TIDMGCM
RNS Number : 3987H
GCM Resources PLC
25 March 2020
25 March 2020
GCM Resources plc
("GCM" or the "Company")
(AIM:GCM)
Interim Results for the six months ended 31 December 2019
GCM Resources plc, an AIM quoted mining and energy company, is
pleased to report its interim results for the six months ended 31
December 2019. 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'm pleased to report to our shareholders on the Company's
performance for the six months ended 31 December 2019. It has been
a busy period for the Company and, despite the macro-economic
headwinds I am pleased with the progress made. We have continued to
pursue our strategy of presenting a comprehensive power solution to
the Bangladesh Government, based on a 15 million tonne per annum
"captive" coal mine in the Phulbari Coal Basin, feeding power
plants with a combined capacity of 6,000MW, utilising highly
energy-efficient ultra-supercritical boiler technology, and we
continue this progress into 2020.
As the world is confronting climate change and looking for ways
to increase power generation, whilst simultaneously reducing
greenhouse gas production, we have taken steps to incorporate "high
efficiency, low emission" (HELE) coal-fired power plant technology
into our project. Over the past decade, developments in HELE
technology have moved coal-fired power plant energy efficiency from
circa 35% to 43-44% using the ultra-supercritical technology and
this trend is expected to continue over the next 5 years, with
"advanced ultra-supercritical plants" expected to further increase
energy efficiency towards 50%, with greatly reduced CO(2)
emissions. This technological advance is highly relevant to GCM, as
it is expected to happen within the 10-year timeframe that is
estimated for the installation of the 6,000MW Phulbari Coal and
Power Project.
Our recent progress can be measured by the fact that:
1. Working under the joint-venture arrangements with
internationally renowned PowerChina (Power Construction Corporation
of China Ltd), we have completed the full Power Proposals covering
an initial 4,000MW. These documents were prepared to the Bangladesh
Power Development Board's requirements and will be presented as two
2,000MW Phases, installed in succession, to suit the production
ramp-up of the Phulbari coal mine.
2. Working under the MOU with NFC (China Non-ferrous Metal
Industry's Foreign Engineering and Construction Co. Ltd) and
PowerChina, NFC successfully completed their Due Diligence studies
towards the end of 2019 and we are hopeful of moving to a formal
joint venture arrangement as early as possible in 2020.
We have prepared the Phulbari Coal and Power Project Proposal
and are working with our appointed local consultant to finalise
ready for submission to the Bangladesh Government. This is a truly
a "Mega Project" and is estimated to require some US$14.5 billion
Foreign Direct Investment into Bangladesh to deliver the Project in
its entirety. The Board would note that it's not just about the
mine and power plants, but also about bringing major local and
regional development, with significant job creation, a new
township, new villages, roads, rail, industrial development based
on stable and expansive power supply, reticulated water supplies
and free water for irrigation schemes, sanitation systems and many
other improved community amenities.
Other steps taken in early 2020 include:
-- Securing the continuing support of Polo Resources Ltd (AIM:
POL) ("Polo") by way of the extension of the loan agreement to
ensure funding for a further 12 months.
-- Agreeing extension of the memorandum of understanding with
NFC and PowerChina for a further three months, through into April
2020, on the same terms as previously announced.
-- Agreeing the extension of the Joint Venture Agreement ("JVA")
and definitive Engineering, Procurement and Construction Contract
("EPC Contract") with PowerChina, for a further 12 months, to 17
January 2021, on the same terms as previously announced.
Financials
GCM incurred a loss after tax of GBP616,000 for the six months
ended 31 December 2019 (31 December 2018: loss after tax of
GBP1,844,000). The most significant expenditure during the period
was pre-development expenditure, while administrative expenses for
the six months ended 31 December 2019 were GBP198,000 (31 December
2018: GBP335,000) and capitalised project expenditure for the
period was GBP287,000 (31 December 2018: GBP275,000).
During the period, GCM agreed an extension in the short-term
loan facility with Polo, the Company's second largest shareholder.
The short-term loan facility was been increased by GBP1.2 million,
in exchange for permitting the outstanding loan balance and accrued
interest to be repaid by issuing new ordinary shares in the
Company, at a conversion price of 11 pence per share. The loan
facility continues to attract an interest rate of 12% per annum and
may be repaid via the issue of new ordinary shares in GCM as
mentioned, or in cash, with Polo being required to give 90 days'
notice to the Company.
