TIDMBZM
RNS Number : 7624R
Bellzone Mining PLC
26 September 2017
26 September 2017
Bellzone Mining plc
("Bellzone" or "the Company")
Unaudited interim results for the six months ended 30 June
2017
Bellzone Mining plc (AIM: BZM) announces its unaudited interim
results for the six months ended 30 June 2017.
Key Highlights
-- Bellzone's principal assets are the iron ore and nickel
laterite JORC-compliant resources and reserves at Kalia in The
Republic of Guinea, West Africa. Total iron ore resources are
6.16bt and nickel ore resources 79.3mt.
-- Iron ore prices remain volatile in 2017 but are showing signs
of settling into a medium-term average meaningfully above the
theoretical 2013 BFS-assessed FOB Conakry all-in production cost of
$34.39/t for 58% iron fines.
-- Updating oil price assumptions in the 2013 BFS model results
in a current expected all-in cost of $28.71/t for our Kalia KP1
project (7mtpa of 58% Fe fines over a life of mine of 10 years,
capable of extension by further JORC Reserve drilling).
-- Main iron ore price drivers include:
o Global supply and demand in iron ore have been moving closer
to balance, with iron ore prices touching their highest levels for
2 1/2 years;
o The drive to reduce Chinese airborne pollution has resulted in
a demand squeeze for +62% "higher quality" iron ore, exacerbating
the price premium of +62% ore over ores of lower grade. This is
perceived to be the start of a long-term global change, the gradual
result of which is expected to be much greater demand for the +65%
pellets and sinter feed capable of being delivered by magnetite
mines, as high grade oxide (DSO) mines are exhausted over time.
Kalia holds 4.72bt of high quality magnetite as well as 913mt of
oxide iron ore.
o The ability of the large Australian producers of iron ore to
make easy productivity gains by de-bottlenecking existing mines has
passed and new mines are now sought to maintain supply - for
example Rio Tinto's new Silvergrass mine, opened in August 2017, is
expected to produce 10mtpa;
o Of the two largest current iron ore mines in development or
ramp-up globally, Hancock Prospecting's 55mtpa Roy Hill mine has
recently been reported as reaching a production rate of 53.4mtpa,
near capacity; and Vale's 90mtpa S11D Carajas extension is half-way
through its ramp-up, scheduled to reach capacity in 2019 or
2020;
o Despite predictions of so-called "peak iron ore" or "peak
steel" being reached, global seaborne demand for iron ore has
continued to grow over the period 2009-2016 at a compound rate of
6.7% per annum (5.9% 2013-2016) and this growth shows little or no
sign of abating. There are, to the knowledge of Bellzone, no new
iron ore mines of the scale of Roy Hill or S11D scheduled for
development in the foreseeable future and the absolute increase in
seaborne traded iron ore tonnes in 2016 alone was 48mt.
-- Markets for steel and steel alloy materials such as nickel
have also strengthened, which has positive pricing effects on our
potential ferronickel project. There is evidence this is not a
short-term phenomenon:
o Chinese industrial modernisation in iron and steel production
and, in particular, next stage environmental controls are being
properly implemented in China's base metals supply chain;
o The stainless steel market is being propelled by wider usage
in developing markets, particularly China, causing demand side
strength in nickel. Nickel usage is also expanding rapidly in
Nickel-Graphite (Lithium ion) batteries used in electric
vehicles;
o Consistently negative approach of Filipino Government to
open-pit mining of nickel ores and slow take-up of low grade nickel
ore export licence usage in Indonesia have caused weakness in
nickel supply. Indonesia and The Philippines are the world's
largest producers of nickel ores.
-- The results of the feasibility study work on the Kalia
Ferronickel project undertaken to date, announced in August 2016,
showed a conservative base case break-even nickel price of
$10,617/t vs the current nickel price of $10,516/t (as at 25(th)
September).
-- In June 2017, Bellzone announced it had reached provisional
agreement with the Guinean Government on the addendum to its 2010
Mining Convention for Kalia. A subsequent announcement was made on
14 September 2017 which stated that no formal signing date had yet
been determined but the Company understands that there are no
significant issues preventing signing. This remains the situation
at this time.
-- Following signature of the Addendum, it is expected that the
feasibility study work on the Kalia Ferronickel Project will
recommence after the worst of the annual rainy season in mid-Q4
2017 with the aim of completion by mid-2018, potential financing
and construction in H2 2018 and thereby the potential for
production to commence in 1H 2019.
-- In parallel, Bellzone will continue to monitor developments
in the iron ore market and will seek to update the 2013 BFS if
market conditions remain positive, enabling the mine to be
financed.
