TIDMTSG
RNS Number : 1532B
Trans-Siberian Gold PLC
05 June 2019
05 June 2019
Trans-Siberian Gold plc
("TSG", the "Company", or the "Group")
Final Results
Trans-Siberian Gold plc (TSG.LN), a low cost, high grade gold
producer in Russia, is pleased to announce its audited financial
results for the year ended 31 December 2018.
Financial Highlights:
-- Record-breaking revenues amounting to $59.8million, a 38% increase YoY (2017: $43.4million)
-- 72% increase YoY in EBITDA at $23.9million (2017: $13.9million)
-- Profit Before Tax of $17million (2017: $3.0million)
-- Proposed final dividend of $0.009cents per share (2017:
$0.021) amounting to $1million in aggregate
-- Total dividend pay-out for the year of $7.7million (subject
to final dividend approval at the AGM) (2017: $6.3million)
Operational Highlights:
-- Record annual production of gold in dore at 42,128oz. a 15% increase YoY (2017: 36,714 oz.)
-- 36% increase YoY in total gold production at refinery at 46,053 oz. (2017: 33,872 oz.)
-- Cost of sales per oz. of gold at $788 (2017: $885)
-- Cash cost per oz. gold sold at $516 (2017: $588)
-- All-in sustaining costs per oz. gold $1,049 (2017: $1,341)
Charles Ryan, Non-Executive Chairman of TSG, commented:
"I am delighted to report that 2018 was a year of
record-breaking operational and financial performance, with TSG
delivering double-digit growth in both gold production and EBITDA.
Our total gold production exceeded 42koz, outperforming our
production target for the year. We achieved this while further
optimizing our operational efficiency and significantly reducing
costs.
In 2018, we reaffirmed our position as a high grade, low cost
producer with a strong track record as one of the most attractive
yielding mining stocks on the London Stock Exchange."
The Company confirms that copies of its Annual Report and
Accounts have been sent to shareholders.
A copy of the Company's Annual Report and Accounts will be
available on the Company's website: www.trans-siberiangold.com
S
Contacts:
TSG
Stewart Dickson +44 (0) 7799 694195
Arden Partners plc
Paul Shackleton (Corporate Finance)
Tim Dainton / Fraser Marshall (Equity Sales) +44 (0) 207 894 7000
Hudson Sandler (Financial PR)
Charlie Jack / Katerina Parker +44 (0) 207 796 4133
About TSG
TSG is focused on low cost, high grade mining operations and
stable gold production from its 100% owned Asacha Gold Mine in Far
East Russia. The Group also holds the licence for the development
and exploration of the Rodnikova deposit, one of the largest gold
fields in South Kamchatka.
Additional information is available from the Company's website:
www.trans-siberiangold.com
Market Abuse Regulations
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the
publication of this announcement via Regulatory Information Service
('RIS'), this inside information is now considered to be in the
public domain.
Disclaimer
This announcement contains "forward-looking statements" - that
is, statements related to future, not past, events. In this
context, forward-looking statements often address our expected
future business and financial performance, and often contain words
such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "should" or "will." Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
For us, uncertainties arise from the behaviour of financial and
metals markets, fluctuations in interest and/or exchange rates and
metal prices; and from numerous other matters of national, regional
and global scale, including those of a political, economic,
business, competitive or regulatory nature. These uncertainties may
cause our actual future results to be materially different that
those expressed in our forward-looking statements.
Chairman's Statement
I am pleased to present the Company's annual report and accounts
for the year ended 31 December 2018, a record breaking year.
In the past year TSG has delivered a record financial and
operational performance.
One of the Board's basic responsibilities is to set our strategy
and monitor progress towards meeting our objectives, so that
we:
-- Mine our high grade Asacha deposit effectively and efficiently;
-- Produce low-cost gold sustainably;
-- Operate responsibly and collaboratively in our host environment; and
-- Create value for our shareholders.
Your Board of Directors is focused on ensuring TSG maintains its
growth trajectory.
Executing our strategy
In 2018, we made significant progress across our business. Our
financial performance reflects the success of the ongoing
improvement measures that have been implemented by our operational
team in Kamchatka. Improved cost discipline and technical
excellence are the areas of focus for ensuring the delivery of our
key strategic pillar; the enhancement of existing operations. Post
period, we have acquired the Rodnikova licence in line with
delivering another of our strategic priorities; utilising our
platform for future growth opportunities.
Operations
In 2018, we achieved an all-time record annual gold production
of 42,128 oz. of gold dore (2017: 36,714 oz.) at a cash cost of
$516/oz (2017: $588/oz.). The average realised gold price for the
year stood at $1,265/oz, compared to $1,260/oz. in 2017. Production
of silver dore increased by 84% to 105,069 oz. (2017: 57,072
oz.).
2018 saw a return to a higher average grade of 7.4 g/t, an 12%
increase from 6.6 g/t in 2017.
The Asacha plant has continued to perform well above its
designed annual capacity of 150,000 tonnes and achieved 94.9%
average gold recovery (2017: 94.4%). Ore extracted and processed in
2018 amounted to 173,597 and 189,695 tonnes respectively.
Please see our Operating and Financial Review on page 11 for
more details.
Safety
The safety of all our employees remains an important priority
for the Board. All efforts continue to be made to ensure that the
highest standards of safety remain in place at the Company's
operational location in Kamchatka.
I am saddened to report that during 2018 there was a fatal
accident in the underground mine. We have conducted a full
investigation into the incident. Any fatality is one too many. We
strive to achieve a zero-fatality rate and continue to invest in
employee training and development in our efforts to improve the
standards of health and safety across our operations.
Licencing
2018 saw the successful extension of the mining licence at the
Asacha Gold mine; in June 2018, the Russian State Subsoil Agency
("Rosnedra") approved TSG's application to extend the existing
licence for a further six-year period, until 31 December 2024. Post
period, we have acquired the highly prospective Rodnikova licence
located approximately 50km from the Asacha Gold Mine.
Financial Performance
2018 was a successful year for the Group, cementing our position
as a high grade, low cost producer. We made two dividend payments
in respect of 2018 amounting to approximately $6.7 million in
aggregate, and bringing our total dividends paid to shareholders to
date to approximately $18.5m. Consequently, TSG has established
itself as one of the highest yielding mining stocks on the London
Stock Exchange. We remain committed to an attractive and stable
dividend pay-out.
Gold industry trends
Average market gold price in 2018 was $1,268.49/oz., marginally
above the 2017 average of $1,257.12. Gold prices started off
strongly at $1,304.50/oz. but fell in the second half of the year.
Over the course of the year, gold struggled due to rising US
interest rates and a strong US Dollar.
However, both private and institutional investors returned to
gold in 2018 and, over the course of the year, the World Gold
Council reported that central banks purchased the highest amount of
the metal for nearly 50 years. According to the 'Gold Demand
Trends' report published by the World Gold Council, total gold
demand grew by 4% in 2018, to 4,345.1 tonnes, from 4,159 tonnes in
2017. Of this, 651.5 tonnes of gold was purchased by Central Banks
state gold reserves of which Russia was the largest purchaser.
We remain confident in the gold mining sector and in its
long-term attractiveness to investors.
Russia
In Russia, 2018 saw changing geopolitical tensions with the
impact of sanctions issued by the US Office of Foreign Assets
Control in April, and the threat of further sanctions from
Washington which was raised several times throughout the year. The
Company is in no way exposed to these sanctions.
The Russian rouble fell sharply in April, and again in early
August, when further sanctions were announced. Over the course of
2018, the USD-RUB exchange rate fell by 21%. This has had a
favourable effect on the costof our operations.
However, despite these factors, Russia's economic growth reached
a six-year high in 2018; the country's gross domestic product
expanded by 2.3 per cent in 2018, beating forecasts by up to 0.8
per cent and is forecast to grow by a further 1.3 per cent in 2019.
In part this is attributable to rebounding commodity prices,
especially oil.
We were pleased to join the Union of Gold Producers of Russia
("UGPR") in November 2018. Members of the UGPR account for
approximately 70% of gold mined within Russia, and we look forward
to exchanging experiences and sharing best practices with our
peers.
We continue to see Russia as an attractive location to conduct
our mining operations. We have a long-established presence and deep
understanding of the country. The recent acquisition of the
Rodnikova licence is an illustration of our commitment to Russia
and Kamchatka in particular.
Governance
The delivery of our strategy is supported by sound and practical
corporate governance.
Our senior leadership team was significantly restructured in
2018. Former Chief Financial Officer Alexander Dorogov was
appointed as Chief Executive Officer, following the retirement of
Dmitry Khilov, in line with the Company's Board succession plan.
Under Dmitry's tenure, the Company saw significant transformation,
including bringing the Asacha Gold Mine into production in 2011. On
behalf of the Board, I would like to thank him sincerely for his
commitment and contribution to TSG.
In 2018 we appointed Eugene Antonov as Chief Operating Officer.
His appointment, together with the recruitment of senior staff in
Kamchatka with substantial industry expertise, has strengthened our
management team significantly, positioning us well to drive future
operational efficiencies and improvements. I am pleased to report
that he has recenty joined the Board.
Having re-structured the Board, we are privileged to have a
stable, skilled and experienced Board. This facilitates a solid
basis for long-term strategic thinking and active oversight of the
business. I thank all Board members for their continuing commitment
and contribution.
I am also grateful to those Directors who are members of the
Committees of the Board, which are set out later in this report.
The diligent way in which they carry out their Committee duties
enables us to have confidence that the appropriate controls and
guardianship are fit for purpose. You can read more about this in
the Corporate Governance Review.
Outlook and priorities
Looking forward into 2019 and the coming years, our strategy is
for TSG to become a premier mid-tier gold producer and developer, a
goal we aim to achieve through enhancing our existing operations,
utilising our stable platform for future growth opportunities and
pursuing selective accretive M&A opportunities.
We have made a strong start to 2019 and notably expanded our
asset portfolio through the acquisition of Rodnikova.
We have a strong investment case and believe our commitment to
an attractive and stable dividend pay-out should increase interest
in the Company's shares and the Company more widely.
We are committed to acting in a responsible manner, protecting
the environment, safeguarding the welfare of our employees and
maintaining good relationships with the communities in which we
operate.
Our achievements are only made possible by the positive
contributions of our skilled and talented team. I am grateful for
their efforts over the past year and look forward to working with
them to deliver future growth.
Charles Ryan
Chairman
04 June 2019
Strategic Report
Strategic Report
The Directors present the Strategic Report for the year ended 31
December 2018.
Principal activities
Trans-Siberian Gold plc is a UK-based resources company, whose
Asacha Gold Mine in the Far East of the Russian Federation has been
in production since September 2011.
The Company is a public limited company, operating under the
laws of England and Wales (the principal legislation being the
Companies Act 2006), incorporated and registered in England and
Wales with registered number 1067991 and domiciled in the United
Kingdom.
TSG is committed to creating value for all stakeholders on a
sustainable basis. For shareholders, value is derived from capital
appreciation in the company's share price and distributions in the
form of dividends and share buybacks. Value is created by
supporting the Far East's economy through taxes paid, employment
and investmentin communities.
Strategy
The Group seeks to provide investors with access to a company
capable of generating industry-leading shareholder returns, while
maintaining a commitment to operational excellence and its social
and environmental responsibilities. The Group's current corporate
strategy is based on the following three pillars:
1. Enhance existing operations
2. Utilise stable platform for future growth opportunities
3. Pursue selective accretive M&A opportunities
How we deliver our strategy & create value
The Group makes use of various inputs and assets in our business
activities to create shareholder value. Our business is focused on
low-cost gold production and enabling investments. The outputs
represent the delivery of our business strategy.
Strategic Report
Operating and Financial Review
Production
In 2018, in its seventh full year of operation, Asacha produced
46,053 oz. (2017: 33,872 oz.) of refined gold and 108,191 oz.
(2017: 52,746 oz.) of refined silver, which is the Company's
all-time record annual gold and silver production.
The average processed ore gold grade in 2018 was 7.4 g/t, 12%
above the 2017 average 6.6 g/t, principally as a result of the
improvements in mine development and availability of multiple
stoping spaces, resulting in a steady increase in the stoping ore
mine production. In 2017, stoping ore accounted for only 58.0% of
the total ore volume delivered to the plant. In order to maintain
annual plant throughput it was necessary to process lower grade
material mined earlier and some tonnage from poor grade ore
stockpiles to supplement new stoping ore. In the first and second
quarters of 2018, the average proportion of new stoping ore
delivered to the plant was 46% and 55% respectively but, in the
third and fourth quarters, with the improvements in the mining
methods, it has increased to 59% and 64% respectively.
Average dilution excluding rockfalls improved from 42.0% in 2017
to 36.0% in 2018, as most of the stoping activities were carried
out in the northern flank of the deposit where enclosing rocks are
more solid. In the first and second quarters of 2018, the average
processed ore gold grade was 6.1 g/t and 6.3 g/t respectively but,
in the third quarter, after the introduction of the new incentive
program for the underground staff and implementation of other
operational changes, the quality of ore improved. The average
processed ore grades increased in the third quarter to 7.8 g/t and
reached a record high of 9.1 g/t in the fourth quarter.
Ore processing at the Asacha plant involves:
-- two-stage grinding with semi-autogenous grinding at the first
stage, ball milling at the second stage, pulp classification in
hydrocyclones by 0.75mm size and hydrocyclones' slurry thickening
in a high-capacity thickener;
-- cyanidation and carbon-in-leach process;
-- electric elution of loaded carbon by basic solutions under
pressure using IPS technology, acid treatment and thermal
regeneration of carbon;
-- melting of cathode deposits into dore alloy; and
-- cyanide destruction of slurry tailings by chlorination and
storing of neutralised tailings as diluted slurry.
Mining and production at Asacha in 2018 is shown in the
following table:
2018 2017
-------------------------- ------------- ------- ------
Mine development metres 6,415 5,780
------------- ------- ------
Ore extracted tonnes ('000) 174 198
------------- ------- ------
Ore processed tonnes ('000) 190 184
------------- ------- ------
Average feed gold grade g/t 7.4 6.6
------------- ------- ------
Average feed silver grade g/t 22.8 12.3
------------- ------- ------
Gold recovery rate % 94.9 94.4
------------- ------- ------
Silver recovery rate % 76.7 78.7
------------- ------- ------
Gold in dore oz. 42,128 36,714
------------- ------- ------
Silver in dore oz. 105,069 57,072
------------- ------- ------
Gold refined oz. 46,053 33,872
------------- ------- ------
Silver refined oz. 108,191 52,746
-------------------------- ------------- ------- ------
In the first quarter of 2019 primary efforts were focused on
completion of construction of a permanent pumping station at level
100m. The construction works were completed in May 2019. In the
interim, mobile pumps and a temporary pumping station at level 150m
were used to reduce the impact of the water ingress. The water
ingress problem is expected to be solved with the construction of
the permanent pumping station at level 100m.
Development of the mine has progressed well; the volume of ore
mined slightly decreased due to the need to allocate mining
equipment to the construction of the pumping station at level 100m.
However the availability of multiple high-grade stoping spaces
prepared earlier facilitated the continued delivery of high grade
stoping ore to the processing plant. As a result the average
processed ore gold grade in the first quarter of 2019 remained high
at 7.4 g/t, with gold in dore 12,345 oz.
Gold production is expected to improve from July 2019 onwards,
with mining commencing in Vein 25, and following the installation
of the permanent water pumping station. In the processing plant
different types of mill liners and grinding media will be tested in
2019 in order to achieve a reduced mill downtime schedule.
In 2019, the Company expects to achieve gold production in the
range 40,000-44,000 oz. (2018: 42,128 oz.).
Employees and safety
At 31 December 2018 TSG's subsidiary TZ employed 702 staff,
including personnel working in two shifts at the site (2017: 711
people).
Efforts to improve the health and safety culture at Asacha
continued. There was one fatal accident at the mine and 3 light
injuries in 2018 (2017: 3 light injuries). The Company continues to
invest in employee training and development, providing to the
employees various training courses, such as labour and fire safety,
accident response and emergency management, electric safety and the
safety of hydro-technical facilities.
Asacha Licence
In June 2018 the Russian State Subsoil Agency ("Rosendra")
approved the Company's application to extend the existing mining
licence at the Asacha Gold Mine for a further six year period. The
extended mining licence will expire on 31 December 2024.
Reserves and resources
As at 31 December 2018, the total mineral resource estimate for
Asacha (Measured, Indicated and Inferred), as reported in
accordance with the JORC Code (2012) was 858,000 tonnes with an
average gold grade of 20 g/t and silver grade of 48 g/t, for
approximately 553,000 oz. of gold and 1.3 million oz. of
silver.
The resource estimate for the Asacha deposit was updated by
Seequent UK Ltd ("SUKL") to the end of December 2018. SUKL has
updated the resource estimate of Asacha at the end of every year
from 2013. The purpose of these updates is to incorporate new data
available from exploration, mining development and to account for
mining depletion. A copy of SUKL's report is available on the
Company's website.
The resource at Asacha occurs in two zones: Main zone (currently
being mined) and East zone (not yet mined).
The Main zone hosts six defined veins, with the majority of the
resource contained in two of these, QV1 and QV2. Three veins have
been defined in the separate East zone. The Main zone has a strike
length of approximately 1500m, whilst the East zone is
approximately 400m.