Over the next six months, the Company will 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 (Note 1 to the
Financial Statements) for further information.
Outlook
Finally, I would like to thank our shareholders for their
continued commitment and support for GCM and its prospects. We are
looking forward to finally presenting the Project Proposal to the
Bangladesh Government and progressing the Project in the interest
of our shareholders and other stakeholders. However, it would be
unrealistic to assume the COVID-19 pandemic won't have an impact on
our timelines, given that governments worldwide are focused on
dealing with the pandemic.
Datuk Michael Tang PJN
Executive Chairman
Interim Consolidated Income Statement
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2019
2019 2018 audited
unaudited unaudited GBP000
GBP000 GBP000
Operating expenses
Pre-development
expenditure (198) (1,427) (5,181)
Exploration and
evaluation costs - (14) (14)
Administrative expenses (279) (335) (6665)
------------------------------- ----------- ----------- -----------
Operating loss (477) (1,776) (5,860)
Finance costs (139) (68) (164)
------------------------------- ----------- ----------- -----------
Loss before tax (616) (1,844) (6,024)
Taxation - - -
Loss and total comprehensive
income for the period (616) (1,844) (6,024)
------------------------------- ----------- ----------- -----------
Earnings per share
Basic loss per share (pence) (0.6p) (1.9p) (6.1p)
Diluted loss per share (pence) (0.6p) (1.9p) (6.1p)
Interim Consolidated Statement of Changes in Equity
Share Share Share Accumulated Total
capital premium based losses GBP000
GBP000 account payments GBP000
GBP000 not settled
GBP000
Balance at 1 July 2018 9,811 50,484 625 (21,540) 39,380
Total comprehensive
loss - - - (6,024) (6,024)
Share issuances 53 13 - - 66
Shares to be issued - - 5,181 - 5,181
Share based payments - - 29 - 29
Balance at 30 June 2019 9,864 50,497 5,835 (27,564) 38,632
Total comprehensive
loss - - - (616) (616)
Share issuances - - - - -
Shares to be issued - - 198 - 198
Share based payments - - 3 - 3
Balance at 31 December
2019 (unaudited) 9,864 50,497 6,036 (28,180) 38,217
------------------------- --------- --------- ------------- ------------ --------
Balance at 1 July 2018 9,811 50,484 625 (21,540) 39,380
Total comprehensive
loss - - - (1,844) (1,844)
Share issuances 10 8 - - 18
Share based payments - - 4 - 4
Balance at 31 December
2018 (unaudited) 9,812 50,492 629 (23,384) 37,558
------------------------ ------ ------- ---- --------- --------
Interim Consolidated Balance Sheet
Notes 31 December 31 December 30 June
2019 2018 2019
unaudited unaudited audited
GBP000 GBP000 GBP000
Current assets
Cash and cash equivalents 236 168 385
Receivables 14 65 23
--------------------------- ------ ------------ ------------ ---------
Total current assets 250 233 408
Non-current assets
Property, plant
and equipment 16 20 19
Intangible assets 3 41,537 40,912 41,250
Receivables - - -
Total non-current
assets 41,553 40,932 41,269
Total assets 41,803 41,165 41,677
--------------------------- ------ ------------ ------------ ---------
Current liabilities
Payables 4 (806) (1,960) (702)
Borrowings 5 (2,780) (1,647) (2,343)
--------------------------- ------ ------------ ------------ ---------
Total current liabilities (3,586) (3,607) (3,045)
Total liabilities (3,586) (3,607) (3,045)
--------------------------- ------ ------------ ------------ ---------
Net assets 38,217 37,558 38,632
--------------------------- ------ ------------ ------------ ---------
Equity
Share capital 6 9,864 9,821 9,864
Share premium account 6 50,497 50,492 50,497
Other reserves 6,036 629 5,835
Accumulated losses (28,180) (23,384) (27,564)
----------------------- --------- --------- ---------
Total equity 38,217 37,558 38,632
----------------------- --------- --------- ---------
Interim Consolidated Statement of Cash Flows
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2019
2019 2018 audited
unaudited unaudited GBP000
GBP000 GBP000
----------------------------------------- -----------
Cash flows used in operating
activities
Loss before tax (616) (1,844) (6,024)
Adjusted for:
Non-cash pre-development expenditure 198 1,427 5,181
Non-cash finance costs 139 68 164
Other non-cash expenses - - 20
------------------------------------------ ----------- ----------- -----------
(279) (349) (659)
Movements in working
capital:
Decrease/(increase) in operating
receivables 9 (30) 13
Increase in operating payables 104 51 219
------------------------------------------ ----------- ----------- -----------
Cash used in operations (166) (328) (427)
Net cash used in operating activities (166) (328) (427)
Cash flows from investing activities
Payments for intangible
assets (283) (268) (579)
Payments for property, plant
and equipment - - (2)
------------------------------------------ ----------- ----------- -----------
Net cash generated from investing
activities (283) (268) (581)
Cash flows from financing activities
Issue of ordinary
share capital - 18 47
Share issue costs - - -
Proceeds from borrowing 300 300 900
Interest paid - - -
Net cash from financing activities 300 318 947
Total (decrease) in cash and
cash equivalents (149) (278) (61)
Cash and cash equivalents at
the start of the period 385 446 446
------------------------------------------ ----------- ----------- -----------
Cash and cash equivalents at
the end of the period 236 168 385
------------------------------------------ ----------- ----------- -----------
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
Board of Directors on 23 March 2020.
