Anglesey Mining plc
Chairman's Statement and Management Report - November 2012
The half year to the end of September
2012 has been one of mixed fortunes for the company.
Labrador Iron Mines (LIM) reported good operating results and a
strong increase in iron ore production but has been impacted by a
very significant fall in the price of iron ore during August and
early September that severely restricted revenue for that period
and resulted in a significant accounting loss for the September
quarter.
At Parys Mountain we have continued to make progress with the
completion of the 2012 drilling programme. The new resource
estimate is almost ready to be released and the scoping study is
making good progress. Largely as a result of the loss reported by
LIM for its September quarter the group has recorded a loss of £7.4
million for the half year. Subsequent to the end of the reporting
period LIM raised $C30 million
through a share issue. Anglesey subscribed $C1.5 million (£0.9m) to this issue and now holds
19.7% of LIM.
Labrador Iron
The highlights at the Schefferville properties for the six month
period to 30th September 2012
were:
* LIM demonstrated its operational ability to produce, rail and sell up to
250,000 tonnes of iron ore product per month from its James mine since the
April start of the 2012 operating season.
* LIM mined 1.6 million tonnes of ore at 61.5% iron.
* LIM railed 1.2 million tonnes of ore to the Port of Sept-Îles. In October,
LIM reached a major milestone, having railed over two million tonnes to the
Port of Sept-Îles since commencing mining operations in June 2011.
* LIM sold 1.1 million dry tonnes in seven shipments of iron ore.
* LIM responded quickly to challenging market conditions and the sharp
decline in iron ore spot prices in August 2012, focusing on cost reduction
and cash conservation measures.
* LIM enhanced long-term rail and port access securing 5 million tonnes of
ship loading capacity at the new multi-user dock at the Port of Sept-Îles
and participating with CN Rail in a feasibility study for the potential
development of a new multi-user rail line and terminal handling facility.
* LIM completed most of the work of a successful 2012 exploration season with
approximately 13,500 metres of diamond and RC drilling forecast to be
completed by the end of November.
Responding to challenging market conditions
Iron ore spot prices and transaction volumes suffered a sharp
decline in August 2012, with spot
prices dropping 33% to below US$90
per tonne on a 62% Fe CFR China basis in early September before
recovering to over US$120 per tonne
by late October. LIM undertook a critical review of its operating
and capital spending for the balance of 2012 and implemented the
following immediate and decisive measures:
* Focus on cost reduction and management of cash resources;
* Utilization of the new dry classifying system to produce sinter and lump
ore only;
* All non-committed capital expenditures, mainly relating to the Silver Yards
wet processing plant and the Houston deposits, were deferred to 2013;
* The 2012 exploration programme was reduced to $5.3 million.
James Mine and Silver Yards
The James Mine re-commenced full-scale operations in
April 2012 and consistently achieved
its planned mining rate of 28,000 tonnes per day of ore and waste
in the months of June through August until the cutbacks in
September as part of the cost reduction programme. Complementing
the ramp up in production, monthly railway volumes increased almost
threefold from the beginning of the season with up to four train
sets in operation.
The ore in the James deposits continues to be soft high grade
and lends itself to simple processing. The higher grade ore
encountered in the upper benches continues as the mine gets deeper
and accesses the lower levels. To enhance productivity and reduce
costs, beginning in late August and continuing for the remainder of
2012, a dry classifying system was utilised to produce lump and
sinter products. The Silver Yards wet processing plant was
winterized at the end of August and not used for the remainder of
2012.
Construction of the Phase 3 expansion of the wet processing
plant, designed to increase plant throughput to 12,000 tonnes per
day and to improve mass yield to above 75%, was substantially
complete at the end of August. With the suspension of capital
expenditure programmes relating to the Silver Yards processing
plant, completion and commissioning of the Phase 3 plant expansion,
originally anticipated to take place in August 2012, is now planned for the 2013
operating season.
