TIDMAVM
RNS Number : 4119W
Avocet Mining PLC
26 April 2016
Avocet Mining PLC
2015 Full Year Results
2015 SUMMARY
-- 74,755 ounces produced at Inata
-- Costs at Inata reduced in spite of challenging production and cashflow
environment
-- Economics of Tri-K improved - capex estimates reduced from US$88 million
to US$60 million
-- No Lost Time Injury ('LTI') incidents in 2015 - nearly 7 million LTI-free
man hours by 31 December 2015
KEY FINANCIAL METRICS
Year ended Year ended
31 December 2015 31 December 2014
Audited Audited
================================================ ================= =================
Gold production (oz) 74,755 86,037
================================================ ================= =================
Average realised gold price (US$/oz) 1,167 1,263
================================================ ================= =================
Revenue (US$000) 85,038 110,444
================================================ ================= =================
Cash production cost (US$/oz) 1,058 1,186
================================================ ================= =================
Loss before tax and exceptional items (US$000) (10,550) (28,443)
================================================ ================= =================
Exceptional items (US$000) (45,148) (111,692)
================================================ ================= =================
EBITDA (US$000) (1,996) (2,231)
================================================ ================= =================
Cash generated by operations (US$000) 7,305 12,095
================================================ ================= =================
David Cather, Chief Executive Officer, commented:
"2015 was a difficult year for the mining sector as a whole, and
Avocet was no exception. As well as lower gold prices, Inata faced
a number of challenges throughout the year, and saw production fall
to 74,755 ounces. In response, measures were taken to reduce
production and support costs across the organisation, and capex was
reduced to minimum levels in order to conserve cash. At Tri-K, the
Company's efforts to raise finance were hampered by the bear market
for mining finance, as well as the ebola crisis. Many challenges
remain; however the outlook for 2016 is more positive, with an
increase in the gold price during Q1 and M&A activity
indicating that investor confidence may be returning. An updated
Life of mine plan for Inata is being developed at the present time,
and I hope to be able to provide more detail on our discussions
regarding the financing of Tri-K and Souma in due course. "
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC Bell Pottinger J.P. Morgan Cazenove
Financial PR Consultants Corporate Broker
David Cather, CEO Daniel Thöle Michael Wentworth-Stanley
Jim Wynn, FD
+44 20 3709 2570 +44 20 2772 2500 +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% of the Inata Gold Mine. The
Inata Gold Mine poured its first gold in December 2009 and produced
74,755 ounces of gold in 2015. 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 kilometres from the Inata Gold Mine.
In Guinea, Avocet owns 100% of the Tri-K Project in the north
east of the country. Drilling to date has outlined a Mineral
Resource of 3.0 million ounces, and in October 2013 the Company
announced a maiden Ore Reserve on the oxide portion of the orebody,
which is suitable for heap leaching, of 0.5 million ounces. As an
alternative, the potential exists to exploit the entire 3.0 million
ounce Tri-K orebody via the CIL processing method. The Company
announced on 2 April 2015 that an exploitation permit had been
awarded for Tri-K.
CHAIRMAN'S STATEMENT
During 2015, the strategic focus was to optimise cashflow
generation at the Inata gold mine, while looking to exploit the
upside opportunities represented by the Souma deposit in Burkina
Faso, and the Tri-K project in Guinea.
The fall in the gold price during the year, together with a
series of operational challenges at the mine itself, meant that
revenues from gold sales at Inata were lower than in 2014; however
this was to some extent partly mitigated by continued hard-won cost
reductions. Nevertheless, tight margins put pressure on plans to
repay supplier credit balances and financial obligations, and at
times required difficult negotiations with the mine's
stakeholders.
The continued operation of the mine is testament to the
flexibility and adaptability shown not only by Inata staff and
management, but also by its creditors and wider stakeholders. It is
likely that compromises will remain necessary on all sides for the
remainder of the mine life, as it remains clear that the best way
to maximise the repayment of the mine's debts is for it to be
allowed to continue in operation.
One effect of this cashflow shortage was that the programme of
drilling and test work undertaken in respect of the Souma deposit
during the year was put on hold, and is now dependent on raising
external finance in order to be completed. We believe that the
funding required for this exercise, which should allow the
completion of a Feasibility Study and application for a mining
permit to be made before the end of 2016, is value-adding, and
likely to be in the interests of all stakeholders.
The award of the mining permit at Tri-K on 27 March 2015
represented a key milestone in the development of that project.
However, the exercise to raise the finance necessary for the
construction of the mine, which is currently estimated to be
approximately US$60 million, was affected by the downturn
experienced by the mining sector globally, as well as by the ebola
crisis in Guinea.
Many of the traditional sources of mining finance (bank debt and
equity markets) have been particularly averse to financing junior
mining projects in developing markets, with only those projects
with the clearest and most certain returns being funded. Tri-K
offers a unique opportunity for investors to participate in what we
believe to be a far larger project than the initial heap leach
outlined in the Feasibility Study, and we continue to target
investors who have an appetite for growth combined with a tolerance
of the specific project and jurisdictional risks.
We hope to be able to provide further details with regard to the
financing of Tri-K, which remains an evolving situation, in due
course.
At the corporate level, in September, Mike Norris stepped down
as Finance Director after more than eight years, and was replaced
by Jim Wynn, who had previously been Head of Finance and Company
Secretary. In addition, at the AGM in May 2015, Mike Donoghue stood
down as a Director, having joined the Board in 2006. I would like
to thank both for their contributions to the Company.
2015 was undoubtedly another difficult year for Avocet Mining
PLC, and many challenges remain. However the recent rise in the
gold price, allied with some increase in financing and M&A
activity in the sector, give cause for cautious optimism.
Russell Edey
Chairman
CHIEF EXECUTIVE'S STATEMENT
Inata Gold Mine, Burkina Faso
Operations at Inata during 2015 were marked by continuous
cashflow pressures, and the need to ensure production levels were
maintained in order to generate sufficient gold sales to meet
payment obligations.
The mine produced 74,755 ounces at a cash cost of US$1,058 per
ounce, compared with 86,037 ounces at US$1,186 per ounce in 2014.
Realised gold prices fell from US$1,263 per ounce in 2014 to
US$1,167 in 2015. Despite the fall in production, the mine was able
to keep cash costs below spot prices.
In December 2014, an illegal strike took place which resulted in
the mine being closed for several weeks. By January 2015, the plant
returned to operation, using stockpiled ore until the mining crews
were re-manned and mining operations returned to normal during
February. This disruption affected gold production, and in
particular mining in Q1 2015, resulting in the need to adapt the
mine schedule to ensure adequate production was maintained to meet
ongoing cashflow requirements.
Pressure on cashflows at the mine was further intensified by
lower gold prices in the year. In particular, spot prices fell
below US$1,100 per ounce in July and again in November.
In September 2015, an attempted military coup took place in
Burkina Faso which meant the mine was unable to export gold
shipments for three weeks. This put pressure on already strained
relationships with key suppliers, and a short term loan of 5bn CFA
(US$8 million) was negotiated with Coris Bank to ensure the
continued delivery of critical supplies.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 12:45 ET (16:45 GMT)
Cashflow shortages at the mine affected almost all aspects of
operations: the mine schedule developed at the start of the year
had to be revised in order to source cleaner oxide ore to meet
short-term cash requirements; the lack of available funds for
maintenance catalysed innovative, low-cost solutions, which were
necessary in order to maintain mining volumes; managing gold
recovery levels became difficult as ore types varied frequently
from oxides to preg-robbing lithologies; and deliveries of critical
supplies to site were at times delayed as a result of late payment
of invoices.
In spite of these challenges, mining volumes of 14.1 million
tonnes exceeded 2014 levels (14.0 million tonnes), while plant
throughput of 1.9 million tonnes was in line with the previous
year. Grades varied throughout the year - during the first half,
higher grade carbonaceous materials were mined, while in later
quarters, lower grade, cleaner ores were used for mill feed.
Average grades in the year were 1.85 g/t compared to 1.77 g/t in
2014.
Recovery levels decreased from 79% to 67% year-on-year, due to
the increase in metallurgically inferior carbonaceous ore treated
in 2015.
Souma, Burkina Faso
Exploration activity in Souma during 2015 consisted of
additional resource and metallurgical drilling, intended to
increase the size and improve the understanding of the deposit,
which lies 20km due east of the Inata mine.
The results that have been received to date have been
encouraging, and once all assay results have been reported the
mineralization models will be updated and new resource models
generated.
The Company will then look to advance the project towards a
Feasibility Study in 2016, with the target of submitting an
application for a mining permit early in 2017.
Tri-K, Guinea
Following the award of a mining permit for the Tri-K project on
27 March 2015, the Company's focus has been to raise finance for
construction. In spite of unfavourable market conditions, as well
as the ebola crisis which affected travel to and from the region
for much of the year, progress has been made with a number of
parties who are interested in investing in the project.
The Government has been kept informed of our progress, and have
indicated their ongoing support for the project. I hope to be able
to provide a more substantive update shortly.
Corporate Review
As with our operations in West Africa, the Company has been
successful in reducing its cost base at the corporate level. UK
head office administration costs in 2015 were over 60% lower than
in the previous year. Funding for these costs, as well as the
Company's support teams in Guinea and Mali, came largely from loans
extended by an affiliate of Elliott Management, Avocet's largest
shareholder, which extended loans totalling almost US$4 million in
the year.
It is encouraging that the gold price in Q1 2016 has enjoyed a
15% increase and has been sustained over US$1,200 per ounce, which
has buoyed Inata's cashflows and enhanced Tri-K's economics. In
addition, recent M&A deals in the West African gold mining
space may prove to be early indicators of a return of investor
interest in the sector.
David Cather
Chief Executive Officer
FINANCIAL REVIEW
Financial highlights(1)
2015 2014
Year ended 31 December Audited Audited
----------------------------------------------------------- -------- ---------
US$000
Revenue 85,038 110,444
Gross loss (4,895) (19,272)
Loss from operations (52,518) (137,537)
EBITDA (1,996) (2,231)
Loss before tax (55,698) (140,135)
----------------------------------------------------------- -------- ---------
Analysed as:
Loss before taxation and exceptional items (10,550) (28,443)
Exceptional items (45,148) (111,692)
----------------------------------------------------------- -------- ---------
Loss for the year (49,705) (149,788)
----------------------------------------------------------- -------- ---------
Net cash generated by operations (before interest and tax) 7,305 12,095
----------------------------------------------------------- -------- ---------
Net cash inflow/(outflow) 1,040 (10,385)
----------------------------------------------------------- -------- ---------
(1) Prepared in accordance with International Financial Reporting Standards.
Revenue
Group revenue for the year was US$85.0 million compared with
US$110.4 million in 2014. The Group sold 72,872 ounces at an
average realised price of US$1,167 per ounce during 2015, compared
with 87,425 ounces sold at an average realised price of US$1,263
per ounce in 2014. The lower revenue reflected lower gold
production in the year, as well as a fall in the average realised
spot price.
Gross loss and unit cash costs
The Group gross loss in 2015 was US$4.9 million compared with
US$19.3 million in 2014, an improvement of US$14.4 million. The
impact of lower gold production and spot prices was offset by a
reduction in costs, particularly in mining, as well as a reduction
in the depreciation charge in the year following the decision in
June 2015 to impair in full the remaining Inata fixed assets.
Unit cash costs at Inata decreased from US$1,186 per ounce in
2014 to US$1,058 per ounce in 2015.
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.
2015 2014
Year ended 31 December US$000 US$000
---------------------------------------------------------------------------------------- ------- --------
Cost of sales 89,933 129,716
---------------------------------------------------------------------------------------- ------- --------
Depreciation and amortisation (5,374) (23,614)
---------------------------------------------------------------------------------------- ------- --------
Changes in inventory (5,895) (895)
---------------------------------------------------------------------------------------- ------- --------
Adjustments for exploration expenses and other costs not directly related to production 426 (3,172)
---------------------------------------------------------------------------------------- ------- --------
Cash costs of production 79,090 102,035
---------------------------------------------------------------------------------------- ------- --------
Gold produced (ounces) 74,755 86,037
---------------------------------------------------------------------------------------- ------- --------
Cash cost per ounce (US$/oz) 1,058 1,186
---------------------------------------------------------------------------------------- ------- --------
Loss before tax
The Group reported a loss before tax of US$55.7 million in the
year ended 31 December 2015, compared with a loss of US$140.1
million in the year ended 31 December 2014.
In 2015, the Group recognised a number of impairments in
relation to its mining and exploration assets. The assets of Inata
were impaired by a total of US$45.1 million (2014: US$105.5
million) during the year, primarily as a result of lower gold
prices, and changes in production assumptions which had the effect
of shortening the mine life and reducing the expectation of cash
generation.
Before exceptional items, the loss before tax for the year ended
31 December 2015 was US$10.6 million compared with a loss of
US$28.4 million for the year ended 31 December 2014.
Taxation
The Group reported a credit in the tax expense line in the
income statement of US$6.0 million in 2015 (2014: tax charge US$9.7
million), analysed as follows:
2015 2014
Year ended 31 December US$000 US$000
----------------------- ------- -------
Inata, Burkina Faso (6,012) 9,641
Avocet Mining PLC, UK 19 12
----------------------- ------- -------
(5,993) 9,653
----------------------- ------- -------
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 expects these balances to be settled.
