11 million, assuming the shareholders and debenture holders all accept cash (in lieu of shares in the Company), and is expected to complete in December 2011.

The capital structure of the Company changed significantly over the reporting period. The Company issued 93 million new ordinary shares in September 2010 at 1.25 pence per share raising GBP1.2 million. In December 2010 and January 2011 a further 361.2 million new ordinary shares were issued at 1.75 pence per share to raise GBP6.3 million. In addition, in August 2011, 25 million shares were issued to Albert Gourley and 15 million were issued to Mark Bolton, both at 2 pence per share.

With effect from 31 August 2011, the Company's share capital was consolidated on the basis of a 25:1 share consolidation, resulting in the outstanding share capital of the Company being substantially reduced. As of the date of this letter, and following the Company's issuance of 3.6 million new ordinary shares (post-consolidation) in September 2011 at GBP1.05 per share raising GBP3.8 million, the Company has an issued share capital of approximately 54 million ordinary shares.

Outlook

As for rare earths, China is the predominant factor in the price of fluorspar. Over the last 20 years, China has moved from exporting 80% of their fluorspar production to exporting 10%. China now consumes over 50% of the world's production of fluorspar; and it continues to build plants for the production of hydrofluoric acid, the major use of acid grade fluorspar. As a result, exports of the raw material have diminished over time and are expected to continue to diminish into the future.

Accordingly, the Company's outlook is positive. Our new management team is well suited to take advantage of the Company's anticipated cash flows to build Fluormin into a significant business, and we are confident that your Company has never been better positioned for success.

Nicholas Davidoff

Chairman

Chief Executive's Report

Recent Accomplishments

During the year ended 30 June 2011 and subsequently, up to the date of its report, the Company enjoyed continued support from its major shareholders, Firebird Global Master Fund Ltd and Firebird Global Master Fund II Ltd. With such support, the Company was able to

-- raise over GBP11 million;

-- acquire substantial interests in fluorspar assets;

-- dispose of assets for consideration exceeding US$10.25 million; and

-- build a trading business in conjunction with a leading trader of fluorspar.

The Company completed a number of transactions with several different parties over the financial year, and subsequent to year-end, in order to acquire its fluorspar assets and relist as a public company, including financings, acquisition agreements, disposals and other transactions. Management is now better able to focus on managing these assets and growing the business from a base of cash-producing assets and a strong statement of financial position.

Fluorspar Assets

The Company currently holds as of the date of this report:

-- a controlling 63 per cent stake in South African fluorspar producer Sallies;

-- a 20 per cent stake in Kenyan fluorspar producer KFC;

-- two fluorspar off-take agreements with subsidiaries of Glencore International AG, which could offer very low cost sources of future fluorspar supply;

-- a 100 per cent interest in the former Zriba-Guebli mine in Tunisia, which merits substantial exploration work; and

-- a 49 per cent interest in FluorOne Trading Limited.

Sallies and KFC, together, produce well in excess of 200,000 tonnes per annum of acid grade fluorspar (or acidspar). Sallies has a stated capacity of 140,000 tonnes per annum, whilst KFC has a stated capacity of approximately 100,000 tonnes per annum. KFC is expected to meet its name-plate capacity in the calendar year ending December 2011, whilst Sallies requires continued investment in the opening of mine pits and build-up of ore feed to meet its name-plate capacity. KFC benefits from a much lower cost of production, but its product does contain higher levels of phosphate which can impact on its pricing.

Fluorspar Uses

The mineral fluorite, commonly known as fluorspar, is the primary commercial source of fluorine. Fluorspar is sold in two common grades - acid grade and metallurgical grade, also known as acidspar and metspar. The major uses of fluorspar are in the production of hydrofluoric acid or hydrogen fluoride (HF) (acidspar), aluminium production (acidspar) and steelmaking (metspar). HF is used to manufacture virtually all organic and inorganic fluorine-containing compounds, including fluoropolymers and fluorocarbons, as well as aluminium trifluoride. The most important use of fluorocarbons is as refrigerants in the domestic, industrial and automotive sectors; this accounts for approximately 45 per cent of HF usage.

There is very limited potential to recycle the majority of fluorochemicals and the potential for substitution is very low. Furthermore, the newer generations of refrigerants has consistently used more fluorspar per kilogram of end product than the products they replaced.

Fluorspar Market

Demand for acid grade fluorspar (acidspar) grew steadily from 2000 until 2007 from 2.7 million tonnes per annum (mtpa) to 3.8 mtpa. This was largely fueled by rising living standards in developing countries, which pushed up demand for fluorspar's derivative chemical products, particularly those used as refrigerants (e.g. freezers, fridges and air conditioning units in homes, cars and industrial cooling applications).

Consumption during this period was in excess of production for each year, except 2001 and 2004 when there was a balanced market. Until 2007, this deficit was partially met by sales from the US strategic stockpile, which is now substantially depleted. In 2008, demand started to drop as a result of the international financial crisis and then collapsed in 2009, as consumers reduced stocks. Demand recovered slowly through 2010 and accelerated during the first quarter of 2011 as Chinese supplies became tighter.

China is a major factor in the fluorspar market. China dominates the production and consumption of fluorspar and has been the leading supplier of fluorspar for 20 years. Nevertheless, in the last decade, China has decreased its exports of fluorspar from approximately 0.85 mtpa to no more than 0.5 mtpa. It is expected that - as China continues to build HF plants and downstream value-added products - its exports may reduce further or cease altogether.

In the last 12 months, Europe and the United States have both placed fluorspar on their list of critical minerals.

A Gourley

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME