TIDMGCM
RNS Number : 6647I
GCM Resources PLC
22 March 2018
22 March 2018
GCM Resources plc
("GCM" or the "Company")
(LON:GCM)
Interim results for the six months ended 31 December 2017
GCM Resources plc (LON:GCM), a resource exploration and
development company, is pleased to report its interim results for
the six months ended 31 December 2017. The Chairman's Statement and
the full unaudited interim report are presented below, and will
shortly be available at the Company's website www.gcmplc.com.
Chairman's Statement
I am pleased to provide an update on the Company's performance
for the December 2017 reporting period. GCM continues to make
progress in line with its strategy to present a simple, practical
power solution for the Government of Bangladesh by combining power
plants with the Company's proposed coal mine.
Over the last six months the Company has focused on
strengthening the relationship with its strategic partner, China
Gezhouba Group International Engineering Co Ltd ("CGGC") as the
next step to progressing the Phulbari Coal and Power Project. CGGC
is an internationally recognised engineering company with large
infrastructure projects across the world. Its parent, China
Gezhouba Group Corporation (en.gzbgj.ceec.net.cn) is a core member
of China Energy Engineering Group Co Ltd ("Energy China"), a super
central state-owned enterprise. In the last three years Energy
China, engaged in the design and construction of power plants with
a total installed capacity of nearly 220GW, ranked first in the
world.
A technical prefeasibility study ("PFS") on a proposed mine
mouth power plant of up to 2,000MW was finalised by CGGC and
formally submitted to GCM in July 2017. Following this, GCM and
CGGC entered negotiations with a view to setting the ground work
for the continued working relationship to the benefit of both
parties. As a result of these discussions a Joint Development
Framework Agreement was formulated and formally signed on 9 March
2018 followed by a Contract Framework Agreement which was signed on
21 March 2018.
The Joint Development Framework Agreement formalises the
collaborative work schedule and respective roles going forward,
including seeking the necessary approvals from the Bangladesh
authorities for development of a coal mine and mine mouth power
plant. The agreement also sets the framework for investing in, and
financing of the proposed power plant. CGGC (or its affiliate or
investment partner) shall invest up to 30% in the power plant,
subject to approval by Chinese authorities, and undertakes to
facilitate financing for the proposed power plant with GCM's
assistance. The Contract Framework Agreement awards CGGC the
exclusive rights to engineer, procure, construct and commission
("EPC") a proposed 2,000MW mine mouth power plant, subject to a
final EPC contract.
In Bangladesh, over the last six months there has been continued
effort by the Government to dramatically increase power generation,
which is seen as a key driver for improving the country's long-term
prospects. While there has been increased discussion on LNG as a
major source of power, developing new coal fired power remains an
integral part of the Government's plans for power sector expansion.
This gives us confidence that presenting a combined mine and power
plant proposal as a holistic and practical power solution continues
to be the right strategy to pursue Project approval.
Financials
GCM incurred a loss after tax of GBP1,902,000 for the six months
ended 31 December 2017 (31 December 2016: loss after tax of
GBP399,000), the increase being due to pre-development expenditure
of GBP1,527,000 incurred on the proposed coal fired power plant.
The pre-development expenditure comprised mainly of the non-cash
cost of GBP1,407,000 consultancy success fees, which were payable
via the issue of the Company's ordinary shares on successfully
reaching key milestones regarding the proposed coal fired power
plant, in accordance with the consulting agreement announced in May
2017. Reflecting the Company's continued focus on cost management,
administrative expenses for the six months ended 31 December 2017
were GBP290,000 (31 December 2016: GBP291,000) and capitalised
Project expenditure was GBP183,000, a decrease of GBP67,000 from
the comparative period.
During the period GCM partly funded its operations by drawdowns
of GBP150,000 from the short-term loan facility with Polo Resources
Limited, the Company's largest shareholder. The short-term loan
facility of GBP1,100,000 has been fully utilised and attracts an
interest rate of 12% per annum with repayment terms of 90 days upon
request. In November 2017, the Company successfully raised GBP1.8
million net of costs via a share placement which allowed both
institutional and retail investors to participate. The funds are
being used to support GCM's continuing operations and working
capital requirements as it pursues its strategy of a joint mine and
power plant proposal.
As at 31 December 2017 the Group's financial resources were
GBP1,507,000 and current liabilities were GBP2,154,000, including
GBP1,214,000 owing to Polo Resources Limited. Over the next six
months the Company will be in discussions with parties to seek new
investment to strengthen GCM's financial position and provide
future funding. Until such time, there remains a material
uncertainty which may cast doubt as to the Group's ability to
continue as a going concern. The directors remain confident that
sufficient funding will be obtained as and when required. As such
the financial statements have been prepared on a going concern
basis. Please refer to the accounting policy note on going concern
for further information.