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.
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EBITDA improved from a loss of US$2.2 million in 2014 to a loss
of US$2.0 million in 2015. This reflected the movements described
above in respect of the gross loss, with the exception of
depreciation, which is excluded from EBITDA, as well as reflecting
a reduction in head office and corporate costs of some US$4.1
million compared with 2014.
A reconciliation of Loss before tax and exceptionals to EBITDA
is set out below:
2015 2014
Year ended 31 December US$000 US$000
--------------------------------- -------- --------
Loss before tax and exceptionals (10,550) (28,443)
--------------------------------- -------- --------
Depreciation and amortisation 5,374 23,614
--------------------------------- -------- --------
Exchange gains (3,136) (5,856)
--------------------------------- -------- --------
Finance income - (2)
--------------------------------- -------- --------
Finance expense 6,316 8,456
--------------------------------- -------- --------
EBITDA (1,996) (2,231)
--------------------------------- -------- --------
Cash flow and liquidity
A total cash inflow of US$1.0 million was reported for the year
ended 31 December 2015. Net cash generated by operating activities
(before interest and tax) totalled US$7.3 million, while capital
expenditures amounted to US$3.8 million.
Financing during the year represented an inflow of US$1.8
million including the loan repayments of US$10.2 million to
Ecobank, finance lease payments of US$0.4 million, and proceeds
from debt of US$3.9 million from Manchester Securities Corp (an
affiliate of Elliott, Avocet's largest shareholder) and US$8.5
million from Coris Bank.
A summary of the movements in cash and debt is set out
below:
2015 2014
---------------------------- -----------------------------
Net Cash/ Net Cash/
Cash Debt (Debt) Cash Debt (Debt)
US$000 US$000 US$000 US$000 US$000 US$000
---------------------------------- ------- -------- --------- -------- -------- ---------
At 1 January 4,816 (66,203) (61,387) 15,201 (76,475) (61,274)
---------------------------------- ------- -------- --------- -------- -------- ---------
Net cash generated by/(used
in) operating activities 3,038 - 3,038 5,208 - 5,208
---------------------------------- ------- -------- --------- -------- -------- ---------
Deferred exploration costs - - - (28) - (28)
---------------------------------- ------- -------- --------- -------- -------- ---------
Property, plant and equipment (3,793) - (3,793) (11,613) - (11,613)
---------------------------------- ------- -------- --------- -------- -------- ---------
Net loan repayments 2,222 (2,222) - (4,371) 4,371 -
---------------------------------- ------- -------- --------- -------- -------- ---------
Other movements including foreign
exchange (427) 2,365 1,938 419 5,901 6,320
---------------------------------- ------- -------- --------- -------- -------- ---------
At 31 December 5,856 (66,060) (60,204) 4,816 (66,203) (61,387)
---------------------------------- ------- -------- --------- -------- -------- ---------
Included within cash at 31 December 2015 was US$3.9 million of
restricted cash (31 December 2014: US$4.2 million), representing a
US$2.1 million debt service reserve account held in relation to the
Ecobank loan (2014: US$2.3 million), and US$1.8 million (2014:
US$1.9 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 2015 consisted of US$22.5 million
owed to Manchester Securities Corp, US$35.2 million due to Ecobank,
and US$8.5 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$23.6 million
in the year ended 31 December 2014 to US$5.4 million in the year
ended 31 December 2015. This decrease is primarily the result of
the impairments applied to the fixed assets in Burkina Faso, which
were fully written down at the half-year.
2015 2014
Year ended 31 December US$000 US$000
----------------------- ------- -------
Inata 5,374 23,614
----------------------- ------- -------
Other - -
----------------------- ------- -------
5,374 23,614
----------------------- ------- -------
Capital expenditure
The Group's capital expenditure in the year was US$3.8 million
analysed as follows:
2015 2014
---------------------------------- ----------------------------------
Property, Property,
Deferred plant and Deferred plant and
exploration equipment Total exploration equipment Total
Year ended 31 December US$000 US$000 US$000 US$000 US$000 US$000
------------------------- ------------ ---------- -------- ------------ ---------- --------
Inata gold mine (Burkina
Faso) - 3,765 3,765 - 11,613 11,613
------------------------- ------------ ---------- -------- ------------ ---------- --------
Tri-K project (Guinea) - - - 28 - 28
------------------------- ------------ ---------- -------- ------------ ---------- --------
Head office (UK) - 28 28 - - -
------------------------- ------------ ---------- -------- ------------ ---------- --------
- 3,793 3,793 28 11,613 11,641
------------------------- ------------ ---------- -------- ------------ ---------- --------
Capital investment both in property, plant and equipment and in
exploration activity was reduced compared with 2014 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.
Jim Wynn
Finance Director
RISK MANAGEMENT AND INTERNAL CONTROL
VIABILITY STATEMENT
Changes to the UK Corporate Governance Code section C2 were
introduced in 2014, and set out a number of additional reporting
and disclosure obligations in relation to the management and
assessment of risks that are relevant to the viability of the
Company. These changes apply to years commencing on or after 1
October 2014, and are therefore applicable to this Annual
Report.
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. 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
Avocet Mining PLC owed, at 31 March 2016, US$23.9 million to an
affiliate of Elliott Associates. These loans, which were made to
fund the Tri-K Feasibility Study and ongoing administrative and
corporate costs, are repayable on demand.
However, the most likely means for these loans to be repaid, or
restructured, is as part of a financing arrangement with a third
party with respect to the Tri-K project.
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In addition, the Company is likely to rely upon short-term
funding from Elliott for its corporate and administrative costs in
Guinea until such time as a financing deal has been concluded with
regard to Tri-K. Such a deal may take some time to conclude.
Provided Elliott remain confident that discussions regarding
Tri-K remain positive and are likely to lead to a favourable
outcome with regard to their loan, the Board believes that Elliott
have every reason to remain supportive.
Should Elliott request the repayment of these loans, or withhold
the provision of short-term loans to cover corporate costs until
such time as a restructuring of the loans is achieved, the Company
would be obliged at short notice to seek alternative funding, which
would be a considerable challenge.
Ability to secure financing for Tri-K
Since 2013, the Company has been actively pursuing funding for
its Tri-K project in Guinea. A Feasibility Study for this project
was submitted in September 2013, which outlined a heap leach
operation with a capex of approximately US$88 million. Since then,
work has been undertaken to revise the design of the project with
the result that the capex estimation has now reduced to
approximately US$60 million.
A mining permit for the project was awarded on 27 March
2015.
Financing discussions in 2014 and 2015 were made more
challenging by the slump in the mining sector, which resulted in
many institutions restricting their focus to larger and more
profitable projects, frequently in jurisdictions with a lower
perceived risk. In addition, the ebola crisis in West Africa meant
that potential investors were unable or unwilling to undertake site
visits necessary for their due diligence procedures.
Nevertheless, interest in the project picked up in the latter
part of 2015 and into 2016, buoyed by an increase in the gold
price.
At the present time, the Company is in discussions with a number
of parties who are interested in investing in the project, and
bringing it into production. The precise nature of the investments
under discussion varies, and all aspects remain subject to
negotiation.
However, until a deal has been formally concluded with a
preferred financing partner, there can be no guarantee that the
Tri-K project will be funded.
Loss of Tri-K permits
Under the terms of the Guinean Mining Code, if the holder of a
mining permit has not commenced construction activity within 12
months of the award of the permit (ie by 27 March 2016), it can be
liable to penalties commencing at US$100k per month. If such
activity has not commenced within a further six months, then the
permit may be withdrawn by the government.
The Company has held a number of meetings with senior members of
the Guinean government, at which extenuating circumstances were
discussed (notably the bear market for mining finance, and the
ebola crisis in Guinea).
Nevertheless, if the securing of financing for the project is
not secured, then there is a risk that the Government of Guinea
will apply penalties (which may in itself discourage investment in
the project), and may ultimately withdraw the permit.
Moreover, any deal involving the external financing of the
project will require the approval of the Guinea Government - not
only if such proposals involve alterations to the construction
plan, but also because any material change in ownership requires
approval under the terms of the Mining Code.
Based on the discussions held with interested parties as well as
senior Government representatives, the Board has a reasonable
expectation that, provided financing terms can be agreed upon, the
Government is likely to be sympathetic to proposals that result in
a mine being constructed at Tri-K of at least the scale and
economics outlined in the Feasibility Study.
Gold price
The profitability of both the Tri-K project and the Inata gold
mine (including surrounding deposits) depend on the gold price.
The NPV16 of the Tri-K project, based on the latest financial
results, indicate that a break-even gold price would be around
US$1,050 per ounce, with every subsequent increase of US$50 per
ounce adding around US$8 million in value.
The cash costs at Inata during 2015 and into 2016 have ranged
between US$1,000 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 rise in the gold price since January 2016, however, has
given cause to believe that the decline in spot prices seen between
2012 and 2015 may be at an end. 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 the end of March 2016 had approximately
US$34 million in trade creditors, and a further US$44 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 can be no guarantee that one or more creditors might not
refuse to allow critical supplies to be delivered to the mine, or
might otherwise initiate legal action that could disrupt
operations.
However, 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.
The recent uptick in gold prices, together with improved
production plans and lower operating costs, are clearly encouraging
signs for the mine's creditors and wider stakeholders.
Souma permit
The future of the Inata gold mine beyond 2018 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 2017.
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 Company
over the longer term.
Such reviews include the following:
- The requirement for management to produce Life of Mine Plans for
Inata and Tri-K to cover the full periods of production of those
mines (currently three years and five years respectively)
- 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 continued support of Elliott
Elliott an affiliate of Elliott as a shareholder, but also,
Associates which is repayable on through its affiliate, as a
demand. lender,
If Elliott were to invoke that remains subject to progress
demand, it is unlikely that the being made with regard to the
Company would be able to source financing of the Tri-K project
funds in the short term to meet in
this repayment obligation, and particular (over which Elliott
would therefore become hold security).
insolvent.
The Company remains in constant
Furthermore, the Company has communication with this lender,
been reliant on loan funding and as recently as April 2016
from this affiliate in order to secured further financing for
continue operating, and this its corporate activities.
reliance is likely to continue
until such time as a refinancing
of the Group is concluded. Were
(MORE TO FOLLOW) Dow Jones Newswires
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such financing to be withheld,
the Company would find it a
challenge to find additional
financing necessary to continue
in operation.
--------------------------------- -------------------------------- --------------- --------------------------------
Ability to secure financing for The Company requires funding High Financing mining projects in
Tri-K totalling US$60 million in Guinea was highly challenging
order to finance the during 2015, particularly given
construction the context of the ebola crisis;
of the Tri-K project in Guinea. however the improved gold price
It is currently in discussions and more benign conditions
with a number of potential in the financial markets in
partners in this regard. 2016, together with the end of
the ebola crisis, have led to an
increase in interest in Tri-K.
In the event that such
negotiations do not succeed in The Company is in discussions
a timely manner, then there is with a number of parties with
a risk regard to financing the project.
that the Guinean authorities
would withdraw the permit,
which in turn might trigger a
repayment
demand from Elliott.
--------------------------------- -------------------------------- --------------- --------------------------------
Loss of Tri-K permits Under the Guinea Mining Code, High The Company has discussed the
construction activity should prevailing unfavourable
start within 12 months of the conditions for raising mining
award finance,
of a mining permit in order to as well as the specific
avoid penalties. The Code also challenges for projects in
states that failure to commence Guinea (including the ebola
construction within 18 months of crisis), with
this date would allow the the Guinean government
Government the right to withdraw (including the Minister of
the permit entirely. Mines).
The loss of the Tri-K mining While no binding assurances have
permit might trigger a repayment been made, the Company believes
demand from Elliott. the Guinean authorities to
be sympathetic to these issues.
In addition, the recent changes
to the Cabinet in Guinea give
cause to believe that the
Government
is eager to prove itself to be a
mining-friendly jurisdiction, in
order to secure the inward
investment needed to develop its
considerable resources.
--------------------------------- -------------------------------- --------------- --------------------------------
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 both include an element of hedging,
the Tri-K and Souma projects but the Board believes that the
to new investors. value for Tri-K and Souma in
A fall in the gold price to particular depend to a large
approximately US$1,000 or lower extent on the upside offered in
is likely to mean that Inata, the event that the gold price
Tri-K and Souma are not continues to rise, and therefore
economically viable, and hedging against the downside
therefore the Company itself might remove this attraction.
could not continue.
--------------------------------- -------------------------------- --------------- --------------------------------
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 over US$75m. current production forecasts,
The mine is committed to the Inata gold mine continues
reducing these amounts as to operate at a positive margin,
quickly as its cashflows allow. which means that it will 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 continues in operation in order
have been necessary. to achieve this.
In the event that one or more If the mine were to close as a
major creditor insists on full result of such legal action, it
repayment in a timeframe that is likely that the prospects
the cashflows of the mine do not for repayment for the creditors
permit, it is possible that that would be considerably worse.
creditor might take legal
recourse, which may lead to the Mine management, supported by
insolvency of the Inata gold head office, remain in constant
mine. communication with key creditors
in this regard.