Financing activities
Bellzone announced a new US$4.0m loan facility with Hudson
Global Group ("Hudson") in December 2016 to finance its operations
through FY2017. Strict cost discipline (detailed below), resulted
in a delayed initial draw down of US$0.8m in June 2017, and as
Bellzone continues to run ahead of budgeted costs, no further draw
downs have yet been necessary.
To remove any potential short-term financing overhang, Bellzone
agreed first with CS International (S) Pte Limited in July 2017 and
then with Hudson in August 2017 to extend loan maturity dates of
all three outstanding loans to 31 December 2018.
Costs
The company's overall operating costs decreased by 36.2%
compared to 1H2016. This was made possible with the full
cooperation of our Guinea staff as the technical leave programme
was extended for a further 6 months. Despite higher absolute
interest costs resulting from the additional Hudson loan drawdown,
the Company's loss for the period decreased by US$1.4mil compared
with 1H2016.
We expect further cost savings in 2H2017 arising from ongoing
structural staffing changes in Guinea as well as from the agreement
of expatriate and non-Guinea staff to accept salary reductions,
coupled with lower Director fees.
Enquiries:
Bellzone Mining plc
Simon Edwards +44 (0) 7767 492 712
WH Ireland Limited
Nominated Adviser and Broker
James Joyce / James Bavister +44 (0) 20 7220 1666
http://www.bellzone.com
Condensed Consolidated Statement of Financial Position
At 30 June 2017
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
Note $'000 $'000 $'000
============================== ==== ========= ========= ============
ASSETS
Non-current assets
Property, plant and equipment 1,324 2,214 1,627
Other intangible assets 91 160 126
Mineral properties in the
exploration and evaluation
phase 3 16,066 16,066 16,066
============================== ==== ========= ========= ============
Total non-current assets 17,481 18,440 17,819
============================== ==== ========= ========= ============
Current assets
Cash and cash equivalents 2,468 2,379 3,138
Trade and other receivables 62 81 58
Inventories 640 723 640
------------------------------ ---- --------- --------- ------------
Total current assets 3,170 3,183 3,836
============================== ==== ========= ========= ============
Total assets 20,651 21,623 21,655
============================== ==== ========= ========= ============
EQUITY
Issued capital 4 333,349 333,349 333,349
Reserves 5 5,101 5,101 5,101
Retained losses (342,785) (336,242) (340,285)
============================== ==== ========= ========= ============
Total equity (4,335) 2,208 (1,835)
============================== ==== ========= ========= ============
LIABILITIES
Non-current liabilities
Secured loans 18,902 13,691 17,603
Total non-current liabilities 18,902 13,691 17,603
============================== ==== ========= ========= ============
Current liabilities
Trade and other payables 5,973 5,532 5,825
Provisions 111 192 62
============================== ==== ========= ========= ============
Total current liabilities 6,084 5,724 5,887
============================== ==== ========= ========= ============
Total liabilities 24,985 19,415 23,490
============================== ==== ========= ========= ============
Total equity and liabilities 20,651 21,623 21,655
============================== ==== ========= ========= ============
The above consolidated statement of financial position should be
read in conjunction with the accompanying notes.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2017
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2017 2016
$'000 $'000
Employee benefits expense (1,070) (1,759)
Depreciation and amortisation
expenses (337) (582)
Administration expenses (370) (354)
Consulting expenses (51) (263)
Exploration expenses (137) (436)
Legal expenses (22) (96)
Occupancy expenses (54) (35)
Travel and accommodation expenses (32) (53)
Results from operating activities (2,073) (3,578)
Finance income 7 3
Finance expense (434) (341)
Loss before income tax from continuing
operations (2,500) (3,916)
Income tax expense - -
======================================= ========= =========
Loss for the period from continuing
operations (2,500) (3,916)
=========================================== ========= =========
Total comprehensive loss for the
period, net of tax:
Attributable to equity holders
of the parent entity (2,500) (3,916)
=========================================== ========= =========
Cents Cents
======================================= ========= =========
Loss per share attributable to
the ordinary equity holders of
the parent entity:
Basic and diluted loss per share (0.249) (0.415)
=========================================== ========= =========
The above consolidated statement of comprehensive income should
be read in conjunction with the accompanying notes.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017
Reserves Total
Stated (Note Retained
capital 6) losses equity
Note $'000 $'000 $'000 $'000
======================= ===== ======== ======== ========= =======
Balance at 1 January
2017 (audited) 333,349 5,101 (340,285) (1,835)
Loss for the period - - (2,500) (2,500)
============================== ======== ======== ========= =======
Total comprehensive
loss for the period 333,349 5,101 (342,785) (4,335)
Balance at 30 June
2017 (unaudited) 333,349 5,101 (342,785) (4,335)
============================== ======== ======== ========= =======
Balance at 1 January
2016 (audited) 331,352 5,101 (332,326) 4,127
======== ======== ========= =======
Loss for the year - - (7,959) (7,959)
Total comprehensive
income/(loss) for the
year - - (7,959) (7,959)
Shares issued, net
of costs 1,997 - - 1,997
Balance at 31 December
2016 (audited) 333,349 5,101 (340,285) (1,835)
============================== ======== ======== ========= =======
Balance at 1 January
2016 (audited) 331,352 5,101 (332,326) 4,127
Loss for the period - - (3,916) (3,916)
===================== ======= ===== ========= =======
Total comprehensive
loss for the period - - (3,916) (3,916)
Share-based payment
transactions 5 1,997 - - 1,997
Balance at 30 June
2016 (unaudited) 333,349 5,101 (336,242) 2,208
===================== ======= ===== ========= =======
The above consolidated statement of changes in equity should be
read in conjunction with the accompanying notes.