Production for the Quarter and Six Months ended 30 September 2012
(all tonnes are dry metric Quarter ended Six Months ended 30
tonnes) 30 September 2012 September 2012
Tonnes Grade % Fe Tonnes Grade % Fe
Total Ore Mined 961,737 60.8 1,629,930 61.5
Direct Rail Ore portion 569,789 62.4 1,053,233 62.5
Waste Mined 1,533,211 - 2,902,609 -
Ore Processed 643,715 58.2 771,178 57.8
Lump Ore Produced 62,884 60.5 80,612 60.4
Sinter Fines Produced 508,773 61.1 543,484 61.4
Total Product Railed 706,495 62.2 1,238,824 62.4
Tonnes Product Sold 647,643 62.3 1,134,149 62.7
Port Product ending 282,344 62.1 282,344 62.1
inventory
Site Product ending 89,917 60.2 89,917 60.2
inventory
ROM Ore ending inventory 432,143 56.2 432,143 56.2
Exploration
As of the end of September 2012,
approximately 9,400 metres of RC and core diamond drilling had been
completed in the 2012 exploration programme. The 2012 budget was
reduced to $5.3 million from the
$8.6 million originally budgeted but
the programme is still expected to achieve approximately 13,500
metres of drilling as a result of cost efficiencies and improved
productivity.
The drill programmes have focused on Houston, Malcolm, James North, the James South extension and
historic stockpiles near Silver Yards. The main purpose of this
drilling is to generate further technical information for more
detailed mine planning of these deposits. In addition to this
drilling, a bulk sampling programme of some of the historic
stockpiles has been initiated together with a further 1,500 metre
diamond drilling programme on the Elizabeth Lake taconite target to
evaluate this type of iron-bearing formation.
LIM outlook
Mining, processing and rail operations for the 2012 season are
complete. The shipping season should shortly be concluded with a
tenth shipment for total sales of 1.6 million dry tonnes, a
significant increase from the 386,000 dry tonnes sold in 2011.
LIM took decisive action in September
2012 in response to dropping iron ore prices and believes
that cost reductions in its operations combined with a scale-back
in production, the deferral of capital expenditures and the
completion of a C$30 million equity
financing will ensure a sustainable position to resume operations
in April 2013. Subject to market
conditions LIM is targeting production of 2 million tonnes of iron
ore in 2013.
Parys Mountain
The 2012 drilling programme at Parys Mountain which was
commenced in January has been completed with 12 holes totalling in
excess of 2,000 metres having been drilled. The results from all
these holes have now been received and have added significantly to
the data base and more importantly to the better understanding of
the geology and the potential location of mineralisation. The last
set of holes drilled about 1,200 metres to the east of the Morris
Shaft have demonstrated the lateral extent of mineralisation.
During the period the Intermine future royalty was bought out in
its entirety for 2,000,000 shares and $C1
million (£0.63m).
Micon has completed a revised ore resource estimate for the
entire site and this will be published shortly. Based on this new
resource Micon is close to completing a scoping study for the
development of the White Rock and
Engine zones initially utilising decline access from a location
close to the planned processing plant. On receipt of this study the
directors will review all the options available to progress
development of Parys Mountain as a mining operation.
Financial results
There was a net loss for the period of £7.4 million (2011 -
profit - £16.7m) most of which was in respect of the holding in
LIM, the group's associate. The group has no revenues from the
operation of its properties. At the period end the cash resources
of the group were £1.9 million (31 March
2012 - £3.2 million) and at 21
November 2012 they were £0.8 million.
Outlook
The medium term outlook for the group remains dependent upon
commodity prices. The iron ore price fell heavily in August and
September but has recovered somewhat since. It needs to remain
close to current levels for LIM to be able to look forward to a
positive restart of production activities in April 2013. LIM is heavily geared to the price of
iron ore and any reasonable move upwards beyond the current price
will have a very positive effect on LIM's profitability.