It is also possible that if a
supplier withholds the delivery
of items critical to the
operation
of the Inata gold mine (such as
fuel, reagents, explosives,
etc), then the mine may not be
able to continue in operation.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 12:45 ET (16:45 GMT)
--------------------------------- -------------------------------- --------------- --------------------------------
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
in which Souma sits might not be However, the liquidity of the
able to continue as a solvent parent organisation, Avocet
entity. Mining PLC, is not dependent on
the Souma project, which
represents value upside rather
than a critical factor for the
viability
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 However, the liquidity of the
point parent organisation, Avocet
it would become necessary to Mining PLC, is not currently
close the mine in order to dependent
prevent further losses being on Inata.
incurred.
--------------------------------- -------------------------------- --------------- --------------------------------
Civil unrest and terrorism Recent events in Burkina Faso Moderate 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 between the two.
of terrorist and similar
incidents to foreigners and to The chief objective for this is
foreign-owned assets. 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.
--------------------------------- -------------------------------- --------------- --------------------------------
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.
During 2015, the Company continued its successful harmonisation
of Safety, Health and Environment teams at Inata into a single
department. This included both cross-training of team members as
well as the merging of the management systems, to provide a
joined-up Safety, Health and Environment ('SHE') service to all
activities at Inata.
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
The workforce of Avocet continued to deliver a world-class
safety performance and 2015 was the second full calendar year
without a Lost Time Incident ('LTI'). The end of the year saw the
Company reach 823 LTI-free days which equated to 6.76 million
hours. This achievement is especially satisfying as early in the
year, it was necessary to recruit a large number of new employees
to replace those lost as a result of the strike at the end of 2014.
All the new starters were thoroughly inducted, and although 2015
was not an incident-free year, no serious injuries occurred
either.
However operations teams have not been resting on their laurels.
The Company has continued and will continue to make the safety of
the workforce a priority. Through worker, supervisor and management
focus, the Company strives to make this aspiration a reality.
During 2015, general and targeted safety training were continued,
along with safety, health and environment inspections, and the
following were completed:
- 1,682 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
- 159 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
- 89 individual First Aider training sessions
- 12 Occupational Safety and Health Committee meetings and 12 management
workplace walkabouts
In addition to these general safety meetings and inspections,
the following programmes continued throughout the year to reduce
risk in areas where specific hazards have been identified:
- Fire drills, particularly around flammable materials such as the
fuel storage area
- Fire prevention and fighting training delivered by the National
Fire Brigade
- Driver training, focussing on both defensive and offensive driving
techniques
- Emergency Response Team training, focusing on first aid and basic
firefighting techniques
Health focus
The ongoing battle against Malaria was again the core focus of
the medical teams' activities in 2015, working with the environment
team to reduce mosquito populations and our malaria incidence rate.
Management's control strategies included the continuation of the
Internal Residual Spraying (IRS) regime but using a different
insecticide to 2014 to prevent the development of insecticide
resistance in the mosquito population, as well as fogging around
accommodation camps and in local villages. Individual preventative
actions were also reinforced through a poster campaign and tool box
talks.
(MORE TO FOLLOW) Dow Jones Newswires
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Despite the mosquito control measures total cases (542) were
higher than in 2013 (349) and 2014 (513). An 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). 2015 also saw very high rainfall and,
importantly, a high number of individual rain events which meant
that mosquito breeding sites remained viable for long periods which
certainly contributed to the high number of cases.
Please see graph attached - No of Malaria cases per month
http://www.rns-pdf.londonstockexchange.com/rns/4119W_-2016-4-26.pdf
SUSTAINABLE DEVELOPMENT
Environmental Focus
Robust environmental monitoring remains the cornerstone to
ensuring we deliver on environmental compliance obligations. The
Company monitors a wide range of environmental parameters including
water quality, air quality, noise and vibration (during blasting)
to evaluate potential impacts. Comprehensive monitoring recorded no
exceedances of our statutory or self-imposed targets in 2015.
Similarly, no adverse impacts related to blasting have been
recorded around Inata.
Additional samples were also analysed to continue to develop a
baseline dataset for the Souma Project environmental assessment.
Throughout the year no analytical results were above target values
and management continue to be confident that operations are having
no adverse impacts on water quality.
During 2015, a major review and revamp of Inata waste management
practices was conducted, and through a series of initiatives,
significant improvements in both none-process waste collection and
management have been made. Waste recycling has increased through
improved segregation and selection at source, coupled with
increased resale of reusable/recyclable waste through the Fondation
Avocet pour le Burkina ('FAB'), which helps to fund community
projects.
Greenhouse gases
Almost all of Avocet's emissions of CO(2) 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 CO(2) is
estimated using standard CO(2) production rates per litre of diesel
fuel consumed.
In 2015, the Inata mine produced 13,795 tonnes of CO(2) , or the
equivalent of 0.18 tonnes per ounce of gold produced. The following
table, which shows the equivalent results over the previous five
years, indicates a gradual increase in the quantity of CO(2)
emitted on a per ounce basis, which can be attributed primarily to
longer haul distances as we mine reserves at some distance from the
plan.
2010 2011 2012 2013 2014 2015
------------------- ------------------- ------------------- ------------------- ------------------- -------------------
CO(2) emissions
(tonnes) 12,602 16,369 20,006 19,347 13,398 13,795
Gold produced
(oz) 137,732 166,744 135,189 118,443 86,037 74,755
CO(2) production
rate (tonnes
per oz) 0.09 0.10 0.15 0.16 0.16 0.18
Community engagement
Since 2010, Avocet has used 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 2015 was on three
areas: community healthcare, education, and potable water. Within
these focus areas were the following key activities:
Community healthcare
-- Construction of a dispensary and pharmaceutical store, with shower
and latrine facilities
-- Construction of a maternity unit
-- Completion of an additional hospital unit
Education
-- Construction of a literacy education hall
-- Establishment of electricity supplies to classrooms in six villages
deemed to be directly impacted by mining activities.
Potable water
-- Repairs and reinstatement of four water pumps
-- Installation of two new borehole wells in local communities
These facilities are expected to provide clean drinking water
for approximately 1,800 members of the local communities.
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 2014 and 2015, 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.
2015 2014
------------------------- -------------------------------------------- ---------------------------------------------
US$000 Burkina Faso Guinea Mali UK Total 2015 Burkina Faso Guinea Mali UK Total 2014
------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ----- ----------
Royalties(1) 2,094 - - - 2,094 4,284 - - - 4,284
Custom duties(2) 4 8 - - 12 6,178 27 - - 6,205
IRVM(3) - - - - - 76 - - - 76
Land tax(4) 16 12 - - 28 718 10 - - 728
Permit renewal 3 276 - - 279 15 - - - 15
Corporation tax 504 - - - 504 1,082 - - - 1,082
------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ----- ----------
Total tax borne (EITI) 2,621 296 - - 2,917 12,353 37 - - 12,390
------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ----- ----------
Net VAT
(recovered)/paid(5) (4,680) 5 - (50) (4,725) (6,033) 5 - (104) (6,132)
Non-recoverable VAT on
fuel(5) 3,589 - - - 3,589 3,247 - - - 3,247
Fuel tax(6) 1,971 - - - 1,971 1,536 - - - 1,536
Payroll tax - employer 1,159 9 18 153 1,339 2,090 23 25 218 2,356
Payroll tax - employee 2,167 11 16 491 2,685 4,084 15 23 665 4,787
Withholding tax(7) 184 13 - - 197 839 67 - - 906
Other 16 14 1 - 31 23 8 1 - 32
------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ----- ----------
Total net payments to
government 7,027 348 35 594 8,004 18,139 155 49 779 19,122
------------------------- ------------ ------ ---- ---- ---------- ------------ ------ ---- ----- ----------
(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. During
2015, 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.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 12:45 ET (16:45 GMT)
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 2015, the average percentage of female
employees was 6% (2014: 5%). There were no female Board members
during 2015, however, due to the size of the Board, which consisted
of just three Non-executive directors and two executive directors
in the year.
REVIEW OF OPERATIONS
Inata Gold Mine
Production Statistics 2015 2014 2013 2012
Ore mined (k tonnes) 1,313 2,529 3,114 2,653
Waste mined (k tonnes) 12,826 11,495 30,100 30,474
Total mined (k tonnes) 14,139 14,024 33,214 33,127
Ore processed (k tonnes) 1,865 1,903 2,353 2,556
Average head grade (g/t) 1.85 1.77 1.75 1.95
Process recovery rate 67% 79% 86% 87%
Gold produced (oz) 74,755 86,037 118,443 135,189
Unit Cash Costs US$/oz 2015 2014 2013 2012
Mining 318 422 547 412
Processing 462 442 373 309
Administration 203 234 187 161
Royalties 75 88 96 118
Total 1,058 1,186 1,203 1,000
Gold produced at Inata in the year totalled 74,755 ounces,
compared with 86,037 in 2014. Although a reduction of 13%, this
production was achieved against a backdrop of a considerable number
of operational and economic challenges.
External events, including the strike in December 2014 (the
effects of which continued into Q1 2015), and the attempted
military coup in September 2015, disrupted production, and
therefore the receipt of revenues from gold sales, for a number of
weeks. In addition, the gold price continued to fall to levels
which tightened margins further still.
The squeeze on cashflows restricted the funds available to repay
historic creditors, which resulted in disruption to the delivery of
supplies to site in the year. The need to produce sufficient gold
to meet immediate payment obligations meant that at various points,
the mine schedule had to be revised in order to maximise short-term
production.
During the first two quarters of the year, mining focused on
higher grade, carbonaceous material, while in the second half,
largely oxide ore was processed, which was lower grade, but offered
better recoveries. Mining volumes, apart from in the first quarter
(no mining activity took place in January as the mining crews were
re-manned in the wake of the strike from the previous month),
averaged 1.4 million tonnes per month in 2015.
Safety
In 2015, there were no Lost Time Injuries ('LTIs') reported at
Inata, and by the end of the year, the number of man hours worked
since the previous LTI had reached 6.76 million. More details on
the mine's safety and health performance can be found in the Safety
and Health Review in the Annual Report.
Souma
The Souma deposit is located within an exploration licence
approximately 20 kilometres east of the Inata gold mine. Avocet
owns 100% of the exploration licence, which extends until 2017.
In April 2015 a drilling and metallurgical test work programme
commenced that is designed to increase the confidence in the
resources already delineated, grow the resources and collect
additional metallurgical data.
Although the drilling programme was completed by July 2015,
cashflow shortages experienced by the Inata mine meant that funds
were no longer available to complete the analysis required to
deliver the expected increase in resource at Souma, as well as
giving indication as to the preferred treatment strategy for the
Souma ore.
Tri-K
Avocet's main project in Guinea is the Tri-K development project
in eastern Guinea, located near to Kankan, Guinea's second largest
city. Within the Tri-K project area a total Mineral Resource of 3.0
million ounces has been delineated in two deposits, Koulékoun and
Kodiéran. In 2013, Feasibility Study work completed on the basis of
a heap leach development of the oxide portion of the orebody showed
that the project could support a 7 year life of mine, producing an
average of 55,000 ounces of gold per year. A maiden Ore Reserve of
480,000 ounces (7.9 million tonnes grading 1.89 g/t Au) was also
announced as part of the Feasibility Study.
A mining permit ('permis d'exploitation') for Tri-K was awarded
on 27 March 2015. In addition, the surrounding exploration permits
were extended for an additional year, and will now expire on 28
December 2016. Avocet owns 100% of all exploration permits it holds
in Guinea.
Although no exploration or development activity took place at
site during 2015, work continued to review and improve the design
and costings of the heap leach study, with the result that
construction capex is now believed to be approximately US$60
million (reduced from US$88 million in the Feasibility Study
submitted to the government in 2013).
These improvements were the result of rationalising the design
of pads and ponds; identifying lower-cost sources of mining and
plant equipment; reflecting lower input costs (eg from fuel,
cyanide and cement); and revisiting the overall footprint of the
site's infrastructure.
For the rest of the year, the activities at Tri-K were focused
on hosting potential financial investors and operating partners,
who would help Avocet to commence construction, and bring the
project into production.
The ebola crisis, together with security issues at Bamako (which
serves as a hub for gaining access to the site), disrupted these
activities, and meant that progress in financing negotiations was
slower than had been hoped. However the recent improvements in the
gold price, together with renewed M&A and financing activity in
the mining sector in West Africa, have given renewed impetus to
this initiative, and at the present time, a number of potential
parties are in talks with regard to the project.
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 2015 mining surface.
Inata's Ore Reserves were estimated to be 0.23 million ounces as
at 31 December 2015 based on optimised pits shells determined on a
gold price assumption of US$1,100 per ounce, reduced from 0.33
million ounces as at 31 December 2014. Cut off grades within the
US$1,100 per ounce shells were based on a gold price assumption of
US$1,250 per ounce. The reduction in Ore Reserves is largely
attributable to mining depletion.
