TIDMSKR
RNS Number : 8052D
Sunkar Resources PLC
02 April 2014
April 2, 2014
RNS
SUNKAR RESOURCES PLC
("Sunkar" or the "Company")
UPDATE ON OPERATIONS AND FINANCIAL POSITION OF THE COMPANY
Sunkar (AIM:SKR) provides the following update:
Background
Since the last update provided by the Company on 12 December
2013, Sunkar's operations have been adversely affected by the 20
per cent. devaluation of the Kazakh Tenge on 11 February 2014 which
has led to financial uncertainty within the domestic economy of
Kazakhstan. Many new government contracts for execution denominated
in the local currency have been put on hold, which has led to
delays in the receipt of monies due to Sunkar in respect of its
existing earth moving contracts and also delays in agreeing any new
contracts.
As shareholders are aware, earth moving contracts associated
with the Kazakh government's infrastructure development programs
are a significant part of Sunkar's revenues and the Company had
been relying on the cash generated by these projects for its
ongoing working capital needs. In the interim results, for the six
months ended 30 June 2013, announced on 24 September 2013, the
Company stated, "Short-term cash flows will be managed by
completion of the existing earth moving contracts, pursuit of
additional contracts and further sales of DAR and ground phosphate
rock backed up by the support of the majority shareholder."
However, recent events have made that forecast unsustainable.
Earth Moving Contracts
The Company's wholly owned subsidiary, Temir Service LLP
("Temir") has been unsuccessful, to date, in concluding
negotiations for a third earth moving contract on the timescale
previously expected and, accordingly, Temir is now expected to
generate materially less cash, during this financial year, than had
been expected at the time of the last update in December.
Management continues to negotiate this contract, but there can be
no certainty as to whether, or when, acceptable terms will be
agreed.
In the interim, on 29 March 2014 management agreed an extension
to the second earth moving contract with a value of approximately
KZT79 million (US$434,000), of which a proportion will be prepaid.
It is expected that the Company will resume its work on site in
approximately 15 days and that the contract extension will take up
to 45 days to complete.
Direct Application Rock sales
Since the beginning of this year Temir has shipped 4,685 tonnes
of DAR, contracted to sell total of 7,501 tonnes, and received
indicative orders of 17,000 tonnes. The majority of these sales are
to Kazakh and Russian farmers, with some additional sales to
European destinations.
Subsoil Use Contract execution
The Company was recently informed that on 20 March 2014 the
Ministry of Industry and New Technologies of the Republic of
Kazakhstan duly executed Addendum #3 to the Subsoil Use Contract
("SUC") with Temir approving the revised ore mining commitment of
300,000 tonnes of rock per annum.
Financial Position of the Company
The Company's current cash position is US$57,000, which is
US$348,000 below budget, as a result of the delays in receipt of
payment in respect of the existing earth moving contracts, the
delays in agreeing a further earth moving contract and the economic
effects of the Tenge devaluation.
The Company has operated at a loss for the year to date, in both
cash and profit terms, and is expected to continue to do so until
further earth moving contracts can be secured or an alternative
strategy developed.
Delay in Asia Credit Bank loan repayment
As announced on 4 January 2012, Temir signed a credit line
facility with Asia Credit Bank (Kazakhstan) ("ACB") for
US$3,000,000 ("ACB Loan"). As a result of delays in signing a new
earth moving contract, Temir was unable to make its regular monthly
payments against the ACB Loan of US$84,000 to ACB on 26 February
2014 and 26 March 2014. On 26 March 2014, Temir was contacted by
ACB requesting payment by 31 March 2014, regarding the two missed
instalments, together with penalties and interest on the missed
instalments, amounting to US$186,712 in aggregate.
After further negotiations between management and ACB, ACB has
advised management that it will trigger default of the ACB Loan and
require the repayment of all outstanding monies, should Temir fail
to make the payment of $186,712 by 14 April 2014. The current
principal amount outstanding on the ACB Loan is US$1,935,456.
SAPC financial support
Sun Avenue Partners Corp ("SAPC"), the Company's majority
shareholder and its owner, Almas Mynbayev, has provided financial
support to the Company historically. In 2012, SAPC provided funding
of US$12.8m by way of convertible loan notes which were
subsequently converted in to new shares in the Company in December
2012.
As stated in the Interim Report on 24 September 2013, the
Company received a letter of support from JSC "Interfarma-K"
confirming that it will, subject to the agreement of mutually
acceptable terms, provide financial support to assist the Company
and its operating subsidiaries to meet their liabilities as they
fall due. The Company is now in negotiations with SAPC with regard
to the provision of possible financial support in the form of a
convertible shareholder loan. The Company anticipates that these
negotiations will be finalised by 13 April 2014.
In the event that the Company is not able to agree acceptable
terms with SAPC, it will not be able to make the payment required
by ACB, as set out above, ACB may trigger a default under the terms
of the ACB Loan. The ACB Loan is secured against earth moving
equipment and certain production facilities located at Temir's
milling and loading complex at Chilisai deposit.
Accordingly, as a result of ongoing operating losses and lack of
clarity regarding its prospects and access to funding, the Company
faces significant financial uncertainty.
Further announcements will be made as and when required.
For further information, please contact:
Sunkar Resources plc
Teck Soon Kong, Chairman Tel: +44 20 7397 3730
Serikjan Utegen, CEO
Strand Hanson Limited
Stuart Faulkner Tel: +44 20 7409 3494
Andrew Emmott
James Dance
Bankside Consultants
Simon Rothschild Tel: +44 7703 167065
or visit: www.sunkarresources.com
Notes to Editors:
Sunkar Resources plc
Sunkar Resources plc, through its wholly owned subsidiary Temir
Service LLP, operates a phosphate rock mine in Aktobe Oblast, North
West Kazakhstan. Temir Service LLP holds a Subsoil Use Contract to
part of the Chilisai Phosphate Rock Deposit. The contract area is
estimated to contain 1,128 million tonnes of phosphate ore.
Sunkar's strategy is to build a world class integrated
ammoniated phosphate fertilizer plant with low operating costs.
Sunkar's low cost base derives from its near surface phosphate rock
deposit and access to sulphur from the nearby North Caspian oil and
gas fields.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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