Asacha's resource estimate was classified according to the
guidelines of the JORC Code (2012). Classification took account of
data quality, confidence in geological interpretation and
confidence in block estimations. Some of these aspects are
necessarily subjective. Classifications were applied by
digitisation of polygon boundaries between classes in long section
view. Resources were only classified and reported within
constrained vein volumes.
Based on the presence of the operating mine and mill, existing
mine economics, the potential for incremental development access to
deeper and more distal parts of the orebody, and the potential for
further exploration success, SUKL opined that all of the vein
resources defined at Asacha have a reasonable prospect of eventual
economic extraction.
Asacha JORC mineral resource - 31 December 2018
Tonnes Au Grade Ag Grade Contained Au Contained Ag
Category Zone (000) g/t g/t oz. (000) oz. (000)
--------------- ----- ------ -------- -------- ------------ ------------
Measured Main 199 16 37 103 240
----- ------ -------- -------- ------------ ------------
Indicated Main 295 19 54 182 515
----- ------ -------- -------- ------------ ------------
Indicated East 3 56 30 6 3
----- ------ -------- -------- ------------ ------------
Total M &
I 498 18 47 290 758
---------------------- ------ -------- -------- ------------ ------------
Inferred Main 90 13 34 39 98
----- ------ -------- -------- ------------ ------------
Inferred East 269 26 53 224 458
----- ------ -------- -------- ------------ ------------
Total Inferred 360 23 48 263 557
---------------------- ------ -------- -------- ------------ ------------
Notes:
--4 g/t cut-off grade
-- Resources are reported after mining depletion.
-- Tonnage and grades have been rounded to reflect an
appropriate level of precision.
-- Rounding may mean that columns do not sum exactly.
Sources of change between 2017 and 2018 resource estimates
The total (Measured + Indicated + Inferred) declared resource
has decreased from 651 Koz Au and 1 638 Koz Ag as reported at 31
December 2017 to 553 Koz Au and 1 314 Koz Ag as at 31 December
2018. The mining depletion accounts for 48 Koz Au and 154 Koz Ag
from the model. The remaining adjustment is due to substantial
development on the 100mRL which has led to a re-interpretation of a
large volume of the main veins QV1 and QV2 that was previously
estimated in 2013. The addition of the new data allowed for a 3D
estimate for all but small areas of QV2 which remain as a 2D
estimate.
The following table gives a breakdown of adjustments:
Au oz. Ag oz.
Description (000) (000)
------------------------------------------------------ ------ ------
Resource Estimate as at 31 December 2017 651 1638
------ ------
Mining depletion -48 -154
------ ------
Difference due to model geometry and grade estimation
changes for new channel data -48 -169
------ ------
Resource Estimate as at 31 December 2018 553 1314
------------------------------------------------------ ------ ------
For the previous three years the model had been under-predicting
the contained metal, however during 2018 the model over predicted
by 7%. The ore dilution remains high but has improved to 58%, which
is 5% lower than 2017.
The information in this report relating to Asacha's mineral
resources is based on information compiled by Carrie Nicholls at 31
December 2018.
Carrie Nicholls is a Member of the Australasian Institute of
Mining and Metallurgy. She has no interest in, and is entirely
independent of the Group. Carrie Nicholls has sufficient experience
which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which she is
undertaking to qualify as a 'Competent Person' as defined in the
2012 edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code).
Ms Nicholls is a Qualified Person under the AIM Rules and
consents to the inclusion in this report of the matters based on
her information in the form and context in which it appears.
Asacha Mineral Resource - Russian State Geological Commission
for Reserves (GKZ) code as at 31 December 2018
C1 + C2 Resources
Au Au Ag Ag
C1 & C2 oz. Grade g/t C1 & C2 oz. Grade g/t Cut-off g/t
------------ ---------- ------------ ---------- -----------
536,223 20.2 1,258,701 47.5 2
------------ ---------- ------------ ---------- -----------
GKZ - Russian State Geological Commission for Reserves
The above table shows the resources approved by GKZ in March
2017, adjusted for ore mined up to 31 December 2018.
Financial Review
Revenue from the sales of 45,956 oz. (2017: 33,870 oz.) of
refined gold was $58.2 million (2017: $42.7 million), and of
108,749 oz. of refined silver (2017: 46,121 oz.) was $1.6 million
(2017: $0.8 million) demonstrating growth of 36% and 100%
respectively.
Average realised prices were $1,265 per oz. gold and $15 per oz.
silver (2017: $1,260 per oz. gold and $16 per oz. silver). All
sales were made on spot basis.
Cost of sales was $37.9 million (2017: $30.7 million), the $7.2
million increase consisting of $3.5 million allocation from WIP as
well as higher depletion and depreciation costs. Cost of sales per
oz. gold, net of silver credits revenue, was $788 (2017: $885)
reflecting an overall reductionin processing and refining
costs.
Cash cost per oz. gold excluding depletion, net of the silver
credit and excluding royalty, was $516 (2017: $588). All-In
Sustaining Costs per oz. gold were $1,049 (2017:$1,341), refer to
note 36 in the financial statements.
In 2018 a reversal of previously recognised provision for ore
stockpiles was recognised in the amount of $4.0 million following
the commencement of significant blending of lower grade ore with
higher grades when feeding the processing plant, as discussed
further in note 20 to the financial statements.
The Group recorded an operating profit for the year of $18.0
million (2017: $4.3 million), after recognising the $4.0 million
reversal of the inventory impairment provision (2017: increase of
provision by $1.9 million) discussed above and exchange gains of
$0.2 million (2017: $0.4 million).
Administrative expenses amounted to $8.4 million (2017: $7.4
million) and included termination payment of $1.0 million (2017:
$0.3 million) in respect of the retirement of the former Chief
Executive Officer (2017: retirement of the former Chief Financial
Officer).
Finance income was $0.025 million (2017: $0.097 million).
Finance costs were $1.1 million (2017: $1.2 million).
Financial Position
Total equity was $87.2 million at 31 December 2018 compared to
$78.0 million at 31 December 2017, after payment of an interim
dividend of $1.0 million ($0.009 per ordinary share) in October
2018 (2017: $4.0 million ($0.036 per ordinary share)) and a final
dividend for 2017 of $2.3 million ($0.021 per ordinary share),
which was paid on 25 July 2018 (2017: $nil).
Total non-current assets increased from $85.8 million to $93.8
million. Mining properties of $47.4 million (2017: $37.0 million)
reflected $13.6 million progress for mining and mine development
and $0.5 million transferred from deferred exploration and
evaluation costs, offset by depletion of $3.6 million. Property,
plant and equipment decreased by $3.4 million to $43.7 million,
primarily due to additional buildings ($0.2 million), plant and
machinery ($2.5 million), vehicles and mobile equipment ($0.3
million) and assets under construction ($1.9 million), offset by
$8.1 million depreciation charges and $0.2 million disposals.
Current assets increased from $23.1 million to $23.9 million.
Inventories at Asacha at 31 December 2018 comprised $1.4 million
gold and silver in production (2017: $6.3 million), $5.2 million
ore stocks (2017: $1.7 million), of which $2.6 million (2017: $1.2
million) has been recognised as a non-current asset as discussed in
note 20 to the financial statements and $7.9 million fuel and other
materials and supplies (2017: $6.1 million), in aggregate $14.6
million (2017: $14.1 million).
Recoverable VAT at 31 December 2018 was $0.9 million (2017: $1.1
million). VAT amounting to $4.2 million (2017: $3.9 million) was
recovered during the year. All recoverable VAT at 31 December 2018
is expected to be received during 2019.
Cash and cash equivalents increased from $7.5 million to $9.7
million.
Loans and borrowings at 31 December 2018 totalled $17.1 million
(2017: $19.8 million), comprising entirely loans outstanding under
the Asacha mine's loan facilities (2017: $19.5 million) described
in note 23 to the financial statements. During the year the Group
repaid all its finance lease obligations resulting in nil balance
at the reporting date (2017: $0.3 million).
Current liabilities at 31 December 2018 totalled $12.5 million
(2017: $10.8 million), the increase principally reflecting a $1.5
million increase in borrowings repayable within one year of the
reporting date.
The deferred tax liability of $6.4 million (2017: $4.0 million)
represents temporary differences between accounting and tax
treatment of various assets and liabilities, partially offset by
tax losses, which may be carried forward to reduce the Group's
future tax liability.
As discussed in note 24 to the financial statements, the Group's
gearing ratio at 31 December 2018 was 7.79% (2017: 13.66%).
Going concern
The Directors have reviewed the Group's cash flow forecast for
the period to 31 December 2020 and they believe that, taking
account of reasonably possible changes in commodity prices, trading
performance and expenditure, the Group's operations will continue
to be cash generative and that the Group has adequate resources to
continue in operational existence for the foreseeable future
without requiring additional funding.
The Buyback announced on 2 May 2019 is expected to increase
leverage (Net Debt/Shareholder funds). However, in light of the
Group's historical and ongoing cash generation capability, the
Board believes that this debt level is prudent. Further details
about the Buyback are set out below.
Management
OOO Trans-Siberian Gold Management, TSG's 100%-owned subsidiary
in Moscow, provides managerial, technical, financial and
procurement services to TZ and currently has 17 staff, including 2
technical managers based at Asacha and TZ's Managing Director.
TSG's Chief Executive Officer and Chief Operating Officer are based
in Moscow.
Events after the reporting date
In January 2019, a special interim dividend of $0.052 per share
equating to approximately $5.7 million in aggregate was declared
and paid.
On 23 April 2019, the Russian Federal Agency for Subsoil Use
("Rosnedra") has issued a 20-year licence to TZ for the development
and exploration of Rodnikova deposit for a consideration of $3
million. Rodnikova is estimated to contain 1Moz. of gold with an
average grade of 5.3g/t. The Group is currently devising its
exploration field work programme to assess the full potential of
the Rodnikova deposit and options to potentially initiate early
stage production. Taking into consideration the fact that the
Asacha and Rodnikova deposits are believed to have similar geology,
mineralogy and metallurgy, the Company will determine the
suitability of utilising the existing processing techniques and
plant at Asacha for the ore at Rodnikova.
On 2 May 2019, the Company entered into conditional agreements
with two of its major shareholders within UFG Asset Management to
buy back 22,894,565 of its existing ordinary shares representing
approximately 21% of the Company's issued share capital by means of
an off-market share buyback at a price of 33 pence per share for an
aggregate purchase price of GBP7.56 million. The buyback represents
a discount of 42% to the closing middle market price of a TSG share
on 1 May 2019. As part of the transaction a further 11,478,410 of
the Company's existing ordinary shares, representing approximately
10.4% of the Company's issued share capital, will be sold by the
same shareholders to other members of the UFG Group, Directors and
to new investors. The buyback is to be paid out of the Company's
existing distributable profits and funded by a term loan of up to
RUB 800 million (approximately GBP9.4 million) facility with VTB
Bank, obtained by the Company's wholly owned subsidiary, TZ. The
share sales, together with the buy back, will reduce the dominance
by UFG of the share register and benefit shareholders as a
whole.
On 31 May 2019, the Company announced the appointment of Eugene
Antonov to the Board as Chief Operating Officer.
Alexander Dorogov
Chief Executive Officer
04 June 2019
Strategic Report
Key Performance Indicators
The following table sets out the key performance indicators
monitored by TSG's Board of directors:
Refined gold sales
45,956 oz. +36%
Average realised gold price
$1,265 +0.4%
Cost of sales per oz. gold
$788 -11%
Cash cost per oz. gold
$516 -12%
Ore extracted
174 tonnes ('000) -12%
Ore processed
190 tonnes ('000) +3%
Average dilution
36% -14%
Average feed gold grade
7.4 g/t +12%
Gold recovery rate
94.9% +1%
Average employee numbers
727 +5%
AISC per oz.gold
$1,049 -22%
Reported injuries*
4 +33%
Net debt
$7.4m -40%
EBITDA
$23.9m +72%
Strategic Report
Risk Review
The risk management philosophy and tolerance levels of the Group
is set and overseen by the Board. Risk tolerance levels are aligned
with Board-approved strategic objectives and adjusted according to
changing internal and external scenarios.
Risks are formally reviewed by the Board and appropriate
processes put in place to monitor and mitigate them. If more than
one event occurs, the overall impact of such events may compound
the possible adverse effects on the Group.
Principal Movement Link to
Risk Nature of Risk in Risk How we manage the risk Strategy
------------- ------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Regulatory "
environment * The Group's activities are subject to extensive * The Russia based management team have extensive * Enhance existing operations
Russian federal and regional laws and regulations. experience.
* Utilise stable platform for future growth
* Legal inconsistencies may arise in view of the legal * Monitoring changing legislation to ensure compliance. opportunities
and regulatory regime in Russia.
* Outsourced legal, taxation and other functions to * Selectively pursue accretive M&A opportunities
* Amendments to current laws and regulations, or more ensure subject matter excellence.
stringent implementation or interpretation of laws
and regulations, could have a material adverse impact
on the Group. * Cultivating good working relationships with
regulators and with representatives of the national
or local government.
------------- ------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Mining "
legislation * The Group is dependent upon the grant and renewal of * Monitoring changing legislation to ensure compliance. * Enhance existing operations
& licencing appropriate licences, permits and regulatory
consents.
* Discussions are held with the appropriate * Utilise stable platform for future growth
authorities. opportunities
* Failure to comply with these could result in
additional costs, penalties being levied or the
suspension or revocation of the licence. * Policies, standards and procedures in place to ensure
compliance.
* Regular compliance review by advisers.
* Register of all mining titles.
* Asacha mining licence renewed in June 2018 for period
of 6 years.
* Rodnikova exploration licence awarded in April 2019
for period of 20 years.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Reserve $
and resource * Estimates may require revision based on actual * The Group estimates its ore reserves and mineral * Enhance existing operations
estimates production experience. resources based on information compiled by Competent
Persons in accordance with JORC.
* Utilise stable platform for future growth
* Volume and grade of reserves mined and processed and opportunities
recovery rates achieved may vary from those * Conduct detailed geological modelling and ensure that
anticipated. all analyses of exploration samples are undertaken by
accredited laboratories.
* Gold price may render reserves containing relatively
lower grades of gold mineralisation uneconomic.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Environmental #
legislation * Use of various chemicals and contaminants including * The Group monitors compliance with the relevant * Enhance existing operations
& compliance cyanide, are subject to extensive environmental and legislation and regulations and seeks to ensure that
health and safety laws and regulations. the Russian environmental authorities are satisfied
with the Group's compliance with applicable
environmental laws and regulations.
* Changes in regulations, or the interpretation of
regulations, may result in additional costs.
* Compliance with water-use licence guidelines.
* Pollution control and water catchment dams.
* Control of toxic materials in contained storage
areas.
* Continuous engagement with and reviews by regulators
on compliance.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Health #
& Safety * Subject to various environmental, health and safety * Management include comprehensive safe working * Enhance existing operations
regulations stipulated by the relevant regulatory practices.
agencies.
* The Group also organises safety training for
* The Group's operations require various employees.
licences/permissions with regard to the operation of
flammable, explosive and chemically aggressive
production facilities and the use of hazardous * Legal compliance, standards and procedures in place,
structures. plan task observation and regular audits conducted.
* Stricter regulations could cause the Group to incur * Ongoing examination of workplace conditions.
additional costs in order to comply with the new
directives.
* Senior and experienced safety managers at operations.
* Independent oversight by regulators.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Mining $
and * Exploration risks include geological and geotechnical * Technical and operational management have extensive * Enhance existing operations
processing factors. experience from other Russian mining projects.
* Production risks include ore grade/quality, tonnages * Operational audits are undertaken by external
and recovery/yields. experts.
* Processing risks include industrial and mechanical * All buildings and installations at the Asacha mine
incidents, technical failures, labour disputes, fire, have been designed and constructed to withstand
flooding and other acts of God. seismic activity.
* Significant seismic activity in Kamchatka. * Logistical arrangements allow for weather disruption.
* Climatic conditions may impact the delivery of
supplies, equipment and fuel.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Property #
and Business * Unable to arrange comprehensive property and business * All buildings and installations at the Asacha mine * Enhance existing operations
interruption interruption insurance for the Asacha mine at an have been designed and constructed to withstand
insurance acceptable cost. seismic activity and significant water ingress
arising from melting snow.
* No guarantee that operations at Asacha will not be
disrupted by property damage or other interruption. * Logistical arrangements allow for weather disruption.
* Risk has been discussed with the Company's major
shareholders.
* Underground water pumping station being commissioned
but not yet fully operational.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Gold price "
volatility * Gold price is affected by numerous factors which are * Focus on production costs to maximise margins and * Enhance existing operations
beyond the Group's control. remain a low-cost producer.
* Utilise stable platform for future growth
* Influencing factors include world production levels, * The Group assesses the economic viability of its opportunities
global and regional economic and political events, projects at gold prices based on long term trends and
inflation, currency exchange fluctuations, industrial forecasts.
and jewellery demand, speculative activity and the * Selectively pursue accretive M&A opportunities
political and economic conditions of major
gold-producing countries. * The Group tests its financial models for sensitivity
to the gold price.
* The Group does not currently hold any financial
instruments to hedge the commodity price risk on its
expected future production and keeps this under
review.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Taxation "
* Tax legislation has been subject to change. * The Russia based management team have extensive * Enhance existing operations
experience to ensure full compliance with the Tax
Code and timely implementation of legislative
* The government's implementation of such legislation, changes. * Utilise stable platform for future growth
and the courts' interpretation thereof, has been opportunities
sometimes unclear, with few precedents established.