A portion of Measured Resources (1.0 million tonnes) has been
classified as Probable Ore Reserves. This downgrading in confidence
is due to uncertainty relating to the metallurgical modifying
factors under JORC (2012) for material with an active carbon
content. The introduction of the carbon blinding circuit in 2014
was a significant step to mitigate this drop in recovery, but a
capped metallurgical recovery has been used until actual
performance consistently supports a calculated value for
metallurgical recovery.
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 2015
topographic surface and above an effective weighted average 0.78
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 2015 topographic surface.
Changes to the Mineral Resources are after mining depletion during
2015.
Gross Attributable
------------------------------- -------------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
------------------------ ----------- ------ ---------- ----------- ------ ----------
Ore Reserves
Proven 2,320,000 1.69 125,800 2,090,000 1.68 113,200
Probable 1,390,000 1.51 67,600 1,250,000 1.52 60,800
ROM stockpiles 1,220,000 1.06 41,700 1,100,000 1.07 37,500
------------------------ ----------- ------ ---------- ----------- ------ ----------
Ore Reserves total 4,930,000 1.48 235,100 4,440,000 1.48 211,500
------------------------ ----------- ------ ---------- ----------- ------ ----------
Mineral Resources
Measured 8,140,000 1.66 435,700 7,330,000 1.66 392,100
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April 26, 2016 12:45 ET (16:45 GMT)
Indicated 22,500,000 1.75 1,264,700 20,250,000 1.75 1,138,200
------------------------ ----------- ------ ---------- ----------- ------ ----------
Measured + Indicated 30,640,000 1.73 1,700,400 27,580,000 1.73 1,530,300
------------------------ ----------- ------ ---------- ----------- ------ ----------
Inferred 29,310,000 1.61 1,518,600 26,380,000 1.61 1,366,700
------------------------ ----------- ------ ---------- ----------- ------ ----------
Mineral Resources total 59,950,000 1.67 3,219,000 53,960,000 1.67 2,897,000
------------------------ ----------- ------ ---------- ----------- ------ ----------
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 2,320,000 1.69 125,800 2,090,000 1.68 113,200
Probable 1,390,000 1.51 67,600 1,250,000 1.52 60,800
ROM stockpiles 1,220,000 1.06 41,700 1,100,000 1.07 37,500
------------------------ ----------- ------ ---------- ----------- ------ ----------
Ore Reserves total 4,930,000 1.48 235,100 4,440,000 1.48 211,500
------------------------ ----------- ------ ---------- ----------- ------ ----------
Mineral Resources
Measured 8,140,000 1.66 435,700 7,330,000 1.66 392,100
Indicated 24,910,000 1.80 1,444,200 22,660,000 1.80 1,317,700
------------------------ ----------- ------ ---------- ----------- ------ ----------
Measured + Indicated 33,050,000 1.77 1,879,900 29,990,000 1.77 1,709,800
------------------------ ----------- ------ ---------- ----------- ------ ----------
Inferred 43,720,000 1.63 2,284,400 40,790,000 1.63 2,132,500
------------------------ ----------- ------ ---------- ----------- ------ ----------
Mineral Resources total 76,770,000 1.69 4,164,300 70,780,000 1.69 3,842,300
------------------------ ----------- ------ ---------- ----------- ------ ----------
Tri-K, Guinea
Mineral Resources as at 31 December 2015.
The table below reports the Mineral Resource above a 0.5 g/t Au
cut-off.
Avocet owns 100% of the Tri-K permits through its wholly-owned
subsidiary, Wega Mining Guinée SA.
Gross Attributable
----------------------------- -----------------------------
Grade Contained Grade Contained
Tonnes (g/t) ounces Tonnes (g/t) ounces
------------------------ ---------- ------ --------- ---------- ------ ---------
Ore Reserves
Proven - - - - - -
Probable 7,909,000 1.89 480,000 7,909,000 1.89 480,000
Ore Reserves total 7,909,000 1.89 480,000 7,909,000 1.89 480,000
------------------------ ---------- ------ --------- ---------- ------ ---------
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
The information in this report that relates to Inata Ore
Reserves in Burkina Faso is based on information compiled by Mr
Oumar Diakite, who is a qualified Mining Engineer but not a
Competent Person, as defined in the 2012 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves".
Tri-K Ore Reserves were estimated by Mr Clayton Reeves (MSAIIM).
Mr Reeves is a Competent Person as defined by the JORC Code. Mr
Reeves has consented to the inclusion of the technical information
in this report in the form and context in which it appears.
The information in this report that relates to Exploration
results is based on information supplied by Mr Robert Seed, a
competent person. Robert Seed is employed by Avocet Mining 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.
Consolidated income statement
For the year ended 31 December 2015
Year ended Year ended
31 December 2015 31 December 2014
Note US$000 US$000
------------------------------------- ---- ----------------- -----------------------------------
Revenue 85,038 110,444
Cost of sales 4 (89,933) (129,716)
------------------------------------- ---- ----------------- -----------------------------------
Gross loss (4,895) (19,272)
------------------------------------- ---- ----------------- -----------------------------------
Administrative expenses (2,061) (5,717)
Share based payments (414) (856)
Net impairment of assets 5,7 (45,148) (111,692)
------------------------------------- ---- ----------------- -----------------------------------
Loss from operations (52,518) (137,537)
------------------------------------- ---- ----------------- -----------------------------------
Finance items
Exchange gains 3,136 5,856
Finance expense 12 (6,316) (8,454)
Loss before taxation (55,698) (140,135)
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------------------------------------- ---- ----------------- -----------------------------------
Analysed as:
Loss before taxation and exceptional
items 9 (10,550) (28,443)
Exceptional items 5 (45,148) (111,692)
Loss before taxation (55,698) (140,135)
------------------------------------- ---- ----------------- -----------------------------------
Taxation 13 5,993 (9,653)
------------------------------------- ---- ----------------- -----------------------------------
Loss for the year (49,705) (149,788)
------------------------------------- ---- ----------------- -----------------------------------
Attributable to:
Equity shareholders of the parent
company (45,732) (136,120)
Non-controlling interest (3,973) (13,668)
------------------------------------- ---- ----------------- -----------------------------------
Loss for the year (49,705) (149,788)
------------------------------------- ---- ----------------- -----------------------------------
Earnings per share:
Basic loss per share (cents per
share) 14 (21.88) (67.09)
Diluted loss per share (cents per
share) 14 (21.88) (67.09)
------------------------------------- ---- ----------------- -----------------------------------
EBITDA(1) (1,996) (2,231)
------------------------------------- ---- ----------------- -----------------------------------
(1) 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 2015
Year ended Year ended
31 December 2015 31 December 2014
----------------- -----------------
Note US$000 US$000
----------------------------- ----- ----------------- -----------------
Loss for the year (49,705) (149,788)
Total comprehensive loss for
the year (49,705) (149,788)
------------------------------------ ----------------- -----------------
Attributable to:
Equity holders of the parent (45,732) (136,120)
Non-controlling interest (3,973) (13,668)
------------------------------------ ----------------- -----------------
Total comprehensive loss for
the year (49,705) (149,788)
------------------------------------ ----------------- -----------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated statement of financial position
At 31 December 2015
31 December 2015 31 December 2014
Note US$000 US$000
----------------------------------------- ---- ---------------- ----------------
Non-current assets
Intangible assets 15 17,206 17,206
Property, plant and equipment 16 1,692 32,750
18,898 49,956
Current assets
Inventories 17 17,274 41,004
Trade and other receivables 18 6,648 8,502
Cash and cash equivalents - unrestricted 19 1,934 533
Cash and cash equivalents - restricted 19 3,922 4,283
----------------------------------------- ---- ---------------- ----------------
29,778 54,322
Current liabilities
Trade and other payables 20 42,681 45,751
Other financial liabilities 21 45,973 32,648
----------------------------------------- ---- ---------------- ----------------
88,654 78,399
Non-current liabilities
Financial liabilities 21 21,960 35,902
Deferred tax liabilities 22 1,670 4,614
Provisions 23 6,813 6,493
----------------------------------------- ---- ---------------- ----------------
30,443 47,009
----------------------------------------- ---- ---------------- ----------------
Net liabilities (70,421) (21,130)
----------------------------------------- ---- ---------------- ----------------
Equity
Issued share capital 28 17,072 17,072
Share premium 146,391 146,391
Other reserves 29 17,895 17,895
Retained earnings (214,932) (169,614)
----------------------------------------- ---- ---------------- ----------------
Total equity attributable to
the parent (33,574) 11,744
Non-controlling interest (36,847) (32,874)
----------------------------------------- ---- ---------------- ----------------
Total equity (70,421) (21,130)
----------------------------------------- ---- ---------------- ----------------
These financial statements were approved and signed on behalf of
the Board of Directors.
RP Edey J Wynn
The accompanying accounting policies and notes form an integral
part of these financial statements.
Avocet Mining PLC is registered in England No. 03036214
Consolidated statement of changes in equity
For the year ended 31 December 2015
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
Note 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
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)
--------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
Issue of shares - - - - - - -
Share based payments - - - 414 414 - 414
At 31 December 2015 17,072 146,391 17,895 (214,932) (33,574) (36,847) (70,421)
--------------------------------- -------- -------- --------- --------- ------------- --------------- ---------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated cash flow statement
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For the year ended 31 December 2015
Year ended Year ended
31 December 2015 31 December 2014
----------------- -----------------
Note US$000 US$000
------------------------------------------- ---- ----------------- -----------------
Cash flows from operating activities
Loss for the year (49,705) (149,788)
Adjusted for:
Depreciation of non-current assets 16 5,374 23,614
Net impairment 5, 7 45,148 111,692
Share based payments 414 856
Taxation in the income statement 13 (5,993) 9,653
Other non-operating items in the income
statement 27 1,409 199
(3,353) (3,774)
Movements in working capital
Decrease in inventory 8,281 2,063
Decrease in trade and other receivables 1,082 3,029
Increase in trade and other payables 1,295 10,777
------------------------------------------- ---- ----------------- -----------------
Net cash generated by operations 7,305 12,095
Interest paid (3,767) (5,981)
Income tax paid (500) (906)
------------------------------------------- ---- ----------------- -----------------
Net cash generated by operating activities 6 3,038 5,208
------------------------------------------- ---- ----------------- -----------------
Cash flows from investing activities
Payments for property, plant and equipment (3,793) (11,613)
Exploration and evaluation expenses - (28)
Net cash used in investing activities (3,793) (11,641)
------------------------------------------- ---- ----------------- -----------------
Cash flows from financing activities
Net proceeds from equity issued - 1,175
Loans repaid 21 (10,169) (4,371)
Proceeds from debt 21 12,391 -
Payments in respect of finance leases 21 (438) (744)
Net cash flows generated by/(used in)
financing activities 1,784 (3,940)
------------------------------------------- ---- ----------------- -----------------
Net cash movement 1,029 (10,373)
------------------------------------------- ---- ----------------- -----------------
Exchange gains/ (losses) 11 (12)
------------------------------------------- ---- ----------------- -----------------
Total increase/(decrease) in cash and
cash equivalents 1,040 (10,385)
------------------------------------------- ---- ----------------- -----------------
Cash and cash equivalents at start
of the year 4,816 15,201
------------------------------------------- ---- ----------------- -----------------
Cash and cash equivalents at end of
the year 5,856 4,816
------------------------------------------- ---- ----------------- -----------------
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 2015
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 IFRS and International
Financial Reporting Interpretations Committee ('IFRIC')
interpretations as adopted by the European Union at 31 December
2015.
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 38 to 51 to the
Annual Report 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) (2014: UK GAAP) as permitted by the Companies Act
2006.
In issue but not effective for periods commencing on 1 January
2015
New standards and interpretations currently in issue but not
effective, based on EU mandatory effective dates, for accounting
periods commencing on 1 January 2015 are:
IFRS 9 Financial Instruments (IASB effective date 1 January
2018)(2)
IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)
(2,4)
IFRS 15 Revenue from Contracts with Customers (effective 1
January 2018) (2)
IFRS 16 Leases (effective 1 January 2019) (2)
Defined Benefit Plans: Employee Contributions (Amendments to
IAS19) (IASB effective date 1 July 2014) (2,5)
Amendments to IFRS 11: Accounting for Acquisitions of Interests
in Joint Operations (IASB effective date 1 January 2016) (5)
Clarification of Acceptable Methods of Depreciation and
Amortisation - Amendments to IAS 16 and IAS 38 (IASB effective date
1 January 2016) (5)
Annual Improvements to IFRSs 2010-2012 Cycle (IASB effective
date generally 1 July 2014) (2,5)
Annual Improvements to IFRSs 2012-2014 Cycle (effective 1
January 2016) (5)
Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1
January 2016) (5)
Amendments to IAS 27: Equity Method in Separate Financial
Statements (effective 1 January 2016) (5)
Amendments to IFRS 10, IFRS 12 and IAS28: Investment Entities:
Applying the Consolidation Exception (effective 1 January 2016)
(2)
Disclosure Initiative : Amendments to IAS 1 Presentation of
Financial Statements (effective 1 January 2016) (5)
Disclosure Initiative: Amendments to IAS 7 Statement of Cash
Flows (effective 1 January 2017) (2)
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture - Amendments to IFRS 10 and IAS 28
(effective 1 January 2016) (3)
Amendments to IAS12: Recognition of Deferred Tax assets for
unrealised Losses (effective 1 January 2017) (2)
(1) Not adopted by the EU (as at 16 Feb 2016)
(2) EU mandatory effective date is financial years starting on
or after 1 February 2015
(3) Endorsement postponed indefinitely
(4) It has been decided not to launch the endorsement process -
The EC will wait for a completely new standard
(5) Endorsed
The Directors anticipate that the above pronouncements, where
relevant, will be adopted in the Group's financial statements for
the year beginning 1 January 2015 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$23.9
million on 31 March 2016, due to an affiliate of Elliott
Associates, its largest shareholder:
1. First Loan - taken out in March 2013, under which US$18.7
million was outstanding at 31 March 2016, comprising US$15.0
million principal and US$3.7 million accrued interest. The first
loan was due on 31 December 2013 and is secured against the Tri-K
exploration asset in Guinea;
2. Second Loan - unsecured demand loan of US$2.5 million
consisting of US$2.25 million principal plus accrued interest of
US$0.27 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
3. Third Loan - demand loan of US$2.6 million consisting of
US$2.45 million principal plus accrued interest of US$0.19 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 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, this 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.