Outlook
Over the coming months, the GCM team is looking forward to
working with CGGC to progress the Project. There are many
significant challenges ahead in advancing the joint proposal and
achieving the necessary approvals from the Government, which remain
a precondition to development. As such the Company will continue to
be in discussions with other potential strategic partners who may
assist in obtaining necessary approvals, financing and/or mine
development.
I would like to express my appreciation to our shareholders for
their ongoing confidence and support. I would also like to thank
the Board and our staff for their dedication and hard work.
Datuk Michael Tang PJN
Executive Chairman
Interim Consolidated Income Statement
6 months 6 months Year ended
ended ended 30 June
31 December 31 December 2017
2017 2016 audited
unaudited unaudited GBP000
GBP000 GBP000
------------------------------ ------------- ------------- -----------
Operating expenses
Pre-production (1,527) - -
expenditure
Exploration
and evaluation
costs (22) (19) (53)
Administrative
expenses (290) (291) (654)
------------------------------- ------------- ------------- -----------
Operating loss (1,839) (310) (707)
Finance costs (63) (89) (299)
------------------------------- ------------- ------------- -----------
Loss before
tax (1,902) (399) (1,006)
Taxation - - -
Loss and total comprehensive
income for the period (1,902) (399) (1,006)
------------------------------- ------------- ------------- -----------
Earnings per
share
Basic loss per share
(pence) (2.3p) (0.6p) (1.6p)
Diluted loss per share
(pence) (2.3p) (0.6p) (1.6p)
Interim Consolidated Statement of Changes in Equity
Share Share Share Convertible Accumulated Total
capital premium based loan losses
account payments equity
not component
GBP000 settled GBP000 GBP000
GBP000 GBP000
GBP000
--------------------- --------- --------- ---------- ------------ ------------ --------
Balance at
1 July 2016 6,286 45,286 609 169 (15,352) 36,998
Total comprehensive
loss - - - - (1,006) (1,006)
Share issuances 1,529 879 - - - 2,408
Share based
payments - - 9 - - 9
Transfer of
convertible
loan equity
component on
share issue - - - (169) 169 -
Balance at
30 June 2017 7,815 46,165 618 - (16,189) 38,409
Total comprehensive
loss - - - - (1,902) (1,902)
Share issuances
(net of costs) 1,003 2,265 - - - 3,268
Share based
payments - - 4 - - 4
Balance at
31 December
2017 (unaudited) 8,818 48,430 622 - (18,091) 39,779
--------------------- --------- --------- ---------- ------------ ------------ --------
Balance at
1 July 2016 6,286 45,286 609 169 (15,352) 36,998
Total comprehensive
loss - - - - (399) (399)
Share based
payments - - 5 - - 5
Balance at
31 December
2016 (unaudited) 6,286 45,286 614 169 (15,751) 36,604
--------------------- ------ ------- ---- ---- --------- -------
Interim Consolidated Balance Sheet
31 December 31 December 30 June
2017 2016 2017
Notes unaudited unaudited Audited
GBP000 GBP000 GBP000
--------------------- -------- ------------- ------------ ---------
Current assets
Cash and cash
equivalents 1,507 181 180
Receivables 40 148 52
--------------------- -------- ------------- ------------ ---------
Total current
assets 1,547 329 232
Non-current
assets
Property, plant
and equipment 24 29 27
Intangible assets 3 40,362 38,637 40,179
Receivables - - -
Total non-current
assets 40,386 38,666 40,206
Total assets 41,933 38,995 40,438
--------------------- -------- ------------- ------------ ---------
Current liabilities
Payables 4 (940) (788) (1,028)
Borrowings 5 (1,214) (1,603) (1,001)
--------------------- -------- ------------- ------------ ---------
Total current
liabilities (2,154) (2,391) (2,029)
Total liabilities (2,154) (2,391) (2,029)
--------------------- -------- ------------- ------------ ---------
Net assets 39,779 36,604 38,409
--------------------- -------- ------------- ------------ ---------
Equity
Share capital 6 8,818 6,286 7,815
Share premium
account 6 48,430 45,286 46,165
Other reserves 622 783 618
Accumulated
losses (18,091) (15,751) (16,189)
---------------- --------- --------- ---------
Total equity 39,779 36,604 38,409
---------------- --------- --------- ---------
Datuk Michael Tang
Chairman
Interim Consolidated Statement of Cash Flows
6 months 6 months Year ended
ended ended 30 June
31 December 31 December 2017
2017 2016 audited
unaudited unaudited
GBP000
GBP000 GBP000
------------------------------- ------------- ------------- -----------
Cash flows used in operating
activities
Loss before
tax (1,902) (399) (1,006)
Adjusted for:
Non-cash finance
costs 63 89 299
Non-cash pre-development 1,527 - -
expenditure
Other non-cash
expenses - - 50
-------------------------------- ------------- ------------- -----------
(312) (310) (657)
Movements in
working capital:
Decrease/(increase) in
operating receivables 4 (13) (6)
(Decrease)/increase in
operating payables (106) 99 280
-------------------------------- ------------- ------------- -----------
Cash used in
operations (414) (224) (383)
Net cash used in operating
activities (414) (224) (383)
Cash flows from investing
activities
Payments for
intangible assets (209) (235) (477)
Payments for property,
plant and equipment - (4) (4)
-------------------------------- ------------- ------------- -----------