Base metal prices, particularly for copper, have been fairly
robust recently and show no serious signs of retreating. Zinc,
which would be the primary source of revenue from the initial
White Rock production at Parys, is
forecast to be in short supply as concentrate within the European
market in the coming two to three years. Should this position
develop then it will be opportune for the early development of
Parys Mountain.
John F Kearney
Chairman
23 November 2012
Anglesey Mining plc - Group
Condensed consolidated income statement
Notes Unaudited Unaudited
six months six months
ended 30 ended 30
September September
2012 2011
All operations are continuing £ £
Revenue - -
Expenses (201,885) (213,422)
Share of loss of associate 11 (7,039,697) (2,635,673)
(Losses)/gains on deemed 11 (133,913) 19,607,503
disposals in associate
Investment income 27,075 20,566
Finance costs (57,456) (56,059)
Foreign exchange profit/(loss) 8,887 (67,700)
(Loss)/profit before tax (7,396,989) 16,655,215
Tax 9 - -
(Loss)/profit for the period (7,396,989) 16,655,215
(Loss)/profit per share 7
Basic - pence per share (4.6)p 10.5 p
Diluted - pence per share (4.6)p 9.9 p
Condensed consolidated statement of comprehensive income
(Loss)/profit for the period (7,396,989) 16,655,215
Other comprehensive income:
Exchange difference on 42,465 (595,891)
translation of foreign holding
Total comprehensive (loss)/income (7,354,524) 16,059,324
for the period
All attributable to equity holders of the company
Condensed consolidated statement of financial position
Notes Unaudited 30 Audited 31
September March 2012
2012
£ £
Assets
Non-current assets
Mineral property development 10 14,626,441 14,255,818
Property, plant and equipment 204,687 204,687
Interest in associate 11 34,394,705 41,240,859
Deposit 121,935 121,685
49,347,768 55,823,049
Current assets
Other receivables 62,771 64,991
Cash and cash equivalents 1,890,637 3,150,644
1,953,408 3,215,635
Total assets 51,301,176 59,038,684
Liabilities
Current liabilities
Trade and other payables (80,812) (1,040,961)
(80,812) (1,040,961)
Net current assets 1,872,596 2,174,674
Non-current liabilities
Loan (2,248,716) (2,191,260)
Long term provision (42,000) (42,000)
(2,290,716) (2,233,260)
Total liabilities (2,371,528) (3,274,221)
Net assets 48,929,648 55,764,463
Equity
Share capital 12 7,116,914 7,096,914
Share premium 9,848,949 9,634,231
Currency translation reserve 3,283,635 3,241,170
Retained earnings 28,680,150 35,792,148
Total shareholders' equity 48,929,648 55,764,463
All attributable to equity holders of the company
Condensed consolidated statement of cash flows
Notes Unaudited Unaudited
six months six months
ended 30 ended 30
September September
2012 2011
£ £
Operating activities
(Loss)/profit for the period (7,396,989) 16,655,215
Adjustments for non-cash items:
Investment revenue (27,075) (20,566)
Finance costs 57,456 56,059
Share of loss of associate 11 7,039,697 2,635,673
Loss/(gain) on deemed disposal 11 133,913 (19,607,503)
in associate
Foreign exchange movement (8,887) 67,700
(201,885) (213,422)
Movements in working capital
Decrease in receivables 2,221 2,212
Decrease in payables (50,682) (18,286)
Net cash used in operating (250,346) (229,496)
activities
Investing activities
Investment revenue 26,825 20,306
Mineral property development (1,280,091) (42,757)
Net cash used in investing activities (1,253,266) (22,451)
Financing activities
Net proceeds from issue of 234,718 9,290
shares
Loan received -
Net cash generated from financing activities 234,718 9,290
Net decrease in cash (1,268,894) (242,657)
and cash equivalents
Cash and cash equivalents at start 3,150,644 3,671,247
of period
Foreign exchange movement 8,887 (67,700)
Cash and cash equivalents at end of 1,890,637 3,360,890
period
Condensed consolidated statement of changes in group equity
Share Share Currency Retained Total
capital premium translation earnings £
£ £ reserve £ £
Equity at 1 April 2012 - 7,096,914 9,634,231 3,241,170 35,792,148 55,764,463
audited
Total comprehensive
income for the period:
Loss for the period - - - (7,396,989) (7,396,989)