* Outsourced taxation function to ensure subject matter
excellence. * Selectively pursue accretive M&A opportunities
* Differing legal interpretations may exist both among
and within government ministries and organisations
and local inspectorates.
* The introduction of new tax provisions may affect the
Group's overall tax efficiency and may result in
significant additional tax liability.
------------------------------------------------------------ -------- ------------------------------------------------------------ -----------------------------------------------------
Governance
Board of Directors
Executive
Alexander Dorogov (aged 49)
Chief Executive Officer
Alexander Dorogov graduated from the State Finance Academy in
Moscow with a degree in financial management. Prior to joining
Trans-Siberian Gold Management LLC in November 2008, he was Chief
Financial Officer of the Alumina division of UC Rusal from 2005 to
2008. From 2009 till 2014 he also held the positions of deputy CEO
and CFO of the Ferroalloys division of Mechel. Between 2001 and
2005 he held various senior positions with a private investment
fund, supervising the acquisition of gold mines in Siberia and Far
East Russia, and previously spent five years with United Financial
Group.
Eugene Antonov (aged 44)
Chief Operating Officer
Eugene Antonov has more than 20 years of experience in the
mining industry, mainly in managerial positions with responsibility
for mine site operations and finance. Most recently he was an
integral part of the leadership team at the Kupol Mine in Far East
Russia which generated the largest annual cash flow and achieved
the lowest operating cost across Kinross Gold Corporation.
Between 1999 and 2007, he was employed at Bema Gold Corporation
in Canada in various executive finance roles, including Director of
Finance, until its acquisition by Kinross. His previous experience
also includes managerial positions at Teck in Canada.
Mr. Antonov, is a graduate of Pace University in New York and
holds a MBA awarded by the Rotman School of Management in Toronto.
Mr Antonov is also a member of the Chartered Professional
Accountants in Canada.
Non-executive
Charles Ryan (aged 52)
Chairman
Charles Ryan is a graduate of Harvard University. He was an
Associate and Principal Banker with the European Bank for
Reconstruction and Development in London, before becoming a founder
director of UFG. After UFG sold its investment banking business to
Deutsche Bank in 2006, he spent two years as Chief Country Officer
and Chief Executive Officer of Deutsche Bank in Russia, stepping
down in October 2008 to become Chairman of UFG Asset Management. He
is also a general partner with Almaz Capital and a director of PGI
Group plc, Yandex N.V., Limitless Mobile Limited, Preferred Sands,
Acumatica and serves on the Harvard Global Advisory Council and
Capital International Inc. Advisory Board.
Robert Sasson (aged 54)
Robert Sasson graduated from Exeter University with a degree in
Russian Studies and International Government. He worked for Phibro
Salomon before serving as the head of the St Petersburg office of
the European Bank for Reconstruction and Development from 1993.
Prior to joining UFG Asset Management in 2009, he spent three years
with a leading US hedge fund on private equity transactions in
Russia and Ukraine.
Stewart Dickson (aged 41)
Stewart Dickson has significant corporate and commercial
experience across the natural resources and financial services
sectors. He currently also serves as Chief Executive Officer of ASX
listed Variscan Mines Limited and consults to the leadership teams
of a number of companies globally. His prior appointment was as
Managing Director and Head of Metals & Mining at Cantor
Fitzgerald Europe in London, with responsibility for client
coverage of public and private mining companies across precious
metals and base metals, bulks, fertilizers and specialty metals. He
has a broad range of experience advising small and mid-sized quoted
companies at Board level on financial advisory, corporate strategy,
equity capital markets, financings, M&A, corporate governance
and regulatory compliance. Prior to investment banking, Mr. Dickson
served in the British Army. He is a graduate of University College
London and holds a MBA from Henley Business School.
Lou Naumovski (aged 62)
Lou Naumovski has more than three decades of experience working
in Russia, most recently as Vice President and General Director of
the Moscow office for Kinross Gold Corporation, the largest
Canadian investor in Russia. He also developed the business of Visa
International, serving as Senior Vice President and General Manager
Visa International Service Organisation (VISA), CEMEA region.
Additionally, he served as Senior Banker and Head of Mission for
the Russian Team of the European Bank of Reconstruction and
Development in Moscow, and he represented the Bank when the Russian
Prime Minister's Foreign Investment Advisory Council was first
founded. Mr. Naumovski has a BA (Honours) in Economics and
Political Science from the University of Toronto and an MA in
International Relations (specialised in Russian/Soviet affairs)
from the Norman Patterson School of International Affairs at
Carleton University in Ottawa.
Florian Fenner (aged 48)
Florian Fenner joined UFG Asset Management as Managing Partner
in July 2002. In addition to his role as Managing Partner, Mr.
Fenner is also responsible for the overall management of UFG's
public markets funds business. Prior to joining UFG, from 2000 to
2002 he was the Head of Unifund's Moscow office with responsibility
for its Russia portfolio. From 1996, Mr. Fenner served as the
Deputy Head of Research at Brunswick Brokerage, one of Russia's
leading investment banks and in 1997 he became the Russian Equity
Portfolio Manager for Brunswick Capital Management. Before joining
Brunswick Brokerage, he worked as an investment banker for Schroder
Munchmeyer Hengst Co. in Frankfurt. Mr. Fenner is a CFA
charterholder and holds a degree in banking from Industrie- und
Handelskammer in Frankfurt-am-Main.
Governance
Corporate Governance Review
Chairman's Statement
TSG is committed to transparency and high standards of corporate
governance.
For many years the Company has sought, where practicable for a
company of its size and nature, to comply with the main provisions
of the UK Corporate Governance Code, although such compliance is
not mandatory for AIM listed companies.
Whilst we have recently refreshed many of our corporate
functions, the introduction of the changes to the AIM Rules for
Companies has been a timely catalyst for a review of our corporate
governance arrangements. After careful consideration, the Board has
decided to apply the Quoted Companies Alliance Corporate Governance
Code (the "QCA Code").
The Quoted Companies Alliance ("QCA") is the membership
organisation which represents the interests of small and mid-size
quoted companies. Further information about the QCA and copies of
the QCA Code are available at: www.theqca.com
The QCA Code is constructed around ten broad principles. We are
pleased to provide an explanation as to how the Group meets and
applies the principles in practice.
How our governance supports the delivery of our strategy
All Directors are collectively responsible for the success of
the Group. As the Chairman of the Company, I am responsible for the
leadership of the Board. The Chairman acts in an advisory capacity
to the Chief Executive Officer ("CEO") and to other Directors on
all matters concerning the interests and management of the Company
and, in coordination with the CEO, may play a role in the Company's
external relationships. The Non-Executive Directors exercise
judgment in respect of Board decisions, and scrutinise and
challenge management.
The Board is responsible for setting strategy and policies,
overseeing risk and corporate governance, and monitoring progress
towards meeting our objectives and annual plans. It is accountable
to shareholders for the proper conduct of the business and our
long-term success, and represents the interests of all
stakeholders. The Board conducts an annual review of the Group's
strategy.
The Senior Executive Team ("SET") takes the lead in developing
the strategy which is then reviewed, constructively challenged and
approved by the Board.
We are always mindful of the trust shareholders place in us as
your elected Directors and of our wider responsibilities to all of
TSG's stakeholders.
Charles Ryan
Chairman
04 June 2019
Strategy
Our strategic priorities
The Group seeks to provide investors with access to a company
capable of generating industry-leading shareholder returns, while
maintaining a commitment to operational excellence and its social
and environmental responsibilities.
The Group's current corporate strategy is set out in the
Strategic Report, together with an explanation of how we deliver
strategy (our business model) and how we measure our progress (our
Key Performance Indicators).
Risks
The management of the Group's business and the execution of its
strategy are subject to a number of risks. Risks are formally
reviewed by the Board and appropriate processes put in place to
monitor and mitigate them. This enables us to meet the expectations
of our shareholders and stakeholders.
The key operating risks affecting the Group, most of which are
those typically faced by other companies in the gold mining sector,
are set out in the Strategic Report on pages 8 to 19.
Governance Structure
Board of Directors
Audit Committee Remuneration Committee
Senior Executive Team (SET)
Operations Committee Health, Safety, Environment, & Community Committee
Notes:
-- Biographies of the Board of Directors are set out in the Corporate Governance Review.
-- Senior Executive Team comprises: CEO, COO, MD and Chief
Engineer of ZAO Trevozhnoe Zarevo. Biographies are available
at:
http://www.trans-siberiangold.com/about-us/leadership-team/
-- Details of the Board Committees are set out in the Corporate
Governance Review and are also available at:
http://www.trans-siberiangold.com/investor-relations/corporate-governance/
-- From time to time ad hoc Board Committees may be constituted
for specific projects or tasks. In these cases, the scope and
responsibilities of the Committee are clearly defined and
documented.
Board Composition
As at the date of this statement, the Board comprised a
Non-Executive Chairman, two Executive Directors and four
Non-Executive Directors, of whom two are independent.
Leadership and Operation of the Board
Leadership & Responsibilities
In line with best practice, the roles of CEO and Chairman are
separated with a clear division of responsibilities between
them.
Charles Ryan, our Chairman, is responsible for leadership of the
Board. He is responsible for ensuring its effectiveness and
ensuring that the Board operates in the interests of the
shareholders and other stakeholders.
Our CEO, Alexander Dorogov, leads the SET and has executive
responsibility for running our business. The composition of the
Board has been refreshed in the past 12 months, including the
planned succession of the CEO role.
Non-Executive Directors have a responsibility to uphold high
standards of integrity and probity and are required to have a
strong command of the issues relevant to the business in order to
make a positive contribution to the Board. Non-Executive Directors
support the Chairman and the Executive Directors in instilling the
appropriate culture and values.
Chairman
-- Leader of the Board
-- Responsible for effective communication flow between Directors
-- Facilitates effective contribution of all Directors
-- Responsible for effective Board governance
-- Ensures effective communication with shareholders
Executive Directors
-- Lead and motivates management team
-- Implement strategy and objectives as directed by the Board
-- Develop Group policies and proposals for approval by the
Board and ensures effective implementation
Non-Executive Directors
-- Supply challenge and support to management
-- Bring independent mind-set and differing backgrounds and experience to Board debates
-- Provide leadership and challenge on the Board Committees
-- Scrutinise leadership of Chairman
Company Secretary
-- Secretary to Board and its Committees
-- Informs the Board on all matters reserved to it and ensures
papers are provided in sufficient detail and on time
-- Available to Directors in respect of Board procedures and provides support and advice
-- Ensure the Board is kept informed on governance matters
The Board discharges its responsibilities through a programme of
meetings that includes regular reviews of financial performance and
business critical issues. All Non-Executive Directors are required
to ensure that there is sufficient consideration of business issues
prior to, and informed debate and challenge at, Board meetings. In
making decisions, they take into account the views of shareholders
and other stakeholders, given that such views may provide different
perspectives on the Company and its performance.
The Board also aims to ensure that a good dialogue with our
shareholders is maintained and that their issues and concerns are
understood and considered. The Company's largest shareholder, UFG
Asset Management ("UFG"), is represented on the Board by Charles
Ryan, Robert Sasson and Florian Fenner (together the "UFG
Representative Directors").
Reserved matters
There is a schedule of matters that the Board has specifically
reserved for its decision. This schedule is reviewed during each
financial year and includes matters such as setting the Group's
strategic aims and objectives, appointment and termination of any
Director, approving significant contractual commitments, approving
changes to the Group's share capital and corporate structure,
approving financial reports and ensuring maintenance of a sound
system of internal control and risk management.
The matters that have not been expressly reserved to the Board
are delegated by the Board to its Committees or the CEO.
Operation of the Board
The Board held 15 meetings in FY 2018. In addition, the Board's
Audit Committee met twice and the Remuneration Committee held a
meeting.
The Board is currently scheduled to meet a minimum of meet 8
times in 2019 and will meet at such times as may be required to
conduct business.
Board Meeting Attendance for the FY18
Audit Committee Remuneration Committee
Director Board Meetings Meetings Meetings
Charles Ryan 14 (14) 1 (2) 1 (1)
-------------- --------------- ----------------------
Dmitry Khilov* 9 (9) - -
-------------- --------------- ----------------------
Alexander Dorogov 15 (15) - -
-------------- --------------- ----------------------
Robert Sasson 14 (14) 2 (2) 1 (1)
-------------- --------------- ----------------------
Florian Fenner 14 (14) - -
-------------- --------------- ----------------------
Lou Naumovski 13 (14) - 1 (1)
-------------- --------------- ----------------------
Stewart Dickson 14 (14) 2 (2) -
-------------- --------------- ----------------------
Notes:
-- Number in brackets denotes number of meetings during the
period that Board members were entitled to attend.
-- Dmitry Khilov retired on 13 July 2018.
-- Eugene Antonov was appointed to the Board on 30 May 2019.
During the year he attended meetings at the invitation of the
Board.
Formal agenda, briefing papers and reports are sent to the Board
in advance of its meetings. As part of the business of each board
meeting, the CEO typically submits a progress report, giving
details of business performance and progress against the objectives
the Board has approved. To ensure that the Board has good
visibility of the key operating decisions of the business, members
of the SET may be invited to participate in Board meetings and meet
with Board members throughout the year. The Board also receives
management information and presentations on industry and regulatory
developments from internal and external subject matter experts.
Principal matters considered by the Board in FY18
Area of focus
Strategic matters
-- The Group's overall strategy, including its long-range plan and budgets
-- The Group's capital structure, financing and strategy
-- Corporate development opportunities
-- Dividend declarations
Operational matters
-- Executive management reports, including business performance
-- Quarterly production information and announcements
-- Health & Safety
Stakeholders
-- Environment & Sustainability
-- Communities
Governance & Risk management
-- Reports from Board Committees
-- Succession planning for SET and Board-level roles
-- Financial and regulatory reporting
Board Committees
The Board delegates certain of its responsibilities to two Board
Committees, which have clearly defined terms of reference as
described below.
Audit Committee
The Audit Committee chaired by Charles Ryan, the other current
members being Robert Sasson and Stewart Dickson, meets at least
twice a year and is responsible for ensuring that the appropriate
financial reporting procedures are properly maintained and reported
on and for meeting the auditors and reviewing their reports
relating to the financial statements and internal control systems.
It is also responsible for monitoring the independence of the
auditors. Executive directors may attend meetings of the Audit
Committee by invitation; however, at least once a year the
Committee meets the auditors without executive directors being
present.
Principal matters considered by the Audit Committee in FY18
-- Financial and regulatory reporting
-- Objectivity and independence of the Company's auditor
Remuneration Committee
The Remuneration Committee, chaired by Charles Ryan, the other
current members being Robert Sasson and Lou Naumovski, is
responsible for reviewing the performance of the executive
directors and other senior executives and for determining
appropriate levels of their remuneration, in consultation with
external advisers as appropriate, with due regard to the interests
of shareholders. It meets as required. The committee also makes
recommendations to the Board in respect of employee incentives,
including the granting of share options.
The Company's remuneration policy is to provide competitive
rewards for its executive directors and other senior managers,
taking into account the performance of the Company and conditions
prevailing in the employment market for executives of equivalent
status, both in terms of the level of responsibility of their
position and their achievement of recognised job qualifications and
skills. Base salaries are reviewed annually. Details of directors'
remuneration are disclosed in note 8 to the financial
statements.
It is the Company's policy that executive directors' service
contracts have no fixed term and that the notice period in those
service contracts does not exceed one year. Dmitry Khilov's (until
retirement), Alexander Dorogov's and Eugene Antonov's service
contracts provide that either party may terminate their employment
by giving six months' written notice and that the Company may make
a payment in lieu of notice.
Principal matters considered by the Remuneration Committee in
FY18
-- Determination and review of levels of remuneration
-- Setting annual bonus targets
-- Board appointments
-- Termination arrangements for leavers
Board effectiveness
Appointments to the Board and succession planning
Due to the size and scale of its operations, the Company
currently does not have a separate Nomination Committee. This
decision is kept under review. The Chairman and, where appropriate,
the full Board regularly review the composition of the Board and
the status of succession to both senior executive management and
Board-level positions. The skills and experience of current Board
members are compared with the skills and experience the Board
believes are appropriate to the Company's overall business and
strategic needs, both now and in the future. Any decision relating
to the appointment of Directors is made by the entire Board based
on the merits of the candidates and the relevance of their
background and experience.
The Board aims to maintain a balance in terms of the range of
experience and skills of individual Board members, which includes
relevant experience of international business, mining industry and
finance. The majority of the Board are fluent in Russian.
Biographies of the Board of Directors are set out earlier and
available at:
http://www.trans-siberiangold.com/about-us/leadership-team/
Board of Directors
Director Nationality Age Tenure
Charles Ryan American 52 9 years
----------------- --- -------
Alexander Dorogov Russian 49 2 years
----------------- --- -------
Eugene Antonov Russian-Canadian 44 <1 year
----------------- --- -------
Robert Sasson British 54 5 years
----------------- --- -------
Florian Fenner* German 48 1 year
----------------- --- -------
Lou Naumovski Canadian 62 1 year
----------------- --- -------
Stewart Dickson British 41 1 year
----------------- --- -------
Notes:
* Previously a Non-Executive Director of the Company between
2006 and 2013
The Board is very cognisant of the discussion in respect of
greater diversity in senior management and the boards of quoted
companies. While we support the aims of diversity, we do not
believe that a pre-determined quota system is appropriate for TSG
given its size and the scale of its operations. The Board ensures
that suitable candidates irrespective of age, gender, ethnicity or
nationality are considered objectively and fairly.
