TIDMAVM
RNS Number : 7391H
Avocet Mining PLC
12 June 2017
Avocet Mining PLC
2016 Full Year Results
Avocet Mining PLC, ("Avocet" or "the Company"), the West African
focused gold mining and exploration company, has today published
its Annual Report and Accounts for the year ended 31 December 2016
on its website -www.avocetmining.com
In compliance with article 6.3.5 of the Disclosure guidance and
Transparency Rules, the Company publishes today the 2016 Annual
Report.
The Company has requested the restoration of trading of its
shares, which it expects shortly.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC Blytheweigh J.P. Morgan Cazenove
Financial PR Corporate Broker
Boudewijn Wentink, CEO Tim Blythe Michael Wentworth-Stanley
Yolanda Bolleurs, CFO Camilla Horsfall
Megan Ray
+44 20 3709 2570 +44 207 138 3204 +44 20 7742 4000
NOTES TO EDITORS
Avocet Mining PLC ("Avocet" or the "Company") is an unhedged
gold mining and exploration company listed on the London Stock
Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The
Company's principal activities are gold mining and exploration in
West Africa.
In Burkina Faso the Company owns 90 per cent of the Inata Gold
Mine. The Inata Gold Mine poured its first gold in December 2009
and produced 72,485 ounces of gold in 2016. Other assets in Burkina
Faso include five exploration permits surrounding the Inata Gold
Mine in the broader Bélahouro region. The most advanced of these
projects is Souma, some 20 kilometers from the Inata Gold Mine.
The Company also holds an interest in the Tri-K project in
Guinea. On 22 May 2017, the Company announced that it had completed
its agreement to dispose of 40 per cent of the project to Managem,
a Moroccan group listed on the Casablanca stock exchange, which
will increase upon completion of a bankable feasibility study for a
CIL plant at the site, the incurring of expenditures of at least
US$10 million, and the enlarging of the ore reserve, to 70 per cent
(in the event of an increase of the reserve to 1 million ounce or
more) or 60 per cent (if less than 1 million ounces).
Avocet Mining PLC
Annual Report and Accounts
2016
Contents
Overview
1 About us
Strategic Report
2 Introduction
3 Chairman's statement
4 Chief Executive's statement
7 Financial review
11 Business model and Strategy
12 Risk management and internal controls
14 Principal risks and uncertainties
16 Safety and health
18 Sustainable development
Review of Operations
21 Inata Gold Mine
21 Tri-K
22 Ore Reserves and Mineral Resources
Directors and Governance
25 Board of Directors
26 Report of the Directors
30 Report on corporate governance
36 Remuneration report
Financial Statements
46 Independent auditor's report to the members of Avocet Mining PLC
50 Consolidated income statement
51 Consolidated statement of comprehensive income
52 Consolidated statement of financial position
53 Consolidated statement of changes in equity
54 Consolidated cash flow statement
55 Notes to the financial statements
89 Independent auditor's report to the members of Avocet Mining PLC (Company)
91 Company balance sheet
92 Company statement of changes in equity
93 Notes to the Company financial statements
100 Shareholder information
103 Directors and advisers
About us
Avocet Mining PLC ('Avocet' or 'the Company') is a West African
gold mining and exploration Company. The Company operates the Inata
gold mine in Burkina Faso and has an interest in exploration
projects in Burkina Faso and Guinea.
Inata Gold Mine, Burkina Faso
The Inata gold mine is an open pit gold mine located in northern
Burkina Faso and has been operational since Avocet completed
construction in late 2009.
The Mineral Resource estimate within the Bélahouro group of
exploration licences, including the Inata and Souma projects,
comprises 4.1 million ounces at a grade of 1.68 g/t Au and includes
an Ore Reserve of 0.34 million ounces at a grade of 1.84 g/t Au.
Production in 2016 was 72,485 ounces.
The Souma project, which is located approximately 20 kilometres
east of the Inata processing plant, is the subject of a search for
financing which aims to progress the project up the development
curve with the objective of submitting a Mining Licence application
as soon as a Feasibility Study has been completed. Mineralisation
at Souma is quartz hosted and does not have the same carbonaceous
ore types as seen at Inata.
Mineralisation along both the Inata and Souma trends remains
open along strike and at depth and it is anticipated that further
exploration at both projects will add additional ounces to the
Inata life of mine plan.
Tri-K, Guinea
Tri-K received its exploitation permit in March 2015 from the
Guinea Government following the submission of a Feasibility Study
in October 2013.
In October 2016, the Company announced that it had entered into
a Joint Venture agreement over the Tri-K project with Managem SA
("Managem"), a Moroccan mining group. Under the terms of this
agreement, Managem has received a 40% interest in the project,
which will increase to 70% upon the successful completion of a
US$10 million work programme to increase the mineral reserve to 1
million ounces and to produce a bankable feasibility study for a
Carbon-in-leach ('CIL') project.
STRATEGIC REPORT
The Directors present their Strategic Report on the Group for
the year ended 31 December 2016.
The Strategic Report is a requirement of the Companies Act for
the year ended December 2016. The report provides a fair review of
the Company, its performance and the challenges it faces.
The review of the business and operations, including key factors
likely to affect the future development of the business, are
included in the Chairman's statement and Chief Executive's
statement on page 3 - 4 and pages 5 to 7 respectively and include
discussions on the key non-financial performance indicators
(including tonnes of waste and ore mined and milled, grades,
recoveries, gold produced and Lost Time Injuries). These are also
analysed on page 22-25 under Review of Operations.
The financial review on pages 8 to 11 includes an analysis of
the development and performance of the business of the Company
during the 2016 financial year and the position of the Company at
year end. This section includes an analysis of the key financial
performance indicators in the year (revenues, gross profit, cash
costs per ounce, profit before tax, taxation, EBITDA, operating
cashflows, depreciation and capex).
The Group's Business Plan and Strategy are outlined on page 12,
while risk management and internal controls within the business
(including the Company's viability statement) are outlined on pages
12 to 14. In addition, the key risks and uncertainties faced by the
business are set out on pages 15 to 16.
An outline of the Company's safety and health performance is
summarised on pages 17 to 18. Information concerning environmental
matters, the Company's employees and social, community and human
rights issues are discussed in the sustainable development section
on pages 19 to 21.
The Strategic Report, as set out on pages 3 to 21, has been
approved by the Board.
By order of the Board
Yolanda Bolleurs
Chief Financial Officer and Company Secretary
CHAIRMAN'S STATEMENT
After a turbulent few years, during which the mining sector as a
whole experienced a protracted bear market, there were signs at the
start of 2016 that the economic environment for gold mining
companies might be on the turn. By early March 2016, the gold price
had risen US$200 per ounce compared to its closing price in 2015 of
US$1,062 and in the course of the year, a number of transactions
were announced that signalled the re-emergence of consolidation
among junior players in West Africa, which had almost dried up
since 2013.
Both of these factors were important for Avocet's strategic
priorities in 2016.
Developments in 2016
Avocet Mining PLC
At the corporate level, the loan of US$27.4 million as per 6
June 2017 from Manchester Securities Corp (an affiliate of Elliott
Management ("Elliott"), the Company's largest shareholder) remains
an unsustainable debt burden and will need to be renegotiated in
order to put the balance sheet of the Group on a more stable
footing. These discussions will remain a key priority for
Avocet.
Inata
At Inata, the focus was and remains, the generation of cash in
order to reduce the mine's indebtedness, while exploring
refinancing opportunities that will allow additional production to
be added to the mine life from satellite deposits. The 2016 average
cash cost was US$966 per ounce and although considerable efforts
have been put into reducing the mine's cost base, the ability of
the mine to generate cash to reduce debts at US$1,200 gold prices
is clearly considerably easier than at US$1,100.
During the first half of 2016, production at Inata enabled some
US$12.1 million of financial debts to be repaid. In the second half
of the year, production was impacted first by the fact that ore
types being processed were, as expected, more preg-robbing in
nature, which reduced recovery levels and second by the forced
shutdown of the mine for four weeks in October-November following
the seizure of gold shipments arising out of a legal dispute with
ex-workers.
Tri-K project
With regard to the Company's Tri-K project in Guinea, the focus
in 2016 was to safeguard the asset by attracting investment and
negotiating revised timelines in respect of the Mining and
Exploration Permits, both of which, without governmental support,
might have been withdrawn in the year without compensation.
In October 2016, a Joint Venture agreement was finally entered
into with a preferred partner, Managem, who will obtain an interest
of 70 per cent in the project in return for an initial payment of
US$4 million and the completion of a US$10 million work programme
aimed at producing a new Bankable Feasibility Study ('BFS') for a
Carbon-in-Leach ('CIL) operation with a reserve of at least 1
million ounces.
The Company believes the partnership with Managem to be a
fruitful one for all parties. The group, which is listed on the
Casablanca stock exchange, has a proven record of bringing mines
into production in West Africa (including Guinea) and thanks to
strong national ties between Morocco and Guinea has been able to
obtain the support of the Guinean government for the proposed
partnership, including, crucially, the renegotiation of time lines
for the Mining Permits and renewals of Exploration Licences, as
well as other fiscal and operating concessions.
The scale and economics of the Tri-K project will naturally be
established more clearly in the BFS, which we expect to be
completed in the first part of 2018. However the deposit remains
open at strike and at depth and anomalies in the surrounding
district point to the possibility of significant, if unproven,
upside to the known resource. The Siguiri basin, in which the Tri-K
project sits, has hosted large gold projects, including the Siguiri
mine owned by AngloGold Ashanti as well as Nordgold's Lefa project,
both of which have been considerably larger than the initial
reserve targeted for Tri-K.
Developments in 2017
Avocet Mining PLC
On 3 April 2017, Boudewijn Wentink was appointed as Chief
Executive Officer, with Yolanda Bolleurs as Chief Financial
Officer. Both Boudewijn and Yolanda have considerable experience in
restructuring and refinancing matters, which the Board believe to
be key to putting the Company onto a more solid financial platform
going forward. David Cather became Technical Director, in order to
provide oversight and guidance on technical and operating matters,
while Jim Wynn became, from 1 May 2017, a Non-executive
Director.
On behalf of the Board, I wish to extend a welcome to Boudewijn
and Yolanda, while thanking David and Jim for their contributions
over the past few years.
Inata
New management has started discussions with trade creditors,
banks and government to stabilise Inata and to restructure its
debts.
In this process a key step was achieved on 31 May 2017: Inata's
major trade and financial creditors (together representing
approximately seventy per cent of Inata's debt) have agreed the
terms of a standstill agreement with management for the duration of
two months as strategic options are being explored in connection
with a financial, debt and corporate restructuring of the
company.
All stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution,
however, inevitably, there can be no guarantee that these
negotiations will prove successful.
Tri-K project
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project in May.
Following this, the so-called 'First Closing' was completed on 22
May 2017 and the Company has received from Managem US$ 4 million
for 40 per cent of its interest in the project.
This marks the commencement of the US$10 million work programme,
whose aim is to complete a Bankable Feasibility Study ('BFS') for a
Carbon-in-Leach ('CIL') project at the site, with a reserve of at
least 1 million ounces. Once this work programme and its objectives
are completed, Avocet will then transfer an additional 30% of its
interest (or 20%, if the reserve defined is less than 1 million
ounces) to Managem, who will then take control of the operation and
construction.
The coming months will be critical for the Company. The
challenges facing the Company are considerable and readers should
be aware of the risks to the future of the Inata mine, as well as
the wider group, which are set out in the Risk Management section,
as well as the Viability Statement.
Russell Edey
Chairman
CHIEF EXECUTIVE'S STATEMENT
2016 Highlights
-- 72,485 ounces produced at Inata at a cash cost of US$966 per ounce
-- Cash costs at Inata reduced compared with 2015 in spite of ongoing operational challenges
-- Two Lost Time Injury ('LTI') incidents in 2016
-- Joint Venture signed with Managem over the Tri-K project
Inata Gold Mine, Burkina Faso
During 2016, the primary focus of the Inata mine was to generate
cash in order to reduce its indebtedness with trade and financial
creditors.
The mine produced 72,485 ounces at a cash cost of US$966 per
ounce, compared with 74,755 ounces at US$1,058 per ounce in 2015.
Realised gold prices increased from US$1,167 per ounce in 2015 to
US$1,240 in 2016, pointing to an increase in the margin per ounce
produced from US$109 in 2015 to US$274 in 2016.
However production in the first half of 2016 was stronger than
in the second half. This was due in part to the nature of the ore
being mined in the first six months, which despite being relatively
low grade, was generally clean and therefore yielded recoveries of
around 92%, while the ore mined in the second half of the year was
more carbonaceous and preg-robbing, with recoveries much lower at
around 75%. In addition, legal action initiated by a group of
ex-workers in October 2016 resulted in the temporary shutdown of
the mine for four weeks. In all, 41,614 ounces were poured in H1
compared with 30,871 ounces in H2.
The result of this was that while the mine was able to reduce
its overall indebtedness in the year, more progress was made in the
first half of the year, where the mine's loans were reduced by over
US$10 million, compared with the second half, where a new loan from
Coris Bank and delays to repayment of the Ecobank loans meant that
the net reduction in loans was reduced to US$4 million.
The mine remained under considerable pressure from its
creditors: a number of the key suppliers are applying pressure on
the mine to reduce their overdue balances.
Souma and Pali/Ouzeni, Burkina Faso
In addition to the remaining mine life at Inata, there exists
the possibility to add production through incorporating the
satellite deposits at Souma (20km to the North-east of the Inata
plant) and Pali and Ouzeni (7km to the South-west and South-east
respectively).
The Souma deposit, which currently has a Mineral Resource of
676k ounces, consists of a north-south deposit which, importantly,
is free of preg-robbing properties. Due to its distance from the
Inata permit, it would need to be the subject of a separate mining
licence application, supported by a feasibility and environmental
study, which in turn would require a short programme of drilling,
testwork and documentation. This initial work, which would need to
be completed ahead of the expiry of the Exploration Licence in July
2018, is estimated to cost between US$5-7 million. Once permission
to mine has been granted, the intention would be to haul the Souma
ore across the flat terrain separating the pit and the Inata plant
where it would be processed. Capex for this production has been
estimated (on a preliminary basis only) to be of the order of US$5
million, to cover haul roads, pit infrastructure and any
enhancements necessary to the comminution part of the Inata
plant.
The Pali and Ouzeni deposits are smaller orebodies that lie just
outside the current Inata mining permit. It is anticipated that
these could be converted to mineable reserves with a modest
drilling programme of just US$1-2 million, which could be achieved
through an extension of the existing permit perimeter (subject to
governmental approval).
The addition of the deposits at Souma and Pali/Ouzeni to the
Inata production plan would be transformative, increasing the mine
life from three to six years, with improved economics. The key
challenge is the successful negotiation of a financing package that
satisfies both the existing Inata creditors as well as new sources
of funding.
Tri-K, Guinea
Following the award of a mining permit for the Tri-K project on
27 March 2015, the Company's focus had been to raise financing for
the construction of the project. Under the Guinean Mining Code,
construction must commence within 12 months of the award date (27
March 2016) of the mining permit or fines of approximately US$100k
per month can be applied and after 18 months (27 September 2016)
the Guinean government has the right to withdraw the permit.
These dates were clearly of concern and the Company remained in
constant communication with the Ministry of Mines and Geology,
pointing to the unprecedentedly challenging market conditions for
raising finance for West African mining projects, as well as the
Ebola crisis also affecting interest in Guinea itself.
By the first deadline, the Company had identified a small group
of potential investors and was able to assure the Government that
progress was being made, albeit more slowly than had been hoped.
Given the importance of Governmental approval to any refinancing
deal, representatives of both the Ministry of Mines and Geology and
SOGUIPAM (the Guinean state mining company) were heavily involved
in final negotiations with Avocet's preferred partner, Managem.
On 10 October 2016, the Company was able to announce the terms
of a Joint Venture over the Tri-K project with Managem, which would
be subject to, inter alia, approval by Avocet's shareholders and
the signing and then parliamentary ratification of a Mining
Convention with the Guinean government. On 19 December 2016, the
Mining Convention was signed by the Minister of Mines and Geology
and the Minister of Budgets (as well as by Avocet and Managem),
while shareholder approval of the transaction was granted at a
General Meeting on 22 December 2016.
Corporate Review
2016 was a busy year in terms of corporate activity and much was
achieved in spite of maintaining downward pressure on head office
costs.
In January and April 2016, loans were agreed with Manchester
Securities Corp, an affiliate of Elliott (Avocet's largest
shareholder), for a total of US$1.5 million, which provided funding
for corporate activities in the first half of the year. In the
second half of 2016, funding was achieved by payment of Management
fees from SMB's Inata gold mine, which signalled management's
intentions for the Company to no longer rely on expensive debt to
finance ongoing corporate activities.
On 9 June 2016, in addition to the normal resolutions set out at
the AGM, shareholders were asked to approve a share re-organisation
which included a 10:1 share consolidation, driven primarily by the
need to comply with the ongoing obligations of the Oslo Børs.
Following the announcement of the Joint Venture with Managem on
10 October 2016, a circular setting out the terms of the
transaction was sent to shareholders on 29 November 2016 and
approved at a general meeting on 22 December 2016.
At the same meeting, shareholders approved a proposal to
transfer Avocet's listing from the Premium List to the Standard
List of the London Stock Exchange, in order to reduce costs and to
make the Company's listing status more appropriate in view of its
market capitalisation and financial situation.
Outlook for 2017 and beyond
Much remains to be achieved during 2017. At Inata, the immediate
priority is to negotiate continued support from creditors to allow
operations to continue, whilst the Company continues to seek the
financing needed to secure the additional production from satellite
pits (including Souma), which is likely to require restructuring
the mine's balance sheet.
In April 2017, discussions started with trade creditors, banks
and government to stabilise Inata and with a view to restructuring
its debts. In this process, a key step was achieved on 31 May 2017:
Inata's major trade and financial creditors (together representing
approximately seventy per cent of Inata's debt) have agreed the
terms of a standstill agreement with management for the duration of
two months as strategic options are being explored in connection
with a financial, debt and corporate restructuring of the company.
All stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution,
however, inevitably, there can be no guarantee that these
negotiations will prove successful.
The ratification of the Guinean Mining Convention, which
includes a number of significant concessions over and above the
terms of the Mining Code, was approved unanimously by the National
Assembly on 24 February 2017. Avocet received the decree signed by
the Guinean President ratifying the Mining Convention for the Tri-K
project in May. Following this, the so-called 'First Closing' was
completed on 22 May 2017 and the Company has received from Managem
US$4 million for 40 per cent of its interest in the project. It
also marked the commencement of the US$10 million work programme,
whose aim is to complete a Bankable Feasibility Study ('BFS') for a
Carbon-in-Leach ('CIL') project at the site, with a reserve of at
least 1 million ounces.
Once this work programme and its objectives are complete, Avocet
will then transfer an additional 30% of its interest (or 20%, if
the reserve defined is less than 1 million ounces) to Managem, who
will then take full control of the operation and construction.
Although Avocet had already completed a feasibility study for
the project in 2013, this study outlined a smaller heap leach
project whose capex was initially estimated at US$88 million and
whose mine life was 5 years. The CIL operation planned by Managem
is likely to be considerably larger, both in terms of capex
(typically US$200-$300 million) but also in the scale of operations
and mine life. This is primarily because a CIL project consists of
more intensive processing of the ore, which, while more expensive
in construction terms, allows considerably more of Tri-K's large
ore body to be economically mined and treated.
Once the BFS has been finalised, which is expected to be in the
first half of 2018, the next stage will be the raising of funding
for construction. This is likely to include a portion of debt, with
the equity contribution to be shared pro rata between Managem and
Avocet. Under the terms of the agreement with Managem, Avocet has
the right to decline to contribute its percentage of this cost,
which would then require Managem to contribute all of the equity,
diluting Avocet's interest proportionately.
Although details of the operation will be set out in the BFS,
Avocet's management are optimistic about its prospects, based on
the characteristics of the known orebody, the geological potential
of the exploration permits (all of which have been renewed under
the terms of the Mining Convention) and by comparison to other CIL
mines in the Siguiri basin.
On a personal level, I would like to thank Avocet's staff at all
levels for the support and commitment they have shown to dealing
with the challenges facing the Company. 2016 was a difficult year
and 2017 is likely to be even more so.
Boudewijn Wentink
Chief Executive Officer
FINANCIAL REVIEW
Financial highlights(1)
2016 2015
Year ended 31 December Audited Audited
----------------------------------------------------------- -------- --------
US$000
Revenue 89,604 85,038
Gross profit/(loss) 13,060 (4,895)
Profit/(loss) from operations 9,464 (52,518)
EBITDA 12,005 (1,996)
Profit/(loss) before tax 5,278 (55,698)
----------------------------------------------------------- -------- --------
Analysed as:
Profit/(loss) before taxation and exceptional items 7,553 (10,550)
Exceptional items (2,275) (45,148)
----------------------------------------------------------- -------- --------
Profit/(loss) for the year 4,795 (49,705)
----------------------------------------------------------- -------- --------
Net cash generated by operations (before interest and tax) 16,589 7,305
----------------------------------------------------------- -------- --------
Net cash (outflow)/inflow (1,045) 1,029
----------------------------------------------------------- -------- --------
(1) Prepared in accordance with International Financial Reporting Standards as adopted by the EU.
Revenue
Group revenue for the year was US$89.6 million compared with
US$85.0 million in 2015. The Group sold 72,282 ounces at an average
realised price of US$1,240 per ounce during 2016, compared with
72,872 ounces sold at an average realised price of US$1,167 per
ounce in 2015. The increase in revenue was therefore essentially
the result of the gold price increase in the year.
Gross profit and unit cash costs
The Group gross profit in 2016 was US$13.1 million compared with
a loss of US$4.9 million in 2015, an improvement of US$18.0
million. The gold price contributed some US$4.9 million to this
improvement, production costs were US$7.3 million lower
year-on-year (partly due to cost control, but partly due to lower
mining volumes), while the negligible depreciation charge in 2016
(the result of the full impairment of the Burkinabe fixed assets at
the end of 2015) led to US$5.1 million improvements compared with
the prior year. The recognition of a number of provisions in the
year largely offset the net credit from inventory movements and
foreign exchange movements.
Unit cash costs at Inata decreased from US$1,058 per ounce in
2015 to US$966 per ounce in 2016.
The table below reconciles the Group's cost of sales to the cash
cost per ounce. Further detail is provided in note 4 of the
financial statements.
2016 2015
Year ended 31 December US$000 US$000
---------------------------------------------------------------------------------------- ------- -------
Cost of sales 76,544 89,933
---------------------------------------------------------------------------------------- ------- -------
Depreciation and amortisation (266) (5,374)
---------------------------------------------------------------------------------------- ------- -------
Changes in inventory (161) (5,895)
---------------------------------------------------------------------------------------- ------- -------
Adjustments for exploration expenses and other costs not directly related to production (6,096) 426
---------------------------------------------------------------------------------------- ------- -------
Cash costs of production 70,021 79,090
---------------------------------------------------------------------------------------- ------- -------
Gold produced (ounces) 72,485 74,755
---------------------------------------------------------------------------------------- ------- -------
Cash cost per ounce (US$/oz) 966 1,058
---------------------------------------------------------------------------------------- ------- -------
Profit before tax
The Group reported a profit before tax of US$5.3 million in the
year ended 31 December 2016, compared with a loss of US$55.7
million in the year ended 31 December 2015.
In 2016, the Group did not recognise any net impairments related
to its mining and exploration assets, while in 2015 the assets of
Inata were impaired by a total of US$45.1 million.
Before exceptional items, the profit before tax for the year
ended 31 December 2016 was US$7.6 million compared with a loss of
US$10.6 million for the year ended 31 December 2015.
During 2016, exceptional items totalling US$2.3 million were
recognised. These included US$1.5 million of advisers' fees and
other costs related to the Tri-K transaction signed with Managem SA
in October 2016; and US$0.8 million relating to accrued leave in
Burkina Faso which had not been recognised at the end of 2015 on
the grounds of materiality at that time.
In 2015, an impairment of US$45.1 million was recognised against
the value of the Inata mining assets.
31 December 2016 31 December 2015
US$000 US$000
---------------------------------- ---------------- ----------------
Transaction costs (1,475) -
Leave pay accrual from prior year (800) -
Impairment of Burkina Faso assets - (45,148)
Exceptional items (2,275) (45,148)
---------------------------------- ---------------- ----------------
Taxation
The Group reported a credit in the tax expense line in the
income statement of US$0.5 million in 2016 (2015: tax credit US$6.0
million), analysed as follows:
2016 2015
Year ended 31 December US$000 US$000
----------------------- ------- -------
Inata, Burkina Faso 249 (6,012)
Avocet Mining PLC, UK 234 19
----------------------- ------- -------
483 (5,993)
----------------------- ------- -------
The 2015 tax credit in Burkina Faso included the release of a
US$3.1 million provision in respect of a tax assessment undertaken
in 2012 covering the years 2009-2011, following an agreement
reached with the Burkinabe tax authorities in the year.
The 2015 tax line also includes the release of a US$3.1 million
deferred tax provision in respect of interest tax ('IRVM') that
would be due on settlement of loan interest invoices payable by the
Company's Burkinabe subsidiary, Société des Mines de Bélahouro SA
('SMB'). This provision was released on the basis that the Company
no longer expected these balances to be settled in full.
EBITDA
EBITDA represents operating profit before
depreciation/amortisation, interest and taxes, as well as excluding
any exceptional items in the period. It is not defined by IFRS but
is commonly used as an indicator of the underlying cash generation
of the business.
EBITDA improved from a loss of US$2.0 million in 2015 to a
profit of US$12 million in 2016. This is reflected in the movements
described above in respect of the gross profit.
A reconciliation of profit/(loss) before tax and exceptionals to
EBITDA is set out below:
2016 2015
Year ended 31 December US$000 US$000
------------------------------------------ ------- --------
Profit/(loss) before tax and exceptionals 7,553 (10,550)
------------------------------------------ ------- --------
Depreciation and amortisation 266 5,374
------------------------------------------ ------- --------
Exchange gains (985) (3,136)
------------------------------------------ ------- --------
Finance expense 5,171 6,316
------------------------------------------ ------- --------
EBITDA 12,005 (1,996)
------------------------------------------ ------- --------
Cash flow and liquidity
A total cash outflow of US$1 million was reported for the year
ended 31 December 2016. Net cash generated by operating activities
(before interest and tax) totalled US$16.6 million, while capital
expenditures amounted to US$0.1 million.
Financing during the year represented an outflow of US$14.1
million including the loan repayments of US$10.9 million to
Ecobank, US$8.4 million to Coris Bank, finance lease payments of
US$0.3 million and proceeds from debt of US$1.5 million from
Manchester Securities Corp (an affiliate of Elliott, Avocet's
largest shareholder) and US$4.1 million from Coris Bank.
A summary of the movements in cash and debt is set out
below:
2016 2015
----------------------------- ---------------------------
Net
Net Cash/ Cash/
Cash Debt (Debt) Cash Debt (Debt)
US$000 US$000 US$000 US$000 US$000 US$000
------------------------------ -------- -------- --------- ------- -------- --------
At 1 January 5,856 (66,060) (60,204) 4,816 (66,203) (61,387)
------------------------------ -------- -------- --------- ------- -------- --------
Net cash generated by/(used
in) operating activities 13,290 - 13,290 3,038 - 3,038
------------------------------ -------- -------- --------- ------- -------- --------
Payments relating to
transaction costs (133) - (133) - - -
------------------------------ -------- -------- --------- ------- -------- --------
Property, plant and equipment (149) - (149) (3,793) - (3,793)
------------------------------ -------- -------- --------- ------- -------- --------
Net loan repayments (13,731) 13,731 - 2,222 (2,222) -
------------------------------ -------- -------- --------- ------- -------- --------
Other movements including
foreign exchange (231) (1,695) (1,926) (427) 2,365 1,938
------------------------------ -------- -------- --------- ------- -------- --------
At 31 December 4,902 (54,024) (49,122) 5,856 (66,060) (60,204)
------------------------------ -------- -------- --------- ------- -------- --------
Included within cash at 31 December 2016 was US$3.8 million of
restricted cash (31 December 2015: US$3.9 million), representing a
US$2.0 million debt service reserve account held in relation to the
Ecobank loan (2015: US$2.1 million) and US$1.8 million (2015:
US$1.8 million) relating to amounts held on restricted deposit in
Burkina Faso for the purposes of environmental rehabilitation work,
as required by the terms of the Inata mining licence.
Company debt at 31 December 2016 consisted of US$26.4 million
owed to Manchester Securities Corp, US$20.4 million due to Ecobank
and US$4.1 million due to Coris Bank. The Manchester loan, of which
US$18 million is secured over the Company's Guinean assets, is owed
by Avocet Mining PLC (the parent Company), while the Ecobank and
Coris loans, which are secured over various assets of the Inata
mine, are owed by SMB in Burkina Faso.
Depreciation
The Group's depreciation charge decreased from US$5.4 million in
the year ended 31 December 2015 to US$0.1 million in the year ended
31 December 2016. This decrease is primarily the result of the
impairments applied to the fixed assets in Burkina Faso, which were
fully written down in 2015.
2016 2015
Year ended 31 December US$000 US$000
----------------------- ------- -------
Inata 149 5,374
----------------------- ------- -------
Other 117 -
----------------------- ------- -------
266 5,374
----------------------- ------- -------
Capital expenditure
The Group's capital expenditure in the year was US$0.1 million
analysed as follows:
2016 2015
---------------------------------- --------------------------------------
Property, Property,
Deferred plant and Deferred plant
exploration equipment Total exploration and equipment Total
Year ended 31 December US$000 US$000 US$000 US$000 US$000 US$000
------------------------- ------------ ---------- -------- ------------ -------------- --------
Inata gold mine (Burkina
Faso) - 149 149 - 3,765 3,765
------------------------- ------------ ---------- -------- ------------ -------------- --------
Tri-K project (Guinea) - - - - - -
------------------------- ------------ ---------- -------- ------------ -------------- --------
Head office (UK) - - - - 28 28
------------------------- ------------ ---------- -------- ------------ -------------- --------
- 149 149 - 3,793 3,793
------------------------- ------------ ---------- -------- ------------ -------------- --------
Capital investment both in property, plant and equipment and in
exploration activity was reduced compared with 2015 in order to
conserve cash. Capex during the year mainly related to the
completion of the second tailings management facility and upgrades
and refurbishments to mining plant and equipment.
Non-financial Key Performance Indicators ('KPIs')
The Company's non-financial KPIs primarily relate to gold
production (see Review of Operations page 22 to 25) and safety at
the mine (see page 17 to 18 for further details).
Yolanda Bolleurs
Chief Financial Officer
BUSINESS MODEL AND STRATEGY
Business model
Avocet's business model is based on finding resources,
developing them to production and generating value through
operational performance. This benefits not only shareholders, but
also a wide range of stakeholders, who grant Avocet the social
licence to operate.
-- Exploration and development - effective mineral resource
development allows further ounces to be brought into the life of
mine plan of existing assets and new projects to be added to the
Company's portfolio of operations. Successful exploration carried
out at a below industry-standard discovery cost.
-- Operational results - continuous improvement at mining
operations, delivery against production and cost targets,
responding as required to operating challenges
-- Value - economic value generated from operation assets
distributed amongst stakeholders including investors, governments,
employees and local communities
-- Social Licence - maintaining a social licence among our
stakeholders enables us to continue operations and expand the
Company's reach in discovering new ounces in existing and new
territories
Business Strategy
The strategy of Avocet remains to develop its asset base in
order to maximise value for its shareholders. In view of the
financial constraints under which the Company has operated in
recent times, along with much of the global mining sector, the
Board of Avocet Mining PLC also acknowledges that the interests of
the Group's creditors must also be met in the first instance.
The Inata gold mine has now been in operation since December
2009. As its mining plan has advanced, pits have become deeper,
ores harder and less weathered, with lower grades and recoveries
and more challenging metallurgy and consequently production levels
have fallen. This has meant that the primary challenge has been to
ensure cashflows remain sufficient to meet the mine's ongoing
obligations. The SMB debt and its servicing is unsustainable and
will need to be renegotiated in order to put the balance sheet of
Inata on a more stable footing. All stakeholders (including
financial creditors, shareholders, government, key operational
stakeholders and employees) will need to contribute to achieve a
consensual restructuring solution, however, inevitably, there can
be no guarantee that these negotiations will prove successful.
Avocet also holds a number of exploration licences in Burkina
Faso surrounding the Inata gold mine. It is the Company's strategy
to look for ways to develop these assets in order to generate value
for the Group's shareholders and other stakeholders. Of the
licences in Burkina Faso, the Souma deposit is the most advanced
and discussions are underway to secure finance to ensure the work
can be completed in 2017 to allow an application to be made for a
mining permit.
In Guinea, the Company's strategy is to support the work
programme to be undertaken over the coming 12 months by Managem
under the terms of the Joint Venture agreement signed in October
2016. The outcome of this work programme, which is expected to cost
at least US$10 million and which will be funded by Managem, will be
the completion of a Bankable Feasibility Study ('BFS') for a
Carbon-in-Leach ('CIL') operation at the site, with a reserve of at
least 1 million ounces. Thereafter, the focus of both Avocet and
Managem will be the raising of funding for the construction of this
operation (the costs of which will be estimated in the BFS). In the
event that Avocet is able to contribute pro rata to the
construction costs (after debt), its interest in the project will
remain at 30 per cent, however if the Company is unwilling or
unable to contribute, its interest will be diluted.
2017 Business Plan
The 2017 Business Plan includes the following key
objectives:
-- Inata - manage the Inata gold mine to maximise cashflows,
while operating within the safety and compliance standards set by
the Group
-- Souma - raise funding to initiate a Feasibility Study and the
process of applying for a mining licence
-- Tri-K - minimise ongoing running costs for Avocet's interests
in Guinea and provide support for Managem as they complete their
work programme at the site
-- Head Office - secure longer term funding to allow the Company
to meet all ongoing corporate obligations
RISK MANAGEMENT AND INTERNAL CONTROL
VIABILITY STATEMENT
Principal risks facing the Group
The Board considers the key risks facing the Group to be those
set out in the section Principal Risks and Uncertainties on pages
15 to 16. The Board monitors these risks regularly and on an
ongoing basis, not only at Board and Committee meetings, but
through ad hoc meetings and telephone discussions, as well as
emails and update reports from senior management.
Period over which viability has been assessed
Guidelines issued in conjunction with the updated UK Corporate
Governance Code include the strong recommendation that Boards
consider the viability of their Companies over periods considerably
longer than the 12 month term used for assessment of the Going
Concern basis (see note 1 to the accounts).
It is indisputable that the ability of the Company to continue
as a Going Concern for a 12 month period, let alone any longer
term, is and has for some time, been a serious concern. The Board
are acutely aware of this fact and have devoted a considerable
amount of time to the discussion of the relevant issues, risks and
the appropriate responses and mitigating actions.
Under normal circumstances, a mining Company in possession of
one or more operating assets would view the length of the life of
mine for those assets and possibly longer, as an appropriate
timeframe over which to consider the risks to the liquidity and
viability of the Company.
However in Avocet's current circumstance, the threats to its
solvency are more immediate. The risks considered most relevant to
the consideration of the Company's viability over the next 12
months, which are addressed in detail in note 1 to the Financial
Statements, are set out below:
Continued financial support from Elliott
The Company has loan facilities from the Elliott Lender with an
outstanding balance of US$27.4 million as at 6 June 2017. The
Elliott loans bear interest at between 11 per cent and 14 per cent
per annum, are repayable on demand and the majority of them are
secured on the Group's assets (excluding Inata). The Elliott Loans
are fully drawn and no further facilities have been provided since
August 2016. Accordingly, the Elliott Lender is entitled to enforce
the terms of the Elliott Loans and security at any time.