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 2019
and applied in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the
six months ended 31 December 2019 have been prepared using the same
policies and methods of computation as applied in the financial
statements for the year ended 30 June 2019. 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 2019 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 6,000MW power plants in conjunction with large Chinese
State-owned engineering enterprises.
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
GBP41,537,000 as at 31 December 2019.
Going concern
As at 31 December 2019 the Group's financial resources were
GBP236,000, as well as access to an unutilised amount of
GBP1,200,000 in the Polo short-term loan facility of GBP3.6
million; such GBP1.2 million increase being formally executed in
January 2020. The unutilised portion of the loan facility is
available to be drawn down in four quarterly instalments.
In order to support its operating expenses for a period of at
least 12 months and discharge its current liabilities as and when
they fall due, the Company will need to obtain further financial
resources through debt or equity financing. The Directors are
confident that the necessary financial resources will be raised as
and when required. The financial statements continue to be prepared
on a going concern basis. However, until such time that sufficient
funds are raised, there remains a material uncertainty which may
cast doubt as to the Group's ability to continue as a going
concern.
Upon achieving approval of the Phulbari Coal and Power Project,
significant additional financial resources will be required to
proceed to development.
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. Intangibles
During the period intangibles increased by GBP287,000. 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
2019 2018 2019
unaudited unaudited audited
GBP000 GBP000 GBP000
-----------------------
Trade payables 259 1,711 304
Related party accrued
payable 397 99 248
Transaction costs
payable 150 150 150
806 1,960 702
----------------------- ------------- ------------ ---------
The trade payables of GBP259,00 at 31 December 2019 includes
GBP60,000 non-cash costs relating to power plant pre-development
expenditure, which will be settled by the issuance of new ordinary
shares in the Company.
The related party accrued payable of GBP397,000 at 31 December
2019 relates to accrued fees owing to the management services
company of the Executive Chairman of the Company, Datuk Michael
Tang PJN.
5. Borrowings
31 December 31 December 30 June
2019 2018 2019
unaudited unaudited audited
GBP000 GBP000 GBP000
Short-term loan facility from
related party 2,780 1,647 2,343
2,780 1,647 2,343
------------------------------- ------------ ------------ ---------
GCM is party to a GBP3,500,000 short-term loan facility with its
second largest shareholder, Polo Resources Limited (AIM: POL)
("Polo"). As at 31 December 2019, the Company owed GBP2,780,000,
comprising GBP2,2300,000 loan balance and accrued finance costs on
borrowings of GBP480,000. 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. Alternatively, the lender
may request repayment by the issuance of new ordinary shares in the
Company at 11 pence per share. Any issue of GCM shares to the Polo
is conditional upon its interest, together with the interest of any
parties with which it is in concert, remaining below 30% of the
Company's issued share capital. The Company may elect to repay all
or part of the outstanding loan at any time giving 60 days'
notice.
6. Share issues
No shares were issued during the period.
7. Post-balance sheet events
On 13 January 2020, the Company announced it had agreed an
extension of the memorandum of understanding ("MoU") with China
Nonferrous Metal Industry's Foreign Engineering and Construction
Co., Ltd. ("NFC") and Power Construction Corporation of China, Ltd.