Exchange difference on - - 42,465 - 42,465
translation of foreign
holdings
Total comprehensive - - 42,465 (7,396,989) (7,354,524)
income for the period:
Shares issued 20,000 220,000 - - 240,000
to discharge a liability
Share issue costs - (5,282) - - (5,282)
Equity-settled benefits - - - 284,991 284,991
credit:
- associate
Equity at 30 September 7,116,914 9,848,949 3,283,635 28,680,150
48,929,648 2012 - unaudited
Comparative period
Equity at 1 April 2011 - 7,092,414 9,621,181 3,620,997 15,748,173 36,082,765
audited
Total comprehensive
income for the period:
Profit for the period - - - 16,655,215 16,655,215
Exchange difference on - - (595,891) - (595,891)
translation of foreign
holdings
Total comprehensive - - (595,891) 16,655,215 16,059,324
income for the period:
Shares issued for cash 2,500 12,812 - - 15,312
in respect of option
exercises
Share issue costs - (6,022) - - (6,022)
Equity-settled benefits - - - 278,933 278,933
credit:
- associate
Equity at 30 September 7,094,914 9,627,971 3,025,106 32,682,321
52,430,312 2011 - unaudited
All attributable to equity holders of the company
Notes to the accounts
1. Basis of preparation
This half-yearly financial report comprises the condensed
consolidated financial statements of the group for the six months
ended 30 September 2012. It has been
prepared in accordance with the Disclosure and Transparency Rules
of the UK Financial Services Authority, the requirements of IAS 34
- Interim financial reporting (as adopted by the European Union)
and using the going concern basis (and the directors are not aware
of any events or circumstances which would make this
inappropriate). It was approved by the board of directors on
23 November 2012. It does not
constitute financial statements within the meaning of section 434
of the Companies Act 2006 and does not include all of the
information and disclosures required for annual financial
statements. It should be read in conjunction with the annual report
and financial statements for the year ended 31 March 2012 which is available on request from
the company or may be viewed at www.angleseymining.co.uk.
The financial information contained in this report in respect of
the year ended 31 March 2012 has been
extracted from the report and financial statements for that year
which have been filed with the Registrar of Companies. The report
of the auditors on those accounts did not contain a statement under
section 498(2) or (3) of the Companies Act 2006 and was not
qualified. The half-yearly results for the current and comparative
periods are unaudited.
2. Significant accounting policies
The accounting policies applied in these condensed consolidated
financial statements are consistent with those set out in the
annual report and financial statements for the year ended
31 March 2012. The following
amendments to interpretations were effective in the current period
and have been adopted:
IFRS 7 Financial Instruments: Amendments enhancing disclosure
about transfers of financial assets; Issued - October 2010; Effective - Annual period beginning
on or after 1 July 2011
IAS 12 Income Taxes: Limited scope amendments (recovery of
underlying assets); Issued - December
2010; Effective - Annual periods beginning on or after
1 January 2012
The adoption of these amendments and new interpretations has not
resulted in a change to the accounting policies nor had a material
effect on the financial performance and position of the group. In
preparing these financial statements any accounting assumptions and
estimates made by management were consistent with those applied to
the aforesaid annual report and financial statements.
3. Risks and uncertainties
The principal risks and uncertainties set out in the group's
annual report and financial statements for the year ended
31 March 2012 remain the same for
this half-yearly financial report and can be summarised as:
development risks in respect of mineral properties, especially in
respect of permitting and metal prices; liquidity risks during
development; and foreign exchange risks. More information is to be
found in the 2012 annual report - see note 1.