If the Elliott Lender was to enforce its rights to demand
repayment, the Directors do not believe that there is any
likelihood of being able secure alternative sources of finance, in
which case the Company would enter an insolvency process as a
result of which Shareholders should expect to lose all of the value
of their Ordinary Shares.
Accordingly, the Company is reliant on the continuing support of
the Elliott Lender.
In addition, the interest burden of the Elliott Loans, which is
in excess of US$200k per month, cannot currently be met out of
Company funds and therefore it will be necessary to restructure
these loans in order to put the Company on a sustainable financial
footing. Negotiations with Elliott in this regard have not yet
commenced, as any solution will need to take into consideration the
investment of any external financier who may be interested in
investing in some or all of the Group's assets.
Notwithstanding the need to restructure the terms of these
loans, the Company believes the funds generated through its
interest in Tri-K to be the most likely means of repaying its debts
to Elliott. It is not yet possible to be certain as to the means
through which this repayment might be achieved, however
possibilities include:
- the raising of significant external finance for the
construction of Tri-K (in order to avoid dilution of Avocet's 30%
interest), which might allow a restructuring of the current debt
facilities with Elliott;
- Use of proceeds of the sale of Avocet's interest in the project to repay Elliott;
- Application of intra-group loans and dividend payments from
Tri-K once it enters into production.
Should Elliott request the repayment of these loans, the Company
would be obliged at short notice to seek alternative funding, which
would be a considerable challenge.
Gold price
The profitability of both the Tri-K project and the Inata gold
mine (including surrounding deposits) depend on the gold price.
The cash costs at Inata during 2016 and into 2017 have ranged
between US$900 and US$1,100 per ounce, therefore a modest fall in
gold prices from current levels would result in margins becoming
extremely tight, which would make the servicing of the mine's debts
and creditors challenging.
The sensitivities of Tri-K's cashflows to different gold prices
cannot be determined with any confidence before the completion of
its BFS, however, as with any gold mine, its profitability and
value are likely to be heavily dependent on the gold price.
In financial forecasts, the Company uses US$1,200 per ounce. The
Board believe this to be a reasonable long term price, in line with
market consensus forecasts.
Nevertheless, it remains clear that a sustained fall in the gold
price would put severe pressure on the operations at Inata and
would also threaten the economic viability of the Tri-K project -
as well as the Avocet Group as a whole.
Support from Inata's creditors
The Inata gold mine at 21 April 2017 had approximately US$28
million in trade creditors and a further US$26 million in bank and
other debt facilities. Many of the balances owing to suppliers are
overdue and the mine has faced a number of demands to bring
balances within credit limits as well as a number of interruptions
to essential supplies.
It is possible that one or more creditors might continue to
refuse to allow critical supplies to be delivered to the mine, or
might otherwise initiate legal action that could disrupt
operations.
Inata's management have spent a considerable amount of time
discussing the mine's predicament with key suppliers, pointing to
the fact that the best means to ensure creditors are repaid is to
allow supplies to continue to be made and for the mine to produce
gold.
In April 2017, discussions started with trade creditors, banks
and government to stabilize Inata and with a view to restructure
its debts. In this process a key step has been achieved on 31 May
2017: Inata, its major trade and financial creditors (together
representing approximately seventy per cent of Inata's debt) have
agreed the terms of a standstill agreement for the duration of two
months as strategic options are being explored in connection with a
financial, debt and corporate restructuring of the company. All
stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution,
however, inevitably, there can be no guarantee that these
negotiations will prove successful.
In the event that the mine was unable to continue and the
insolvency of its operating company is unavoidable, it is possible
that Avocet may be able to realise value from its interest in the
exploration permits, particularly Souma. However even in the event
that this were not possible, none of the debts in the Group's
Burkina Faso entities have any recourse to the Company's interests
in Guinea or in the UK, therefore as the Company has obtained funds
to cover head office operating costs (from the proceeds of First
Closing from the Tri-K divestment), then the loss of the Group's
Burkinabe assets would not necessarily lead to the insolvency or
discontinuation of the rest of the Group.
Souma permit
The future of the Inata gold mine beyond 2019 will rely upon the
successful completion of a Feasibility Study for the Souma deposit,
located 20km north-east of the Inata plant.
The work needed to complete the study, which is expected to cost
between US$5-7 million, must be completed in order for an
application for a mining permit to be submitted by July 2018.
The Company is currently in negotiation with its financiers with
regards to the funding of this activity. However, until any
financing package is negotiated, there can be no guarantee that
this funding will be made available.
Longer-term Viability
Although the Directors do not believe they can provide a
meaningful assurance as to the viability of the Company beyond the
12 month period covered by the Going Concern review, the Board does
nevertheless continue to review plans for the operation of the
Company over the longer term.
Such reviews include the following:
- The requirement for management to produce Life of Mine Plans
for Inata to cover the full periods of production
- Review of exploration options within existing permits, which might further extend production
- Consideration and discussion of financial restructuring
scenarios to safeguard the Company's liquidity beyond the near
term
- Longer-term views on commodity prices (notably gold and oil)
PRINCIPAL RISKS AND UNCERTAINTIES
The Board of Avocet Mining PLC has identified the risks in the
table below as being those that are most likely to have a material
impact on the prospects of the Company, based on their knowledge of
the economic and other exogenous factors likely to affect the
liquidity and continued operation of the Company and its assets, as
well as their experience in the type of issues that specifically
affect mining operations.
Risk Comment Business Impact Mitigation
--------------------------------- -------------------------------- --------------- --------------------------------
Continued financial support from The Company has a debt owing to High The Company regularly discusses
Elliott an affiliate of Elliott its financial situation with
Associates which is repayable on Elliott and continues to explore
demand. possibilities of restructuring
If Elliott were to invoke that its balance sheet in order to
demand, it is unlikely that the put the Company's finances on
Company would be able to source a more sustainable footing.
funds in the short term to meet
this repayment obligation and
would therefore become
insolvent.
--------------------------------- -------------------------------- --------------- --------------------------------
Adverse action undertaken by key The Inata gold mine has bank and High At prevailing gold prices and
suppliers and creditors of Inata trade creditors of approximately current production forecasts,
USS$60m. The mine is committed the Inata gold mine can continue
to reducing these amounts as to operate at a positive margin,
quickly as its cashflows allow. which means that it can make a
contribution to the repayment
However in many instances, of its creditors.
suppliers and financiers have
demanded repayments that cannot It is therefore in the interests
be of all creditors (as well as
met by the cashflows of the stakeholders) that the mine
operations and negotiations have continues in operation in order
been necessary. to achieve this.
In the event that one or more Mine management, supported by
major creditor insists on full head office, remain in constant
repayment in a timeframe that communication with key creditors
the cashflows of the mine do not in this regard.
permit, it is possible that that
creditor might take legal In the event of the insolvency
recourse, which may lead to the of SMB (the entity owning the
insolvency of the Inata gold Inata mine), the prospects for
mine. the mine's creditors would not
be good. It is unlikely that
It is also possible that if a proceeds realised from the sale
supplier withholds the delivery of the mine's assets, most of
of items critical to the which are secured in favour of
operation Ecobank (fixed assets) or
of the Inata gold mine (such as Elliott
fuel, reagents, explosives, Management (gold in circuit),
etc), then the mine may not be would be sufficient for anything
able to continue in operation. other than a very modest
distribution
If Inata were to cease operating to creditors.
permanently as a result of
creditor action, this would
likely
mean the insolvency of its legal
entity, SMB. In this scenario,
the prospects for the creditors
of SMB would be limited. In
particularly, it would be
unlikely that more than a modest
portion
of outstanding debts could be
paid out of the sale of the
entity's assets.
In addition, no further
management fees would be paid to
the head office entity, Avocet
Mining
PLC, which would then need to
rely on funding from other
sources (either the proceeds
from
the Tri-K divestment or from
third party fundraising) in
order to avoid the insolvency of
the Group.
--------------------------------- -------------------------------- --------------- --------------------------------
Operating issues at Inata The Inata gold mine has faced High In spite of challenging
and continues to face, a number circumstances, the Inata team
of operating issues. remains committed to dealing
with the
These have included mechanical challenges that arise, as well
reliability of its mining fleet as planning against foreseen
and plant; metallurgical difficulties in the future.
uncertainty
of its orebody; pit wall In the event of the mine closing
stability; strikes and staff as a result of these matters,
relations; and maintaining the consequences would be
timely delivery negative
of supplies. for Inata's stakeholders -
including its creditors,
Any one, or a combination of employees and suppliers.
these, might lead to Inata
becoming loss making, at which If Inata were to cease operating
point permanently, this would likely
it would become necessary to mean the insolvency of its
close the mine in order to legal entity, SMB and would mean
prevent further losses being that the prospects for the
incurred. creditors of SMB would be
limited.
In particularly, it would be
unlikely that more than a modest
portion of outstanding debts
could be paid out of the sale of
the entity's assets.
--------------------------------- -------------------------------- --------------- --------------------------------
Gold price The gold price is a key element High The Board has no control over
in determining sales income for the gold price, so limited
the Inata gold mine (and mitigating action is possible.
therefore
its continued viability), but Some financing packages might
also the attractiveness of the include an element of hedging,
Souma and other satellite but the Board believes that the
projects value for its assets depends to
to new investors. a large extent on the upside
offered in the event that the
At current production levels, a gold price continues to rise and
fall of US$100 per ounce in the therefore hedging against the
gold price reduces the cash downside might remove this
generated by the mine by attraction.
approximately US$7 million.
--------------------------------- -------------------------------- --------------- --------------------------------
Civil unrest and terrorism Recent events in Burkina Faso High The Company has increased its
and elsewhere in West Africa security arrangements both in
have underlined the increased Ouagadougou, on site and for
risk transit
of terrorist and similar between the two.
incidents to foreigners and to
foreign-owned assets. The chief objective for this is
to safeguard the mine's staff,
those of contractors/suppliers
and the Company's assets.
However it remains a possibility
that a terrorist action, or the
threat of such an action,
might make the continued
operation of the mine unsafe.
Under such circumstances, it may
be
necessary to close the mine.
--------------------------------- -------------------------------- --------------- --------------------------------
Loss of Souma permit If financing cannot be sourced Moderate The Company is in discussion
for the Souma project, it is with a number of parties
possible that the legal entity interested in financing Souma
that owns the exploration permit and continues
in which Souma sits might not be to discuss the permitting
able to continue as a solvent situation with the government of
entity. Burkina Faso.
--------------------------------- -------------------------------- --------------- --------------------------------
SAFETY AND HEALTH
Avocet is committed to providing a safe, healthy and sustainable
environment for all its employees, contractors, visitors and
neighbours. The Company actively strives to identify and manage the
potential direct and indirect effects of all its activities.
At the Inata Gold Mine, safety and health governance is directed
by the Management Safety Committee which meets regularly to lead
all aspects of safety, health and environment, ensuring ongoing
compliance with both Burkina Faso law as well as international best
practice. Group safety, health and environment is the ultimate
responsibility of the Avocet Mining PLC Board Safety, Health,
Environment and Community ('SHEC') Committee.
Safety focus
Leading indicators
The Company has continued and will continue to make the safety
of the workforce, contractors and neighbouring communities a
priority. Through relevant training and regular reinforcement, the
Company strives to ensure all site workers are aware of the hazard
in the workplace and are empowered to work with management to
improve safety.
During 2016, general and role specific safety training was
delivered along with daily tool box talks and monthly safety
meetings. All these activities were coordinated through the
management Occupation Safety, Health and Environment Committee
which met monthly as well as carried out regular 'safety tours' of
different work areas. Specifically, the following were
completed:
-- 1,806 induction or specialist training sessions for SMB
staff, contractors and visitors including annual refresher
training
-- 173 unannounced workplace inspections, involving both workers
and management, designed to assess compliance with safety best
practices and policies and where appropriate, identifying
corrective action plans
-- 105 safety meetings, attended by workers, supervisors and
management, including contractors' representatives, which provide a
forum at which ongoing and emerging issues and concerns can be
discussed and solutions discussed and developed
-- 10 Occupational Safety and Health Committee meetings and 10
management workplace walkabouts (technical shutdown meant two
months were missed)
-- Weekly Emergency Response Team training, focusing on incident
response, casualty recover, first aid and firefighting
During 2016 the mine extended its operation into an area near
the village of Filio. This involved the relocation of a small
number of houses within the new pits safe blast zone. The Company
also undertook significant rerouting of the mine access road, which
is also used by the local populace, to route it away from active
mining areas.
In order to allow the safe development of a new pit, known as
Filio, a full review of safety aspects was carried out which
resulted in a number of risk management measures. These included
construction of a 1.4 km access road diversion, significant
increase in road signage, additional road lighting, raising hazard
awareness in local communities and a new haul route routing mine
traffic away from mine and process infrastructure.
Lagging indicators
During 2016 there were two Lost Time Injuries ('LTIs') at Avocet
operations. Workers involved in both accidents received injuries
sufficient to require them to take time off work, but both
recovered fully and returned to work in their previous roles.
Following these LTIs, all workers were put through safety refresher
training, with a particular focus of hazard identification. At the
end of the year the Company had recorded 174 consecutive LTI-free
days, which equated to 1.80 million hours.
In addition, there were 18 accidents which required first aid
and 8 which required medical treatment by our site medical team.
None of these resulted in serious injury.
Health focus
The battle against mosquito borne disease has again been the
core focus of the medical teams' activities in 2016, working to
reduce mosquito populations. In 2016, the mosquito problem was
exacerbated by a national epidemic in Burkina Faso of Dengue Fever.
The mine's mosquito control programme was therefore extended well
beyond the end of the rainy season to combat potential spread of
Dengue. As with previous years we combined Internal Residual
Spraying (IRS), fogging and larvacide treatment of standing water.
Individual preventative actions were also reinforced through a
poster campaign and tool box talks.
In 2016 there were a total of 298 cases, the lowest number
recorded for many years. This low number is likely to be due to a
combination of our mosquito control programme, as well as low
rainfall for the year which reduced the number and persistence of
breeding places (this contrasted with 2015 when a high rainfall was
recorded). As in previous years the overwhelming majority of the
cases were diagnosed in the rotational national workforce who split
their time between the mine site or administration office (where
mosquito control measures can be implemented) and their own homes
(where we cannot).
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SUSTAINABLE DEVELOPMENT
Environmental Focus
The Company monitors a wide range of environmental parameters
including water quality, air quality, noise and vibration (during
blasting) to evaluate potential impacts from our operations. During
2016 our monitoring found no exceedances of our statutory or
self-imposed targets and management continue to be confident that
operations are having no adverse impacts on the environment.
A small number of complaints were received from a village
following blasting in a new pit.
During the technical shutdown at the mine in Q4 a small team was
retained on site to ensure the continuance of compliance monitoring
and other critical activities such as waste management.
Greenhouse gases
Almost all of Avocet's emissions of CO2 derive from its
consumption of diesel, which is used as the fuel for the mining and
auxiliary fleet and in the generators used to generate electricity
for the processing plant and site. The production of CO2 is
estimated using standard CO2 production rates per litre of diesel
fuel consumed.
In 2016, the Inata mine produced 12,526 tonnes equivalent of
CO2, which equals 0.17 tonnes per ounce of gold produced. The
following table, which shows the equivalent results over the
previous seven years, indicates the first annual reduction in the
quantity of CO2 emitted on a per ounce. This is attributed in part
to the exploitation of small shallow pits, located nearer the
beneficiation and processing plant than those which had previously
mined resulting in shorter haul distances.
2010 2011 2012 2013 2014 2015 2016
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
CO(2) emissions
(tonnes) 12,602 16,369 20,006 19,347 13,398 13,795 12,526
Gold produced
(oz) 137,732 166,744 135,189 118,443 86,037 74,755 72,485
CO(2) production
rate (tonnes
per oz) 0.09 0.10 0.15 0.16 0.16 0.18 0.17
Community engagement
Since 2010, Avocet has used Fondation Avocet pour le Burkina
('FAB') to act as the vehicle for its community based projects in
Burkina Faso. FAB is governed by representatives of Avocet,
Avocet's local subsidiary SMB and local community leaders. Inata's
Community Relations department manages the day to day running of
FAB.
The primary focus of FAB's activities in 2016 was on three
areas: community healthcare, education and potable water. Within
these focus areas were the following key activities:
Community healthcare
-- Construction of toilets and showers at the maternity wing of
Gomdé clinic and at the pharmacy in Tiahiguel;
-- Donation of maternity medical equipment to the clinics in
Gomdé and Filio and to the pharmacy in Tiahiguel.
Education
-- Sale at reduced prices (sponsoring) of 1,050 lamps to the
communities of the six villages neighbouring Inata mine.
Potable water
-- Drilling of four drinking water boreholes in the villages of
Namata Mossi, Namata Fulbé, Filio and Tiahiguel.
-- Repairs to the water storage towers of Gomdé Mossi, Sona,
Namata and Filio (School/Health centre);
-- Training of 11 manual borehole pump maintenance assistants.
In addition to the above, the Foundation was behind the donation
of 1,250 kgs of sugar to communities, religious leaders, provincial
and communal administrative authorities, local elected officials
and traditional chiefs of the districts neighbouring Inata to of
Tongomayel, Arbinda, Koutougou and Djibo and to the Governor of
Sahel Region.
Extractive Industries Transparency Initiative ('EITI')
Avocet expressly supports the EITI and formally became an active
supporting company in 2011. The primary objective of the EITI is to
set a global standard for transparency on tax, royalty and other
payments to governments through the verification and full
publication of government revenues and company payments. Burkina
Faso and Guinea currently have candidate country status.
Avocet is committed to supporting and cooperating in the
implementation of the EITI work plan to ensure that the objective
of transparency is achieved. This is also in line with our
corporate commitment to fight corruption and provide sustainable
development by supporting the local community in being able to hold
their governments, as well as the mining industry, to account.
Government payments
This report, covering 2015 and 2016, presents key data on
government payments in the countries in which Avocet operates. This
includes taxes, royalty payments, custom duties and amounts
collected by Avocet on behalf of employees.
2016 2015
-------------------------- -------------------------------------------- --------------------------------------------
US$000 Burkina Faso Guinea Mali UK Total 2016 Burkina Faso Guinea Mali UK Total 2015
-------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ---- ----------
Royalties(1) 4,601 - - - 4,601 2,094 - - - 2,094
Custom duties(2) 1 62 - - 63 4 8 - - 12
IRVM(3) - - - - - - - - - -
Land tax(4) 653 11 - - 664 16 12 - - 28
Permit renewal - - - - - 3 276 - - 279
Corporation tax 232 - - - 232 504 - - - 504
-------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ---- ----------
Total tax borne (EITI) 5,487 73 - - 5,560 2,621 296 - - 2,917
-------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ---- ----------
Net VAT
(recovered)/paid(5) 1,086 4 - (44) 1,046 (4,680) 5 - (50) (4,725)
Non-recoverable VAT on
fuel(5) 3,164 - - - 3,164 3,589 - - - 3,589
Fuel tax(6) 1,441 - - - 1,441 1,971 - - - 1,971
Payroll tax - employer 1,680 8 18 100 1,806 1,159 9 18 153 1,339
Payroll tax - employee 2,799 9 14 320 3,142 2,167 11 16 491 2,685
Withholding tax(7) 513 4 - - 517 184 13 - - 197
Other 6 2 1 - 9 16 14 1 - 31
-------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ---- ----------
Total net payments to
government 16,176 100 33 376 16,685 7,027 348 35 594 8,004
-------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ---- ----------
(1) Royalties are charged on gold sales in Burkina Faso at rates
which vary according to the spot gold price (3% up to US$1,000 per
ounce, 4% between US$1,000 and US$1,299 per ounce and 5% from
US$1,300 per ounce)
(2) Customs duties are charged on the import of goods and equipment
(3) IRVM (Impôt sur le revenu des valeurs mobilières) is
taxation on interest paid on loans
(4) Land tax represents payments levied on mining and
exploration permits
(5) Value added tax ('VAT') represents sales tax charged at 18%
on purchases of goods in Burkina Faso. Most VAT is recoverable (a
process which can take six months or more), but in Burkina Faso VAT
on fuel is not recoverable
(6) In Burkina Faso, a levy of CFA 50 per litre of diesel has
been applied as fuel tax ('TPP') since June 2013
(7) Withholding tax ('WHT') in Burkina Faso is levied at 10% for
mining related services (20% for non-mining related activities)
provided by firms who do not have a permanent presence in Burkina
Faso. The intention is that this cost is borne by the supplier; in
reality, it represents an additional cost of doing business in
Burkina Faso and is factored into supplier charges, increasing the
cost to Avocet
Employees
Avocet's management are committed to the development and
training of national staff, particularly local communities. The
percentage of non-Burkinabe staff at the Inata mine decreased from
5.3% (37 heads) in December 2014 to 4.4% (25 heads) by December
2015 and then further to 3.5% (19 heads) by December 2016.
The Company is committed to developing a diverse workforce and
to providing a work environment in which everyone is treated fairly
and with respect. Its policies in this area are set out in full for
all staff members in its Employee Handbooks, which include details
of the Company's Code of Conduct and Ethics, Whistleblowing policy
and Anti-bribery and Government Payment policies.
Regular meetings are held with employee representatives to
discuss strategies and the financial position of the Group and
their own business units. The Group is committed to providing equal
opportunity for individuals in all aspects of employment.
It is Avocet's policy that people with disabilities should have
full and fair consideration for all vacancies. Employment of
disabled people is considered on merit and with regard only to the
ability of any applicant to carry out the role. The Company commits
to endeavour to retain the employment of and arrange suitable
retraining for, any employees in the workforce who become disabled
during their employment.
The Company is committed to gender equality throughout the
organisation. During 2016, the average percentage of female
employees was 5% (2015: 6%). There were no female Board members
during 2016.
REVIEW OF OPERATIONS
Inata Gold Mine
Production Statistics 2016 2015 2014 2013
Ore mined (k tonnes) 1,341 1,313 2,529 3,114
Waste mined (k tonnes) 9,811 12,826 11,495 30,100
Total mined (k tonnes) 11,152 14,139 14,024 33,214
Ore processed (k tonnes) 1,843 1,865 1,903 2,353
Average head grade (g/t) 1.46 1.85 1.77 1.75
Process recovery rate 84% 67% 79% 86%
Gold produced (oz) 72,485 74,755 86,037 118,443
Unit Cash Costs US$/oz 2016 2015 2014 2013
Mining 302 318 422 547
Processing 385 462 442 373
Administration 193 203 234 187
Royalties 87 75 88 96
Total 966 1,058 1,186 1,203
Gold produced at Inata in the year totalled 72,485 ounces,
compared with 74,755 in 2015. Production was impacted by the
temporary suspension of operations for approximately four weeks
from 27 October 2016, following the seizure of a gold shipment by
Burkinabe bailiffs acting under the instructions of a group of
ex-workers who were claiming unpaid back pay.
Although the mine returned to operation in late November 2016,
the mine took a number of weeks to reach full capacity.
During the first half of the year, mining focussed on cleaner
ore types and recoveries over the first two quarters averaged 92%.
Although grades processed in the second half of the year were
higher, more of the ore was preg-robbing in nature and recovery
levels were therefore lower at 75%, for a full year average of 84%.
Total gold produced in H1 was 41,614 ounces while H2 production was
just 30,871.
In spite of lower production in 2016 compared with 2015, cost
control measures, including ongoing reductions in headcount and
support costs, meant that unit costs were lower in the year -
US$966 per ounce compared with US$1,058 per ounce in 2015.
Safety
In 2016, there were two Lost Time Injuries ('LTIs') reported at
Inata and by the end of the year, the Company had recorded 174
consecutive LTI-free days, which equated to 1.80 million hours.
Tri-K
During 2016, no work took place at the Tri-K site. Instead, the
management were focused on negotiations with investment partners
for the project. On 10 October 2016, the Company announced that it
had entered into a Joint Venture agreement with Managem.
Under the terms of this agreement (which remains subject to the
formal publication of a presidential decree in respect of its
Mining Convention), Managem will obtain an initial 40 per cent
interest in the project (excluding the government's free carry of
15 per cent) for an up-front payment of US$4m. This interest will
increase to 70 per cent upon the expenditure of at least US$10
million on exploration and development work at the site, the
completion of a Bankable Feasibility Study for a CIL plant and
increasing the reserve to at least 1 million ounces. In the event
that all other commitments are met but the reserve remains less
than 1 million ounces, Managem's interest will increase to just 60
per cent.
ORE RESERVES AND MINERAL RESOURCES
BURKINA FASO
Avocet Mining PLC owns 90% of Société des Mines de Bélahouro SA
('SMB'), owner of the Inata gold mine. Avocet owns 100% of the
exploration permits surrounding the Inata mining licence through
its wholly owned subsidiary, Goldbelt Resources (West Africa)
SARL.
The Company's Burkina Faso Mineral Resource estimates are
presented in the tables below, quoted for blocks above a nominated
cut-off grade of 0.8g/t Au. The Inata and Minfo Mineral Resources
were depleted to the end December 2016 mining surface.
Inata's Ore Reserves were estimated to be 0.34 million ounces as
at 31 December 2016 based on pit shells optimised at US$1,150 per
ounce, increased from 0.24 million ounces as at 31 December 2015.
Cut off grades within the US$1,150 per ounce pit shells were based
on a gold price assumption of US$1,250 per ounce. The increase in
Ore Reserves is attributable to an increased gold price assumption,
the identification of additional geological resources at Minfo and
improved recoveries now assumed in the treatment of carbonaceous
(preg-robbing) ores.
The financial analysis of the Ore Reserve Statement is
independent of future financing requirements.
Inata, Minfo and Filio Trends
Ore Reserve estimates are reported beneath the 31 December 2016
topographic surface and above an effective weighted average 0.8 g/t
Au economic cut-off grade within mine designs based on economic
shell optimisations. Mineral Resources are reported above a 0.8 g/t
Au cut-off and below the 31 December 2016 topographic surface.
Gross Attributable
----------------------------- -----------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
--------------------- ---------- ------ --------- ---------- ------ ---------
Ore Reserves
Proven 3,066,000 1.89 186,000 2,759,000 1.89 167,400
Probable 1,823,000 1.81 106,000 1,641,000 1.81 95,400
ROM stockpiles 873,000 1.72 48,400 786,000 1.72 43,600
--------------------- ---------- ------ --------- ---------- ------ ---------
Ore Reserves total 5,762,000 1.84 340,400 5,186,000 1.84 306,400
--------------------- ---------- ------ --------- ---------- ------ ---------
Mineral Resources
Measured 7,318,000 1.59 373,000 6,586,000 1.59 335,700
Indicated 22,217,000 1.74 1,245,300 19,995,000 1.74 1,120,800
--------------------- ---------- ------ --------- ---------- ------ ---------
Measured + Indicated 29,535,000 1.70 1,618,300 26,581,000 1.70 1,456,500
--------------------- ---------- ------ --------- ---------- ------ ---------
Inferred 29,018,000 1.61 1,506,000 26,116,000 1.61 1,355,400
--------------------- ---------- ------ --------- ---------- ------ ---------
Mineral Resources
total 58,553,000 1.66 3,124,300 52,697,000 1.66 2,811,900
--------------------- ---------- ------ --------- ---------- ------ ---------
Note: rounding errors may occur
Souma
Gross Attributable
----------------------------- -----------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
--------------------- ---------- ------ --------- ---------- ------ ---------
Mineral Resources
Measured - - - - - -
Indicated 2,410,000 2.32 179,500 2,410,000 2.32 179,500
--------------------- ---------- ------ --------- ---------- ------ ---------
Measured + Indicated 2,410,000 2.32 179,500 2,410,000 2.32 179,500
--------------------- ---------- ------ --------- ---------- ------ ---------
Inferred 9,220,000 1.67 496,100 9,220,000 1.67 496,100
--------------------- ---------- ------ --------- ---------- ------ ---------
Mineral Resources
total 11,630,000 1.81 675,600 11,630,000 1.81 675,600
--------------------- ---------- ------ --------- ---------- ------ ---------
Ouzeni and Pali
Gross Attributable
---------------------------- ----------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
--------------------- --------- ------ --------- --------- ------ ---------
Mineral Resources
Measured - - - - - -
Indicated - - - - - -
--------------------- --------- ------ --------- --------- ------ ---------
Measured + Indicated - - - - - -
--------------------- --------- ------ --------- --------- ------ ---------
Inferred 5,190,000 1.62 269,700 5,190,000 1.62 269,700
--------------------- --------- ------ --------- --------- ------ ---------
Mineral Resources
total 5,190,000 1.62 269,700 5,190,000 1.62 269,700
--------------------- --------- ------ --------- --------- ------ ---------
Total Burkina Faso
Gross Attributable
------------------------------- -------------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
--------------------- ----------- ------ ---------- ----------- ------ ----------
Ore Reserves
Proven 3,066,000 1.89 186,000 2,759,000 1.89 167,400
Probable 1,823,000 1.81 106,000 1,641,000 1.81 95,400
ROM stockpiles 873,000 1.72 48,400 786,000 1.72 43,600
--------------------- ----------- ------ ---------- ----------- ------ ----------
Ore Reserves total 5,762,000 1.84 340,400 5,186,000 1.84 306,400
--------------------- ----------- ------ ---------- ----------- ------ ----------
Mineral Resources
Measured 7,318,000 1.59 373,000 6,586,000 1.59 335,700
Indicated 24,627,000 1.80 1,424,800 22,405,000 1.80 1,300,300
--------------------- ----------- ------ ---------- ----------- ------ ----------
Measured + Indicated 31,945,000 1.75 1,797,800 28,991,000 1.75 1,636,000
--------------------- ----------- ------ ---------- ----------- ------ ----------
Inferred 43,428,000 1.62 2,271,800 40,526,000 1.62 2,121,200
--------------------- ----------- ------ ---------- ----------- ------ ----------
Mineral Resources
total 75,373,000 1.68 4,069,600 69,517,000 1.68 3,757,200
--------------------- ----------- ------ ---------- ----------- ------ ----------
TRI-K, GUINEA
Avocet owns 100% of the Tri-K permits through its wholly-owned
subsidiary, Wega Mining Guinée SA.
Ore Reserves
From October 2013, the Company reported an Ore Reserve of
480,000 ounces in respect of a heap leach operation at the Tri-K
project, as set out in the initial feasibility study submitted to
the Guinean government in September 2013. This study led to the
granting of a Mining Permit for the project on 27 March 2015.
However, the Joint Venture agreement entered into in October
2016 with Managem now means that a heap leach operation is no
longer envisaged at Tri-K. Managem have committed to a 12-month
programme of work targeting the completion of a new feasibility
study for a larger CIL project at the site with 1 million ounces of
reserve. In light of this, management no longer consider it
appropriate to continue to report the Ore Reserve under the heap
leach project.
Mineral Resources as at 31 December 2016.
The table below reports the Mineral Resource above a 0.5 g/t Au
cut-off, as at 31 December 2016.
Gross Attributable
----------------------------- -----------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
------------------------ ---------- ------ --------- ---------- ------ ---------
Mineral Resources
Measured - - - - - -
Indicated 41,300,000 1.51 1,998,000 41,300,000 1.51 1,998,000
------------------------ ---------- ------ --------- ---------- ------ ---------
Measured + Indicated 41,300,000 1.51 1,998,000 41,300,000 1.51 1,998,000
------------------------ ---------- ------ --------- ---------- ------ ---------
Inferred 25,200,000 1.26 1,020,000 25,200,000 1.26 1,020,000
------------------------ ---------- ------ --------- ---------- ------ ---------
Mineral Resources total 66,500,000 1.41 3,018,000 66,500,000 1.41 3,018,000
------------------------ ---------- ------ --------- ---------- ------ ---------
Note: rounding errors may occur
QUALIFIED AND COMPETENT PERSONS
The information in this report that relates to Inata Ore
Reserves in Burkina Faso is based on information compiled by Mr
Martin Raml, who is a Qualified Person, as defined by NI 43.101.
Martin Raml is employed by Avocet Mining PLC.
The information in this report that relates to Exploration
results in both Burkina Faso and Guinea is based on information
supplied by Mr Robert Seed, a competent person. Robert Seed is
employed by Avocet Mining PLC and has sufficient experience which
is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves". Robert Seed consents to the inclusion
in the report of the matters based on his information in the form
and context in which it appears.
DIRECTORS AND GOVERNANCE
This section aims to provide a transparent view of Avocet Mining
PLC which not only complies with the UK Corporate Governance Code
but applies best practice where possible. It includes:
- Current board of Directors;
- Report of the Directors;
- Report on corporate governance; and
- Remuneration report.
CURRENT BOARD OF DIRECTORS
Executive Directors
Boudewijn Wentink - Chief Executive Officer
Boudewijn was appointed Chief Executive Officer in April 2017.
Boudewijn has a wealth of experience in managing businesses in
challenging circumstances, most recently with New World Resources
plc, a coal mining group based in the Czech Republic, where he
served as New World Resources' finance and legal director and
executive director.
David Cather - Technical Director
David was appointed Technical Director in April 2017, having
been Chief Executive Officer since July 2012, after joining the
Company as Chief Operating Officer in April 2012. David is a mining
engineer and brings over 30 years of mining experience to Avocet,
most recently as Chief Operating Officer with European Goldfields.
David's career has included senior roles at Anglo American plc
where he was Technical Director for its Industrial Minerals
Division. He spent five years consulting to the industry on a
variety of early stage projects principally for gold and base metal
projects in DRC, Sierra Leone, Nicaragua, Philippines and Columbia.
He is a graduate from the Royal School of Mines, Imperial College
London with a first class degree in mining engineering and has
gained extensive senior level project development experience and
operations management in both open pit and underground
operations.
Non-Executive Directors
Russell Edey - Chairman and Non-executive Director
Russell was appointed Non-Executive Director in July 2010 and
Chairman of the Company in September 2010. He retired as Chairman
of AngloGold Ashanti Limited in May 2010 having been a member of
that company's board since 1998. He worked at Rothschilds from 1977
until 2014 and sat on the Boards of a number of its subsidiaries.
Prior to that, he worked for Anglo American Corporation of South
Africa Limited in South Africa and Australia. He currently sits on
the Board of the BlackRock World Mining Trust plc and the Genesis
Emerging Markets Fund.
Russell Edey chairs the Nominations Committee and sits on the
Audit, SHEC and Remuneration Committees.
Barry Rourke - Non-executive Director
Barry was appointed Non-Executive Director and Chairman of
Avocet Mining PLC's Audit Committee in July 2010. He served as a
Partner at PricewaterhouseCoopers for 17 years, acting as an
advisor and auditor for several large and medium-sized businesses
in both the public and private sector before retiring in 2001. He
has significant experience in the resources sector as an
independent non-executive director of several companies and has
been Chairman of the Audit Committee at a number of these.
Barry Rourke chairs the Audit and Remuneration Committees and
sits on the Nominations and SHEC Committees.
Gordon Wylie - Non-executive Director
Gordon joined the Board of Avocet Mining in February 2012. A
geologist by training, Gordon has over 40 years of experience in
mining and exploration geology, Gordon has served on the board of a
number of listed companies with operations in Central Asia, South
America, Europe and Russia. He currently serves as Chairman of
Lydian International.
Gordon Wylie chairs the SHEC Committee and also sits on the
Audit, Nominations and Remuneration Committees.
Jim Wynn - Non-executive Director
Jim joined Avocet Mining in November 2008 and was appointed
Finance Director in September 2015. Jim is a Chartered Accountant
and was previously employed by Anglo American plc where he held a
number of roles within the finance, business development and
strategy departments of Anglo Industrial Minerals. Jim became a
Non-executive Director with effect from 1 May 2017.