Net cash generated from
investing activities (209) (239) (481)
Cash flows from financing
activities
Issue of ordinary 2,000 - -
share capital
Share issue (200) - -
costs
Proceeds from
borrowing 150 450 850
Net cash from financing
activities 1,950 450 850
Total (decrease)/increase
in cash and cash equivalents 1,327 (13) (14)
Cash and cash equivalents
at the start of the period 180 194 194
-------------------------------- ------------- ------------- -----------
Cash and cash equivalents
at the end of the period 1,507 181 180
-------------------------------- ------------- ------------- -----------
Notes to the Interim Condensed Consolidated Financial
Statements
1. Accounting policies
GCM Resources plc (GCM) is domiciled in England and Wales, was
incorporated as a Public Limited Company on 26 September 2003 and
admitted to the London Stock Exchange Alternative Investment Market
(AIM) on 19 April 2004.
This unaudited interim report was authorised for issue by the
Directors on 22 March 2018, and the Interim Consolidated Balance
Sheet was signed on the Board's behalf by Datuk Michael Tang
PJN.
Basis of preparation
The annual consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union as they apply to the
financial statements of the Group for the year ended 30 June 2017
and applied in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the
six months ended 31 December 2017 have been prepared using the same
policies and methods of computation as applied in the financial
statements for the year ended 30 June 2017, with the exception of a
new accounting policy with respect to power plant costs, as
follows: Pre-development expenditure relating to power plants at
the proposed mine site is expensed until it is probable that future
economic benefits associated with the project can flow to the Group
and the cost of the project can be measured reliably. When it is
probable that future economic benefits will flow to the Group, all
costs associated with the development of the power plant are
capitalised as Power Plant Development within property, plant and
equipment category in tangible non-current assets. Power Plant
Development costs will be depreciated once commercial operation has
commenced.
There has been no impact on the Group's financial position or
performance from new and amended IFRS and IFRIC interpretations
mandatory as of 1 July 2017.
The financial information contained herein does not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006 and is unaudited. The figures for the year ended
30 June 2017 have been extracted from the statutory accounts for
that year. Those accounts have been delivered to the Registrar of
Companies and contained an unqualified auditors' report which
included an emphasis of matter concerning significant doubt over
the ability for the Group to continue as a going concern and did
not include a statement under section 498(2)(a) or (b), or section
498(3) of the Companies Act 2006.
Political and economic risks - carrying value of intangible
asset
The principal asset is in Bangladesh and accordingly subject to
the political, judicial, fiscal, social and economic risks
associated with operating in that country.
The Group's principal project relates to thermal coal and
semi-soft coking coal, the markets for which are subject to
international and regional supply and demand factors, and
consequently future performance will be subject to variations in
the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the
Government of Bangladesh which gives it the right to explore,
develop and mine in respect of the licence areas. The Group holds a
mining lease and exploration licences in the Phulbari area covering
the prospective mine site. The mining lease has a 30-year term from
2004 and may be renewed for further periods of 10 years each, at
GCM's option.
In accordance with the terms of the Contract, GCM submitted a
combined Feasibility Study and Scheme of Development report on 2
October 2005 to the Government of Bangladesh. Approval of the
Scheme of Development from the Government of Bangladesh is
necessary to proceed with development of the mine. GCM continues to
await approval.
The Group has received no notification from the Government of
Bangladesh (Government) of any changes to the terms of the
Contract. GCM has received legal opinion that the Contract is
enforceable under Bangladesh and International law and will
consequently continue to endeavour to receive approval for
development.
Accordingly, the Directors are confident that the Phulbari Coal
and Power Project (Project) will ultimately receive approval,
although the timing of approval remains in the hands of the
Government. To enhance the prospects of the Project, GCM has
engaged in a strategy to align the Project with the needs and
objectives of the Government. The Government seeks to rapidly
expand the country's power generation, including the increase in
coal fired power generation from the current 250MW to approximately
20,000MW. The Group's strategy is to combine the planned coal mine
with a proposed 2,000MW mine-mouth power plant in conjunction with
China Gezhouba Group International Engineering Co Limited, an
internationally recognised engineering company.