4. Statement of directors' responsibilities
The directors confirm to the best of their knowledge that: (a)
the condensed consolidated financial statements have been prepared
in accordance with lAS 34 as adopted by the European Union; and (b)
the interim management report includes a fair review of the
information required by the FSA's Disclosure and Transparency Rules
(4.2.7 R and 4.2.8 R). This report and financial statements were
approved by the board on 23 November
2012 and authorised for issue on behalf of the board by
Bill Hooley, Chief Executive Officer
and Ian Cuthbertson, Finance
Director.
5. Activities
The group is engaged in mineral property development and
currently has no turnover. There are no minority interests or
exceptional items.
6. Results for the period
The interim results may be subject to seasonal effects in the
Labrador operations.
7. Earnings per share
The loss per share is computed by dividing the loss attributable
to ordinary shareholders of £7.4 million (2011 profit £16.7m), by
159,328,270 (2011 - 158,401,220) - the weighted average number of
ordinary shares in issue during the period. Where there are losses
the effect of outstanding share options is not dilutive.
8. Business and geographical segments
There are no revenues. The cost of all activities charged in the
income statement relates to exploration and development of mining
properties. The group's income statement and assets and liabilities
are analysed as follows by geographical location, which is the
basis of internal management reporting.
Unaudited six months ended 30 Unaudited six months
September 2012 ended 30 September 2011
UK Canada - Total UK Canada - Total
associate associate
£ £ £ £ £ £
Expenses (201,885) - (201,885) (213,422) - (213,422)
Share of loss - (7,039,697) (7,039,697) - (2,635,673) (2,635,673)
in associate
(Loss)/gain on - (133,913) (133,913) - 19,607,503 19,607,503
deemed
disposals
Investment 27,075 - 27,075 20,566 - 20,566
income
Finance costs (57,456) - (57,456) (56,059) - (56,059)
Exchange rate 8,887 - 8,887 (67,700) - (67,700)
movements
Loss/profit (223,379) (7,173,610) (7,396,989) (316,615)
16,971,830 16,655,215 for the period
Unaudited 30 September 2012 Audited 31 March 2012
UK Canada - Total UK Canada - Total
associate associate
£ £ £ £ £ £
Assets 16,906,471 34,394,705 51,301,176 17,797,825 41,240,859 59,038,684
Liabilities (2,371,528) - (2,371,528) (3,274,221) -
(3,274,221)
Net assets 14,534,943 34,394,705 48,929,648 14,523,604
41,240,859 55,764,463
9. Deferred tax
There is an unrecognised deferred tax asset of £1.2 million
(31 March 2012 - £ 1.2m) which, in
view of the group's trading results, is not considered to be
recoverable in the short term. There are also capital allowances,
including mineral extraction allowances, exceeding £11 million
(unchanged from 31 March 2012)
unclaimed and available. No deferred tax asset is recognised in the
condensed financial statements.
10. Mineral property development
Mineral development costs incurred by the group are carried in
the condensed consolidated financial statements at cost, less an
impairment provision if appropriate. The recovery of mineral
development costs is dependent upon the successful development and
operation of the Parys Mountain project which is itself conditional
on finance being available to fund such development. During the
period expenditure of £370,623 was incurred (six months to
30 September 2011 - £42,757), a
significant increase due to drilling and other activities in 2012
and the cost of buying out Intermine Limited's royalty. Intermine
was paid C$1 million in cash
(£630,000) and issued with 2,000,000 ordinary shares with a market
value of 12 pence each in the company
to discharge all amounts due and to cancel entirely its net profits
royalty agreement. There have been no indicators of impairment
during the period.
