TIDMKEM
Kemin Resources Plc
('Kemin" or the "Company')
Preliminary Results for the Year Ended 31 December 2015
Kemin (AIM: KEM), a molybdenum and tungsten exploration and
development company with substantial interests in Kazakhstan, today
announces its preliminary results for the Year Ended 31 December
2015.
Highlights
-- Continuation of exploration programme to include further drilling and
infrastructure enhancement in order to efficiently mine the
resource
in the future
-- The value of the Drozhilovskoye and Smirnovskoye molybdenum and
tungsten deposits to be preserved pending a recovery in metal
prices
in the future
-- Completion of Competent Person's Reports to be postponed until the
completion of the additional exploration programme, which the
Company
aims to have finished in H1 2017
-- Continued support for the Company from Amrita Investments Limited, an
entity owned by the Company's majority shareholders
-- Attributable loss of GBP1,101,000 (2014: GBP818,000) in the year
The accounts for the year ended 31 December 2015 will shortly be
available at the Company's website, www.keminresources.com, in
accordance with AIM Rule 26.
The Annual General Meeting of the Company will be held at the
offices of BDO LLP, 55 Baker Street, London,W1U 7EU on 29 June 2016
at 11:00am
Commenting on the results, Sanzhar Assaubayev, the CEO of Kemin,
said:
"The recent stabilisation of molybdenum and tungsten prices is
encouraging and we continue to evaluate future demand for both
minerals in neighbouring China.Through the work programme currently
underway we are enhancing our understanding of the geological
resources so that we will be able to move quickly to project
development and production once the economic climate is more
favourable."
For further information, please visit
http://www.keminresources.com or contact:
Kemin Resources Plc
Louise Wrathall (Investor relations)
+44(0)207 932 2456
Strand Hanson Limited (Nomad, Financial Adviser and Broker)
Andrew Emmott / Ritchie Balmer
+44(0)207 409 3494
Information on the Company
Kemin Resources plc (AIM: KEM) was formed into its present
structure in April 2013 by the reverse take-over of GMA Resources
plc by the 'Joint Venture Kazakh-Russian Mining Company LLP'
(KRMC). The Company is focused on developing its two molybdenum and
tungsten deposits Drozhilovskoye and Smirnovskoye. Each of the
deposits is assessed to have significant value. Kemin's 90% owned
Kazakh entity, KRMC, is the developer and future operator of the
two subsoil licences that allow mining to take place at each
deposit. Both deposits are located in northern Kazakhstan.
Chairman's Statement
Since I last reported to you there has not been any significant
change in the prices of our principal commodities. However it
appears that the prices have stabilised, with Molybdenum trading
around US$16,000 a metric tonne. It appears clear to both myself
and the Board that our current strategy is the correct one to
maximise the return to shareholders. In simple our strategy is to
put major development of the assets on hold whilst at the same time
putting the Company in a position to develop the resource once
economic conditions improve.
In the current year we have taken steps to improve our
understanding of our deposits performing infill drilling and
targeting potentially high grade zones for testing, this has been
complemented by laboratory testing of samples. Some improvements
have been made to the infrastructure but at this stage we are
conscious of cost control at all levels. In this regard cost
savings were made at head office in order to preserve the cash
balances at this time.
The work undertaken was used to underpin our licence renewals
for both deposits, and a detailed programme of exploration works
has formed part of our application to extend the licences which are
currently with the relevant ministry. We will continue with further
exploration and evaluation work during the licence renewal process
and do not anticipate any issues in the grant of the licences
contract extensions.
As stated previously, the Board is of the opinion that both
Drozhilovskoye and Smirnovskoye remain very attractive projects for
Kemin and, because of their relatively high grades, low strip
ratios and their proximity to the largest steel producer in the
world, China, they remain outstanding investment opportunities.
However, given the current pricing environment the Board will
continue to refine its understanding of the resources and to
optimise the strategy for bringing the commodities into commercial
production in the medium to long term. It is difficult at this
stage to give a definitive roll out plan, to move the Company to
the production phase, however the Board is reassessing the
situation on a regular basis.
In the meantime, the Board remains focussed on preserving cash
and maintaining our low cost base where possible.
The Company will continue to benefit from the backing of its
major shareholder, which has indicated its support for the current
strategy and will provide finance as and when required.
Kanat Assaubayev
Chairman
6 June 2016
Chief Executive Officer's statement
Since our H1 2015 results, when we reported that it would not
make economic sense to accelerate into production our
Drozhilovskoye and Smirnovskoye deposits given current market
conditions, we have been undertaking certain further work to
optimise returns to shareholders in the future. During this period
we are aware that we also need to maintain our focus on keeping our
operating costs to a minimum, with the aim to be able to move
quickly once the conditions are conducive to the development of the
asset.