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In addition, on 20 April 2016, the Company announced that it had
agreed terms to increase the limit under the Second Loan to US$3.05
million, with the additional US$0.8 million to be drawn down in
four equal monthly tranches beginning from 25 April 2016.
All of these loans are 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 that 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.
This restructuring is most likely to come about as part of the
financing of the Tri-K project in Guinea. The Company is in active
discussions with several parties in this regard, and the Board has
a reasonable expectation that these discussions will bear
fruit.
Until such discussions are concluded, the Company will remain
reliant on the support of Elliott, not only with regard to the
repayment of the existing loans, but also for the provision of
ongoing funding until the discussions around Tri-K financing, and
the restructure of the Elliott loans, are concluded.
As the successful negotiation of these funding discussions
represents the most likely means for Elliott to secure the
repayment or satisfactory restructuring of its outstanding debts,
the Board has a reasonable expectation of receiving ongoing support
from Elliott in this regard.
However, thereafter, can be no certainty that Elliott will be
willing to remain supportive, nor to provide ongoing financing,
particularly if the discussions around financing Tri-K become
protracted or become less likely to lead to a satisfactory outcome
for all parties. In the event that their support was withdrawn, the
Company would need to agree funding from an alternative source at
short notice, which is likely to be extremely challenging.
Ability to secure financing for Tri-K
Since 2013, the Company has been actively pursuing funding for
its Tri-K project in Guinea. A Feasibility Study for this project
was submitted in September 2013, which outlined a heap leach
operation with a capex of approximately US$88 million. Since then,
work has been undertaken to revise the design of the project with
the result that the capex estimation has now reduced to
approximately US$60 million.
A mining permit for the project was awarded on 27 March
2015.
Financing discussions in 2014 and 2015 were made more
challenging by the slump in the mining sector, which resulted in
many institutions restricting their focus to larger and more
profitable projects, in jurisdictions with a lower perceived risk.
In addition, the ebola crisis in West Africa meant that many
potential investors were unable or unwilling to undertake site
visits necessary for their due diligence procedures.
Nevertheless, interest in the project picked up in the latter
part of 2015 and into 2016, buoyed by an increase in the gold
price.
At the present time, the Company is in discussions with a number
of parties who are interested in investing in the project, and
bringing it into production. The precise nature of the investments
under discussion varies, and all aspects remain subject to
clarification and negotiation.
However, until a deal has been formally concluded with a
preferred financing partner, there can be no guarantee that the
Tri-K project will be funded.
Loss of Tri-K permits
The Company has received considerable pressure from the Guinean
authorities to commence pre-production activity at the Tri-K site.
Under the terms of the Guinean Mining Code, if the holder of a
mining permit has not commenced construction activity within 12
months of the award of the permit (ie by 27 March 2016), it can be
liable to penalties commencing at US$100k per month. If such
activity has not commenced within a further six months (by 27
September 2016), then the permit may be withdrawn by the
government.
The Company has held discussions with a number of senior members
of the Government of Guinea (including the Prime Minister and the
Minister of Mines and Geology), at which the challenges in raising
financing in the prevailing climate were explained and
acknowledged.
Nevertheless, if the securing of financing for the project is
not secured, then there is a risk that the Government of Guinea
will apply penalties (which may in itself discourage investment in
the project), and may ultimately withdraw the permit.
Moreover, any deal involving the external financing of the
project will require the approval of the Guinea Government - not
only if such proposals involve alterations to the construction
plan, but also because any material change in ownership requires
approval under the terms of the Mining Code.
Based on the discussions held with interested parties as well as
senior Government representatives, the Board has a reasonable
expectation that, provided financing terms can be agreed upon, the
Government is likely to be sympathetic to proposals that result in
a mine being constructed at Tri-K of at least the scale and
economics as those which were outlined in the Feasibility
Study.
Gold price
The profitability of both the Tri-K project and the Inata gold
mine (including surrounding deposits) depends on the gold
price.
The NPV(16) of the Tri-K project, based on the latest cashflow
forecasts, indicates that a break-even gold price would be around
US$1,050 per ounce, with every subsequent increase of US$50 per
ounce adding around US$8 million in value.
The cash costs at Inata during 2015 and into 2016 have ranged
between US$1,000 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 rise in the gold price since January 2016, however, has
given cause to believe that the decline in spot prices seen between
2012 and 2015 may be at an end. In financial forecasts, the Company
uses US$1,200 per ounce. The Board believe this to be a reasonable
long term price.
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 the end of March 2016 had approximately
US$34 million in trade creditors, and a further US$44 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 can be no guarantee that one or more creditors might not
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.
The recent uptick in gold prices, together with improved
production plans and lower operating costs, are encouraging
developments for Inata's creditors and wider stakeholders.
Souma permit
The future of the Inata gold mine beyond 2018 will rely upon the
successful completion of a Feasibility Study for the Souma deposit,
located 20km 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 2017.
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
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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.
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$1.0 million of VAT recoverable was written off as a result of
uncertainty relating to its recoverability.
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.
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
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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
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 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
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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.
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.
3. SEGMENTAL REPORTING
Burkina
UK Faso Guinea Total
For the year ended 31 December 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)
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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 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 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
UK Faso Guinea Total
For the year ended 31 December 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 - (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 increase/(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.
Burkina
UK Faso Guinea Total
For the year ended 31 December 2014 US$000 US$000 US$000 US$000
-------------------------------------- ------- --------- ------- ---------
INCOME STATEMENT
Revenue - 110,444 - 110,444
-------------------------------------- ------- --------- ------- ---------
Cost of Sales - (128,645) (1,071) (129,716)
Cash production costs: -
* mining - (36,296) - (36,296)
* processing - (38,084) - (38,084)
* overheads - (20,118) - (20,118)
* royalties - (7,537) - (7,537)
-------------------------------------- ------- --------- ------- ---------
- (102,035) - (102,035)
Changes in inventory - (895) - (895)
Expensed exploration and other cost
of sales(1) - (2,101) (1,071) (3,172)
Depreciation and amortisation(2) - (23,614) - (23,614)
-------------------------------------- ------- --------- ------- ---------
Gross loss - (18,201) (1,071) (19,272)
Administrative expenses and share
based payments (6,573) - - (6,573)
Net impairment of assets (74) (105,547) (6,071) (111,692)
-------------------------------------- ------- --------- ------- ---------
Loss from operations (6,647) (123,748) (7,142) (137,537)
Net finance items (1,695) (903) - (2,598)
-------------------------------------- ------- --------- ------- ---------
Loss before taxation (8,342) (124,651) (7,142) (140,135)
-------------------------------------- ------- --------- ------- ---------
Analysed as:
Loss before tax and exceptional
items (8,268) (19,104) (1,071) (28,443)
Exceptional items (impairments) (74) (105,547) (6,071) (111,692)
-------------------------------------- ------- --------- ------- ---------
Taxation (12) (9,641) - (9,653)
-------------------------------------- ------- --------- ------- ---------
Loss for the year (8,354) (134,292) (7,142) (149,788)
-------------------------------------- ------- --------- ------- ---------
Attributable to:
Equity shareholders of parent company (8,354) (120,624) (7,142) (136,120)
Non-controlling interest - (13,668) - (13,668)
-------------------------------------- ------- --------- ------- ---------
Loss for the year (8,354) (134,292) (7,142) (149,788)
-------------------------------------- ------- --------- ------- ---------
EBITDA(3) (6,573) 5,413 (1,071) (2,231)
-------------------------------------- ------- --------- ------- ---------
(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.
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(3) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation.
Burkina
UK Faso Guinea Total
At 31 December 2014 US$000 US$000 US$000 US$000
-------------------------------- -------- --------- ------- ---------
STATEMENT OF FINANCIAL POSITION
Non-current assets - 30,933 19,023 49,956
Inventories - 40,936 68 41,004
Trade and other receivables 352 7,992 158 8,502
Cash and cash equivalents 145 4,632 39 4,816
-------------------------------- -------- --------- ------- ---------
Total assets 497 84,493 19,288 104,278
-------------------------------- -------- --------- ------- ---------
Current liabilities (19,355) (58,673) (371) (78,399)
Non-current liabilities (164) (46,845) - (47,009)
-------------------------------- -------- --------- ------- ---------
Total liabilities (19,519) (105,518) (371) (125,408)
-------------------------------- -------- --------- ------- ---------
Net (liabilities)/assets (19,022) (21,025) 18,917 (21,130)
-------------------------------- -------- --------- ------- ---------
Burkina
UK Faso Guinea Total
For the year ended 31 December 2014 US$000 US$000 US$000 US$000
-------------------------------------------- ------- --------- ------- ---------
CASH FLOW STATEMENT
Loss for the year (8,354) (134,292) (7,142) (149,788)
Adjustments for non-cash and non-operating
items(1) 2,632 137,405 5,977 146,014
Movements in working capital 797 14,248 824 15,869
-------------------------------------------- ------- --------- ------- ---------
Net cash (used in)/generated by operations (4,925) 17,361 (341) 12,095
Net interest (paid)/received (755) (5,226) - (5,981)
Tax paid - (906) - (906)
Purchase of property, plant and equipment - (11,613) - (11,613)
Deferred exploration expenditure - - (28) (28)
Loans repaid - (4,371) - (4,371)
Proceeds from equity issued 1,175 - - 1,175
Other cash movements(2) 723 (1,800) 321 (756)
-------------------------------------------- ------- --------- ------- ---------
Total decrease in cash and cash equivalents (3,782) (6,555) (48) (10,385)
-------------------------------------------- ------- --------- ------- ---------
(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.
4. EXCEPTIONAL ITEMS
31 December 31 December
2015 2014
US$000 US$000
-------------------------------------------------- ----------- -----------
Impairment of Burkina Faso assets (45,148) (105,547)
Impairment of Guinea exploration asset - (6,071)
Impairment of available for sale financial assets - (74)
Exceptional loss (45,148) (111,692)
-------------------------------------------------- ----------- -----------
Net impairments of Burkina Faso assets
The Group recognised a net impairment of non-current assets of
US$45.1 million (2014: US$105.5 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.
Impairment of Guinea exploration asset
No impairment (2014: US$6.1 million) was recognised in the
capitalised exploration costs (intangible assets) in relation to
the Tri-K project in Guinea. Further details are provided in note
7.
Impairment of available for sale financial assets
At 31 December 2013 management concluded that the decline in the
share price of Golden Peaks Resources Limited reflected a permanent
diminution in the value of that asset. Management considered the
fall to be indicative of the investment's ability to provide a
future return and was therefore not considered a short term
fluctuation in the market value. The cumulative loss that had been
recognised directly in other comprehensive income was reclassified
from equity and recognised in profit or loss as a cumulative
impairment of US$2.2 million. During 2014, the remaining value of
the assets was impaired to nil.
5. 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
2015 2014
US$000 US$000
------------------------------- ----------- -----------
Loss before taxation (55,698) (140,135)
Exceptional Items (see note 5) 45,148 111,692
Depreciation 5,374 23,614
Exchange gains (3,136) (5,856)
Net finance income - (2)
Net finance expense 6,316 8,456
------------------------------- ----------- -----------
EBITDA (1,996) (2,231)
------------------------------- ----------- -----------
Reconciliation of EBITDA to net cash generated by/(used in)
operating activities
31 December 31 December
2015 2014
US$000 US$000
------------------------------------------- ----------- -----------
EBITDA (1,996) (2,231)
Working capital 7,260 15,869
Net interest paid (3,767) (5,981)
Income tax paid (500) (906)
Provisions and other non-cash costs 2,041 (1,543)
------------------------------------------- ----------- -----------
Net cash generated by operating activities 3,038 5,208
------------------------------------------- ----------- -----------
6. IMPAIRMENT OF ASSETS
Net impairment of Burkina Faso assets in 2015
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.
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.