REPORT OF THE DIRECTORS
The Directors are pleased to present their report together with
the audited financial statements of the Company and of the Group
for the year ended 31 December 2016.
The Company
Avocet Mining PLC, the parent company of the Avocet Group, is
registered and domiciled in the United Kingdom. Further details
relating to the Company, including its registered office, are set
out in the Shareholders' Information section on page 107.
Principal activity and business review
The Group's principal activity during the period continued to be
gold mining, mineral processing and exploration. Further
information is included in the CEO's statement as well as the
operational reviews on Inata, Souma and Tri-K and the financial
review. An overview of the Company's activities is set out on page
1 and a description of the Company's business model is also set out
on page 12.
Future developments
The Group's future developments are outlined in the Strategic
Report.
Share capital
As at 27 May 2017 the issued share capital of the Company was
comprised of 20,949,671 ordinary shares of 1 pence each and
209,496,710 deferred shares of 0.49 pence each. Each ordinary share
carries the right to one vote per share, while the deferred shares
have very limited rights, including no right to vote. The liability
of the members of the Company is limited to the amount unpaid, if
any, on the shares held by them. All issued shares of the Company
are fully paid.
Prior to 9 June 2016, the issued share capital of the Company
stood at 209,496,710 ordinary shares of 5 pence each, with each
ordinary share carrying the right to one vote per share. On 9 June
2016, a shareholders' resolution was passed consisting of two
stages: firstly, each ordinary share was split into one
intermediary ordinary share with a nominal value of 0.1 pence and
one deferred share with a nominal value of 4.9 pence; secondly,
every 10 intermediary ordinary shares were cancelled and replaced
with a single new ordinary share with a nominal value of 1 pence
each.
The purpose of this share consolidation was to increase the
market value of each share (in order to comply with the Company's
listing obligations on the Oslo Børs, which stipulate that the
market price of each listed share cannot go below 1 NOK, or
approximately 8.4 pence at the time), while reducing the number of
ordinary shares in issue so as to leave the total value of ordinary
shares unchanged. The consolidation also had the effect of reducing
the nominal value of the ordinary shares to a level considerably
below their market price.
The rights of the deferred shares are very limited, rendering
them effectively valueless. They have no voting rights, no
entitlement to dividends, may not be transferred without the
Company's written approval and are only entitled to payment on the
winding up of capital after each ordinary share has received GBP1m
each.
Details relating to Share Capital and the purchase and transfer
of Treasury and Own Shares are set out in notes 28 and 29 to the
Group accounts.
Company's listings
The Company's ordinary shares have been traded on the Official
List of the Main Market of the London Stock Exchange since 8
December 2011, prior to which they were traded on London's
Alternative Investment Market ('AIM'). J.P. Morgan Cazenove Limited
acts as the Company's broker and financial advisor. Since 16 June
2010, the Company has also been listed on the Oslo Børs.
On 22 December 2016, the Company's shareholders approved a
resolution to move down from the Premium List to the Standard List
of the Main Market of the London Stock Exchange. The reason for
this listing was to reduce the costs associated with compliance
with the more rigorous obligations of a Premium Listing, which the
Board considered appropriate for a company of Avocet's size and
financial condition. This transfer became effective on 25 January
2017.
Results and dividends
The Group reported a profit for the year of US$4.8 million
(2015: Loss of US$49.7 million). The results for the year are
explained in the Financial Review on pages 8 to 11.
The Directors do not recommend the payment of a dividend in
respect of the year ended 31 December 2016.
Events after the reporting period
On 3 April 2017, Boudewijn Wentink was appointed Chief Executive
Officer, while David Cather became Technical Director. Jim Wynn
stepped down as Finance Director as of 1 May 2017, at which point
he became a Non-executive Director. Yolanda Bolleurs was appointed
Chief Financial Officer from 3 April 2017.
In April 2017, discussions started with trade creditors, banks
and government in Burkina Faso, to stabilise Inata and with a view
to restructuring its debts. In this process, a key step has been
achieved on 31 May 2017: Inata, its major trade and financial
creditors (together representing approximately seventy per cent of
Inata's debt) have agreed the terms of a standstill agreement for
the duration of two months as strategic options are being explored
in connection with a financial, debt and corporate restructuring of
the company. All stakeholders (including financial creditors,
shareholders, government, key operational stakeholders and
employees) will need to contribute to achieve a consensual
restructuring solution, however, inevitably, there can be no
guarantee that these negotiations will prove successful.
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project in May.
Following this, the so-called 'First Closing' was completed on 22
May 2017 and the Company has received from Managem USD 4 million
for 40 per cent of its interest in the project.
There were no other material events taking place after the
reporting date.
Key performance indicators
The Group monitors its key performance indicators ('KPIs') on a
monthly basis or more frequently and when KPIs diverge from
expectation, an investigation is carried out and appropriate action
taken. Non-financial KPIs include tonnes of waste and ore mined and
milled, grades, recoveries and gold produced, as well as lost time
injuries ('LTIs'). Financial KPIs include revenues, gross profit,
cash costs per ounce, profit before tax, taxation, EBITDA,
operating cashflows and capex. These measures are identified as
KPIs on the basis that they represent the primary drivers of
shareholder value for a gold mining company.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are
outlined within the Strategic Report on pages 15 to 16. Financial
risk and capital management disclosures are provided within notes
21, 24 and 25 to the financial statements.
Directors and their interests in shares
The names of the current Directors are shown on page 26 and
details of their interests in the share capital of the Company are
shown on page 45.
In accordance with Code Provision B.7.1 of the UK Corporate
Governance Code, all Directors stand for re-election on an annual
basis.
Substantial shareholders
At 5 June 2017, the following had notified the Company of
disclosable interests in 3% or more of the nominal value of the
Company's shares:
Shareholder Shareholding %
---------------------------------------- ------------ -----
Elliott International, L.P. and Elliott
Associates, L.P.(1) 2,824,504 13.51
---------------------------------------- ------------ -----
UBS AG 2,209,220 10.57
---------------------------------------- ------------ -----
Prelas AS 1,431,803 6.84
---------------------------------------- ------------ -----
Bank of America Merrill Lynch 1,086,654 5.20
---------------------------------------- ------------ -----
(1) - Elliott also holds a beneficial interest in 2,964,823
Contracts For Difference ('CFDs').
Creditor payments
It is the Group's policy to agree the terms of payment with
suppliers when entering into contracts and to meet its obligations
accordingly. The Group does not follow any specific published code
or standard on payment practice.
Key contracts
The Company has contractual arrangements with key suppliers for
its operations, notably for fuel, reagents, grinding media and
other materials and regular discussions are held with these
suppliers. However, given sufficient advance warning, alternative
sources could be arranged if necessary, hence the Company does not
believe it is unduly reliant on any single contract or supplier.
The Company is reliant on retaining its exploration and mining
permits, which are subject to compliance with various government
obligations and regulations. The Company considers such compliance
a high priority, in view of this reliance.
Donations
As in previous years, no donations were made for political
purposes during the year and the Company has a policy of
maintaining political neutrality. The Company makes regular
contributions to community and social projects, particularly in
Burkina Faso through the Fondation Avocet pour le Burkina ('FAB'),
as outlined in the Community Engagement review on page 18.
Corporate governance
A report on corporate governance is provided on pages 31 to
37.
Employees
The Company has a policy of equal opportunities throughout the
organisation and is proud of its culture of diversity and
tolerance. Further details are set out within the Strategic Report
on page 20. Employees benefit from regular communication both
informally and formally with regard to Company issues (external and
internal developments, updates, etc), including a monthly
newsletter distributed at the mine site and in the corporate office
in Burkina Faso. Employees are made aware of the Company's share
ownership policy, both to ensure compliance with listing rules but
also to make them aware of the opportunity to participate in the
Company's share performance. Share-based payment schemes are also
available to senior staff, as set out in the Remuneration Report,
although no shares have been issued under these schemes for some
time.
Disclosure table pursuant to Listing Rule LR9.8.4
Listing Information to be Disclosure
Rule disclosed
---------- --------------------------- ----------------------------------
9.8.4(1) Interest capitalised None in year
by the Group
---------- --------------------------- ----------------------------------
9.8.4(2) Unaudited financial Unaudited H1 2016 Interim
information Results
---------- --------------------------- ----------------------------------
9.8.4(4) Long term incentive None - see Remuneration Report
scheme only involving
a Director
---------- --------------------------- ----------------------------------
9.8.4(5) Directors' waivers Non-executive Directors proposed
of emoluments and approved fee reductions
and D Cather voluntarily waived
a portion of his salary -
See Remuneration Report for
details
---------- --------------------------- ----------------------------------
9.8.4(6) Directors' waivers See above
of future emoluments
---------- --------------------------- ----------------------------------
9.8.4(7) Non pro-rata allotments None in year
for cash
(issuer)
---------- --------------------------- ----------------------------------
9.8.4(8) Non pro-rata allotments None in year
for cash
(major subsidiaries)
---------- --------------------------- ----------------------------------
9.8.4(9) Listed company is Not applicable
a subsidiary of
another company
---------- --------------------------- ----------------------------------
9.8.4(10) Contracts of significance None in year
involving
a director
---------- --------------------------- ----------------------------------
9.8.4(11) Contracts of significance None in year
involving
a controlling shareholder
---------- --------------------------- ----------------------------------
9.8.4(12) Waiver of dividends None in year
---------- --------------------------- ----------------------------------
9.8.4(13) Waiver of future None in year
dividends
---------- --------------------------- ----------------------------------
9.8.4(14) Agreement with a No controlling shareholders
controlling in year therefore not applicable
shareholder per
LR9.2.2AR
---------- --------------------------- ----------------------------------
Health, safety and sustainable development
Details of the Group's activities relating to safety and health
are set out on pages 17 to 18 and those relating to sustainable
development are provided on pages 19 to 21. This latter section
also includes the disclosures in relation to the Company's
greenhouse gas emissions.
Going concern
The Board believe there to be a material uncertainty over the
ability of the Company to continue as a Going Concern. These
matters are set out in full in note 1 to the financial
statements.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report,
the Remuneration Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union ('IFRSs'). Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
-- prepare financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Remuneration Report comply with
the Companies Act 2006 and Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors confirm that:
-- so far as each Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- the Directors have taken all steps that they ought to have
taken as Directors to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that
information.
The Directors are responsible for preparing the Annual Report in
accordance with applicable law and regulations. Having taken advice
from the Audit Committee, the Directors consider that the Annual
Report and the financial statements, taken as a whole, provide the
information necessary to assess the Company's performance, business
model and strategy and is fair, balanced and understandable.
The Directors believe that the Annual Report and accounts taken
as a whole are fair, balanced and understandable and confirm that
the narrative sections of the Annual Report are consistent with the
financial statements and accurately reflect the Company's
performance.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
To the best of my knowledge:
-- the Group financial statements, prepared in accordance with
IFRSs as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that the Company faces.
Boudewijn Wentink
Chief Executive Officer
6 June 2017
REPORT ON CORPORATE GOVERNANCE
Chairman's introduction
The priorities for the Company during 2016 were clearly the
management of the Inata mine, in the context of financial and
operating difficulties and the conclusion of the Tri-K joint
venture with Managem.
On 22 December 2016, a resolution was approved by shareholders
to move the Company's listing down from the Premium List to the
Standard List, as a result of which the compliance obligations are
reduced in a number of areas, including corporate governance.
The Board believes that a less rigorous compliance regime to be
more appropriate to a Company of Avocet's size, particularly when
keeping costs to a minimum forms a critical part of the ability of
the Company to continue in operation. Nevertheless, the Board
remains committed to good governance in all material respects and
wishes to assure shareholders that it will continue to remain
focused on safeguarding the assets and interests of the
Company.
Russell Edey
Chairman
6 June 2017
Throughout the year ended 31 December 2016 and in the
preparation of this Annual Report and these Accounts, the Company
has complied with the main and supporting principles and provisions
set out in the UK Corporate Governance Code as described in the
following sections of this Report, except with regard to the
frequency of assessment of Board performance, as described
below.
Board of Directors
The Board of Directors is responsible for the management of the
Company on behalf of the shareholders. The objective of the Company
is to create long term value for shareholders and the Board is
responsible for delivering that objective by governing the Company
and its subsidiaries. The Board is responsible for approving the
Company strategy and policies, for safeguarding the assets of the
Company and is the ultimate decision-making body of the Group in
all matters except those that are reserved for specific shareholder
approval.
The current Board consists of two Executive Directors who hold
the key operational positions in the Company and four Non-executive
Directors (including a Non-executive Chairman), who bring a breadth
of experience and knowledge.
The Board meets at least every three months and is supplied with
appropriate and timely information. In 2016, the Board met twelve
times. Where appropriate, the Board invites external advisers
and/or senior management to attend meetings to discuss matters
where their expertise may be beneficial.
The responsibilities of RP Edey as Chairman include those
contained in the Supporting Principles to paragraph A.3 of the UK
Corporate Governance Code, namely: for providing leadership to the
Board, ensuring its effectiveness in all aspects of its role and
setting its agenda; ensuring that adequate time is available for
discussion of all agenda items; ensuring that the Directors receive
accurate, timely and clear information; ensuring effective
communication with shareholders; promoting a culture of openness
and debate by facilitating the effective contribution to the Board
of Non-executive Directors in particular; and ensuring constructive
relationships between the Executive and Non-executive
Directors.
The Company provides independent professional and legal advice
and offers training, to all Directors where necessary, to ensure
they are able to discharge their duties. In addition, all Board
members have access to the services of the Company Secretary, who
is responsible for ensuring all Board procedures are complied
with.
The Chairman and other Board members consider the training and
development needs of each Director and concluded that none was
necessary in the year, as all Directors were adjudged to have
sufficient experience and knowledge.
Board independence
The UK Corporate Governance Code requires that the board of all
companies (other than small companies) be made up of at least 50%
Independent Non-executive Directors ('NEDs'). The Company believes
RP Edey, BJ Rourke and G Wylie to be independent.
The Chairman of the Board is RP Edey and the Chief Executive
Officer is B Wentink (DC Cather until 3 April 2017). The Board has
named BJ Rourke as the senior independent Non-executive
Director.
Remuneration Nomination
Position Appointed Status Audit Committee Committee Committee SHEC Committee
---------- -------- ------------ --------------- --------------- --------------- --------------- --------------
R Edey Chairman 08 Jul 2010 Independent Member Member Chair Member
BJ Rourke NED 08 Jul 2010 Independent Chair Chair Member Member
G Wylie NED 22 Feb 2012 Independent Member Member Member Chair
J Wynn NED 7 Sep 2015 Non-independent - - - -
BC Wentink CEO 3 April 2017 Executive - - - -
D Cather TD 18 Jul 2012 Executive - - - -
---------- -------- ------------ --------------- --------------- --------------- --------------- --------------
Board performance
The Board undertakes a regular formal process to evaluate its
effectiveness and that of the Board Committees and individual
Directors, consisting of a review of the Board's performance
against the guidelines of the Financial Reporting Council on Board
effectiveness. The recommendations of the UK Corporate Governance
Code are that this review be undertaken by an external facilitator
every three years. Such an external review was last undertaken in
November 2012, this being the first full year that Avocet had been
listed on the main board of the London Stock Exchange. The Board
acknowledges that the next external review is overdue, however this
has been deferred for reasons of cost constraint.
The most recent internal review was completed in April 2015,
prior to which Board members were asked to submit assessments of
the performance of the Board as a whole, as well as individual
Directors, the Senior Independent Director and the Chairman,
against a range of criteria and requested to provide further
details on areas where improvements could be found. The results of
this exercise were then fed back to the Board and discussed at a
Board meeting on 27 April 2015.
Board and Committee meetings
Attendance at Board and committee meetings by the relevant Board
members during 2016 is set out below (note that 'n/a' indicates
that a Director was not a member of the committee at any time
during the year):
Board Audit Committee Remuneration Committee Nomination Committee SHEC Committee
---------- ----- --------------- ---------------------- -------------------- --------------
RP Edey 12/12 4/4 2/2 1/1 2/2
BJ Rourke 11/12 4/4 2/2 1/1 2/2
G Wylie 12/12 4/4 2/2 1/1 2/2
DC Cather 12/12 n/a n/a n/a n/a
J Wynn 12/12 n/a n/a n/a n/a
---------- ----- --------------- ---------------------- -------------------- --------------
Board Committees
While the Board retains responsibility for making key decisions,
it also delegates other matters to various standing Committees. The
purpose of this is to allow a more focused discussion on specific
matters which would benefit from a forum outside the Main Board,
with a different balance of skills, experience and independence
from its members. Further information on each of these Committees,
along with their terms of reference, is available on the Company's
website www.avocetmining.com.
Nomination Committee
Purpose
The Nomination Committee was established to review the
structure, size and composition (including the balance of skills,
knowledge and experience) of the Board and its Committees and to
review succession planning for the Board and senior management.
It is also responsible for monitoring the ongoing performance of
the Board and its Committees. The Nomination Committee reports and
makes recommendations to the Board in respect of any action
required in these matters.
Composition
The Nominations Committee must consist of not less than three
Non-executive Directors. The current membership of the Committee
comprises all of the Non-executive Directors of the Company, namely
RP Edey (Chairman), BJ Rourke and G Wylie.
Operations
The Nomination Committee meets at least once a year, or more
frequently as required. In 2016, it met in December to consider
whether any changes were required to the directorate. Although none
were necessary at that time, on 31 March 2017, the Committee
convened to recommend the appointment of B Wentink as Chief
Executive Officer, in place of D Cather, who moved to become
Technical Director. In addition, the Committee accepted the
resignation of J Wynn as Finance Director, effective 1 May 2017 (at
which point he would become a Non-executive Director) and approved
the appointment of Y Bolleurs as Chief Financial Officer in his
place. Both B Wentink and Y Bolleurs joined with effect from 3
April 2017.
Responsibilities
The Nomination Committee has the following responsibilities:
-- to review and report on the composition of the Board and its
Committees;
-- to review and report on the performance of the Board and its
Committees;
-- to make recommendations as to changes to the Board and its
Committees, including the nomination of Chairman of the Board,
chairmen of each Committee and senior independent
non-executive;
-- to ensure succession planning for executive Directors and
senior managers;
-- to review the overall leadership needs of the Group,
including involving external advisers to facilitate this review and
to assist with succession;
-- to monitor appointments to the Board and ensure compliance
with statutory, legal and other regulatory requirements; and
-- to make recommendations to the Board considering any matters
that might call into question the suitability of Directors or
senior managers to continue in their roles.
The Nomination Committee is also responsible for ensuring
compliance with the principles of B.2 of the UK Corporate
Governance Code, specifically with regard to the need for
candidates to be considered on merit, against objective criteria
and with due regard for the benefits of diversity on the Board,
including gender. It is also responsible for satisfying itself that
plans are in place for orderly succession for appointments to the
Board and to senior management, so as to maintain an appropriate
balance of skills and experience within the Company and on the
Board and to ensure progressive refreshing of the board.
Following the resignation of N Harwerth in 2013, the Board has
not included any female members, although from 3 April 2017, the
Company appointed a female Chief Financial Officer (Y Bolleurs).
Although the Board values equality in all areas, it does not
believe it would be in the interests of the Company at the present
time to seek to add an additional member to the Board in order to
address the issue of gender balance.
The Nomination Committee met only once in 2016, as no changes to
the Board or senior management were proposed nor considered. In
March 2017, the Nomination Committee met to consider changes to the
executive management team and recommended the appointment of B
Wentink as CEO and Y Bolleurs as CFO, with D Cather to become
Technical Director. In addition, the Nomination Committee
recommended the appointment of J Wynn to a Non-executive director
role, following his decision to stand down as executive director
with effect from 1 May 2017.
Remuneration Committee
Purpose
The Remuneration Committee reviews the performance of the
Directors and Executive Committee members and sets the scale and
structure of their remuneration with due regard to the interests of
the shareholders and the overall performance of the Group.
The Remuneration Committee also makes recommendations to the
Board concerning the Company's overall philosophy and policy with
respect to executive remuneration, bonuses and incentive
arrangements including share and option awards, compensation
payments and pension rights.
Composition
The Remuneration Committee must consist of not less than three
Non-executive Directors. Its members and chairman, are to be
determined by the Board. The current membership of the Committee
comprises BJ Rourke (Chair), RP Edey and G Wylie.
Operations
The Remuneration Committee normally meets at least twice a year,
or more frequently as required. In 2016, the Remuneration Committee
met twice. The Committee considered the remuneration strategy for
the Group as a whole, particularly in the context of scarce funds,
as well as to approve the Remuneration Report in the 2016 Annual
Report.
Further details on remuneration matters are set out in the
Remuneration Report on pages 38 to 47.
Responsibilities
The Remuneration Committee is responsible for the following
matters:
-- to review the performance objectives and determine and agree
the appropriate levels of remuneration for the Executive Directors
and the senior management of the Company;
-- to determine the remuneration of the Chairman of the Board,
Non-executive Directors, as well as Chairmen and members of all
Board Committees, subject to the condition that no person shall
participate in discussions relating to his or her own
remuneration;
-- to review the design and management of Group salary
structures and incentive schemes and to ensure proper authorisation
for any awards made under such schemes;
-- to review the recommendations of the Chief Executive of the
Company as to the grant of share awards and other bonuses and to
approve such awards as appropriate; and
-- to review and approve the Remuneration Report in the Avocet
Mining PLC Annual Report.
Audit Committee
Purpose
The Audit Committee reviews the principles, policies and
practices adopted in the preparation of the financial statements of
Avocet Mining PLC and its subsidiaries, as well as ensuring any
other formal announcements relating to the financial performance of
the Group comply with relevant statutory and regulatory
requirements.
The Audit Committee is also responsible for assisting the Board
in discharging its responsibilities with respect to the integrity
of the Company's financial statements, the effectiveness of the
systems of governance, risk management and internal control and
monitoring the effectiveness and independence of the external
auditors. It also reviews the requirement for an internal audit
function within the Group.
Composition
The Audit Committee must consist of not less than three
Independent Non-executive Directors. The Audit Committee is chaired
by BJ Rourke and also comprises G Wylie and R Edey. The UK
Corporate Governance Code stipulates that at least one of the
members of the Audit Committee must have recent and relevant
financial experience. The Company believes that all members have
such experience, in particular BJ Rourke, who served for 17 years
as an audit partner at PricewaterhouseCoopers.
Operations
The Audit Committee is required to meet twice a year, but in
practice meets more frequently. In 2016, the Committee met on four
occasions. In addition to its members, the Audit Committee also
routinely invites the Group's auditors, the Finance Director and
other Board members to attend its meetings as required.
During 2016 and up to 6 June 2017, the Audit Committee
considered the key areas of risk and judgement relevant to the
Company, including their treatment in the Financial Statements
(Full Year and Interims). These included:
- The ongoing liquidity and going concern of the Group - in
particular to consider the risks to the interests of the Company's
creditors and stakeholders of continuing in operation and whether
or not the Company continued to be a going concern;
- The valuation and impairment of the Company's assets, -
including an assessment of the cost and carrying value of the Inata
gold mine and Tri-K projects, based on internal cashflow forecasts,
market valuations and other indications from third parties;
- Legal matters; and
- The adequacy of financial controls at Inata.
All of these matters were addressed through discussions between
Board members and senior management, as well as reviews of
forecasts, updates on correspondence and negotiations with third
parties and (where relevant) preparation of papers.
In addition to matters raised at the Committee meetings, Avocet
management submits working papers and notes outlining the key
issues, which are circulated to the Committee for consideration
ahead of the meetings.
During 2016, the Audit Committee considered the performance of
the Group's external auditors. Upon reviewing the plans and results
of the 2015 audit work, the Audit Committee was satisfied with the
way in which the 2015 year-end audit was conducted.
It was noted that Grant Thornton had been the Company's auditors
for over 15 years without there being any external tender process
since their appointment. It was noted, however, that the partner
leading the audit, as well as the audit team, had changed regularly
over this period. The Company engaged Grant Thornton in respect of
two non-audit services: as reporting accountants in respect of the
Class 1 Circular for the Tri-K transaction published on 22 November
2016; and for VAT advisory services in 2016. The partners and staff
involved in these discrete pieces of work were entirely separate
from the audit teams and the Audit Committee therefore does not
believe this work compromised the independence of the auditors.
Responsibilities
The Audit Committee reviews and monitors the integrity of the
Group financial statements and press releases, as well as any other
formal announcements relating to the Company's financial
performance. As part of this review, it focuses in particular on
areas of judgement, appropriateness of policies, going concern
matters and any other areas it identifies as risks (e.g. on the
grounds of materiality or uncertainty).
In addition, the Audit Committee reviews plans for and the
conduct of, the Group's external audit, receiving the report of the
auditors and thereby monitoring not only the performance of the
Company's finance teams but also that of the auditors themselves.
On consideration of the performance of the external auditors (Grant
Thornton UK LLP), the Audit Committee concluded that it was
appropriate to recommend their re-appointment to the shareholders
at the AGM on 19 June 2015.
The Audit Committee is also responsible for reviewing the
internal controls of the Company and assessing the requirement for
an internal audit function. The Audit Committee concluded that the
key activities of an internal audit function (including a review of
internal controls) were being undertaken by the finance team and
that in view of the size of the organisation, a separate internal
audit team was not required.
Safety, Health Environment and Communities ('SHEC')
Committee
Purpose
The SHEC Committee was established to provide the Board with
assurance that the appropriate systems are in place to deal with
the management of health, safety, environmental and community
relations matters. The SHEC Committee was established in October
2011 in order to formalise a separate forum exclusively for the
purpose of reviewing such matters.
Composition
The SHEC Committee comprises G Wylie (Chairman), BJ Rourke and
RP Edey.
Operations
The SHEC Committee met twice during the year. At that meeting,
it focussed on an assessment of the safety environment at Inata, as
well as considering ongoing matters relating to community
relations, health, environmental and security. The Committee also
focused on the ongoing security risked posed by the terrorist
attacks in Burkina Faso, especially those which took place in the
Soum region where the Inata mine is located. The Committee approved
management recommendations that measures be taken to improve
security at the mine site, at Ouagadougou and for convoys between
the two.
Responsibilities
The SHEC Committee's particular responsibilities include the
following:
-- to establish and review the Group's policies with respect to
health, safety, environmental and community relations matters;
-- to ensure adequate procedures and responses are in place to
deal with accidents, fatalities, or other serious medical,
environmental, or safety issues;
-- to monitor and review the performance of the Group with
regard to health, safety, environmental and community relations
matters and to ensure compliance with relevant local and
international regulations;
-- to review and investigate any serious accidents and deaths
that occur in connection with any Group employees, contractors,
consultants, suppliers, or agents operating on behalf of Avocet,
which may take place on or off Group sites, in order to establish
cause and recommend further actions as may be required;
-- to monitor the quality and frequency of reporting of health,
safety, environmental and community relations matters;
-- to maintain awareness of all regulatory changes and to ensure
the Board is aware of relevant material changes, in health, safety,
environmental and community relations matters;
-- to report to the Board with regard to any health, safety,
environmental and community relations matters that should be
brought to its attention; and
-- to review and approve the Group Health, Safety and
Environment and Community Relations disclosures within the Annual
Report, or other relevant publications.
Service Contracts
No Director has any service contracts, consultancy agreements or
other such arrangements with a notice period in excess of one
year.
Going Concern
The Board acknowledges its responsibility towards safeguarding
the assets of the Company for the benefit of shareholders, as well
as its wider duties towards stakeholders. This includes the regular
monitoring of cashflows and forecasts. The appropriateness of the
going concern basis for the preparation of the 2016 financial
statements is discussed in detail in note 1 to the financial
statements.
Non-Audit Services
The Board regularly reviews the provision of non-audit services
from its auditors, at least annually through discussion at
Committee meetings. The Board is satisfied that the provision of
non-audit services by Grant Thornton UK LLP is compatible with the
general standard of independence for auditors and does not give
rise to any conflict of interest.
Internal Control
The Board is ultimately responsible for maintaining a sound
system of internal control to safeguard shareholders' investment
and the Company's assets, for which it looks to the recommendations
of the Audit Committee. Such a system is designed to manage, but
may not eliminate, the risk of failure to achieve business
objectives. There are inherent limitations in any control system
and, accordingly, even the most effective system can provide only
reasonable and not absolute, assurance against material
misstatement or loss. The Board review the effectiveness and
adequacy of internal controls on an annual basis and is satisfied
that the internal control systems provide sufficient assurance as
to the safety of the Company's assets and the value of the Group's
operations as a whole.
In accordance with the guidance of the Turnbull Committee on
Internal Control, an ongoing process has been established for
identifying, evaluating and managing risks faced by the
Company.
During 2016, the key financial risk faced by the Company as a
whole was identified as being liquidity and in particular, the
ability of the subsidiaries within the Group to meet obligations as
they fell due. Considerable focus was placed on this area by all
finance teams and by the Audit Committee and members of the
Board.
Finance teams were asked to maintain updated and detailed
cashflow projections, which were reviewed by senior management and
reported to the Board and Audit Committee. Details of discussions
with creditors and potential funding providers were reported to the
Committee by the Finance Director and a considerable amount of time
was spent ensuring that the Company was able to meet its
obligations and responsibilities.
The financial reporting systems of the Group are subject to
internal and external review. The accounts of the main operating
entity in Burkina Faso are subject to both IFRS group audits
(undertaken by Grant Thornton) as well as local compliance audits
in accordance with SYSCOA and OHADA (undertaken by Fidexco).
Reconciliations are undertaken between sub-ledgers and general
ledgers, as well as between internal accounts and third party
statements (bank statements, supplier statements and other third
party sources). Financial results and KPIs are reported from
subsidiaries on a monthly basis and reviewed and consolidated by
head office staff.
Employees
The Company's employee matters are discussed in the Strategic
Report on page 20.
Anti-bribery and whistleblowing
The Company has incorporated into its code of conduct and ethics
an anti-bribery policy, details of which are referenced in all
employee service contracts. In addition, all employees in both the
UK and West Africa are required to attend specific anti-bribery
training sessions and sign a register to confirm their attendance
and understanding. Regular updates and presentations are made to
employee groups to ensure greater understanding of the principles
behind Avocet's policy and to allow discussions on how to deal with
practical issues that may arise.
In addition, the Company has a whistleblowing policy and
procedure, to ensure any concerns raised by employees are able to
be dealt with in the appropriate manner.
Relations with Shareholders
The Company values the views of its shareholders and recognises
their interest in the Company's strategy and performance, Board
membership and the quality of its management teams. It holds
regular meetings with and presents to, its institutional and
private shareholders to discuss its objectives.
The AGM is a forum for communicating with institutional and
private investors and all shareholders are encouraged to attend and
participate. The Chairmen of the Board Committees are also
available to answer questions, along with the Senior Independent
Non-executive Director (BJ Rourke). Separate resolutions are
proposed on each issue so that they can be given proper
consideration and there is a resolution to approve the Annual
Report and Accounts and to approve the Remuneration Report. The
Company counts all proxy votes and will indicate the level of
proxies lodged on each resolution, after it has been dealt with by
a show of hands.
The Company operates and regularly updates its website
(www.avocetmining.com) with shareholder information.
The Company has engaged the services of Blytheweigh to assist
with its financial public relations.
Risk Management
The Board is responsible for the management of the Company on
behalf of the shareholders. The objective of the Company is to
create long term value for shareholders and the Board is
responsible for delivering that objective by governing the Company
and its subsidiaries.
In so doing, the Board is responsible for understanding the
risks faced by the Company and determining the risk appetite of the
Company. The Board ensures these risks are managed appropriately,
in order to draw a balance between safeguarding the assets and
interests of the Company and maximising its exposure to sustainable
growth and profitability. The Board and senior management regularly
monitor areas of risk. Senior management regularly visits
operations to understand site-specific risks as well as to assess
local political, fiscal and legal risks. In this regard, the Group
maintains a strict policy of compliance with local laws and
regulations and community issues (including safety and health,
community development and environmental responsibility) are at the
forefront of strategic and operational decision-making.
Although the Board retains responsibility for managing the
overall risk of the Group, certain specific risk areas are
delegated to Committees as follows:
-- Financial risks and internal financial controls are reviewed
by the Audit Committee;
-- Safety, Health and Environmental risks are monitored by the
SHEC Committee; and
The key risks that relate to the Group have been set out on
pages 15-16, categorised as follows:
-- Economic risks - Risks associated with changes in the markets
in which it operates
-- Operational risks - Risks relating to the operation of the
mines and exploration projects
-- Country risks - Country-specific risks related to Burkina
Faso, Guinea and any other countries in which Avocet may do
business
-- Other risks - Other significant risks not covered by the
above categories.
Russell Edey
Chairman
6 June 2017
REMUNERATION REPORT
This report is presented to shareholders by the Board and
provides information on Directors' remuneration for the year ended
31 December 2016. This report complies with the requirements of
both the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 and the UK Corporate
Governance Code. As such this report is divided into three
sections; the Annual Statement highlights key decisions on
remuneration, the Directors' Remuneration Policy details the
Group's remuneration policies and links to strategy and the Annual
Report on Remuneration focuses on the implementation of the
remuneration policy in 2016 and how we intend to implement our
remuneration policy in 2017.
ANNUAL STATEMENT
In setting the Remuneration strategy for 2016, the Remuneration
Committee was required to take into consideration the shortage of
cash across the Group, as well as the low share price. While the
Committee recognised the importance of incentivising Executive
Directors, these constraints effectively meant that it was
impossible to set appropriate targets that would be affordable, or
acceptable to shareholders. As a result, no bonus targets were set
and no share awards were made of any kind during the year.
The Company has retained its remuneration schemes, as approved
by shareholders and these are set out in the report below. At the
present time, while the Company focuses on refinancing, no awards
are proposed under these schemes.
DIRECTORS' REMUNERATION POLICY
Remuneration Policy for Executive Directors
The Company operates within a competitive environment and its
performance depends on the individual contributions of the
Directors and employees. Executive remuneration packages are
designed to attract, motivate and retain executives of the calibre
necessary to manage the Company's operations and to reward them for
enhancing shareholder value.
The framework for remuneration for the Executive Directors
consists of six main elements, as follows:
Element and purpose Operation Opportunity Performance measures
---------------------------- ---------------------------- ---------------------------- ----------------------------
Base salary Salaries are reviewed Salary increases will The salary review takes into
Reflects competitive market, annually by the Remuneration typically be in line with account individual
level, role and individual Committee. In setting those for other Company performance.
contribution salaries, the Committee employees. The Committee
considers pay levels and has discretion to award
practices at Avocet's higher increases in
principal competitors as exceptional circumstances,
well as FTSE-listed such as phased increases
companies of a similar size. for a newly appointed
The Committee also takes Executive Director, a
into account pay and material change in
conditions across complexity of the role or a
the Company when setting material movement in market
base salaries for the pay levels.
Executive Directors, to
ensure the relativities
are reasonable and
commensurate with
differences in experience,
skill levels and
responsibility.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Pension All Executive Directors are Minimum employer None
To allow individuals to save eligible to participate in contribution of 3% of base
for an income on retirement the Company's Defined salary. Employees may
Contribution contribute up to 6% of their
Pension Scheme. salary, which is matched by
additional employer
contributions giving a
maximum total combined
pension contribution of 15%
of salary. The maximum
employer contribution is 9%
of salary.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Benefits Executive Directors are Benefits vary by role and None
To support the individual in eligible to receive benefits individual. The Committee
their undertaking of the such as medical insurance periodically reviews the
role and gym membership. cost of providing
benefits and has discretion
to approve additional
benefits in exceptional
circumstances, such
as relocation or expat
benefits. Excluding these,
the cost of benefits will
not exceed 10%
of salary.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Share Incentive Plan A HMRC approved Share Employees, including None
To allow UK tax residents to Incentive Plan that allows Executive Directors, may
purchase shares in the UK tax residents to receive receive bonus shares each
Company under favourable tax bonus shares year up to the HMRC
terms in the Company under approved limit (currently
favourable tax terms GBP3,000 of gross pay).