Board & SET Changes
In recent years, the Board and SET has been significantly
re-organised to achieve a balance of continuity and the
introduction of fresh thinking.
Board & SET Changes during FY18
Senior Management Appointment -
7 August 2018 Chief Operating Officer
Directorate Change - Appointment
16 July 2018 of new CEO
--------------------------------
Senior Management Appointment -
14 June 2018 TZ Chief Engineer
--------------------------------
Senior Management Appointment -
7 March 2018 TZ Managing Director
--------------------------------
Mr. Eugene Antonov was appointed to the Board on 30 May
2019.
Independence of the Non-Executive Directors
The Board considers the independence of each Non-Executive
Director for the purpose of the QCA Code. With the exception of
Charles Ryan, Robert Sasson and Florian Fenner, the Board considers
that the Non-Executive Directors are independent. Messrs Ryan,
Sasson and Fenner are connected with UFG. UFG is an established
multi-asset investment manager and long-term majority shareholder
of TSG. On 17 April 2018, TSG published the interests of UFG, its
connected entities and individuals in the Company's issued share
capital, having recevied such notification from UFG.
The Board believe that the UFG Representative Directors have
brought, and continue to bring, considerable business experience
and make a valuable contribution to the work of the Board. Given
their experience of investing in Russia, skills and familiarity
with the operating environment in which the Company's assets are
located, the Board believes their appointments to be in the best
interests of the Company. The Board believe the representation of
UFG on the Board is proportional to its aggregated economic
interest and can be beneficial to all shareholders. Further it
provides an effective conduit for understanding and meeting the
needs and expectations of shareholders holding approximately 86% of
TSG's issued shares, in aggregate as at the date of this
statement.
There is no Relationship Agreement between TSG and UFG. The
Board believe that such an agreement would be nugatory as the Board
are of the opinion that TSG is capable of carrying on its
day-to-day business independently of UFG and that there are no
commercial transactions or relationships with the UFG, save for its
shareholding. Should these circumstances change, the independent
Non-Executive Directors would reconsider the need for a
Relationship Agreement and would ensure that any business is
conducted at arm's length and on normal commercial terms.
Time Commitment
The Company's expectation is that Non-Executive Directors should
be prepared to commit 15 days a year, as an absolute minimum, to
the Group's business.
In practice, Board members' time commitment exceeds this minimum
expectation when all the work that they undertake for the Group is
considered. As well as their work in relation to formal Board and
Board Committee meetings, the Non-Executive Directors also commit
time throughout the year to meetings, telephone calls and site
visits.
On those occasions when a Director is unavoidably absent from a
Board or Board Committee meeting they still receive and review the
papers for the meeting and typically provide verbal or written
input ahead of the meeting, so that their views are made known and
considered at the meeting. Should Directors have concerns of any
nature which cannot be resolved within the Board meeting, they have
the right to ensure that their view is recorded in the minutes.
Information & Support
The Company Secretary is responsible to the Chairman for
ensuring that all Board and Board Committee meetings are properly
conducted, that the Directors receive appropriate information prior
to meetings to enable them to make an effective contribution, and
that governance requirements are considered and implemented.
The Company maintains Directors' and Officers' Liability
insurance cover. Any Director may also take independent advice at
the Company's expense in the furtherance of his duties.
Re-election of Directors
In accordance with the Articles of Association, each year one
third of the directors (generally those who have held office for
the longest time since their election) will retire from office at
the AGM. A retiring director may
be re-elected if eligible and a director appointed by the Board
since the previous AGM may also be elected, although in the latter
case the director's period of prior appointment by the Board will
not be taken into account
for the purposes of rotation.
A copy of the Company's Articles of Association is available on
its website at:
http://www.trans-siberiangold.com/media/1253/tsg-mem-arts.pdf
Board performance evaluation
The Company has not conducted an external evaluation of the
Board. Given the recent changes to the Board membership (as
detailed above), the Board has agreed that given these changes an
internal evaluation will be carried out in the next financial
year.
Following accepted norms, it is envisaged that the internal
evaluation will be in the format of a questionnaire which will be
distributed to all of the Board, with the survey results presented
on an anonymous basis. Following an initial review of the
responses, the Chairman will discuss with the Executive and
Non-Executive Directors the general themes raised by the survey and
any other survey-related points they wish to discuss.
Directors training and development
Directors' training needs are met by a combination of internal
presentations and external speaker presentations as part of Board
and Board Committee meetings. All Directors continue to have free
access to visit our mining operations outside scheduled Board
arrangements. Board training and development needs are reviewed on
an on-going basis. The Board views external directorships as being
an important source of industry knowledge and corporate governance
best practices. Directors may take independent professional advice,
as necessary, at the Company's expense in the furtherance of their
duties.
Relations with shareholders
TSG is committed to promoting effective and open communication
with all shareholders, ensuring consistency and clarity of
disclosure at all times. We strive to be accessible to both
institutional and private investors.
The Company has invested substantially in making information
more accessible to shareholders and stakeholders. This includes a
new corporate website, new corporate presentation and re-design of
our financial reports.
TSG has a designated Director who is the primary point of
contact with the investment community and is responsible for
maintaining TSG's on-going relations with investors and
shareholders.
In addition to its annual and half-year financial reports, TSG
publishes quarterly reports to the market, which provide further
information on production and operational performance. We aim to
present a balanced and understandable assessment of our strategy,
financial position and prospects.
We make information about the Group available to shareholders
through a range of media, including our corporate website,
http://www.trans-siberiangold.com, which contains a wide range of
data of interest to institutional and private investors. We
consider our website to be an important means of communication with
our shareholders. Additionally, we utilise a number of alternative
channels to engage with shareholders and stakeholders.
Institutional Investors
A structured engagement programme is in place to ensure regular
and proactive communication with shareholders and prospective
investors.
We aim to balance investor engagement throughout the year,
providing the opportunity for frequent interaction with all
investors through a variety of forums including meetings, mining
conferences and management presentations. We aim to periodically
hold investor days to update investors on our businesses and
strategy.
Private shareholders
We communicate with shareholders throughout the year through our
electronic notification of regulatory announcements, which include
notifications of dividends, the AGM and other initiatives which we
feel may be of benefit to them.
We encourage all shareholders to participate at our Annual
General Meeting ("AGM"). At the AGM a presentation of the Group's
activities is provided. All shareholders, including private
investors, have an opportunity at the AGM to put questions to
members of the Board about our operations and performance.
Stakeholder Engagement
We need constructive relationships with our stakeholders to
optimise our business. We listen to, and work with others, to
explore the challenges we face as a business.
Our stakeholders include our employees and contractors, host
communities, civil society, unions, governments, investors and the
media. We reach out to them on local, national and international
levels.
We engage with all stakeholder groups to build meaningful
relationships and understand their expectations and aspirations.
This minimises any potential negative societal impact, optimises
the value we bring to local communities and maintains our licence
to operate.
We hold regular face-to-face meetings, conference calls and
participate in multi-stakeholder discussions. We participate in
roundtables with government and other industry representatives to
discuss new policies as well as amendments to existing
legislation.
Further information and selected examples of our engagement with
local and regional stakeholders is available at:
http://www.trans-siberiangold.com/sustainability/approach-policies/
People & Culture
We value our people and encourage the development of talented
and motivated employees to support the continued performance of our
mining operations. We strive to build a sense of purpose and
achievement among all our people in the work we do.
Our culture is based on ethical values and behaviours which are
set out on the Company's website at:
http://www.trans-siberiangold.com/sustainability/our-people. We
believe that our culture and expected standards are consistent with
industry best-practice and our strategy.
The Group's policy is to consult and discuss with employees,
through unions, staff councils and at meetings, matters likely to
affect employees' interests.
The Board ensures that the policy is enacted and our values and
behaviours are recognised and respected by first hand employee
dialogue and observation on site visits ('walking the floor') and
management reports from the SET.
Assessing our performance against the QCA Code - A summary
Principle Key points of how we deliver
DELIVER GROWTH
-------------------------------------------------------------
Establish a strategy and
business model which promote * Clearly stated & communicated on the Company's
long-term value for shareholders. website and in our corporate materials (annual
reports, investor presentations).
* How we deliver our strategy and measure progress
(KPIs) are set out in our annual report.
* Risks to our strategy and our actions to mitigate
them set out in our annual report.
-------------------------------------------------------------
Seek to understand and
meet shareholder needs * Clearly structured engagement programme in place for
and expectations. both institutional and private investors.
* Investor roadshow feedback shared and discussed at
Board meetings.
* Existing major shareholder has proportionate Board
representation and therefore a direct link exists
between 86% of the ownership of the Company and the
Board.
* Invested in more comprehensive and appealing
corporate materials & website.
* Established multiple communication channels (online
and offline).
-------------------------------------------------------------
Take into account wider
stakeholder and social * Key stakeholders are identified and their needs are
responsibilities and their understood.
implications for long-term
success.
* Website disclosures of regional and local memberships
and activities.
* Transparency of Companies House filings of Payments
to Governments.
* Clear policy on Modern Slavery and Supply-Chain
management available on the Company's website.
-------------------------------------------------------------
Embed effective risk management,
considering both opportunities * Risks to our strategy and our actions to mitigate
and threats throughout them set out in our annual report.
the organisation.
-------------------------------------------------------------
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Maintain the board as
a well-functioning, balanced * Roles and responsibilities set out online, in annual
team led by the Chair. reports and in this document.
* Details about the operation of the Board are included
in this document.
* Composition of the Board and its effectiveness is
discussed in our annual report.
* The Company has a minimum of two independent
Non-Executive Directors.
* Non-independent Directors are identified, the reasons
why and their contribution are explained.
* Board committees set out on the Company's website and
in annual reports.
* Details of time commitments and meeting attendance is
set out in this document.
-------------------------------------------------------------
Ensure that between them
the directors have the * Biographies of Directors available on the Company's
necessary up-to-date experience, website and in annual reports.
skills and capabilities.
* Board and senior management have been restructured
significantly.
* Directors have a blend of mining sector, finance and
capital markets experience.
* Diversity considered but quota system assessed to be
inappropriate.
-------------------------------------------------------------
Evaluate board performance
based on clear and relevant * An internal board evaluation will be conducted for
objectives, seeking continuous FY19.
improvement.
-------------------------------------------------------------
Promote a corporate culture
that is based on ethical * Ethical values and behaviours set out online.
values and behaviours.
* Consistent with industry best practice & our
strategy.
* Values and behaviours are recognised and respected by
first hand employee dialogue and observation on site
visits ('walking the floor') and management reports
from the SET.
-------------------------------------------------------------
Maintain governance structures
and processes that are * Governance structures and processes kept under
fit for purpose and support review.
good decision-making by
the Board.
* This statement explains how we apply the QCA Code.
* Roles and responsibilities set out on the Company's
website, in annual reports and in this document.
-------------------------------------------------------------
BUILD TRUST
Communicate how the Company
is governed and is performing * Significantly increased our engagement with
by maintaining a dialogue shareholders and stakeholders.
with shareholders and
other relevant stakeholders.
* Multi-channel communication channels to facilitate
dialogue and feedback - see online and this document.
* Governance information and documents freely
available.
-------------------------------------------------------------
As a UK company with a listing on the AIM Market of the London
Stock Exchange, TSG is required to make certain statements
regarding the way it is governed. Accordingly, this statement in
its entirety explains how TSG applies the Ten Principles of the
Corporate Governance Code as set out in the QCA Code.
Governance
Directors' Report
The Directors present their annual report and audited
consolidated financial statements for the year ended 31 December
2018.
Principal activities
Trans-Siberian Gold plc is a UK-based resources company, whose
Asacha Gold Mine in the Far East of the Russian Federation has been
in production since September 2011.
Details of the Group's activities, including key performance
indicators and expected future developments, are included in the
Chairman's Statement on pages 5 and 7 and the Operating and
Financial Review on pages 11 to 15.
Results and dividends
The financial results for the year are set out on page 38.
The Company paid an interim dividend of US$0.009 per ordinary
share, equivalent to approximately $1 million, on 26 October 2018
(2017: $4.0 million at 0.036 per ordinary share). Additionally,
after the period end, the Company paid a special interim dividend
of US$0.052 per ordinary share, equivalent to approximately $5.7
million, on 28 February 2019.
The Directors recommend a final dividend payment of $0.009 per
ordinary share, equivalent to approximately $1 million.
The Company is committed to making regular, sustainable,
dividend payments in future.
Share capital
The Company's authorised and issued share capital as at 31
December 2018 is set out in note 27 to the financial
statements.
Major shareholdings
At the reporting date, the following interests of 3% or more in
the issued share capital of the Company appeared in the register
maintained in accordance with section 808 of the Companies Act
2006:
Significant Shareholdings
Percentage of
No. of Ordinary Issued Share
Shareholder Shares Capital Notes
UFG Private Equity Fund
I LP 30,887,775 28.07%
--------------- ------------- ---------------
UFG Special Situations
Fund LP 23,141,018 21.03%
--------------- ------------- ---------------
Destin Investment Management
Ltd 15,250,461 13.86%
--------------- ------------- ---------------
UFG Investment Company
I Ltd 10,716,977 9.74%
--------------- ------------- ---------------
Wholly owned by
UFG Investors Limited 6,076,306 5.52% Charles Ryan
--------------- ------------- ---------------
Florian Fenner 3,430,528 3.1%
--------------- ------------- ---------------
Wholly owned by
Petrovka GmbH 1,715,264 1.56% Florian Fenner
--------------- ------------- ---------------
UFG Asset Management ("UFG") is an established multi-asset
investment manager and long-term majority shareholder of TSG. UFG's
interests in the Company's shares are held through various funds
and connected entities and individuals.
The shareholdings of Messrs Ryan and Fenner shown above do not
include their beneficial interests in TSG's shares held by virtue
of their connection with UFG and several of its funds.
The ultimate control of the Company is discussed in note 35 to
the financial statements.
Political and charitable donations
The Group made no political or charitable donations (2017:
$nil).
Financial instruments
Details of the Group's financial instruments and its key
financial risks are set out in note 24 to the financial statements
which forms part of this Directors' Report.
Events after the reporting date
These events are discussed in the Operating and Financial Review
on pages 11 to 15 and in note 34 to the financial statements.
Going concern
The Directors have reviewed the Group's cash flow forecast for
the period to 31 December 2020 and they believe that, taking
account of reasonably possible changes in commodity prices, trading
performance and expenditure, the Group's operations will continue
to be cash generative and that the Group has adequate resources to
continue in operational existence for the foreseeable future
without requiring additional funding.
Disabled persons
Applications for employment by disabled persons are always fully
considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled,
every effort is made to ensure that their employment within the
Group continues and that the appropriate training is arranged. It
is the policy of the Group that the training, career development
and promotion of disabled persons should, as far as possible, be
identical to that of other employees.
Employee involvement
The Group's policy is to consult and discuss with employees,
through unions, staff councils and at meetings, matters likely to
affect employees' interests.
Information about matters of concern to employees is given
through information bulletins and reports which seek to achieve a
common awareness on the part of all employees of the financial and
economic factors affecting the Group's performance.
Further information about our people and culture is set out in
the Corporate Governance Review.
Directors
The Directors who held office during the year and up to the date
of signature of the financial statements were as follows:
Board of Directors
Director Notes
Charles Ryan
------------
Retired 13
Dmitry Khilov July 2018
------------
Alexander
Dorogov
------------
Appointed 30
Eugene Antonov May 2019
------------
Robert Sasson
------------
Florian Fenner
------------
Lou Naumovski
------------
Stewart Dickson
------------
In accordance with the provisions of the Company's Articles of
Association, Messrs Charles Ryan and Lou Naumovski retire by
rotation at the forthcoming Annual General Meeting and, being
eligible, offers themselves for re-election.
Board of Directors
The Company's board currently comprises two executive directors
and five Non-Executive Directors, including the chairman. Three
Non-Executive Directors are appointed by UFG Asset Management, a
major shareholder. The other Non-Executive Directors are considered
by the board to be independent of management and free from any
business or other relationship that could materially interfere with
the exercise of his independent judgement.
The Board ordinarily meets on a bi-monthly basis to determine
strategy and to approve budgets and business plans, major capital
expenditure, acquisitions and disposals. Additional meetings are
held as appropriate to transact other business. Formal agendas,
briefing papers and reports are sent to the Board in advance of its
meetings. The Board delegates certain of its responsibilities to
two Board Committees, which have clearly defined terms of reference
as described below.
The directors have access to the advice and services of the
Company Secretary. Any director may also take independent
professional advice at the Company's expense in the furtherance of
his duties. In accordance with the Articles of Association, each
year one third of the directors (generally those who have held
office for the longest time since their election) will retire from
office at the AGM. A retiring director may be re-elected if
eligible and a director appointed by the Board may also be elected,
although in the latter case the director's period of prior
appointment by the Board will not be taken into account for the
purposes of rotation.
Audit Committee
The Audit Committee chaired by Charles Ryan, the other current
members being Robert Sasson and Stewart Dickson, meets at least
twice a year and is responsible for ensuring that the appropriate
financial reporting procedures are properly maintained and reported
on and for meeting the auditors and reviewing their reports
relating to the financial statements and internal control systems.