The combined impact of lower gold price assumptions, together
with a mine life which was six months shorter than at 31 December
2014, led the Company to recognise an impairment of US$30.6 million
at 30 June 2015.
US$28.4 million of this impairment was set against the carrying
value of the fixed assets of Inata (which were reduced to nil in
the Balance Sheet), with the remaining US$2.2 million set against
the value of the stockpiled ore.
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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 Cash flows were forecast over An extension or shortening
flows the current life of the mine, of the mine life would have
which forecasts mining activities resulted in a corresponding
to occur until April 2017, increase or decrease in impairment,
with a further four months the extent of which it was
during which stockpiles would not possible to quantify.
be processed and rehabilitation
costs would be incurred.
---------------- ----------------------------------- ------------------------------------
Production costs Production costs were forecast A change of 10% in production
based on detailed assumptions, costs excluding royalties
including staff costs, consumption would have varied the pre-tax
of fuel and reagents, maintenance, impairment attributable by
and administration and support US$15.1 million(1) .
costs.
---------------- ----------------------------------- ------------------------------------
Gold price A gold price of US$1,100 per A change of 10% in the gold
ounce was assumed. price assumption would have
varied the pre-tax impairment
recognised in the year by
US$18.1 million.
---------------- ----------------------------------- ------------------------------------
Discount rate A discount rate of 20% (pre-tax) An increase in the discount
was used in the VIU estimation, rate of five percentage points
based on estimations of Avocet's would have decreased the pre-tax
cost of capital, adjusted impairment recognised in the
for specific risk factors year by US$0.1million(1) .
related to Inata including
liquidity and production risks.
---------------- ----------------------------------- ------------------------------------
Gold production The June 2015 life of mine A 10% change in ounces produced
plan showed total gold production would have varied the pre-tax
of 0.21 million ounces. impairment recognised in the
year by US$18.1 million(1)
.
---------------- ----------------------------------- ------------------------------------
At 31 December 2015, a further US$14.5 million of impairments
were recognised. Although a new LoMP indicated a longer mine life
(extending until 2019), its cashflow remain insufficiently robust
to warrant a reversal of the impairments previously booked, and in
fact the carrying value of the mine's fixed assets was held at nil
by impairing a further US$1.3 million of additions.
In addition, inventory spares were impaired by US$5.6 million as
a result of an obsolescence review, particularly in the context of
a short mine life, and a further US$7.6 million of stockpile value
was written down as a result of revising the expected recoveries of
the gold it contained. The total impairment for 2015 for Inata was
therefore US$45.1 million.
Impairment of Inata at prior reporting dates
At 31 December 2014 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$105.5
million was recorded in 2014, being an impairment of mining
property and plant of US$83.9 million, spares parts inventory of
US$15.9 million, and VAT recoverable of US$5.7 million. The 2014
impairment also included an impairment of US$26.6 million in
respect of capitalised exploration costs.
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 Cash flows were forecast over An extension or shortening
flows the expected life of the mine. of the mine life would result
The life of mine plan in December in a corresponding increase
2014 forecasted mining activities or decrease
to occur until April 2017, in impairment, the extent
with a further four months of which it was not possible
during which stockpiles would to quantify.
be processed and rehabilitation
costs would be incurred.
---------------- ----------------------------------- ------------------------------------
Production costs Production costs were forecast An increase in production
based on detailed assumptions, costs excluding royalties
including staff costs, consumption of 10% would have increased
of fuel and reagents, maintenance, the pre-tax impairment attributable
and administration and support by US$17.9 million(1) .
costs.
---------------- ----------------------------------- ------------------------------------
Gold price Management have used a gold A decrease of 10% in the gold
price of US$1,200 per ounce, price assumption would have
in line with market consensus increased the pre-tax impairment
estimates and management's recognised in the year by
own view of gold prices over US$21.9 million(1) .
the period of the Life of
Mine.
---------------- ----------------------------------- ------------------------------------
Discount rate A discount rate of 20% (pre-tax) An increase in the discount
was used in the VIU estimation, rate of five percentage points
based on estimations of Avocet's would have decreased the pre-tax
own cost of capital, adjusted impairment recognised in the
for specific risk factors year by US$0.7million(1) .
related to the Inata LoMP
(liquidity risk, production
risk, etc).
---------------- ----------------------------------- ------------------------------------
Gold production The life of mine plan was A 10% decrease in ounces produced,
based on gold production of compared with the life of
0.25 million ounces for the mine gold production, would
Inata Mine. have increased the pre-tax
impairment recognised in the
year by US$21.9 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.
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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.
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.
31 December 2015 31 December 2014 31 December 2013 31 December 2012
US$000 US$000 US$000 US$000
--------------------------------------------- ---------------- ---------------- ---------------- ----------------
Impairment at 31 December 2012 - - - (135,300)
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) - - -
Net impairment (45,148) (105,547) (30,500) (135,300)
--------------------------------------------- ---------------- ---------------- ---------------- ----------------
Impairment of Guinea exploration asset
During 2014, cost and production estimates for the Tri-K project
in Guinea were revisited, with a view to optimising the project.
The gold price assumption was also reduced to US$1,200 per ounce.
Based on these revised estimates, an impairment assessment
indicated that an impairment of the carrying value of the project
was required, based on a fair value estimate of US$18.8 million for
the Guinea exploration CGU. As a result, an impairment of US$6.1
million was recorded at 31 December 2014.
The deadlines in respect of the mining permit caused management
to undertake an impairment review at 31 December 2015, however no
impairment was deemed necessary, as the key assumptions which
underpin the asset's valuation (similar to those stated for Inata
above) remained unchanged, and the discount rate would need to be
increased by 3% to 19% to create a material variance.
7. LOSS FOR THE PERIOD BEFORE TAX
31 December 31 December
2015 2014
US$000 US$000
----------------------------------------------------------- ----------- -----------
Loss for the period has been arrived at after charging:
Depreciation of property, plant and equipment 5,292 23,257
Depreciation of property, plant and equipment held
under finance lease 82 357
Operating lease charges 1,613 1,262
Audit services:
* fees payable to the Company's auditor for the audit
of the Company and Group accounts 160 210
Fees payable to the Company's auditor for other services:
* tax services 18 18
----------------------------------------------------------- ----------- -----------
8. LOSS BEFORE TAXATION AND EXCEPTIONAL ITEMS
Loss before taxation and exceptional items is calculated as
follows:
31 December 31 December
2015 2014
US$000 US$000
-------------------------------------------------- ----------- -----------
Loss from operations (52,518) (137,537)
Impairment of Burkina Faso assets 45,148 105,547
Impairment of Guinea exploration asset - 6,071
Impairment of available for sale financial assets - 74
Exchange gains 3,136 5,856
Net finance expense (6,316) (8,454)
Loss before taxation and exceptional items (10,550) (28,443)
-------------------------------------------------- ----------- -----------
9. 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
2015 2014
US$000 US$000
----------------------------------------------- ----------- -----------
Wages and salaries 1,179 1,572
Social security costs 153 182
Bonus - 64
Share based payments - -
Pension costs - defined contribution plans 104 109
----------------------------------------------- ----------- -----------
Total remuneration of key management personnel 1,436 1,927
----------------------------------------------- ----------- -----------
10. TOTAL EMPLOYEE REMUNERATION (INCLUDING KEY MANAGEMENT PERSONNEL)
31 December 31 December
2015 2014
US$000 US$000
------------------------------------------------------ ----------- -----------
Wages and salaries 14,880 23,647
Social security costs 3,012 2,130
Bonus 69 348
Redundancy payments 4,504 388
Share based payments 413 856
Pension costs - defined contribution plans 104 634
------------------------------------------------------ ----------- -----------
Total employee remuneration 22,980 28,003
------------------------------------------------------ ----------- -----------
The average number of employees during the period was
made up as follows:
Directors 6 6
Management and administration 34 59
Mining, processing and exploration staff 534 750
------------------------------------------------------ ----------- -----------
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574 815
------------------------------------------------------ ----------- -----------
11. FINANCE INCOME AND EXPENSE
31 December 31 December
2015 2014
US$000 US$000
--------------------------- ----------- -----------
Finance income
Bank interest received - 2
--------------------------- ----------- -----------
Finance expense
Interest on loans 5,705 6,655
Interest on finance leases 152 225
Other finance costs 459 1,576
--------------------------- ----------- -----------
6,316 8,456
Net finance expense 6,316 8,454
--------------------------- ----------- -----------
The interest on loans of US$5.7 million consists of US$3.8
million in respect of the Inata facility with Ecobank Burkina and
US$1.9 million in respect of the Elliott loan. 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.
12. TAXATION
31 December 31 December
2015 2014
US$000 US$000
------------------------------------ ----------- -----------
Current tax:
Current tax on loss for the year - -
Current tax relating to prior years (3,049) 5,039
Current tax (credit)/charge (3,049) 5,039
------------------------------------ ----------- -----------
In 2012, SMB (the subsidiary in Burkina Faso which operates the
Inata mine) underwent a tax audit in respect of the years 2009,
2010, and 2011. The initial assessment of this tax audit, which was
undertaken by the tax department of the Burkina Faso government,
was that a total of US$25.5 million was due in taxes and penalties.
A review of the assumptions underlying this conclusion led Avocet,
along with its tax advisers, to believe that this assessment was
factually inaccurate and based on incorrect application and
interpretation of the Burkina Faso tax code. Avocet felt confident
that, with the exception of some minor items which were settled
without delay, the full amount would be revised on review and
discussion with the Burkina Faso Director General of Taxes.
Following discussions with senior government representatives
during 2013, the Company believed that the final amount to be
settled would be US$3.5 million and paid this amount in December
2013 in what it believed to be full and final settlement.
Subsequently, however, a revised assessment of US$8.5 million was
received by the Company. The Company paid US$0.9 million during
2014 and accrued the remaining US$4.1 million as at 31 December
2014.
During 2015, the Company paid a further US$0.5 million in
respect of this matter, however agreed to a final settlement amount
that meant that US$3.0 million could be released from the
provision.
31 December 31 December
2015 2014
US$000 US$000
------------------------------------------------------- ----------- -----------
Deferred tax:
Deferred tax provision in respect of withholding taxes
on intra-group balances (2,944) 4,614
Deferred tax (credit)/ charge (2,944) 4,614
------------------------------------------------------- ----------- -----------
Total tax (credit)/charge for the year (5,993) 9,653
------------------------------------------------------- ----------- -----------
The deferred tax liability of US$1.7 million (2014: US$4.6
million) relates to withholding tax ('WHT') and interest tax
('IRVM') that would be due in Burkina Faso on settlement of
intragroup management fees and loan interest 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, 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
2015 2014
US$000 US$000
------------------------------------------------------------- ----------- -----------
Loss for the period before tax (55,698) (140,135)
Loss for the period multiplied by the UK standard rate
of corporation tax 20% (2014: 21.5%) (11,140) (30,129)
Effects of:
Differences in taxation rate (4,190) (8,746)
Disallowable expenses 12,724 32,944
Gains not taxable (996) (1,259)
Tax provision in respect of withholding taxes on intra-group
balances (2,944) 4,614
Adjustment in respect of prior periods (3,049) 12
Carry forward of tax losses 3,602 12,217
------------------------------------------------------------- ----------- -----------
Tax (credit)/charge for the period (5,993) 9,653
------------------------------------------------------------- ----------- -----------
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$174 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.
13. 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
2015 2014
Shares Shares
-------------------------------------------------------- ------------ ------------
Weighted average number of shares in issue for the
year
* number of shares with voting rights 209,054,701 202,893,879
- -
* effect of share options in issue
-------------------------------------------------------- ------------ ------------
Total used in calculation of diluted earnings per share 209,054,701 202,893,879
-------------------------------------------------------- ------------ ------------
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 and 2014 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
2015 2014
US$000 US$000
--------------------------------------------------------------- ----------- -----------
Earnings per share
Loss for the year (49,705) (149,788)
Adjustments:
Adjusted for non-controlling interest 3,973 13,668
--------------------------------------------------------------- ----------- -----------
Loss for the year attributable to equity shareholders
of the parent (45,732) (136,120)
--------------------------------------------------------------- ----------- -----------
Loss per share
* basic (cents per share) (21.88) (67.09)
* diluted (cents per share) (21.88) (67.09)
Earnings per share before exceptional items
Loss for the year attributable to equity shareholders
of the parent (45,732) (136,120)
Adjustments:
Add back exceptional items 45,148 111,692
Add back non-controlling interest of exceptional items 4,515 10,447
Profit/(loss) for the year attributable to equity shareholders
of the parent before exceptional items 3,931 (13,981)
--------------------------------------------------------------- ----------- -----------
Earnings per share before exceptional items
* basic (cents per share) 1.88 (6.89)
* diluted (cents per share) 1.88 (6.89)
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--------------------------------------------------------------- ----------- -----------
14. INTANGIBLE ASSETS
31 December 31 December
2015 2014
Note US$000 US$000
--------------------------------- ---- ----------- -----------
At 1 January 17,206 23,249
Additions - 28
Impairment of exploration assets 5, 7 - (6,071)
At 31 December 17,206 17,206
--------------------------------- ---- ----------- -----------
Year end balances are analysed as follows:
31 December 31 December
2015 2014
US$000 US$000
------------- ----------- -----------
Burkina Faso - -
Guinea 17,206 17,206
Total 17,206 17,206
------------- ----------- -----------
As set out in note 7, an review of Tri-K determined a net fair
value of US$18.8 million (2014: US$18.8 million) for the Guinea
exploration CGU (which includes US$1.6 million of other net assets)
resulting in a US$ nil (2014: US$6.1 million) impairment to
intangible assets. Under the Guinea Mining Code, if construction on
the project has not commenced within 12 months of the date of grant
of the permit (27 March 2016), penalties may be incurred, and after
a subsequent 6 months (27 September 2016) the permit may be
withdrawn.