We are currently in the process of renewing the licences for
both sites, and have provided all the necessary documentation to
the relevant authorities in Kazakhstan. The normal process time
tends to span between 9-12 months. We are confident we will obtain
the necessary licence extensions and expect the confirmation of
licence extension for contract 1605 (Smirnovskoye). This licence
will run until 2018 with contract 1606 (Drozhilovskoye) running to
2021. Licence 1605 recently expired in May 2016 but we expect to
obtain confirmation in relation to this in H2 2016 or H1 2017 at
the latest.
The recent price performance of molybdenum and tungsten has
stabilised with the current prices for molybdenum and tungsten in
the region of US$16,000 and US$10,500 per metric tonne
respectively. We do not believe that moving the resource to the
production phase at these prices will deliver the maximum return to
our shareholders.
As noted in the 2015 interim results, Kemin's management team
has been continuing its work following up on the recommendations
provided by consultants for both Drozhilovskoye and Smirnovskoye. A
number of key actions were identified at that stage, and these are
forming the basis of the current work programme, and are expanded
on below:
-- further infill drilling of the ore body has been undertaken and
specific areas have been targeted in order to increase the
resource
confidence. During 2015 nineteen exploratory holes were drilled
on the
Smirnovskoye prospect, and 34 in the Drozhilovskoye deposit with
a
number of core samples being processed. In particular
further
laboratory testing has been undertaken into the metallurgy
properties
of tungsten and to identify other resources such as lithium,
rubidium
and caesium and their potential value;
-- upgrades have been made at both sites to the infrastructure to include
hydro geological works, and upgrades to the pumping stations
and
offices. Further work has been undertaken in relation to
geophysical
surveys, topographical studies and assessments in relation
to
environmental impact of development; and
-- an updated geological model is being completed encompassing the
results obtained from the additional drilling complimented
with
modelling techniques as recommended by the external advisors to
better
understand the available resources.
It is expected that once the geological model has been
re-assessed and remodeled using implicit modelling techniques and
further metallurgical studies are carried out on tungsten, a more
detailed pit optimization and pushback study will be carried out
which we anticipate will be completed in H1 2017. This will be key
in order to better determine the mining options and to complete a
life of mine plan. It is envisaged that the greater depth of
information available will be used to complete more detailed CPR's
in relation to both deposits. The current intention is to finalise
the report once the work programme is completed, and move onto a
feasibility study after this stage.
The key factors now required to move the Company forward are out
of the Company's control, being the improvement in the price of
both Molybdenum and Tungsten. Albeit it is not envisaged that the
price will return to the levels of a few years ago, the Board does
believe there will be a cyclical upturn in the price sufficient to
justify the move to development. At this point the Company will be
well positioned to move quickly ahead with the roll out plan to
move into production.
As reported in the interims a number of preliminary discussions
were undertaken with Chinese groups however there are currently no
plans to follow up on any of the discussions that were held. We
still believe that there are good opportunities to work with a
number of interested parties, however the Board is of the opinion
this better undertaken once a more defined rollout plan backed up
with more detailed information is developed.
Mineral resource statement
The tables below demonstrate the most recent reserves /
resources for the two deposits at a cut-off grade of 0.05% based on
GKZ classifications as follows:
Drozhilovskoye
Reserve/ Ore Reserve/ Molybdenum Molybdenum Tungsten Tungsten
Resource Resource Metal Grade Metal Grade
Classification (Mt) (kt) (%) (kt) (%)
C1 139.8 262.9 0.19 64.3 0.05
C2 130.5 77.5 0.06 88.3 0.03
P 300 150 0.05 150 0.05
Smirnovskoye
Reserve/ Ore Reserve/ Molybdenum Molybdenum Tungsten Tungsten
Resource Resource Metal Grade Metal Grade
Classification (Mt) (kt) (%) (kt) (%)
C1 170.5 221.7 0.13 17.1 0.01
C2 108.1 114.2 0.11 13.2 0.12
P 673 417 0.06 165 0.03
Financial performance
The consolidated loss attributable to Kemin shareholders in the
12 months ended 31 December 2015 was GBP1,101,000 (FY 2014:
GBP818,000). The overall loss including that attributable to
minority shareholders was GBP1,261,000 (2014:GBP870,000), an
increase of GBP391,000.