It is also responsible for monitoring the independence of the
auditors. Executive directors may attend meetings of the Audit
Committee by invitation; however, at least once a year the
Committee meets the auditors without executive directors being
present.
Remuneration Committee
The Remuneration Committee, chaired by Charles Ryan, the other
current members being Robert Sasson and Lou Naumovski, is
responsible for reviewing the performance of the executive
directors and other senior executives and for determining
appropriate levels of their remuneration, in consultation with
external advisers as appropriate, with due regard to the interests
of shareholders. It meets as required. The committee also makes
recommendations to the Board in respect of employee incentives,
including the granting of share options.
The Company's remuneration policy is to provide competitive
rewards for its executive directors and other senior managers,
taking into account the performance of the Company and conditions
prevailing in the employment market for executives of equivalent
status, both in terms of the level of responsibility of their
position and their achievement of recognised job qualifications and
skills. Base salaries are reviewed annually. Details of directors'
remuneration are disclosed in note 8 to the financial
statements.
It is the Company's policy that executive directors' service
contracts have no fixed term and that the notice period in those
service contracts does not exceed one year. Dmitry Khilov's (until
his contract terminated in accordance with his retirement),
Alexander Dorogov's and Eugene Antonov's service contracts provide
that either party may terminate their employment by giving six
months' written notice and that the Company may make a payment in
lieu of notice.
Further information about the Board of Directors and its
operation is set out on pages 22 to 30 and in the Corporate
Governance Review.
Qualifying third party indemnity provisions
The company has made qualifying third-party indemnity
provisions, as defined in section 234 of the Companies Act 2006,
for the benefit of the directors in respect of liabilities incurred
as a result of their office to the extent permitted by law. These
provisions remain in force at the reporting date. The Company also
maintained a directors' and officers' liability insurance policy
throughout the financial year.
Internal control
The Board is responsible for ensuring that the Group maintains
an adequate system of internal control and risk management. The
internal controls are designed to safeguard the Group's assets and
to ensure the reliability of financial information both for
internal use by management and for external reporting.
The directors are aware that no system can provide absolute
assurance against material misstatement or loss but are satisfied
that the current controls and processes to manage significant risks
are adequate with regard to the current stage of the Group's
development.
Shareholders
The Board attaches great importance to maintaining good
relationships with all its shareholders and ensures that all price
sensitive information is released to its shareholders
simultaneously in accordance with the AIM Rules for Companies and
Market Abuse Regulations.
The Board believes that the AGM provides an important
opportunity for dialogue with private shareholders. At the AGM, the
Chief Executive Officer presents a review of the Group's activities
and the directors are available to answer questions.
The Company's website, www.trans-siberiangold.com, is regularly
updated and contains a wide range of information about the
Group.
Further information about how the Group manages its relationship
with shareholders is set out in the Corporate Governance
Review.
Auditors
PricewaterhouseCoopers LLP have expressed their willingness to
continue in office and a Resolution to re-appoint them will be
proposed at the Annual General Meeting.
Statement of disclosure to auditors
Each of the directors at the time this report was approved
confirms that:
-- so far as he is aware, there is no relevant audit information
(that is, information needed by the Company's auditors in
connection with preparing their report) of which the Company's
auditors are unaware; and
-- he has taken all the steps that he ought to have taken in his
duty as a director in order to make himself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Group and Company financial statements
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the
Group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the AIM
Market.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRS
as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the directors.
The directors' responsibility also extends to the on-going
integrity of the financial statements contained therein.
By order of the Board
Alexander Dorogov
Chief Executive Officer
04 June 2019
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018
2018 2017
Notes $'000 $'000
Revenue 4 59,769 43,447
----- -------- --------
Cost of sales (37,872) (30,737)
----- -------- --------
Ore stock inventory impairment reversal
/ (charge) 20 4,028 (1,862)
----- -------- --------
Gross profit 25,925 10,848
----- -------- --------
Administrative expenses (8,393) (7,392)
----- -------- --------
Other operating income 279 411
----- -------- --------
Foreign exchange on operating activities 192 432
----- -------- --------
Operating profit 5 18,003 4,299
----- -------- --------
Finance income 11 25 97
----- -------- --------
Finance expense 12 (1,077) (1,217)
----- -------- --------
Foreign exchange on financing activities 12 (143)
----- -------- --------
Profit before taxation 16,963 3,036
----- -------- --------
Income tax on profit 14 (4,529) (520)
----- -------- --------
Profit for the financial year 12,434 2,516
----- -------- --------
Total comprehensive income for the year 12,434 2,516
----- -------- --------
Total comprehensive income for the year
is attributable to:
----- -------- --------
- Owners of the parent company 12,434 2,516
----- -------- --------
Profit per share attributable to the owners
of the parent company (expressed in cents)
----- -------- --------
- Basic and diluted 13 11.30 2.29
----- -------- --------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
Financial Statements
Consolidated Statement of Financial Position
as at 31 December 2018
Company Registration No. 01067991
2018 2017
Notes $'000 $'000 $'000 $'000
-------- -------- -------- --------
Non-current assets
----- -------- -------- -------- --------
Intangible assets 16 - 501
----- -------- -------- -------- --------
Property, plant and equipment 17 91,122 84,125
----- -------- -------- -------- --------
Inventories 20 2,651 1,166
----- -------- -------- -------- --------
93,773 85,792
----- -------- -------- -------- --------
Current assets
----- -------- -------- -------- --------
Inventories 20 11,924 12,884
----- -------- -------- -------- --------
Trade and other receivables 21 2,229 2,484
----- -------- -------- -------- --------
Current income tax receivable - 281
----- -------- -------- -------- --------
Cash and cash equivalents 9,725 7,491
----- -------- -------- -------- --------
23,878 23,140
----- -------- -------- -------- --------
Total assets 117,651 108,932
----- -------- -------- -------- --------
Current liabilities
----- -------- -------- -------- --------
Trade and other payables 22 (5,167) (5,730)
----- -------- -------- -------- --------
Current income tax payable (834) -
----- -------- -------- -------- --------
Borrowings 23 (6,522) (5,031)
----- -------- -------- -------- --------
(12,523) (10,761)
----- -------- -------- -------- --------
Non-current liabilities
----- -------- -------- -------- --------
Borrowings 23 (10,571) (14,800)
----- -------- -------- -------- --------
Provisions 25 (1,008) (1,327)
----- -------- -------- -------- --------
Deferred tax liability 26 (6,362) (4,028)
----- -------- -------- -------- --------
(17,941) (20,155)
----- -------- -------- -------- --------
Total liabilities (30,464) (30,916)
----- -------- -------- -------- --------
Net assets 87,187 78,016
----- -------- -------- -------- --------
Capital and reserves attributable to
owners of the Company
----- -------- -------- -------- --------
Share capital 27 18,988 18,988
----- -------- -------- -------- --------
Retained earnings 27 68,199 59,028
----- -------- -------- -------- --------
87,187 78,016
----- -------- -------- -------- --------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
The financial statements on pages 41 to 76 were approved by the
board of directors and authorised for issue on 04 June 2019 and are
signed on its behalf by:
Alexander Dorogov
Chief Executive Officer
Financial Statements
Company Statement of Financial Position
as at 31 December 2018
Company Registration No. 01067991
2018 2017
Notes $'000 $'000 $'000 $'000
----- ------- ----- -------
Non-current assets
----- ----- ------- ----- -------
Investments in subsidiaries 18 96,278 106,369
----- ----- ------- ----- -------
Current assets
----- ----- ------- ----- -------
Trade and other receivables 21 2,643 2,618
----- ----- ------- ----- -------
Cash and cash equivalents 6,365 1,146
----- ----- ------- ----- -------
9,008 3,764
----- ----- ------- ----- -------
Total assets 105,286 110,133
----- ----- ------- ----- -------
Current liabilities
----- ----- ------- ----- -------
Trade and other payables 22 (160) (344)
----- ----- ------- ----- -------
Total liabilities (160) (344)
----- ----- ------- ----- -------
Net assets 105,126 109,789
----- ----- ------- ----- -------
Capital and reserves attributable to
owners of the Company
----- ----- ------- ----- -------
Share capital 27 18,988 18,988
----- ----- ------- ----- -------
Retained earnings 27 86,138 90,801
----- ----- ------- ----- -------
Total equity 105,126 109,789
----- ----- ------- ----- -------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
As permitted by s408 of the Companies Act 2006, the Company has
elected not to present its own statement of comprehensive income
and related notes. The Company's loss for the year was $1,400,000
(2017: $710,000).
The financial statements on pages 41 to 76 were approved by the
board of directors and authorised for issue on 04 June 2019 and are
signed on its behalf by:
Alexander Dorogov
Chief Executive Officer
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2018
Share Retained Total
capital earnings equity
Notes $'000 $'000 $'000
Balance at 1 January 2017 18,988 60,518 79,506
----- -------- --------- -------
Year ended 31 December 2017:
----- -------- --------- -------
Profit and total comprehensive income
for the year - 2,516 2,516
----- -------- --------- -------
Dividends 15 - (4,006) (4,006)
----- -------- --------- -------
Balance at 31 December 2017 18,988 59,028 78,016
----- -------- --------- -------
Year ended 31 December 2018:
----- -------- --------- -------
Profit and total comprehensive income
for the year - 12,434 12,434
----- -------- --------- -------
Dividends 15 - (3,263) (3,263)
----- -------- --------- -------
Balance at 31 December 2018 18,988 68,199 87,187
----- -------- --------- -------
Company Statement of Changes in Equity
for the year ended 31 December 2018
Share Retained Total
capital earnings equity
Notes $'000 $'000 $'000
Balance at 1 January 2017 18,988 95,517 114,505
----- -------- --------- -------
Year ended 31 December 2017:
----- -------- --------- -------
Loss and total comprehensive income
for the year - (710) (710)
----- -------- --------- -------
Dividends 15 - (4,006) (4,006)
----- -------- --------- -------
Balance at 31 December 2017 18,988 90,801 109,789
----- -------- --------- -------
Year ended 31 December 2018:
----- -------- --------- -------
Loss and total comprehensive income
for the year - (1,400) (1,400)
----- -------- --------- -------
Dividends 15 - (3,263) (3,263)
----- -------- --------- -------
Balance at 31 December 2018 18,988 86,138 105,126
----- -------- --------- -------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
Financial Statements
Consolidated Statement of Cash Flows
for the year ended 31 December 2018
2018 2017
Notes $'000 $'000 $'000 $'000
-------- -------- -------- --------
Cash flows from operating
activities
----- -------- -------- -------- --------
Cash generated from operations 31 28,852 11,982
----- -------- -------- -------- --------
Interest paid (1,153) (1,333)
----- -------- -------- -------- --------
Income taxes paid (1,255) (475)
----- -------- -------- -------- --------
Net cash generated from operating
activities 26,444 10,174
----- -------- -------- -------- --------
Investing activities
----- -------- -------- -------- --------
Purchase of intangible assets - (501)
----- -------- -------- -------- --------
Purchase of property, plant
and equipment (17,816) (14,192)
----- -------- -------- -------- --------
Interest received 25 97
----- -------- -------- -------- --------
Net cash used in investing
activities (17,791) (14,596)
----- -------- -------- -------- --------
Financing activities
----- -------- -------- -------- --------
Proceeds of new bank loans 4,900 19,500
----- -------- -------- -------- --------
Repayment of bank borrowings (7,330) (16,500)
----- -------- -------- -------- --------
Repayment of finance leases (338) (314)
----- -------- -------- -------- --------
Dividends paid (3,263) (4,006)
----- -------- -------- -------- --------
Net cash used in financing
activities (6,031) (1,320)
----- -------- -------- -------- --------
Net increase/(decrease) in
cash and cash equivalents 2,622 (5,742)
----- -------- -------- -------- --------
Cash and cash equivalents
at beginning of year 7,491 13,097
----- -------- -------- -------- --------
Exchange (losses)/gains on
cash and cash equivalents (388) 136
----- -------- -------- -------- --------
Cash and cash equivalents
at end of year 9,725 7,491
----- -------- -------- -------- --------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
Financial Statements
Company Statement of Cash Flows
for the year ended 31 December 2018
2018 2017
Notes $'000 $'000 $'000 $'000
------- ------- ------- -------
Cash flows from operating
activities
----- ------- ------- ------- -------
Cash used in operations 32 (2,905) (2,275)
----- ------- ------- ------- -------
Investing activities
----- ------- ------- ------- -------
Repayment of loans by subsidiary
companies 11,406 7,197
----- ------- ------- ------- -------
Interest received 8 2
----- ------- ------- ------- -------
Net cash generated from investing
activities 11,414 7,199
----- ------- ------- ------- -------
Financing activities
----- ------- ------- ------- -------
Dividends paid (3,263) (4,006)
----- ------- ------- ------- -------
Net cash used in financing
activities (3,263) (4,006)
----- ------- ------- ------- -------
Net increase in cash and cash
equivalents 5,246 918
----- ------- ------- ------- -------
Cash and cash equivalents
at beginning of year 1,146 215
----- ------- ------- ------- -------
Exchange (losses)/gains on
cash and cash equivalents (27) 13
----- ------- ------- ------- -------
Cash and cash equivalents
at end of year 6,365 1,146
----- ------- ------- ------- -------
The accompanying notes on pages 47 to 76 form an integral part
of these financial statements.
Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2018
1 Accounting policies
1.1 General information
Trans-Siberian Gold plc (the Company) is a UK-based resources
company, with the objective of acquiring and developing a portfolio
of quality gold-mining assets in Russia. The Company is a public
limited company, incorporated and domiciled in England and Wales
and has two subsidiaries based in the Russian Federation, one of
which holds the licence for the Asacha deposit where gold
production commenced in 2011. The Company's registered office is 39
Parkside Cambridge CB1 1PN United Kingdom.
The registered number of the Company is 01067991. The Company's
shares are traded on the AIM Market of the London Stock
Exchange.
1.2 Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared under the
historical cost convention, on the basis of a going concern and in
line with International Financial Reporting Standards (IFRS) and
IFRIC interpretations issued by the International Accounting
Standards Board (IASB) adopted by the European Union and with those
parts of the Companies Act 2006 that are applicable to companies
reporting under IFRSs.
The consolidated financial statements are prepared in US dollars
($), rounded to the nearest thousand.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to
the consolidated financial statements, are disclosed in note 2.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
Standards, amendments and interpretations effective in 2018
A number of new and amended standards and interpretations issued
by IASB have become effective for the first time for financial
periods beginning on (or after) 1 January 2018 and have been
applied by the Group in these financial statements. None of these
new and amended standards and interpretations had a significant
effect on the Group because they are either not relevant to the
Group's activities or require accounting which is consistent with
the Group's current accounting policies.
The following new standards and interpretations have been
adopted by the Group:
IFRS 15 has replaced IAS 18 Revenue and IAS 11 Construction
Contracts as well as various interpretations previously issued by
the IFRS Interpretations Committee. The Group's accounting policies
have remained unchanged from those previously disclosed in the 2017
annual financial statements. Under IAS 18, the timing of revenue
recognition from the sale of goods was based primarily on the
transfer of risks and rewards, whereas IFRS 15 focuses instead on
when the performance obligations are met. This different approach
has not resulted in a change of timing for revenue recognition for
the Group.
IFRS 9 has replaced IAS 39 Financial Instruments: Recognition
and Measurement. The Group's principal financial assets comprise
trade and other receivables and cash and short-term deposits. All
of these financial assets continue to be classified and measured at
amortised cost. The Group's principal financial liabilities
comprise trade and other payables and loans and borrowings. All of
these financial liabilities continue to be classified and measured
at amortised cost. There are no material financial assets subject
to the expected credit loss model defined within IFRS 9, except for
cash. The level of credit risk that the Group is exposed to has not
given rise to material allowances within the expected credit loss
model.
Standards, amendments and interpretations that are not yet
effective and have not been early adopted
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early. None of these are expected to have a significant
effect on the Group, in particular:
IFRS 16 Leases (effective for periods beginning on or after 1
January 2019) requires lessees to use a single on-balance sheet
model and recognise all lease assets and liabilities on the balance
sheet. Management have completed an assessment of existing
operating contracts and do not anticipate the adoption of IFRS 16
to have a significant impact on the Group's financial statements as
the operating leases held by the Group are of low value and the
majority of the existing contracts either relate to service
agreements or contain performance obligations based on variable
terms and thus do not result in right of use assets or lease
liabilities.
1.3 Basis of consolidation
The consolidated financial statements of the Group include the
accounts of Trans-Siberian Gold plc and its subsidiaries. Where the
Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the
following elements are present: power over the investee, exposure
to variable returns from the investee and the ability of the
investor to use its power to affect those variable returns. Control
is reassessed whenever facts and circumstances indicate that there
may be a change in any of these elements of control. Subsidiaries
are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date on
which control ceases. Inter- company transactions, balances and
unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated but considered an
impairment indicator of the asset transferred. The accounting
policies and financial year ends of its subsidiaries are consistent
with those applied by the Company.
Business combinations
The consolidated financial statements incorporate the results of
the business combinations using the acquisition method of
accounting. In the consolidated statement of financial position,
the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included
in the consolidated statement of comprehensive income from the date
on which control is obtained.