Until approval of the Scheme of Development from the Government
of Bangladesh is received there is continued uncertainty over the
recoverability of the intangible mining assets. The Directors
consider that it is appropriate to continue to record the
intangible mining assets at cost, however if for whatever reason
the Scheme of Development is not ultimately approved the Group
would impair all of its intangible mining assets, totalling
GBP40,362,000 as at 31 December 2017.
Going concern
As at 31 December 2017 the Group's financial resources were
GBP1,507,000 and current liabilities were GBP2,154,000, including a
short-term loan of GBP1,214,000 owing to Polo Resources Limited,
GCM's largest shareholder. In order to support its operating
expenses for a period of at least 12 months and discharge its
current liabilities as they fall due, the Company will need to
obtain further financial resources through debt or equity
financing. Over the next six months the Company will be in
discussions with parties to seek new investment to strengthen GCM's
financial position and provide financial resources for the
foreseeable future. Until such time, there remains a material
uncertainty which may cast doubt as to the Group's ability to
continue as a going concern.
Projections of future costs for a range of scenarios leading to
approval of the Phulbari Coal and Power Project have been prepared
and taking into account a number of factors, the directors have
satisfied themselves that upon the Group securing further funding
it will have adequate financial resources to continue in
operational existence for the foreseeable future. The directors
remain confident that sufficient funding will be obtained as and
when required. As such the financial statements have been prepared
on a going concern basis, however these conditions indicate the
existence of a material uncertainty which may cast doubt as to the
Group's ability to continue as a going concern.
2. Segment analysis
The Group operates in one segment being the exploration and
evaluation of energy related projects. The only significant project
within this segment is the Phulbari Coal and Power Project in
Bangladesh.
3. Intangible assets
During the period intangibles increased by GBP183,000 (December
2016: increase of GBP250,000). The increase is due to capitalised
mining exploration and evaluation expenditure relating to the
Phulbari Coal and Power Project in Bangladesh.
4. Payables
31 December 31 December 30 June
2017 2016 2017
unaudited unaudited audited
GBP000 GBP000 GBP000
------------------ ------------- ------------ ---------
Trade payables 319 241 332
Related party
accrued payable 471 397 546
Transaction
costs payable 150 150 150
940 788 1,028
------------------ ------------- ------------ ---------
The related party accrued payable of GBP471,000 at 31 December
2017 relates to fees owing to the management services company of
the Executive Chairman of the Company, Datuk Michael Tang PJN. In
2015 the Executive Chairman offered to defer payment of his
management services remuneration in order to assist the
Company.
5. Borrowings
31 December 31 December 30 June
2017 2016 2017
unaudited unaudited audited
GBP000 GBP000 GBP000
----------------- ------------- ------------ ---------
Short-term loan
from related
party 1,214 561 1,001
Convertible - 1,042 -
loan
1,214 1,603 1,001
----------------- ------------- ------------ ---------
GCM is party to a GBP1,100,000 short-term loan facility with its
largest shareholder, Polo Resources Limited. As at 31 December 2017
the Company owed GBP1,214,000, comprising GBP1,100,000 loan balance
and accrued finance costs on borrowings of GBP114,000. The
principle terms of the short-term loan are 12% per annum interest
rate on the loan balance and repayment within 90 days upon request.
The Company may elect to repay at any time giving 60 days'
notice.
6. Share issues
On 18 July 2017 4,207,700 shares were issued to a consultant as
payment for their services in accordance with a Power Plant
Consulting Agreement signed on 18 May 2017. The consulting payment
included GBP60,000 (300,000 shares at 20p per share) as payment for
a retainer and GBP1,407,000 (3,907,700 shares at 36p per share) as
payment for a success fee.
On 20 November 2017 the Company successfully completed a public
fundraising of GBP2,000,000 before costs, by the issue and
allotment of 5,813,953 ordinary shares at 34.4p per share.
7. Post balance sheet events
Consultancy success fees
The Company and its strategic partner China Gezhouba Group
International Engineering Co. Ltd signed a Joint Development
Framework Agreement on 9 March 2018 and a Contract Framework
Agreement on 21 March 2018 ("Key Milestones"). In accordance with
the terms of a consulting agreement, a success fee equal to 10% of
the issued capital of the Company is due to a consultant for the
achievement of the Key Milestones, payable by the issuance of
shares within five business days of the Key Milestones occurring.
In accordance with the International Accounting Standard IAS 10
Events After the Reporting Period the financial statements
contained in this December 2017 Interim Report have not been
adjusted to reflect this.
For further information:
GCM Resources plc Northland Capital Partners
James Hobson Ltd
Finance Director Nominated Adviser and
+44 (0) 20 7290 1630 Broker
Tom Price
Matthew Johnson
+44 (0) 203 861 6625
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKBDPPBKDCNB
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