The increase in the loss is principally a reflection of the
devaluation of the Kazakh Tenge in the year, which saw it reduce in
value against the Pound and US Dollar by 75% from the start of
year. The retranslation of the non-intercompany dollar denominated
loans in the subsidiary has resulted in forex loss of approximately
GBP575,000 due to this devaluation. The other principal expense
relates to finance charges which total GBP377,000. These are
accrued charges mainly in relation to the borrowings from Amrita,
which are in line with the prior year. Administrative expenses
reduced from GBP340,000 last year to GBP309,000 in the current
year, due to cuts at Head Office in the support functions of
investor relations and consultancy, they are set to reduce again in
the forthcoming year.
As in the prior year the cash spend is kept to a minimum at
present with a limited capital expenditure programme.
The current cash balances and availability of further draw downs
on the loan facility if required, provides sufficient funds for the
company to continue to meet its current obligations.
Principal risks and uncertainties
The principal and other risks which the Group is exposed to
are:
-- Availability of future funding;
-- Political and economic environment;
-- Fluctuation in commodity prices;
-- Financial risk;
-- The resources differing in grade and quantity to that predicted by
feasibility studies;
-- Fluctuations in exchange rates resulting from changes in the value of
Kazakh Tenge
Mitigation of risks and uncertainties
The Company's Management has analysed the risks and
uncertainties and monitors the risks as far as it is practical do
so given the early development of the Company.
Certain factors are beyond the control of the Company such as
the fluctuations in the price of the commodities. However the Group
is aware of these factors and tries to mitigate them as far as
possible. In relation to the commodity prices, we plan to preserve
the value of our projects until such time as commodity prices
recover in the future. The current plan is to continue exploration
of the sites in order to maximise the value from exploitation of
the resource at a later stage.
The Company cannot control the political and economic
environment of the country in which the resources are based.
However, to minimise the risk, Kemin maintains close relationships
with the Kazakhstan authorities in order to minimise bureaucratic
delays and problems.
The Company has no current plans to raise further finance at
present. However in the future it is the Company's aim is to fix
interest rates, where possible, with the preferred option being to
raise funds via equity. As stated the Company has sufficient
working capital facilities at present to meet its current cash flow
requirements.
The Company has used independent consultants experienced in
resource reports, of the type required by the Group, to mitigate as
far as possible any material changes in the resource estimates.
Key Performance Indicators
Given the stage of development of the Company, the key
performance indicators used by the management for monitoring
progress and strategic objectives for the business are set out
below:
31 December
2015 2014
Molybdenum resources ( Metal equivalent) - inferred (Kt) 484.6 484.6
Tungsten resources ( Metal equivalent)- inferred (Kt) 81.4 81.4
Molybdenum resources - inferred grade (%) 0.156 0.156
Tungsten Resources - inferred grade (%) 0.026 0.026
Cash Balance ( GBP000's) 307 704
Exploration expenditure (cumulative - GBP000's) 2,070* 2,801
Net loss (GBP000's) 1,261 870
*Reduction in value of the exploration expenditure is due to the
effect of the exchange devaluation of the Kazakh Tenge against
Sterling.
The key statistic is the level of resources which has been
measured under the GKZ classification and will be updated under
JORC (2012) by an independent consultancy once the additional
exploration and evaluation work is completed. This is expected to
be completed in H1 2017.
Given the stage of development of the Group, it has a low number
of employees who are concentrated in the head office.