(provided they are held in
the scheme for a minimum
of 5 years).
---------------------------- ---------------------------- ---------------------------- ----------------------------
Annual incentive (including Performance is assessed over Maximum opportunity of 75% Key performance indicators
deferral) one year against measures, of salary, with 50% of include gold production,
Motivates the achievement of weightings and targets that salary payable for an cash costs, profitability
annual financial, operating are set on-target level of and specific
and strategic goals, as well at the start of the year performance and 25% payable strategic milestones, as
as individual 50% of any award in excess for threshold performance. well as personal
performance goals of GBP30,000 is subject to performance.
mandatory deferral into To ensure that awards
Avocet shares appropriately reflect Health, safety and
which vest after a one-year business performance, the environmental performance
holding period, subject to Committee has discretion acts as an over-ride at the
continued employment. The to adjust awards upwards or discretion of the
remainder downwards within the maximum Remuneration Committee
of any award is paid in award level of 75% of (which in extreme
cash. salary. circumstances could lead to
a zero bonus)
No clawback or malus is
operated in respect of this
scheme.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Performance Share Plan Awards are normally made Maximum award of 200% of Avocet's TSR over the 3-year
Drives long-term value annually and vest after salary based on face value period relative to
creation and aligns 3-years subject to of award. comparable gold-mining
executives' and performance. Performance companies.
shareholders' interests is assessed based on TSR The Committee's policy is to
performance targets set at determine the appropriate Details of performance
the start of the performance award sizes on an annual targets will be provided in
period. basis, taking the annual report for the
into account performance of year in which
Awards may be delivered in both the Company and the the award is made, providing
shares or nil-cost options. individual. they are not commercially
Any award finally vesting sensitive.
may be increased to take 25% of an award vests for
into account dividend threshold performance, with
payments in the period. straight-line vesting
between threshold
No clawback or malus is and maximum. No award vests
operated in respect of this for below the threshold
scheme. level of performance.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Share Option Plan Options may be awarded to Maximum award of 200% of The Remuneration Committee
To provide a means of employees with an exercise salary based on face value will determine the
alignment to shareholders' price per share equal to the of award. appropriate performance
interests that is market value measures to apply to
appropriate also for use of a share at the time of The Committee's policy is to each option award prior to
below the senior executive grant. Grants of options determine the appropriate grant, tailored to the
level will vest after three years, award sizes on an annual strategic objectives of the
subject to basis, taking Company at the
performance and be into account performance of relevant time. Measures may
exercisable for up to 10 both the Company and the include, but are not limited
years from grant. individual. to, a minimum level of share
price
No clawback or malus is Up to 25% of an award vests growth.
operated in respect of this for threshold performance.
scheme. Vesting will also be subject
to the Remuneration
Committee's satisfaction
that underlying
financial performance is at
a sufficient level such that
vesting is appropriate.
Details of performance
measures and targets will be
provided in the annual
report for the
year in which the award is
made, providing they are not
commercially sensitive.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Remuneration Policy for Non-Executive Directors
Element and purpose Operation Opportunity Performance measures
------------------------------ ------------------------------- ------------------------------- --------------------
Annual fee Annual fees are reviewed Fees will be varied in line Not applicable
To reflect the annually by the Board taking with the outcome of the annual
responsibilities and time into account independent advice review
spent by the Directors on the
affairs of the Company Non-executive Directors do not
vote on any increases of their
own fees
Committee Chairs receive an
additional fee to reflect
additional responsibilities and
time
commitment
------------------------------ ------------------------------- ------------------------------- --------------------
Awards under previous remuneration policies
Any awards or remuneration commitments made to directors under
previous remuneration policies will continue to be honoured.
Approach to recruitment remuneration
In considering the remuneration levels for new directors, the
Committee takes into account the market rate for similar roles, as
well as considering the remuneration levels offered to existing and
previous directors of the Company. The new director would be
entitled to the same remuneration schemes as the current directors,
as set out below.
Element Approach Maximum annual award
---------------------- ---------------------------------------------- ----------------------------------------------
Base salary Base salary on appointment will be determined Not applicable
based on the skills and experience of the
individual,
as well as the prevailing market remuneration
level for the role. Should the Committee
consider
it appropriate to appoint an Executive
Director below the median market remuneration
level,
it may determine a phased salary increase
schedule to be applied over a number of years
---------------------- ---------------------------------------------- ----------------------------------------------
Pension In line with existing policy
---------------------- ---------------------------------------------- ----------------------------------------------
Benefits
---------------------- ---------------------------------------------- ----------------------------------------------
Annual Incentive Annual Incentive, Performance Share Plan and 75% of salary
Share Option Plan awards will be in line with
existing policy. Awards may be pro-rated for
time where the Executive Director joins
part-way
through a year
---------------------- ---------------------------------------------- ----------------------------------------------
Performance Share Plan 200% of salary (based on face value(1) of PSP
award)
---------------------- ---------------------------------------------- ----------------------------------------------
Share Option Plan 200% of salary (based on face value(1) of
Option award)
---------------------- ---------------------------------------------- ----------------------------------------------
(1) Face value is based on the underlying share price at the
date of the award. The final value of the award at the time of
vesting may be lower, depending on whether performance conditions
are met (in the case of PSP awards), or whether the share price at
the time of exercise exceeds the grant price (in the case of
Options).
No compensation is normally offered for the forfeit of
remuneration from previous employment. However, under exceptional
circumstances, the Committee has discretion to make a one-off award
to a newly appointed Executive Director in recognition of any
amount forfeited. Any such award will be made on a like-for-like
basis, with a fair-value no higher than that of the awards
forfeited, taking into account time to vesting and any performance
conditions that may apply. It may also be necessary for the
Committee to utilise Listing Rule 9.4.2 R to make an award under a
different structure to the current incentive plans outlined in the
policy table.
Where an Executive Director is appointed as a result of internal
promotion, any contractual commitments made prior to their
promotion may be honoured.
When recruiting a new Non-Executive Director, the Board will
determine the appropriate fee level in line with the policy stated
above.
Remuneration scenarios
During the year, D Cather was entitled to a gross salary of
GBP300k plus benefits of GBP6k and J Wynn received GBP200k plus
benefits of GBP22k.
D Cather voluntarily waived 10% of his contractual salary and
pension entitlement with effect from October 2015 and 7.3% with
effect from May 2016, in order to conserve cash for the Company.
The Non-executive Directors (R Edey, G Wylie and B Rourke) also
agreed to suspend payment of their director's fees from November
2016 until the settlement of the Tri-K transaction was concluded,
which occurred in May 2017.
No Director received a target in respect of the Annual Incentive
Scheme, nor an Share Options or PSP shares, therefore there is no
additional remuneration that could be achieved for either On-target
or Maximum performance in respect of 2016.
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Service contracts
Executive Directors currently have employment contracts which
may be terminated by the Company with twelve months of notice, or
by the employee with six months of notice. No other payments are
made to Executive Directors for compensation for loss of office.
Payments equivalent to the notice period may be made by the
Company's subsidiary, Resolute West Africa Limited, in the event
that insufficient funds are held at Avocet Mining PLC following a
change of ownership of that subsidiary.
Other than as outlined above, there are no additional payments
for Directors that are triggered by a change of control, nor are
there any other remuneration-related contractual provisions such as
side-letters.
The Chairman and other Non-executive Directors each have a
formal letter of appointment setting out their duties and
responsibilities. These letters are available for inspection at the
Company's registered office.
Exit payment policy
The Company's policy is to limit severance payments on
termination to pre-established contractual arrangements. In the
event that the employment of an Executive Director is terminated,
any compensation payable will be determined in accordance with the
terms of the service contract between the Company and the employee,
as well as the rules of any incentive plans. Any payment in lieu of
notice will be limited to salary and benefits and will be subject
to mitigation. Below we have outlined how incentives are typically
treated in specific circumstances.
Annual bonus: Executive directors who leave during a year other
than for misconduct may, at the discretion of the Committee, be
entitled to receive a bonus which is pro-rated for the proportion
of the year worked, subject to the extent of achievement of the
performance targets at the date of termination.
PSP and Share Option awards: For good leavers (normally defined
as a participant ceasing to be employed by the Group by reason of
death, injury, ill-health or disability, retirement with the
agreement of the Board, redundancy, the employing company ceasing
to be part of the Group, or any other reason which the Board
permits), awards may vest within 30 days of cessation, subject to
pro-rating for the proportion of the vesting period elapsed and the
extent to which performance conditions are determined to have been
achieved. For leavers for any other reason, awards lapse on
cessation.
In the event of a change of control, awards may vest, subject to
pro-rating for the proportion of the vesting period elapsed and the
extent to which performance conditions are determined to have been
achieved.
The Committee retains discretion to adjust the treatment of
awards, within the rules of the relevant plans, to reflect
individual circumstances and to ensure fairness for participants
and shareholders.
In the event of compromise agreements being entered into, it is
normal practice to include the payment of relevant moderate legal
fees (e.g. GBP500) for the departing Director, as is normal
practice.
Difference between director remuneration policy and that for
other employees
The remuneration policy for senior executives is consistent with
that for Executive Directors, including participation in the
Company's PSP and Share Option schemes. Below this level employees
participate in incentive schemes tailored to their role, as
appropriate and receive salaries and benefits which are consistent
with local market practice.
Consideration of employment conditions
When setting Executive Director remuneration, the Committee
considers the remuneration and overall conditions for all
employees. The Committee does not annually consult with employees
when deciding the remuneration policy for Executive Directors,
however the Committee receives regular updates on salary increases,
bonus and share awards made to Group employees and is aware of how
the remuneration of Directors compares to that of other employees.
These matters were taken into account when conducting the most
recent review of executive remuneration.
Consideration of shareholder views
The Committee is always open to feedback from shareholders on
remuneration policy and consults formally with them in advance of
any significant changes being made. Our current remuneration policy
remains unchanged since the approval at the Company's Annual
General Meeting in May 2013.
ANNUAL REPORT ON REMUNERATION
This section of the report presents the remuneration paid to or
receivable by directors in respect of 2016, as well as how we
intend to implement our policy for 2017.
Please note that following the 10:1 consolidation of the
Company's ordinary shares on 9 June 2016, all share figures quoted
here (including the number and pricing of share options and PSPs)
have been restated for consistency.
Single figure of total remuneration - audited
Annual Long-Term
Benefits(1) Pension Incentive Incentive(2)
Salary US$000 US$000 US$000 US$000 US$000 Total $000
----------------- --------------- ------------- -------------- ----------------- ------------------
12 months Dec Dec Dec Dec Dec Dec
ended Dec 2015 2016 2015 Dec 2016 2015 2016 2015 Dec 2016 2015 Dec 2016 Dec 2015 Dec 2016
------------ -------- ------- ---- --------- ---- ------- ---- -------- ---- ----------- -------- --------
Executive Directors
DC Cather 447 371 - - 40 7 - - - - 487 378
AM Norris(3) 320 - 4 - 29 - - - - - 349 -
J Wynn(4) 77 269 2 6 7 24 - - - - 86 299
Non-executive Directors
RP Edey 46 40 - - - - - - - - 46 40
MJ
Donoghue(5) 25 - - - - - - - - - 25 -
BJ Rourke 38 34 - - - - - - - - 38 34
G Wylie 38 34 - - - - - - - - 38 34
Notes
(1) Benefits include healthcare and dental cover
(2) Reflects the total value on vesting of long-term incentives
with performance periods ending in the year. Note no options were
exercised by Directors in 2015 or 2016
(3) A Norris stood down from the Board on 7 September 2015
(4) J Wynn was appointed to the Board on 7 September 2015
(5) M Donoghue stood down from the Board on 19 May 2015
2016 annual incentive outcomes - audited
During 2016, as in 2015, the Company was under considerable
pressure to conserve cash, in order to meet its obligations to
creditors and financiers as far as possible. The Remuneration
Committee therefore determined that, in order for there to be
sufficient cash available to support an annual incentive payment to
Directors and Senior Management, the performance of the Company in
those KPIs normally used as a basis for target-setting (gold
production, cash costs, cashflow, etc) would need to be
substantially above levels that might be reasonably expected and on
that basis, no annual incentive targets were set for 2016.
Long-term incentives vesting in 2016 - audited
Performance Share Plan (PSP) vesting in 2016
There were no PSP shares which vested in 2016.
Share Option Plan vesting in 2016
Details of those options held by Directors which vested in 2016
and 2015 are set out on pages 44 to 46. None of these options had
any embedded value on the date on which they became
exercisable.
Scheme interests awarded during 2016 - audited
No share options were awarded to any staff during 2016.
Payments to past directors - audited
No payments were made to past Directors in 2016
Payments for loss of office - audited
No loss of office payments were made to Directors in 2016
Sums Paid by Third Parties
Neither of the Executive Directors received any additional fees
during the year relating to external appointments.
Relative importance of spend on pay
2016 2015
(US$m) (US$m) % change
Aggregate employee remuneration 15.7 23.0 -32%
Dividends incl. share buybacks - - n/a
Aggregate employee remuneration reduced in 2016 compared to 2015
as a result of a reduction in the workforce across the Group, as
well as a targeted policy of replacing expatriate managers with
locally-trained staff.
No dividends have been paid, nor are any proposed, in respect of
2015 or 2016.
Percentage change in CEO remuneration
The table below sets out the percentage change in CEO salary,
taxable benefits and annual bonus from 2015 to 2016 compared to the
wider employee population.
CEO Other employees
Salary 0% -32%
------------------ ---- ----------------
Taxable benefits 0% -94%
------------------ ---- ----------------
Annual bonus n/a n/a
------------------ ---- ----------------
D Cather was not awarded a pay rise in 2015 or 2016 and received
no Bonus for either year. The other employee group above represents
all Avocet employees, excluding the Executive Directors.
CEO remuneration and Company performance
The chart below shows Avocet's Total Shareholder Return ('TSR')
compared with the FTSE All Share Index and FTSE Gold Mines Index
over the five-year period from 31 December 2011 to 31 December
2016. The FTSE Gold Mines Index has been chosen as it comprises
companies who are operating in the same sector as Avocet and are
exposed to broadly similar risks and opportunities. In addition,
the FTSE All Share Index has been chosen as an appropriate general
index of UK equities.
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2009 2010 2011 2012 2013 2014 2015 2016
CEO single figure of total remuneration (US$000) 1,166 1,820 679 828 546 539 487 378
Annual incentive as a percentage of maximum 100% 100% 41% 35% 0% 0% 0% 0%
Long-term incentives as a percentage of maximum Share options(1) 0% 0% 0% 25% 0% 0% 0% 0%
PSP shares(2) n/a n/a n/a 0% n/a n/a n/a n/a
(1) Prior to May 2011, options were awarded based under an old
Share Option scheme
(2) PSP performance period in respect of the first awards made
to David Cather in 2012 is three years. The 2012 award was not
completed until 31 December 2014, while the 2013 awards did not
complete until 31 December 2015. No awards were made in 2015 or
2016.
Implementation of remuneration policy in 2017
Executive Directors
Executive Director salary levels for 2016 were as follows:
2016 salary (GBP) 2015 Salary (GBP) % increase
D Cather(1) 300,000 300,000 0%
M Norris(2) - 250,000 n/a
J Wynn(3) 200,000 200,000 0%
(1) D Cather waived 10% of his contractual salary and pension
entitlement with effect from October 2015 and 7.3% with effect from
May 2016
(2) M Norris stood down from the Board on 7 September 2015
(3) J Wynn was appointed to the Board on 7 September 2015, at a
salary of GBP200,000.
In view of the recent performance of the Company and taking into
account relevant benchmarking, the Committee decided not to
increase salaries for Executive Directors in 2017.
The salary for B Wentink, who was appointed on 3 April 2017, was
set at GBP250,000 per annum.
Non-Executive Directors
Non-Executive Director fees for the years 2013-2017 are as
follows:
Position 2017 2016 2015 2014 2013
Chairman of the Board GBP30,000 GBP30,000 GBP30,000 GBP70,000 GBP70,000
Non-executive Directors' fees GBP25,000 GBP25,000 GBP25,000 GBP30,000 GBP30,000
Additional fees for chairmanships:
Technical Review Committee - - - GBP15,000 GBP15,000
SHEC Committee - - - GBP15,000 GBP15,000
Audit Committee - - - GBP10,000 GBP10,000
Remuneration Committee - - - GBP5,000 GBP5,000
Fee levels for Non-executive Directors were reduced in 2013 and
2015. The Chairman's fee was fixed at GBP30,000 per annum, with the
other Non-executive Directors' fees at GBP25,000. No additional
fees are payable in 2017 in respect of committee chairmanships.
In recognition of cashflow pressures facing the head office of
the Company, the Non-executive Directors agreed to defer fee
payments from November 2016 until the completion of the Tri-K
transaction, which was completed in May 2017.
Directors' shareholdings - audited
The beneficial interests of Directors and Persons Discharging
Managerial Responsibility ('PDMRs') in the shares of the Company at
31 December 2016 were as follows:
Shares owned Restricted PSP shares Share options
shares held in EBT/SIP
---------- ------------ ----------
EBT SIP Total Performance conditions No performance Condition
---------- ------------ --------- ------ -------- ---------- ---------------------- ------------------------
DC Cather 5,000 1,492 - 1,492 - - 25,000
R Edey 15,032 - - - - - -
J Wynn 3,189 - 236 236 - 7,500 10,000
23,221 1,492 236 1,728 - 7,500 35,000
The following share options held by PDMRs have performance
conditions:
Date of grant 18 Mar 2010
------------------------ ------------
Date first exercisable 18 Mar 2013
------------------------ ------------
Grant price (Pence) 1,050
------------------------ ------------
Performance condition See below
------------------------ ------------
J Wynn 7,500
------------------------ ------------
Total 7,500
------------------------ ------------
Performance conditions outlined are that the share price change
between the date of grant and the date of exercise must be higher
than the change in the value of the FTSE Gold Mining Index over the
same period
None of the other share options are subject to outstanding
performance conditions, other than the discretion retained by the
Remuneration Committee to disallow the exercise of any options for
any reason, for instance if it believes underlying business
performance to be insufficiently strong.
There are no shareholding guidelines currently in place for any
of the directors.
Employee Benefit Trust and UK Share Incentive Plan
The Company has established an Employee Benefit Trust ('EBT')
and a UK Share Incentive Plan ('SIP').
The EBT, which is administered by independent trustees, is
funded by Avocet and holds shares that may be used, on the
recommendation of the Remuneration Committee and at the discretion
of the trustees, exclusively for the settlement of employee share
awards. Shares released in this manner may be for the settlement of
awards made under the Share Bonus Plan, Performance Share Plan,
Annual Incentive Plan, or to satisfy the exercise of share options,
as well as previous discretionary share bonus awards. Restricted
shares may be held in the EBT prior to release.
During the year ended 31 December 2016, there were no movements
of shares held under the EBT:
EBT shares EBT shares EBT shares EBT shares Date on which
allocated at 31 allocated during released/ allocated at 31 shares vest
December 2015 the period cancelled during December 2016
the period
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
Executive Directors
DC Cather 1,492 - - 1,492 02/05/14
Others
Others 682 - - 6,820
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
Total 2,174 - - 2,174
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
The EBT held 33,430 shares at 31 December 2016.
During the year ended 31 December 2016, there were no share
allocations or releases were made under the SIP.
SIP shares SIP shares SIP shares SIP shares Latest date on
allocated at 31 allocated during released/ allocated at 31 which shares vest
December 2015 the period cancelled during December 2016
the period
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
Executive Directors
J Wynn 236 - - 236 13/05/15
Others
Others - - - -
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
Total 236 - - 236
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
The SIP held 190 shares at 31 December 2016.
Share Option Schemes
In 2011, the Company introduced a new Share Option Plan. Prior
to 2011, the Company awarded share options under an older scheme,
originally introduced in 1999. All new awards are made under the
newer scheme, however some outstanding awards under the older
scheme are still outstanding and may be exercised at the
appropriate time, providing the relevant performance conditions are
satisfied (specifically the requirement for growth in the Company's
net assets per share and returns to shareholders, through share
price increase and dividends, to be in excess of at least half of
the companies in the FTSE Gold Mines Index).
The share options held by the Executive Directors under either
of these schemes during the year were as follows:
Options Options Options Options Exercise Date of Date from Expiry date
held at 31 exercised/ granted held at 31 price grant which
December cancelled during the December (pence) exercisable
2015(1) during the period 2016
period
---------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ -----------
DC Cather 25,000 - - 25,000 750 01/08/12 01/08/15 01/08/22
75,000 (75,000) - - 205 26/03/13 26/03/16 26/03/16
100,000 (75,000) - 25,000
J Wynn 491 (491) - - 750 17/05/09 17/05/12 17/05/16
7,500 - - 7,500 1,050 18/03/10 18/03/13 18/03/17
1,333 - - 1,333 2,193 23/05/11 21/02/12 21/02/18
1,333 - - 1,333 2,193 23/05/11 21/02/13 21/02/18
1,334 - - 1,334 2,193 23/05/11 21/02/14 21/02/18
6,000 - - 6,000 2,297 12/03/12 12/03/15 12/03/22
19,500 (19,500) - - 205 26/03/13 26/03/16 26/03/16
37,491 (19,991) - 17,500
---------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ -----------
(1) restated to reflect the changes as a result of the share
consolidation which took place on 9 June 2016
No options became exercisable during 2015 or 2016.
The total number of active unexercised share options under both
schemes is set out below:
Grant date Exercise price (pence) No of options Exercise date Expiry date
----------- ---------------------- -------------- ------------- -----------
08-Mar-13 235 75,000 08-Mar-16 08-Mar-23
01-Aug-12 750 25,000 01-Aug-13 01-Aug-22
18-Mar-10 1,050 37,500 18-Mar-13 18-Mar-17
23-May-11 2,193 3,000 21-Feb-12 21-Feb-18
3,000 21-Feb-13 21-Feb-18
3,000 21-Feb-14 21-Feb-18
12-Mar-12 2,297 16,000 12-Mar-15 12-Mar-22
Total 162,500
----------- ---------------------- -------------- ------------- -----------
Share Price Movements During 2016
The mid-market closing price of the Company's shares at 31
December 2016 was GBP0.54 (31 December 2015: GBP0.26). The highest
and lowest trading prices of the Company's shares during the year
were GBP1.23 and GBP0.25 respectively.
Dilution
Taking account of all shares newly issued as a consequence of
incentive schemes over the ten-year period to 31 December 2016 plus
outstanding equity awards under all the Company's equity schemes,
where new issue shares may be used to satisfy their exercise,
potential dilution is less than 10% of the issued ordinary
shares.
Interests of Directors and Persons Discharging Managerial
Responsibility ('PDMRs')
Other than Directors and the Group's auditor, there were no
other PDMRs during 2016.
The Remuneration Committee and its advisors
Avocet's remuneration policies, as well as specific awards for
Directors and senior managers, are determined by the Remuneration
Committee. Details of this Committee's purpose, composition,
operation and responsibilities are set out on page 34.
The Chief Executive Officer attends meetings at the invitation
of the Committee to provide guidance as appropriate on the impact
of remuneration decisions and on the performance of senior
executives; he does not participate directly in discussions which
concern his own remuneration. The Company Secretary also
attends.
None of the Committee has any personal financial interest in the
matters to be decided, other than as shareholders, or any day to
day involvement in running the business. All Directors are required
to submit to the Board on an annual basis a declaration of their
interests and to seek approval from the Board, whenever these
interests change, to ensure that such changes do not cause a
conflict in the interests of the individual in his capacity as a
member of the Board.
Shareholder voting
The number of votes against the motion to accept the 2015
Remuneration Report at the 2016 AGM was not significant, as set out
below:
Shares owned % of votes cast
For 38,733,519 99.71%
Against 112,715 0.29%
Withheld 141,980 0.36%
Total 38,988,214
This report has been approved by the Board.
Barry Rourke
Chairman, Remuneration Committee
6 June 2017
Independent auditor's report to the members of Avocet Mining
plc
What we have audited
Avocet Mining plc's financial statements for the year ended 31
December 2016 which comprise of the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Cash Flow
Statement and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Basis for qualified opinion on the group financial
statements
With respect to physical inventory contained in the ore
stockpile, in circuit and in finished goods as at 31 December 2015
(being $11,450,000 included within total inventory of $17,274,000
as disclosed in note 17) the audit evidence available to us was
limited because we were unable to observe the counting of this
physical inventory due to safety concerns arising from acts of
terrorism within Burkina Faso. Owing to the nature of the group's
accounting records, we were unable to obtain sufficient appropriate
audit evidence regarding the quantities of this inventory by using
other audit procedures, which caused us to qualify our audit
opinion on the financial statements relating to that year.
Since opening inventories enter into the determination of the
financial performance, we were unable to determine whether
adjustments might have been necessary in respect of the profit for
the year reported in the consolidated income statement. Our opinion
on the current year's financial statements is also modified because
of the possible effect of this matter on the comparability of the
current year's figures and the corresponding figures.
Our opinion on the financial statements is modified
In our opinion, except for the possible effects
of the matters described in the Basis for Qualified
Opinion paragraph, the group financial statements:
* give a true and fair view of the state of the group's
affairs as at 31 December 2016 and of its profit for
the year then ended;
* have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
* have been prepared in accordance with the
requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of
the IAS Regulation.
=============================================================
Emphasis of matter - Going concern and the carrying value of
assets in Burkina Faso
In forming our opinion on the group financial statements, we
have considered the adequacy of the disclosure made in note 1 to
the group financial statements concerning the Group's ability to
continue as a going concern.
The group is reliant on the continuing support from an affiliate
of Elliott Associates, the Company's largest shareholder, however,
should Elliott request the repayment of these loans, the Company
would be obliged at short notice to seek alternative funding, which
the Directors believe would be a considerable challenge.
In relation to Burkina Faso, and in particular Inata, the
immediate priority is to negotiate continued support from creditors
to allow operations to continue. The carrying value of all assets
held in Burkina Faso assumes a successful outcome, if there is not
a successful outcome to negotiations with all stakeholders at Inata
operations may not be able to continue and hence assets in Burkina
Faso would need to be impaired in full. This will represent a
considerable challenge, with compromises needed from all
stakeholders, with there being no guarantee of a successful
outcome.
These conditions, along with the other matters explained in note
1 to the financial statements, indicate the existence of a material
uncertainty that may cast significant doubt over the group's
ability to continue as a going concern and of the carrying value of
assets in Burkina Faso.
The Group financial statements do not include the adjustments
that would result if the group was unable to continue as a going
concern.
Who we are reporting to
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/7391H_4-2017-6-10.pdf
Overview of our audit approach
* Overall group materiality: $837,000, which is based
on approximately 1% of the group's revenues;
* We performed a full scope audit of the financial
information of the UK head office, in respect of the
parent company and the group consolidation, and of
the West Africa mining operations site in Burkina
Faso, which covers 100% of revenue; and
* Key audit risks were identified as Going concern and
Inventory - Ore stockpile
============================================================
Our assessment of risk
In arriving at our opinions set out in this report, we highlight
the following risks that, in our judgement, had the greatest effect
on our audit:
Audit risk How we responded to the
risk
----------------------------------- ------------------------------------------------------------------
Going Concern
The financial statements Our audit work included,
are prepared on a going but was not restricted
concern basis in accordance to:
with International Accounting * We considered the directors' plans for future actions
Standard (IAS) 1 'Presentation in relation to its going concern assessment along
of Financial Statements'. with its parent company cashflow forecasts covering
As the directors' assessment the coming 12 months, taking into account any
of the group's ability relevant events subsequent to the year-end through
to continue as a going discussion at Audit Committee, as disclosed in Note
concern requires significant 1; and
judgement we identified
going concern as a significant
risk requiring special * Management provided us with a copy of the signed
audit consideration, specifically presidential decree from the President of Guinea
given the group's dependency formally enacting the Tri-K mining convention into
on timing of funding. national law which we have reviewed and agreed
fulfilled the final criteria for first close of the
Tri-K transaction.
* We inspected evidence of the receipt of proceeds due
to the Company upon first close of the Tri-K
transaction.
The group's assessment
of going concern is included
in note 1 to the financial
statements. As noted in
the Report on Corporate
Governance on page 30,
the Audit Committee also
considered the on-going
liquidity and going concern
of the group as one of
the key areas of risk
and judgement relevant
to the group for the year.
----------------------------------- ------------------------------------------------------------------
Inventory - Ore stockpile
The measurement and valuation Our audit work included,
of ore stockpile included but was not restricted
in inventory, together to:
with its net realisable * Observing the three key controls over stockpile
value, involves significant valuations:
judgement by the directors
as to the quantum and
quality of the gold ore * Run of mine ore tonnages are closely monitored by
held in the stockpile. spotters who count the movement of haulage trucks
At 31 December 2016 ore from pit to the discrete sections in the stockpile.
stockpile was recorded The counts are then submitted and summarised in a
in the consolidated statement daily report. We have monitored and reperformed this
of financial position control.
at the lower of its cost
and net realisable value
being $8,446,000. We therefore * The tonnages processed through the mill are well
identified the valuation understood using the weightometers on the conveyor
of ore stockpile as a feeds, which are calibrated weekly. We attended a
significant risk requiring calibration as part of our inventory review.
special audit consideration.
* On a weekly and monthly basis surveys are perfomed on
the stockpiles for a more accurate picture of
stockpile tonnages. We attended a survey being
performed 14 December 2016.
* We viewed documents which supported our understanding
of the controls in place and performed a walkthrough
of controls to support the reconciliation of value
attributed to the physical inventory contained in ore
stockpile on the date that we observed the counting
to the value attributed to it at the year-end.
The group's accounting
policy in respect of inventory
is included in note 3
to the group financial
statements and related
disclosures are included
in note 17.
----------------------------------- ------------------------------------------------------------------
Our application of materiality and an overview of the scope of
our audit
Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality in determining the nature, timing
and extent of our audit work and in evaluating the results of that
work.
We determined materiality for the audit of the group financial
statements as a whole to be $837,000 (2015: $2,700,000), which was
approximately 1% of the group's revenues (2015: 5% of the loss
before income taxes) in the year to 31 December 2016. This
benchmark is considered appropriate because, as an operating
company, this is an important measure of performance. No revision
to the materiality determined at the planning stage of our audit
was necessary as we judged that it remained appropriate in the
context of the group's actual financial results for the year ended
31 December 2016.
Given the financial performance in 2016, using the same
benchmark as in previous years would have resulted in a lower
materiality than the level that we determined for the year ended 31
December 2015. Revenues are considered to be the most appropriate
benchmark due to their consistency in recent years and being an
important measure of performance. Given the history of impairments
to the Inata CGU, which have not been considered exceptional due to
their frequency, earnings before income taxes are no longer
considered to be the most appropriate benchmark due to the ongoing
volatility of this performance measure.
We use a different level of materiality, performance
materiality, to drive the extent of our testing and this was set at
60% (2015: 60%) of financial statement materiality. We also
determine a lower level of specific materiality for certain areas
such as directors' remuneration and related party transactions.
We determined the threshold at which we will communicate
misstatements to the audit committee to be $41,850 (2015:
$130,000). In addition, we will communicate misstatements below
that threshold that, in our view, warrant reporting on qualitative
grounds.
Overview of the scope of our audit
A description of the generic scope of an audit of financial
statements is provided on the Financial Reporting Council's website
at www.frc.org.uk/auditscopeukprivate.
We conducted our audit in accordance with International
Standards on Auditing (ISAs) (UK and Ireland). Our responsibilities
under those standards are further described in the
'Responsibilities for the financial statements and the audit'
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
We are independent of the group in accordance with the Auditing
Practices Board's Ethical Standards for Auditors, and we have
fulfilled our other ethical responsibilities in accordance with
those Ethical Standards.
-- The overall approach to the group audit included the group
audit team performing a full scope audit of the financial
information of the UK head office, in respect of the parent company
and the group consolidation, and of the West Africa mining
operations site in Burkina Faso, which covers 100% of revenue.
Specified audit procedures were performed by the group audit team
on certain material balances and transactions within the West
Africa Exploration entities in Burkina Faso and Guinea; and
-- Our approach was based on a thorough understanding of Avocet
Mining plc's business and is risk based. We identified and
concentrated our resources on areas of higher risk, including those
areas of concern to the directors. We undertook substantive testing
on significant transactions, account balances and disclosures, the
extent of which was based on various factors such as our overall
assessment of the control environment, the effectiveness of
controls over individual systems and the management of specific
risks.
Other reporting required by regulations
Our opinions on other matters prescribed by the
Companies Act 2006 are unmodified
In our opinion, based on the work undertaken in
the course of the audit:
* the information given in the Strategic Report and
Directors' Report for the financial year for which
the group financial statements are prepared is
consistent with the group financial statements; and
* the Strategic Report and the Directors' Report have
been prepared in accordance with applicable legal
requirements.
===========================================================
Matters on which we are required to report under the Companies
Act 2006
In the light of the knowledge and understanding of the group and
its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the
Directors' Report.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Under the Listing Rules, we are required to review:
-- the directors' statements in relation to going concern and
longer-term viability, set out on pages 28 and 13 respectively;
and
-- the part of the Corporate Governance Statement relating to
the company's compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Under the ISAs (UK and Ireland), we are required to report to
you if, in our opinion, information in the annual report is:
-- materially inconsistent with the information in the audited financial statements; or
-- apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the group acquired in the
course of performing our audit; or
-- otherwise misleading.
In particular, we are required to report to you if:
-- we have identified any inconsistencies between our knowledge
acquired during the audit and the directors' statement that they
consider the annual report is fair, balanced and understandable;
or
-- the annual report does not appropriately disclose those
matters that were communicated to the audit committee which we
consider should have been disclosed.
In respect solely of the limitation on our work relating to
inventory and cost of sales, described in the Basis for qualified
opinion on group financial statements paragraph, we have not
obtained all the information and explanations that we considered
necessary for the purposes of our audit. We have nothing to report
in respect of any of the other matters above.
We also confirm that we do not have anything material to add or
to draw attention to in relation to:
-- the directors' confirmation in the annual report that they
have carried out a robust assessment of the principal risks facing
the group including those that would threaten its business model,
future performance, solvency or liquidity;
-- the disclosures in the annual report that describe those
risks and explain how they are being managed or mitigated;
-- the directors' statement in the financial statements about
whether they have considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group's ability
to continue to do so over a period of at least twelve months from
the date of approval of the financial statements; and
-- the directors' explanation in the annual report as to how
they have assessed the prospects of the group, over what period
they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the group will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Responsibilities for the financial statements and the audit
What the directors are responsible for:
As explained more fully in the Statement of Directors'
Responsibilities set out on page 29, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view.
What we are responsible for:
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and ISAs (UK
and Ireland). Those standards require us to comply with the
Auditing Practices Board's Ethical Standards for Auditors.
Other matter
We have reported separately on the parent company financial
statements of Avocet Mining plc for the year ended 31 December 2016
and on the information in the Directors' Remuneration Report that
is described as having been audited. That report includes an
emphasis of matter.
