RNS Number : 4866D
Monterrico Metals PLC
16 September 2008
Monterrico Metals plc
('Monterrico' or the 'Company')
16 September 2008
Interim Results for the period ended 30 June 2008
Highlights
* Two conditional warrant agreements entered into with Agropecuaria Las Huaringas S.A., a private subsidiary of the Romero Group.
* Appointment of Mr Fusheng Lan as Non-executive Chairman
* Head office relocation to Hong Kong to strengthen relationships with major shareholders in Asia
* Commission of a new trade off study to evaluate alternative technical options for the development of the Rio Blanco Project.
Completion of study expected Q4 2008.
* Significant progress made on the Environmental and Social Impact Assessment license.
* Continued robust support from the Peruvian Government
* Financial Results
* Operating loss for the period reduced to US$ 1,450,000 (30 June 2007: US$ 8,998,000)
* Loss for the period improved to US$ 1,664,000 (30 June 2007: US$ 8,899,000)
* Cash and cash equivalents at the end of June amounted to US$ 1,722,000
* Available drawdown balance from loan with Zijin Consortium of US$7.5m, as at 30 June 2008.
Commenting on these results, Fusheng Lan, as Non-executive Chairman of the Company said:
"I am delighted to be appointed as the Non- Executive Chairman of the Company and I am also very pleased with the progress of the
Company. The Company has taken great steps to ensure achieving sustainable development of its major project, Rio Blanco Copper Project."
Enquiries:
Monterrico Metals plc
Susan Li, Finance Director Tel: +852 2803 2738
Andrew Bristow, Investor Relations Manager Tel: +511 226 3322
Evolution Securities Limited Tel: +44 (0)20 7071 4300
(Nominated advisor)
Rob Collins
Tim Redfern
Adam James
Evolution Securities China Limited Tel: +44 (0)20 7220 4850
(Financial advisor and broker)
Nick Martin
Jerry Zheng
Chief Executive Officer's Statement
Dear Shareholder,
I am pleased to report that Monterrico is making steady progress to becoming a major mining company. Monterrico has moved its head
office from London to Hong Kong to strengthen relationships with major shareholders in Asia as well as accessing the capital market both in
London and Hong Kong to attract Asian investors. The Board of the Company has been strengthened with the appointment of Mr Fusheng Lan as
Non-executive Chairman, who brings extensive experience in the mining sector. We believe that as the Chairman of the Zijin Consortium and
the Vice Chairman of Zijin Mining Group Co. Ltd., the largest shareholder of the Zijin Consortium, Mr Lan will bring strong guidance and
technical support to the management of Monterrico. The outgoing non-executive Chairman, Mr Richard Ralph, has been invited to take the
position of Senior Advisor to the Board of Rio Blanco Copper S.A., the Company's Peruvian subsidiary that is directly responsible for the
development of the reputed Rio Blanco copper - molybdenum deposit.
Rio Blanco Copper S.A. has made a lot of progress with community relationships and in reviewing the results of the feasibility study in
the past months. The Company has also consolidated the strong support from the Peruvian central and regional governments to develop the Rio
Blanco Project.
On 28 August 2008, the Company granted two conditional warrant agreements to Agropecuaria Las Huaringas S.A. ("ALH"), a private company
wholly owned by the Romero Group, a large Peruvian private business group. The Warrants are conditional upon, inter alia, the passing of the
Resolutions to give the directors the authority to grant the Warrants and to disapply the statutory pre-emption rights under the Act in
respect of such grant. In addition, the second Warrant is conditional on the Company's Peruvian subsidiary, Rio Blanco Copper S.A.
obtaining approval of the EIAS by the Peruvian Ministry of Energy and Mines for the Rio Blanco Project. The Warrants together grant ALH
conditional rights to subscribe for up to 20 per cent of the Company's issued share capital in issue at the time of exercise as enlarged by
the grant of such Warrants. The Company believes that a strategic partnership with ALH would provide significant in-country and industry
expertise to the Group in connection with the production phase of the Rio Blanco Project.