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2017
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2017 2016
Note $'000 $'000
===================================== ==== ========= =========
Net cash outflow from operating
activities 7 (1,475) (3,216)
------------------------------------- ---- --------- ---------
Cash flows from investing activities
Payments for property, plant and - -
equipment
Receipts on behalf of jointly - -
controlled entity
===================================== ==== ========= =========
Net cash inflow from investing - -
activities
===================================== ==== ========= =========
Cash flows from financing activities
Proceeds from issue of shares 4(c) - 1,997
Net proceeds from secured loans 800 3,000
------------------------------------- ---- --------- ---------
Net cash inflow from financing
activities 800 4,997
------------------------------------- ---- --------- ---------
Net increase/(decrease) in cash
and cash equivalents (675) 1,781
Cash and cash equivalents at the
beginning of the period 3,138 598
Exchange differences 5 -
------------------------------------- ---- --------- ---------
Cash and cash equivalents at end
of period 2,468 2,379
===================================== ==== ========= =========
The above consolidated cash flow statement should be read in
conjunction with the accompanying notes.
Notes to The Unaudited Interim Condensed Consolidated Financial
Statements For the six months ended 30 June 2017
1. Reporting Entity
The condensed consolidated interim financial statements of
Bellzone Mining plc ("the Company") for the six months ended 30
June 2016 were issued on 26 September 2017 in accordance with the
authority of a resolution of the board.
Bellzone Mining plc is a public company listed on the AIM Market
of the London Stock Exchange, and incorporated and registered in
Jersey, Channel Islands. The Company's registered office is located
at Standard Bank House, 47-49 La Motte Street, St Helier, Jersey,
JE2 4SZ.
The condensed consolidated financial statements of the Company
as at and for the six months period ended 30 June 2016 comprise the
Company and its subsidiaries (together referred to as the
"Group").
The nature of the principal activities of the Group is the
exploration and development of resources, primarily at its flagship
Kalia Iron Ore and Nickel Project in Guinea, West Africa. The
principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been
consistently applied unless otherwise stated.
2. Basis of preparation
a. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted for
use in the European Union.
b. Early adoption of standards
The Group has not early-adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
c. Basis of measurement
The financial statements have been prepared on the historical
cost basis except where indicated otherwise in the notes to the
interim condensed consolidated financial statements.
d. Functional and presentation currency
The functional currency of the Company and all of its
subsidiaries is the United States Dollar ("$"), which is the
currency of the primary economic environment in which the entities
operate. All amounts are expressed in $ and all values are rounded
to the nearest thousand ($'000) unless otherwise stated.
e. Going concern
The nature of the Group's current activities does not provide
the Group with production or trading revenues. In June 2017, the
Group announced the conclusion of negotiations with the Guinea
Government on an Addendum to its Kalia mining convention which
would provide the necessary framework for the development of the
proposed ferronickel project and the overall Kalia iron ore
project.
Following the expected amendment to the Kalia mining convention,
the Group will continue feasibility study work on its proposed
ferronickel project within the Kalia licence area and has set aside
sufficient funding to complete this study which is expected to be
completed in the first half of 2018. However, our ability to
complete this study is also dependent on our majority shareholder
Hudson releasing the remaining funds from its US$4.0 million
facility, which is at Hudson's discretion and could be impacted if
agreement is not reached on the amendment to the Kalia
convention.