Christopher Smith
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
6 June 2017
Consolidated income statement
For the year ended 31 December 2016
Year ended Year ended
31 December 31 December
2016 2015
Note US$000 US$000
---------------------------------- ---- ------------ ------------
Revenue 89,604 85,038
Cost of sales 4 (76,544) (89,933)
---------------------------------- ---- ------------ ------------
Gross profit/(loss) 13,060 (4,895)
---------------------------------- ---- ------------ ------------
Administrative expenses (2,121) (2,475)
Transaction costs 5 (1,475) -
Net impairment of assets 5,8 - (45,148)
---------------------------------- ---- ------------ ------------
Profit/(loss) from operations 9,464 (52,518)
---------------------------------- ---- ------------ ------------
Finance items
Exchange gains 985 3,136
Finance expense 12 (5,171) (6,316)
Profit/(loss) before taxation 5,278 (55,698)
---------------------------------- ---- ------------ ------------
Analysed as:
Profit/(loss) before taxation
and exceptional items 9 7,553 (10,550)
Exceptional items 5 (2,275) (45,148)
Profit/(loss) before taxation 5,278 (55,698)
---------------------------------- ---- ------------ ------------
Taxation 13 (483) 5,993
---------------------------------- ---- ------------ ------------
Profit/(loss) for the year 4,795 (49,705)
---------------------------------- ---- ------------ ------------
Attributable to:
Equity shareholders of the parent
company 3,623 (45,732)
Non-controlling interest 1,172 (3,973)
---------------------------------- ---- ------------ ------------
Profit/(loss) for the year 4,795 (49,705)
---------------------------------- ---- ------------ ------------
Earnings per share(1) :
Basic profit/(loss) per share
(cents per share) 14 17.33 (218.76)
Diluted profit/(loss) per share
(cents per share) 14 17.33 (218.76)
---------------------------------- ---- ------------ ------------
EBITDA(1) 6 12,005 (1,996)
---------------------------------- ---- ------------ ------------
(1) The 2015 earnings per share has been restated to reflect the
changes as a result of the share consolidation which took place on
9 June 2016
(2) EBITDA represents earnings before exceptional items, finance
items, depreciation and amortisation. EBITDA is not defined by IFRS
but is commonly used as an indication of underlying cash
generation.
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
----------------- -----------------
US$000 US$000
----------------------------------------------- ----------------- -----------------
Profit/(loss) for the year 4,795 (49,705)
Total comprehensive income/(loss) for the year 4,795 (49,705)
------------------------------------------------ ----------------- -----------------
Attributable to:
Equity holders of the parent 3,623 (45,732)
Non-controlling interest 1,172 (3,973)
------------------------------------------------ ----------------- -----------------
Total comprehensive income/(loss) for the year 4,795 (49,705)
------------------------------------------------ ----------------- -----------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated statement of financial position
At 31 December 2016
31 December 31 December
2016 2015
Note US$000 US$000
------------------------------ ---- ----------- -----------
Non-current assets
Intangible assets 15 18,781 17,206
Property, plant and equipment 16 - 1,692
18,781 18,898
Current assets
Inventories 17 15,369 17,274
Trade and other receivables 18 4,550 6,648
Cash and cash equivalents
- unrestricted 19 1,118 1,934
Cash and cash equivalents
- restricted 19 3,784 3,922
------------------------------ ---- ----------- -----------
24,821 29,778
Current liabilities
Trade and other payables 20 36,551 42,681
Other financial liabilities 21 46,588 45,973
------------------------------ ---- ----------- -----------
83,139 88,654
Non-current liabilities
Financial liabilities 21 8,775 21,960
Deferred tax liabilities 22 1,586 1,670
Provisions 23 15,704 6,813
------------------------------ ---- ----------- -----------
26,065 30,443
------------------------------ ---- ----------- -----------
Net liabilities (65,602) (70,421)
------------------------------ ---- ----------- -----------
Equity
Issued share capital 28 17,072 17,072
Share premium 146,391 146,391
Other reserves 29 17,895 17,895
Retained earnings (211,285) (214,932)
------------------------------ ---- ----------- -----------
Total equity attributable
to the parent (29,927) (33,574)
Non-controlling interest (35,675) (36,847)
------------------------------ ---- ----------- -----------
Total equity (65,602) (70,421)
------------------------------ ---- ----------- -----------
These financial statements were approved and signed on behalf of
the Board of Directors.
RP Edey BJ Rourke
The accompanying accounting policies and notes form an integral
part of these financial statements.
6 June 2017
Avocet Mining PLC is registered in England No. 03036214
Consolidated statement of changes in equity
For the year ended 31 December 2016
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------------------ -------- -------- --------- --------- ------------- --------------- ---------
At 1 January 2014 16,247 146,040 17,895 (34,350) 145,832 (19,206) 126,626
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Loss for the year - - - (136,120) (136,120) (13,668) (149,788)
Total comprehensive income
for the year - - - (136,120) (136,120) (13,668) (149,788)
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Issue of shares 825 351 - - 1,176 - 1,176
Share based payments - - - 856 856 - 856
Total transactions with owners 825 351 - 856 2,032 - 2,032
At 31 December 2014 17,072 146,391 17,895 (169,614) 11,744 (32,874) (21,130)
Loss for the year - - - (45,732) (45,732) (3,973) (49,705)
Total comprehensive income
for the year - - - (45,732) (45,732) (3,973) (49,705)
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Share based payments - - - 414 414 - 414
Total transactions with owners - - - 414 414 - 414
At 31 December 2015 17,072 146,391 17,895 (214,932) (33,574) (36,847) (70,421)
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Profit/(Loss) for the year - - - 3,623 3,623 1,172 4,795
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Total comprehensive income
for the year - - - 3,623 3,623 1,172 4,795
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Share based payments - - - 24 24 - 24
Total transactions with owners - - - 24 24 - 24
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
At 31 December 2016 17,072 146,391 17,895 (211,285) (29,927) (35,675) (65,602)
------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated cash flow statement
For the year ended 31 December 2016
Year ended Year ended
31 December 31 December
2016 2015
Note US$000 US$000
----------------------------------- ---- ------------ ------------
Cash flows from operating
activities
Profit/(loss) for the year 4,795 (49,705)
Adjusted for:
Depreciation of non-current
assets 16 266 5,374
Net impairment 5,7 - 45,148
Share based payments 24 414
Provisions 23 3,313 -
Taxation in the income statement 13 483 (5,993)
Other non-operating items
in the income statement 27 3,154 1,409
12,035 (3,353)
Movements in working capital
Decrease in inventory 1,904 8,281
Decrease in trade and other
receivables 1,436 1,082
Increase in trade and other
payables 1,214 1,295
----------------------------------- ---- ------------ ------------
Net cash generated by operations 16,589 7,305
Interest paid (3,067) (3,767)
Income tax paid (232) (500)
----------------------------------- ---- ------------ ------------
Net cash generated by operating
activities 6 13,290 3,038
----------------------------------- ---- ------------ ------------
Cash flows from investing
activities
Payments for property, plant
and equipment (149) (3,793)
Payments relating to transaction
costs (133) -
Net cash used in investing
activities (282) (3,793)
----------------------------------- ---- ------------ ------------
Cash flows from financing
activities
Loans repaid 21 (19,366) (10,169)
Proceeds from debt 21 5,635 12,391
Payments in respect of finance
leases 21 (322) (438)
Net cash flows (used in)/generated
by financing activities (14,053) 1,784
----------------------------------- ---- ------------ ------------
Net cash movement (1,045) 1,029
----------------------------------- ---- ------------ ------------
Exchange gains 91 11
----------------------------------- ---- ------------ ------------
Total (decrease)/increase
in cash and cash equivalents (954) 1,040
----------------------------------- ---- ------------ ------------
Cash and cash equivalents
at start of the year 5,856 4,816
----------------------------------- ---- ------------ ------------
Cash and cash equivalents
at end of the year 4,902 5,856
----------------------------------- ---- ------------ ------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Notes to the financial statements
For the year ended 31 December 2016
1. BASIS OF PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL
REPORTING STANDARDS ('IFRS')
The Group financial statements consolidate those of the Company
and of its subsidiary undertakings; the Group financial statements
have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union ('IFRS') and
International Financial Reporting Interpretations Committee
('IFRIC') interpretations as adopted by the European Union at 31
December 2016.
The Group financial statements have been prepared under the
historical cost convention except for share based payments that are
fair valued at the date of grant and other financial assets and
liabilities that are measured at fair value. The accounting
policies applied in these financial statements are unchanged from
those used in the previous annual financial statements.
Certain amounts included in the consolidated financial
statements involve the use of judgement and/or estimation.
Judgements, estimations and sources of estimation uncertainty are
discussed in note 2.
The Parent Company financial statements in notes 37 to 49
present information about the Company as a separate entity rather
than about the Group and have been prepared under Financial
Reporting Standard 101 "Reduced disclosure framework" (FRS101) as
permitted by the Companies Act 2006.
In issue but not effective for periods commencing on 1 January
2016
New standards and interpretations currently in issue but not
effective, based on EU mandatory effective dates, for accounting
periods commencing on 1 January 2016 are:
IFRS 9 Financial Instruments (IASB effective date 1 January
2018)(1, 3)
IFRS 15 Revenue from Contracts with Customers (effective 1
January 2018)(1,3)
IFRS 16 Leases (effective 1 January 2019)(2)
IFRIC 22 Foreign Currency Translations and Advance Consideration
(Effective 1 January 2018)(2)
Amendments to IFRS 2 Classification and Measurement of
Share-based Payment Transactions (effective 1 January 2018) (2)
Amendment to IAS7 Disclosure Initiative (Effective 1 January
2017) (2)
Amendment to IAS12 Recognition of Deferred Tax assets for
unrealised losses (Effective 1 January 2017) (2)
Annual Improvements to IFRSs 2014 - 2016 Cycle (effective 1
January 2018)(2)
(1) Endorsed by the EU
(2) Not Endorsed by the EU
(3) EU effective date is 1 January 2018
The Directors anticipate that the above pronouncements, where
relevant, will be adopted in the Group's financial statements for
the year beginning 1 January 2016 and will have little impact on
the Group's accounting policies or results.
Going concern
Continued financial support from Elliott
The Company has the following loans, which totalled US$27.4
million on 6 June 2017, due to an affiliate of Elliott Associates,
its largest shareholder:
1. First Loan - taken out in March 2013, under which US$20.5
million was outstanding at 26 April 2017, comprising US$15.0
million principal and US$5.5 million accrued interest. The first
loan was due on 31 December 2013 and is secured against the Tri-K
asset in Guinea;
2. Second Loan - unsecured demand loan of US$3.7million
consisting of US$3.05 million principal plus accrued interest of
US$0.6 million. The initial US$1.5 million was drawn down in
January 2015 and a further US$0.75 million was drawn down in three
equal tranches between January and March 2016 and a further US$0.8
million was drawn down in four equal tranches between April and
July 2016; and
3. Third Loan - demand loan of US$3.0 million consisting of
US$2.5 million principal plus accrued interest of US$0.5 million.
The initial US$2.05 million was drawn down in August 2015 (of which
US$1.55 million was used to repay a previous unsecured loan) and a
further US$0.4 million was drawn down between September and October
2015. These amounts are secured over a range of Group assets
including intragroup loans, shares in subsidiaries and over the
gold in circuit and gold in transit of the Inata gold mine.
The First Loan was entered into in March 2013 in order to
finance the Tri-K project Feasibility Study in Guinea. It had been
intended to repay this facility by 31 December 2013 using cashflows
from the Inata gold mine, however a fall in the gold price combined
with production difficulties meant that this was not possible.
Since 1 January 2014, the facility has been in default and is
therefore repayable on demand.
The Second Loan and the Third Loan were drawn down over the
course of 2015 and into 2016 and were used to provide funding for
corporate and administrative activities in London and in
Guinea.
These loans are repayable on demand and if repayment was
requested by Elliott, the Company would have considerable
difficulty in raising external financing needed to settle these
amounts in full.
Since 2014, the cashflow shortages resulting from gold prices
and lower production at the Inata mine meant the Company has relied
primarily on loan financing from Elliott in order to meet its
running costs of its head office and Guinea administrative
functions.
These loans represent short-term facilities with high interest
rates (between 11% and 14%). In order to become financially secure,
the Company will need to negotiate a restructuring of these loans
with Elliott.
Accordingly, the Company is reliant on the continuing support of
the Elliott Lender.
In addition, the interest burden of the Elliott Loans, which is
in excess of US$200k per month, cannot currently be met out of
Company funds and therefore it will be necessary to restructure
these loans in order to put the Company on a sustainable financial
footing. Negotiations with Elliott in this regard have not yet
commenced, as any solution will need to take into consideration the
investment of any external financier who may be interested in
investing in some or all of the Group's assets.
Notwithstanding the need to restructure the terms of these
loans, the Company believes funds generated through its interest in
Tri-K to be the most likely means of repaying its debts to Elliott.
It is not yet possible to be certain as to the means through which
this repayment might be achieved, however possibilities
include:
- the raising of significant external finance for the
construction of Tri-K (in order to avoid dilution of Avocet's 30%
interest), which might allow a restructuring of the current debt
facilities with Elliott;
- Use of proceeds of the sale of Avocet's interest in the project to repay Elliott;
- Application of intra-group loans and dividend payments from
Tri-K once it enters into production.
Should Elliott request the repayment of these loans, the Company
would be obliged at short notice to seek alternative funding, which
would be a considerable challenge. However, management do not
believe Elliott currently intend to demand repayment of their
loans.
Head office creditors
Apart from the Elliott Loans, the head office creditors are
primarily advisers whose fees relate to the Tri-K deal and
directors' fees. These creditors understood that they will be
repaid on receipt of the proceeds of the Tri-K disposal and were
prepared to await this event.
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project in early May.
Following this, the so-called 'First Closing' was completed on 22
May and the Company received from Managem USD 4 million for 40 per
cent of its interest in the project.
The Company relied until recently on management fees out of the
Inata mine, however as the mine is experiencing operational and
cashflow issues, it is not certain that funds will be available to
settle management fees in the near future and therefore the Company
will need to rely on the money received from Managem. After payment
of the outstanding Tri-K obligations and current Head Office
obligations, the Company has funds available to fund Head Office
costs and invest in SMB's restructuring in return for an
opportunity for it and its shareholders to participate in the
Avocet business going forward.
Gold price
The profitability of both the Tri-K project and the Inata gold
mine (including surrounding deposits) depends on the gold
price.
The cash costs at Inata during 2016 and into 2017 have ranged
between US$900 and US$1,100 per ounce and therefore a modest fall
in gold prices from current levels would result in margins becoming
extremely tight, which would make the servicing of the mine's debts
and creditors challenging.
The Company has no control over the gold price and is not in a
position to enter into any hedging arrangements in view of its
financial difficulties.
The sensitivities of Tri-K's cashflows to different gold prices
cannot be determined with any confidence before the completion of
its BFS, however, as with any gold mine, its profitability and
value are likely to be heavily dependent on the gold price.
In financial forecasts, the Company uses US$1,200 per ounce. The
Board believes this to be a reasonable long term price, in line
with market consensus forecasts.
Nevertheless, it remains clear that a sustained fall in the gold
price would put severe pressure on the operations at Inata and
would also threaten the economic viability of the Tri-K project -
as well as the Avocet Group as a whole.
Support from Inata's creditors
The Inata gold mine at 21 April 2017 had approximately US$28
million in trade creditors and a further US$26 million in bank and
other debt facilities. Many of the balances owing to suppliers are
overdue and the mine has faced a number of demands to bring
balances within credit limits.
There have been a number of recent interruptions to critical
supplies, which have temporarily affected mining or production.
Other creditors might also refuse to allow critical supplies to be
delivered to the mine, or might otherwise initiate legal action
that could disrupt operations.
In order to stabilise production and avoid interruptions to
supplies which have affected ongoing operations over the past few
months, the mine needs to spend at least US$3-5 million urgently on
inventories and spare parts, either out of funds generated from
operations or from third party investment.
Inata's management have spent a considerable amount of time
discussing the mine's predicament with key suppliers, pointing to
the fact that the best means to ensure creditors are repaid is to
allow supplies to continue to be made and for the mine to produce
gold.
Nevertheless, the current life of mine plan, which shows
production running until the end of 2019, indicates that in the
absence of a very significant near-term increase in the gold price,
the mine will not be able to repay all of its creditors. However,
as long as the mine forecasts indicate that it is able to generate
cashflow from its ongoing activities, these funds can be used to
reduce the mine's indebtedness, which is likely to be a
considerably better outcome for creditors than closing the mine and
putting its operating company into a form of insolvency.
The threat of creditor action and the risk to ongoing
production, represents a material uncertainty as to the ability of
Inata to continue as a going concern.
In relation to Burkina Faso, and in particular Inata, the
immediate priority is to negotiate continued support from creditors
to allow operations to continue. The carrying value of all assets
held in Burkina Faso assumes a successful outcome, if there is not
a successful outcome to negotiations with all stakeholders at
Inata, operations may not be able to continue and hence assets in
Burkina Faso would need to be impaired in full. This will represent
a considerable challenge, with compromises needed from all
stakeholders, with there being no guarantee of a successful
outcome. These conditions indicate the existence of a material
uncertainty that may cast significant doubt over the group's
ability to continue as a going concern and of the carrying value of
assets in Burkina Faso.
In the event that the mine was unable to continue and the
insolvency of its operating company is unavoidable, it is possible
that Avocet may be able to realise value from its interest in the
exploration permits, particularly Souma. However even in the event
that this were not possible, none of the debts in the Group's
Burkina Faso entities have any recourse to the Company's interests
in Guinea or in the UK, therefore as the Company has obtained funds
to cover head office operating costs (from the proceeds of First
Closing from the Tri-K divestment), then the loss of the Group's
Burkinabe assets would not necessarily lead to the insolvency or
discontinuation of the rest of the Group.
On 31 May SMB, its major trade creditors and its bank (together
representing approximately seventy per cent of SMB's debt) agreed
the terms of a standstill agreement for the duration of two months
as strategic options are being explored in connection with a
financial, debt and corporate restructuring of the company.
Pursuant to this agreement SMB's major trade creditors and its
bank shall refrain from exercising their rights and remedies and
taking any legal action to protect and preserve such rights and
remedies, in relation to the outstanding debts. SMB agreed to a
payment scheme for deliveries of services and goods during the
standstill period that provides for payments thereof in sync with
the receipt of the gold proceeds by SMB.
All stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution.
Souma permit
The future of the Inata gold mine beyond 2019 will rely upon the
successful completion of a Feasibility Study for the Souma deposit,
located 20km north-east of the Inata plant.
The work needed to complete the study, which is expected to cost
between US$5-7 million, must be completed in order for an
application for a mining permit to be submitted by July 2018.
The Company is currently in negotiation with its financiers with
regards to the funding of this activity. However, until any
financing package is negotiated, there can be no guarantee that
this funding will be made available.
Conclusion
The above areas of risk represent material uncertainties that
may cast significant doubt over the ability of the Group to
continue as a Going Concern and that it may be unable to realise
all of its assets and discharge all of its liabilities in the
normal course of business. Nevertheless, the Directors have a
reasonable expectation that these risks can be managed, or will not
come to pass and accordingly the Financial Statements have been
prepared on a Going Concern basis and do not include the
adjustments that would result if the Group were unable to continue
as a Going Concern.
2. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND SOURCES OF
ESTIMATION UNCERTAINTY
Certain amounts included in the financial statements involve the
use of judgement and/or estimation. These are based on management's
best knowledge of the relevant facts and circumstances, having
regard to prior experience. However, judgements and estimations
regarding the future are a key source of uncertainty and actual
results may differ from the amounts included in the financial
statements. Information about judgements and estimation is
contained in the accounting policies and/or other notes to the
financial statements. The key areas are summarised below:
Mineral Resources and Ore Reserves
Quantification of Mineral Resources requires a judgement on the
reasonable prospects for eventual economic extraction.
Quantification of Ore Reserves requires a judgement on whether
Mineral Resources are economically mineable. These judgements are
based on assessment of mining, metallurgical, economic, marketing,
legal, environmental, social and governmental factors involved.
These factors are a source of uncertainty and changes could result
in an increase or decrease in Mineral Resources and Ore Reserves.
This would in turn affect certain amounts in the financial
statements such as depreciation and closure provisions, which are
calculated on projected life of mine figures and carrying values of
mining property and plant which are tested for impairment by
reference to future cash flows based on life of mine Ore Reserves.
Certain relevant judgements are discussed in note 7 in respect of
the impairment of mining assets.
Deferred exploration expenditure
The recoverability of exploration expenditure capitalised within
intangible assets is assessed based on a judgement about the
feasibility of the project and estimates of its future cash flows.
Future gold prices, operating costs, capital expenditure and
production are sources of estimation uncertainty. The Group
periodically makes judgements as to whether its deferred
exploration expenditure may have been impaired, based on internal
and external indicators. Any impairment is based on estimates of
future cash flows. In particular, the Group recognises that, if it
decides, or is compelled due to insufficient funding, to withdraw
from exploration activity at a project, then the Company would need
to assess whether an impairment is necessary based on the likely
sale value of the property. Certain relevant judgements are
discussed in note 7 in respect of the impairment of mining
assets.
Carrying values of property, plant and equipment
The Group periodically makes judgements as to whether its
property, plant and equipment may have been impaired, based on
internal and external indicators. A detailed impairment assessment
was undertaken at 31 December 2015, which was triggered by a
reduction in the gold price, as well as a reassessment of the Inata
life of mine plan.
The carrying value of assets was compared to the recoverable
amount. The recoverable amount used in the impairment review was
calculated on the Value in Use ('VIU') basis, being the discounted
cash flow of the Cash Generating Unit ('CGU'). A CGU is the
smallest group of assets that generate cash inflows from continuing
use. The Inata Mine has been identified as the CGU for the purposes
of impairment testing.
Key assumptions used in the calculation of VIU involve judgement
and estimation of uncertainties, including assessment of
recoverable Mineral Resources and Ore Reserves, gold prices,
operating costs, capital expenditure and discount rates. Further
information is provided on key assumptions and the judgements made,
in note 7.
Deferred stripping costs
The recoverability of deferred stripping costs is assessed based
on the projected future cash flows of the project. The Company does
not anticipate deferring any stripping costs from its current
operations.
Functional currencies
Identification of functional currencies requires a judgement as
to the currency of the primary economic environment in which the
companies of the Group operate. This is based on analysis of the
economic environments and cash flows of the subsidiaries of the
Group.
Taxation and deferred tax
Within the Group there are entities with significant losses
available to be carried forward against future taxable profits. The
quantum of the losses or available deductions for which no deferred
tax asset is recognised is set out in note 13. Estimates of future
profitability are required when assessing whether a deferred tax
asset may be recognised. The entities in which the losses and
available deductions have arisen are principally non-revenue
generating exploration companies and corporate management
functions. It is not expected that taxable profits will be
generated in these entities in the foreseeable future and therefore
the Directors do not consider it appropriate to recognise a
deferred tax asset. Judgements made in estimating future
profitability include forecasts of cash flows and the timing of
intercompany recharges.
Inventory valuations
Valuations of gold in stockpiles and in circuit require
estimations of the amount of gold contained in and recovery rates
from, the various works in progress. These estimations are based on
analysis of samples and prior experience. A judgement is also
required about when stockpiles will be used and what gold price
should be applied in calculating net realisable value; these are
both sources of uncertainty.
The value of consumables and spares in inventory are normally
held at the lower of cost and realisable value. In the 2016
accounts, provisions were made against slow and obsolete stock
items, such that all items greater than 1 year old were written
down in full and the overall carrying value was decreased to just
10% of the cost. Management believe this to be a reasonable resale
level for recently bought stock items.
Restoration, rehabilitation and environmental provisions
Such provisions require a judgement on likely future
obligations, based on assessment of technical, legal and economic
factors. The ultimate cost of environmental remediation is
uncertain and cost estimates can vary in response to many factors,
including changes to the relevant legal requirements, the emergence
of new restoration techniques and changes to the life of mine.
Provisions and contingent liabilities
Judgements are made as to whether a past event has led to a
liability that should be recognised in the financial statements or
disclosed as a contingent liability. Quantifying any such liability
often involves judgements and estimations. These judgements are
based on a number of factors including the nature of the claim or
dispute, the legal process and potential amount payable, legal
advice received, previous experience and the probability of a loss
being realised. Each of these factors is a source of estimation
uncertainty.
Recoverability of VAT
Recoverability of the VAT receivable in Burkina Faso is assessed
based on a judgement of the validity of the claim and, following
review by management, the carrying value in the financial
statements is considered to be fully recoverable. At year end,
US$0.1 million of VAT recoverable was written off as a result of
uncertainty relating to its recoverability.
3. ACCOUNTING POLICIES
Consolidation
The Group financial statements consolidate the results of the
Company and its subsidiary undertakings using the acquisition
accounting method. On acquisition of a subsidiary, all of the
subsidiary's identifiable assets and liabilities which exist at the
date of acquisition are recorded at their fair values reflecting
their condition on that date. The results of subsidiary
undertakings acquired are included from the date of acquisition. In
the event of the sale of a subsidiary, the subsidiary results are
consolidated up to the date of completion of the sale.
The cost of an acquisition is measured by the fair value of the
assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable
to the acquisition where the acquisition completed prior to
accounting periods commencing 1 January 2010. For any acquisitions
occurring after 1 January 2010, the costs of acquisition are
recognised in the income statement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date irrespective of the extent of any Non-controlling
interest. The excess of the cost of acquisition over the fair value
of the Group's share of the identifiable net assets acquired is
recorded as goodwill. If the cost of the acquisition is less than
the fair value of the net assets of the subsidiary acquired, the
difference is recognised directly in the income statement as a
gain.
Exchange differences arising from the translation of the net
investment in foreign entities are taken to equity. All other
transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated, unless the
unrealised loss provides evidence of an impairment of the asset
transferred.
Joint Ventures
A joint venture is a joint arrangement in which the parties that
share joint control have rights to the net assets of the
arrangement. Joint ventures are accounted for using the equity
accounting method.
Exceptional items
Exceptional items are those significant items which are
separately disclosed by virtue of their size or incidence to enable
a full understanding of the Group's financial performance.
Transactions which may give rise to exceptional items include the
impairment of property, plant and equipment and deferred
exploration expenditure, the cost of restructuring forward
contracts and material profit or losses on disposals.
Segmental reporting
An operating segment is a component of the Group engaged in
exploration or production activity that is regularly reviewed by
the Chief Operating Decision Maker ('CODM') for the purposes of
allocating resources and assessing financial performance. The CODM
is considered to be the Board of Directors. The Group's operating
segments are determined as the UK, Burkina Faso (which includes the
Inata mine as well as exploration activity within the Bélahouro
licence area) and Guinea (which includes the Tri-K project).
The Group does not report geographic segments by location of
customer as its business is the production of gold which is traded
as a commodity on a worldwide basis. Sales are made into the
bullion market, where the location of the ultimate customer is
unknown.
Foreign currency translation
1. Functional and presentational currency
The functional currency of the entities within the Group is the
US dollar, as the currency which most affects each company's
revenue, costs and financing. The Group's presentation currency is
also the US dollar.
2. Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
reporting period end exchange rates of monetary assets and
liabilities denominated in foreign currencies, are recognised in
the income statement.
Revenue
Revenue is the fair value of the consideration receivable by the
Group for the sale of gold bullion. Currently, all revenue is
derived from the sale of gold produced by the Inata gold mine. Gold
doré is produced at Inata and shipped to South Africa for refining
into gold bullion, being gold of 99.99% purity. Revenue is
recognised when the risks and rewards of ownership pass to the
purchaser, which occurs when confirmation is received of the
conclusion of a trading instruction to sell gold into the bullion
market at spot prices or to sell at pre-determined prices as part
of a forward contract.
Intangible assets
All directly attributable costs associated with mineral
exploration including those incurred through joint venture projects
are capitalised within Non-current intangible assets pending
determination of the project's feasibility. If an exploration
project is deemed to be economically viable based on feasibility
studies, the related expenditures are transferred to property,
plant and equipment and amortised over the life of the mine on a
unit of production basis. Where a project is abandoned or is
considered to be no longer economically viable, the related costs
are written off. The cost of ancillary services supporting the
exploration activities are expensed when incurred.
Property, plant and equipment
Mining property and plant consists of mine development costs
(including mineral properties, buildings, infrastructure and an
estimate of mine closure costs to be incurred at the end of the
mine life), plant and machinery and vehicles, fixtures and
equipment.
Mining property and plant is initially recognised at the cost of
acquisition and subsequently stated at cost less accumulated
depreciation and any impairment. The cost of acquisition is the
purchase price and any directly attributable costs of acquisition
or construction required to bring the asset to the location and
condition necessary for the asset to be capable of operating in the
manner intended by management.
Mining property and plant is depreciated over the shorter of the
estimated useful life of the asset using the straight-line method,
or the life of mine using the unit of production method and life of
mine reserve ounces. Residual values and useful lives are reviewed
on an annual basis and changes are accounted for over the remaining
lives.
Exploration property, plant and equipment comprises vehicles and
camp buildings specifically used in the Group's exploration
programmes. Exploration property and plant is depreciated over 3-7
years on a straight-line basis.
The following depreciation methods and asset life estimates are
used for the components of mining and exploration property and
plant:
Category Depreciation method Asset life
-------------------------------- ------------------- ------------
Mine development costs Unit of production Life of mine
Plant and machinery Unit of production Life of mine
Vehicles, fixtures and equipment Straight-line 3-7 years
Office Equipment Straight-line 3-7 years
Exploration property and plant Straight-line 3-7 years
-------------------------------- ------------------- ------------
Deferred stripping costs
Stripping costs incurred during the development phase of the
mine as part of initial pit stripping are capitalised as mine
development costs within mining property and plant. Subsequently,
these costs are depreciated from the point at which commercial
production commences using the units of production method and life
of mine ore reserves. Changes to life of mine ore reserves are
accounted for prospectively.
Stripping costs incurred during the production stage of the mine
are treated as either part of the cost of inventory produced or a
non-current deferred stripping asset, depending on the expectation
of when the benefit of the stripping activity is realised through
the processing of ore.
To the extent that the bene t from the stripping activity is
realised in the form of inventory produced in the current period,
the directly attributable costs of that mining activity is treated
as part of the ore stockpile inventory.
To the extent that the bene t from the stripping activity is the
improved access to ore that will be mined in future periods and the
cost is material, the directly attributable costs are treated as a
non-current 'stripping activity asset'. Stripping activity costs
are only capitalised during a sustained period of waste stripping,
such as significant push backs or pit expansion. The costs of short
term variations from a life of mine stripping ratio are absorbed as
part of current period mining costs or ore stockpiles, rather than
being capitalised.
Stripping activity assets are depreciated using the unit of
production method based on the ore reserves for the component of
the orebody for which the stripping activity relates.
Treasury shares
Treasury shares are held at cost and are deducted from equity.
Any gain or loss on the sale or transfer of treasury shares is
recognised in the statement of changes in equity.
Own shares
Own shares are held in the EBT and SIP and are recorded at cost
and deducted from equity. Any gain or loss on the sale or transfer
of these shares is recognised in the statement of changes in
equity.
Impairment of intangible assets and property, plant and
equipment
The Group carries out a review at each balance sheet date to
determine whether there is any indication that the above assets are
impaired. Assets are assessed for indicators of impairment (and
subsequently tested for impairment if an indicator exists) at the
level of a Cash Generating Unit ('CGU'). A CGU is the smallest
group of assets that generates cash inflows from continuing use. If
an indication of impairment exists, the recoverable amount of the
asset or CGU is estimated based on future cash flows, in order to
determine the extent of impairment. Future cash flows are based on
estimates of the life of mine Ore Reserves together with estimates
of future gold prices and cash costs. Deferred exploration costs
are tested for impairment at least annually.
The recoverable amount is the higher of fair value less cost to
sell and value in use. An impairment is recognised immediately as
an expense. Where there is a reversal of the conditions leading to
an impairment, the impairment is reversed as income through the
income statement.
Inventories
Inventories comprise consumables, work in progress, stock pile
and finished goods. Consumables are recognised at average cost and
are subsequently held at the lower of cost less a provision for
obsolescence and net realisable value. Work in progress consists of
ore in stockpiles and gold in process and is valued at the lower of
average production cost and net realisable value. Finished goods
represent gold doré that is undergoing refining processes, or gold
bullion awaiting sale. Finished goods are valued at the lower of
average production cost and net realisable value. Net realisable
value is the estimated selling price less the estimated cost of
completion and any applicable selling expenses.
Financial assets
Financial assets are classified into the following specific
categories which determine the basis of their carrying value in the
statement of financial position and how changes in their fair value
are accounted for: at fair value through profit and loss, available
for sale and loans and receivables. Financial assets are assigned
to their different categories by management on initial recognition,
depending on the purpose for which the investment was acquired.
Available for sale financial assets are included within
non-current assets unless designated as held for sale in which case
they are included within current assets. They are carried at fair
value at inception and changes to the fair value are recognised in
other comprehensive income; when sold, or impaired, the accumulated
fair value adjustments recognised in other comprehensive income are
reclassified through the income statement.
Trade and other receivables are measured on initial recognition
at fair value and subsequently at amortised cost using the
effective interest rates.
De-recognition of financial instruments occurs when the rights
to receive cash flows from the investments expire or are
transferred and substantially all of the risks and rewards of
ownership have been transferred. An assessment for impairment is
undertaken at least annually at each balance sheet date whether or
not there is objective evidence that a financial asset or a group
of financial assets is impaired.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand
deposits and short term highly liquid investments and are measured
at cost which is deemed to be fair value as they have short-term
maturities.
Leases
Finance leases are recognised as those leases that transfer
substantially all the risks and rewards of ownership. Assets held
under finance leases are capitalised and the outstanding future
lease obligations are shown in liabilities at the fair value of the
lease, or if lower at the present value of the lease payments. They
are depreciated over the term of the lease or their useful economic
lives, whichever is the shorter. The interest element (finance
charge) of lease payments is charged to the income statement on a
constant basis over the period of the lease.
All other leases are regarded as operating leases and the
payments made under them are charged to the income statement in the
period on a straight-line basis. The Company does not act as a
lessor.
Financial liabilities
Financial liabilities include loans, overdrafts, forward
contracts and trade and other payables. In the statement of
financial position these items are included within Non-current
liabilities and Current liabilities. Financial liabilities are
recognised when the Group becomes a party to the contractual
agreements giving rise to the liability. Interest related charges
are recognised as an expense in Finance costs in the income
statement unless they meet the criteria of being attributable to
the funding of construction of a qualifying asset, in which case
the finance costs are capitalised.
Trade and other payables and loans are recognised initially at
their fair value and subsequently measured at amortised costs using
the effective interest rate, less settlement payments.
Forward contracts are designated as held for trading financial
assets or liabilities at fair value through profit or loss, in
accordance with IAS39, on the basis that they represent derivatives
not designated as hedging instruments. As a result the forward
contracts are recognised at fair value as defined under IFRS
13.
Borrowing costs
Borrowing costs that are incurred in respect of the construction
of a qualifying asset are capitalised where the construction of an
asset takes a substantial period of time to be prepared for use.
Other borrowing costs are expensed in the period in which they are
incurred and reported in finance costs.
Income taxes
Current income tax liabilities comprise those obligations to
fiscal authorities in the countries in which the Group carries out
mining operations and where it generates its profits. They are
calculated according to the tax rates and tax laws applicable to
the financial period and the country to which they relate. All
changes to current tax assets and liabilities are recognised as a
component of the tax charge in the income statement.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amount of assets and liabilities in the consolidated
financial statements with their respective tax bases. However,
deferred tax is not provided on the initial recognition of
goodwill, nor on the initial recognition of an asset or liability
unless the related transaction is a business combination or affects
taxes or accounting profit.