The Strategic report was approved and authorised by the Board on
6 June 2016 and signed on its behalf by:
Sanzhar Assaubayev
Chief Executive Officer
Consolidated statement of profit or loss
Year ended 31 December 2015
Year ended Year ended
31 December 31
2015 December
2014
GBP000 GBP000
Administrative Expenses (309) (340)
Operating loss (309) (340)
Finance income - 1
Finance expense (952) (531)
Loss before income tax (1,261) (870)
Income tax expense - -
Loss for the year (1,261) (870)
Loss for the year attributable to:
Equity shareholders of the parent (1,101) (818)
Non-controlling interest (160) (52)
(1,261) (870)
Loss per ordinary share - basic and diluted
Attributable to the equity shareholders (0.62p) (0.5p)
of the parent - basic
Consolidated statement of comprehensive income
Year ended 31 December 2015
2015 2014
GBP000 GBP000
Loss for the year (1,261) (870)
Items which may be re-classified
to statement of profit or loss
Currency translation differences (8) 121
arising on translations
of foreign operations that may be
reclassified to the profit or loss
Total comprehensive loss (1,269) (749)
Total comprehensive loss for
the year attributable to:
Owners of the parent (1,210) (703)
Non-controlling interest (59) (46)
(1,269) (749)
Consolidated statement of financial position
Year ended 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
Notes GBP'000 GBP'000
Assets
Non-current
Intangible assets 5 2,070 2,801
Property, plant and equipment 14 26
Other non-current assets 145 152
Restricted cash 3 6
Non-current assets 2,232 2,985
Current
Other receivable 15 32
Cash and equivalents 307 704
322 736
Total assets 2,554 3,721
Liabilities
Non-current
Borrowings 2,873 2,773
Other Liabilities - 5
Non-current liabilities 2,873 2,778
Current
Trade and other payables 1,376 1,319
Borrowings 551 592
Current liabilities 1,927 1,911
Total liabilities 4,800 4,689
Net liabilities
(2,246) (968)
Equity
Equity attributable to owners of the parent
Ordinary share capital 1,748 1,748
Deferred share capital 6,168 6,168
Share premium account 37,414 37,414
Merger reserve (41,682) (41,682)
Share based payment reserve 1,105 1,105
Other reserve 912 921
Retained earnings (7,792) (6,691)
Currency translation reserve 52 161
(2,075) (856)
Non-controlling interest (171) (112)
Total equity (2,246) (968)
Consolidated
statement
of changes in equity
Year ended 31
December
2015
Ordinary Deferred Share based
Share Share Share Merger payment Other Accumulated Translation Attributed Non -
to owners of the parent controlling
capital capital premium reserve reserve reserve losses reserve Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2014 1.520 6,168 35,693 (41,682) 1,105 702 (5,873) 46 (2,321) (66) (2,387)
Loss for the year - - - - (818) (818) (52) (870)
Currency translation - - - - - 115 115 6 121
differences
arising on translation
of
foreign operations
Total comprehensive - - - - (818) 115 (703) (46) (749)
loss
Shares issued 228 1,824 2,052 2,052
in the year
Share issue expenses (103) (103) (103)
Modification of 219 219 219
loans received
At 31 December 2014 1,748 6,168 37,414 (41,682) 1,105 921 (6,691) 161 (856) (112) (968)
& 1 January 2015
Loss for the year (1,101) (1,101) (160) (1,261)
Currency translation (109) (109) 101 (8)
differences
arising on translation
of
foreign operations
Total comprehensive - - - - - - (1,101) (109) (1,210) (59) (1,269)
loss
Contribution to (9) (9) (9)
related party
At 31 December 2015 1,748 6,168 37,414 (41,682) 1,105 912 (7,792) 52 (2,075) (171) (2,246)
Ordinary share capital: Amount subscribed
for share capital at nominal value.
Deferred shares: The shares carry no right
to receive income distributions
or entitle the shareholders to attend or vote at company meetings.
Share premium: Amount subscribed for share
capital in excess of nominal value.
Merger reserve: Represents the amount arising
on the acquisition of KRMC.
Share based payment reserve: This relates to the adjustment
required under IFRS 2 to account for the reverse takeover.
Other reserve: The premium between the effective
interest rate and coupon rate on
the loan issued by a related party. This
is credited to equity and subsequently
released to the profit or loss over the remaining
life of the financial liability.
released to the profit or loss over the remaining
life of the financial liability.
Accumulated losses: Cumulative losses recognized in the
consolidated statement of comprehensive income.
Translation reserve: Gains/losses arising on retranslating
the net assets of overseas operations into sterling.
Consolidated statement of cashflows
Year ended 31 December 2015
Year ended Year ended
31 December 31
December
2015 2014
GBP'000 GBP'000
Net cash outflow from operating activities (339) (740)
Investing activities
Additions to intangible assets - (947)
-
Additions to property, plant and equipment - (4)
Net cash used in investing activities - (951)
Financing activities
Proceeds from borrowings - 949
(58)
Repayment of borrowings (58) (514)
Proceeds on issue of shares - 2,052
Expenses on issue of shares - (103)
Net cash inflow from financing activities (58) 2,384
(Decrease)/increase in cash (397) 693
and cash equivalents
Cash and cash equivalents at 704 11
the beginning of period
Cash and cash equivalents at the end of period 307 704
Notes
1. General Information
The Group's principal activity is that of mining, exploration
and mine development. The parent company principal
activity is managing the trade and the investment of its
subsidiary company. It is incorporated in England
and Wales and has its registered office and business
address at 28 Eccleston Square, London SW1V 1NZ. The
shares of Kemin Resources Plc are quoted on the AIM market
which is operated by the London Stock Exchange.