1. Detailed Feasibility Study ("DFS") Review
Over the past months the Company's DFS has been reviewed, both internally, by the new management, and in conjunction with the principal
consultants involved. From the review, management has concluded that the DFS has a number of deficiencies and that the current design does
not represent the optimum plan for the long term development of the Rio Blanco Project.
The rising cost of capital items over the past year, even without the inclusion of the preferred pipeline option, makes it prudent to
consider a wider range of scales of operation, in order to optimize the economic return of the project.
Certain elements of the project, notably the design and location of the Tailings Storage Facility ("TSF"), require further evaluation to
ensure the design is suitable for long term use and that all aspects meet international environmental standards.
The transport of concentrates was to be by truck in the DFS published in 2007. Management anticipates transport of the concentrate from
the mine site to the port will now be by pipeline which will improve environmental and safety performance and will also reduce operating
costs through energy savings.
To address the deficiencies in the current design, a new trade-off study was commissioned to evaluate alternative technical options for
the development of the Rio Blanco Project. The objective of this study is to arrive at a design which will maximize value from the resource
defined to date at Rio Blanco, optimizing the economics of the project whilst improving environmental and social outcomes. The trade-off
study result is expected to be completed during the fourth quarter of 2008. Based on the result, a revised DFS will be produced by a
selected group of international consultants.
2. Environmental and Social Impact Assessment ("ESIA") Update
Management continues to progress on the ESIA, which is expected to be completed before the third quarter of 2009. The ESIA will be
conducted in accordance with international standards of environmental protection and corporate social responsibility.
3. Social Program Update
A major priority for the Company has been the continued development of its social programs and the improvement of its contact and
communication with local communities through newly installed information centers and more effective social teams. These are designed to win
the support of local people for the development of Rio Blanco Project by fostering their inclusion in the formal economy through parallel
development initiatives. In the future, the Company aims to focus on developing local skills which could then be utilized by the Rio Blanco
Project. These initiatives demonstrate to the people the ways in which Rio Blanco Project provides them with opportunities local through
integration with a mining project and the associated infrastructure to be implemented in this isolated and impoverished region in Northern
Peru.
The Peruvian Government remains robustly supportive and committed to mining in general, and the Rio Blanco Project in particular, as
demonstrated by the Stability Agreement which Rio Blanco Copper S.A. concluded with the Peruvian Government during the course of the year.
Since the Company's key projects are located in Peru, the Zijin Consortium and Monterrico management are also developing strategies to
encourage more local participation.
4. Corporate Development and Other Projects
Management has been evaluating new project development opportunities in the South American region.
5. Internal Control and Management
Management has implemented a series of ISO standards in different management areas of the Company including human resources, accounting
& financing, logistics, administration, legal department, operations and technical departments. Monterrico is also adopting an overall
budget control system to closely monitor the expenditures of the Group and identify any weaknesses on internal control procedures. Internal
audit work has been conducted at Monterrico's head office, and at Rio Blanco Copper S.A., to improve internal control and management.
Management is also improving the human resources of the Company, building and training the teams for a producing mining company.
6. Financials
The Company's expenditure for the period ended 30 June 2008 was principally comprised of costs incurred in relation to social programs,
the review of the DFS for the Rio Blanco Copper Project and the EISA works. The Company's operating loss for the period amounted to
US$1,450,000 (30 June 2007: US$8,998,000). The Company did not generate any income other than finance income. The total finance income for
the period was US$157,000 (30 June 2007: US$179,000). The total interest payable by the Company to Zijin Consortium, the largest shareholder
of the Company amounted to US$302,000 (30 June 2007: US$80,000). The Company's loss for the period was US$1,664,000 (30 June 2007:
US$8,899,000).
The Company entered into a loan facility agreement with Zijin Consortium on 4 February 2008 with the aggregate amount of US$10 million
to cover the working capital need for the Company in 2008. The available drawdown balance of the loan is US$7.5 million as at 30 June 2008.