Deferred tax liabilities are provided for in full; deferred tax
assets are recognised when there is sufficient probability of
utilisation. Deferred tax assets and liabilities are calculated at
tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Pension obligations
The only defined benefit pension scheme operated by the Group
relates to a former US subsidiary undertaking which is no longer
part of the Group. Accordingly full provision has been made for
outstanding post-retirement benefits. The liability recognised in
the statement of financial position is the present value of the
Defined Benefit Obligation ('DBO') at the balance sheet date less
the fair value of plan assets, together with adjustments for
unrecognised actuarial gains or losses and past service costs. The
DBO is calculated annually by independent actuaries using the
projected unit credit method or an accepted equivalent in the USA
and independent assumptions. The present value of the DBO is
determined by discounting the estimated future cash outflows using
interest rates of high quality corporate bonds that are denominated
in the currency in which the benefits will be paid and that have
terms to maturity approximating the terms of the related pension
liability. Actuarial gains and losses are not recognised in the
income statement.
Provisions, contingent liabilities and contingent assets
Other provisions are recognised when the present obligations
arising from legal or constructive commitment, resulting from past
events, will probably lead to an outflow of economic resources from
the Group which can be estimated reliably. Provisions are measured
at the present value of the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the balance sheet date. All provisions are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and
environmental costs arises when environmental disturbance is caused
by the development or ongoing production of a mining property. Such
costs arising from the decommissioning of plant and other site
preparation work, discounted to their net present values, are
provided for in full as soon as the obligation to incur such costs
arises and can be quantified. On recognition of a full provision,
an addition is made to property, plant and equipment of the same
amount; this addition is then charged against profits on a unit of
production basis over the life of the mine. Closure provisions are
updated annually for changes in cost estimates as well as for
changes to life of mine Ore Reserves, with the resulting
adjustments made to both the provision balance and the net book
value of the associated non-current asset.
Share based payments
The Group operates equity settled share based compensation plans
for remuneration of its employees, which may be settled in cash
under certain circumstances. All employee services received in
exchange for the grant of any share based compensation are measured
at their fair values. These are indirectly determined by reference
to the share based award. Their value is appraised at the grant
date and excludes the impact of any non-market vesting
conditions.
All share based compensation is ultimately recognised as an
expense in profit and loss with a corresponding credit to retained
earnings, net of deferred tax where applicable. Where share based
compensation is to be cash settled, such as certain share based
bonus awards, the corresponding credit is made to accruals or cash.
The Group has certain share option schemes that may be settled in
cash at the absolute discretion of the Board. Currently, it is the
expectation that the options will be settled in shares, when
exercised.
If any equity settled share based awards are ultimately settled
in cash, then the amount of payment equal to the fair value of the
equity instruments that would otherwise have been issued is
accounted for as a repurchase of an equity interest and is deducted
from equity. Any excess over this amount is recognised as an
expense.
If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. No adjustment to the expense recognised in prior periods
is made if fewer share options are ultimately exercised than
originally granted.
Upon exercise of share options, the proceeds received, net of
any directly attributable transaction costs, up to the nominal
value of the shares issued, are allocated to share capital with any
excess being recorded in share premium.
Share based payment disclosures have been amended to account for
the share consolidation which took place on 9 June 2016.
Non-current assets and liabilities classified as held for sale
and discontinued operations
A discontinued operation is a component of the entity that
either has been disposed of, or is classified as held for sale and
represents a separate major line of business or geographical area
of operations; is part of a single coordinated plan to dispose of a
separate major line of business or geographical area of operations;
or is a subsidiary acquired exclusively with a view to resale.
The results from discontinued operations, including
reclassification of prior year results, are presented separately in
the income statement.
When the Group intends to sell a non-current asset or a group of
assets (a disposal group) and if sale within twelve months is
judged to be highly probable, the assets of the disposal group are
classified as held for sale and presented separately in the
statement of financial position. Liabilities are classified as held
for sale and presented as such in the statement of financial
position if they are directly associated with a disposal group.
Assets classified as held for sale are measured at the lower of
their carrying amounts immediately prior to their classification as
held for sale and their fair value less costs to sell. However,
some held for sale assets such as financial assets or deferred tax
assets, continue to be measured in accordance with the Group's
accounting policy for those assets. No assets classified as held
for sale are subject to depreciation or amortisation subsequent to
their classification as held for sale.
4. SEGMENTAL REPORTING
Burkina
For the year ended 31 December UK Faso Guinea Total
2016 US$000 US$000 US$000 US$000
---------------------------------- ------- -------- ------- --------
INCOME STATEMENT
Revenue - 89,604 - 89,604
---------------------------------- ------- -------- ------- --------
Cost of Sales - (75,965) (581) (76,544)
Cash production costs:
* mining - (21,881) - (21,890)
* processing - (27,876) - (27,867)
* overheads - (13,978) - (13,978)
* royalties - (6,286) - (6,286)
---------------------------------- ------- -------- ------- --------
- (70,021) - (70,021)
Changes in inventory - (161) - (161)
Expensed exploration and
other cost of sales(1) - (5,632) (464) (6,096)
Depreciation and amortisation(2) - (149) (117) (266)
---------------------------------- ------- -------- ------- --------
Gross profit/(loss) - 13,641 (581) 13,060
Administrative expenses and
share based payments (2,121) - - (2,121)
Transactions costs (1,475) - - (1,475)
Profit/(Loss) from operations (3,596) 13,641 (581) 9,464
Net finance items (2,097) (2,089) - (4,186)
---------------------------------- ------- -------- ------- --------
Profit/(Loss) before taxation (5,693) 11,552 (581) 5,278
---------------------------------- ------- -------- ------- --------
Analysed as:
Profit before tax and exceptional
items (4,218) 12,352 (581) 7,553
Exceptional items (1,475) (800) - (2,275)
---------------------------------- ------- -------- ------- --------
Taxation (234) (249) - (483)
---------------------------------- ------- -------- ------- --------
Profit/(Loss) for the year (5,927) 11,303 (581) 4,795
---------------------------------- ------- -------- ------- --------
Attributable to:
Equity shareholders of parent
company (5,927) 10,131 (581) 3,623
Non-controlling interest - 1,172 - 1,172
---------------------------------- ------- -------- ------- --------
Profit/(Loss) for the year (5,927) 11,303 (581) 4,795
---------------------------------- ------- -------- ------- --------
EBITDA(3) (2,121) 14,590 (464) 12,005
---------------------------------- ------- -------- ------- --------
(1) Expensed exploration and other cost of sales represents
costs not directly related to production, including exploration
expenditure not capitalised and foreign exchange.
(2) Includes amounts in respect of the amortisation of closure provision at Inata.
(3) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation.
Burkina
UK Faso Guinea Total
At 31 December 2016 US$000 US$000 US$000 US$000
-------------------------------- -------- -------- ------- ---------
STATEMENT OF FINANCIAL POSITION
Non-current assets - - 18,781 18,781
Inventories - 15,316 53 15,369
Trade and other receivables 383 3,857 310 4,550
Cash and cash equivalents
- unrestricted 45 1,063 10 1,118
Cash and cash equivalents
- restricted - 3,784 - 3,784
-------------------------------- -------- -------- ------- ---------
Total assets 428 24,020 19,154 43,602
-------------------------------- -------- -------- ------- ---------
Current liabilities (29,753) (53,065) (321) (83,139)
Non-current liabilities (71) (25,994) - (26,065)
-------------------------------- -------- -------- ------- ---------
Total liabilities (29,824) (79,059) (321) (109,204)
-------------------------------- -------- -------- ------- ---------
Net (liabilities)/assets (29,396) (55,039) 18,833 (65,602)
-------------------------------- -------- -------- ------- ---------
Burkina
For the year ended 31 December UK Faso Guinea Total
2016 US$000 US$000 US$000 US$000
--------------------------------- ------- -------- ------- --------
CASH FLOW STATEMENT
(Loss)/profit for the year (5,927) 11,303 (581) 4,795
Adjustments for non-cash
and non-operating items(1) 2,742 58 354 3,154
Movements in working capital 440 7,778 422 8,640
--------------------------------- ------- -------- ------- --------
Net cash (used in)/generated
by operations (2,745) 19,139 195 16,589
Net interest paid - (3,067) - (3,067)
Tax paid - (232) - (232)
Purchase of property, plant
and equipment - (149) - (149)
Payments relating to transaction
costs (133) - - (133)
Loans advanced/(repaid) 1,550 (15,281) - (13,731)
Other cash movements(2) 1,200 (1,124) (307) (231)
--------------------------------- ------- -------- ------- --------
Total (decrease)/increase
in cash and cash equivalents (128) (714) (112) (954)
--------------------------------- ------- -------- ------- --------
(1) Includes impairments, depreciation and amortisation, share
based payments, movement in provisions, taxation in the income
statement and non-operating items in the income statement.
(2) Other cash movements include cash flows from financing activities and exchange losses.
Burkina
For the year ended 31 December UK Faso Guinea Total
2015 US$000 US$000 US$000 US$000
--------------------------------- ------- -------- ------- --------
INCOME STATEMENT
Revenue - 85,038 - 85,038
--------------------------------- ------- -------- ------- --------
Cost of Sales - (89,008) (925) (89,933)
Cash production costs:
* mining - (23,772) - (23,772)
* processing - (34,492) - (34,492)
* overheads - (15,256) - (15,256)
* royalties - (5,570) - (5,570)
--------------------------------- ------- -------- ------- --------
- (79,090) - (79,090)
Changes in inventory - (5,895) - (5,895)
Expensed exploration and
other cost of sales(1) - 1,198 (772) 426
Depreciation and amortisation(2) - (5,221) (153) (5,374)
--------------------------------- ------- -------- ------- --------
Gross loss - (3,970) (925) (4,895)
Administrative expenses and
share based payments (2,475) - - (2,475)
Net impairment of assets - (45,148) - (45,148)
--------------------------------- ------- -------- ------- --------
Loss from operations (2,475) (49,118) (925) (52,518)
Net finance items (2,768) (412) - (3,180)
--------------------------------- ------- -------- ------- --------
Loss before taxation (5,243) (49,530) (925) (55,698)
--------------------------------- ------- -------- ------- --------
Analysed as:
Loss before tax and exceptional
items (5,243) (4,382) (925) (10,550)
Exceptional items (impairments) - (45,148) - (45,148)
--------------------------------- ------- -------- ------- --------
Taxation (19) 6,012 - 5,993
--------------------------------- ------- -------- ------- --------
Loss for the year (5,262) (43,518) (925) (49,705)
--------------------------------- ------- -------- ------- --------
Attributable to:
Equity shareholders of parent
company (5,262) (39,545) (925) (45,732)
Non-controlling interest - (3,973) - (3,973)
--------------------------------- ------- -------- ------- --------
Loss for the year (5,262) (43,518) (925) (49,705)
--------------------------------- ------- -------- ------- --------
EBITDA(3) (2,475) 1,251 (772) (1,996)
--------------------------------- ------- -------- ------- --------
(1) Expensed exploration and other cost of sales represents
costs not directly related to production, including exploration
expenditure not capitalised and intercompany charges.
(2) Includes amounts in respect of the amortisation of closure provision at Inata.
(3) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation.
Burkina
UK Faso Guinea Total
At 31 December 2015 US$000 US$000 US$000 US$000
-------------------------------- -------- -------- ------- ---------
STATEMENT OF FINANCIAL POSITION
Non-current assets - - 18,898 18,898
Inventories - 17,212 62 17,274
Trade and other receivables 217 6,211 220 6,648
Cash and cash equivalents
- unrestricted 173 1,640 121 1,934
Cash and cash equivalents
- restricted - 3,922 - 3,922
-------------------------------- -------- -------- ------- ---------
Total assets 390 28,985 19,301 48,676
-------------------------------- -------- -------- ------- ---------
Current liabilities (25,043) (63,280) (331) (88,654)
Non-current liabilities - (30,443) - (30,443)
-------------------------------- -------- -------- ------- ---------
Total liabilities (25,043) (93,723) (331) (119,097)
-------------------------------- -------- -------- ------- ---------
Net (liabilities)/assets (24,653) (64,738) 18,970 (70,421)
-------------------------------- -------- -------- ------- ---------
Burkina
For the year ended 31 December UK Faso Guinea Total
2015 US$000 US$000 US$000 US$000
------------------------------- ------- -------- ------- --------
CASH FLOW STATEMENT
Loss for the year (5,262) (43,518) (925) (49,705)
Adjustments for non-cash
and non-operating items(1) 765 45,786 (199) 46,352
Movements in working capital (1,067) 10,363 1,362 10,658
------------------------------- ------- -------- ------- --------
Net cash (used in)/generated
by operations (5,564) 12,631 238 7,305
Net interest (paid)/received - (3,767) - (3,767)
Tax paid - (500) - (500)
Purchase of property, plant
and equipment - (3,765) (28) (3,793)
Loans advanced/(repaid) 3,928 (1,706) - 2,222
Other cash movements(2) 1,664 (1,963) (128) (427)
------------------------------- ------- -------- ------- --------
Total decrease in cash and
cash equivalents 28 930 82 1,040
------------------------------- ------- -------- ------- --------
(1) Includes impairments, depreciation and amortisation, share
based payments, movement in provisions, taxation in the income
statement and non-operating items in the income statement.
(2) Other cash movements include cash flows from financing activities and exchange losses.
5. EXCEPTIONAL ITEMS
31 December 31 December
2016 2015
US$000 US$000
---------------------------------- ----------- -----------
Transaction costs (1,475) -
Leave pay accrual from prior year (800) -
Impairment of Burkina Faso assets - (45,148)
Exceptional loss (2,275) (45,148)
---------------------------------- ----------- -----------
Transaction costs
Transaction costs of US$1.5 million were incurred during the
year in respect of the Joint Venture agreement with Managem
relating to the Tri-K asset in Guinea. This transaction was
completed in May 2017.
Prior year leave pay
Included in the staff provisions of US$3.1 million is an amount
of US$0.8 million which relates to accrued but unpaid employee
leave entitlements in Burkina Faso due at 31 December 2015. This
amount had not been recognised in previous reporting periods on the
grounds of materiality.
Net impairments of Burkina Faso assets
The Group recognised a net impairment of non-current assets of
US$ nil (2015: US$45.1 million) in respect of the Inata cash
generating unit and Bélahouro exploration licences, driven by a
reduction in the forecasted gold price and changes in the life of
mine plan, together with lower expected cash recoveries from VAT
and inventory balances. Further details are provided in note 7.
Net Impairment of Guinea assets
The group recognised a net impairment of non-current assets of
US$ nil (2015: US$ nil).
An impairment of US$1.6 million was recognised against the
exploration property, plant and equipment in Tri-K, which was
offset by an equal and opposite impairment reversal in respect of
the Tri-K intangible asset. Further details are provided in note
7.
6. EBITDA
Earnings before interest, tax, depreciation and amortisation
('EBITDA') represents profit before depreciation/amortisation,
interest and taxes, as well as excluding any exceptional items and
profit or loss from discontinued operations and changes in fair
value of forward contracts.
Reconciliation of loss before taxation to EBITDA
31 December 31 December
2016 2015
US$000 US$000
------------------------------- ----------- -----------
Profit/(loss) before taxation 5,278 (55,698)
Exceptional Items (see note 5) 2,275 45,148
Depreciation 266 5,374
Exchange gains (985) (3,136)
Net finance expense 5,171 6,316
------------------------------- ----------- -----------
EBITDA 12,005 (1,996)
------------------------------- ----------- -----------
Reconciliation of EBITDA to net cash generated by/(used in)
operating activities
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------- ----------- -----------
EBITDA 12,005 (1,996)
Working capital 8,640 7,260
Net interest paid (3,067) (3,767)
Income tax paid (232) (500)
Provisions and other non-cash costs (4,056) 2,041
------------------------------------------- ----------- -----------
Net cash generated by operating activities 13,290 3,038
------------------------------------------- ----------- -----------
7. IMPAIRMENT OF ASSETS
No impairments were recognised on the Group's Burkina Faso
assets in 2016.
In accordance with IAS 36 Impairment of Assets, at each
reporting date the Company assesses whether there are any
indicators of impairment of non-current assets. When circumstances
or events indicate that non-current assets may be impaired, these
assets are reviewed in detail to determine whether their carrying
value is higher than their recoverable value and, where this is the
result, an impairment is recognised. Recoverable value is the
higher of value in use ('VIU') and fair value less costs to sell.
VIU is estimated by calculating the present value of the future
cash flows expected to be derived from the asset cash generating
unit ('CGU'). Fair value less costs to sell is based on the most
reliable information available, including market statistics and
recent transactions. The Inata mine has been identified as CGU.
This includes all tangible non-current assets, intangible
exploration assets and net current assets excluding cash.
Impairment of Inata at prior reporting dates
At 31 December 2015 the Company concluded that the reduction in
the market forecasted gold price and the decrease in the expected
gold recovered from the change in Inata's life of mine plan were
indicators of impairment. An assessment was carried out of the fair
value of Inata's CGU, using the discounted cash flows of the mine's
latest estimated life of mine plan to calculate their VIU. As a
result of this review, a pre-tax impairment loss of US$45.1 million
was recorded in 2015, being an impairment of mining property and
plant of US$31.9 million, spares parts inventory of US$5.6 million
and stockpile ore inventory of US$7.6 million.
When calculating the VIU, certain assumptions and estimates were
made. Changes in these assumptions can have a significant effect on
the recoverable amount and therefore the value of the impairment
recognised. Should there be a change in the assumptions which
indicated the impairment, this could lead to a revision of recorded
impairment losses in future periods. The key assumptions are
outlined in the following table.
Assumption Judgements Sensitivity
--------------- ------------------------------- ---------------------------
Timing of Cash flows were forecast An extension or shortening
cash flows over the current life of the mine life would
of the mine, which have resulted in a
forecasts mining activities corresponding increase
to occur until Q4 2019, or decrease in impairment,
with a further four the extent of which
months during which it was not possible
stockpiles would be to quantify.
processed and rehabilitation
costs would be incurred.
--------------- ------------------------------- ---------------------------
Production Production costs were A change of 10% in
costs forecast based on detailed production costs excluding
assumptions, including royalties would have
staff costs, consumption varied the pre-tax
of fuel and reagents, impairment attributable
maintenance and administration by US$15.1 million(1)
and support costs. .
--------------- ------------------------------- ---------------------------
Gold price A gold price of US$1,100 A change of 10% in
per ounce was assumed. the gold price assumption
would have varied the
pre-tax impairment
recognised in the year
by US$18.1 million.
--------------- ------------------------------- ---------------------------
Discount A discount rate of An increase in the
rate 20% (pre-tax) was used discount rate of five
in the VIU estimation, percentage points would
based on estimations have decreased the
of Avocet's cost of pre-tax impairment
capital, adjusted for recognised in the year
specific risk factors by US$0.1million(1)
related to Inata including .
liquidity and production
risks.
--------------- ------------------------------- ---------------------------
Gold production The January 2017 life A 10% change in ounces
of mine plan showed produced would have
total gold production varied the pre-tax
of 0.31 million ounces. impairment recognised
in the prior year by
US$18.1 million(1)
.
--------------- ------------------------------- ---------------------------
(1) Sensitivities provided were on a 100% basis, pre-tax. 10% of
the post-tax impairment would be attributed to the non-controlling
interest.
The Inata mine has undergone a number of impairments in recent
years, which have been summarised below.
At 31 December 2012 the Company concluded that the reduction in
Inata's Ore Reserve and subsequent revision to the life of mine
represented an indication of impairment. A review was therefore
carried out of the carrying value of Inata's assets, using the
discounted cash flows of Inata's latest estimated life of mine plan
to calculate their VIU. As a result of this review, a pre-tax
impairment loss of US$135.3 million was recorded in 2012, being an
impairment of intangible exploration costs of US$6.4 million and
mine development costs of US$128.9 million.
In accordance with IAS 36, the Company is required to assess at
the end of each reporting period whether there is any indication
that a previous impairment loss may no longer exist or may have
decreased, as well as a requirement to review any indication of
additional impairment. As a result of the Group's quarterly
reporting during 2013, such reviews were carried out on a quarterly
basis and during 2013 resulted in a reversal of impairment and
subsequent impairments as described below. The impairment in the
accounts for 2013 was recognised on a net basis and was in line
with the impairment charge that would have been recognised if
reviewed on an annual basis.
(1) Sensitivities provided are on a 100% basis, pre-tax. 10% of
the post-tax impairment would be attributed to the non-controlling
interest.
At 31 March 2013 the recognition of the forward contract
liability at fair value during March 2013 was excluded from both
the carrying amount of the CGU and the cash flows of the VIU
calculation. The Company concluded that the requirements of an
indication of a reversal of impairment were identified in relation
to the Inata mining assets. An assessment was therefore carried out
of the fair value of Inata's CGU, using the discounted cash flows
of Inata's latest estimated life of mine plan to calculate the VIU.
As a result of the review, a pre-tax partial reversal of impairment
losses of US$72.2 million was recorded in 31 March 2013 and
allocated to mine development costs
At 30 June 2013 the Company concluded that the fall in the gold
spot price and market forecasts was considered to be an indicator
for impairment. An assessment was carried out of the fair value of
Inata's assets, using the discounted cash flows of Inata's latest
estimated life of mine plan to calculate their VIU. As a result of
this review, a pre-tax impairment loss of US$73.3 million was
recorded at 30 June 2013, being an impairment of mine development
costs.
At 30 June 2014, the Company reviewed its latest life of mine
plan forecast (details of which were announced on 12 June 2014) and
concluded that the reduction in gold production (and therefore cash
generation) compared to previous forecasts represented an indicator
of impairment. An assessment was carried out of the fair value of
Inata's CGU, using the discounted cash flows of the mine's latest
estimated life of mine plan to calculate their VIU. As a result of
this review, a pre-tax impairment loss of US$25.8 million was
recorded in the accounts at 30 June 2014, which was applied against
the carrying value of mine development costs at Inata.
At 30 June 2015, the Company revised its near term gold price
assumptions down to US$1,100 per ounce (from US$1,200 per ounce at
31 December 2014) for 2015-2017, the period covered by the current
Inata life of mine. These lower gold prices, together with the
production uncertainties associated with the complex ore types
which remain to be processed in the life of mine, were considered
by management to be an indication of impairment of the Inata cash
generating unit. As a result of this review, a pre-tax impairment
loss of US$30.6 million was recorded in the accounts at 30 June
2015, of which US$28.4 million was set against the carrying value
of the fixed assets of Inata (which were reduced to nil in the
Consolidated Statement of Financial Position), with the remaining
US$2.2 million set against the value of the stockpiled ore.
31 December 2016 31 December 2015 31 December 2014 31 December 2013
US$000 US$000 US$000 US$000
--------------------------------------------- ---------------- ---------------- ---------------- ----------------
Impairment partial reversal at 31 March 2013 - - - 72,200
Impairment at 30 June 2013 - - - (73,300)
Impairment at 31 December 2013 - - - (29,400)
Impairment at 30 June 2014 - - (25,780) -
Impairment at 31 December 2014 - - (79,767) -
Impairment at 30 June 2015 - (30,609) - -
Impairment at 31 December 2015 - (14,539) - -
Impairments at 30 June 2016 - - - -
Impairments at 31 December 2016 - - - -
Net impairment - (45,148) (105,547) (30,500)
--------------------------------------------- ---------------- ---------------- ---------------- ----------------
Impairment of Guinea fixed assets and reversal of impairment of
exploration asset
An impairment review over the Company's assets in Guinea (the
Tri-K project) indicated a fair value estimate of US$18.8 million
at 31 December 2014 and 31 December 2015. The transaction to divest
up to 70% of the project to Managem for proceeds of US$14.0
million, which was signed on 9 October 2016, supported this
valuation and indicated that no further impairments were necessary
over the Tri-K CGU.
Included within the balance of US$18.8 million was a fixed asset
balance of US$1.6 million. At 31 December 2016, the Company
considered that these specific assets could not be shown to have
any residual value and should therefore be written down in full. As
the overall value of the Tri-K project remained unchanged, this
write off was offset by an equal and opposite reversal in the
impairment of the project's intangible assets. The overall effect
in the Group accounts therefore was a reduction in tangible assets
and an increase in intangible assets, of US$1.6 million, with no
impact on the Income Statement.
8. LOSS FOR THE PERIOD BEFORE TAX
31 December 31 December
2016 2015
US$000 US$000
----------------------------------------------------------- ----------- -----------
Profit for the period has been arrived
at after charging:
Depreciation of property, plant and equipment 266 5,292
Depreciation of property, plant and equipment
held under finance lease - 82
Operating lease charges 263 1,613
Audit services:
* fees payable to the Company's auditor for the audit
of the Company and Group accounts 155 160
Fees payable to the Company's auditor
for other services:
* tax compliance services 13 18
* tax advisory services 17 -
- all services relating to corporate
finance transactions (either proposed
or entered into ) by or on behalf of the
Company or any of its associates 62 -
----------------------------------------------------------- ----------- -----------
9. PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS
Loss before taxation and exceptional items is calculated as
follows:
31 December 31 December
2016 2015
US$000 US$000
---------------------------------------------- ----------- -----------
Profit/(loss) from operations 9,464 (52,518)
---------------------------------------------- ----------- -----------
Transaction costs 1,475 -
Prior year leave pay 800 -
Impairment of Burkina Faso assets - 45,148
Exchange gains 985 3,136
Net finance expense (5,171) (6,316)
Profit/(loss) before taxation and exceptional
items 7,553 (10,550)
---------------------------------------------- ----------- -----------
10. REMUNERATION OF KEY MANAGEMENT PERSONNEL
In accordance with IAS 24 - Related party transactions, key
management personnel, including all Executive and Non-executive
Directors, are those persons having authority and responsibility
for planning, directing and controlling the activities of the
Group. The Company uses the same definition as for Persons
Discharging Managerial Responsibility ('PDMRs'), an up-to-date list
of whom can be found on the Company's website
(wwww.avocetmining.com).
31 December 31 December
2016 2015
US$000 US$000
----------------------------------------------- ----------- -----------
Wages and salaries 778 1,179
Social security costs 104 153
Bonus - -
Share based payments - -
Pension costs - defined contribution plans 39 104
----------------------------------------------- ----------- -----------
Total remuneration of key management personnel 921 1,436
----------------------------------------------- ----------- -----------
11. TOTAL EMPLOYEE REMUNERATION (INCLUDING KEY MANAGEMENT PERSONNEL)
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------- ----------- -----------
Wages and salaries 12,102 14,880
Social security costs 3,535 3,012
Bonus - 69
Redundancy payments 9 4,504
Share based payments 24 413
Pension costs - defined contribution plans 39 104
------------------------------------------- ----------- -----------
Total employee remuneration 15,709 22,980
------------------------------------------- ----------- -----------
The average number of employees during
the period was made up as follows:
Directors 5 6
Management and administration 14 34
Mining, processing and exploration staff 548 534
------------------------------------------- ----------- -----------
567 574
------------------------------------------- ----------- -----------
12. FINANCE INCOME AND EXPENSE
31 December 31 December
2016 2015
US$000 US$000
--------------------------- ----------- -----------
Finance income
Bank interest received - -
--------------------------- ----------- -----------
Finance expense
Interest on loans 4,779 5,705
Interest on finance leases 113 152
Other finance costs 279 459
--------------------------- ----------- -----------
Net finance expense 5,171 6,316
--------------------------- ----------- -----------
The interest on loans of US$4.8 million consists of US$2.2
million in respect of the Inata facility with Ecobank Burkina,
US$0.3 million in respect of the short term facility with Coris
Bank and US$2.3 million in respect of the Elliott Loans. The
interest on finance leases relates to the fuel storage facility
located on the Inata site. Other finance costs reflect costs
incurred in respect of the Group's financing activities during the
year.
13. TAXATION
31 December 31 December
2016 2015
US$000 US$000
------------------------------------ ----------- -----------
Current tax:
Current tax on profit for the year 567 -
Current tax relating to prior years - (3,049)
Current tax charge/(credit) 567 (3,049)
------------------------------------ ----------- -----------
The current tax charge in 2016 relates to taxation on the
results of the Inata mine in Burkina Faso. The credit of US$3.0
million in 2015 relates to the release of a provision in respect of
a taxation assessment covering 2009-2011, which was settled in the
year.
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------------- ----------- -----------
Deferred tax:
Deferred tax provision in respect of withholding
taxes on intra-group balances (84) (2,944)
Deferred tax charge/(credit) (84) (2,944)
------------------------------------------------- ----------- -----------
Total tax charge/(credit) for the year 483 (5,993)
------------------------------------------------- ----------- -----------
The deferred tax liability of US$1.6 million (2015: US$1.7
million) relates to withholding tax ('WHT') and interest tax
('IRVM') that would be due in Burkina Faso on settlement of
intragroup management fee invoices. Restrictions on payments to
Group companies as a result of Avocet's loan arrangements, together
with limited cash availability, have led management to believe it
is now unlikely that the loan interest balances will be paid in
full and accordingly it was considered appropriate to release this
element of the provision during 2015.
Factors affecting the tax charge for the year:
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------ ----------- -----------
Profit/(loss) for the period before tax 5,278 (55,698)
Profit/(loss) for the period multiplied
by the UK standard rate of corporation
tax 20% (2015: 20%) 1,055 (11,140)
Effects of:
Differences in taxation rate 434 (4,190)
Disallowable expenses 549 12,724
Gains not taxable 295 (996)
Tax provision in respect of withholding
taxes on intra-group balances (145) (2,944)
Tax on turnover in Burkina Faso 333 -
Adjustment in respect of prior periods - (3,049)
(Utilisation)/carry forward of tax losses (940) 3,602
------------------------------------------ ----------- -----------
Tax charge/(credit) for the period 483 (5,993)
------------------------------------------ ----------- -----------
The Group contains entities with tax losses and deductible
temporary differences for which no deferred tax asset is
recognised. The total unrecognised losses and deductible temporary
differences amount to approximately US$79.7 million. A deferred tax
asset has not been recognised because the entities in which the
losses and allowances have been generated either do not have
forecast taxable profits in the foreseeable future, or the losses
have restrictions whereby their utilisation is considered to be
unlikely.
14. EARNINGS PER SHARE
Earnings per share are analysed in the table below, which also
shows earnings per share after adjusting for exceptional items.
31 December 31 December
2016 2015
Shares Shares
---------------------------------------------- ----------- -----------
Weighted average number of shares in issue
for the year(1)
* number of shares with voting rights 20,905,470 20,905,470
- -
* effect of share options in issue
---------------------------------------------- ----------- -----------
Total used in calculation of diluted earnings
per share 20,905,470 20,905,470
---------------------------------------------- ----------- -----------
(1) The 2015 weighted average number of shares has been restated
to reflect the position as a result of the share consolidation
which took place on 9 June 2016
Potential ordinary shares are treated as dilutive, when and only
when, their conversion to ordinary shares would decrease earnings
per share or increase loss per share from continuing operations. As
potential ordinary shares for 2015 would decrease the loss per
share, they are therefore not included in diluted earnings per
share. Note 26 outlines share options in issue, none of which were
exercisable at the period end.
31 December 31 December
2016 2015
US$000 US$000
----------------------------------------------- ----------- -----------
Earnings per share
Earnings/(loss) for the year 4,795 (49,705)
Adjustments:
Adjusted for non-controlling interest (1,172) 3,973
----------------------------------------------- ----------- -----------
Profit/(Loss) for the year attributable
to equity shareholders of the parent 3,623 (45,732)
----------------------------------------------- ----------- -----------
Profit/(Loss) per share
* basic (cents per share) 17.33 (218.76)
* diluted (cents per share) 17.33 (218.76)
Earnings per share before exceptional
items
Profit/(Loss) for the year attributable
to equity shareholders of the parent 3,623 (45,732)
Adjustments:
Add back exceptional items 2,275 45,148
Less non-controlling interest of exceptional
items (80) (4,515)
Profit for the year attributable to equity
shareholders of the parent before exceptional
items 5,818 3,931
----------------------------------------------- ----------- -----------
Earnings per share before exceptional
items
* basic (cents per share) 27.83 18.80
* diluted (cents per share) 27.83 18.80
----------------------------------------------- ----------- -----------
15. INTANGIBLE ASSETS
31 December 31 December
2016 2015
Note US$000 US$000
------------------------------- ---- ----------- -----------
At 1 January 17,206 17,206
Additions - -
Impairment partial reversal at
31 December 2016 5, 7 1,575 -
At 31 December 18,781 17,206
------------------------------- ---- ----------- -----------
The Company's intangible assets relate exclusively to the Tri-K
project in Guinea.
As set out in note 7, in 2016 the write off of US$1.6 million of
tangible fixed assets in Guinea led to an equal and opposite
reversal of the impairment against the intangible asset in Guinea,
on the grounds that the overall value of the Tri-K CGU remained
unchanged at US$18.8 million.
16. PROPERTY, PLANT AND EQUIPMENT
Mining property
and plant
------------------------------------
Vehicles, Exploration
Mine Plant fixtures property
development and and and Office
costs machinery equipment plant equipment
------------ ---------- ---------- ----------- ----------
Burkina Burkina Burkina
Year ended 31 December Faso Faso Faso Guinea UK Total
2016 Note US$000 US$000 US$000 US$000 US$000 US$000
----------------------- ---- ------------ ---------- ---------- ----------- ---------- -------
Cost
At 1 January 2016 76,420 37,649 42,181 3,123 770 160,143
Additions - 149 - - - 149
At 31 December 2016 76,420 37,798 42,181 3,123 770 160,292
----------------------- ---- ------------ ---------- ---------- ----------- ---------- -------
Depreciation
At 1 January 2016 76,420 37,649 42,181 1,431 770 158,451
Charge for the year - 149 - 117 - 266
Impairment 7 - - - 1,575 - 1,575
At 31 December 2016 76,420 37,798 42,181 3,123 770 160,292
----------------------- ---- ------------ ---------- ---------- ----------- ---------- -------
Net Book Value at 31
December 2016 - - - - - -
----------------------- ---- ------------ ---------- ---------- ----------- ---------- -------
Net Book Value at 31
December 2015 - - - 1,692 - 1,692
----------------------- ---- ------------ ---------- ---------- ----------- ---------- -------
All of the Company's fixed assets in Burkina Faso and in the UK
were impaired to nil as at 31 December 2015. Subsequent additions
in 2016 were fully written down in the year.
The impairment of US$1.6 million of fixed assets in Guinea took
place as the carrying value of those properties could no longer be
supported (see note 7 and note 15 above).
Mining property
and plant
------------------------------------
Vehicles, Exploration
Mine Plant fixtures property
development and and and Office
costs machinery equipment plant equipment
------------ ---------- ---------- ----------- ----------
Burkina Burkina Burkina
Year ended 31 December Faso Faso Faso Guinea UK Total
2015 Note US$000 US$000 US$000 US$000 US$000 US$000
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
Cost
At 1 January 2015 76,114 45,035 60,813 3,095 770 185,827
Additions 3,072 692 - 28 - 3,792
Impairment 7 (2,766) (8,078) (18,632) - - (29,476)
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
At 31 December 2015 76,420 37,649 42,181 3,123 770 160,143
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
Depreciation
At 1 January 2014 76,114 36,163 38,752 1,278 770 153,077
Charge for the year 306 1,486 3,429 153 - 5,374
At 31 December 2014 76,420 37,649 42,181 1,431 770 158,451
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
Net Book Value at 31
December 2015 - - - 1,692 - 1,692
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
Net Book Value at 31
December 2014 - 8,872 22,061 1,817 - 32,750
----------------------- ---- ------------ ---------- ---------- ----------- ---------- --------
17. INVENTORIES
31 December 31 December
2016 2015
US$000 US$000
------------------ ----------- -----------
Consumables 1,845 5,824
Stockpile 8,446 7,283
Work in progress 2,428 2,079
Finished goods 2,650 2,088
------------------ ----------- -----------
Total inventories 15,369 17,274
------------------ ----------- -----------
Consumables represent stocks of mining supplies, reagents,
lubricants and spare parts held on site. US$1.8 million is deemed
to be the realisable value of the spares and consumables held on
site at year end and represents less than 10% of the historic
cost.
