TIDMVGM
RNS Number : 1917Z
Vatukoula Gold Mines PLC
04 February 2014
4 February 2014
Vatukoula Gold Mines plc
('VGM' or 'the Company')
Final Results for the 12 months ended 31 August 2013
Vatukoula Gold Mines Plc (AIM:VGM), the AIM listed gold
producer, is pleased to announce its audited results for the year
ended 31st August 2013. Results are based on IFRS and expressed in
Pounds Sterling (GBP).
Operational and Financial Highlights 2012/2013
Financial
-- Turnover of GBP39.1 million (2012: GBP54.9 million) -
variance driven by lower gold production
-- Cost of Sales GBP40.3 million (2012: GBP53.5 million) - as a result of lower mining costs
-- EBITDA loss of GBP9 million (2012: GBP1.5 million) - as a result of lower gold production
-- Underlying operating loss GBP12.6 million (2012: Loss: GBP6.6 million)
-- Loss for the period of GBP15.7 million (2012: Loss: GBP7.1 million)
-- Continued capital investment of GBP13.8 million (2012: GBP16.1 million)
-- Completion of GBP12.4 million equity placing through the
issue of 58.8 million shares in during the year
-- Agreed US$40 million financing to fund the expansion of mine
Operational
-- Gold shipped was 39,517 ounces for the year ended August 2013
compared to 52,616 ounces for the year ended August 2012. This was
a result of both a lower grade delivered to the mill and lower
tonnes.
-- Ore Processed was 428,978 tonnes in the period under review
compared to 479,524 tonnes during the previous period.
-- Capital development decreased from 4,975 metres to 4,498
metres during the year as a result of the constrained cash flow
during the period under review
Year ended Year ended
31 August 2013 31 August 2012
--------------------------------------------- ---------------- ------------------
Ore processed (tonnes) 428,978 479,524
--------------------------------------------- ---------------- ------------------
Average ore head grade (grams /
tonne) 3.81 4.24
--------------------------------------------- ---------------- ------------------
Total Recovery (%) 75.55% 78.57%
--------------------------------------------- ---------------- ------------------
Gold shipped (ounces) 39,517 52,616
--------------------------------------------- ---------------- ------------------
Revenue (GBP'000) 39,080 54,925
--------------------------------------------- ---------------- ------------------
EBITDA (GBP'000) (8,977) (1,548)
--------------------------------------------- ---------------- ------------------
Cash (used) / generated from operating
activities (GBP'000) (72) 6,257
--------------------------------------------- ---------------- ------------------
Loss (GBP'000) (15,664) (7,070)
--------------------------------------------- ---------------- ------------------
Cash cost (US$/ounce) 1,606 1,627
--------------------------------------------- ---------------- ------------------
Average realised gold price (GBP/ounce) 989 1,044
--------------------------------------------- ---------------- ------------------
Enquiries:
Vatukoula Gold Mines plc Bell Pottinger
+ 44 (0)20 +44 (0)20 7861
David Paxton 7440 0643 Daniel Thöle 3232
Kiran Morzaria
W.H. Ireland Limited
James Joyce + 44 (0)20
James Bavister 7220 1666
Chairman's Statement
Dear Shareholders,
This is my first annual statement as VGM Chairman, having taken
over from Colin Orr-Ewing as non-executive chairman of the board at
the end of May 2013. I am honoured to serve as chairman of VGM and
to tackle the challenges that VGM may encounter during one of the
more difficult periods in the gold mining sector. Nonetheless I
have a firm belief in the Vatukoula Gold Mine and its potential. In
a recent report, by Natural Resource Holdings Ltd, the Vatukoula
Gold Mine was ranked 212(th) in terms of minerals resources among
580 mines, and ranked 29(th) among the top 50 producing mines by
grade.
Introduction to the role
As part of my planned introduction to the role of chairman, I
have had the opportunity to spend some time at the Vatukoula Gold
Mine in Fiji, and to meet with many of its senior leaders in a
range of forums. I have been extremely impressed by the enthusiasm
and professionalism by many of the Group's managers.
I have also been able to meet most of the Company's larger
shareholders. Keeping in touch with investors is an essential part
of my role and I intend to maintain regular contact with them in
future.
Market and economy
During this financial year we have seen a downward pressure on
the gold price. This is despite evidence that shows a very positive
increase in consumer demand and only a moderate increase in supply.
However financial and investment demand has fallen which has been
the primary driver for the negative price trend and, as such, I
believe that in the short term the gold price is going to be
dominated by unpredictable economic shocks and political shocks and
an element of speculation amongst traders.
Nonetheless commodity prices have always been cyclical in nature
and the gold market is no exception. If the past events are any
indication for the future, the gold market has now reached its
bottom, and is poised to recover in the future years. Why? Over the
last 20 years, since 1993, we have witnessed three major cycles for
gold markets. In January 1996, gold price reached its 7-year high
at US$403 per ounce. A bear market followed, triggered by the 1997
Asian financial crisis. In January 2001, gold price reached its
bottom at US$253 per ounce. This represents a 37.2% correction from
its previous high. Then the gold price embarked on an initially
gradual and later accelerated rise. In February 2008, gold price
reached its 20 year high at US$973 per ounce. This represents a
141% rise from its 2001 price. This new high was followed by a
major corrective phase triggered by the US financial crisis. In
October 2008, gold price dropped to US$732 per ounce, representing
a 24.8% correction over its previous high. This correction is then
followed by another bull run in the gold market. In July 2011, gold
price reached another new high of US$1,838 ounce, representing a
151% rise over its previous low; 3 quarters later in April 2013,
because of the US monetary policy, the gold price fell to as low as
US$1, 206 per ounce, representing a 34.4% drop from its previous
high.
I believe that we can conclude from the above events that with
each major correction of 25% to 40% in gold price, a major bull run
of over 100% could follow, with initial price consolidation at the
bottom and later an accelerated rise. If history repeats itself,
the gold price might rise to a US$2,000 per ounce level following
the current consolidation.
Another major factor influencing the gold price is China's
strategy is to make its Renminbi ("RMB") freely exchangeable and as
an international reserve currency. The Chinese government has been
preparing for this since 1996 when China made RMB exchangeable
under current account. To achieve its goal, China would have to
substantially increase its current gold holding of 1,054 tonnes,
which represents 1.2% of China's total foreign reserve of US$3.662
trillion in September 2013. In comparison, gold holding accounts
for 50% to 70% of foreign reserves for the US and most of the
European Union countries. In order to increases its gold holding to
the global average of 10% of foreign reserves, China needs to
acquire an additional 7,706 tonnes gold, in par with the US gold
holding of 8,133 tonnes.
Financial performance
The continued downward pressure on the gold price has made
developing and mining at the Vatukoula Gold Mines very difficult.
Moreover the delays in securing the capital investment has
prevented the mine from embarking on its growth strategy which in
turn lowered production below management expectations. The losses
this year have increased compared to the same period last year,
however this was driven not by an increase in costs but as a result
of lower gold prices and lack of capital investment which hampered
production.
Financing and shareholder support
As mentioned at last year's Annual General Meeting the Board
highlighted that to achieve its production targets it would require
US$40 million for capital investment and working capital. While we
secured this financing we continued to receive support from our
major shareholders - including DRK Energy Co., Limited ("DRK"), who
over the period under review, invested GBP4.5 million in May 2013
and Zhongrun International Mining Co. Ltd ("Zhongrun"), whom
invested GBP6.6 million in October 2012 and GBP1.3 million in April
2013.
More importantly this year we finalised the US$40 million
investment agreement with Zhongrun. The investment agreement
stipulated that the funding will be provided in two tranches of
approximately US$20 million each. The first tranche was completed
after the year end in November 2013. The second tranche was due for
completion at the end of January 2014 and we have subsequently
agreed with Zhongrun that they will deliver these funds by the end
of February 2014.
I would personally like to thank both DRK and Zhongrun for their
continued support in this difficult market.
The Board
2013 saw change on the Board, with the retirement of Colin
Orr-Ewing and my appointment as his replacement. I would like to
thank Colin for his service to the Group, both as chairman since
2004 and before that as a director of the Group. Continually
refreshing is vitally important if a Board is to function as
effectively as possible.
In January 2013, Ian Stalker resigned from the board for
personal reasons. Ian was appointed as a non-executive director in
2008 and was heavily involved in the initial commissioning of
operations at the Vatukoula Gold Mine. His experience and knowledge
was invaluable in planning the development of the Vatukoula Gold
Mine.
As part of the equity subscription agreement announced in
October 2012, VGM agreed with Zhongrun that they were entitled to
propose four nominees for election as Directors at the Annual
General Meeting ("AGM"). In January 2013, the following directors
were appointed as directors of the Group; Mr. Yeung Ng, Mr. Fengwen
Zheng and myself.
As part of the equity subscription agreement announced in May
2013, VGM agreed with DRK that they were entitled to nominate two
directors for appointment to the board. The two directors appointed
were Mr. Yongan Lu and Mr. Wei Li.
In addition, and in order to complete the DRK agreement and
comply with the shareholder agreement with Zhongrun, both of which
require a board of seven directors, both Kiran Caldas Morzaria and
John Francis Kearney agreed to tender their resignations as
Directors.
I would like to thank John Kearney for his tireless efforts over
the past 4 years. He contributed immensely to the development of
the Board and provided the Company with valuable guidance and
strategic vision.
Although no longer a Director, Kiran Caldas Morzaria has
remained as the Chief Financial Officer of the Group.
I am delighted with these new appointments to the board; their
qualities will be invaluable to the Board and to the Group as we
continue to develop the business.
Strategic Review Committee
2014 will be a time of both change and consolidation for the
Group. There have been a number of changes at both Board and Group
executive committee level and there will be new challenges involved
in implementing the Group's strategy.
Subsequent to the year-end VGM agreed with Zhongrun to form a
strategic review committee, which has been reviewing all aspects of
the Vatukoula Gold Mine. It is anticipated that these findings will
be made available to the Board during the second quarter of this
year. The Group will however continue to grow and develop and I
have learned in the short time that I have been involved with the
Company that, in this aim, it is well served by a group dedicated
and professional employees.
Strategy and key business objectives
We have a clear strategy: to deliver to our shareholders the
full potential of the Vatukoula Gold Mine. We aim to achieve this
by focusing on four key strategic priorities: expand, sustain,
optimise and grow:
In the coming year our key business objectives are:
Expand:
To expedite the underground development and achieve a total
capital development of 5,000 metres.
To produce 45,000 ounces of gold.
Sustain:
To re-embark on the resource definition drilling campaign
started in 2011.
Optimise:
To review all current suppliers and embark on negotiating longer
term contracts which will improve our operational process flow and
reduce unit costs.
Grow:
Carry out preliminary field work on identified gold and copper
targets in the Tavua basin.
In the longer term our key business objectives are:
Expand:
To produce 100,000 ounces per annum at a cash cost of below US$
900 per ounce.
Sustain:
Continue resource development drilling at approximately 20,000
metres per annum.
Optimise:
To actively seek investment from international utility and power
companies for building a power plant in Fiji, permanently resolving
the problem of high power costs.
Grow:
To continue our exploration efforts to upgrade and increase our
4 million once gold Mineral Resource estimate, laying the
foundation for future mine expansion.
In addition to the above VGM will be seeking the opportunity of
listing the Company in the Asia or North America markets, where
gold companies command a better company valuation.
I firmly believe VGM is poised for growth and future success.
With 2013 behind us, I take this opportunity to thank our employees
for their tireless efforts and hard work; and acknowledge the
support provided to the Company by all our stakeholders and
suppliers.
To all who share our optimism for seizing the great
opportunities and challenges that lie ahead, we say thanks for your
continuing confidence and support.
Y.B. Ian He
Non-Executive Chairman
Chief Executive Officer's Statement
During the last twelve months the operations at the Vatukoula
Gold Mine have been severely hampered by the lack of capital to
undertake the necessary development required to establish
production levels to our targeted rate. At the beginning of the
year we were waiting for the funding that had been agreed to by a
Hong Kong based mining investment company but unfortunately those
funds never materialised.
As discussed in my last commentary we established that a major
capital program was required to undertake the development required.
The mining plan for the year was based on a development program
over 18 months, opening up major new areas for long term mining at
Vatukoula. Due to the delay in the funding this program was
delayed. At the end of the year, a full twelve months later, the
program has not been commenced.
It is a credit to all the mine staff, from the General Manager
to the trainees for the support that they have given to the Company
during this trying time. We have been forced, due to lack of funds,
to severely reduce our stock levels, which have impacted on
underground equipment availability. Ore mining has been undertaken
on a limited 'where available' basis. Exploration drilling was also
halted in order to maintain funds. The lack of drill data
compounded the planning for new development.
Operating and Financial Performance
VGM sold 39,517 ounces of gold in the year at an average cost of
US$1,606 per ounce. The main driver to the lower cost per ounce was
the lower operating costs per tonne which decreased to US$148 per
tonne.
The negative movement of the gold price further exacerbated the
lower production figures, with our gross loss for the year being
GBP1.2 million. After administrative expenses, foreign exchange
gains and depreciation and amortisation expenses the underlying
operating loss was GBP12.6 million.
The lack of funds affected our underground fleet most severely.
Without being able to maintain our stock levels, we were forced to
'rob Peter to pay Paul' with underground equipment. Critical parts
that were required had to be ordered and air freighted to site at
an additional cost.
We also continued to face issues as a result of the lack of
resource definition, another capital item that we placed on hold
during the year. One such example occurred in the Matanagata ore
body, in Smith section. Our new footwall development was undertaken
at the required elevation as defined in the Mineral Resource model.