The Company had cash and bank balances of US$1,722,000 as at 30 June 2008.
Having been the CEO of Monterrico for over a year, I am optimistic and confident of the future of Monterrico as the owner of the Rio
Blanco Copper Deposit. I believe there is every reason for shareholders to be able to benefit from such a deposit and from the bright future
of Monterrico.
XIAODONG HUANG
Chief Executive Officer
12 September 2008
THE RIO BLANCO PROJECT
- wholly owned by Monterrico through our Peruvian subsidiary Rio Blanco Copper S.A.;
- Resources of the Rio Blanco Project;
- 1,257 million tonnes at 0.57% copper and 228 ppm molybdenum
- Contained copper: 7 million tonnes (i.e. 15.5 billion pounds) plus by-product molybdenum
- Excellent potential for expanding the resource still further;
- Conventional open pit mine planned, producing copper and molybdenum concentrates;
- Concentrates will be free of penalty elements and highly desirable;
- Average annual production at Rio Blanco for the first five years of operation * according to the recent DFS * would be 191,000
tonnes of copper and 2,180 tonnes of molybdenum
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2008
For the six months ended 30 June Year ended31December
Notes 2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US$*000 US$*000 US$*000
Administrative expenses (1,450) (2,611) (3,940)
Non-recurring administrative - (5,930) (5,930)
expenses
Other income and gains - 36 19
Exploration cost written off - (493) (495)
Operating loss (1,450) (8,998) (10,346)
Finance income 5 157 179 464
Financeexpenses 5 (371) (80) (754)
LOSS BEFORE TAX 6 (1,664) (8,899) (10,636)
Tax 7 - - -
LOSS FOR THE PERIOD/ YEAR (1,664) (8,899) (10,636)
Attributable to:
Equity holder of the parent (1,664) (8,899) (10,636)
LOSS PER SHAREATTRIBUTABLETO
SHAREHOLDERS OF THECOMPANY
- Basicand diluted(US cents) 8 (6.3) (33.8) (40.4)
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2008
30 June 30 June 31 December
Notes 2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US$*000 US$*000 US$*000
ASSETS
Non-current assets
Property, plant and equipment 646 267 283
Intangible assets * deferred exploration 48,246 40,537 44,200
costs
Other receivables 3,347 3,578 2,969
Total non-current assets 52,239 44,382 47,452
Current assets
Prepayments and other 123 135 350
receivables
Cash and cash equivalents 1,722 2,402 5,044
Total current assets 1,845 2,537 5,394
TOTAL ASSETS 54,084 46,919 52,846
EQUITY AND LIABILITIES
Equity
Share capital 4,546 4,546 4,546
Reserves 33,815 37,693 35,164
Total equity 38,361 42,239 39,710
Current liabilities
Trade and other payables 546 633 777
Interest bearing loans and 10 15,177 4,047 12,359
borrowings
Total current liabilities 15,723 4,680 13,136
TOTAL EQUITY AND LIABILITIES 54,084 46,919 52,846
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2008
Share Exchange
Share Share option fluctuation Accumulated Total
capital premium reserve reserve losses equity
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2008 4,546 50,178 38 3,213 (18,265) 39,710
Income for the period
recognised directly
in equity
-Exchange realignment - - - 134 - 134
Loss for the period - - - - (1,664) (1,664)
Totalrecognised loss
for the period - - - 134 (1,664) (1,530)
Share-based payment - - 181 - - 181
At 30 June 2008 4,546 50,178* 219* 3,347* (19,929)* 38,361
At 1 January 2007 4,546 50,178 1,092 2,494 (8,327) 49,983
Income for the period
recognised directly
in equity - - - 834 - 834
-Exchange realignment
Loss for the period - - - - (8,899) (8,899)
Totalrecognised loss
for the period - - - 834 (8,899) (8,065)
Share-based payment - - 321 - - 321
At 30 June 2007 4,546 50,178* 1,413* 3,328* (17,226)* 42,239
* These reserves accounts comprise the consolidated reserves of US$33,815,000 (30 June 2007: US$37,693,000) in the condensed
consolidated balance sheet.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2008
For the six months ended 30 Year ended31 December
June
Notes 2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US$*000 US$*000 US$*000