("PowerChina"), for a further three months, on the same terms as
previously announced. In addition, the Company also announced that,
further to its announcement of 17 January 2019, it had agreed the
extension of the Joint Venture Agreement ("JVA") and definitive
Engineering, Procurement and Construction Contract ("EPC Contract")
with PowerChina, for a further 12 months, to 17 January 2021, on
the same terms as previously announced.
On 23 January 2020, the Company announced the issuance of new
ordinary shares of 10 pence each in the capital of the Company
("Ordinary Shares") as payment of consulting fees in accordance
with the consultancy agreement announced on 26 October 2018, with
Dyani Corporation Limited ("Dyani") (the "Dyani Agreement"), and in
accordance with the consultancy agreement announced on 4 September
2019, with DG Infratech Pte Ltd ("DG") (the "DG Agreement")
(together, the "Agreements").
The Agreements provide that new Ordinary Shares would be awarded
to Dyani and DG in the event that certain key milestones were
reached in respect of formally securing the interest of Chinese
State-owned enterprises to partner in the Phulbari Coal and Power
Project. Details of these milestones are set out in the Company's
announcements dated 26 October 2018 with respect to the Dyani
Agreement and 4 September 2019 with respect to the DG
Agreement.
Accordingly, the following consulting fees were settled via the
issuance of new Ordinary Shares:
-- in lieu of the retainer fee for the period from 1 April 2018
to 30 June 2018, the Company issued 300,000 new Ordinary Shares to
Dyani in accordance with the terms of the previous Dyani
consultancy agreement, announced on 18 May 2017;
-- in lieu of the retainer fee for the period from 1 July 2018
to 30 June 2019, the Company issued 2,142,856 new Ordinary Shares
to Dyani;
-- for the negotiation and finalisation of the MOU with Power
Construction Corporation of China, Ltd ("PowerChina") for power
plants generating up to 4,000MW, as announced on 27 November 2018,
a success fee was awarded to Dyani, satisfied by the issue of
3,928,546 new Ordinary Shares;
-- for the negotiation and finalisation of definitive agreements
with PowerChina in respect of power plants generating up to
2,000MW, as announced on 17 January 2019, a success fee was awarded
to Dyani, satisfied by the issue of 7,149,954 new Ordinary Shares;
and
-- in lieu of the retainer fee for the period from 1 September
2019 to 30 November 2019, the Company has issued 199,998 new
Ordinary Shares to DG, in accordance with the terms of the DG
Agreement.
On 3 February 2020, the Company announced it had agreed a GBP1.2
million increase to its existing loan facility of GBP2.3 million
with Polo (the "Polo Facility").
Prior to this amendment, the Polo Facility allowed the Company
to borrow up to GBP2.3 million, to be repaid within 90 days upon
request and attracting an interest rate of 12% per annum. As set
out in the Company's Annual Report and Accounts for the year ended
30 June 2019, the existing Polo Facility had been fully drawn down.
The revised terms provide for an increase in the Polo Facility
amount by GBP1.2 million (up to an aggregate of GBP3.5 million),
which can be drawn down by the Company in equal quarterly
instalments of GBP300,000. As set out in the Company's
announcement, of 30 November 2018, Polo will have the right to
convert the outstanding loan balance and accrued interest into new
ordinary shares in the Company's capital at a price of 11p per
share, within 14 days upon request. Any issue of GCM shares to the
Polo is conditional upon its interest, together with the interest
of any parties with which it is in concert, remaining below 30% of
the Company's issued share capital. All other principal terms of
the Polo Facility remained unchanged.
For further information:
GCM Resources plc Strand Hanson Limited
Keith Fulton Nominated Adviser and Broker
Finance Director Stuart Faulkner
+44 (0) 20 7290 1630 Rory Murphy
James Dance
+44 (0) 20 7409 3494
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com
About GCM Resources
GCM Resources plc (LON:GCM), the AIM listed mining and energy
company, has identified a high quality coal resource of 572 million
tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project
(the Project) in north-west Bangladesh.
Utilising the latest highly energy efficient power generating
technology the Phulbari coal mine is capable of supporting power
plants of up to 6,000MW. GCM is awaiting approval from the
Government of Bangladesh to develop the Project. The Company has a
strategy of combining the Company's mine proposal with up to
6,000MW of power generation, together with credible,
internationally recognised strategic partners. GCM aims to deliver
a practical power solution to provide the cheapest electricity in
the country, in a manner amenable to the Government of
Bangladesh.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKQBPBBKDBNB
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