The ore body was identified a high grade ore body. Ore was exposed
in 3 crosscuts at the location as expected. Raises were initiated,
including the ore passes and truck chutes as required.
However the exposed ore body did not reconcile to the Mineral
Resource model and was not at a mineable grade. The development was
halted for further investigation, and follow up underground
drilling initiated.
It was discovered that the ore body we developed was a split of
the main ore body and not the main Matanagata ore body. The main
ore body was in fact 18 meters above this split. The area in
question has been developed to the correct elevation and has
commenced mining. However this example shows the fraught nature of
blind developing at Vatukoula and shows how vital resource drilling
is.
Development of the Vatukoula Gold Mine
Despite the lack of funds VGM still managed to carry out some
additional capital development. We continued the development on the
new lower levels at Philip Shaft, and the clearing of the lower
levels at Smith Shaft. The key area for mining will be the lower
levels at Philip, between 18 and 20 level. We are clearing the
shaft above 20 level. Once cleared we will install new shaft
furniture, including tipping points. This will become a major
production level as planned in our 7 year mine plan. This area is
considered a high grade area and will account for a significant
portion of the gold produced at Vatukoula in that 7 year plan.
Development in the lower levels is undertaken cautiously, due to
the potential of hot water. The amount of water is not significant
- but the heat can make the operating conditions difficult. Our
program is to either seal the area, or to drain the water and
remove - so removing the heat from the area. We have found that
once ore mining operations commence - the draining technique works
best.
For the Philip Shaft sections, comprising Prince, Prince
William, Cayzer Prince and all of the associated ore bodies access
to the 20 level station at Philip Shaft was a vital first step. We
have completed the development to the 20 level station, and started
some of the development required on both 19 and 20 levels. The
decline from 18 to 20 level will become one of the key access
routes for the long term profitability at Vatukoula for a long
future. We have exposed the original 20 level station, and we are
cleaning out the spillage in the shaft between 18 and 20 levels.
This has been very difficult with the limited equipment available
to us, and has been completed when we have equipment available
only. 20 level in the Philip Shaft will become a major production
centre. This station will service all of the new mining of the high
grade ore bodies at levels between 18 level down to 23 level, as
detailed in our 7 year plan.
Sustainable Power
A major expenditure at the Vatukoula Gold Mine is the cost of
power generation. Diesel fuel is imported and used to generate
power at the mine. This has costed up to F$0.70 per kilo watt. The
major uses for power are pumping, hoisting and mill processing.
Numerous opportunities exist for the reduction of power use at the
Vatukoula Gold Mine, but the biggest factor would be the reduction
in the cost of power. We have investigated a number of options,
however the use of biomass appears to be the most practical.
The FSC has designed a 40MW power biomass project at the nearby
Rurawai Sugar plant, specifically designed to provide Vatukoula
with the power required. However, at this time the FSC has not
initiated construction.
We are fully aware that a power source, which is not at the
behest of the international hydrocarbon price is essential for the
long term profitability of VGM. Investigations toward possible
solutions have been placed as a major priority.
Health & Safety
I would also like to thank the health and safety department for
their diligent work over the past year. We have seen a major
improvement in our accident statistics. One accident is one too
many - and the focus of safety for all employees by all employees
is one that we strive to achieve.
Financing
I would like to thank our largest shareholders for the support
given to the Group at a very critical time. Although we had a
positive independent engineers report confirming that our
development plans and the production targets were achievable, we
were unable to secure a suitable financial package to provide for
our plans. Zhongrun stepped into the breach, and on behalf of all
of the employees, their families and the communities that surround
the Vatukoula Gold Mine I give my heartfelt thanks. Zhongrun now
owns over two thirds of VGM, but without their investment the
future would have been distressed.
Post Balance Sheet Events
Subsequent to year-end VGM completed the first tranche of the
US$ 40 million financing with the issue of 188,897,000 new ordinary
shares at a subscription of 6.89 pence per share, raising
approximately GBP13 million. The second tranche was due for
completion at the end of January 2014 and we have subsequently
agreed with Zhongrun that they will deliver these funds by the end
of February 2014.
On the 3(rd) of February 2014 we appointed Xuexin (Kevin) Zhu as
General Manager of the Vatukoula Gold Mine. Xuexin is a
professional mining engineer and PMI certified Project Management
Professional with over twenty years' experience in corporate
management, mine planning, engineering design, construction and
operation management of open pit and underground precious and base
metal mines.
The Board would like thank the outgoing General Manager, David
Whittle, for his efforts and the progress that has been made at the
Vatukoula Gold Mine. Under difficult financial circumstances David
Whittle has improved many key operating and safety measures which
will stand us in good stead going forward. In particular his focus
on the development of the higher grade Cayzer prince ore-body forms
part of the building blocks to increase production in the coming
years.
Outlook
2013 was a difficult year for VGM in terms of achieving our
targets that we set out at the beginning of the year. With limited
financing we were not able to hit our production targets.
Looking forward, the investment by Zhongrun allows us to make
the necessary adjustments and positions the Company to increase
production in 2014. The mine has a number of world class ore
bodies, any one of which could be a mine by itself. The mine is
very shallow in international mining standards. Deeper drilling has
shown the continuation of ore bodies at depths of double our
current deepest mining depth and exploration at Vatukoula has
identified some very high grades. Recent re-examination of the
central Caldera has identified some indications of porphyry ore
bodies and exploration will be undertaken in these areas over the
coming year.
It is the development that we have achieved in the year that
will assist in opening high-grade areas that will sustain
production in the longer term. Over the coming first half year
ending February 2014 this increase in capital development will
continue to negatively impact our gold production. Subsequent to
this, production from the Cayzer Prince ore body will come on
stream and production should increase to targeted production
levels.
In conclusion, I would like to thank all of the operating staff
at the Vatukoula Gold Mine for their commitment, enthusiasm and
enormous effort in what has been a challenging year in the
development of the business. I would also like to thank the Board
for their support, advice and commitment throughout the year.
David Karl Paxton
Chief Executive Officer
Our Business
Vatukoula Gold Mines plc. ("VGM" or "Group") explores,
discovers, and develops gold mining operations. The Group is
primarily focused on its operations on the Pacific Island of Viti
Levu, Fiji.
VGM is the owner of the longest producing gold mine in Fiji.
Operating for over 75 years, the mine has produced in excess of
seven million ounces of gold. VGM acquired the mine in 2008 and
aims to reach a sustainable and profitable production level. We are
currently in our next phase of expansion at the mine, increasing
our production from the current base of approximately 40,000 ounces
per annum. The mine currently has 4.1 million ounces of Mineral
Resources and 750,000 ounces of Mineral Reserves.
The Vatukoula Gold Mine is located in the northern part of
Fiji's main island, approximately ten kilometres inland from the
coast and within the Tavua Basin. The mine is located at the foot
of the hills that make up the Tavua Volcanic Crater.
The mine operates within three Special Mining Leases which cover
a total area of 1,255 hectares. In addition VGM has the right to
explore areas outside the current mining leases via Special
Prospecting Licenses that cover over 19,000 hectares of the
surrounding Tavua Volcano.
The Vatukoula Gold Mine is currently both an open pit and
underground operation, however in the medium-term it will become
predominantly an underground mine. Underground production is
sourced from four mining areas; Smith Shaft, Philip Shaft, R1
Cayzer Shaft and Emperor Decline. The Smith and Philip Shafts, and
the Emperor Decline serve as the main accesses to the underground
workings for personnel and materials, and are used for ore and
waste haulage.
Once the ore is hauled to the surface it is crushed, enriched
and refined at our on-site treatment plant, to produce gold doré.
Gold doré produced at the mine is typically 80% gold, 19% silver
and 1% base metals such as copper and iron. The gold doré is sold
to the Perth Mint in Australia.
VGM has onsite workshops, assay labs and produces its own power
via diesel generators.
Vatukoula Gold Mines plc. is a UK public company with its
headquarters in London. We are listed on the AIM market of the
London Stock Exchange under the symbol VGM. The Group reports in
Pounds Sterling (GBP) in accordance with IFRS as adopted by the
European Union.
Forward-looking Statement
This annual report contains 'forward-looking information', which
may include, but is not limited to, statements with respect to the
future financial and operating performance of VGM, its
subsidiaries, investment assets and affiliated companies, its
mining projects, the future price of gold, the estimation of
mineral resources, the realisation of mineral resource estimates,
costs of production, capital and exploration expenditures, costs
and timing of the development of new deposits, costs and timing of
the development of new ore zones, costs and timing of future
exploration, requirements for additional capital, governmental
regulation of mining operations and exploration operations, timing
and receipt of approvals, licenses, and conversions under The
Republic of Fiji and other applicable mineral legislation,
environmental risks, title disputes or claims, limitations of
insurance coverage and the timing and possible outcome of pending
litigation and regulatory matters.
Often, but not always, forward-looking statements can be
identified by the use of words such as 'plans', 'expects', 'is
expected', 'budget', 'scheduled', 'estimates', 'forecasts',
'intends', 'anticipates' or 'believes', or variations (including
negative variations) of such words and phrases, or state that
certain actions, events or results 'may', 'could', 'would', 'might'
or 'will' be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or
achievements of VGM and/or its subsidiaries, investment assets
and/or its affiliated companies to be materially different from any
future results, performance, or achievements expressed or implied
by the forward-looking statements.
Such factors include, among others, general business, economic,
competitive, political and social uncertainties; the actual results
of current exploration activities; conclusions of economic
evaluations and studies; fluctuations in the value of UK Pounds
Sterling relative to the United States Dollar, Fijian Dollar,
Australian Dollar and other foreign currencies; changes in project
parameters as plans continue to be refined; future prices of gold;
possible variations of ore grade or recovery rates; failure of
plant, equipment or processes to operate as anticipated; accidents,
labour disputes and other risks of the mining industry; political
instability, adverse weather conditions, insurrection or war;
delays in obtaining governmental approvals or financing or in the
completion of development or construction activities.
Although VGM has attempted to identify important factors that
could cause actual actions, events or results to differ materially
from those described in forward-looking statements, there may well
be other factors that cause actions, events or results to differ
from those currently anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the
date of this annual report and VGM disclaims any obligation to
update any forward-looking statements, whether as a result of new
information, future events or results or otherwise. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements due to the inherent uncertainty therein. Nothing in this
annual report should be construed as a profit forecast.
Operational Review
Due to the delay in our required financing, operations were
severely hampered with most key operational metrics reducing over
the period. Total gold produced was 39,858 ounces, a 25% decrease
on last year's figure.
Operating results Year ended Year ended % Variance
31 August 31 August
2013 2012
-------------------------------------- ----------- ----------- -----------
Underground Mining
-------------------------------------- ----------- ----------- -----------
Total Underground Tonnes Mined
(Ore, Waste) 397,995 477,089 (17%)
-------------------------------------- ----------- ----------- -----------
Operating Development Metres 13,644 15,644 (13%)
-------------------------------------- ----------- ----------- -----------
Strike Drive Development Metres 1,682 4,034 (58%)
-------------------------------------- ----------- ----------- -----------
Capital Development metres 4,498 4,975 (10%)
-------------------------------------- ----------- ----------- -----------
Total Development metres 19,823 24,653 (20%)
-------------------------------------- ----------- ----------- -----------
Underground Operations Plant
-------------------------------------- ----------- ----------- -----------
Underground Operations Ore delivered
(tonnes) 240,156 304,042 (21%)
-------------------------------------- ----------- ----------- -----------
Underground Operations head grade
(grams / tonne) 5.00 5.12 (2%)
-------------------------------------- ----------- ----------- -----------
Surface Operations Plant
-------------------------------------- ----------- ----------- -----------
Surface Operations delivered
(tonnes) 189,047 176,357 7%
-------------------------------------- ----------- ----------- -----------
Surface Operations head grade
(grams / tonne) 2.39 2.07 16%
-------------------------------------- ----------- ----------- -----------
Total (Sulphide + Oxide)
-------------------------------------- ----------- ----------- -----------
Ore processed (tonnes) 428,978 479,524 (11%)
-------------------------------------- ----------- ----------- -----------
Average ore head grade (grams
/ tonne) 3.81 4.24 (10%)
-------------------------------------- ----------- ----------- -----------
Total Recovery (%) 75.55% 78.57% (4%)
-------------------------------------- ----------- ----------- -----------
Gold produced (ounces) 39,858 53,152 (25%)
-------------------------------------- ----------- ----------- -----------
Gold shipped (ounces) 39,517 52,616 (25%)
-------------------------------------- ----------- ----------- -----------
Cash Costs
-------------------------------------- ----------- ----------- -----------
Total cash cost / shipped ounce(US$) 1,606 1,627 (1%)
-------------------------------------- ----------- ----------- -----------
Total cash cost / tonne (US$) 148 179 (17%)
-------------------------------------- ----------- ----------- -----------
Underground Production
Total tonnes of ore, waste and capital mined for 2013 decreased
by 17% to 397,995 tonnes compared to 2012. The lower tonnages were
driven by decreases in strike drive development, which decreased
from 4,034 metres to 1,682 metres representing a 58% decrease over
the twelve months ending 31st August 2013.
The ore delivered from underground for 2013 was 240,156 tonnes,
a 21% decrease compared to the same period last year. This
reduction in ore delivered was due in part to lower strike drive
development during the year, which is typically delivered as
ore.
The average underground grade for the twelve months was 5.00
grams per tonne, which was marginally lower than the same period
last year (5.12 grams per tonne). We had forecast higher grades in
this year, however lack of available finance prevented VGM
accessing the higher grade deposits of the Philip Shaft.
Underground operations remain focused on infrastructure
development which should enable the mine to produce at our
long-term projected rate.
Surface Production
Production from surface oxides and sulphide waste piles for the
twelve months delivered 189,047 tonnes at a grade of 2.39 grams per
tonne. The surface production predominantly came from historic
waste dumps which are generally of a higher grade compared to the
oxide material, but does lower the overall recovery in the oxide
circuit given that the material has not been completely
oxidised.
Vatukoula Treatment Plant ("VTP")
During the year, the VTP processed 428,978 tonnes of ore which
was an 11% reduction compared to the same period last year (479,524
tonnes).
The average grade decreased from 4.24 grams of gold per tonne in
the year ending August 2012, to 3.81 grams of gold per tonne in the
year ending August 2013. This was driven by lower grades delivered
from underground operations.
Recoveries for the year were 75.6%. This was lower than the
comparable period last year (78.6%) as a result of the sulphide
nature of the material delivered from the surface mining at the
waste dump.
Cash Costs
As a result of decreases in unit mining, cash cost per ounce of
gold shipped decreased to US$1,606. Overall cash cost per tonne
mined and milled also decreased to US$148 (2012: US$179). Further
detail on the main drivers that led to these increases are
contained within the Financial Review.
Employees
At the year-end we employed 1,425 individuals as either
full-time employees or as casual labour. Of our workforce 803 are
involved in direct mining operations, and a further 365 are
involved in engineering support services and 77 are involved in the
processing of ore. The remainder are involved in administration,
finance, information technology, supply, security, and operational
health and safety.
Other Activity
The group is currently rehabilitating some areas of land covered
by historical trial mining and rehabilitation leases in the state
of Cuiaba, Brazil. These areas were being explored for diamond
prospects up to 2008, at which point the group decided that the
area was not suitable for a large scale miming operation.
Financial Review
Financial Review
The purpose of this review is to provide a detailed analysis of
the Group's consolidated 2013 results and the main factors
affecting the financial performance. The Financial Review should be
read in conjunction with the financial statements and associated
notes.
Year ended Year ended
31 August 2013 31 August 2012
----------------------------------------- ---------------- ----------------
Ore processed (tonnes) 428,978 479,524
----------------------------------------- ---------------- ----------------
Average ore head grade (grams /
tonne) 3.81 4.24
----------------------------------------- ---------------- ----------------
Total Recovery (%) 75.55% 78.57%
----------------------------------------- ---------------- ----------------
Gold shipped (ounces) 39,517 52,616
----------------------------------------- ---------------- ----------------
Revenue (GBP'000) 39,080 54,925
----------------------------------------- ---------------- ----------------
EBITDA (GBP'000) (8,977) (1,548)
----------------------------------------- ---------------- ----------------
Cash (used) / generated from operating
activities (GBP'000) (72) 6,257
----------------------------------------- ---------------- ----------------
Loss (GBP'000) (15,664) (7,070)
----------------------------------------- ---------------- ----------------
Cash cost (US$/ounce) 1,606 1,627
----------------------------------------- ---------------- ----------------
Average realised gold price (GBP/ounce) 989 1,044
----------------------------------------- ---------------- ----------------
Average realised gold price (US$/ounce) 1,537 1,643
----------------------------------------- ---------------- ----------------
During the period under review the Group's financial results
were adversely affected by both the decrease in gold price and more
importantly lower production levels. As a result the Group posted a
loss of GBP15.7 million.
Revenue
Revenue for the year of GBP39.1 million was 29% lower than the
prior year period of GBP54.9 million. The Group's year-on-year
sales volume decreased by 13,099 ounces, which adversely reduced
revenue by some GBP13.0 million. In addition to this the reduction
in gold price from US$1,643 per ounce in the previous year to
US$1,537 per ounce during the period under review reduced revenue
by some GBP2.2 million.
Commodity Prices
Gold prices have a significant impact on the Group's revenue,
net profits and its ability to generate cash flows. In 2013 the
price of Gold reached US$1,784 in October 2012 and traded as low as
US$1,192 per ounce in June 2013. Our average realised gold price
was US$1,537 per ounce.
Cost of Sales and Operating Expenses before Underlying Operating
Loss
(GBP'000) Year ended Year ended
31 August 2013 31 August 2012
------------------------------------ ---------------- ----------------
Cost of Sales & Operating Expenses
------------------------------------ ---------------- ----------------
Underground Mining (21,868) (32,924)
------------------------------------ ---------------- ----------------
Surface Mining (1,644) (2,762)
------------------------------------ ---------------- ----------------
Processing (9,081) (10,281)
------------------------------------ ---------------- ----------------
Overheads (6,571) (5,917)
------------------------------------ ---------------- ----------------
Gold Duty (1,150) (1,660)
------------------------------------ ---------------- ----------------
Administrative expenses (2,341) (2,762)
------------------------------------ ---------------- ----------------
Foreign exchange gains/ (loss) (1,707) 1,334
------------------------------------ ---------------- ----------------
Depreciation and amortisation (7,328) (6,551)
------------------------------------ ---------------- ----------------
Cost of Sales and Operating Expenses decreased to GBP51.7
million in 2013 from GBP61.5 million in 2012. A 34% decrease in
underground mining costs decreased the cost of sales and operating
expenses by GBP11.1 million. Removing the effect of the reduced
tonnes mined and processed the reduction in costs on a like for
like basis is GBP1.5 million. The GBP1.5 million is explained by
the following variances:
-- a net decrease in unit mining costs which represented a GBP5 million reduction in costs,
-- a net decrease in unit milling costs which represented a GBP0.1 million reduction in costs,
-- a GBP0.2 million increase in overhead and administrative costs,
-- decreases in the value of gold shipped which reduced the gold duty paid by GBP0.5 million,
-- higher amortization and depreciation charges of GBP0.8 million, and
-- an increase in unrealised foreign exchange losses on intercompany loans of GBP3 million.
As outlined above the variance in unit mining costs represented
the key driver to the decrease in costs compared to the previous
year. The mining costs totalled GBP23.5 million for the year. This
represents a decrease of GBP12.2 million from the prior year period
(GBP35.7 million). Taking into account the decrease in the ore
mined and processed which reduced the costs by GBP7.2 million, the
decrease in costs can be mainly attributed to:
-- a decrease in unit mining costs of GBP7.2 million which can
be mainly attributable to changes in accounting estimates in which
the allocation of development related overheads between operating
expenditure and capitalised mine properties and development was
calculated on a per tonne basis. Previously, this allocation was
calculated on a per metre basis.
-- a GBP1.4 million increase in labour costs. This is a result
of increased labour and an implementation of a bonus system
-- a GBP0.5 million increase in engineering higher maintenance costs on heavy vehicles,
-- a GBP2.6 million increase in power and pumping costs mainly
due to higher fuel costs experienced during the year.
-- a GBP1 million decrease in mining costs which is attributable
to the higher portion of waste dump material mined which has a
lower mining cost
-- expensing the gold in circuit drawn down in the period, which
decreased compared to the previous year and decreased costs by
GBP1.1 million
(GBP'000) Year ended 31 Year ended 31 August
August 2013 2012
------------------------------ ------------------------- --------------------------------
Mining
------------------------------ ------------------------- --------------------------------
Variable Direct Mining Costs 8,712 11,865
------------------------------ ------------------------- --------------------------------
Total Mining Labour Costs 3,939 3,311
------------------------------ ------------------------- --------------------------------
Engineering Costs 555 7,779
------------------------------ ------------------------- --------------------------------
Other Mining Costs 11,273 11,325
------------------------------ ------------------------- --------------------------------
Gold stock movement 143 1,405
------------------------------ ------------------------- --------------------------------
Total mining expenses 23,512 35,686
------------------------------ ------------------------- --------------------------------
Depreciation and amortisation was GBP7.3 million for the year.
This represents an increase of 12% from the prior year (GBP6.2
million). This increase is due to the higher capital investment
base employed in late 2011 and in 2012 as a result of the
accelerated development programme, capital equipment replacement
programme and the rate of depreciation when compared to older
capital development and equipment.
During the year we carried out an impairment review on some of
the previously capitalised exploration and evaluation costs which
resulted in an impairment charge of GBP3.3 million during the
period under review.
Cash Costs
Cash costs for the year ending 31 August 2013 were US$1,606 per
ounce sold (2012: US$1,627 per ounce). This decrease in cash costs
can mainly be attributed to the lower unit costs per tonne of ore
mined, the effect of this would have reduced the cash costs per
ounce to US$1,410. However decreases in recovery rates and lower
grades increase the cash cost to US$1,606.
The table below provides reconciliation between cost of sales,
operating expenses and cash costs to calculate the cash cost per
ounce sold.
Year ended Year ended
31 August 2013 31 August
2012
------------------------------------- ----------------- ------------
Mining (GBP'000) (23,512) (35,686)
------------------------------------- ----------------- ------------
Processing (GBP'000) (9,081) (10,281)
------------------------------------- ----------------- ------------
Overheads (GBP'000) (6,571) (5,917)
------------------------------------- ----------------- ------------
Gold Duty (GBP'000) (1,150) (1,660)
------------------------------------- ----------------- ------------
Mine administrative costs (GBP'000) (525) (829)
------------------------------------- ----------------- ------------
Total cash costs of production (40,839) (54,373)
------------------------------------- ----------------- ------------
GBGBP / US$ foreign exchange rate 0.644 0.635
------------------------------------- ----------------- ------------
Gold Sold (Oz) 39,517 52,616
------------------------------------- ----------------- ------------
Tonnes mined and milled 428,978 479,524
------------------------------------- ----------------- ------------
Cash cost per ounce sold (US$/Oz) 1,606 1,627
------------------------------------- ----------------- ------------
Administrative Costs
Administrative expenses totalled GBP2.3 million for the year
ended August 2013 which was a 15% decrease in costs from the prior
year of GBP2.8 million. The administrative expenses are those costs
associated with maintaining the London office and the
administrative expenses in Fiji not directly attributable to
operating activities. Costs include salaries, office rent,
regulatory, audit, legal fees and investor related expenses.
Exploration and Evaluation Costs
Given the constrained cash flow during the year we substantially
reduced exploration and evaluation costs to GBP1.1 million this
year compared to GBP4.2 million in 2012. All the exploration and
evaluation costs were capitalised as an Intangible Asset in
accordance with the requirements of IFRS 6 Exploration for and
Evaluation of Mineral Assets. Exploration costs to the amount
GBP3,264,000 (2012: Nil) relate to specific areas which have not
led to the discovery of commercially viable quantities of mineral
resources, and the directors has decided to discontinue such
activities in those specific areas. These costs have been
impaired.
Taxation and Other Expenses
During the year the Group had a tax credit of GBP1.2 million
(2012: GBP1.1 million). This tax credit arises as a result of the
utilisation of the deferred tax liability.
Other expenses amounted to GBP1 million in 2013 down from GBP1.5
million in the previous year. This decrease was primarily due to a
reduction in provision against prepayments of more than one year
which reduced to GBP0.3 million.
EBITDA
EBITDA for the year ended 31 August 2013 was a loss of GBP8.9
million compared to a loss of GBP1.5 million in the prior year.
This decrease was driven by decreases in production and lower
average gold prices achieved during the years; this decrease was
partly offset by lower mining costs.
Reconciliation between net profit for the period and EBITDA is
presented below.
GBP('000) Year ended Year ended
31 August 2013 31 August
2012
------------------------------------ ---------------- -----------
Loss for the period (15,664) (7,070)
------------------------------------ ---------------- -----------
Less income tax credit (1,189) (1,075)
------------------------------------ ---------------- -----------
Plus depreciation and amortisation
expense 7,328 6,551
------------------------------------ ---------------- -----------
Less finance income (8) (65)
------------------------------------ ---------------- -----------
Plus finance expense 556 111
------------------------------------ ---------------- -----------
EBITDA (8,977) (1,548)
------------------------------------ ---------------- -----------
Basic Loss per Share
Basic loss per share for the year ended 31 August 2013 was 12.74
pence compared to basic loss per share of 7.81 pence for the year
ended 31 August 2012. This decrease was driven by the net loss for
the year.
Cash Flow
Net cash used in operating activities was GBP0.1 million for the
year, a decrease of GBP6.3 million on the prior year. The net
operating loss before changes in working capital was GBP2.5 million
compared to a net operating loss of GBP0.1 million in the previous
year. This reduction was due to lower EBITDA. Changes in working
capital generated GBP2.4 million (2012 generated GBP6.4 million)
this cash was generated primarily from the Group decreasing its
receivables.
Cash flow used in investing activities equated to GBP13.8
million for the year which represents a 14% decrease from the prior
year of GBP16.1 million. Of the GBP13.8 million used in investing
activities, GBP2.2 million (2012: GBP7.2 million) was used in the
purchase of plant and equipment and GBP11.7 million (2012: GBP9.1
million) was used in underground development and exploration
activities. This increase is primarily attributable to changes in
accounting estimates in which the allocation of development related
overheads between operating expenditure and capitalised mine
properties and development was calculated on a per tonne basis.
Previously, this allocation was calculated on a per metre
basis.
Cash provided by financing activities for the year ended 31
August 2013 was GBP12.2 million (2012: GBP5.3 million). The large
majority (GBP12.4 million) of this relates to equity issues
completed during the year. At 31 August 2013 the Group had cash and
cash equivalents of GBP0.6 million (2012: GBP2.4 million).
In November 2013, and subsequent to the year end, the Group
completed the first tranche of the US$40 million dollar financing
via the placing of 188,897,000 new ordinary shares at 6.89 pence
per share raising approximately GBP13 million
Zhongrun have informed the Group that it remains willing and
will be able to complete the subscription for the secured loan
notes. However as a result of administrative delays Zhongrun and
the Group have agreed an extension of the time for payment until
the end of February 2014.