CASH FLOWS FROM OPERATING
ACTIVITES
Loss before tax (1,664) (8,899) (10,636)
Adjustments for:
Depreciation 28 45 97
Impairment on property, plant and equipment 50 - -
Share-based payment 181 321 453
Exploration cost written - 493 495
off
Interest income (39) (179) (332)
Interest expenses 302 80 384
(1,142) (8,139) (9,539)
Increase in other receivables (1,142) (8,139)
and prepayments (151) (131) (698)
Increase/(decrease) in trade and other (231) 968 (801)
payables
Cash used in operation (1,524) (7,302) (11,038)
Interest received 39 179 332
Net cash outflow from operating activities (1,485) (7,123) (10,706)
CASH FLOWS FROM INVESTING ACTIVITES
Purchase of property, plant and equipment (441) (12) (77)
Exploration and evaluation (4,046) (5,702) (9,402)
expenditures
Net cash outflow from investing activities (4,487) (5,714) (9,479)
CASH FLOWS FROM FINANCING ACTIVITES
Proceed from borrowings 2,516 4,012 11,853
Net cash inflow from financing activities 2,516 4,012 11,853
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2008
For the six months ended 30 Year ended31
June December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US$*000 US$*000 US$*000
NET DECREASE IN CASH AND
CASH EQUIVALENTS (3,456) (8,825) (8,332)
Cash and cash equivalents at beginning of
period/year 5,044 12,576 12,576
Effect of foreign exchange rate changes, 134 (1,349) 800
net
CASH AND CASH EQUIVALENTS
AT END OF PERIOD/YEAR 1,722 2,402 5,044
ANALYSIS OF BALANCES OF CASH
AND CASH EQUIVALENTS
Cash and bank balances 1,722 2,402 5,044
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The condensed consolidated interim financial statements of the Group for the six months ended 30 June 2008 were authorised to issue in
accordance with a resolution of the directors on 12 September 2008.
Monterrico Metals Plc is a limited company incorporated in United Kingdom and its shares are publicly traded in the AIM of the London
Stock Exchange.
2. BASIS OF PREPARATION
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the Group's annual financial statements as at 31December 2007.
The interim financial statements are neither audited nor reviewed and do not constitute statutory accounts within the meaning of Section
240 of the Companies Act 1985. Comparatives figures for the year ended 31 December 2007 have been extracted from the Group's financial
statements which received an unqualified opinion from the auditors and did not contain any statement under Section 287(2) or (3) of the
Companies Act 1985 and have been filed with the Registrar of Companies. The Group's financial statements are also available on the Group's
website, www.monterrico.co.uk.
The interim financial statements are presented in United States Dollar ("US$").
The directors have a reasonable expectation that the Company will receive continued support from Zijin Consortium, the largest
shareholder of the Company and based on a review of the Group's budget and cash flow plans, the directors are satisfied with the Group has
sufficient resources to continue its operations and to meet its commitments in the foreseeable future. The financial statements have
therefore been prepared on a going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES
The Group prepares its financial statements on the basis of International Financial Reporting Standards ("IFRS") as adopted by the
European Union.
The accounting policies and basis of preparation adopted in the preparation of these interim financial statements are the same as those
used in the annual financial statements for the year ended 31 December 2007, except for the adoption of new Standards and Interpretations,
noted below:
* IFRIC 11 IFRS 2 -Group and Treasury Share Transactions
This interpretation requires arrangements whereby an employee is granted rights to an entity's equity instruments, to be accounted for as an
equity-settled scheme, even if the entity buys the instruments from another party, or the shareholders provide the equity instruments
needed.