11. Interest in associate
At 30 September 2012 the group had
a 26% (31 March 2012 - 26%) interest
in Labrador Iron Mines Holdings Limited (LIM), a company registered
in Ontario, Canada, which is
independently managed and is accounted for in these financial
statements as an associate company. LIM is the 100% owner and
operator of a series of iron ore properties in Labrador and Quebec, some of which were formerly held and
initially explored by the group. The fully diluted interest of the
group in LIM was 25% (31 March 2012 -
25%). At 21 November 2012 the
published fair value of the group's investment in LIM was £9.1
million based on a share price of C$0.75 per LIM common share at that date. The
changes in the group's interest in LIM are:
Unaudited 30 Audited 31
September 2012 March 2012
Values in group financial statements: £ £
Value brought forward from previous period 41,240,859
21,073,132
Group's share of losses of associate (7,039,697) (3,484,140)
Group's share of equity-settled benefits 284,991 657,420
included in losses above and now added
back
(Loss)/profit on deemed disposals (133,913) 23,374,274
following
LIM share issues
Exchange rate movement 42,465 (379,827)
Amount carried in the group accounts - 34,394,705 41,240,859
being the value of group's share of net
assets of the associate without any fair
value adjustment in respect of mineral
properties
12. Share capital
Ordinary shares of 1p Deferred shares of 4p Total
Issued and Nominal Number Nominal Number Nominal
fully paid value £ value £ value £
At 31 March 2011 1,581,581 158,158,051 5,510,833 137,770,835 7,092,414
Issued 5 April 2,500 250,000 - - 2,500
2011
Issued 22 March 2,000 200,000 - - 2,000
2012
At 31 March 2012 1,586,081 158,608,051 5,510,833 137,770,835 7,096,914
Issued 11 July 20,000 2,000,000 - - 20,000
2012
At 30 September 1,606,081 160,608,051 5,510,833 137,770,835 7,116,914
2012
On 11 July 2012, 2,000,000 shares
were issued to Intermine Limited - see note 10.
13. Events after the reporting period
In November 2012 LIM issued 30
million shares in respect of a fund raising. The group contributed
C$1.5 million to this financing
resulting in an increase in its holding of LIM shares from
17,789,100 to 19,289,100. Following this issue the group's holding
is 19.7%.
14. Related party transactions
None.
About Labrador Iron Mines Holdings Limited
Labrador Iron Mines (LIM) is Canada's newest iron ore producer with a
portfolio of direct shipping (DSO) iron ore operations and projects
located in the prolific Labrador Trough. Initial production
commenced at the James Mine in June
2011. The first full production season commenced in
April 2012, with nine cape-size
shipments totalling approximately 1,456,000 dry tonnes of iron ore
sold in the seven months ended October 31,
2012.
The James Mine is connected by a direct rail link to the Port of
Sept-Iles, Québec. The project
also benefits from established infrastructure including the town,
airport, hydro power and railway service. Starting with the James
Mine and leading to the development of the expanding Houston flagship project, LIM's objective is
to provide shareholders with long-term value with a plan to
increase production towards 5 million tonnes per year from a
portfolio of 20 iron ore deposits in Labrador and Quebec, all within 50 kilometres of the town
of Schefferville.
LIM is currently the only independently-owned Canadian iron ore
producer listed on the Toronto Stock Exchange and trades under the
symbol LIM. For further information see
www.labradorironmines.ca.
About Anglesey Mining plc
Anglesey now holds 19.7% of Toronto-listed Labrador Iron Mines Holdings
Limited which is producing iron ore from its James deposit, one of
LIM's twenty direct shipping iron ore deposits in western
Labrador and north-eastern
Quebec.
Anglesey is also carrying out development and exploration work
at its 100% owned Parys Mountain zinc-copper-lead deposit in
North Wales, UK.
For further information, please contact:
Bill Hooley, Chief Executive +44
(0)1492 541981;
Ian Cuthbertson, Finance Director
+44 (0)1248 361333;
Samantha Harrison / Klara Kaczmarek: RFC Ambrian +44 (0)20 3440
6800;
Emily Fenton / Jos Simson:
Tavistock Communications +44 (0)20 7920 3155