Financial Position
Intangible assets decreased from GBP36.8 million in 2012 to
GBP32.8 million in 2013. The decrease is primarily attributable to
the impairment charge incurred during the period of GBP3.3 million.
The net book value of property, plant equipment and mine properties
and development was GBP43.5 million (2012: GBP37.2 million). The
main capital expenditure drivers being those outlined in the cash
flow used in investing in activities section above, which were
offset by amortisation and depreciation charges of GBP7.3 million
(2012: GBP6.6 million).
Total assets decreased from GBP90.7 million in 2012 to GBP86.5
million in 2013. The decrease was for the large part due to a 39%
decrease in current assets, which was driven by decreases in trade
and other receivables and inventories.
During the year the Group reached a settlement agreement with
FIRCA in relation to the GBP4 million taxation assessment against
the Group. In the settlement the parties agreed that the Group had
made advance tax payments million against this assessment and FRICA
agreed to refund the Group GBP0.8 million.
Total current liabilities for the year ended 31 August 2013 were
GBP11.2 million, a decrease of GBP1.1 million from the balance of
GBP12.3 million in 2012. This decrease is primarily driven by the
decrease in trade payables as we reversed the trend of extending
creditor terms in the previous year. Non-current liabilities
decreased to GBP10.3 million from GBP10.4 million in the previous
year. This decrease is the net result of an increase in employee
related and mine rehabilitation provisions, and a decrease in the
Deferred Tax Liability.
Non-IFRS Measures: The Group has identified certain measures in
this report that are not measures as defined under IFRS. Non-IFRS
financial measures disclosed by the directors and management are
provided to shareholders as additional information in order to
provide them with an alternative method of assessing the Group's
financial condition and operating results. These measures are not
in accordance with, or a substitute for IFRS, and may be different
from or inconsistent with non-IFRS measures used by other
companies. These measures are explained below.
Average realised gold price is a non-IFRS financial measure and
is calculated by dividing the total revenue for the year by the
total ounces sold during the year and converting the GBGBP value to
US$ at the average foreign exchange rate over the year.
EBITDA is a non-IFRS measure. The Group calculates EBITDA as
(loss)/profit for the period excluding:
-- Income tax credits or expense
-- Finance expense
-- Finance income
-- Depreciation and amortisation charges; and
-- Goodwill impairment charges
EBITDA is intended to provide additional information to
investors and analysts. It does not have a standard definition
under IFRS and other companies may calculate EBITDA differently.
Refer to the financial review section for a reconciliation of
profit to EBITDA. EBITDA should not be considered a substitute or
in isolation for measures of performance as prepared in accordance
with IFRS, as it excludes the impact of cash costs of financing
activities and taxes and the changes of working capital
balances,
Cash cost per ounce sold / per tonne mined and milled are
non-IFRS financial measures. Cash costs include all costs
associated with mining and processing the unit of measure,
inclusive of all costs absorbed into inventory, as well as
royalties, production taxes and mine overheads/administrative
costs. The cash costs exclude foreign exchange gains, depreciation
and amortisation expenses, impairment charges, inventory
obsolesces, rehabilitation charges, doubtful debts and share based
payments. These cash costs are aggregated and divided by either
ounces of gold shipped or the tonnes mined and milled to reach the
relevant non-IFRS financial measure.
Operating cash flow per share is a non-IFRS financial measure
and is calculated by dividing the Net cash (used) / generated in
operating activities by the weighted average number of Ordinary
Shares in issue.
Reserves and Resources
Mineral Resource Statement
The Vatukoula Gold Mine Mineral Resource estimate is classified
and reported in Table 1 below, in accordance with the 2004 JORC
Code(1) .
Table 1 VGM Mineral Resources at 31 August 2013
Mineral Measured Indicated Inferred
Resource
=============
Tonnes Grade Contained Tonnes Grade Contained Tonnes Grade Contained
(Mt) (g/t Gold (Mt) (g/t Gold (Mt) (g/t Gold
Au) (Moz) Au) (Moz) Au) (Moz)
============= ======= ====== ========== ======= ====== ========== ======= ====== ==========
Underground 3.1 12.6 1.3 3.6 10.3 1.2 4.0 9.7 1.3
============= ======= ====== ========== ======= ====== ========== ======= ====== ==========
Waikatakata - - - - - - 5.1 0.9 0.1
============= ======= ====== ========== ======= ====== ========== ======= ====== ==========
Tailings 4.5 1.5 0.2 0.7 1.3 0.03 - - -
============= ======= ====== ========== ======= ====== ========== ======= ====== ==========
Total 7.6 6.1 1.5 4.3 8.8 1.2 9.1 4.6 1.4
============= ------- ------ ---------- ------- ------ ---------- ------- ------ ----------
Note: Values are rounded and may not add correctly in this
table.
The 2013 Mineral Resource estimate is compared to the 2012
Mineral Resource in Table 2.
Table 2 Comparison with 2012 Mineral Resource
Classification 2013 2012
====================
Tonnes Grade Contained Tonnes Grade Contained
(Mt) (g/t Gold (Mt) (g/t Gold
Au) (Moz) Au) (Moz)
==================== ------- ------ ---------- ------- ------ ----------
Measured Resource 7.6 6.1 1.5 7.7 6.2 1.5
==================== ------- ------ ---------- ------- ------ ----------
Indicated Resource 4.3 8.8 1.2 4.4 8.9 1.2
==================== ======= ====== ========== ======= ====== ==========
Inferred Resource 9.1 4.6 1.4 9.1 4.8 1.4
==================== ======= ====== ========== ======= ====== ==========
Total Mineral
Resource 21.1 6.0 4.1 21.2 6.2 4.2
==================== ------- ------ ---------- ------- ------ ----------
Changes in the Mineral Resources between 2012 and 2013 were the
result of reductions due to depletion of the models between mining
face positions at 1 September 2012 and 31 August 2013 - 75,000
ounces gold
Underground Mineral Resource
AMC Consultants Pty Ltd ("AMC") completed a Mineral Resource
estimate for VGM using geological and assay data available at 18
May 2012. The data supplied by VGM allowed AMC to generate a
constrained grade model and estimate a Mineral Resource. AMC
estimated the Mineral Resources using the end of August 2013
surveyed face positions.
The VGM Mineral Resource estimate is classified into Measured,
Indicated, and Inferred Mineral Resources based on the current
drillhole spacing, quality of the drilling information and
confidence in the geological controls on the gold mineralisation
and grade continuity. The Mineral Resource estimate includes
Measured and Indicated Mineral Resources that will convert to Ore
Reserves on application of modifying factors.
The information in this statement of underground Mineral
Resources is based on information compiled by Mr John Tyrrell, who
is a Member of the Australasian Institute of Mining and Metallurgy
and a full-time employee of AMC Consultants Pty Ltd. Mr Tyrrell has
sufficient relevant experience to be a Competent Person as defined
by the JORC Code. Mr Tyrrell consents to the inclusion of this
information in the form and context in which it appears. Mineral
Resources listed as being prepared by AMC were estimated under the
direct supervision of Mr Tyrrell.
The following notes highlight assumptions used to generate the
Underground VGM Mineral Resource estimate:
-- An intercept width times gold grade cut-off of 4 metre grams
per tonne ("m.g/t Au") and a gold grade cut-off of 2 g/t were
applied to the resource models to obtain the estimated Mineral
Resources.
-- The Mineral Resource models were depleted for mining to 31
August 2013, using surveyed mine outlines at 31 August 2013.
-- The Mineral Resource models use geological and assay data available at 18 May 2012.
-- Samples are prepared and analysed by fire assay using a 25
gram charge at the on-site Vatukoula laboratory.
-- The mineralised envelope was defined using geological logging
and assay information from diamond drillholes using a nominal lower
gold cut-off grade of 1 m.g/t Au.
-- Extrapolation of the interpreted mineralised zone was limited
to 50 m between section lines and 25 m at the end of each
section.
-- In situ density data were available from drillhole sampling.
Densities were assigned to each of the modelled mineralised
structures based on the average results from all available
samples.
-- The estimation method used 3D wireframe and block modelling
projected to a 2D plane, with ordinary kriging interpolation. A
grade variable (the product of the intercept width and grade) was
estimated using modelled semi-variograms and geostatistical
analysis to determine kriging search parameters. The intercept
width was estimated separately and the grade back-calculated.
-- Grade times thickness (AUMET) capping was applied in
calculating the grade times thickness variable.
Waikatakata Mineral Resource
The information for the Waikatakata Mineral Resource is based on
information compiled by Mrs Rachael Birch, who is a Member of the
Australasian Institute of Mining and Metallurgy and a full-time
employee of AMC Consultants Pty Ltd. Mrs Birch has sufficient
relevant experience to be a Competent Person as defined by the JORC
Code. Mrs Birch consents to the inclusion of this information in
the form and context in which it appears. The Waikatakata Mineral
Resource was first reported in 2012 and has not changed since.
The following notes highlights assumptions used to generate the
Waikatakata Mineral Resource estimate:
-- The Waikatakata Mineral Resource estimate was completed in
October 2011 using 11 diamond drillholes and 133 reverse
circulation drillholes for a total drilled length of 4,338 m. A
twin drillhole programme was completed in 2011. Four twin diamond
drillholes were drilled into the broader Waikatakata area
-- The Mineral Resource estimate is based on the interpretation
of mineralised zones using a nominal lower gold cut-off grade of
0.3 g/t Au. The interpretation was constrained within the contact
breccia, andesite, and tuff units and between 8,400 m E and 9,500 m
E
-- All twin drill core samples were prepared and assayed at the
VGM site laboratory. All samples were analysed for gold by fire
assay on a 50 g charge with AAS finish
-- Drillhole samples were composited to a dominant length of 1
m. Residual composites (less than 1 m) were retained for
estimation
-- A global bulk density value of 2.5 t/m(3) was assigned to the model
-- Estimation of gold was completed using ordinary kriging with
estimation parameters derived from modelled semi-variograms
Tailings Mineral Resource
The Tailings Mineral Resource is an estimate developed by CSA
Group Limited (CSA). In March 2008, CSA compiled an independent
Competent Persons Report (CSA CPR), on behalf of River Diamonds,
for inclusion in the application for readmission to trading on the
Alternative Investment Market (AIM) of the London Stock
Exchange.
The CSA CPR reported the 2006 Mineral Resources, including the
Tailings Mineral Resource, according to the JORC Code. No further
estimates or data is available at the time of this report. AMC
cannot verify the estimate and allocates a low reliability to the
estimate.
The Tailings Mineral Resource is approximately 10% of the total
Measured and Indicated Mineral Resources at VGM. AMC believes that
the Tailings Mineral Resource may provide an opportunity to improve
the output of the operation, but also believes the relevance of the
Tailings Mineral Resource is low. VGM plans to review the tailings
resource, in conjunction with the results of exploration programs
currently under way, to determine the preferred means to extract
the contained gold. VGM production plans do not include the
Tailings Mineral Resource pending this review and conversion of
Mineral Resources to Ore Reserves.
Ore Reserve Statement
Classification 2013 2012
======================
Tonnes Grade Contained Tonnes Grade Contained
Gold Gold
(Mt) (g/t (Moz) (Mt) (g/t (Moz)
Au) Au)
====================== ======= ====== ========== ======= ====== ==========
Proved Ore Reserve 0.64 8.14 0.17 0.7 8.22 0.19
====================== ======= ====== ========== ======= ====== ==========
Probable Ore Reserve 2.37 7.66 0.58 2.5 7.57 0.61
====================== ======= ====== ========== ======= ====== ==========
Total Ore Reserve 3.01 7.768 0.75 3.2 7.71 0.79
---------------------- ------- ------ ---------- ------- ------ ----------
Note: Values are rounded and may not add correctly in this
table.
The following notes highlight assumptions used to estimate the
Ore Reserve:
-- The Ore Reserve includes that part of the Mineral Resource
that can be economically mined and includes the allowed
dilution.
-- A gold price of US$1,300 per ounce and Exchange rate of F$1.00 = US$0.55.
-- Cut-off grade of 4.63 g/t Au.
-- Minimum stope mining width of 1.07 m.
-- 10% stope and development mining dilution.
-- 95% mining recovery in development headings.
-- 85% mining recovery in stopes.
-- The metallurgical response for the ore bodies is well
understood from actual production. No additional recovery factors
were applied to the Ore Reserve estimate.
The Ore Reserve statement is based on mine design information
prepared in 2012 under the supervision of Mr David Lee, who is a
fulltime employee of AMC. The 2012 mining models were depleted with
31 August 2013 face positions to estimate the new Ore Reserve. The
depletions were carried out by Mr Kevin Oborne, who is a full-time
employee of VGMPLC, and reviewed by Mr Lee. Mr Oborne is a Member
and Mr Lee is a Fellow of the Australasian Institute of Mining and
Metallurgy. Mr Lee has sufficient relevant experience to be a
Competent Person as defined by the JORC Code.
The reduction in 2013 Ore Reserve estimate from the 2012 Ore
Reserve estimate is mainly attributable to:
-- the change in cut-off grade (12,000 ounces)
-- mining depletion between mining faces at 1 September 2102 and
31 August 2013 (30,000 ounces)
The method used to determine the 2013 Ore Reserve estimate
required stopes to be split into panels to allow some stopes to be
partially mined, such that only the panels with an ore reserve
classification were considered. Access development to the ore
reserve stopes was added to the mine plan if the panel met the Ore
Reserve classification.