The adoption of these interpretations did not have any material effect on the financial position or performance of the Group.
4. SEGMENT INFORMATION
The Group's only business segment is the exploration for and development of copper and associated metals.
5. FINANCE INCOME AND EXPENSES
For the six months ended 30 June
2008 2007
(Unaudited) (Unaudited)
US$*000 US$*000
Finance income
Unwind of discount on IGV 90 -
receivable
Interest on short-term deposit 39 179
Exchange gain on foreign
current denominate
bank and loan accounts 28 -
157 179
Finance expenses
Interest onother loan wholly 302 80
repayable within five years
Discounting of IGV receivable 69 -
371 80
6. LOSS BEFORE TAX
For the six months ended 30 June
2008 2007
(Unaudited) (Unaudited)
US$*000 US$*000
Depreciation 28 45
Impairment on property, plant 50 -
and equipment
7. TAX
Provision for United Kingdom profit tax has been provided at the rate of 29% (2007: 30%) on the assessable profits arising in United
Kingdom for the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the
countries/jurisdictions in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.
As all entities within the Group are loss making, there is no tax charge for the period (six months ended 30 June 2007: nil).
8. LOSS PER SHARE
The calculation of basic and diluted loss per share for the six months ended 30 June 2008 is based on the unaudited loss for the period
attributable to the equity holder of the parent of approximately US$1,664,000 (six months ended 30 June 2007: loss of US$8,899,000), and the
weighted average of 26,306,068 (30 June 2007: 26,306,068) ordinary shares in issue during the period.
The impact of the outstanding share option was anti-dilutive.
9. INTERIM DIVIDEND
The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2008 (six months ended 30 June 2007:
Nil).
10. INTEREST BEARING LOANS AND BORROWINGS
On the 4 February, 2008 the Company entered into a loan facility agreement with Zijin Consortium, the majority shareholder of the
Company. The loan facility is for an aggregate amount of up to US$10 million at an interest rate of not greater than 1 per cent above LIBOR,
as published by the British Bankers Association ("BBA"). The loan is repayable on 4 February 2009. At the option of the Company the whole or
part of the loan may be converted into ordinary shares in the Company ("Ordinary Shares") at a conversion price of the lower of (i) 350
pence per Ordinary Share and (ii) the average mid-market price of an Ordinary Share over the three business days preceding the date of
conversion. As at 30 June 2008, US$2.5 million was drawdown.
11. RELATED PARTY TRANSACTIONS
For the six months ended 30 June 2008, the Group had interest charged by the Zijin Consortium of US$302,000 (six months ended 30 June
2007: US$80,000). The interest is charged, with reference to the market rates, at interest rates of 3.0675% to 6.5% (six months ended 30
June 2007: 6.5%) per annum.
The balance due to Zijin Consortium included in the interest bearing loans and borrowings as at 30 June 2008 was approximately
US$15,177,000 (31 December 2007: US$12,359,000), of which, approximately US$4,284,000 was charged at an interest rate of not greater than 1
percent above the base rate from time to time of Barclays Bank plc and approximately US$10,893,000 was charged at an interest rate of not
greater than 1 percent above the LIBOR rate from time to time as published by the BBA. Of the total US$15,177,000 approximately
US$12,665,000 was repayable on demand and approximately US$2,512,000 was repayable on 4 February 2009.
12. POST BALANCE SHEET EVENTS
Subsequent to the balance sheet date, on 28 August 2008, the Company granted two conditional warrants to Agropecuaria Las Huaringas S.A.
("ALH"), a private company wholly owned by the Romero Group, a large Peruvian private business group.