1.4 Going concern
The Group's operations are cash generative and management
tightly control the level of committed expenditure to ensure that
the Group has sufficient resources available to meet its
liabilities as they fall due. Regular cash forecasts are reviewed
to assess the potential impact of factors such as changes in
commodity prices, production rates and the timing of capital
expenditure.
The Group has reported an operating profit for the year of $18.0
million, which is stated after significant non-cash depreciation
and other non-cash items. The Directors have reviewed the Group's
cash flow forecast for the period to 31 December 2020 and they
believe that, taking account of reasonably possible changes in
commodity prices, trading performance and expenditure and scheduled
repayment of bank loan facilities, the Group has adequate resources
to continue in operational existence for the foreseeable future,
wherefore the Directors are confident that the Group will continue
as a going concern and have prepared the financial statements on
that basis.
1.5 Revenue
The Company's subsidiary TZ has entered into contracts for the
sale of refined gold and silver, whereby 100% of its refined
production is sold to Russian bank VTB. Revenue arising from sales
under these contracts is recognised when the price is determinable
and the refined gold and silver has been delivered at the refinery
in accordance with the terms of the contract at which point the
performance obligation is met.
Revenue is measured based on the consideration to which the
Group expects to be entitled under the terms of a contract with a
customer. In most cases the consideration is determined by
reference to the gold market price at the point of delivery.
Consideration typically falls due upon delivery.
From 1 January 2018 the Group has adopted a new revenue
recognition standard, IFRS 15 Revenue from contracts with
customers. The adoption of this standard has not had a material
effect on the Group's existing revenue recognition policy.
1.6 Intangible assets
Intangible assets relate to the Group's deferred exploration and
evaluation expenditure. When the Group incurs expenditure on mining
properties that have not reached the stage of commercial
production, the costs of acquiring the rights to such mining
properties and related exploration and evaluation costs, including
directly attributable employment costs, are deferred where the
expected recovery of costs is considered probable by the successful
exploitation or sale of the asset. General overheads are expensed
immediately. Depreciation on property, plant and equipment used on
exploration and evaluation projects is charged to deferred costs
whilst the projects are in progress.
Exploration and evaluation costs are not amortised.
Where a feasibility study indicates that the future recovery of
costs is not probable, full provision is made in respect of any
deferred costs. Where mining properties are abandoned, deferred
expenditure is written off in full.
1.7 Property, plant and equipment
Property, plant and equipment are recorded at historical cost
less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation of property, plant and equipment is calculated
using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, being:
Buildings 3 to 20 years
Plant and machinery 4 to 12 years
Office equipment 3 to 5 years
Motor vehicles 4 to 7 years
Assets in the course of construction are not depreciated.
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income
statement.
Mining properties
Once a project reaches the stage of commercial production, the
capitalised exploration and evaluation expenditure, other than that
on buildings, machinery and equipment, related to that project is
transferred to tangible assets as mining properties.
Mining properties are depleted over the estimated life of
Asacha's Main Zone resource on a 'unit of production' basis.
Commercial resources are measured and indicated resources.
Changes in commercial resources affecting unit of production
calculations are dealt with prospectively over the revised
remaining resources.
1.8 Determination of ore reserves
The Group estimates its ore reserves and mineral resources based
on information compiled by Competent Persons as defined in
accordance with the 2012 edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves (the JORC code).
1.9 Non-current investments
In its separate financial statements, the Company recognises
investments in subsidiary companies involved in mining operations,
exploration and development at cost less any provision for
impairment.
1.10 Impairment of non-current assets
The carrying amount of the Group's non-current assets is
compared to the recoverable amount of the assets whenever events or
changes in circumstances indicate that the net book value may not
be recoverable. The recoverable amount is the higher of value in
use and the fair value less costs to sell.
Value in use is estimated by reference to the net present value
of expected future cash flows of the relevant cash generating unit.
Individual mining properties are considered to be separate income
generating units for this purpose, except where they would be
operated together as a single mining business.
If the recoverable amount is less than the carrying amount of an
asset, an impairment loss is recognised. The revised carrying
amounts are amortised in line with the Group's accounting
policy.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. The reversal
is recognised in the income statement and is limited to the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in the prior
reporting periods.
1.11 Inventories
Raw materials and consumables, which consist of fuel and
materials used in mining operations, spare parts and tools for
development activities are initially recognised at cost, and
subsequently valued at the lower of cost and net realisable
value.
Stockpiles comprise ore containing gold and are valued at the
lower of weighted average cost (including direct labour costs and
related overheads, allocated on a value/gold content) and net
realisable value (using assay data to estimate the amount of gold
contained in the stockpiles, adjusted for expected gold recovery
rates). Ore extracted is allocated to stockpiles based on estimated
grade, with grades below defined cut-off levels treated as waste
and expensed. While held in physically separate stockpiles, the
group blends the ore from each stockpile when feeding the
processing plant to achieve the resultant gold content. Ore
stockpiles which are blended together or with future ore mined when
fed to the plant are assessed as an input to the gold production
process to ensure the combined stockpiles are carried at the lower
of cost and net realisable value. Ore stockpiles which are not
blended in production are assessed separately to ensure they are
carried at the lower of cost and net realisable value.
The processing of ore in stockpiles occurs in accordance with
the Life of Mine (LoM) processing plan that has been optimised
based on the known mineral reserves, current plant capacity and
mine design. Ore tonnes contained in the stockpile which exceed the
annual tonnes to be milled as per the mine plan in the following
year, are classified as non-current inventory in the statement of
financial position.
Finished goods (comprising refined gold and silver) and work in
progress (including gold in circuit and gold dore) are stated at
the lower of weighted average cost and net realisable value. Cost
includes direct materials, direct labour costs and production
overheads, including depreciation and depletion of relevant
property, plant and equipment and mining properties. Net realisable
value represents the estimated selling price less all expected
costs to completion and costs to be incurred in selling and
distribution.
1.12 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short term highly liquid investments with
original maturities of three months or less, and, for the purpose
of the statement of cash flows, bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
consolidated statement of financial position.
1.13 Financial instruments
Financial assets and financial liabilities are recognised in the
Group statement of financial position when the Group becomes a
party to the contractual provisions of the instrument. Financial
assets and financial liabilities are only offset and the net amount
reported in the consolidated statement of financial position and
statement of comprehensive income when there is a currently
enforceable legal right to offset the recognised amounts and the
Group intends to settle on a net basis or realise the asset and
liability simultaneously.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in
their entirety at either amortised cost or fair value, depending on
the classification of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured
subsequently at amortised cost using effective interest rate
method:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
The Group does not hold any financial assets that meet
conditions for subsequent recognition at fair value through profit
or loss ("FVTPL") or at fair value through other comprehensive
income ("FVTOCI").
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
("ECL") on financial assets that are measured at amortised cost
which comprise mainly trade receivables. The amount of expected
credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective
financial instrument. The Group always recognises lifetime ECL on
trade receivables. The expected credit losses on these financial
assets are estimated using a provision matrix based on the Group's
historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of
conditions at the reporting date, including time value of money
where appropriate.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All purchases of
financial liabilities are recorded on trade date, being the date on
which the Group becomes party to the contractual requirements of
the financial liability. Unless otherwise indicated the carrying
amounts of the Group's financial liabilities approximate to their
fair values. The Group's financial liabilities consist only of
financial liabilities measured at amortised cost.
Financial liabilities measured subsequently at amortised
cost
Financial liabilities that are not (i) contingent consideration
of an acquirer in a business combination, (ii) held for trading, or
(iii) designated as at FVTPL, are measured subsequently at
amortised cost using the effective interest method. The Group's
financial liabilities measured at amortised cost comprise trade and
other payables, and loans and borrowings. The effective interest
method is a method of calculating the amortised cost of a financial
asset/liability and of allocating interest income/expense over the
relevant period. The effective interest rate is the rate that
discounts estimated future cash receipts/payments through the
expected life of the financial asset/liability or, where
appropriate, a shorter period.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to the
statement of comprehensive income.
1.14 Equity instruments
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The Group's ordinary shares are classified as equity
instruments.
1.15 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
Current tax is the expected tax payable or recoverable on the
taxable profit or loss for the year, using rates enacted at the
reporting date and any adjustments to the tax payable in respect of
previous years.
Deferred tax
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted by
the reporting date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
1.16 Provisions
Provisions for decommissioning, environmental restoration and
legal claims are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Group companies are generally required to restore mine and
processing sites at the end of their producing lives to a condition
acceptable to the relevant authorities and consistent with the
Group's environmental policies. The expected cost of any committed
decommissioning or restoration programme, discounted to its net
present value where the effect of discounting is material, is
provided and capitalised at the beginning of each project. The
capitalised cost is amortised over the life of the operation and
the increase in the net present value of the provision for the
expected cost is included with interest and similar charges.
The costs of on-going programmes to prevent and control
pollution and to rehabilitate the environment are charged to profit
or loss as incurred.
1.17 Retirement benefits
Contributions to employees' defined contribution personal
pension plans are recognised as an expense in profit or loss as the
services giving rise to the Group's obligations are rendered by the
employees.
1.18 Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases.
Rentals payable under operating leases, including any lease
incentives received, are charged to income on a straight line basis
over the term of the relevant lease except where another more
systematic basis is more representative of the time pattern in
which economic benefits from the lease asset are consumed.
1.19 Foreign exchange
Functional and presentation currency
Items included in the financial information of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial information is presented in
US dollars ($), which is the functional and presentation currency
of the Company and the functional currency of its subsidiaries. The
exchange rates on 31 December 2018 were GBP1:$1.2769 (2017:
GBP1:$1.3510) and $1:RUB69.4706 (2017: $1:RUB57.6002). The average
rates applied to transactions during the year were GBP1:$1.3353
(2017: GBP1:$1.2886) and $1:RUB62.9264 (2017: $1:RUB58.2982).
Transactions and balances
Foreign currency transactions are translated into the functional
currency at the average exchange rate ruling during the month in
which the transactions occur. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss. Foreign exchange gains and losses resulting from
the translation of cash, cash equivalents and borrowings
denominated in foreign currencies are shown as financing
activities; all other foreign exchange gains and losses are shown
as operating activities.
1.20 Borrowings cost
The Group capitalises borrowing costs directly attributable to
the acquisition, construction or production of a qualifying asset
(one that takes a substantial period of time to get ready for use
or sale) as part of the cost of that asset. Finance costs incurred
in respect of the Group's general borrowings are expensed in profit
or loss as incurred.
1.21 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision makers.
The chief operating decision makers have been identified as the
Chief Executive Officer and the non-executive board members.
The Group has one operating segment in Russia which has
production, exploration and development activities. Its operating
results are regularly reviewed by the Group's chief operating
decision makers in order to make decisions about the allocation of
resources and to assess its performance. The Group's activities in
the United Kingdom are of an administrative and corporate nature
and do not form part of the operating segment.
2 Judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Key sources of estimation uncertainty
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results.
The more significant areas requiring the use of management
estimates and assumptions relate to mineral resources that are the
basis of future cash flow estimates and unit-of-production
depreciation, depletion and amortisation calculations;
decommissioning, site restoration, environmental costs and closure
obligations; estimates of recoverable gold and other materials; and
asset impairments.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Mining properties and property plant and equipment
The recoverability of the amounts shown in the Group statement
of financial position in relation to mining properties and
property, plant and equipment (and also the carrying value of the
Company's investments in its subsidiaries) are dependent upon
compliance with the terms of the relevant mineral rights licences,
extensions of the terms of those licences beyond their current
expiry dates, the political, economic and legislative stability of
the regions in which the Group operates, the Group's ability to
maintain the necessary financing to fulfil its obligations as they
arise, the successful extraction of the defined mineral resources
and the future profitable production or proceeds from the disposal
of properties. This is discussed further in note 17.
Ore stocks
Stock is valued at the lower of cost or net realisable value.
Costs that are incurred in or benefit the production process are
accumulated as ore stockpiles, gold in process and gold bullion.
Although the quantities of recoverable metal are reconciled by
comparing the grades of ore to the quantities of gold and silver
actually recovered (metallurgical balancing), the nature of the
process inherently limits the ability to precisely monitor
recoverability levels. Net realisable value tests are performed at
least annually and represent the estimated future sales price of
the product based on contained gold and metals prices, less
estimated costs to complete production and bring the product to
sale. These net realisable tests take into account management's
estimate of the maximum values to be realised from ore stockpiles,
in some instances through blending of different ore stockpile
grades, prior to these being added to future processing plant
feeds. Judgement is required in assessing whether stockpiles of
different grades should be tested individually, or tested as inputs
to the gold production process, as detailed in the Group's
accounting policy. This is discussed further in note 20.
Decommissioning, site restoration and environmental costs
The Group's mining and exploration activities are subject to
various laws and regulations governing the protection of the
environment. The Group recognises management's best estimate for
asset retirement obligations in the period in which they are
incurred. Actual costs incurred in future periods could differ
materially from the estimates. Additionally, future changes to
environmental laws and regulations, life of mine estimates and
discount rates could affect the carrying amount of this provision.
Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited
to the life of mine. This is discussed further in note 25.
Critical judgements
The following judgements (apart from those involving estimates)
have had the most significant effect on amounts recognised in the
financial statements.
Deferred tax
The Group has incurred trading losses in previous periods which
give rise to potential deferred tax assets. The recognition of the
deferred tax asset is dependent upon the Group making sufficient
taxable profits in future periods to utilise those losses. This is
discussed further in note 26.
Contingencies
By their nature, contingencies will only be resolved when one or
more future events occur or fail to occur. The assessment of such
contingencies inherently involves the exercise of significant
judgement and estimates of the outcome of future events. This is
discussed further in note 30.
Determination of functional currency
The Group has determined US dollar as the functional currency of
its Russian operating subsidiary TZ on the basis that it is the
currency that influences its sale prices (first primary indicator)
and in which funds from financing activities are generated and
retained (secondary indicators).
Significant judgement has been exercised in determining the
functional currency of TZ, since the secondary primary indicator
related to the currency influencing TZ's labour, materials and
other costs of providing goods or services is Russian rouble.
3 Segment information
The Group's operations are entirely focused on gold production
and exploration and development activities within the Russian
Federation, with its corporate head office in the UK.
The operating segment has been identified on the basis of
internal reports about the components of the Group.
The Group has one reportable segment, being operations in
Russia, whose accounting policies are in line with those set out in
note 1. The operating results of this segment are regularly
reviewed by the Group's chief operating decision makers in order to
make decisions about the allocation of resources and to assess
their performance.
With the exception of UK administrative costs amounting to
$2,723,000 (2017: $2,350,000), the numbers in the primary
statements reflect the results of the sole operating segment. All
revenue arises from the production of gold with silver as a
by-product which is sold to one customer in Russia. All non-current
assets are located in Russia.
4 Revenue
2018 2017
$'000 $'000
Revenue analysed by product
------ ------
Gold 58,122 42,691
------ ------
Silver 1,647 756
------ ------
59,769 43,447
------ ------
5 Operating profit
2018 2017
$'000 $'000
Operating profit for the year is stated after
charging/(crediting):
------- ------
Depreciation/depletion of owned property, plant
and equipment 9,873 7,744
------- ------
Depreciation of property, plant and equipment
held under finance leases 95 220
------- ------
Loss on disposal of property, plant and equipment 148 248
------- ------
Inventories impairment losses (reversed)/recognised (4,028) 1,862
------- ------
Operating lease charges 197 481
------- ------
6 Auditors' remuneration
2018 2017
$'000 $'000
Fees payable to the Company's auditors and associates:
------ ------
For audit services
------ ------
Audit of the financial statements of the Group
and Company 62 71
------ ------
Audit of the financial statements of the Company's
subsidiaries 108 105
------ ------
170 176
------ ------
7 Employees
The average monthly number of persons (including directors)
employed by the Group and Company during the year was:
Group Company
2018 2017 2018 2017
Number Number Number Number
------- ------- ------- -------
Operations 648 629 - -
------- ------- ------- -------
Administration 79 64 3 2
------- ------- ------- -------
727 693 3 2
------- ------- ------- -------
Their aggregate remuneration comprised:
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------ ------
Wages and salaries 14,767 14,403 2,106 1,481
------ ------ ------ ------
Social security costs 3,219 2,819 - 83
------ ------ ------ ------
Pension costs - 8 - 8
------ ------ ------ ------
17,986 17,230 2,106 1,572
------ ------ ------ ------
Employee benefit costs have been capitalised under mining
properties $1,274,000 (2017: $1,964,000) and property, plant and
equipment $462,000 (2017: $646,000). Employee benefit costs charged
to inventories amounted to $1,040,000 (2017: $2,449,000). Employee
benefit expense charged to the statement of comprehensive income
amounted to $15,210,000 (2017: $12,171,000).