Independent reviews of the process plant, tailings facilities
and environmental status were conducted by independent consultants
for the 2010 Ore Reserve report. These reviews established that the
operation at that time was fit for purpose and the facilities are
in a condition suitable to enable recovery of the Ore Reserves of
the project.
Major recommendations highlighted in this report include:
-- Further work is required to improve the efficiency of the
processing plant - to be completed by existing VGM staff.
-- Design and construction of the Toko West tailings dam to
provide sufficient capacity. Budget cost F$7.8M.
-- Adoption of the proposed environmental management system and
associated management plans - to be developed by existing VGM
staff
-- Development of a comprehensive exploration program to replace
Mineral Resources depleted over the past 10 years - Budget cost
F$15.6M
The conclusions of reviews conducted by independent consultants
on the process plant, tailings storage facilities and environmental
issues indicate that applying modifying factors should result in no
change to the confidence level of the Ore Reserves when converted
from Mineral Resources. Work on these recommendations
continues.
AMC is not aware of any significant changes to the operation
since the independent reviews were conducted. AMC believes at this
time that additional work is required to improve operational
efficiency at VGM, but this is not likelyto impede economic
extraction of the Ore Reserves.
Financial Information
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2013
Notes 2013 2012
GBP'000 GBP'000
------------------------------------------- ------ --------- ---------
Turnover 4 39,080 54,925
Cost of sales (40,314) (53,544)
Gross (loss) / profit (1,234) 1,381
------------------------------------------- ------ --------- ---------
Operating expenses
Administrative expenses (2,341) (2,762)
Foreign exchange (loss) / gain (1,707) 1,334
Depreciation and amortisation expense (7,328) (6,551)
Underlying operating loss (12,610) (6,598)
------------------------------------------- ------ --------- ---------
Impairment charge (3,264) -
Inventory obsolescence write back 18 47
Gain on disposal of assets 32 27
Provision for mine rehabilitation - 45
Doubtful debt expense (296) (993)
Share based payments expense (185) (627)
Operating loss (16,305) (8,099)
------------------------------------------- ------ --------- ---------
Interest receivable and other income 8 65
Interest payable and similar charges (556) (111)
------------------------------------------- ------ --------- ---------
Net loss before taxation (16,853) (8,145)
------------------------------------------- ------ --------- ---------
Taxation 5 1,189 1,075
------------------------------------------- ------ --------- ---------
Loss for the period (15,664) (7,070)
------------------------------------------- ------ --------- ---------
Attributable to:
Owners of the Parent (15,664) (7,070)
------------------------------------------- ------ --------- ---------
Other comprehensive (expenses) and income
Currency translation differences (46) 440
------------------------------------------- ------ --------- ---------
Total comprehensive loss (15,710) (6,630)
------------------------------------------- ------ --------- ---------
Attributable to:
Owners of the Parent (15,710) (6,630)
------------------------------------------- ------ --------- ---------
Loss per share
------------------------------------------- ------ --------- ---------
Pence Pence
Basic 6 (12.74) (7.81)
Diluted 6 (12.74) (7.81)
------------------------------------------- ------ --------- ---------
All activities relate to continuing operations. The notes form
an integral part of this audited financial information.
Consolidated Statement of Financial Position
As at 31 August 2013
Notes 2013 2012
GBP'000 GBP'000
-------------------------------------------- ------ --------- ---------
Assets
Non-current assets
Intangible assets 7 32,758 36,841
Property, plant and equipment 8 23,604 25,713
Mine properties and development 9 19,913 11,515
-------------------------------------------- ------ --------- ---------
Total non-current assets 76,275 74,069
-------------------------------------------- ------ --------- ---------
Current assets
Inventories 6,558 7,771
Trade and other receivables 3,008 6,383
Cash and cash equivalents 617 2,437
-------------------------------------------- ------ --------- ---------
Total current assets 10,183 16,591
-------------------------------------------- ------ --------- ---------
Total assets 86,458 90,660
-------------------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 8,404 10,053
Provisions 11 1,261 1,073
Borrowings 62 -
Vatukoula Social Assistance Trust Fund 12 1,127 1,189
Convertible loan 347 -
-------------------------------------------- ------ --------- ---------
Total current liabilities 11,201 12,315
-------------------------------------------- ------ --------- ---------
Non-current Liabilities
Provisions 11 4,751 3,320
Convertible loan - 317
Vatukoula Social Assistance Trust Fund 12 15 15
Deferred tax liability 5,569 6,758
-------------------------------------------- ------ --------- ---------
Total non-current liabilities 10,335 10,410
-------------------------------------------- ------ --------- ---------
Shareholders' Equity
Share capital 10 7,768 4,828
Share premium account 91,139 81,659
Merger reserve 2,167 2,167
Foreign exchange reserve 1,068 1,022
Other reserves 3,067 2,882
Accumulated losses (40,287) (24,623)
-------------------------------------------- ------ --------- ---------
Total shareholders' equity 64,922 67,935
-------------------------------------------- ------ --------- ---------
Total liabilities and shareholders' equity 86,458 90,660
-------------------------------------------- ------ --------- ---------
The notes form an integral part of this audited financial
information.
Consolidated Statement of Changes in Shareholders' Equity
As at 31 August 2013
Equity
Share component
Ordinary Foreign based of convertible
share Share Merger exchange payment loan Accumulated
capital premium reserve reserve reserve note losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Balance at 1
September 2012 4,828 81,659 2,167 1,022 2,837 45 (24,623) 67,935
Loss for the
period - - - - - - (15,664) (15,664)
Other
comprehensive
income
- Currency
translation
differences - - - 46 - - - 46
Total
comprehensive
income - - - 46 - - (15,664) (15,618)
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Issue of shares 2,940 9,480 - - - - - 12,420
Share based
payments - - - - 185 - - 185
Balance at 31
August 2013 7,768 91,139 2,167 1,068 3,022 45 (40,287) 64,922
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Equity
Share component
Ordinary Foreign based of convertible
share Share Merger exchange payment loan Accumulated
capital premium reserve reserve reserve note losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Balance at 1
September 2011 4,378 76,709 2,167 582 2,313 45 (17,656) 68,538
Profit for the
year - - - - - - (7,070) (7,070)
Other
comprehensive
income
- Currency
translation
differences - - - 440 - - - 440
Total
comprehensive
income - - - 440 - - (7,070) (6,630)
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Issue of shares 450 4,950 - - - - - 5,400
Share option
expired - - - - (103) - 103 -
Share based
payments - - - - 627 - - 627
Balance at 31
Aug 2012 4,828 81,659 2,167 1,022 2,837 45 (24,623) 67,935
------------------- --------- --------- --------- ---------- --------- ---------------- ------------ ---------
Share premium: The share premium reserve represents the
consideration that has been received in excess of the nominal value
of shares on issue of new ordinary share capital
Merger reserve: The merger reserve represents shares that have
been issued at a premium to their nominal value on acquisition of
another company
Foreign exchange reserve:The foreign exchange reserve represents
the exchange gains or losses resulting from the translating foreign
currency amounts to the reporting currency during the consolidation
of the accounts of the Group companies
Share based payment reserve: The share-based payment reserve
represents cumulative amounts charged to the Statement of
Comprehensive Income in respect of share based payment
arrangements, where it has not yet been settled by means of an
award of shares
Equity component of convertible loan note: The equity component
of the convertible loan notes represents the remaining equity
component of convertible notes which has not yet been converted in
shares
Accumulated losses: The accumulated losses represent profits and
losses retained in previous and current period
The notes form an integral part of this audited financial
information.
Consolidated Statement of Cash Flows
For the year ended 31 August 2013
Notes 2013 2012
GBP'000 GBP'000
---------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Operating loss for the period: (16,305) (8,099)
Adjustments for:
Share based payments expense 185 627
Depreciation and amortisation expense 7,328 6,551
Impairment charge 3,264 -
Gain on disposal of assets (32) (27)
Inventory obsolescence write back (18) (47)
Foreign exchange losses / (gains) 2,513 (429)
Doubtful debt expense 296 993
Provision for mine rehabilitation - (45)
Movements in employment provisions 279 411
---------------------------------------------- ------ --------- ---------
Net operating loss before changes in working
capital (2,490) (65)
---------------------------------------------- ------ --------- ---------
Payment to Vatukoula Social Assistance
Trust Fund (103) (397)
Decrease in inventories 837 492
Decrease in receivables 2,888 561
(Decrease) / increase in accounts payable (1,204) 5,666
---------------------------------------------- ------ --------- ---------
Net cash (used) / generated in operating
activities (72) 6,257
---------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Exploration for and evaluation of mineral
resources 7 (1,085) (4,164)
Purchase of property, plant and equipment (2,177) (7,245)
Payments for mine properties and development 9 (10,624) (4,952)
Proceeds from disposals of property plant
and equipment 29 233
Interest received 8 65
---------------------------------------------- ------ --------- ---------
Net cash used in investing activities (13,849) (16,063)
---------------------------------------------- ------ --------- ---------
Cash flows before financing (13,921) (9,806)
---------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Proceeds from issuance of shares 10 12,420 5,400
Interest paid (308) (88)
Proceeds / (repayment) of borrowings 62 (5)
---------------------------------------------- ------ --------- ---------
Net cash provided by financing activities 12,174 5,307
---------------------------------------------- ------ --------- ---------
Net decrease in cash and cash equivalents (1,747) (4,499)
---------------------------------------------- ------ --------- ---------
Cash and cash equivalents at beginning
of the period 2,437 6,892
Effect of foreign exchange on cash and
cash equivalents (73) 44
---------------------------------------------- ------ --------- ---------
Cash and cash equivalents at end of the
period 617 2,437
---------------------------------------------- ------ --------- ---------
The notes form an integral part of this audited financial
information.
1. General information
Vatukoula Gold Mines plc. is registered in England and Wales
under number 5059077. The Company is governed by its articles of
association and the principal statute governing the Company is the
Companies Act 2006. The Company's registered office is situated at
Level 5, 2 More London Riverside, London, SE1 2AR. The Company is
listed on the AIM market of the London Stock Exchange.
The condensed consolidated financial information for the year
ended 31 August 2013 was approved for issue by the Board of
Directors of the Company on the 3 February 2014. The condensed
consolidated financial information does not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. The condensed consolidated financial information is
audited.
.
2. Basis of preparation
The consolidated financial statements of Vatukoula Gold Mines
plc. and all its subsidiaries (the 'Group') have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union.
The consolidated financial statements have been prepared on a
historical cost basis. The consolidated financial statements are
presented in Pounds Sterling (GBP) and all values are rounded to
the nearest thousand (GBP'000) except when otherwise indicated.
The principal accounting policies adopted by the Group and
Company in the preparation of the financial statements are set out
below.
The Board has reviewed the accounting policies set out in the
financial statements and considers them to be most appropriate to
the Group's business.
These financial statements are presented in Pounds Sterling.
Group revenues are in US Dollars. Given that the Fijian dollar is
not widely used as a reporting currency and that the parent company
is listed in the United Kingdom it is deemed appropriate for the
presentation currency of the Group to be in Pound Sterling.
Statement of Compliance with IFRS
The Group's and Company's financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS and interpretations) as adopted by the European
Union.
3. Summary of significant accounting policies
(a) Basis of consolidation
The consolidated financial information incorporates the
financial statements of the Company and its subsidiaries (the
"Group"). Control is achieved where the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated; unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in
line with those used by the Group.
(b) Going concern
The Group's business activities, together with factors likely to
affect its future development, performance and position are set out
in the Business Review section of this report. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the financial review.
In assessing the Group's going concern the Directors have taken
into account the above factors, including the financial position of
the Group and in particular its cash position, the current gold
price and market expectation for the same over the medium term, and
the Group's capital expenditure and financing plans.
The Group's forecasts and projections, taking account of
reasonable possible changes in gold price, mining costs and the
concentration of the gold in the ore delivered to the mill show
that the Group should be able to operate using its current cash
position and financing facilities. The directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
Subsequent to the year end the Group completed the first tranche
of the US$40 million dollar financing via the placing of
188,897,000 new ordinary shares at 6.89 pence per share. Included
in the Group's forecasts and projections is the completion and
drawdown of the US$20 million secured loan notes agreed with
Zhongrun.
Zhongrun have informed the Group that it remains willing and
will be able to complete the subscription for the secured loan
notes. However as a result of administrative delays Zhongrun and
the Group have agreed an extension of the time for payment until
the end of February 2014.
(c) Business combinations
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of the
acquisition is measured as the aggregate of the fair values, at the
date of exchange, of the assets given, liabilities incurred or
assumed and equity instruments issued by the Group in exchange for
control of the acquiree. Acquisition costs incurred are expensed
and included in administrative expenses. The acquiree's
identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 "Business
Combinations" are recognised at their fair value at the acquisition
date, except for non-current assets (or disposal groups) that are
classified as held for sale in accordance with IFRS 5 "Non Current
Assets Held for Sale and Discontinued Operations", which are
recognised and measured at fair value less costs to sell.
Where there is a difference between the Group's interest in the
net fair value of the acquiree's identifiable assets, liabilities
and contingent liabilities and the cost of the business
combination, any excess cost is recognised in the statement of
financial position as goodwill and any excess net fair value is
recognised immediately in the profit or loss as negative goodwill
on acquisition of subsidiary. The non-controlling interest in the
acquiree is initially measured as the non-controlling interest
proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
(d) Significant accounting judgements, estimates and assumptions
Judgments
In the process of applying the Group's accounting policies,
management has made the following judgments, apart from those
involving estimations and assumptions, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
I. Mineral Resources and Reserves
Quantification of mineral resources requires a judgement on the
reasonable prospects for eventual economic extraction.