The first warrant ("Warrant A") is exercisable in respect of 2,922,896 ordinary shares provided however, that in the event Warrant B (as
defined below) is exercised before Warrant A, then Warrant A shall be exercisable in respect of 3,653,621 Ordinary Shares. Warrant A may be
exercised by ALH any time following the first anniversary of the Warrant Agreement but before the third anniversary of the Warrant Agreement
("Warrant A Exercise Period"). The purchase price of the Warrant Shares to be issued pursuant to Warrant A is 190 pence per share, which
represents a premium of 37.7 per cent to the mid-market price as at the close of trading on 22 August 2008. To the extent that ALH does not
serve a notice to exercise Warrant A on or before the date that is three years from the date of the Warrant Agreement, Warrant A shall
automatically expire, and all rights and obligations of the parties thereunder shall automatically terminate, without any further liability
with respect thereto.
The second warrant ("Warrant B") is exercisable in respect of 2,922,896 Ordinary Shares provided however, that in the event Warrant A is
exercised before Warrant B, then Warrant B shall be exercisable in respect of 3,653,621 Ordinary Shares. Warrant B may be exercised by ALH
any time before the date occurring three years and thirty days from the date of the Warrant Agreement subject to receipt by the Company's
Peruvian subsidiary, Rio Blanco Copper S.A., of the approval of the Peruvian Ministry of Energy and Mines for the EIAS relating to the
construction and exploitation of the Rio Blanco Project. The purchase price of the Warrant Shares to be issued pursuant to Warrant B shall
be 190 pence per share, which represents a premium of 37.7 per cent to the mid-market price as at the close of trading on 22 August 2008. In
the event the Peruvian Ministry of Energy and Mines does not approve the EIAS on or before the date that is three years and thirty days from
the date of the Warrant Agreement, the warrants granted under Warrant B shall not become exerciseable, and all rights and obligations of the parties thereunder shall automatically terminate
without any further liability with respect thereto.
The Warrants are conditional upon, inter alia, the passing of the Resolutions to give the directors the authority to grant the Warrants
and to disapply the statutory pre-emption rights under the Act in respect of such grant. In addition, the second Warrant is conditional on
the Company's Peruvian subsidiary, Rio Blanco Copper S.A. obtaining approval of the EIAS by the Peruvian Ministry of Energy and Mines for
the Rio Blanco Project. The Warrants together grant ALH conditional rights to subscribe for up to 20 per cent of the Company's issued share
capital in issue at the time of exercise as enlarged by the grant of such Warrants.
13. COMPARATIVE AMOUNTS
Certain comparative amounts have been reclassified, where appropriate, in order to conform to the
current period's presentation.
Corporate Information
Directors
Fusheng Lan (Non-Executive Chairman)
Xiaodong Huang (Chief Executive Officer)
Shan Shan (Susan) Li (Finance Director)
Guobin Hu (Technical Director)
Wenzhou Huang (Non-Executive Director)
Harry Cooper (Non-Executive Director)
Company Secretary
Shan Shan (Susan) Li
Corporate Head Office
Monterrico Metals plc
Suite 1608, West Tower
Shun Tak Centre
168-200 Connaught Road Central
Sheung Wan
Hong Kong
Tel: +852 2803 2738
Fax: +852 2803 0878
e-mail: info@monterrico.com
website: www.monterrico.com
Head Office in Peru
Rio Blanco Copper S.A.
Av. San Borja Sur No 143
San Borja
Lima 41
Peru
Tel: +511 226 3322
Fax: +511 226 3320
Nominated Adviser
Evolution Securities Limited
100 Wood Street
London EC2V 7AN
United Kingdom
Broker
Evolution Securities China Limited
29-30 Comhill
London EC3V 3NT
United Kingdom
Reporting Accountants and Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
United Kingdom
Solicitors to the Company
Lawrence Graham LLP
4 More London Riverside
London SE1 2AU
United Kingdom
Registrars
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Registered Office
Monterrico Metals plc
2nd Floor
50 Gresham Street
London EC2V 7AY
United Kingdom
Share Capital (as at 12 September 2008)
Issued and outstanding: 26,306,068
This information is provided by RNS
The company news service from the London Stock Exchange
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