Given difficult market conditions, Bellzone remains wholly
reliant on its majority shareholder, Hudson. China Sonangol (a
related company of Hudson) provided loan financing to the Company
from August 2014 to the end of 2015, totalling a principal amount
of US$10.2 million. Hudson provided a second loan in the principal
amount of US$6.5 million to finance the Company through 2016, with
the final drawdown on this loan received in March 2017. The Company
has drawn these loans fully, amounting to US$16.7 million and the
total principal and accrued interest for both loans was US$19.6
million as at 30 June 2017. A further loan of US$4.0 million was
agreed with Hudson to enable the Company to continue operating
through 2017 and the first draw down on this loan in the amount of
US$800,000 was completed on 6 June 2017. It is at Hudson's
discretion to allow further drawdowns under this facility. Due to
successful cost management which has obviated the need to draw down
on this third loan earlier, this most recent loan amount is
expected to be sufficient to meet Bellzone's working capital needs
up to June 2018, subject to assumptions necessarily made in respect
of the group's cashflow forecast.
All three loan agreements have the same repayment date for
principal and accrued interest of 31 December 2018. If no
additional funds are raised before such time to allow Bellzone to
discharge its loan obligations, Bellzone, China Sonangol and Hudson
would need to reach agreement to defer repayment to avoid Bellzone
defaulting.
A positive outcome on the ferronickel feasibility study is
uncertain and in any event additional funding is likely to be
required to advance the project to a bankable feasibility stage.
Furthermore, to commence development, significant funding would be
required from external parties which is not committed at the date
of this interim statement.
The current cash reserves and shareholder loans would be
sufficient to see the Group's activities through to the end of June
2018, however drawdowns on the shareholder loan facility are at the
discretion of the shareholder. The Group will therefore require
drawdowns to be made available and further financing beyond 30 June
2018 to enable it to continue to meet its liabilities as and when
they fall due.
The Group continues to evaluate its strategy and its ability to
secure funding that would enable it both to continue operations for
the short term and in the long term to develop the Kalia licence
area. However, at present there are no committed facilities which
would enable Bellzone to continue as a going concern for a period
of 12 months from the date of this interim report nor provide
certainty that the ferronickel feasibility study can be completed.
In the event of Hudson withdrawing support, the Directors' view is
that additional funding may be sourced from one or more of the
following:
-- placement of further securities;
-- the sale of assets; and/or
-- funding in exchange for an interest in the Group's projects
or future production from the projects.
Whilst the above funding sources are considered available to the
Group, there are currently no advanced plans to execute any of
these strategies.
Hudson has confirmed in a letter to the Directors dated 29 June
2017 that its current intention is to continue making funds
available to support the Group's working capital requirements for a
period of 12 months from the date of signing of the financial
statements for the period ending 31 December 2016, on a basis that
allows Hudson to change that intention. On this basis and given
Hudson's past support, the Directors believe they have a reasonable
expectation that Hudson will continue to provide on-going funding
to Bellzone, as well as consider favourably postponing the
repayment date for all of its existing loans.
Taking the above factors into account, the Directors believe it
is reasonable to expect that the Group will obtain sufficient
funding from one or more of the aforementioned funding sources and
have continued to adopt the going concern basis of accounting in
preparing the Consolidated Financial Statements. However, the
Directors wish to highlight that there is a material uncertainty in
relation to the continuing support from Hudson, in particular the
availability of committed short-term funding, and reaching an
agreement for the deferral of the repayment date for its loan
facilities.
As the Directors have concluded that there is a material
uncertainty that may cast significant doubt on the ability of
Bellzone to continue as a going concern beyond a period of 12
months from the date of this report, there is a risk that the Group
and Company may be unable to realise their assets and discharge
their liabilities in the normal course of business. The financial
statements do not include the adjustments that would result if the
company was unable to continue as a going concern.
3. Mineral properties in the exploration and evaluation phase
Unaudited Unaudited
30 June 30 June
2017 2016
$'000 $'000
---------------------------------- --------- ---------
Reconciliation of carrying amount
Opening net book amount 16,066 16,066
Closing net book amount 16,066 16,066
---------------------------------- --------- ---------
At Balance sheet date
Cost 16,066 16,066
Net book amount 16,066 16,066
================================== ========= =========
The above asset values relate to the mineral properties in the
exploration and evaluation phase and are based on the cost of
acquiring 100% of the companies holding the Kalia and Faranah
exploration permits.