Quantification of ore reserves requires a judgement on whether
mineral resources are economically mineable. These judgements are
based on the assessment of mining, metallurgical, economic,
marketing, legal, environmental, social and governmental factors
involved, in accordance with the Australasian Code for Reporting
Exploration Results, Mineral Resources and Ore Reserves. 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 amortisation, rehabilitation provisions which are
calculated on a projected life of mine figures.
II. 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. Several of these factors are a source of estimation
uncertainty.
III. Inventory Valuations
Valuations of gold stockpiles, gold in circuit and gold within
the fine ore bin requires estimations of the amount contained in,
and the recovery rates from, the various work in progress gold
circuits. These estimations are based on analysis of samples and
prior experience. A judgement is also applied when the gold in
circuit will be recovered and what gold price should be applied in
calculating the net realisable value; these are both sources of
uncertainty.
IV. Income taxes
The Group is subject to income taxes in the United Kingdom, Fiji
and Brazil. Significant judgement is required in determining the
worldwide provision for income taxes. There are many transactions
and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Where the final
tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current
and deferred tax provisions in the period in which such
determination is made.
Estimates and Assumptions
The preparation of financial statements requires the application
of estimates and assumptions on future events, which affects assets
and liabilities at the reporting date and income and expenditure
for the period. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future
periods.
The key estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting period
are:
V. Share-based payment transactions
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
using the Black-Scholes model. The Black-Scholes model is
particularly sensitive to expected volatility. Therefore any change
in the methodology of the calculation of volatility will impact the
amount expensed as share based payments on the statement of
comprehensive income.
The value expensed in the statement of comprehensive income is
GBP185,000 (2012: GBP627,000).
VI. Intangible assets (see note 7)
Amortisation
Intangible assets (other than goodwill) are amortised over their
useful lives. Useful lives are based on management's estimates of
the period that the assets will generate revenue, which are
periodically reviewed for continued appropriateness. Due to the
long lives of assets, changes to the estimates used can result in
significant variances in the carrying value.
The Group assesses the impairment of intangible assets subject
to amortisation or depreciation whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Factors considered important that could trigger an
impairment review include the following:
- significant underperformance relative to historical or
projected future operating results;
- significant changes in the manner of the use of the acquired
assets or the strategy for the overall business; and
- significant negative industry or economic trends.
The complexity of the estimation process and issues related to
the assumptions, risks and uncertainties inherent in the
application of the Group's accounting estimates in relation to
intangible assets affect the amounts reported in the financial
statements, especially the estimates of the expected useful
economic lives and the carrying values of those assets. If business
conditions were different, or if different assumptions were used in
the application of this and other accounting estimates, it is
likely that materially different amounts could be reported in the
Group's financial statements. In particular it would affect, the
value of the intangible asset and rehabilitation provisions.
The carrying value at the reporting date of the intangible
assets is GBP32,758,000 (2012: GBP36,841,000).
VII. Mine Rehabilitation Provisions
The Mine Rehabilitation provision requires 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 in the relevant legal requirements, the emergence
of new restoration techniques and changes to the life of mine.
Changes to any of these costs will affect amounts in the financial
statements, such as the mine asset and the provision for mine
rehabilitation.
The carrying value at the reporting date of the mine
rehabilitation provision is GBP4,660,000 (2012: GBP3,247,000).
VIII. Allowance for doubtful debts
Each receivable balance is assessed to determine recoverability.
Provisions are made for those debtors where evidence indicates that
recoverability is doubtful. Amounts are written off when they are
deemed irrecoverable. Any changes to estimates made in relation to
debtors recoverability may result in materially different amounts
being reported by the Group's financial statements. In particular
any changes will affect trade and other receivable as well as the
statement of comprehensive income.
The carrying value at the reporting date of the provision for
doubtful debts is GBP520,000 (2012: GBP3,913,000).
(e) Revenue recognition
Revenue is recognised when persuasive evidence exists that all
of the following criteria are met:
-- the significant risks and rewards of ownership of the product
have been transferred to the buyer;
-- neither continuing managerial involvement to the degree
usually associated with ownership, nor effective control over the
goods sold has been retained;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
sale will flow to the Group; and
-- the costs incurred or to be incurred in respect of the sale can be measured reliably.
Gold doré sales
The transfer of risks and rewards for the sale of the gold doré
is assessed as taking place when the physical possession is passed
to the customer upon collection of the gold doré from the mining
premises. The customer does not have any right of return subsequent
to the physical transfer, and accordingly at this point revenue is
recognised.
Finance revenue
Interest revenue is recognised as interest accrues using the
effective interest rate method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
(f) Turnover and Segmental Analysis
The reportable segments identified make up all of the Group's
external revenue, which is derived primarily from the sale of gold.
The reportable segments are an aggregation of the operating
segments within the Group as prescribed by IFRS 8. The reportable
segments are based on the Group's management structures and the
consequent reporting to the Chief Operating Decision Maker, the
Board of Directors. Our sector results are attributable to
unallocated head office corporate costs, gold production &
exploration costs, and other costs. These reportable segments also
correspond to geographical locations such that each reportable
segment is in a separate geographic location, i.e.; unattributed
head office costs - UK, gold mining - Fiji, other activities -
Brazil.
Income and expenses included in profit or loss for the year are
allocated directly or indirectly to the reportable segments.
Expenses allocated as either directly or indirectly attributable
comprise: cost of sales, gold duty and administrative expenses.
Non-current segment assets comprise the non-current assets used
directly for segment operations, including intangible assets,
property, plant and equipment and mine properties and
development.
Current segment assets comprise the current assets used directly
for segment operations, including inventories, trade receivables,
other receivables and pre-payments.
Inter-company balances comprise transactions between operating
segments making up the reportable segments. These balances are
eliminated to arrive at the figures in the consolidated
accounts.
(g) The Company's investments in subsidiaries
In its separate financial statements the Company recognises its
investments in subsidiaries at cost, less any provision for
impairment. Differences arising from changes in fair values of
intercompany loans receivable at below market rates of interest are
treated as an increase in the investment in the subsidiary.
(h) Foreign currency
The consolidated financial statements are presented in Pounds
Sterling ("GBP"), which is the parent company's functional currency
and the Group's presentation currency. Each entity in the Group
determines its own functional currency and items included in the
financial statements of each entity are measured using that
functional currency. The assets and liabilities of these
subsidiaries are translated into the presentation currency of
Vatukoula Gold Mines plc. at the rate of exchange ruling at the
reporting date and their Statements of Comprehensive Income are
translated at the average exchange rate for the year. The exchange
differences arising on the translation are taken directly to a
separate component of equity.
All other differences arising on translation are included in the
profit or loss except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair
values are recognised directly in equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Exchange differences recognised in profit or loss of Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to the foreign
exchange reserve. On disposal of a foreign operation, the
cumulative exchange differences recognised in the foreign exchange
reserve relating to that operation up to the date of disposal are
transferred to the Statements of Comprehensive Income as part of
the profit or loss.
(i) Goodwill on acquisition
Goodwill arising on the acquisition of a subsidiary or jointly
controlled entity represents the excess of the cost of acquisition
over the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary or
jointly controlled entity recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
(j) Inventories
Ore stock, consisting of stocks on which further processing is
required to convert them to trading stocks, and gold doré is valued
at the lower of cost and net realisable value. Cost is calculated
using a weighted average cost model, where inventories are valued
at the weighted average cost of the closing inventory. Net
realisable value is estimated selling price less the estimated
costs necessary to make the sale.
Other inventories include:
(i) Stores, comprising plant spares and consumable stores are
valued on the basis of weighted average cost after providing for
obsolescence.
(ii) Work in progress is valued on the basis of first in first
out and includes direct costs, depreciation and amortisation.
(iii) Insurance spares are stated at the lower of cost and net
realisable value. Insurance spares are critical spare parts to
equipment, that although may not be required on a regular basis are
kept in inventory because, should a particular piece of equipment
fail it would materially adversely affect production.
Gold in circuit
Gold in circuit is valued at the lower of cost and net
realisable value. Cost comprises direct material, labour and
transportation expenditure incurred in getting inventories to their
existing location and condition, together with an appropriate
portion of fixed and variable overhead expenditure based on
weighted average costs incurred during the period in which such
inventories were produced. Net realisable value is the amount
anticipated to be realised from the sale of inventory in the normal
course of business less any anticipated costs to be incurred prior
to its sale.
(k) Intangible assets
Acquired intangible assets, which consist of mining rights and
intangible computer software, are valued at cost less accumulated
amortisation.
Amortisation for both types of intangibles is calculated using
the units of production method which is calculated over the life
span of the mine. As at 31 August 2013, the estimated remaining
life span of the mine is 7 years. This is the entire period over
which the mine is currently being amortised.
The Group applies the full cost method of accounting for
exploration and evaluation costs, having regard to the requirements
of IFRS 6 'Exploration for and Evaluation of Mineral Resources'.
All costs associated with mining development and investment are
capitalised on a project by project basis pending determination of
the feasibility of the project. Such expenditure comprises
appropriate technical and administrative expenses but not general
overheads.
Such exploration and evaluation costs are capitalised provided
that the Group's rights to tenure are current and one of the
following conditions is met:
(i) such costs are expected to be recouped through successful
development and exploitation of the area of interest or
alternatively by its sale; or
(ii) the activities have not reached a stage which permits a
reasonable assessment of whether or not economically recoverable
resources exist; or
(iii) active and significant operations in relation to the area are continuing.
When an area of interest is abandoned or the directors decide
that it is not commercial, any exploration and evaluation costs
previously capitalised in respect of that area are written off to
profit or loss. Amortisation does not take place until production
commences in these areas. Once production commences, amortisation
is calculated on the unit of production method, over the remaining
life of the mine.
Impairment assessments are carried out regularly by the
directors. Exploration and evaluation assets are assessed for
impairment when facts and circumstances suggest that the carrying
amount may exceed its recoverable amount. Such indicators include
the point at which a determination is made as to whether or not
commercial reserves exist.
The recoverability of capitalised mining costs and mining
interests is dependent upon the discovery of economically
recoverable reserves, the ability of the Company to obtain
necessary financing to complete the development of reserves and
future profitable production or proceeds from the disposition of
recoverable reserves.
The assets' residual value and useful lives are reviewed and
adjusted if appropriate, at each reporting date. An asset's
carrying value is written down immediately to its recoverable value
if the asset's carrying amount is greater than its listed
recoverable amount.
(l) Tangible assets
(i) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any accumulated impairment losses.
Cost is the fair value of consideration given to acquire the asset
at the time of its acquisition or construction and includes the
direct cost of bringing the asset to the location and condition
necessary for operation and the estimated future cost of closure
and rehabilitation of the facility. Depreciation is provided on all
tangible assets to write down the cost less estimated residual
value of each asset over its useful economic life on a units of
production method or straight line basis. The estimated useful
lives are as follows:
Freehold land Not depreciated
Plant and machinery Over 3 - 10 years
Mine Asset Life of mine basis
Motor vehicles Over 3 years
Fixtures, fittings and equipment Over 4 years
Work in progress Not depreciated
The depreciation charge for each period is recognised in the
Statement of Comprehensive Income.
Assets in the course of construction are capitalised in the Work
in Progress account. The cost comprises its purchase price and any
costs directly attributable to bringing it into working condition
for its intended use, at which point it is transferred to property,
plant and equipment and depreciation commences.
Subsequent expenditure relating to an item of property, plant
and equipment is capitalised when it is probable that future
economic benefits from the use of the asset will be increased. All
other subsequent expenditure is recognised as an expense in the
period in which it is incurred.
Repairs and maintenance which neither materially add to the
value of assets nor appreciably prolong their useful lives are
charged against income.
The gain or loss arising from the de-recognition of any items of
property, plant and equipment is included in the profit or loss
when the item is de-recognised. The gain or loss arising from the
de-recognition of an item of property, plant and equipment is
determined as the difference between the net disposal proceeds, if
any, and the carrying amount of the item. The carrying values of
property, plant and equipment are reviewed for impairment when
events or changes in circumstances indicate the carrying value may
not be recoverable.
(ii) Mine properties and development ("MPD")
This represents the accumulated exploration, evaluation,
development and acquisition expenditure in relation to areas of
interest in which economically recoverable reserves exist.
Development costs that can be capitalised fall into the
following categories:
-- Initial Capital Development
This includes, but is not restricted to the following:
o Shaft sinking
o Station (plant) development & underground workshops
o Pump station and dams
o Ore and waste pass systems
-- Primary Capital Development
This is the development carried out on each level in the
exploration and exploitation of a mining area or orebody. It
includes, but is not restricted to the following:
o Cross cuts, haulages and drives to the orebody
o Initial rises on the orebody to effect the first holdings to facilitate production
o Main airways
-- Secondary Capital Development
This is the development carried out within an area in which the
primary development has been completed and which is critical to the
continued operation of the mine or mining area. It includes, but is
not restricted to the following:
o Airways, crosscuts and drives
o Pump stations
(l) Tangible assets (continued)
The capitalised value of mine properties is depreciated on a
life of mine basis. The life of mine has been calculated on a units
of production method based on economically recoverable reserves and
resources. The depreciation for the period is calculated using the
following:
Delivered gold ounces during the
period X Net book value at the
---------------------------------
Total estimated delivered ounces beginning of the period
over the Life of Mine plus costs capitalised
during the period
The net carrying value of mine assets is reviewed regularly and,
to the extent to which this amount exceeds its recoverable amount
(based on the higher of estimated future net cash flows and the
mine's asset's current realisable value) that excess is fully
provided against in the financial year in which this is
determined.