The financial information set out above for the years ended
31 December 2015 and 31 December 2014 does not
constitute statutory accounts as defined in Section
434 of the Companies Act 2006, but is derived
from those accounts. Whilst the financial information
included in this announcement has been compiled in
accordance with International Financial Reporting
Standards ("IFRS") (as adopted by the European
Union), this announcement itself does not contain sufficient
financial information to comply with IFRS.
A copy of the statutory accounts for 2014 has been
delivered to the Registrar of Companies and those
for 2015 will be submitted for approval by shareholders
at the Annual General Meeting. The full audited
financial statements for the years end 31 December
2015 and 31 December 2014 do comply with IFRS.
2. Basis of preparation
The Group's consolidated financial statements
are for the year ended 31 December 2015.
They have been prepared in accordance with
the accounting policies set out below.
The Group prepares its consolidated financial statements
in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union.
The parent company has taken advantage of the exemption under
section 408 (3) of the Companies Act 2006 and has not
presented its Statement of profit or loss in these Financial
Statements. The Parent Company's loss for the
year ended 31 December
year ended 31 December 2015 is ?223,000 (2014: ?318,000).
The consolidated financial statements have been prepared
under the historical cost basis. They are presented
in Pounds Sterling and are rounded to the nearest
thousand (GBP'000) except where otherwise noted.
year ended 31 December 2015 is GBP233,000 (2014: GBP318,000).
The consolidated financial statements have been prepared
under the historical cost basis. They are presented
in Pounds sterling and are rounded to the nearest
thousand (GBP'000) except where otherwise noted.
The preparation of financial statements in compliance with adopted
IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise
judgment in applying the Groups accounting policies.
3. Auditors opinion
The auditor has issued an unqualified opinion in respect
of the financial statements, which does
not contain any statements under the Companies
Act 2006, Section 498(2) or Section 498(3).
4. Going concern
As at 31 December 2015, the Group had cash on hand of GBP307,000
and at the reporting date the Company's liabilities exceeded its
assets by GBP2,246,000.
The parent Company has an agreement with Amrita Investment
Limited (the "Lender"), a company incorporated in the British
Virgin Islands and ultimately controlled by the Assaubayev family,
for the provision of an unsecured GBP7,000,000 loan facility to be
applied towards working capital requirements. At present there is
still a facility of approximately GBP4.6m available under this
facility.
The loan bears an interest rate of LIBOR +5%. The loan is
repayable on the earlier of the fifth anniversary of the agreement
or in the date fundraising completed date in respect of any equity
fundraising ,raising at least GBP5,000,000 (before expenses) at
which point the Lender may choose to convert the loan in the
ordinary shares of the Company at the conversion rates stipulated
by the agreement.
The Directors anticipate that while they may seek to raise
further finance in the future it now has access to sufficient funds
for its immediate need, and have therefore prepared these financial
statements on a going concern basis.
5. Intangible Assets
Exploration & evaluation assets Contract Contract
No 1605 No 1606 Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2014 405 1,580 1,985
Additions 348 599 947
Exchange difference (19) (112) (131)
At 31 December 2014 & 1 January 2015 734 2,067 2,801
Additions 291 446 737
Exchange difference (481) (987) (1,468)
At 31 December 2015 544 1,526 2,070
Exploration and evaluation assets relate to the capitalised
licence costs and subsequent exploration,
expenditure incurred in respect of the Smirnovskoe
deposit ( licence No 1605) and the Drozhilovskoye
deposit (licence No 1606 awarded to KRMC in December 2004
for the exploration and production of tungsten,
Molybdenum and copper at the Smirnovskoe and
the Drozhilovskoye deposit respectively.
Licence No. 1605: The exploration subsoil
contract has expired in September
2015. All necessary documentation has been submitted to the relevant
Ministry for extension of the contract until March 2018. The extension
for contract is expected to be signed in H2 2016 or H1 2017.
Licence No. 1606: The exploration subsoil
contract has expired in May 2016.
The Group has applied for the extension of the exploration contract.
According to the underlying contract the
Group has a legal right to extend
the exploration contract for a period not exceeding 2 years.
Both deposits are located in Kostanay region of Kazakhstan.
6. Events after the reporting date
In April 2015 the Company applied to the Ministry for Investment and
Development in Kazakhstan for an extension of the exploration period
for the contract ?1605 until the end of 2018. The decision in relation
to the award of the extension for contract is expected
in H2 2016. It also applied to the same department in relation to
contract, No 1606 in March 2016. This contract expired during
May 2016, and an application to extend the licence to 2021 is
currently pending with a decision also expected in H2 2016.
View source version on businesswire.com:
http://www.businesswire.com/news/home/20160607006369/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
June 07, 2016 11:37 ET (15:37 GMT)
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