8 Directors' remuneration
2018 2017
$'000 $'000
Remuneration for qualifying services 2,224 1,354
------- ------
Company pension contributions to defined contribution
schemes - 8
------- ------
2,224 1,362
------- ------
Remuneration disclosed above includes the following amounts paid
to the highest paid director:
2018 2017
$'000 $'000
Remuneration for qualifying services 1,471 602
------- ------
Company pension contributions to defined contribution
schemes - 8
------- ------
The following table shows the directors who served during the
year or in the previous year together with an analysis of their
remuneration:
Total Total
Salary Fees Bonus Termination 2018 2017
$'000 $'000 $'000 $'000 $'000 $'000
Executive directors
------- ------ ------ ----------- ------ ------
Dmitry Khilov 234 - 224 1,013 1,471 547
------- ------ ------ ----------- ------ ------
Alexander Dorogov 312 - 242 - 554 9
------- ------ ------ ----------- ------ ------
Simon Olsen - - - - - 610
------- ------ ------ ----------- ------ ------
Non-Executive Directors
------ ------ ----------- ------ ------
Charles Ryan - 38 - - 38 64
------- ------ ------ ----------- ------ ------
Robert Sasson - 38 - - 38 64
------- ------ ------ ----------- ------ ------
Stewart Dickson - 13 - - 13 4
------- ------ ------ ----------- ------ ------
Lou Naumovski - 72 - - 72 25
------- ------ ------ ----------- ------ ------
Florian Fenner - 38 - - 38 13
------- ------ ------ ----------- ------ ------
Peter Burnell - - - - - 26
------- ------ ------ ----------- ------ ------
546 199 466 1,013 2,224 1,362
------- ------ ------ ----------- ------ ------
During the year, management consultancy services have been
acquired from Feldi Limited, of which Stewart Dickson is a director
and a shareholder, for $165,000 (2017: $105,000).
The following tables show the beneficial interests of the
directors who held office at the end of the year in the ordinary
shares of the Company by virtue of those shareholdings (except for
the beneficial interests of Messrs Fenner, Sasson and Ryan by
virtue of their connection with the Company's major shareholder UFG
Asset Management):
Charles Florian Robert
Ryan Fenner Sasson
Number Number Number
Shares
--------- ---------- -------
6,076,306
At 1 January 2018 (1) 15,862,769 709,279
--------- ---------- -------
Additions - - -
--------- ---------- -------
10,716,977
Disposals - (2) -
--------- ---------- -------
At 31 December 2018 6,076,306 5,145,792 709,279
--------- ---------- -------
1 Held via UFG Investors Limited
2 Beneficial interest was held via UFG Investment Company I
Limited
9 Share-based payments
There were no share-based payments in 2018 (2017: none).
10 Pension arrangements
The Group does not provide a pension scheme for its directors or
employees (2017: none).
11 Finance income
2018 2017
$'000 $'000
Interest income on short-term bank deposits 25 97
------ ------
12 Finance expense
2018 2017
$'000 $'000
Interest payable on long term bank debt 904 1,046
------ ------
Finance charges under finance lease 42 77
------ ------
Accretion of decommissioning provision 131 94
------ ------
1,077 1,217
------ ------
13 Earnings per share
The basic and diluted earnings per share for the year amounted
to 11.30 cents per share (2017: 2.29 cents per share). The
calculation of basic profit per 10p ordinary share is based on the
retained profit for the year ended 31 December 2018 of $12,434,000
(2017: $2,516,000) and on 110,053,073 (2017: 110,053,073) ordinary
shares, being the weighted average number of ordinary shares in
issue and ranking for dividends during the year.
The Group had no dilutive potential ordinary shares in either
year that would serve to reduce the profit per ordinary share.
There is therefore no difference between the basic and diluted
profit per share for either year.
14 Income tax on profit
2018 2017
$'000 $'000
Current tax
------ ------
Current tax - UK Corporation tax - -
------ ------
Current tax - Russian Corporation tax 2,195 368
------ ------
Total current tax 2,195 368
------ ------
Deferred tax
------ ------
Origination and reversal of temporary differences 2,334 152
------ ------
Changes in tax rates - -
------ ------
Total deferred tax 2,334 152
------ ------
Total tax charge for the year 4,529 520
------ ------
Factors affecting corporation tax for the year
From 1 April 2017 the UK Corporation tax rate reduced from 20%
to 19%, giving a weighted average rate for the comparative year of
19.25%.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
2018 2017
$'000 $'000
Profit before taxation 16,963 3,036
------ ------
Expected tax charge based on the UK corporation
tax rate of 19% (2017: 19.25%) 3,223 584
------ ------
Tax effect of expenses that are not deductible
in determining taxable profit 993 127
------ ------
Tax effect of income not taxable in determining
taxable profit (346) (344)
------ ------
Other permanent differences 125 (107)
------ ------
Effect of overseas tax rates 183 28
------ ------
Foreign exchange differences 80 95
------ ------
Unrecognised taxable losses carried forward 271 137
------ ------
Taxation charge for the year 4,529 520
------ ------
Factors affecting future tax charges
With effect from 1 April 2020, the UK corporation tax rate will
be reduced to 17%. This change, which was enacted on 15 September
2016, is not expected to have a significant impact on the Company
and the Group.
15 Dividends
2018 2017
$'000 $'000
Final dividend for 2017 of $0.021 per ordinary
share 2,295 -
------ ------
Interim dividend of $0.009 (2017: $0.036) per
ordinary share 968 4,006
------ ------
3,263 4,006
------ ------
16 Intangible assets
Deferred
exploration
and evaluation
costs
Group $'000
Cost
---------------
At 1 January 2017 2,106
---------------
Additions 501
---------------
Transfers (2,106)
---------------
At 31 December 2017 501
---------------
Additions -
---------------
Transferred to mining properties (501)
---------------
At 31 December 2018 -
---------------
Amortisation
---------------
At 1 January 2018 and 31 December 2018 -
---------------
Carrying amount
---------------
At 31 December 2018 -
---------------
At 31 December 2017 501
---------------
At 1 January 2017 2,106
---------------
The Company had no intangible assets at 31 December 2018 or 31
December 2017.
The Group's intangible assets related to the deferred
exploration and evaluation expenditure incurred on the "Asacha
East" zone, a separate orebody within the Asacha mineral rights
licence. During the year the intangible assets were transferred to
mining properties following the successful completion of the
related exploration and evaluation works (note 17).
17 Property, plant and equipment
Assets
Mining Plant Office Motor under
properties Buildings and machinery equipment vehicles construction Total
Group $'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
----------- --------- -------------- ---------- --------- ------------- -------
At 1 January 2017 65,271 79,028 20,161 451 3,176 1,144 169,231
----------- --------- -------------- ---------- --------- ------------- -------
Additions 7,395 787 1,429 17 2,952 3,242 15,822
----------- --------- -------------- ---------- --------- ------------- -------
Disposals - - (1,426) (15) (510) - (1,951)
----------- --------- -------------- ---------- --------- ------------- -------
Transfers - 94 400 - - (494) -
----------- --------- -------------- ---------- --------- ------------- -------
Transferred from intangible
assets 2,106 - - - - - 2,106
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2017 74,772 79,909 20,564 453 5,618 3,892 185,208
----------- --------- -------------- ---------- --------- ------------- -------
Additions 13,560 190 2,455 11 254 1,895 18,365
----------- --------- -------------- ---------- --------- ------------- -------
Disposals - - (1,211) (45) (181) - (1,437)
----------- --------- -------------- ---------- --------- ------------- -------
Transfers - 4,316 98 - - (4,414) -
----------- --------- -------------- ---------- --------- ------------- -------
Transferred from intangible
assets 501 - - - - - 501
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2018 88,833 84,415 21,906 419 5,691 1,373 202,637
----------- --------- -------------- ---------- --------- ------------- -------
Depreciation
----------- --------- -------------- ---------- --------- ------------- -------
At 1 January 2017 34,782 43,366 11,203 441 2,371 183 92,346
----------- --------- -------------- ---------- --------- ------------- -------
Depreciation charge 3,014 5,408 1,591 8 419 - 10,440
----------- --------- -------------- ---------- --------- ------------- -------
Disposals - - (1,178) (15) (510) - (1,703)
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2017 37,796 48,774 11,616 434 2,280 183 101,083
----------- --------- -------------- ---------- --------- ------------- -------
Depreciation charge 3,607 5,859 1,367 6 874 - 11,713
----------- --------- -------------- ---------- --------- ------------- -------
Disposals - - (1,063) (41) (177) - (1,281)
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2018 41,403 54,633 11,920 399 2,977 183 111,515
----------- --------- -------------- ---------- --------- ------------- -------
Carrying amount
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2018 47,430 29,782 9,986 20 2,714 1,190 91,122
----------- --------- -------------- ---------- --------- ------------- -------
At 31 December 2017 36,976 31,135 8,948 19 3,338 3,709 84,125
----------- --------- -------------- ---------- --------- ------------- -------
At 1 January 2017 30,489 35,662 8,958 10 805 961 76,885
----------- --------- -------------- ---------- --------- ------------- -------
The Company had no property, plant and equipment at 31 December
2018 or 31 December 2017.
The net carrying value of tangible fixed assets includes the
following in respect of assets held under finance leases or hire
purchase contracts.
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------- ------- ------- ------
Plant and machinery 127 222 - -
------- ------- ------- ------
Depreciation charge for the
year in respect of leased
assets 95 220 - -
------- ------- ------- ------
Mining properties
Mining properties assets relate to the Asachinskoye (Asacha)
mining licence held by the Company's subsidiary TZ.
On 8 September 1994, the Kamchatka Department of the Geological
Committee of the Russian Ministry for Natural Resources issued a
licence, after tender, to TZ for the exploration and development of
the Asacha minerals deposit in Kamchatka. The licence includes the
right to extract gold and silver and, pursuant to the decision of
the Federal Agency on Subsoil Use on 12 September 2013, its term
was extended for five years until 1 September 2018. On 26 June 2018
the Group received a further six-year extension to the licence term
until 31 December 2024.
Capitalisation of depreciation/depletion
$477,000 (2017: $527,000) of the depreciation charge is included
in additions to mining properties
$55,000 (2017: $110,000) of the depreciation charge is included
in additions to assets under construction
$1,213,000 (2017: $1,839,000) of the depreciation and mining
properties' depletion charges are included in inventory
18 Investments in subsidiaries
Group Company
2018 2017 2018 2017
Notes $'000 $'000 $'000 $'000
------ ------ ------- -------
Investments in subsidiaries 19 - - 73,976 73,976
----- ------ ------ ------- -------
Loans to subsidiaries - - 22,302 32,393
----- ------ ------ ------- -------
- - 96,278 106,369
----- ------ ------ ------- -------
The loans to subsidiaries are unsecured, bear interest between
6% and 8% and settlement is not likely to occur in the foreseable
future.
At the reporting date, TZ had sufficient available highly liquid
assets to repay the loans if they would have been demanded on that
date, therefore the expected credit losses for this asset are
considered to be immaterial.
Movements in non-current investments
Investments Loans to
in subsidiaries subsidiaries Total
Company $'000 $'000 $'000
Cost
---------------- ------------- --------
At 1 January 2017 73,976 37,952 111,928
---------------- ------------- --------
Additions (interest accrued) - 1,638 1,638
---------------- ------------- --------
Repayments - (7,197) (7,197)
---------------- ------------- --------
At 31 December 2017 73,976 32,393 106,369
---------------- ------------- --------
Additions (interest accrued) - 1,315 1,315
---------------- ------------- --------
Repayments - (11,406) (11,406)
---------------- ------------- --------
At 31 December 2018 73,976 22,302 96,278
---------------- ------------- --------
Carrying amount
---------------- ------------- --------
At 31 December 2018 73,976 22,302 96,278
---------------- ------------- --------
At 31 December 2017 73,976 32,393 106,369
---------------- ------------- --------
At 1 January 2017 73,976 37,952 111,928
---------------- ------------- --------
19 Subsidiaries
Details of the Company's subsidiaries at 31 December 2018 are as
follows:
Nature of Class of shares % Held
Name of undertaking Registered office business held Direct
Office 55, 15A Leninskiy
OOO Trans-Siberian Prospekt, 119071 Moscow, Participating
Gold Management Russian Federation Administration shares 100
---------------------------- --------------- ---------------- -------
1a Uralskaya Str., Elizovo,
Elizovo district, 684007
ZAO Trevozhnoye Kamchatskiy Kray, Russian
Zarevo Federation Mining Common shares 100
---------------------------- --------------- ---------------- -------
20 Inventories
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------- ------- ------- ------
Non-current:
------- ------- ------- ------
Ore stocks 2,651 5,194 - -
------- ------- ------- ------
Less accumulated provision - (4,028) -
------- ------- ------- ------
2,651 1,166 - -
------- ------- ------- ------
Current:
------- ------- ------- ------
Finished silver 24 - - -
------- ------- ------- ------
Gold in progress 1,395 4,858 - -
------- ------- ------- ------
Silver in progress 47 1,418 - -
------- ------- ------- ------
Ore stocks 2,596 505 - -
------- ------- ------- ------
Raw materials and consumables 7,862 6,103 - -
------- ------- ------- ------
11,924 12,884 - -
------- ------- ------- ------
14,575 14,050 - -
------- ------- ------- ------
Finished silver, gold in progress, silver in progress and ore
stocks include mining properties depletion $1,213,000 (2017:
$1,135,000).
During 2018, for the first time, the Group has commenced
significant blending of lower grade ore with higher grades when
feeding the processing plant. Consequently, management have
reassessed their estimate of the maximum values to be realised from
the existing ore stockpiles reflecting the planned blended feed of
such stockpiles to the mill on the basis that they are blended with
future ore mined. The net realisable value tests demonstrate
significant headroom with no reasonable sensitivity indicating
impairment. As a result, a reversal of the previously recognised
impairment provision in the amount of $4,028,000 has been
recognised in 2018. In previous years, no significant blending of
ore grades was practiced and the net realisable values of ore
stockpiles were assessed separately on non-blending basis giving
rise to an accumulated impairment provision of $4,028,000 at 31
December 2017. Had the same assessment basis been applied in 2018
an accumulated impairment provision of $2,097,000 would be required
at the reporting date.
21 Trade and other receivables
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------ ------
Trade receivables 70 144 - -
------ ------ ------ ------
Receivables from subsidiary
companies - - 2,605 2,585
------ ------ ------ ------
Other receivables 951 1,108 7 14
------ ------ ------ ------
Prepayments and accrued income 1,208 1,232 31 19
------ ------ ------ ------
2,229 2,484 2,643 2,618
------ ------ ------ ------
Included within the Group's other receivables is $876,000 (2017:
$1,051,000) of Russian VAT recoverable at the year end. During the
year $4,232,000 (2017: $3,884,000) of Russian VAT was
recovered.
Amounts receivable from subsidiary companies include short-term
loans of $1,361,000 (2017: $1,361,000). The loans are unsecured,
bear no interest and repayable on demand.
22 Trade and other payables
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------ ------
Trade payables 1,748 2,500 23 79
------ ------ ------ ------
Amounts due to subsidiary
companies - - 37 45
------ ------ ------ ------
Social security and other
taxes 12 12 - -
------ ------ ------ ------
Other payables 3,322 3,114 15 116
------ ------ ------ ------
Accruals and deferred income 85 104 85 104
------ ------ ------ ------
5,167 5,730 160 344
------ ------ ------ ------
Amounts due to subsidiaries are unsecured, interest free and
repayable on demand.
23 Borrowings
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------- ------
Current:
------ ------ ------- ------
Bank borrowings 6,522 4,743 - -
------ ------ ------- ------
Finance lease obligations - 288 - -
------ ------ ------- ------
6,522 5,031 - -
------ ------ ------- ------
Non-current:
------ ------ ------- ------
Bank borrowings 10,571 14,800 - -
------ ------ ------- ------
Finance lease obligations - - - -
------ ------ ------- ------
10,571 14,800 - -
------ ------ ------- ------
17,093 19,831 - -
------ ------ ------- ------
Movement in borrowings is analysed as follows:
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------- -------- ------- ------
At 1 January 19,831 16,755 - -
------- -------- ------- ------
Proceeds from issue of loans 4,900 19,500 - -
------- -------- ------- ------
Repayment of loans and accrued
interest (7,330) (16,507) - -
------- -------- ------- ------
Release of debt issue costs - 221 - -
------- -------- ------- ------
Net movement in finance leases (308) (138) - -
------- -------- ------- ------
At 31 December 17,093 19,831 - -
------- -------- ------- ------
On 19 June 2017, the Company's wholly owned subsidiary TZ
entered into an agreement with VTB Bank for a $15,000,000 loan
facility for a 5-year term, repayable in equal amounts quarterly
with the first repayment effective seven calendar quarters after
initial drawdown.
On 21 June 2017, TZ entered into a further agreement with VTB
Bank for an additional $5,000,000 revolving credit facility for a
3-year term.
Both facilities bear annual interest at 6.2% and are secured
against the equity and fixed assets of TZ only. The Group is
currently in the process of finalising the equity and fixed assets
security documentation. Additionally, TZ was required to enter into
an exclusive gold sales agreement with VTB Bank effective from
January 2018.
The new facilities were used to repay TZ's existing two loans
with Sberbank amounting to $16,507,000, and to provide additional
funds for working capital and other corporate purposes.
24 Financial instruments
The Group is exposed through its operations to the following
financial risks: liquidity risk, credit risk, cash flow interest
rate risk, commodity price risk and foreign exchange risk. The
Board seeks to minimise the Group's exposure to those risks by
reviewing and agreeing policies for managing each financial risk
and monitoring them on a regular basis. No formal policies have
been put in place in order to hedge the Group's activities to the
exposure to interest risk, commodity price risk or currency risk,
however these may be considered in future. No derivatives or hedges
were entered into during the year.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its policies and processes for
managing those risks or the methods used to measure them unless
otherwise stated in this note.