(m) Provision for mine rehabilitation
A provision for rehabilitation is initially recognised at the
present value of expected future cash flows when there exists a
constructive obligation for the entity to undertake rehabilitation
at the mine site. When provisions for closure and rehabilitation
are initially recognised, the corresponding cost is capitalised as
an asset, representing part of the cost of acquiring the future
economic benefits of the operation.The capitalised cost of closure
and rehabilitation activities is recognised in property, plant and
equipment and depreciated accordingly. The increase in the
provision for rehabilitation relating to the unwinding of the
discount on the provision to the date of settlement of the
provision and the depreciation of the rehabilitation asset are
recorded within profit or loss.
(n) Impairment of intangible and tangible assets excluding goodwill
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of the asset's or
cash-generating unit's fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of
those from other assets or groups of assets and the asset's value
in use cannot be estimated to be close to its fair value. In such
cases the asset is tested for impairment as part of the
cash-generating unit to which it belongs. When the carrying amount
of an asset or cash-generating unit exceeds its recoverable amount,
the asset or cash-generating unit is considered impaired and is
written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risk specific to the asset. Impairment losses of continuing
operations are recognised in those expense categories consistent
with the function of the impaired asset unless the asset is carried
at a revalued amount (in which case the impairment is treated as a
revaluation decrease).
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated, a previously recognised
impairment loss is reversed only if there has been a change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such
reversal is recognised in profit or loss unless the asset is
carried at a revalued amount, in which case the reversal is treated
as a revaluation increase. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset's
revised carrying amount, less any residual value, on a systematic
basis over its remaining useful life.
(o) Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
instruments and on a trade date basis. A financial asset is
derecognised when the Group's contractual rights to future cash
flows from the financial asset expire or when the Group transfers
the contractual rights to future cash flows to a third party. A
financial liability is derecognised only when the liability is
extinguished.
a. Trade and other receivables and other assets
Trade and other receivables and other assets are measured at
initial recognition at fair value, and are subsequently measured at
amortised cost using the effective interest rate method.
Appropriate allowances for estimated irrecoverable amounts are
recognised in the statement of comprehensive income when there is
objective evidence that the asset is impaired.
b. Cash and cash equivalents
For purposes of the consolidated statement of financial position
and consolidated statement of cash flows, the Group considers all
highly liquid investments which are readily convertible into known
amounts of cash and have a maturity of three months or less when
acquired to be cash equivalents. Cash and cash equivalents comprise
cash at bank and in hand, and short term deposits with an original
maturity of three months or less, all of which are available for
use by the Group unless otherwise stated.
c. Investments
Investments included as financial assets are valued at fair
value and are held as available for sale. When available for sale
assets are considered to be impaired, cumulative gains or losses
previously recognised in equity are reclassified to the profit or
loss in the period.
d. Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities. The Group's financial liabilities include trade
and other payables, bank loans, other borrowings, convertible loans
and obligations under finance leases. All financial liabilities,
are recognised initially at their fair value plus transaction costs
that are directly attributable to the acquisition or issue of the
financial liability and subsequently measured at amortised cost,
using the effective interest method, unless the effect of
discounting would be insignificant, in which case they are stated
at cost.
e. Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method.
f. Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis to the
Statement of Comprehensive Income using the effective interest
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
g. Trade payables, provisions and other payables
Trade payables are not interest-bearing and are stated at cost.
Other payables which are interest-bearing are measured at fair
value. Provisions are recognised when the Group has a present legal
or constructive obligation as a result of a past event, it is
probable that an outflow of economic benefits will be required to
settle the obligations, and a reliable estimate of the amount can
be made. Provisions are measured at fair value. Provision has been
made in the financial statements for benefits accruing in respect
of sick leave, annual leave, and long service leave.
h. Compound financial instruments
Compound financial instruments issued by the Group comprise
convertible loan notes that can be converted to share capital at
the option of the holder, and the number of shares to be issued
does not vary with changes in their fair value.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that
does not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
financial instrument is measured at amortised cost using the
effective interest method. The equity component of a compound
financial instrument is not re-measured subsequent to initial
recognition except on conversion or expiry.
(p) Financing costs and interest income
Financing costs comprise interest payable on borrowings and
finance lease payments and interest income which is calculated
using the effective interest rate method.
(q) Impairment of financial assets
At each reporting date, the Group assesses whether there is
objective evidence that financial assets, other than those at fair
value through profit or loss, are impaired. The impairment loss of
financial assets carried at amortised cost is measured as the
difference between the assets' carrying amounts and the present
value of estimated future cash flows discounted at the financial
asset's original effective interest rates.
(r) Share Capital
Ordinary shares are recorded at nominal value and proceeds
received in excess of nominal value of shares issued, if any, are
accounted for as share premium. Both ordinary shares and share
premium are classified as equity. Costs incurred directly relating
to the issue of shares are accounted for as a deduction from share
premium, otherwise they are charged to the Statement of
Comprehensive Income.
(s) Taxation
Tax on profit or loss for the period comprises current and
deferred tax. Tax is recognised in the Statement of Comprehensive
Income except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
(t) Share-based payments
The Company operates a share option scheme for granting share
options, for the purpose of providing incentives and rewards to
eligible employees of the Group. The cost of share options granted
is measured by reference to the fair value at the date at which
they are granted.
Non-market performance and service conditions are included in
the assumptions about the number of options expected to vest. The
total expense is recognised over the vesting period, which is the
period over which all the specified vesting conditions are to be
satisfied.
At the end of each reporting period, the Group revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to the original estimate, if any, in the statement of
comprehensive income with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares.
The proceeds received net of any directly attributable transactions
costs are credited to share capital (nominal value) and share
premium.
(u) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that an outflow of economic resources
will be required or the amount of obligation cannot be measured
reliably.
A contingent liability is not recognised but is disclosed in the
notes to the accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision.
A contingent asset is a possible asset that arises from past
events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain events not wholly within
the control of the Group.
Contingent assets are not recognised but are disclosed in the
notes to the accounts when an inflow of economic benefits is
probable. When an inflow is virtually certain, an asset is
recognised.
(v) Leased assets
Operating lease: Operating lease payments are recognised as an
operating expense in profit or loss on a straight-line basis over
the lease term.
Finance lease: Finance leases, which transfer to the Group
substantially all the risks and benefits incidental to ownership of
the leased item, are capitalised at the commencement of the lease
at the fair value of the leased property or, if lower, at the
present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised
in finance costs in profit or loss.
(w) Employee benefits
a. Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed in profit or loss as the
related service is provided.
b. Long-term employee benefits
Obligations in respect of long-term employee benefits such as
long service leave is the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present
value.
c. Termination benefits
Termination benefits are recognised as an expense when the Group
is demonstrably committed, without realistic probability of
withdrawal, to a formal detailed plan to either terminate
employment before the normal retirement date, or to provide
termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary
redundancies are recognised as an expense if the Company has made
an offer encouraging voluntary redundancy, it is probable that the
offer will be accepted, and the number of acceptances can be
measured reliably. Benefits falling due in more than 12 months of
the reporting date are discounted to their present value.
4. Turnover and Segmental Analysis
All turnover in the Group in the current and prior year is
derived from the sales to one customer, which is included in the
Gold mining segment. Other activities relate to a restoration
obligation in Brazil.
Unattributed
2013 Head Office Gold Other
Costs Mining Activity Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------- --------- --------- ---------
Turnover - 39,080 - 39,080
------------------------------- ------------- --------- --------- ---------
Mining - (23,512) - (23,512)
Processing - (9,081) - (9,081)
Gold duty - (1,150) - (1,150)
Overheads - (6,571) - (6,571)
------------------------------- ------------- --------- --------- ---------
Cost of sales - (40,314) - (40,314)
------------------------------- ------------- --------- --------- ---------
Gross Loss - (1,234) - (1,234)
------------------------------- ------------- --------- --------- ---------
Administrative expenses (1,664) (525) (152) (2,341)
Foreign exchange gains - (1,707) - (1,707)
Depreciation and amortisation (1,590) (5,721) (17) (7,328)
------------------------------- ------------- --------- --------- ---------
Underlying operating loss (3,254) (9,187) (169) (12,610)
------------------------------- ------------- --------- --------- ---------
Inventory obsolescence - 18 - 18
Gain on disposal of assets - 32 32
Impairment charge - (3,264) - (3,264)
Provision for doubtful
debt - (296) - (296)
Share based payments (28) (157) - (185)
------------------------------- ------------- --------- --------- ---------
Operating loss (3,282) (12,854) (169) (16,305)
------------------------------- ------------- --------- --------- ---------
Interest receivable and
other income 3 5 - 8
Interest payable and similar
charges (48) (508) - (556)
------------------------------- ------------- --------- --------- ---------
Net loss before taxation (3,327) (13,357) (169) (16,853)
------------------------------- ------------- --------- --------- ---------
Taxation 1,189 - - 1,189
------------------------------- ------------- --------- --------- ---------
Loss for the period (2,138) (13,357) (169) (15,664)
------------------------------- ------------- --------- --------- ---------
Other Segment Items
Additions to intangible
assets - 1,085 - 1,085
Additions to property,
plant, and equipment - 2,216 26 2,242
Additions to mine properties
and development - 10,624 - 10,624
------------------------------- ------------- --------- --------- ---------
Current assets 142 9,964 77 10,183
Non currents assets 27,848 48,258 169 76,275
------------------------------- ------------- --------- --------- ---------
Current liabilities (813) (10,383) (5) (11,201)
Non current liabilities (5,593) (4,742) - (10,335)
------------------------------- ------------- --------- --------- ---------
Unattributed
2012 Head Office Gold Other
Costs Mining Activity Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------- --------- --------- ---------
Turnover - 54,925 - 54,925
------------------------------- ------------- --------- --------- ---------
Mining - (35,686) - (35,686)
Processing - (10,281) - (10,281)
Gold duty - (1,660) - (1,660)
Overheads - (5,917) - (5,917)
------------------------------- ------------- --------- --------- ---------
Cost of sales - (53,544) - (53,544)
------------------------------- ------------- --------- --------- ---------
Gross profit - 1,381 - 1,381
------------------------------- ------------- --------- --------- ---------
Administrative expenses (1,769) (829) (164) (2,762)
Foreign exchange gains - 1,334 - 1,334
Depreciation and amortisation
expense (1,971) (4,560) (20) (6,551)
------------------------------- ------------- --------- --------- ---------
Underlying operating loss (3,740) (2,674) (184) (6,598)
------------------------------- ------------- --------- --------- ---------
Inventory obsolescence
write back / (provision) - 47 - 47
Gain on disposal of assets - 27 27
Rehabilitation charge - 45 - 45
Provision for doubtful
debt write back - (993) - (993)
Share based payments expense (360) (267) - (627)
------------------------------- ------------- --------- --------- ---------
Operating loss (4,100) (3,815) (184) (8,099)
------------------------------- ------------- --------- --------- ---------
Interest receivable and
other income 53 12 - 65
Interest payable and similar
charges (51) (54) (6) (111)
------------------------------- ------------- --------- --------- ---------
Net loss before taxation (4,098) (3,857) (190) (8,145)
------------------------------- ------------- --------- --------- ---------
Taxation 1,075 - - 1,075
------------------------------- ------------- --------- --------- ---------
Loss for the period (3,023) (3,857) (190) (7,070)
------------------------------- ------------- --------- --------- ---------
Other Segment Items
Additions to intangible
assets - 4,164 - 4,164
Additions to property,
plant, and equipment - 7,245 - 7,245
Additions to mine properties
and development - 4,952 - 4,952
------------------------------- ------------- --------- --------- ---------
Current assets 502 15,856 233 16,591
Non currents assets 29,437 44,447 185 74,069
------------------------------- ------------- --------- --------- ---------
Current liabilities (192) (12,114) (9) (12,315)
Non current liabilities (7,074) (3,336) - (10,410)
------------------------------- ------------- --------- --------- ---------
5. Taxation
2013 2012
GBP'000 GBP'000
------------------------------------ --------- --------
Current taxation - -
Deferred taxation - effect of
change in tax rate (871) (622)
Deferred taxation - current year (318) (453)
------------------------------------ --------- --------
(1,189) (1,075)
------------------------------------ --------- --------
Factors affecting tax charge:
Loss before tax (16,853) (8,145)
Tax at 23.58% (2012: 25.17%) (3,974) (2,050)
Effects of:
- Non deductible expenses 226 595
- Tax losses for which no deferred
income tax was recognised 3,548 556
- Rate adjustment (871) (1,691)
- Tax effect of income not subject
to income Tax (118) 1,515
------------------------------------ --------- --------
(1,189) (1,075)
------------------------------------ --------- --------
The deferred taxation credit arises on the release of the
deferred tax liability.
The Finance Act 2013, which was substantively enacted on 2 July
2013, has reduced the main corporation tax rate to 23% from 1 April
2013, 21% from 1 April 2014 and 20% from 1 April 2015. This
reduction has been taken into account when calculating deferred tax
assets and liabilities. The changes are not expected to have a
material cash impact on the company.
The Group has estimated tax benefits in respect of tax losses of
GBP2,953,000 (2012: GBP1,704,000) of which GBP2,162,000 will fully
expire within 4 years and other net deferred tax benefits in
respect of temporary differences of GBP1,159,000 (2012: 1,764,000)
which have not been recognised as a deferred tax asset.