15. PROPERTY, PLANT AND EQUIPMENT
Mining property and
plant
--------------------------------------------
Exploration
Mine Vehicles, property
development Plant fixtures, and Office
costs and machinery and equipment plant equipment
------------ -------------- -------------- ----------- ----------
Burkina Burkina Burkina
Faso Faso Faso Guinea UK Total
Year ended 31 December 2015 Note US$000 US$000 US$000 US$000 US$000 US$000
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
Cost
At 1 January 2015 76,114 45,035 60,813 3,095 770 185,827
Additions 3,072 692 - 28 - 3,792
Impairment 7 (2,766) (8,078) (18,632) - - (29,476)
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
At 31 December 2015 76,420 37,649 42,181 3,123 770 160,143
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
Depreciation
At 1 January 2015 76,114 36,163 38,752 1,278 770 153,077
Charge for the year 306 1,486 3,429 153 - 5,374
At 31 December 2015 76,420 37,649 42,181 1,431 770 158,451
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
Net Book Value at 31 December
2015 - - - 1,692 - 1,692
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
Net Book Value at 31 December
2014 - 8,872 22,061 1,817 - 32,750
------------------------------ ---- ------------ -------------- -------------- ----------- ---------- --------
Included within property, plant and equipment are assets held
under finance leases with a net book value of US$ nil (2014: US$2.4
million) and assets in the course of construction with a value of
US$ nil (2014: US$8.2 million), (principally being the construction
of the second tailings management facility). Assets in the course
of construction are not depreciated until they are completed and
brought into use.
Mining property and
plant
--------------------------------------------
Exploration
Mine Vehicles, property
development Plant fixtures, and Office
costs and machinery and equipment plant equipment
------------ -------------- -------------- ----------- ----------
Burkina Burkina Burkina
Faso Faso Faso Guinea UK Total
Year ended 31 December 2014 Note US$000 US$000 US$000 US$000 US$000 US$000
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
Cost
At 1 January 2014 106,251 87,833 64,095 3,095 770 262,044
Additions 1,656 8,275 1,682 - - 11,613
Assets scrapped - - (1,304) - - (1,304)
Reclassification to inventory
as spares - - (2,578) - - (2,578)
Impairment 7 (31,793) (51,073) (1,082) - - (83,948)
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
At 31 December 2014 76,114 45,035 60,813 3,095 770 185,827
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
Depreciation
At 1 January 2014 64,886 32,100 31,230 1,070 770 130,056
Charge for the year 11,228 4,063 8,115 208 - 23,614
Accumulated depreciation
relating
to scrapped assets - - (593) - - (593)
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
At 31 December 2014 76,114 36,163 38,752 1,278 770 153,077
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
Net Book Value at 31 December
2014 - 8,872 22,061 1,817 - 32,750
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
Net Book Value at 31 December
2013 41,365 55,733 32,865 2,025 - 131,988
------------------------------- ---- ------------ -------------- -------------- ----------- ---------- --------
16. INVENTORIES
31 December 31 December
2015 2014
US$000 US$000
------------------ ----------- -----------
Consumables 5,824 13,858
Stockpile 7,283 21,709
Work in progress 2,079 2,985
Finished goods 2,088 2,452
------------------ ----------- -----------
Total inventories 17,274 41,004
------------------ ----------- -----------
Consumables represent stocks of mining supplies, reagents,
lubricants and spare parts held on site. As a result of Inata's
shorter life of mine, the value of slow-moving spares and
consumables held at Inata was impaired by US$5.6 million in the
year (2014: US$15.9 million).
The stockpile was impaired by US$7.6 million due to lower gold
prices and recoveries reducing the expected Net Realisable
Value.
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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.
17. TRADE AND OTHER RECEIVABLES
31 December 31 December
2015 2014
US$000 US$000
---------------------------------- ----------- -----------
Payments in advance to suppliers 1,182 2,296
VAT recoverable 4,415 4,682
Prepayments 1,051 1,524
---------------------------------- ----------- -----------
Total trade and other receivables 6,648 8,502
---------------------------------- ----------- -----------
A total of US$1.0 million (2014: US$5.7 million) of unrecovered
VAT has been written down on the basis of being outstanding for
more than 12 months by 31 December 2015.
18. CASH AND CASH EQUIVALENTS
31 December 31 December
2015 2014
US$000 US$000
Cash at bank and in hand - unrestricted 1,934 533
Cash at bank and in hand - restricted 3,922 4,283
---------------------------------------- ----------- -----------
Cash and cash equivalents 5,856 4,816
---------------------------------------- ----------- -----------
Included within cash at 31 December 2015 was US$3.9 million of
restricted cash (31 December 2014: US$4.3 million), representing a
US$2.1 million debt service reserve account held in relation to the
Ecobank loan (2014: US$2.3 million), and US$1.8 million (2014:
US$1.9 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.
19. TRADE AND OTHER PAYABLES
31 December 31 December
2015 2014
US$000 US$000
-------------------------------- ----------- -----------
Trade payables 36,059 38,975
Corporation tax 167 3,735
Other 156 -
Social security and other taxes 47 102
Accrued expenses 6,252 2,939
-------------------------------- ----------- -----------
Total trade and other payables 42,681 45,751
-------------------------------- ----------- -----------
The Corporation tax liability consists of a provision in respect
of a tax assessment for the years 2009, 2010 and 2011, as set out
in note 13.
20. OTHER FINANCIAL LIABILITIES
31 December 31 December
2015 2014
Current financial liabilities US$000 US$000
------------------------------------- ----------- -----------
Interest bearing debt 44,987 31,679
Finance lease liabilities 732 715
Warrants on the Company's own equity 254 254
------------------------------------- ----------- -----------
Total current financial liabilities 45,973 32,648
------------------------------------- ----------- -----------
31 December 31 December
2015 2014
Non-current financial liabilities US$000 US$000
---------------------------------------- ----------- -----------
Interest bearing debt 21,073 34,524
Finance lease liabilities 887 1,378
---------------------------------------- ----------- -----------
Total non-current financial liabilities 21,960 35,902
---------------------------------------- ----------- -----------
Total financial liabilities 67,933 68,550
---------------------------------------- ----------- -----------
Interest bearing debt
On 31 December 2015, the Group had interest bearing debt of
US$66.1 million (31 December 2014: US$66.2 million).
Elliott loan
The Elliott loan of US$22.5 million (31 December 2014: US$16.7
million) is repayable on demand and is considered due at the time
these accounts were completed. The settlement of the loan is
discussed in note 1. US$4.0 million of new loan amounts were drawn
down in the year. The loan is recognised as a current liability
held at amortised cost and includes the US$18.9 million loan
principal and accrued interest of US$3.6 million (2014: US$1.7
million). The weighted average interest on the loan during the year
was 11.27%.
Ecobank Inata loan
At 31 December 2015, a loan balance of US$31.2 million (2014:
US$44.5 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 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 2015, payments totalling US$12.7 million were made in
respect of this loan, which was made up of US$9.2 million in loan
repayments, US$3.0 million of interest, and US$0.5 million in VAT
charged on interest. The weighted average interest on the loan
during the year was 8.73%.
The facility is recognised at amortised cost and the amounts due
within twelve months are included as current US$12.6 million (2014:
US$ 10.0 million) with the remaining balance of US$18.6 million
(2014: US$ 34.5 million) included as non-current.
Ecobank VAT advance
Included within current interest bearing debt is a balance of
US$4.0 million (2014: US$5.0 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$0.9 million were made in 2015, with US$0.1 million
of FX movements.
Coris bank Inata loan
On 30 November 2015, the Company secured a short-term loan of
5.0 billion CFA (US$8.4 million) with Coris Bank International. The
proceeds of the loan are being used to address temporary working
capital shortages at the Inata mine in Burkina Faso. The loan
amount was provided and held in FCFA, carries a coupon rate of 10%
and is repayable monthly between January and June 2016. The loan is
secured over the Inata mining permit and other assets of the mine
(including the stockpile).
The Ecobank loan was made to SMB, which owns the Inata mine.
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 has been 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 has been
considered a liability rather than equity as the exercise price is
quoted in GBP, and therefore the cash payment from Elliott will not
be fixed when accounting in the Company's functional currency
USD.
The warrant relates to 4,000,000 of ordinary shares with a
strike price of GBP 0.40 and expires three years from issuance on
28 May 2013. 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.
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 balance sheet and capitalised the cost of the fuel
storage facility in Mining property and plant.
31 December 31 December
2015 2014
Gross finance lease liabilities - minimum lease payments US$000 US$000
--------------------------------------------------------- ----------- -----------
No later than 1 year 765 754
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Later than 1 year and no later than 5 years 1,078 1,758
Later than 5 years - -
--------------------------------------------------------- ----------- -----------
1,843 2,512
Future finance charges on finance leases (224) (419)
--------------------------------------------------------- ----------- -----------
Present value of lease liabilities 1,619 2,093
--------------------------------------------------------- ----------- -----------
31 December 31 December
2015 2014
Present value of lease liabilities US$000 US$000
-------------------------------------------- ----------- -----------
No later than 1 year 732 715
Later than 1 year and no later than 5 years 887 1,378
Later than 5 years - -
-------------------------------------------- ----------- -----------
1,619 2,093
-------------------------------------------- ----------- -----------
21. DEFERRED TAX
31 December 31 December
2015 2014
US$000 US$000
----------------------------------------- ----------- -----------
Liabilities
At 1 January 4,614 -
Deferred tax (credit)/charge in the year (2,944) 4,614
----------------------------------------- ----------- -----------
At 31 December 1,670 4,614
----------------------------------------- ----------- -----------
During 2015 the Group recorded deferred tax liabilities of
US$1.7 million (2014: US$4.6 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.
22. PROVISIONS
Post retirement
Mine closure benefits Total
US$000 US$000 US$000
------------------------------------- ------------ --------------- -------
At 1 January 2015 6,329 164 6,493
New amounts provided during the year 320 - 320
At 31 December 2015 6,649 164 6,813
------------------------------------- ------------ --------------- -------
Mine closure provisions represent management's best estimate of
the cost of mine closure at its operation in Burkina Faso. 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.
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
2015 2014
----------------------------------------- ----------- -----------
Rate of increase for pensions in payment 0.0% 0.0%
Discount rate 5.8% 6.0%
Inflation 3.0% 3.0%
----------------------------------------- ----------- -----------
The assets in the scheme and the expected long-term rate of
return were:
US$000 US$000
------------------------------------ ------ ------
Cash 314 328
Present value of scheme liabilities (376) (380)
Deficit in scheme (62) (52)
------------------------------------ ------ ------
Rate of return 0.0% 0.0%
------------------------------------ ------ ------
23. FINANCIAL INSTRUMENTS
Categories of financial instrument:
31 December 2015 31 December 2014
------------------------------------ ------------------------------------
Measured Measured Measured
Measured at amortised at at amortised
at fair value cost fair value cost
----------------- ----------------- ----------------- -----------------
Available Available
for sale Loans and for sale Loans and
asset and receivables asset and receivables
warrants including warrants including
on the Company's cash and on the 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 - 5,856 - 4,816
Other financial assets - - - -
------------------------------------- ----------------- ----------------- ----------------- -----------------
Total Financial Assets - 5,856 - 4,816
------------------------------------- ----------------- ----------------- ----------------- -----------------
Financial liabilities
Trade and other payables - 42,681 - 45,751
Interest bearing borrowings - 66,060 - 66,203
Finance lease liabilities - 1,619 - 2,093
Warrants on the Company's own equity 254 - 254 -
------------------------------------- ----------------- ----------------- ----------------- -----------------
Total Financial Liabilities 254 110,360 254 114,047
------------------------------------- ----------------- ----------------- ----------------- -----------------
31 December 31 December
2015 2014
US$000 US$000
Results from financial assets and liabilities
Other financial assets - impairment - (74)
The impairment in 2014 related to the Company's shares in Golden
Peak, an exploration company that management deemed in that year to
be unlikely to return to profitability.
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
2015 2014
US$000 US$000
-------------------------- ----------- -----------
Cash and cash equivalents 5,856 4,816
5,856 4,816
-------------------------- ----------- -----------
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.