The stockpile at 31 December 2016 consisted of 873k tonnes of
ore at an average grade of 1.72 g/t for 48k ounces of contained
gold.
Work in progress reflects the cost of gold contained in circuit.
Finished goods represent gold that has been poured but has not yet
been sold, whether in transit or undergoing refinement.
18. TRADE AND OTHER RECEIVABLES
31 December 31 December
2016 2015
US$000 US$000
---------------------------------- ----------- -----------
Payments in advance to suppliers 597 1,182
VAT recoverable 3,806 4,415
Prepayments 147 1,051
---------------------------------- ----------- -----------
Total trade and other receivables 4,550 6,648
---------------------------------- ----------- -----------
A total of US$0.1 million (2015: US$1.0 million) of unrecovered
VAT was written down on the basis of being outstanding for more
than 12 months by 31 December 2016.
19. CASH AND CASH EQUIVALENTS
31 December 31 December
2016 2015
US$000 US$000
Cash at bank and in hand - unrestricted 1,118 1,934
Cash at bank and in hand - restricted 3,784 3,922
---------------------------------------- ----------- -----------
Cash and cash equivalents 4,902 5,856
---------------------------------------- ----------- -----------
Included within cash at 31 December 2016 was US$3.8 million of
restricted cash (31 December 2015: US$3.9 million), representing a
US$2.0 million debt service reserve account held in relation to the
Ecobank loan (2015: US$2.1 million) and US$1.8 million (2015:
US$1.8 million) relating to amounts held on restricted deposit in
Burkina Faso for the purposes of environmental rehabilitation work,
as required by the terms of the Inata mining licence.
20. TRADE AND OTHER PAYABLES
31 December 31 December
2016 2015
US$000 US$000
-------------------------------- ----------- -----------
Trade payables 28,897 36,059
Corporation tax 268 167
Other 10 156
Social security and other taxes 30 47
Accrued expenses 7,346 6,252
-------------------------------- ----------- -----------
Total trade and other payables 36,551 42,681
-------------------------------- ----------- -----------
21. OTHER FINANCIAL LIABILITIES
31 December 31 December
2016 2015
Current financial liabilities US$000 US$000
------------------------------------- ----------- -----------
Interest bearing debt 45,763 44,987
Finance lease liabilities 825 732
Warrants on the Company's own equity - 254
------------------------------------- ----------- -----------
Total current financial liabilities 46,588 45,973
------------------------------------- ----------- -----------
31 December 31 December
2016 2015
Non-current financial liabilities US$000 US$000
---------------------------------------- ----------- -----------
Interest bearing debt 8,261 21,073
Finance lease liabilities 514 887
---------------------------------------- ----------- -----------
Total non-current financial liabilities 8,775 21,960
---------------------------------------- ----------- -----------
Total financial liabilities 55,363 67,933
---------------------------------------- ----------- -----------
Interest bearing debt
On 31 December 2016, the Group had interest bearing debt of
US$54.1 million (31 December 2015: US$66.1 million).
31 December 31 December
2016 2015
Non-current financial liabilities US$000 US$000
---------------------------------- ----------- -----------
Elliott loans 26,396 22,533
Ecobank loan 20,444 31 188
Ecobank VAT facility 3,101 4,032
Coris Bank loan 4,083 8,307
Finance lease 1,339 1,619
Warrants - 254
---------------------------------- ----------- -----------
Total financial liabilities 55,363 67,933
---------------------------------- ----------- -----------
Elliott loan
At 31 December 2016 the Company had debts totalling
US$26.4million (31 December 2015: US$22.5 million) due to
Manchester Securities Corp, an affiliate of Elliott Management (the
'Elliott loans'). The Elliott Loan balance is made up of three
individual loans, which are the subject of separate loan
agreements, with different interest rates and security, as
summarised in the table below:
First Loan Second Loan Third Loan Total
US$000 US$000 US$000 US$000
--------------------------------------------- ----------- ------------ ----------- -------
Principal at 1 January 2016 15,000 1,500 2,450 18,950
Accrued interest at 1 January 2016 3,300 169 114 3,583
--------------------------------------------- ----------- ------------ ----------- -------
Total Elliott loans due at 1 January 2016 18,300 1,669 2,564 22,533
Loans drawn down in period - 1,550 - 1,550
Accrued interest in period 1,655 363 295 2,313
Principal at 31 December 2016 15,000 3,050 2,450 20,500
Accrued interest at 31 December 2016 4,955 532 409 5,896
--------------------------------------------- ----------- ------------ ----------- -------
Total Elliott loans due at 31 December 2016 19,955 3,582 2,859 26,396
--------------------------------------------- ----------- ------------ ----------- -------
First Loan
The First Loan was entered into in March 2013. The original
repayment date was 31 December 2013. However, the Company was
unable to meet this repayment obligation and since this time, the
loan has been in default and therefore repayable on demand. The
interest rate applicable to this loan is 11 per cent per annum and
the loan has been secured against the Company's interests in
Tri-K.
Second Loan
The Second Loan began as a US$1.5 million loan that was drawn
down in January 2015. This facility was increased by US$0.75
million in January 2016 and again by US$0.8 million in April 2016
in order to provide working capital for corporate and head office
activities during 2016. The last tranche of this facility was drawn
down on 25 July 2016.
The Second Loan has an interest rate of 14 per cent per annum,
is unsecured and is repayable on demand.
Third Loan
The Third Loan was entered into in April 2015 and comprises
three tranches, all of which have been fully drawn down in respect
of an aggregate amount of US$2.4 million. The loan is secured over
a number of Group assets outside Guinea, including almost all
shareholdings and intra-group loans, the exploration permits in
Burkina Faso (including Souma) and the gold in circuit and in
transit at Inata.
The Third Loan has an interest rate of 12 per cent per annum and
is repayable on demand.
Ecobank Inata loan
At 31 December 2016, a loan balance of US$20.4 million (2015:
US$31.2 million) was due in respect of a medium term loan facility
with Ecobank Burkina Faso ('Ecobank'), which was drawn down in
October 2013. The loan amount was provided and held in Francs de la
Communauté Financière d'Afrique ('FCFA'), which is the legal
currency of Burkina Faso. The Ecobank loan was provided to the
Company's 90% subsidiary, Société des Mines de Bélahouro SA
('SMB'), which owns the Inata mine.
The Ecobank facility has a five year term and bears an interest
rate of 8% per annum. Ecobank has the right to secure the balance
against certain of the fixed assets of SMB. Monthly debt service
payments of 0.6 billion FCFA (currently equal to approximately
US$1.1 million) comprising interest and principal will continue for
the 60 month duration of the loan. The facility requires that an
amount equal to two months' payments, 1.3 billion FCFA (US$2.1
million), be held as a debt service reserve account. Subject to the
debt service reserve account requirement, there are no restrictions
on SMB's use of loan proceeds or cash flow generated, including the
transfer of funds from SMB to Avocet for corporate purposes. The
Ecobank loan facility has no hedge requirement.
During 2016, payments totalling US$12.7 million were made in
respect of this loan, which was made up of US$10.1 million in loan
repayments, US$2.2 million of interest and US$0.4 million in VAT
charged on interest. The weighted average interest on the loan
during the year was 10.82%.
The facility is recognised at amortised cost and the amounts due
within twelve months are included as current US$12.2 million (2015:
US$ 12.6 million) with the remaining balance of US$8.3 million
(2015: US$18.6 million) included as non-current.
Ecobank VAT advance
Included within current interest bearing debt is a balance of
US$3.1 million (2015: US$4.0 million) due to Ecobank as short-term
loans secured on VAT recoverable amounts. Under an agreement with
Ecobank, SMB is able to draw down a cash advance of up to 80% of
any VAT rebates confirmed as payable by the Burkina Faso tax
department. On receipt of the rebate, the advance is repayable. Net
repayments of US$0.8 million were made in 2016, with US$0.1 million
of FX movements.
Coris bank Inata loan
On 28 October 2016, the Company agreed a short-term loan of 2.5
billion CFA (US$4.2 million) with Coris Bank International. The
proceeds of the loan were used to address temporary working capital
shortages at the Inata mine in Burkina Faso following the temporary
shutdown in October 2016. The loan amount was provided and held in
FCFA, carries a coupon rate of 9% and was repaid in full on 3 April
2017.
On 30 November 2015, the Company entered into another short-term
loan of 5.0 billion CFA (US$8.4 million) with Coris, which was
repaid in full in July 2016.
Warrant on company equity
A warrant on Avocet Mining PLC's equity was issued to Elliott as
part of the loan facility transaction. The warrant was treated as a
financial instrument rather than a share based payment on the basis
that the warrant was issued as part of the loan and not as a result
of services provided. Furthermore, the warrant was considered a
liability rather than equity as the exercise price was quoted in
GBP and therefore the cash payment from Elliott would not have been
fixed when accounting in the Company's functional currency USD.
The warrant related to 4,000,000 of ordinary shares with a
strike price of GBP 0.40. The warrant was valued using a
Black-Scholes model based on the 31 December 2013 closing share
price of GBP 0.0953. Due to the subsequent fall in the share price,
the revaluation of this liability was deemed to be
non-material.
3 million warrants expired on 3 June 2016 and the remaining
warrants, which, following the 10:1 share consolidation in June
2016, were reduced to 100,000 in number at an increased strike
price of GBP4.00, expired on 2 September 2016.
Finance lease liability
In 2009, SMB entered into an agreement with Total Burkina SA for
the provision of fuel and lubricants to the Inata gold mine.
Included in this agreement were terms relating to the construction
of a fuel storage facility located on the Inata site. The
construction and commissioning of the facility was completed during
2011. Under the terms of the agreement, the cost of the
construction work was borne by Total Burkina SA, prior to being
recovered from SMB over the subsequent seven years. Management has
assessed that the terms of this part of the agreement represent a
finance lease under IAS 17 and it has therefore recognised the
liability on the Consolidated Statement of Financial Position and
capitalised the cost of the fuel storage facility in Mining
property and plant.
31 December 31 December
Gross finance lease liabilities - minimum 2016 2015
lease payments US$000 US$000
------------------------------------------ ----------- -----------
No later than 1 year 854 765
Later than 1 year and no later than 5
years 588 1,078
Later than 5 years - -
------------------------------------------ ----------- -----------
1,442 1,843
Future finance charges on finance leases (103) (224)
------------------------------------------ ----------- -----------
Present value of lease liabilities 1,339 1,619
------------------------------------------ ----------- -----------
31 December 31 December
2016 2015
Present value of lease liabilities US$000 US$000
-------------------------------------- ----------- -----------
No later than 1 year 825 732
Later than 1 year and no later than 5
years 514 887
Later than 5 years - -
-------------------------------------- ----------- -----------
1,339 1,619
-------------------------------------- ----------- -----------
22. DEFERRED TAX
31 December 31 December
2016 2015
US$000 US$000
-------------------------------- ----------- -----------
Liabilities
At 1 January 1,670 4,614
Deferred tax credit in the year (84) (2,944)
-------------------------------- ----------- -----------
At 31 December 1,586 1,670
-------------------------------- ----------- -----------
During 2016 the Group recorded deferred tax liabilities of
US$1.6 million (2015: US$1.7 million) in relation to the
withholding tax ('WHT') and interest tax ('IRVM') that would be due
on settlement of intragroup management fees and loan interest
invoices, as set out in note 13.
23. PROVISIONS
Mine closure Post-retirement benefits Staff provisions Royalties Total
US$000 US$000 US$000 US$000 US$000
------------------------------------- ------------ ------------------------ ---------------- --------- -------
At 1 January 2016 6,649 164 - - 6,813
Reclassification from Trade Creditors 5,578 5,578
Amounts (reversed)/provided during the
year (1,866) (93) 3,028 2,244 3,313
-------------------------------------- ------------ ------------------------ ---------------- --------- -------
At 31 December 2016 4,783 71 3,028 7,822 15,704
-------------------------------------- ------------ ------------------------ ---------------- --------- -------
Mine closure provisions represent management's best estimate of
the cost of mine closure at its operation in Burkina Faso.
The provision has reduced as a result of revisions in the
various assumptions pertaining to the categories of the provision.
A decision was taken to reduce the re-vegetation from 100% of an
area down to 10% as to re-vegetate 100% of the area is considered
unsustainable due to the harsh climate of the area. Another
decision was the proposal not to decommission the dam situated in
the Gomdé area, as the body of water created by this feature
provides a vital source of irrigation and fishing for local
communities.
In accordance with the Group accounting policy, the amounts and
timing of cash flows are reviewed annually and reflect any changes
to life of mine plans.
Staff provisions of US$3.0 million include a provision for
untaken leave and for unpaid entitlements (currently the subject of
ongoing legal action).
The royalty provision represents amounts that have not been paid
in respect of a 2.5% royalty in favour of Royal Gold Inc over
production from the Inata mine, US$5.6 million of which had been
included under Trade Creditors at 31 December 2015. The Company
paid royalties under this agreement until July 2015, after which
the legal validity of the agreement was challenged by the Burkina
Faso government, who have refused to permit payments to be made
from the Inata mine's operating company in respect of this royalty,
which they believe to be invalid. Notwithstanding the previous
payments made to Royal Gold, the status of this royalty agreement
is uncertain. The royalty agreement itself was Resolute West Africa
Ltd ('RWAL'), a subsidiary of the Group which holds 90% of the
shares in Société des Mines de Bélahouro SA (which owns the Inata
mine) and 100% of the shares in Goldbelt Resources West Africa SARL
(which holds the Burkinabe exploration permits). The royalty is the
subject of a guarantee from Wega Mining Inc, a dormant Canadian
subsidiary of the Group which has held no assets since before the
Group's acquisition of Wega Mining AS in 2009. Wega Mining Inc was
formerly the parent entity of RWAL, but was restructured in
2008.
The provision for post-retirement benefits represents
management's best estimate of costs following the closure of a US
subsidiary no longer owned by the Group. The above amount
represents a full provision for the liability, based on the most
recent actuarial valuation at 1 January 2016. The main assumptions
used by the actuary were as follows:
31 December 31 December
2016 2015
----------------------------------------- ----------- -----------
Rate of increase for pensions in payment 0.0% 0.0%
Discount rate 5.6% 5.8%
Inflation 3.0% 3.0%
----------------------------------------- ----------- -----------
The assets in the scheme and the expected long-term rate of
return were:
US$000 US$000
------------------------------------ ------ ------
Cash 299 314
Present value of scheme liabilities (370) (376)
Deficit in scheme (71) (62)
------------------------------------ ------ ------
Rate of return 0.0% 0.0%
------------------------------------ ------ ------
24. FINANCIAL INSTRUMENTS
Categories of financial instrument:
31 December
31 December 2016 2015
------------------------------ --------------------------------
Measured
Measured Measured at Measured
at fair at amortised fair at amortised
value cost value cost
----------- ----------------- ------------- -----------------
Available Available
for sale for sale
asset and Loans asset Loans
warrants and receivables and warrants and receivables
on the including on the including
Company's cash and Company's cash and
own equity cash equivalents own equity cash equivalents
Categories US$000 US$000 US$000 US$000
---------------------------- ----------- ----------------- ------------- -----------------
Financial assets
Cash and cash equivalents
- unrestricted - 1,118 - 1,934
Cash and cash equivalents
- unrestricted - 3,784 - 3,922
Other financial assets - - - -
---------------------------- ----------- ----------------- ------------- -----------------
Total Financial Assets - 4,902 - 5,856
---------------------------- ----------- ----------------- ------------- -----------------
Financial liabilities
Trade and other payables - 36,551 - 42,681
Interest bearing borrowings - 54,024 - 66,060
Finance lease liabilities - 1,339 - 1,619
Warrants on the Company's
own equity - - 254 -
---------------------------- ----------- ----------------- ------------- -----------------
Total Financial Liabilities - 91,914 254 110,360
---------------------------- ----------- ----------------- ------------- -----------------
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. In order to minimise this risk the Group endeavours only to
deal with companies which are demonstrably creditworthy and this,
together with the aggregate financial exposure, is continuously
monitored. The maximum exposure to credit risk is the value of the
outstanding amounts as follows:
31 December 31 December
2016 2015
US$000 US$000
----------------------------------------- ----------- -----------
Cash and cash equivalents - unrestricted 1,118 1,934
Cash and cash equivalents - restricted 3,784 3,922
4,902 5,856
----------------------------------------- ----------- -----------
Credit risk on cash and cash equivalents is considered to be
acceptable as the counterparties are either substantial banks with
high credit ratings or with whom the Group has offsetting debt
arrangements. The maximum exposure is the amount of the
deposit.
Liquidity risk
The Group constantly monitors the cash outflows from day to day
business and monitors longer term liabilities to ensure that
liquidity is maintained. As disclosed in the going concern
statement in note 1, the Group faces an ongoing requirement to
manage the funds it is able to generate at its operating mine,
Inata, as well as to raise new financing to fund corporate and
development activities. This is an area which receives considerable
focus from the Board and management on a daily basis, as cash
balances have remained critically low for some period and balances
are due to key suppliers.
At the balance sheet date the Group's financial liabilities were
as follows:
31 December 31 December
2016 2015
US$000 US$000
---------------------------------------- ----------- -----------
Trade payables 28,897 36,059
Other short-term financial liabilities 46,588 45,719
---------------------------------------- ----------- -----------
Current financial liabilities (due less
than one year) 75,485 81,778
Non-current financial liabilities (due
greater than one year) 8,775 21,960
---------------------------------------- ----------- -----------
84,260 103,738
---------------------------------------- ----------- -----------
The above amounts reflect contractual undiscounted cash flows,
which may differ to the carrying values of the liabilities at the
reporting date.
Interest rate risk
Weighted
Weighted At 31 average At 31
average interest December interest December
rate 2016 rate 2015
% US$000 % US$000
-------------------------- ----------------- --------- --------- ---------
Cash and cash on hand 0.0 4,902 0.0 5,856
Short-term deposits n/a - n/a -
-------------------------- ----------------- --------- --------- ---------
Cash and cash equivalents 0.0 4,902 0.0 5,856
Interest bearing debt 9.41 (54,024) 9.56 (66,060)
-------------------------- ----------------- --------- --------- ---------
Net debt (49,122) (60,204)
-------------------------- ----------------- --------- --------- ---------
Interest rate risk arises from the Group's long-term variable
rate borrowings which expose the Group to cash flow interest rate
risk.
An increase in interest rates of 100 basis points in the period
would have resulted in additional interest costs of US$0.5 million
in the year (31 December 2015: US$0.7 million).
Foreign currency risk
The Group's cash balances at 31 December 2016 and 31 December
2015 consisted of the following currency holdings:
At 31 At 31
December December
2016 2015
US$000 US$000
--------------------------------------------- --------- ---------
Sterling 38 73
US dollars 5 97
Guinean Francs 3 -
Francs de la Communauté Financière
d'Afrique ('FCFA') 4,856 5,686
--------------------------------------------- --------- ---------
4,902 5,856
--------------------------------------------- --------- ---------
The Group's loan balances at 31 December 2016 and 31 December
2015 consisted of the following currency holdings:
At 31 At 31
December December
2016 2015
US$000 US$000
--------------------------------------------- --------- ---------
US dollars 26,395 22,533
Francs de la Communauté Financière
d'Afrique ('FCFA') 27,629 43,527
--------------------------------------------- --------- ---------
54,024 66,060
--------------------------------------------- --------- ---------
The Group may be exposed to transaction foreign exchange risk
due to its transactions not being matched in the same currency. The
Group currently has no currency hedging in place.
In Burkina Faso, local currency payments account for
approximately 75% of total production costs. The Burkina Faso FCFA,
which has a fixed exchange rate to the euro, weakened by 3% (2015:
4%) against the US dollar in the year. It is estimated that without
this weakening, profit would have been US$1.9 million (2015: US$2.4
million) lower.
There is no material difference between the fair values and the
book values of these financial instruments.
Measurement of fair value
The Company measures the fair value of its financial assets and
liabilities in the statement of financial position in accordance
with the fair value hierarchy. This hierarchy groups financial
assets and liabilities into three levels based on the significance
of inputs used in measuring the fair value of the financial assets
and liabilities. The fair value hierarchy has the following
levels:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Available for sale financial assets were valued in line with
Level 1, based on quoted market prices of the shares.
25. CAPITAL MANAGEMENT
The Group's capital management objectives are to ensure the
Group's ability to continue as a going concern and to provide an
adequate return to shareholders.
The Group manages the capital structure through a process of
constant review and makes adjustments to it in the light of changes
in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital
structure, the Group may issue new shares, adjust dividends paid to
shareholders, return capital to shareholders, or seek additional
debt finance. Further detail is provided in the Going Concern
section of note 1.
26. SHARE BASED PAYMENTS
Performance Share Plan ('PSP') shares
Details of the number of PSP shares that were outstanding during
the year are as follows:
31 December 31 December
2016 2015
---------------------- ---------------------
Weighted
average
Weighted award
average award value
Number value (GBP) Number (GBP)
-------------------------------- ------ -------------- ----------- --------
Outstanding at the beginning
of the period - - 1,260,000 0.07
Granted during the period - - - -
Exercised during the period - - - -
Cancelled or expired during the
period - - (1,260,000) 0.07
Outstanding at the period end - - - -
Exercisable at the period end - - - -
-------------------------------- ------ -------------- ----------- --------
Share options
Details of the number of share options and the weighted average
exercise price ('WAEP') outstanding during the year are as
follows:
31 December 31 December
2016 2015
------------------- -------------------
WAEP WAEP
Number (GBP) Number (GBP)
------------------------------------ ----------- ------ ----------- ------
Outstanding at the beginning of
the period 3,144,917 0.61 5,405,405 0.69
Granted during the period - - - -
Exercised during the period - - - -
Cancelled or expired during the
period (151,992) 0.81 (2,260,488) 0.81
Adjustment as a result of the share
consolidation (2,830,425)
Outstanding at the period end 162,500 0.81 3,144,917 0.61
Exercisable at the period end - - - -
------------------------------------ ----------- ------ ----------- ------
Options granted between 2005 and 2010 were subject to market
performance conditions. The fair value of these options has been
arrived at using a third party Monte Carlo simulation model, taking
into consideration the market performance criteria. Options granted
between 1 January 2011 and 1 August 2012 have no market performance
criteria and have been valued using the Black Scholes model.
Options granted since 13 December 2012 are valued using a Monte
Carlo simulation model. The assumptions inherent in the use of
these models are as follows:
Vesting Expected Risk Exercise Volatility Fair
period Date life free price of share value Number
Date of grant (years) of vesting (years) rate (GBP) price (GBP) outstanding
-------------- -------- ----------- -------- ----- -------- ---------- ------ ------------
18/03/2010 3 18/03/2013 4 2.42% 10.50 55.86% 0.47 37,500
23/05/2011 0.75 21/02/2012 2.75 1.46% 21.93 53.98% 0.57 3,000
23/05/2011 1.75 21/02/2013 3.75 1.88% 21.93 53.98% 0.69 3,000
23/05/2011 2.75 21/02/2014 4.75 2.25% 21.93 53.98% 0.79 3,000
12/03/2012 3 12/03/2015 5 1.02% 22.97 45.80% 0.76 16,000
01/08/2012 3 01/08/2015 5 0.59% 7.50 56.47% 0.25 25,000
08/03/2013 3 08/03/2013 3 0.41% 2.35 47.22% 0.03 75,000
162,500
-------------- -------- ----------- -------- ----- -------- ---------- ------ ------------
Exercise prices are determined using the closing share price on
the day prior to the option grant.
Expected volatility was determined by calculating the historical
volatility of the Company's share price over the previous five
years. The expected life used in the model has been adjusted, based
on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
The Group recognised total expenses of US$24k related to share
based payment transactions during the year (US$0.4 million in the
year ended 31 December 2015).
Further details of the PSP and Share Option Plan are provided in
the Remuneration Report on pages 36 to 45.
27. CONSOLIDATED CASH FLOW STATEMENT
In arriving at net cash flow from operating activities, the
following non-operating items in the income statement have been
adjusted for:
Other non-operating items in the income statement
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------------ ----------- -----------
Exchange losses/(gains) in operating activities 903 (2,559)
Exchange gains in finance items (985) (3,136)
Finance expense 5,266 6,316
Movement in provisions and other non-cash
items (2,030) 788
Other non-operating items in the income
statement 3,154 1,409
------------------------------------------------ ----------- -----------
28. SHARE CAPITAL
31 December 31 December
2016 2015
------------------- -------------------
Number US$000 Number US$000
------------------------------------ ----------- ------ ----------- ------
Authorised:
Ordinary share of 1p (2015 5p) 80,000,000 1,395 800,000,000 69,732
Deferred shares of 4.9p 800,000.000 68,337 - -
------------------------------------ ----------- ------ ----------- ------
Total 880,000,000 69,732 800,000,000 69,732
------------------------------------ ----------- ------ ----------- ------
Allotted, called up and fully paid:
Ordinary shares 20,949,671 341 209,496,710 17,072
Deferred shares 209,496,710 16,731 -
------------------------------------ ----------- ------ ----------- ------
Closing balance 230,446,381 17,072 209,496,710 17,072
------------------------------------ ----------- ------ ----------- ------
On 10 June 2016, the Company's share capital was subdivided from
209,496,710 ordinary shares of 5p each into 209,496,710
intermediate shares of 0.1p each and 209,496,710 deferred shares of
4.9p each.
On the same day the Company consolidated the intermediate
ordinary shares on 1 0:1 basis and the intermediate ordinary shares
were re-designated as 1 new ordinary share of 1p each.
The deferred shares have no rights to vote, attend or speak at
general meetings of the Company or to receive any dividend or other
distribution and have no valuable economic rights to participate in
any return of capital on a winding up or liquidation of the
Company.
29. OTHER RESERVES
Merger reserve Investment in own and treasury shares Foreign exchange Total
US$000 US$000 US$000 US$000
-------------------- -------------- ------------------------------------- ---------------- -------
At 31 December 2014 19,901 (1,845) (161) 17,895
Movement in year - - - -
At 31 December 2015 19,901 (1,845) (161) 17,895
Movement in year - - - -
-------------------- -------------- ------------------------------------- ---------------- -------
At 31 December 2016 19,901 (1,845) (161) 17,895
-------------------- -------------- ------------------------------------- ---------------- -------
In 2016, the Company allotted no new shares to the EBT. No
shares were released from the EBT in the year.
At 31 December 2016, the Company held 33,620 own shares (of
which 33,430 were held in the EBT and 190 were held in the Share
Incentive Plan).
At 31 December 2016, the Company held 44,200 treasury shares.
During 2016, no shares were issued by the Company from treasury
shares.
30. CONTINGENT LIABILITIES
There were no Contingent liabilities at 31 December 2016 (2015:
US$ nil).
PT Lebong Tandai
In April 2011, Avocet was informed that a law suit had been
filed against it in the District Court of South Jakarta, Indonesia
by PT Lebong Tandai ('PT LT'), Avocet's former partner in a joint
venture in Indonesia (the 'First PT LT Case'). The law suit relates
to a challenge as to the legality of the sale of Avocet's South
East Asian assets. PT LT asserts that it was entitled to acquire
all of these assets pursuant to an agreement allegedly entered into
between PT LT and Avocet in April 2010. In its law suit, PT LT has
claimed damages totalling US$1.95 billion, comprising US$450
million loss in respect of an alleged on-sale by PT LT of part of
the assets, US$500 million loss in respect of financing
arrangements allegedly entered into by PT LT and US$1 billion for
loss of reputation. In November 2011, Avocet challenged the
jurisdiction of the District Court to hear the law suit on the
basis that PT LT and Avocet were obligated under the terms of their
joint venture to settle any dispute through arbitration. In
addition, Avocet challenged the court's jurisdiction on the grounds
that Avocet is not subject to the Indonesian courts as it has no
presence in Indonesia. In December 2011 the District Court found in
Avocet's favour and dismissed the case. In January 2013, it was
confirmed to Avocet that PT LT had lodged an appeal to the
Indonesian High Court against the District Court's decision. In
September 2013 the High Court released its decision on the appeal
brought by PTLT and decided in Avocet's favour that the District
Court's original decision was correct and that the District Court
did not have jurisdiction to hear the matter. During October 2013,
Avocet was informed that PT LT had appealed the High Court's
decision to the Supreme Court of Indonesia. In May 2014, the
Supreme Court ruled in Avocet's favour that the High Court's
decision was correct and that the District Court did not have
jurisdiction to hear the matter. The Company is unaware of whether
PT LT has sought, or will seek, a judicial review of the Supreme
Court's decision.
On 2 May 2012, Avocet was informed that PT LT had filed a second
law suit against it, as well as against J&Partners Asia
Limited, PT. J Resources Asia Pasifik Tbk and PT J Resources
Nusantara - all being subsidiaries or affiliates of J&Partners
L.P. ('J&Partners') which was the buyer of Avocet's South East
Asian assets - in the District Court of South Jakarta, Indonesia
(the 'Second PT LT Case'). The Second PT LT Case is based on almost
identical grounds to the First PT LT Case with the addition of the
further defendants and claims against them. In the Second PT LT
Case, PT LT is seeking a declaration that the assignment of
Avocet's shares in the joint venture with PT LT to any third party
other than PT LT is null and void and that PT LT has the right to
acquire the shares in the joint venture with Avocet. PT LT also
seeks an order that all of the defendants (Avocet and
J&Partners) must surrender/assign the shares in the joint
venture to PT LT and that PT. J Resources Asia Pasifik Tbk or any
other entity must not sell, assign or make any legal undertakings
in respect of the shares in the joint venture and/or all the assets
of Avocet in Indonesia. Finally PT LT seeks damages for material
and immaterial injury of US$1.1 billion and US$1 billion
respectively. In September 2012, Avocet disputed the jurisdiction
of the Indonesian court over the Second PT LT Case for the same
reasons that it disputed the jurisdiction of the Indonesian court
in relation to the First PT LT Case, namely that PT LT and Avocet
were obligated under the terms of their joint venture to settle any
dispute through arbitration. In addition, Avocet challenged the
court's jurisdiction on the grounds that Avocet is not subject to
the Indonesian courts as it has no presence in Indonesia and also
on the ground that the substance of the Second PT LT Case is the
same as the First PT LT Case, over which the Indonesian court had
already found that it did not have jurisdiction. The District Court
subsequently found in favour of Avocet and the other defendants and
dismissed the case. In February 2013, PT LT appealed the District
Court's decision on jurisdiction to the High Court. In January 2014
the High Court released its decision in favour of Avocet and the
other defendants. During February 2014, Avocet was informed that PT
LT had appealed the High Court's decision to the Supreme Court of
Indonesia.
The Company understands that PT LT has filed a third law suit
against J&Partners or its affiliates which makes similar
arguments as the Second PT LT Case (the 'Third PT LT Case'). The
Company understands that the South Jakarta District Court has
dismissed the Third PT LT Case and that PTLT has appealed to the
Indonesian High Court against the District Court's decision.
The Board remains confident that all the actions taken in
respect of the transaction have been in accordance with prevailing
rules and regulations and there are no grounds for any such legal
action by PT LT. As any financial settlement with PT LT is
considered to be remote, this matter does not constitute a
contingent liability, however the matter is disclosed in these
financial statements to replicate statements already made by the
Company.
The buyer, J&Partners, notified Avocet that in the event PT
LT were successful in actions against J&Partners,
J&Partners would make a claim for damages against Avocet. The
basis for the claim would be that Avocet had breached a warranty in
the sales agreement, which is governed by English law, in which it
stated that it was selling the assets free of encumbrance. Avocet
strongly disagreed that there was any such breach and initiated
arbitration in the English courts to have any such claim
dismissed.
The arbitration hearing took place in London in January 2015 and
the verdict was delivered in December 2015. Although the verdict
was partial and certain areas remained unresolved, the Company does
not believe there to be any further contingent liabilities with
regard to the arbitration.
No further developments in respect of this case have taken place
since the arbitration verdict and the Company believes it is highly
unlikely that any successful action can now be brought against it
by PT LT.
Claim for Repayment of VAT
In March 2016, the Company received notification from HM Revenue
and Customs that its VAT registration status had been challenged on
the grounds that its management fees were not considered taxable
supplies due to not having been fully settled in cash. The Company
believes that these were valid taxable supplies in respect of bona
fide services performed by Avocet Mining PLC on behalf of its
subsidiaries (notably the Inata gold mine) and the non-payment was
the result of temporary cashflow shortages and other restrictions
in connection with its subsidiary's loan facilities. In the event
that the VAT registration were to be held to be invalid (which the
Board considers a remote possibility), the total VAT reclaimed that
would be repayable by the Company would be approximately GBP950k
(US$1.4 million).
31. CAPITAL COMMITMENTS
At 31 December 2016, the Group had entered into no contractual
commitments for the acquisition of property, plant and equipment of
(31 December 2015: US$ nil).
32. OPERATING LEASE COMMITMENTS
At 31 At 31
December December
2016 2015
Operating lease commitments US$000 US$000
-------------------------------------- --------- ---------
Due within one year 116 379
After one year but within two years 63 -
After two years but within five years - -
179 379
-------------------------------------- --------- ---------
Operating lease payments represent rentals payable by the Group
for offices and employee housing.
33. EVENTS AFTER THE REPORTING PERIOD
On 3 April 2017, David Cather stepped aside as Chief Executive
Officer and Boudewijn Wentink was appointed in his stead with
immediate effect. At the same date, it was announced that Jim Wynn
would be standing down on 30 April 2017 as Finance Director.
Yolanda Bolleurs was appointed as Chief Financial Officer on 3
April 2017.
On 3 April 2017, D Cather became Technical Director and from 1
May 2017, J Wynn became a Non-executive Director.
In April 2017, discussions started with trade creditors, banks
and government to stabilize Inata and with a view to restructure
its debts. In this process a key step was achieved on 31 May 2017:
Inata, its major trade and financial creditors (together
representing approximately seventy per cent of Inata's debt) agreed
the terms of a standstill agreement for the duration of two months
as strategic options are being explored in connection with a
financial, debt and corporate restructuring of the company. All
stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution,
however, inevitably, there can be no guarantee that these
negotiations will prove successful.
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project in May.
Following this, the so-called 'First Closing' was completed on 22
May 2017 and the Company received from Managem US$4 million for 40
per cent of its interest in the project.
34. RELATED PARTY TRANSACTIONS
The table below sets out charges during the year and balances at
31 December 2016 between the Company and Group companies that were
not wholly-owned, in respect of management fees and interest on
loans:
Avocet Mining PLC Wega Mining AS
--------------------------------------------- ---------------------------------------------
Balance at 31 December Balance at 31 December
Year ended 31 December Charged in the year 2016 Charged in the year 2016
2016 US$000 US$000 US$000 US$000
------------------------ ------------------- ------------------------ ------------------- ------------------------
Société des
Mines de Bélahouro
SA (90%) 753 135,961 - 58,079
------------------------ ------------------- ------------------------ ------------------- ------------------------
Avocet Mining PLC Wega Mining AS
--------------------------------------------- ---------------------------------------------
Balance at 31 December Balance at 31 December
Year ended 31 December Charged in the year 2015 Charged in the year 2015
2015 US$000 US$000 US$000 US$000
------------------------ ------------------- ------------------------ ------------------- ------------------------
Société des
Mines de Bélahouro
SA (90%) 770 137,451 - 58,079
------------------------ ------------------- ------------------------ ------------------- ------------------------
During 2016 an amount of GBP250 (approximately US$308) was paid
to H Wynn, spouse of J Wynn, in respect of accounting services to
the Company.
Information on remuneration of Key Management Personnel is set
out in note 10.
No dividends were received by Directors during 2015 or 2016 in
respect of shares held in the Company.