6. Loss per share
a. Basic
The calculation of consolidated loss per share is based on the
following loss and number of shares:
2013 2012
GBP'000 GBP'000
---------------------------------------- ------------ -----------
Loss after tax (15,664) (7,070)
---------------------------------------- ------------ -----------
2013 2012
Number Number
---------------------------------------- ------------ -----------
Basic weighted average ordinary shares
in issue during the period 122,958,339 90,509,159
---------------------------------------- ------------ -----------
2013 2012
Pence Pence
---------------------------------------- ------------ -----------
Basic loss per share (12.74) (7.81)
---------------------------------------- ------------ -----------
Basic loss per share is calculated by dividing the loss for the
year from continuing operations of the Group by the weighted
average number of ordinary shares in issue during the year.
Outstanding share options could potentially dilute basic
earnings per share by 8,407,112 shares in future periods, but were
not included in the calculation of basic earnings per share because
they are antidilutive for the year ended 31 August 2013.
Subsequent to year end the Group issued a total of 188,897,000
ordinary shares (note 13). These share issues would have
significantly changed the number of ordinary shares outstanding as
at 31 August 2013, if the share issues had occurred before 31
August 2013.
b. Diluted
All potential shares were anti-dilutive as the Group was in a
loss making position. As a result diluted loss per share for the
years ended 31 August 2013 and 31 August 2012 is disclosed as the
same value as basic loss per share. The diluted weighted average
ordinary shares in issue during the period were 122,958,339 (2012:
90,509,159).
Subsequent to the year end, the company issued an additional
20,000,000 new ordinary shares in a private placing.
7. Intangible assets
Mining Computer Exploration
Rights Software expenditure Total
Group GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- ------------ --------
Cost
As at 1 September 2012 38,721 551 6,933 46,205
Additions - - 1,085 1,085
Exchange difference - (29) (410) (439)
---------------------------------- -------- --------- ------------ --------
As at 31 August 2013 38,721 522 7,608 46,851
---------------------------------- -------- --------- ------------ --------
Amortisation
As at 1 September 2012 9,284 80 - 9,364
Current charge 1,590 30 - 1,620
Impairment charge - - 3,264 3,264
Exchange difference - (6) (149) (155)
---------------------------------- -------- --------- ------------ --------
As at 31 August 2013 10,874 104 3,115 14,093
---------------------------------- -------- --------- ------------ --------
Carrying value as at 31 August
2013 27,847 418 4,493 32,758
---------------------------------- -------- --------- ------------ --------
Mining Computer Exploration
Rights Software expenditure Total
Group GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- ------------ --------
Cost
As at 1 September 2011 38,414 243 2,769 41,426
Additions - - 4,164 4,164
Disposals - - (111) (111)
Transferred from tangible assets 307 299 - 606
Exchange difference - 9 111 120
---------------------------------- -------- --------- ------------ --------
As at 31 August 2012 38,721 551 6,933 46,205
---------------------------------- -------- --------- ------------ --------
Amortisation
As at 1 September 2011 7,313 56 - 7,369
Current charge 1,971 23 - 1,994
Exchange difference - 1 - 1
---------------------------------- -------- --------- ------------ --------
As at 31 August 2012 9,284 80 - 9,364
---------------------------------- -------- --------- ------------ --------
Carrying value as at 31 August
2012 29,437 471 6,933 36,841
---------------------------------- -------- --------- ------------ --------
The Mining rights represent the mining rights acquired on the
acquisition of the Vatukoula Gold Mine in April 2008. The
amortisation of the Mining Rights is calculated on a unit of
production basis, based on forecast production and the total
Mineral Reserves. At the current production, reserves and gold
price, the economic useful life is expected to be 7 years. This
rate will vary from year to year and is dependent on the mineral
reserves which are reassessed every year. Amortisation is included
in depreciation and amortisation in the Statement of Comprehensive
Income.
The directors believe that there have been no indicators of
impairment for the mining rights for the year ended 31 August 2013
(and 31 August 2012).
A deferred tax liability of GBP10,757,000 arose in 2008 in
respect of the intangible assets recognised on the acquisition in
the prior periods. The deferred tax liability is in respect of
future taxable profits potentially generated from the exploration
of the mining rights.
The Exploration expenditure is an internally generated
intangible asset, and represents costs associated with the
exploration and evaluation of mineral deposits on our mining and
special prospecting licenses and are capitalised in accordance with
IFRS 6. At the current production, reserves and gold price, the
economic useful life is expected to be 7 years. This rate will vary
from year to year and is dependent on the mineral reserves which
are reassessed every year. Amortisation is included in depreciation
and amortisation in the Statement of Comprehensive Income.
Exploration costs to the amount GBP3,264,000 (2012: Nil) relate
to specific areas which have not led to the discovery of
commercially viable quantities of mineral resources, and the Group
has decided to discontinue such activities in those specific areas.
These costs have been impaired. The assets impacted by the
impairment are allocated to the Gold Mining segment (note 4).
The Computer Software expenditure represents the costs
associated with the purchase of specialised mining and inventory
software.
8. Property, plant and equipment
Freehold Fixtures
and leasehold Work Plant Motor Mine fittings
land in progress and machinery vehicles assets and equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Cost
As at 1 September
2012 1,024 2,572 33,466 341 1,998 145 39,546
Additions - 2,216 - 26 - - 2,242
Transferred on
completion - (3,109) 3,109 - - - -
Disposals - - (169) - - - (169)
Changes in
estimates - - - - 1,439 - 1,493
Exchange
difference (49) (88) (2,737) (20) (169) (2) (3,065)
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
As at 31 August
2013 975 1,591 33,669 347 3,268 143 39,993
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Accumulated
depreciation
As at 1 September
2012 13 - 13,021 238 463 98 13,833
Charge for the
period 17 - 4,436 3 66 1 4,523
Disposals - - (169) - - - (169)
Exchange
difference (1) - (1,759) (9) (27) (2) (1,798)
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
As at 31 August
2013 29 - 15,529 232 502 97 16,389
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Net book value
At 31 August 2013 946 1,591 18,140 115 2,766 46 23,604
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
At 31 August 2012 1,011 2,572 20,445 103 1,535 47 25,713
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Freehold Fixtures
and leasehold Work Plant Motor Mine fittings
land in progress and machinery vehicles assets and equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Cost
As at 1 September
2011 1,165 201 28,087 370 2,869 148 32,840
Additions - 7,245 - - - - 7,245
Transferred on
completion 90 (4,607) 4,517 - - - -
Disposals - - (122) - - - (122)
Changes in
estimates - - - - (932) - (932)
Transferred to
intangible (250) (299) - - - - (549)
Exchange
difference 19 32 984 (29) 61 (3) 1,064
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
As at 31 August
2012 1,024 2,572 33,466 341 1,998 145 39,546
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Accumulated
depreciation
As at 1 September
2011 - - 8,643 251 315 98 9,307
Charge for the
period 13 - 3,835 2 139 2 3,991
Disposals - - (27) - - - (27)
Impairment - - - - - - -
Exchange
difference - - 570 (15) 9 (2) 562
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
As at 31 August
2012 13 - 13,021 238 463 98 13,833
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
Net book value
At 31 August 2012 1,011 2,572 20,445 103 1,535 47 25,713
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
At 31 August 2011 1,165 201 19,444 119 2,554 50 23,533
------------------ --------------- ------------- --------------- ---------- --------- --------------- ---------
9. Mine properties and development
2013 2012
GBP'000 GBP'000
----------------------------- -------- --------
Cost
Balance as at 1 September 13,865 8,695
Additions 10,624 4,952
Foreign exchange difference (1,217) 218
----------------------------- -------- --------
Balance at end of period 23,272 13,865
----------------------------- -------- --------
Depreciation
Balance as at 1 September 2,350 1,740
Current charge 1,185 566
Foreign exchange difference (176) 44
----------------------------- -------- --------
Balance at end of period 3,359 2,350
----------------------------- -------- --------
Carrying value
Balance at end of period 19,913 11,515
----------------------------- -------- --------
10. Share capital
(a) Share capital
Group and Company
------------------------------------------ --------------------
(a) Share Capital
2013 2012
GBP'000 GBP'000
------------------------------------------ --------- ---------
Allotted, issued and fully paid
155,358,339 ordinary shares of 5p each
(31 Aug 2012: 96,558,339 ordinary shares
of 5p each) 7,768 4,828
------------------------------------------ --------- ---------
(b) Share issues during the year
Value
Issue Share of shares
value Par value premium Share Share issued
per Share per Share per Share Shares Capital premium for cash
Date GBP GBP GBP GBP GBP GBP
--------------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- -----------
Shares issued
for cash
Issue for
cash 12/11/2012 0.33 0.05 0.28 20,000,000 1,000,000 5,600,000 6,600,000
Issue for
cash 08/04/2013 0.15 0.05 0.10 8,800,000 440,000 880,000 1,320,000
Issue for
cash 20/05/2013 0.15 0.05 0.10 15,000,000 750,000 1,500,000 2,250,000
Issue for
cash 27/06/2013 0.15 0.05 0.10 15,000,000 750,000 1,500,000 2,250,000
58,800,000 2,940,000 9,480,000 12,420,000
---------------------------- ----------- ----------- ----------- ----------- ---------- ---------- -----------
11. Provisions
Group
------------------------------------ ------------ -------------------- -------------------
2013 2012
GBP'000 GBP'000
------------------------------------ ------------ -------------------- --------- --------
Current
Provision for annual leave 260 272
Provision for workers compensation 102 137
Other employee related provisions 899 664
------------------------------------ ------------ -------------------- --------- --------
1,261 1,073
------------------------------------ ------------ -------------------- --------- --------
Non current
Provision for mine rehabilitation 4,660 3,247
Provision for Long Service Leave 91 73
------------------------------------ ------------ -------------------- --------- --------
4,751 3,320
------------------------------------ ------------ -------------------- --------- --------
6,012 4,393
------------------------------------ ------------ -------------------- --------- --------
Employee Long
related Service
provisions Mine rehabilitation Leave Total
Group GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------ -------------------- --------- --------
Balance at 1 September 2012 1,073 3,247 73 4,393
Additional provisions made during
the period 938 - 49 987
Reversed during the period (682) - (26) (708)
Unwinding of discount - 219 - 219
Changes in estimates - 1,439 - 1,439
Exchange difference (68) (245) (5) (318)
------------------------------------ ------------ -------------------- --------- --------
Balance at 31 August 2013 1,261 4,660 91 6,012
------------------------------------ ------------ -------------------- --------- --------
Employee related provisions include a provision for unpaid
annual leave based on Fijian labour legislation, and a provision
for legally required workers compensation relating to work
injuries. Based on current estimates, these are expected to realise
in approximately 10 years.
The provision for mine rehabilitation represents the current
mine closure plan. The present value of the estimated cost is
capitalised as a mine asset, as part of property, plant and
equipment. Over time the discounted liability will be increased for
the change in the present value based on the discount rates that
reflect the current market assessments and the risks specific to
the liability. The capitalised mine asset is expected to be
expensed over the life of mine which is currently 7 years (2012: 7
years). The life of mine is dependent on the economic viability of
extracting the contained Mineral Resources and may vary on a year
by year basis dependant on the mining / processing costs and the
price of gold. In addition the quantum of the provision may vary on
a year by year basis dependant on the costs associated with
executing the Mine Rehabilitation Plan.
Long service leave is a contractual obligation for additional
leave days earned by employees with 10 years or more service. Based
on current estimates, these are expected to realise by the end of
the life of mine.
12. Vatukoula Social Assistance Trust Fund
Group
2013 2012
GBP'000 GBP'000
----------------------------------- -------- --------
Current
Vatukoula Social Assistance Trust
Fund 1,127 1,189
----------------------------------- -------- --------
1,127 1,189
----------------------------------- -------- --------
Non Current:
Vatukoula Social Assistance Trust
Fund 15 15
----------------------------------- -------- --------
15 15
----------------------------------- -------- --------
The Vatukoula Social Assistance Trust Fund ("VSATF") was
established for the purpose of social assistance for the employees
made redundant by the previous mine operator and the local mining
community in accordance with the Trust Deed dated 18 December
2009.
The VSATF is part of the Vatukoula Trust Deed, a binding
contract between the Company's wholly owned subsidiary and the
Fijian Ministry of Lands and Mineral Resources. A total of
F$6million is payable of which the Group paid F$1.5 million on 10
March 2010 and F$1.125 million on 31 December 2011. The remaining
F$3.375 million has been allocated to Current and Non Current
Liabilities as follows:
F$'000 GBP'000
-------------------------------------- ------- --------
Current:
Redundancy payment due within 1 year 3,325 1,127
-------------------------------------- ------- --------
3,325 1,127
-------------------------------------- ------- --------
Non Current:
Instalments according to Trust Deed
due more than 1 year 50 17
-------------------------------------- ------- --------
50 17
-------------------------------------- ------- --------
3,375 1,144
-------------------------------------- ------- --------
13. Post balance sheet events
On 21 October 2013, the Company completed the first tranche of a
placing with Zhongrun whereby Zhongrun has subscribed for
90,000,000 new ordinary shares in the Company at a price of GBP0.69
per share, to raise GBP6.2 million.
On 5 November 2013, the Company completed the second tranche of
the placing with Zhongrun whereby Zhongrun has subscribed for
98,897,000 new ordinary shares in the Company at a price of GBP0.69
per share, to raise GBP6.8 million. As a result of this placing,
Zhongrun's total holding increased to approximately 66% of the
enlarged share capital of the Company.
In January 2014 the company agreed with Zhongrun to extend the
time for payment by Zhongrun of the US20million loan note to 28
February 2014. Zhongrun formally acknowledged and represented that
it is willing and will be able to make full payment of the
USD20million loan note.
(1) Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves, The JORC Code 2004 Edition,
Effective December 2004, Prepared by the Joint Ore Reserves
Committee of the Australasian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and Minerals Council of
Australia (JORC).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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