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At the balance sheet date the Group's financial liabilities were
as follows:
31 December 31 December
2015 2014
US$000 US$000
------------------------------------------------------- ----------- -----------
Trade payables 36,059 38,975
Other short-term financial liabilities 45,719 32,433
------------------------------------------------------- ----------- -----------
Current financial liabilities (due less than one year) 81,778 71,408
Non-current financial liabilities (due greater than
one year) 21,960 36,282
------------------------------------------------------- ----------- -----------
103,738 107,690
------------------------------------------------------- ----------- -----------
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 average
average interest At 31 December interest At 31 December
rate 2015 rate 2014
% US$000 % US$000
-------------------------- ----------------- -------------- --------- --------------
Cash and cash on hand 0.0 5,856 0.0 4,816
Short-term deposits n/a - n/a -
-------------------------- ----------------- -------------- --------- --------------
Cash and cash equivalents 0.0 5,856 0.0 4,816
Interest bearing debt 9.56 (66,060) 8.58 (66,203)
-------------------------- ----------------- -------------- --------- --------------
Net debt (60,204) (61,387)
-------------------------- ----------------- -------------- --------- --------------
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$0.7 million
in the year (31 December 2014: US$0.7 million).
Foreign currency risk
The Group's cash balances at 31 December 2015 and 31 December
2014 consisted of the following currency holdings:
At 31 December At 31 December
2015 2014
US$000 US$000
------------------------------------------------------- -------------- --------------
Sterling 73 16
US dollars 97 516
Francs de la Communauté Financière d'Afrique
('FCFA') 5,686 4,284
------------------------------------------------------- -------------- --------------
5,856 4,816
------------------------------------------------------- -------------- --------------
The Group's loan balances at 31 December 2015 and 31 December
2014 consisted of the following currency holdings:
At 31 December At 31 December
2015 2014
US$000 US$000
------------------------------------------------------- -------------- --------------
US dollars 22,533 16,667
Francs de la Communauté Financière d'Afrique
('FCFA') 43,527 49,536
------------------------------------------------------- -------------- --------------
66,060 66,203
------------------------------------------------------- -------------- --------------
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 4% (2014:
13%) against the US dollar in the year. It is estimated that
without this weakening, profit would have been US$2.4 million
(2014: US$8.0 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
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Available for sale financial assets were valued in line with
Level 1, based on quoted market prices of the shares.
24. 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.
25. 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 2015 31 December 2014
--------------------------- -------------------
Weighted
average
Weighted award
average award value
Number value (GBP) Number (GBP)
------------------------------------------- ----------- -------------- --------- --------
Outstanding at the beginning of the period 1,260,000 0.07 1,850,000 0.42
Granted during the period - - - -
Exercised during the period - - - -
Cancelled or expired during the period (1,260,000) 0.07 (590,000) 1.18
Outstanding at the period end - - 1,260,000 0.07
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 2015 31 December 2014
------------------- -------------------
WAEP WAEP
Number (GBP) Number (GBP)
------------------------------------------- ----------- ------ ----------- ------
Outstanding at the beginning of the period 5,405,405 0.69 9,150,524 0.69
Granted during the period - - - -
Exercised during the period - - - -
Cancelled or expired during the period (2,260,488) 0.81 (3,745,119) 0.71
------------------------------------------- ----------- ------ ----------- ------
Outstanding at the period end 3,144,917 0.61 5,405,405 0.69
Exercisable at the period end - - - -
------------------------------------------- ----------- ------ ----------- ------
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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
-------------- -------- ----------- -------- ----- -------- ---------- ------ ------------
17/05/2009 3 17/05/2012 5 1.91% 0.75 49.97% 0.28 4,917
25/06/2009 3 25/06/2012 5 2.13% 0.81 50.16% 0.30 450,000
18/03/2010 3 18/03/2013 4 2.42% 1.05 55.86% 0.47 375,000
23/05/2011 0.75 21/02/2012 2.75 1.46% 2.19 53.98% 0.57 30,000
23/05/2011 1.75 21/02/2013 3.75 1.88% 2.19 53.98% 0.69 30,000
23/05/2011 2.75 21/02/2014 4.75 2.25% 2.19 53.98% 0.79 30,000
12/03/2012 3 12/03/2015 5 1.02% 2.30 45.80% 0.76 160,000
01/08/2012 3 01/08/2015 5 0.59% 0.75 56.47% 0.25 250,000
08/03/2013 3 08/03/2013 3 0.41% 0.23 47.22% 0.03 870,000
26/03/2013 3 26/03/2016 3 0.29% 0.20 47.47% 0.02 945,000
3,144,917
-------------- -------- ----------- -------- ----- -------- ---------- ------ ------------
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$ 0.4 million related
to share based payment transactions during the year (US$0.9 million
in the year ended 31 December 2014).
Further details of the PSP and Share Option Plan are provided in
the Remuneration Report in the Annual Report.
26. 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
2015 2014
US$000 US$000
-------------------------------------------------- ----------- -----------
Exchange gains in operating activities (2,559) (4,151)
Exchange gains in finance items (3,136) (5,856)
Finance income - (2)
Finance expense 6,316 8,456
Movement in provisions and other non-cash items 788 1,752
Other non-operating items in the income statement 1,409 199
-------------------------------------------------- ----------- -----------
27. SHARE CAPITAL
31 December 2015 31 December 2014
------------------- -------------------
Number US$000 Number US$000
------------------------------------ ----------- ------ ----------- ------
Authorised:
Ordinary share of 5p 800,000,000 69,732 800,000,000 69,732
Allotted, called up and fully paid:
Opening balance 209,496,710 17,072 199,546,710 16,247
Issued during the year - - 9,950,000 825
------------------------------------ ----------- ------ ----------- ------
Closing balance 209,496,710 17,072 209,496,710 17,072
------------------------------------ ----------- ------ ----------- ------
On 14 August 2014, the Company issued 9,950,000 new ordinary
shares to existing investors, at a price of 7.13 pence per share (a
discount of 5% to the closing price of 7.51 pence on the previous
day, the date on which the terms where agreed). Elliott, Avocet's
largest shareholder, subscribed for 2,550,000 of these shares,
while Prelas AS, Avocet's second-largest shareholder, subscribed
for 4,950,000, while two other Norwegian private investors J Roger
and A Vohra subscribed for 2,000,000 and 450,000 shares
respectively. No new shares were issued in 2015.
28. OTHER RESERVES
Investment in own and Revaluation of other
Merger reserve treasury shares financial assets Foreign exchange Total
US$000 US$000 US$000 US$000 US$000
-------------------- -------------- ------------------------- -------------------------- ---------------- -------
At 31 December 2013 19,901 (1,845) - (161) 17,895
Movement in year - - - - -
At 31 December 2014 19,901 (1,845) - (161) 17,895
Movement in year - - - - -
-------------------- -------------- ------------------------- -------------------------- ---------------- -------
At 31 December 2015 19,901 (1,845) - (161) 17,895
-------------------- -------------- ------------------------- -------------------------- ---------------- -------
In 2015, the Company allotted no new shares to the EBT. No
shares were released from the EBT in the year.
At 31 December 2015, the Company held 336,201 own shares (of
which 334,300 were held in the EBT and 1,901 were held in the Share
Incentive Plan).
At 31 December 2015, the Company held 442,009 treasury shares.
During 2015, no shares were issued by the Company from treasury
shares.
29. CONTINGENT LIABILITIES
There are no Contingent liabilities at 31 December 2015 (2014:
US$ 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.
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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.
30. CAPITAL COMMITMENTS
At 31 December 2015 the Group had entered into no contractual
commitments for the acquisition of property, plant and equipment of
(31 December 2014: US$1.0).
31. EVENTS AFTER THE REPORTING PERIOD
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).
There were no other material post balance sheet events.
32. RELATED PARTY TRANSACTIONS
The table below sets out charges during the year and balances at
31 December 2015 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 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
------------------------ ------------------- ------------------------ ------------------- ------------------------
Avocet Mining PLC Wega Mining AS
--------------------------------------------- ---------------------------------------------
Balance at 31 December Balance at 31 December
Year ended 31 December Charged in the year 2014 Charged in the year 2014
2014 US$000 US$000 US$000 US$000
------------------------ ------------------- ------------------------ ------------------- ------------------------
Société des
Mines de Bélahouro
SA (90%) 6,647 138,328 662 58,080
------------------------ ------------------- ------------------------ ------------------- ------------------------
Information on remuneration of Key Management Personnel is set
out in note 10.
No dividends were received by Directors during 2014 or 2015 in
respect of shares held in the Company.
33. 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.
Q1 2015 Q2 2015 Q3 2015 Q4 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
Gold produced (oz) 17,011 22,848 17,517 17,379 74,755 86,037
Total cash production cost
(US$000) 18,933 21,750 19,384 19,023 79,090 102,035
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
Total cash production cost
(US$/oz) 1,113 952 1,107 1,094 1,058 1,186
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
Other costs of sales (US$000) (1,440) 3,130 1,414 (3,530) (426) 2,426
Foreign exchange (US$000) (1,951) 662 445 (1,715) (2,559) (4,151)
Sustaining capital expenditure
(US$000) 1,466 1,197 872 258 3,793 4,680
Share based payments (US$000) 83 123 123 85 414 856
Administrative expenses
(US$000) 1,009 442 716 (106) 2,061 5,717
All-in Sustaining Costs
(US$000) 18,100 27,304 22,954 14,015 82,373 111,563
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
All-in Sustaining Costs
(US$/oz) 1,064 1,195 1,310 806 1,102 1,297
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 12:45 ET (16:45 GMT)
-------------------------------- ------------- ------------- ------------- ------------- ----------- -----------
34. 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.
UNAUDITED QUARTERLY INCOME STATEMENT FOR CONTINUING
OPERATIONS
The following table presents an analysis of the 2015 results by
quarter. This analysis has not been audited and does not form part
of the statutory financial statements.
Q1 2015 Q2 2015 Q3 2015 Q4 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
US$000 US$000 US$000 US$000 US$000
US$000
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Revenue 21,048 26,761 19,253 17,976 85,038 110,444
Cost of sales (24,135) (30,239) (18,761) (16,798) (89,933) (129,716)
Cash production costs:
* mining (4,456) (7,151) (6,337) (5,828) (23,772) (36,296)
* processing (9,184) (9,324) (8,512) (7,472) (34,492) (38,084)
* overheads (4,012) (3,543) (3,285) (4,416) (15,256) (20,118)
* royalties (1,281) (1,732) (1,250) (1,307) (5,570) (7,537)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
(18,933) (21,750) (19,384) (19,023) (79,090) (102,035)
Changes in inventory (4,426) (2,265) 2,112 (1,316) (5,895) (895)
Expensed exploration and other cost
of sales 1,440 (3,130) (1,414) 3,530 426 (3,172)
Depreciation and amortisation (2,216) (3,094) (75) 11 (5,374) (23,614)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Gross (loss)/profit (3,087) (3,478) 492 1,178 (4,895) (19,272)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Administrative expenses (1,009) (442) (716) 106 (2,061) (5,717)
Share based payments (83) (123) (123) (85) (414) (856)
Net impairment of assets - (30,609) - (14,539) (45,148) (111,692)
Loss from operations (4,179) (34,652) (347) (13,340) (52,518) (137,537)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Finance items
Exchange gains/(losses) 5,567 (886) (630) (915) 3,136 5,856
Finance expense (1,943) (1,567) (1,698) (1,108) (6,316) (8,456)
Finance income - - - - - 2
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Loss before taxation (555) (37,105) (2,675) (15,363) (55,698) (140,135)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Analysed as:
Loss before taxation and exceptional
items (555) (6,496) (2,675) (824) (10,550) (28,443)
Exceptional items - (30,609) - (14,539) (45,148) (111,692)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Taxation (19) 4,614 - 1,398 5,993 (9,653)
Loss for the period (574) (32,491) (2,675) (13,965) (49,705) (149,788)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
Attributable to:
Equity shareholders of the parent
company (708) (29,411) (2,471) (13,142) (45,732) (136,120)
Non-controlling interest 134 (3,080) (204) (823) (3,973) (13,668)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
(574) (32,491) (2,675) (13,965) (49,705) (149,788)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
EBITDA (1,963) (949) (272) 1,188 (1,996) (2,231)
------------------------------------- ------------ ------------ ------------ ------------ ---------- -----------
35. Publication of non-statutory accounts
The financial information, for the year ended 31 December 2015,
set out in this announcement does not constitute statutory
accounts. This information has been extracted from the Group's 2015
statutory financial statements upon which the auditors' opinion is
modified, with respect to physical stock contained in ore
stockpile, in circuit and finished goods of $11.5m included within
inventory of $17.3m.The audit evidence available was limited
because they were unable to observe the counting of this physical
stock due to safety concerns arising from acts of terrorism within
Burkina Faso. The Group financial statements contain an emphasis of
matter opinion in connection with the carrying value of the Tri-K
asset and the Going Concern of the Group. The parent financial
statements contain an emphasis of matter opinion in connection with
the company investment in its subsidiaries and going concern.
36. Annual Report
The Annual Report for the year ended 31 December 2015 will
shortly be available on the Company's website at
www.avocetmining.com and will be printed for posting to
shareholders today. The Notice of the Annual General Meeting and
the Form of Proxy will be sent to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFESSTIRFIR
(END) Dow Jones Newswires
April 26, 2016 12:45 ET (16:45 GMT)
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