35. ALL-IN SUSTAINING COSTS
The All-in sustaining cost ('AISC') has been reported in line
with the guidance issued by the World Gold Council during 2014. The
Company will continue to disclose cash costs in order to provide
comparability to prior periods.
The AISCs below are based on the Avocet Group and include share
based payments and general and corporate administrative costs.
Q2 Q3 Q4
Q1 2016 2016 2016 2016 2016 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
Gold produced (oz) 20,528 21,086 17,694 13,177 72,485 74,755
Total cash production cost
(US$000) 18,986 19,032 18,532 13,471 70,021 79,090
Total cash production cost
(US$/oz) 925 903 1,047 1,022 966 1,058
Other costs of sales (US$000) 1,499 982 803 2,812 6,096 (426)
Foreign exchange (US$000) 330 588 334 (349) 903 (2,559)
Sustaining capital expenditure
(US$000) 98 51 - - 149 3,793
Share based payments (US$000) 6 6 6 6 24 414
Administrative expenses (US$000) 465 489 595 548 2,097 2,061
All-in Sustaining Costs (US$000) 21,384 21,148 20,270 16,488 79,290 82,373
All-in Sustaining Costs (US$/oz) 1,042 1,003 1,146 1,251 1,094 1,102
36. GROUP STRUCTURE
All subsidiaries within the Avocet Group are 100% owned, with
the exception of Société des Mines de Bélahouro SA ('SMB'), a
Burkina Faso incorporated entity, which is 90% owned. In accordance
with the Mining Code of Burkina Faso, the remaining 10% is owned by
the Burkinabe Government, who are represented on the Board of SMB.
It is not considered that the Governmental ownership represents a
restriction on the activities of the company, nor on the free flow
of its funds. All material contracts and financial arrangements are
referred to the Board of SMB for approval.
The interest of the Government in SMB is shown in the financial
statements under Non-controlling Interest in the income statement
and statement of financial condition, as there are no other
Non-controlling interests in the Group.
37. UNAUDITED QUARTERLY INCOME STATEMENT FOR CONTINUING OPERATIONS
The following table presents an analysis of the 2016 results by
quarter. This analysis has not been audited and does not form part
of the statutory financial statements.
2015
Q1 2016 Q2 2016 Q3 2016 Q4 2016 2016 (Audited)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$000 US$000 US$000 US$000 (Audited) US$000 US$000
------------------------------ ------------ ------------ ------------ ------------
Revenue 25,649 26,196 26,109 11,650 89,604 85,038
Cost of sales (20,476) (23,731) (17,529) (14,808) (75,965) (89,933)
Cash production costs:
* mining (5,969) (6,281) (6,125) (3,506) (21,881) (23,772)
* processing (7,702) (7,311) (7,379) (5,484) (27,876) (34,492)
* overheads (3,766) (3,439) (3,216) (3,557) (13,978) (15,256)
* royalties (1,549) (2,001) (1,812) (924) (6,286) (5,570)
(18,986) (19,032) (18,532) (13,471) (70,021) (79,090)
Changes in inventory 141 (3,657) 1,821 1,534 (161) (5,895)
Expensed exploration and
other cost of sales (1,499) (982) (803) (2,812) (6,096) 426
Depreciation and amortisation (132) (60) (15) (59) (266) (5,374)
Gross profit/(loss) 5,173 2,465 8,580 (3,158) 13,060 (4,895)
------------------------------ ------------ ------------ ------------ ------------
Administrative expenses (465) (489) (595) (548) (2,097) (2,061)
Share based payments (6) (6) (6) (6) (24) (414)
Transaction costs - - - (1,475) (1,475) -
Net impairment of assets - - - - - (45,148)
Profit/(loss) from operations 4,702 1,970 7,979 (5,187) 9,464 (52,518)
------------ ------------ ------------ ------------
Finance items
Exchange (losses)/gains (777) 617 (586) 1,731 985 3,136
Finance expense (1,512) (1,109) (1,187) (1,363) (5,171) (6,316)
Finance income - - - - - -
------------------------------ ------------ ------------ ------------ ------------
Profit/(loss) before taxation 2,413 1,478 6,206 (4,819) 5,278 (55,698)
------------------------------ ------------ ------------ ------------ ------------
Analysed as:
Profit/(loss) before taxation
and exceptional items 2,413 1,478 6,206 (2,544) 7,553 (10,550)
Exceptional items - - - (2,275) (2,275) (45,148)
------------------------------ ------------ ------------ ------------ ------------
Taxation - (79) (135) (269) (483) 5,993
Profit/(loss) for the period 2,413 1,399 6,071 (5,088) 4,795 (49,705)
------------------------------ ------------ ------------ ------------ ------------
Attributable to:
Equity shareholders of the
parent company 2,078 1,149 5,318 (4,922) 3,623 (45,732)
Non-controlling interest 335 250 753 (166) 1,172 (3,973)
------------------------------ ------------ ------------ ------------ ------------
2,413 1,399 6,071 (5,088) 4,795 (49,705)
------------------------------ ------------ ------------ ------------ ------------
EBITDA 4,834 2,030 7,994 (2,853) 12,005 (1,996)
------------------------------ ------------ ------------ ------------ ------------
Independent auditor's report to the members of Avocet Mining
PLC
Our opinion on the financial statements is unmodified
In our opinion the parent company financial statements:
-- give a true and fair view of the state of the Company's affairs as at 31 December 2016;
-- have been properly prepared in accordance with applicable law
and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) including FRS 101 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland';
and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made in
note 39 to the parent company's financial statements concerning the
parent company's ability to continue as a going concern.
The Company and the group are reliant on the continuing support
from an affiliate of Elliott Associates, the Company's largest
shareholder, however, should Elliott request the repayment of these
loans, the Company would be obliged at short notice to seek
alternative funding, which the Directors believe would be a
considerable challenge.
These conditions indicate the existence of a material
uncertainty that may cast significant doubt over the Company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the parent company
was unable to continue as a going concern.
Who we are reporting to:
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
What we have audited
Avocet Mining PLC's parent company financial statements comprise
the company balance sheet, the company statement of changes in
equity and the related notes.
The financial reporting framework that has been applied in their
preparation is United Kingdom Generally Accepted Accounting
Practice including FRS 101 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland'.
Other reporting required by regulations
Our opinion on other matters prescribed by the Companies Act
2006 is unmodified
In our opinion, the part of the Directors' Remuneration Report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and Report of
the Directors for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Report of the Directors have
been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies
Act 2006
In the light of the knowledge and understanding of the parent
company and its environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report
or the Report of the Directors.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities for the financial statements and the audit
What an audit of financial statements involves:
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
What the directors are responsible for:
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view.
What we are responsible for:
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Other matter
We have reported separately on the group financial statements of
Avocet Mining PLC for the year ended 31 December 2016. That report
includes a qualified opinion in relation to inventory and an
emphasis of matter in relation to going concern and the carrying
value of assets in Burkina Faso.
Christopher Smith
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
6 June 2017
Company balance sheet
At 31 December 2016
At At
31 December 31 December
2016 2015
Note US$000 US$000
------------ ------------
Fixed assets
Tangible assets 41 - -
Shares in Group undertakings 42 18,800 18,800
18,800 18.800
Current assets
Debtors due within one year 43 299 134
Cash at bank and in hand 41 168
------------ ------------
340 302
Creditors: amounts falling due within one year 44 (29,803) (24,644)
------------ ------------
Net current liabilities (29,463) (24,342)
------------ ------------
Total assets less current liabilities (10,663) (5,542)
------------ ------------
Net liabilities (10,663) (5,542)
------------ ------------
Capital and reserves
Called up share capital 45 17,072 17,072
Share premium account 46 146,391 146,391
Investment in own shares 47 (169) (169)
Investment in treasury shares 48 (1,676) (1,676)
Profit and loss account (172,281) (167,160)
------------ ------------
Equity shareholders' funds (10,663) (5,542)
------------ ------------
During the year the Company made a loss of US$5.1 million (2015:
US$14.9 million).
These financial statements were approved and signed on behalf of
the Board of Directors.
RP Edey BJ Rourke
The accompanying accounting policies and notes form an integral
part of these financial statements.
6 June 2017
Avocet Mining PLC is registered in England No. 03036214
Company statement of changes in equity
At 31 December 2015
Investment
in own
shares
and
Share Share treasury Total
capital premium shares equity
US$000 US$000 US$000 Profit and loss account US$000 US$000
--------------------------- -------- -------- ---------- --------
At 1 January 2015 17,072 146,391 (1,845) (152,670) 8,948
------------------------------ -------- -------- ---------- --------
Loss for the year - - - (14,904) (14,904)
Total comprehensive income
for the year - - - (14,904) (14,904)
Share based payments - - - 414 414
At 31 December 2015 17,072 146,391 (1,845) (167,160) (5,542)
Loss for the year - - - (5,145) (5,145)
Total comprehensive income
for the year - - - (5,145) (5,145)
------------------------------ -------- -------- ---------- --------
Share based payments - - - 24 24
At 31 December 2016 17,072 146,391 (1,845) (172,281) (10,663)
------------------------------ -------- -------- ---------- --------
Notes to the Company financial statements
For the year ended 31 December 2016
38. FINANCIAL STATEMENTS OF THE PARENT COMPANY
The separate financial statements of the Company are presented
as required by the Companies Act 2006. The Company has taken
advantage of the exemption under section 408 of the Companies Act
2006 not to publish its individual profit and loss account and
related notes. As permitted by the Act, the separate financial
statements have been prepared in accordance with all applicable UK
accounting standards.
39. SIGNIFICANT ACCOUNTING POLICIES
Avocet Mining PLC Company financial statements have been
prepared in accordance with Financial Reporting Standard 101
"Reduced disclosure framework", (FRS 101), for all periods
presented. This differs from the Group financial statements which
are prepared under IFRS.
As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation
to:
-- Share-based payments
-- Financial instruments
-- Capital management
-- Presentation of comparative information in respect of certain assets
-- Presentation of an income statement
-- Presentation of a cashflow statement
-- Standards not yet effective
-- Impairment of assets
-- Related party transactions
The principal accounting policies which differ to those set out
in note 3 to the consolidated financial statements are noted
below.
During the year the Company made a loss of US$5,145 (2015:
US$14,904).
Going concern
Continued financial support from Elliott
The Company has the following loans, which totalled US$27.4
million on 29 May 2017, due to an affiliate of Elliott Associates,
its largest shareholder:
1. First Loan - taken out in March 2013, under which US$20.5
million was outstanding at 26 April 2017, comprising US$15.0
million principal and US$5.5 million accrued interest. The first
loan was due on 31 December 2013 and is secured against the Tri-K
asset in Guinea;
2. Second Loan - unsecured demand loan of US$3.7million
consisting of US$3.05 million principal plus accrued interest of
US$0.6 million. The initial US$1.5 million was drawn down in
January 2015 and a further US$0.75 million was drawn down in three
equal tranches between January and March 2016 and a further US$0.8
million was drawn down in four equal tranches between April and
July 2016; and
3. Third Loan - demand loan of US$3.0 million consisting of
US$2.5 million principal plus accrued interest of US$0.5 million.
The initial US$2.05 million was drawn down in August 2015 (of which
US$1.55 million was used to repay a previous unsecured loan) and a
further US$0.4 million was drawn down between September and October
2015. These amounts are secured over a range of Group assets
including intragroup loans, shares in subsidiaries and over the
gold in circuit and gold in transit of the Inata gold mine.
The First Loan was entered into in March 2013 in order to
finance the Tri-K project Feasibility Study in Guinea. It had been
intended to repay this facility by 31 December 2013 using cashflows
from the Inata gold mine, however a fall in the gold price combined
with production difficulties meant that this was not possible.
Since 1 January 2014, the facility has been in default and is
therefore repayable on demand.
The Second Loan and the Third Loan were drawn down over the
course of 2015 and into 2016 and were used to provide funding for
corporate and administrative activities in London and in
Guinea.
All of these loans are repayable on demand and if repayment was
requested by Elliott, the Company would have considerable
difficulty in raising external financing needed to settle these
amounts in full.
Since 2014, the cashflow shortages resulting from gold prices
and lower production at the Inata mine meant the Company has relied
primarily on loan financing from Elliott in order to meet its
running costs of its head office and Guinea administrative
functions.
These loans represent short-term facilities with high interest
rates (between 11% and 14%). In order to become financially secure,
the Company will need to negotiate a restructuring of these loans
with Elliott.
Accordingly, the Company is reliant on the continuing support of
the Elliott Lender.
In addition, the interest burden of the Elliott Loans, which is
in excess of US$200k per month, cannot currently be met out of
Company funds and therefore it will be necessary to restructure
these loans in order to put the Company on a sustainable financial
footing. Negotiations with Elliott in this regard have not yet
commenced, as any solution will need to take into consideration the
investment of any external financier who may be interested in
investing in some or all of the Group's assets.
Notwithstanding the need to restructure the terms of these
loans, the Company believes funds generated through its interest in
Tri-K to be the most likely means of repaying its debts to Elliott.
It is not yet possible to be certain as to the means through which
this repayment might be achieved, however possibilities
include:
- the raising of significant external finance for the
construction of Tri-K (in order to avoid dilution of Avocet's 30%
interest), which might allow a restructuring of the current debt
facilities with Elliott;
- Use of proceeds of the sale of Avocet's interest in the project to repay Elliott;
- Application of intra-group loans and dividend payments from
Tri-K once it enters into production.
Should Elliott request the repayment of these loans, the Company
would be obliged at short notice to seek alternative funding, which
would be a considerable challenge. However, management do not
believe Elliott currently intend to demand repayment of their
loans.
Head office creditors
Apart from the Elliott Loans, the head office creditors are
primarily advisers whose fees relate to the Tri-K deal and
directors' fees. These creditors understood that they will be
repaid on receipt of the proceeds of the Tri-K disposal and were
prepared to await this event.
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project early May.
Following this, the so-called 'First Closing' was completed on 22
May and the Company received from Managem USD 4 million for 40 per
cent of its interest in the project.
The Company relied until recently on management fees out of the
Inata mine, however as the mine is experiencing operational and
cashflow issues, it is not certain that funds will be available to
settle management fees in the near future and therefore will need
to rely on the money received from Managem. After payment of the
outstanding Tri-K obligations and current Head Office obligations,
the company has funds available to fund Head Office costs and
invest in SMB's restructuring in return for an opportunity for it
and its shareholders to participate in the Avocet business going
forward..
Gold price
The profitability of both the Tri-K project and the Inata gold
mine (including surrounding deposits) depends on the gold
price.
The cash costs at Inata during 2016 and into 2017 have ranged
between US$900 and US$1,100 per ounce and therefore a modest fall
in gold prices from current levels would result in margins becoming
extremely tight, which would make the servicing of the mine's debts
and creditors challenging.
The Company has no control over the gold price and is not in a
position to enter into any hedging arrangements in view of its
financial difficulties.
The sensitivities of Tri-K's cashflows to different gold prices
cannot be determined with any confidence before the completion of
its BFS, however, as with any gold mine, its profitability and
value are likely to be heavily dependent on the gold price.
In financial forecasts, the Company uses US$1,200 per ounce. The
Board believes this to be a reasonable long term price, in line
with market consensus forecasts.
Nevertheless, it remains clear that a sustained fall in the gold
price would put severe pressure on the operations at Inata and
would also threaten the economic viability of the Tri-K project -
as well as the Avocet Group as a whole.
Support from Inata's creditors
The Inata gold mine at 21 April 2017 had approximately US$28
million in trade creditors and a further US$26 million in bank and
other debt facilities. Many of the balances owing to suppliers are
overdue and the mine has faced a number of demands to bring
balances within credit limits.
There have been a number of recent interruptions to critical
supplies, which have temporarily affected mining or production.
Other creditors might also refuse to allow critical supplies to be
delivered to the mine, or might otherwise initiate legal action
that could disrupt operations.
In order to stabilise production and avoid interruptions to
supplies which have affected ongoing operations over the past few
months, the mine needs to spend US$3-5 million urgently on
inventories and spare parts, either out of funds generated from
operations or from third party investment.
Inata's management have spent a considerable amount of time
discussing the mine's predicament with key suppliers, pointing to
the fact that the best means to ensure creditors are repaid is to
allow supplies to continue to be made and for the mine to produce
gold.
Nevertheless, the current life of mine plan, which shows
production running until the end of 2019, indicates that in the
absence of a very significant near-term increase in the gold price,
the mine will not be able to repay all of its creditors. However,
as long as the mine forecasts indicate that it is able to generate
cashflow from its ongoing activities, these funds can be used to
reduce the mine's indebtedness, which is likely to be a
considerably better outcome for creditors than closing the mine and
putting its operating company into a form of insolvency.
The threat of creditor action and the risk to ongoing
production, represents a material uncertainty as to the ability of
Inata to continue as a going concern.
In relation to Burkina Faso, and in particular Inata, the
immediate priority is to negotiate continued support from creditors
to allow operations to continue. The carrying value of all assets
held in Burkina Faso assumes a successful outcome, if there is not
a successful outcome to negotiations with all stakeholders at
Inata, operations may not be able to continue and hence assets in
Burkina Faso would need to be impaired in full. This will represent
a considerable challenge, with compromises needed from all
stakeholders, with there being no guarantee of a successful
outcome. These conditions indicate the existence of a material
uncertainty that may cast significant doubt over the group's
ability to continue as a going concern and of the carrying value of
assets in Burkina Faso.
In the event that the mine was unable to continue and the
insolvency of its operating company is unavoidable, it is possible
that Avocet may be able to realise value from its interest in the
exploration permits, particularly Souma. However even in the event
that this were not possible, none of the debts in the Group's
Burkina Faso entities have any recourse to the Company's interests
in Guinea or in the UK, therefore as the Company has obtained funds
to cover head office operating costs (from the proceeds of First
Closing from the Tri-K divestment), then the loss of the Group's
Burkinabe assets would not necessarily lead to the insolvency or
discontinuation of the rest of the Group.
On 31 May 2017 SMB, its major trade creditors and its bank
(together representing approximately seventy per cent of SMB's
debt) have agreed the terms of a standstill agreement for the
duration of two months as strategic options are being explored in
connection with a financial, debt and corporate restructuring of
the company.
Pursuant to this agreement SMB's major trade creditors and its
bank shall refrain from exercising their rights and remedies and
taking any legal action to protect and preserve such rights and
remedies, in relation to the outstanding debts. SMB agreed to a
payment scheme for deliveries of services and goods during the
standstill period that provides for payments thereof in sync with
the receipt of the gold proceeds by SMB.
All stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution.
Souma permit
The future of the Inata gold mine beyond 2019 will rely upon the
successful completion of a Feasibility Study for the Souma deposit,
located 20km north-east of the Inata plant.
The work needed to complete the study, which is expected to cost
between US$5-7 million, must be completed in order for an
application for a mining permit to be submitted by July 2018.
The Company is currently in negotiation with its financiers with
regards to the funding of this activity. However, until any
financing package is negotiated, there can be no guarantee that
this funding will be made available.
Conclusion
The above areas of risk represent material uncertainties that
may cast significant doubt over the ability of the Company to
continue as a Going Concern and that it may be unable to realise
all of its assets and discharge all of its liabilities in the
normal course of business. Nevertheless, the Directors have a
reasonable expectation that these risks can be managed, or will not
come to pass and accordingly the Financial Statements have been
prepared on a Going Concern basis and do not include the
adjustments that would result if the Company were unable to
continue as a Going Concern.
Investments in subsidiaries
Investments are included at cost less amounts written off.
Foreign currency
The Company's financial statements have been reported in US
dollars as the dollar is considered to be the Company's functional
currency. Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date.
40. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The profit is stated after charging:
31 December 31 December
2016 2015
US$000 US$000
------------------------------------------------------------- ----------- -----------
Auditor's remuneration
* audit - Company 12 12
Non-audit services
* tax compliance services 13 18
- Tax advisory services 17 -
* all services relating to corporate finance
transactions (either proposed or entered into ) by or
on behalf of the Company or any of its associates 62 -
Operating lease charges 142 208
------------------------------------------------------------- ----------- -----------
41. TANGIBLE ASSETS
Office
and IT
equipment Total
US$000 US$000
----------------------------------- ---------- -------
Cost
At 1 January 2016 1,119 1,119
At 31 December 2016 1,119 1,119
----------------------------------- ---------- -------
Depreciation
At 1 January 2016 1,119 1,119
At 31 December 2016 1,119 1,119
----------------------------------- ---------- -------
Net book value at 31 December 2016 - -
----------------------------------- ---------- -------
Net book value at 31 December 2015 - -
----------------------------------- ---------- -------
All fixed assets were impaired to nil during 2013. No fixed
assets were acquired during 2016 or 2015.
42. SHARES IN GROUP UNDERTAKINGS
31 December 2016 31 December 2015
Subsidiary undertakings US$000 US$000
Cost
At 1 January 18,800 28,072
Impairment - (9,272)
At 31 December 18,800 18,800
Net book value at 31 December 18,800 18,800
In 2016, following a review of the underlying valuation of its
assets, no impairment was recognised against the Company's
investment in Wega Mining AS shares (2015: US$9.3 million).
Shares in Wega Mining AS are pledged in favour of Manchester
Securities Corp.
During the period the principal trading subsidiaries of the
Company, including those held indirectly by the Company, were as
shown in the following table.
Percentage of ordinary share capital
held by
-------------------------------------
Country of
registration or
incorporation & Class of share
Name of entity Nature of business operation capital held Company Group
----------------- ------------------
Société
des Mines de
Bélahouro SA Gold mining Burkina Faso Ordinary - 90%
Goldbelt Resources
West Africa SARL Gold exploration Burkina Faso Ordinary - 100%
Wega Mining
Guinée SA Gold exploration Guinea Ordinary - 100%
------------------ ----------------- ------------------
This information is given only in respect of undertakings as are
mentioned in s410 (2) of the Companies Act 2006.
43. DEBTORS DUE WITHIN ONE YEAR
31 December 31 December
2016 2015
US$000 US$000
----------------------------------- ----------- -----------
Due within one year
Amounts owed by Group undertakings - -
Other debtors 243 53
Prepayments 56 81
----------------------------------- ----------- -----------
299 134
----------------------------------- ----------- -----------
Following a review of the valuation of its underlying assets,
the Company recognised an impairment of US$0.5 million against
loans due from Group undertakings in the year. Prior to
impairments, these loans had a book value of US$262.5 million,
however the impairment in 2016, on top of impairments in previous
years, have brought their carrying value to nil. Amounts owed to
the Company by its subsidiaries are secured in favour of Manchester
Securities Corp.
44. CREDITORS: AMOUNTS FALLING DUE IN LESS THAN ONE YEAR
31 December 31 December
2016 2015
US$000 US$000
-------------------------------- ----------- -----------
Other taxes and social security 30 47
Other financial liabilities 27,533 22,964
Accruals and deferred income 2,240 1,633
-------------------------------- ----------- -----------
29,803 26,644
-------------------------------- ----------- -----------
Other financial liabilities include a loan of US$26.4 million
due to Manchester Securities Corp (an affiliate of Elliott) and a
US$0.1 million pension liability relating to ATI, Avocet's former
operations in the USA.
45. SHARE CAPITAL
31 December 31 December
2016 2015
--------------------- ---------------------------
Number US$000 Number US$000
------------------------------------ ----------- -------- --------------- ----------
Authorised:
Ordinary share of 1p (2015 5p) 80,000,000 1,395 800,000,000 69,732
Deferred shares of 4.9p 800,000,000 68,337 - -
Allotted, called up and fully paid:
Ordinary shares 20,949,671 341 209,496,710 17,072
Deferred shares 209,496,710 16,731 - -
------------------------------------ ----------- -------- --------------- ----------
Closing balance 230,446,381 17,072 209,496,710 17,072
------------------------------------ ----------- -------- --------------- ----------
On 10 June 2016, the Company's share capital was subdivided from
209,496,710 ordinary shares of 5p each into 209,496,710
intermediate shares of 0.1p each and 209,496,710 deferred shares of
4.9p each.
On the same day the Company consolidated the intermediate
ordinary shares on a 10:1 basis and the intermediate ordinary
shares were re-designated as 1 new ordinary share of 1p each.
The deferred shares have no rights to vote, attend or speak at
general meetings of the Company or to receive any dividend or other
distribution and have no valuable economic rights to participate in
any return of capital on a winding up or liquidation of the
Company.
46. SHARE PREMIUM
31 December 31 December
2016 2015
US$000 US$000
--------------- ----------- -----------
At 1 January 146,391 146,391
At 31 December 146,391 146,391
--------------- ----------- -----------
47. INVESTMENT IN OWN SHARES AND TREASURY SHARES
31 December 2016 31 December 2015
US$000 US$000
Own shares Treasury shares Own shares Treasury shares
US$000 US$000 US$000 US$000
At 1 January 169 1,676 169 1,676
At 31 December 169 1,676 169 1,676
In 2016 and 2015, the Company allotted no new shares to the EBT.
No shares were released from the EBT in 2016 or 2015.
At 31 December 2016, the Company held 33,620 Own Shares (of
which 33,430 were held in the EBT and 190 were held in the Share
Incentive Plan).
During 2016 and 2015, no shares were issued by the Company from
Treasury shares. At 31 December 2016, the Company held 44,200
Treasury shares.
48. RELATED PARTY TRANSACTIONS
The table below sets out charges during the year and balances at
31 December 2016 between the Company and Group companies that were
not wholly-owned, in respect of management fees and interest on
loans:
Year ended 31 December 2016 Year ended 31 December 2015
--------------------------------------------- ---------------------------------------------
Balance at 31 December Balance at 31 December
Year ended 31 December Charged in the year 2016 Charged in the year 2015
2016 US$000 US$000 US$000 US$000
Société des
Mines de Bélahouro
SA (90%) 753 135,961 770 137,451
During 2016 an amount of GBP250 (approximately US$308) was paid
to H Wynn, spouse of J Wynn, in respect of accounting services to
the Company.
No dividends were received by Directors during 2015 or 2016 in
respect of shares held in the Company.
49. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2016 or 31
December 2015.
In April 2011, Avocet was informed that a law suit had been
filed against it in the District Court of South Jakarta, Indonesia
by PT Lebong Tandai ('PT LT'), Avocet's former partner in a joint
venture in Indonesia (the 'First PT LT Case'). The law suit relates
to a challenge as to the legality of the sale of Avocet's South
East Asian assets. PT LT asserts that it was entitled to acquire
all of these assets pursuant to an agreement allegedly entered into
between PT LT and Avocet in April 2010. In its law suit, PT LT has
claimed damages totalling US$1.95 billion, comprising US$450
million loss in respect of an alleged on-sale by PT LT of part of
the assets, US$500 million loss in respect of financing
arrangements allegedly entered into by PT LT and US$1 billion for
loss of reputation. In November 2011, Avocet challenged the
jurisdiction of the District Court to hear the law suit on the
basis that PT LT and Avocet were obligated under the terms of their
joint venture to settle any dispute through arbitration. In
addition, Avocet challenged the court's jurisdiction on the grounds
that Avocet is not subject to the Indonesian courts as it has no
presence in Indonesia. In December 2011 the District Court found in
Avocet's favour and dismissed the case. In January 2013, it was
confirmed to Avocet that PT LT had lodged an appeal to the
Indonesian High Court against the District Court's decision. In
September 2013 the High Court released its decision on the appeal
brought by PTLT and decided in Avocet's favour that the District
Court's original decision was correct and that the District Court
did not have jurisdiction to hear the matter. During October 2013,
Avocet was informed that PT LT had appealed the High Court's
decision to the Supreme Court of Indonesia. In May 2014, the
Supreme Court ruled in Avocet's favour that the High Court's
decision was correct and that the District Court did not have
jurisdiction to hear the matter. The Company is unaware of whether
PT LT has sought, or will seek, a judicial review of the Supreme
Court's decision.
On 2 May 2012, Avocet was informed that PT LT had filed a second
law suit against it, as well as against J&Partners Asia
Limited, PT. J Resources Asia Pasifik Tbk and PT J Resources
Nusantara - all being subsidiaries or affiliates of J&Partners
L.P. ('J&Partners') which was the buyer of Avocet's South East
Asian assets - in the District Court of South Jakarta, Indonesia
(the 'Second PT LT Case'). The Second PT LT Case is based on almost
identical grounds to the First PT LT Case with the addition of the
further defendants and claims against them. In the Second PT LT
Case, PT LT is seeking a declaration that the assignment of
Avocet's shares in the joint venture with PT LT to any third party
other than PT LT is null and void and that PT LT has the right to
acquire the shares in the joint venture with Avocet. PT LT also
seeks an order that all of the defendants (Avocet and
J&Partners) must surrender/assign the shares in the joint
venture to PT LT and that PT. J Resources Asia Pasifik Tbk or any
other entity must not sell, assign or make any legal undertakings
in respect of the shares in the joint venture and/or all the assets
of Avocet in Indonesia. Finally PT LT seeks damages for material
and immaterial injury of US$1.1 billion and US$1 billion
respectively. In September 2012, Avocet disputed the jurisdiction
of the Indonesian court over the Second PT LT Case for the same
reasons that it disputed the jurisdiction of the Indonesian court
in relation to the First PT LT Case, namely that PT LT and Avocet
were obligated under the terms of their joint venture to settle any
dispute through arbitration. In addition, Avocet challenged the
court's jurisdiction on the grounds that Avocet is not subject to
the Indonesian courts as it has no presence in Indonesia and also
on the ground that the substance of the Second PT LT Case is the
same as the First PT LT Case, over which the Indonesian court had
already found that it did not have jurisdiction. The District Court
subsequently found in favour of Avocet and the other defendants and
dismissed the case. In February 2013, PT LT appealed the District
Court's decision on jurisdiction to the High Court. In January 2014
the High Court released its decision in favour of Avocet and the
other defendants. During February 2014, Avocet was informed that PT
LT had appealed the High Court's decision to the Supreme Court of
Indonesia.
The Company understands that PT LT has filed a third law suit
against J&Partners or its affiliates which makes similar
arguments as the Second PT LT Case (the 'Third PT LT Case'). The
Company understands that the South Jakarta District Court has
dismissed the Third PT LT Case and that PTLT has appealed to the
Indonesian High Court against the District Court's decision.
The Board remains confident that all the actions taken in
respect of the transaction have been in accordance with prevailing
rules and regulations and there are no grounds for any such legal
action by PT LT. As any financial settlement with PT LT is
considered to be remote, this matter does not constitute a
contingent liability, however the matter is disclosed in these
financial statements to replicate statements already made by the
Company.
The buyer, J&Partners, notified Avocet that in the event PT
LT were successful in actions against J&Partners,
J&Partners would make a claim for damages against Avocet. The
basis for the claim would be that Avocet had breached a warranty in
the sales agreement, which is governed by English law, in which it
stated that it was selling the assets free of encumbrance. Avocet
strongly disagreed that there was any such breach and initiated
arbitration in the English courts to have any such claim
dismissed.
The arbitration hearing took place in London in January 2015 and
the verdict was delivered in December 2015. Although the verdict
was partial and certain areas remained unresolved, the Company does
not believe there to be any further contingent liabilities with
regard to the arbitration.
Claim for Repayment of VAT
In March 2016, the Company received notification from HM Revenue
and Customs that its VAT registration status had been challenged on
the grounds that its management fees were not considered taxable
supplies due to not having been fully settled in cash. The Company
believes that these were valid taxable supplies in respect of bona
fide services performed by Avocet Mining PLC on behalf of its
subsidiaries (notably the Inata gold mine) and the non-payment was
the result of temporary cashflow shortages and other restrictions
in connection with its subsidiary's loan facilities. In the event
that the VAT registration were to be held to be invalid (which the
Board considers a remote possibility), the total VAT reclaimed that
would be repayable by the Company would be approximately GBP285k
(US$351K).
50. CAPITAL COMMITMENTS
There were no capital commitments at 31 December 2016 or 31
December 2015.
51. POST BALANCE SHEET EVENTS
On 3 April 2017, David Cather stepped aside as Chief Executive
Officer to become Technical Director, with Boudewijn Wentink
appointed in his stead with immediate effect. On 30 April 2017 Jim
Wynn stood down as Finance Director and became a Non-executive
Director. Yolanda Bolleurs was appointed as Chief Financial Officer
on 3 April 2017.
In April 2017, discussions started with trade creditors, banks
and government to stabilize Inata and with a view to restructure
its debts. In this process a key step was achieved on 31 May 2017:
Inata, its major trade and financial creditors (together
representing approximately seventy per cent of Inata's debt) agreed
the terms of a standstill agreement for the duration of two months
as strategic options are being explored in connection with a
financial, debt and corporate restructuring of the company. All
stakeholders (including financial creditors, shareholders,
government, key operational stakeholders and employees) will need
to contribute to achieve a consensual restructuring solution,
however, inevitably, there can be no guarantee that these
negotiations will prove successful.
Avocet received the decree signed by the Guinean President
ratifying the Mining Convention for the Tri-K project in May.
Following this, the so-called 'First Closing' was completed on 22
May 2017 and the Company received from Managem US$4 million for 40
per cent of its interest in the project.
There were no other material post balance sheet events.
SHAREHOLDER INFORMATION
Avocet Mining PLC ordinary shares are listed on the Official
List of the Main Market of the London Stock Exchange and on the
Oslo Børs.
The Company's lead broker and sponsor is J.P. Morgan Cazenove
Limited.
Avocet Mining PLC has a website (www.avocetmining.com) on which
press releases and background information on the Company and its
operations are set out.
Shares may be bought or sold through a stockbroker who is a
member of the London Stock Exchange, or through a stockbroker who
is a member of the Oslo Børs.
Market makers in the shares of the Company are Cantor Fitzgerald
Europe, Peel Hunt LLP, Cenkos Securities PLC, Jefferies,
Winterflood Securities and the Knight Capital Group.
HISTORICAL SHARE PRICES:
High Low
Quarter Ended pence pence
--------------------------------- ------ -----------
31 March 2016 4.29 4.05
30 June 2016 89 84.5
30 September 2016 92 90.52
31 December 2016 54.5 52.19
--------------------------------- ------ -----------
Closing price:
--------------------------------- ------ -----------
31 December 2016 54.25
--------------------------------- ------ -----------
Total number of shares in issue:
--------------------------------- ------ -----------
31 December 2015 209,496,710
31 December 2016 20,949,671
------
UNSOLICITED MAIL
Avocet Mining PLC is aware that some shareholders have had
occasion to complain that outside organisations, for their own
purposes, have used information obtained from the Company's share
registers. Avocet Mining PLC, like other companies, cannot by law
refuse to supply such information provided that the organisation
concerned pays the appropriate statutory fee. If you are in the UK
and wish to stop receiving unsolicited mail then you should
register with The Mailing Preference Service by letter, telephone
or through its website:
The Mailing Preference Service
DMA House
70 Margaret Street
London W1W 8SS
Complaints Department - 020 7291 3321
www.mpsonline.org.uk
DIRECTORS AND ADVISERS
Executive directors
Boudewijn Wentink - Chief Executive Officer
David Cather - Technical Director
Non-executive directors
Russell Edey - Chairman
Barry Rourke
Gordon Wylie
Jim Wynn
Company Secretary and registered office
Yolanda Bolleurs
5th Floor, 15 Old Bailey
London EC4M 7EF
Registrars and transfer office
Computershare Investor Services PLC
PO Box 82, The Pavilions, Bridgwater Road
Bristol BS99 7NH
Bankers
Barclays Bank PLC
Ecobank Burkina SA
Coris Bank SA
Stockbrokers
J.P. Morgan Cazenove Ltd
Auditor
Grant Thornton UK LLP
Solicitors
Fieldfisher LLP
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFKEFDFXEFF
(END) Dow Jones Newswires
June 12, 2017 02:01 ET (06:01 GMT)
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