The Agreement with China International Fund ("CIF") of 2 August
2010 required certain actions to be fulfilled for the transfer of
50% of the defined Kalia II area (part of the Kalia permit) and
100% of the Faranah permit to be transferred to CIF. The
prerequisite actions have not occurred and the transfers have not
taken place. The permitted areas remain 100% owned by Bellzone
through the relevant subsidiaries. In addition to the costs of
acquiring the exploration permits through the acquisition of the
subsidiaries, the statutory fees paid on the issue of the Mining
Concessions (Permits) for the Kalia and Faranah areas are
included.
4. Issued capital
Unaudited Unaudited
30 June 2017 30 June 2016
Shares SHARES $'000 SHARES $'000
--- ---------------------- ------------- ------------------------------ ------------- --------
a. Issued capital
Ordinary Shares
of no par value 1,469,858,383 352,291 1,469,858,383 352,291
Share issue costs (18,942) (18,942)
---------------------- ------------- -------- ----------------------------------- --------
1,469,858,383 333,349 1,469,858,383 333,349
---------------------- ------------- -------- ----------------------------------- --------
Movements in Ordinary
b. Shares
Stated
Number Capital
Date Details of shares $'000
--- --------------------- ---------------------------------------------- ------------- --------
1 January
2017 Opening balance 1,469,858,383 352,291
30 June 2017
(unaudited) 1,469,858,383 352,291
====================== ================================================= ============= ========
The Company is a no par value company. No share issued by the
Company shall have a par value.
There is no limit on the number of shares which may be issued by
the Company, subject to shareholder approval, and if the share
capital structure of the Company is at any time divided into
separate classes of share there is no limit on the number of shares
of any class which may be issued by the Company.
Subject to the provisions of the Companies (Jersey) Law 1991 (as
amended) (the "Companies Law") and the Articles of the Company and
without prejudice to any rights attached to any existing shares or
class of shares, any share may be issued with such rights or
restrictions as the Company may by ordinary resolution determine
or, subject to and in default of such determination, as the Board
shall determine.
The Company may, pursuant to the Companies Law, issue fractions
of shares and any such fractional shares shall rank pari passu in
all respects with other shares of the same class issued by the
Company.
The Company shall maintain a stated capital account in
accordance with the Companies Law for each class of issued share. A
stated capital account may be expressed in any currency determined
by the Board from time to time.
Ordinary shares have no par value, carry one vote per share and
carry the right to dividends.
The Group is in a project development stage and did not declare
or pay any dividends during the period (2016: nil).
c. Reconciliation of net cash inflow
from financing activities
Unaudited Unaudited
30 June 30 June
2017 2016
$'000 $'000
----- ------------------------------------------- ----------- ---------
Increase in ordinary share capital - 2,015
Share issue costs - (18)
------------------------------------------------- ----------- ---------
Proceeds from issue of shares - 1,997
------------------------------------------------- ----------- ---------
d. Capital risk management
The Group's objectives when managing capital
are to safeguard its ability to continue as
a going concern so that it may provide returns
for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital
structure, the Group may adjust the amount
of dividends payable to shareholders, return
capital to shareholders, issue new shares
or sell assets to reduce debt.
5. RESERVES
Unaudited Unaudited
30 June 30 June
2017 2016
$'000 $'000
--- --------- --------- ---------
a. Reserves 5,101 5,101
--- --------- --------- ---------
Cumulative
Translation Treasury Share-based
Adjustment shares payment reserve TOTAL
$'000 $'000 $'000 $'000
Balance at 1 January
2017 (audited) 63 (3,300) 8,338 5,101
Balance at 30 June
2017 (unaudited) 63 (3,300) 8,338 5,101
--------------------- ------------ -------- ---------------- -----
Balance at 1 January
2016 (audited) 63 (3,300) 8,338 5,101
Balance at 30 June
2016 (unaudited) 63 (3,300) 8,338 5,101
===================== ============ ======== ================ =====
6. Events occurring after the reporting period
There were no significant events occurring after the balance
sheet date and the date of this report.
7. Reconciliation of loss after income tax to net cash OUTflow
from operating activities
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2017 2016
$'000 $'000
Loss for the period after tax (2,500) (3,916)
Depreciation and amortisation expense 337 582
Non cash interest accrued on loan 499 -
Unrealised foreign exchange loss/(gain) (4) 2
Change in working capital 193 116
--------- ---------
Decrease/(increase) in receivables (4) 52
Decrease in stock - (84)
(Decrease)/increase in payables 148 18
(Decrease)/increase in provisions 49 130
--------- ---------
Net cash outflow from operating
activities (1,475) (3,216)
=========================================== ========= =========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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