Principal financial instruments
The Group's principal financial instruments, from which
financial instrument risk arises, comprise long and short-term
loans, cash and short-term deposits as well as trade and other
receivables and trade and other payables which arise directly from
its operations.
The table below shows the carrying value of the Group's
financial assets and financial liabilities.
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------- ------
Carrying amount of financial
assets
------ ------ ------- ------
Trade and other receivable 145 201 24,911 34,981
------ ------ ------- ------
Cash and cash equivalents 9,725 7,491 6,365 1,146
------ ------ ------- ------
Carrying amount of financial
liabilities
------ ------ ------- ------
Measured at amortised cost 19,116 22,753 160 344
------ ------ ------- ------
Liquidity risk
The Group's policy is to ensure that it has sufficient cash to
allow it to meet its liabilities when they become due. Cash
forecasts identifying the Group's funding and liquidity
requirements are reviewed regularly by the Board.
The contractual maturities of the Group's financial liabilities
(which are all carried at amortised cost) are shown in the table
below:
Carrying Contractual 6 months 6 to 12 12 to 36
Group amount cash flows or less months months
2018 $'000 $'000 $'000 $'000 $'000
Current financial
liabilities:
-------- ----------- -------- ------- --------
Trade and other payables 2,023 2,023 2,023 - -
-------- ----------- -------- ------- --------
Loans and borrowings 6,500 6,500 - 6,500 -
-------- ----------- -------- ------- --------
Interest 22 426 224 202 -
-------- ----------- -------- ------- --------
Non-current financial
liabilities:
-------- ----------- -------- ------- --------
Loans and borrowings 10,571 10,571 - - 10,571
-------- ----------- -------- ------- --------
Interest - 1,557 328 328 901
-------- ----------- -------- ------- --------
19,116 21,077 2,575 7,030 11,472
-------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 36
Company amount cash flows or less months months
2018 $'000 $'000 $'000 $'000 $'000
Current financial
liabilities:
-------- ----------- -------- ------- --------
Trade and other payables 160 160 160 - -
-------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 36
Group amount cash flows or less months months
2017 $'000 $'000 $'000 $'000 $'000
Current financial
liabilities:
-------- ----------- -------- ------- --------
Trade and other payables 2,922 2,922 2,922 - -
-------- ----------- -------- ------- --------
Loans and borrowings 4,700 4,700 - 4,700 -
-------- ----------- -------- ------- --------
Interest 43 721 145 146 430
-------- ----------- -------- ------- --------
Finance lease obligations 288 298 149 149 -
-------- ----------- -------- ------- --------
Non-current financial
liabilities:
-------- ----------- -------- ------- --------
Loans and borrowings 14,800 14,800 - - 14,800
-------- ----------- -------- ------- --------
Interest - 4,100 458 460 3,182
-------- ----------- -------- ------- --------
Finance lease obligations - - - - -
-------- ----------- -------- ------- --------
22,753 27,541 3,674 5,455 18,412
-------- ----------- -------- ------- --------
Carrying Contractual 6 months 6 to 12 12 to 36
Company amount cash flows or less months months
2017 $'000 $'000 $'000 $'000 $'000
Current financial
liabilities:
-------- ----------- -------- ------- --------
Trade and other payables 344 344 344 - -
-------- ----------- -------- ------- --------
Credit risk
The credit risk on liquid funds is limited because the
counterparties are banks with credit ratings assigned by
international credit rating agencies. The Company has made
investments in and loans to one of its subsidiaries, recovery of
which is dependent on
the future income generation of that subsidiary.
The Group and Company's maximum exposure to credit risk by class
of individual financial instrument is shown in the table below:
2018 2017
Carrying Carrying
value Maximum exposure value Maximum exposure
Group $'000 $'000 $'000 $'000
-------- ---------------- -------- ----------------
Current financial assets:
-------- ---------------- -------- ----------------
Trade and other receivables 145 145 201 201
-------- ---------------- -------- ----------------
Cash and cash equivalents 9,725 9,725 7,491 7,491
-------- ---------------- -------- ----------------
9,870 9,870 7,692 7,692
-------- ---------------- -------- ----------------
2018 2017
Carrying Carrying
value Maximum exposure value Maximum exposure
Company $'000 $'000 $'000 $'000
-------- ---------------- -------- ----------------
Current financial assets:
-------- ---------------- -------- ----------------
Trade and other receivables 4 4 1,224 1,224
-------- ---------------- -------- ----------------
Loans to subsidiaries 2,605 2,605 1,364 1,364
-------- ---------------- -------- ----------------
Cash and cash equivalents 6,365 6,365 1,146 1,146
-------- ---------------- -------- ----------------
Non-current financial assets:
-------- ---------------- -------- ----------------
Loans to subsidiaries 22,302 22,302 32,393 32,393
-------- ---------------- -------- ----------------
31,276 31,276 36,127 36,127
-------- ---------------- -------- ----------------
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its
deposits of cash and cash equivalents with banks. The cash balances
maintained by the Group are managed in order to ensure that the
maximum level of interest is received for the available funds but
without affecting working capital flexibility.
The Group's borrowings are all issued at fixed rates and do not
expose the Group to cash flow interest rate risk.
The Group has no other debt or fixed rate finance leases. No
subsidiary of the Group is permitted to enter into any borrowing
facility or lease agreement without the Company's prior
consent.
The interest rate profile of the Group and Company's financial
assets at the reporting date was as follows:
Group Company
2018 2017 2018 2017
Cash $'000 $'000 $'000 $'000
------ ------ ------ ------
US dollars Fixed rate 6,214 665 6,214 665
--------------------- ------ ------ ------ ------
US dollars Floating rate 2,924 4,219 - -
--------------------- ------ ------ ------ ------
Sterling Non-interest bearing 147 475 147 475
--------------------- ------ ------ ------ ------
Sterling Floating rate 4 4 4 4
--------------------- ------ ------ ------ ------
Roubles Fixed rate 100 1,910 - -
--------------------- ------ ------ ------ ------
Roubles Floating rate 336 218 - 2
--------------------- ------ ------ ------ ------
9,725 7,491 6,365 1,146
--------------------------------- ------ ------ ------ ------
Group Company
2018 2017 2018 2017
Loans $'000 $'000 $'000 $'000
------ ------ ------ ------
US dollars Fixed rate - 6.2% 17,071 19,500 - -
------------------ ------ ------ ------ ------
17,071 19,500 - -
------------------------------ ------ ------ ------ ------
The weighted average interest rate payable during the year was
6.2% (2017: 7.7%) on fixed rate US dollar loans.
The weighted average interest rates earned during the year were
0.0% (2017: 0.0%) on floating rate sterling cash balances, 0.10%
(2017: 0.10%) on floating rate US dollar balances and 5.5% (2017:
5.5%) on floating rate Russian rouble balances.
At the year end, the Group had cash on overnight deposit.
Short-term deposits during the year included overnight, one-week
and one-month notice periods.
Commodity price risk
By the nature of its activities the Group is exposed to
fluctuations in commodity prices and, in particular, the price of
gold as these could affect its ability to raise further finance in
the future, its future revenue levels and the viability of its
projects. The Group does not currently hold any financial
instruments to hedge the commodity price risk on its expected
future production. The Board will keep this exposure under review,
taking account of the extent to which the commodity price risk can
be hedged and other factors including production risks and the
costs of the hedge programme.
Foreign currency risk
The Group reports in US dollars and conducts most of its
business in dollars and Russian roubles. It also conducts business
in sterling.
The table below shows the extent to which Group companies have
monetary assets and liabilities in currencies other than their
functional currency.
31 December 2018 31 December 2017
RUB GBP RUB GBP
$'000 $'000 $'000 $'000
--------- ------- --------- -------
Trade and other receivables 142 3 199 4
--------- ------- --------- -------
Trade and other payables (1,900) (123) (2,703) (219)
--------- ------- --------- -------
Cash 436 151 2,128 479
--------- ------- --------- -------
(1,322) 31 (376) 264
--------- ------- --------- -------
Effect on profit of changes in exchange rates
Net foreign exchaivnge gains totalling $204,000 (2017: $289,000)
have been recognised in the statement of comprehensive income for
the year. The exchange gains principally reflect the impact of the
appreciation of the Russian rouble on the Group's rouble
denominated monetary assets, partially offset by the adverse impact
on its rouble denominated provisions.
The table below shows the impact of changes in exchange rates on
the result and financial position of the Group:
31 December 2018 31 December 2017
RUB GBP RUB GBP
$'000 $'000 $'000 $'000
-------- -------- -------- --------
10% increase in exchange rate 120 (3) 34 (24)
-------- -------- -------- --------
10% decrease in exchange rate (147) 3 (42) 29
-------- -------- -------- --------
Fair values of the Group's and Company's financial liabilities
and assets
The fair value of the Group's long-term borrowing (which is US
dollar fixed rate debt) and provisions are shown at their carrying
values as any differences are not material. The fair value of the
Group's and the Company's short-term borrowing, cash and cash
equivalents equates to their carrying value because of the short
maturity of these instruments. The fair values of the Group's and
the Company's trade and other payables and trade and other
receivables are not significantly different from their carrying
values. The fair values have been calculated by discounting
expected cash flows at prevailing interest rates and by applying
year end exchange rates.
Capital risk management
The Company is not required to comply with any externally
imposed capital requirements. The Company's Russian subsidiaries
are required to maintain net asset values equal to or above their
share capital. In previous years the Company has made additional
capital contributions to its subsidiaries through the forgiveness
of loans in order to correct negative equity positions in those
subsidiaries' local accounts.
The Group's primary objective when managing capital is to ensure
that there is sufficient capital available to support the Group's
funding requirements, including capital expenditure, in a way that
optimises the cost of capital, maximises shareholders' returns and
ensures the Group's ability to continue as a going concern. There
were no changes to the Group's capital management approach during
the year.
The Group may make adjustments to the capital structure as
opportunities arise, as and when borrowings mature or as and when
funding is required. This may take the form of raising equity, debt
finance, equipment supplier credits or a combination thereof.
The Group monitors capital on the basis of the gearing ratio,
which is defined as net debt divided by total capital. Net debt is
calculated as total borrowings (including current and non-current
borrowings as shown in the consolidated statement of financial
position) less cash and cash equivalents.
Total capital is calculated as equity as shown in the
consolidated statement of financial position plus net debt. While
the Group does not set absolute limits on the ratio, the Group
believes that a ratio of up to 40% was acceptable in the final
stages of the construction and the commissioning phase of the
Asacha mine and that optimally this should reduce to and remain
below 25% thereafter. The Company's policy in respect of capital
risk management is the same as that of the Group.
The gearing ratios at 31 December 2018 and 2017 were as
follows:
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------- ------- ------- -------
Total borrowings 17,093 19,831 - -
------- ------- ------- -------
Less: cash and cash equivalents (9,725) (7,491) (6,365) (1,146)
------- ------- ------- -------
Net debt 7,368 12,340 (6,365) (1,146)
------- ------- ------- -------
Total equity 87,187 78,016 105,126 109,789
------- ------- ------- -------
Total capital 94,555 90,356 98,761 108,643
------- ------- ------- -------
Gearing ratio 7.79% 13.66% (6.44)% (1.05)%
------- ------- ------- -------
25 Provisions
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------ ------
Environmental/site restoration
provision 1,008 1,327 - -
------ ------ ------ ------
Movements on provisions
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------- ------
At 1 January 1,327 697 - -
------ ------ ------- ------
Liability adjustment (233) 492 - -
------ ------ ------- ------
Unwinding of discount 131 94 - -
------ ------ ------- ------
Exchange difference (217) 44 - -
------ ------ ------- ------
At 31 December 1,008 1,327 - -
------ ------ ------- ------
The provision relates to site restoration at the Asacha mine,
which is expected to commence in 2027. The provision is estimated
based on regional data from the Monitoring Ecological Centre of
Kamchatka.
26 Deferred taxation
The following are the major deferred tax liabilities and assets
recognised by the Group and Company, and movements thereon:
2018 2017
Group $'000 $'000
Liability: Accelerated capital allowances 6,550 5,110
------ ------
Asset: Tax losses (31) (250)
------ ------
Asset: Other provisions (157) (832)
------ ------
Net deferred tax liabilities 6,362 4,028
------ ------
Net deferred tax liabilities to be recovered
after more than 12 months 6,547 4,457
------ ------
Net deferred tax assets to be recovered within
12 months (185) (429)
------ ------
6,362 4,028
------ ------
The Company has no deferred tax assets or liabilities.
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------ ------ ------
Movements in the year:
------ ------ ------ ------
Net liability at 1 January 4,028 3,876 - -
------ ------ ------ ------
Charged to statement of comprehensive
income 2,334 152 - -
------ ------ ------ ------
Net liability at 31 December 6,362 4,028 - -
------ ------ ------ ------
Deferred tax assets are recognised for tax losses carried
forward to the extent that the realisation of the relevant tax
benefit through future taxable profits is probable.
As at 31 December 2018, the Company had unrecognised tax losses
carried forward with a tax value, at the UK weighted average rate
of corporation tax of 19% (2017: 19.25%) of $2,100,000 (2017:
$1,858,000).
The subsidiaries in Russia had recognised tax losses carried
forward with a tax value, at the standard rate of corporation tax
in Russia of 20%, of $31,000 (2017: $250,000).
As of 31 December 2018, the Group did not record deferred tax
assets in respect of temporary differences of $ 4,000,000
(2017:
$ 6,500,000) associated with investments in subsidiaries as the
Group is able to control the timing of the reversal of those
temporary differences and does not intend to reverse them in the
foreseeable future.
27 Share capital and reserves
Group and Company
2018 2017
Number Number
----------- -----------
Authorised
----------- -----------
Ordinary shares of 10p each 150,000,000 150,000,000
----------- -----------
Group and Company
2018 2017
$'000 $'000
--------- --------
Issued and fully paid
--------- --------
110,053,073 (2017: 110,053,073) ordinary shares
of 10p each 18,988 18,988
--------- --------
Share capital
Share capital represents amounts subscribed for share capital at
nominal value.
Retained earnings
Retained earnings represents the cumulative net gains and losses
recognised in the statement of comprehensive income less any
amounts reflected directly in other reserves.
28 Operating lease commitments
Lessee
The Group leases various property, plant and machinery under
cancellable operating lease agreements. The lease expenditure
charged to profit or loss during the year is disclosed in note
5.
At the reporting end date the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Group Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------ ------- ------- -------
Within one year 368 551 - -
------ ------- ------- -------
368 551 - -
------ ------- ------- -------
Lease payments are effected by equal monthly instalments. Leased
equipment may only be used at the Asacha mine. Leased land and
buildings includes property in Moscow and Kamchatka.
The Company had no operating lease commitments.
29 Finance lease obligations
In previous years the Group entered into various finance lease
agreements in respect of plant and machinery. All leases were fully
repaid during 2018. There were no outstanding finance lease
commitments at 31 December 2018.
The Company has no finance lease commitments (2017: none).
30 Contingencies
The Company's wholly owned subsidiary TZ has received a claim
from the Federal Service for Supervision of Use of Natural
Resources, RosPrirodNadzor ("RPN") over the payments for disposal
of waste materials following a site inspection in 2016. Having
taken appropriate advice, the management believe that they have a
strong legal position and as such, dispute the claim made by RPN.
The claim could potentially amount to approximately $2.1
million.
31 Cash generated from Group's operations
2018 2017
$'000 $'000
Profit for the financial year after tax 12,434 2,516
------- -------
Adjustments for:
------- -------
Taxation charged 4,529 520
------- -------
Finance expense 1,077 1,217
------- -------
Finance income (25) (97)
------- -------
Loss on disposal of property, plant and equipment 148 248
------- -------
Unrealised foreign exchange differences 341 (152)
------- -------
Depreciation of property, plant and equipment 9,968 7,964
------- -------
(Reversal of impairment)/impairment provision
of ore stocks (4,028) 1,862
------- -------
Movements in working capital:
------- -------
Decrease/(increase) in inventories 4,716 (2,882)
------- -------
Decrease/(increase) in trade and other receivables 255 (1,333)
------- -------
(Decrease)/increase in trade and other payables (563) 2,119
------- -------
Cash generated from operations 28,852 11,982
------- -------
32 Cash used in Company's operations
2018 2017
$'000 $'000
Loss for the year after tax (1,400) (710)
------- -------
Adjustments for:
------- -------
Finance income (1,323) (1,640)
------- -------
Unrealised foreign exchange differences 19 (13)
------- -------
Movements in working capital:
------- -------
(Increase)/decrease in trade and other receivables (25) 17
------- -------
(Decrease)/increase in trade and other payables (176) 71
------- -------
Cash used in operations (2,905) (2,275)
------- -------
33 Related party transactions
The directors of the Company consider that there are no key
management personnel, as defined by IAS 24, Related party
transactions, other than the directors themselves.
Directors' emoluments and their beneficial interests in the
ordinary shares of the Company are detailed in note 8.
Transactions between the Company and its subsidiaries and
between those subsidiaries include technical, management and other
services and loans as detailed below:
Purchases Balance at Purchases Balance at
(Sales) 31 December (Sales) 31 December
2018 2018 2017 2017
Nature of transaction $'000 $'000 $'000 $'000
Trans-Siberian Gold plc
--------- ------------ --------- ------------
Technical services - 1,242 - 1,221
--------- ------------ --------- ------------
Other services - (37) - (45)
--------- ------------ --------- ------------
Loan interest - 4,991 - 3,001
--------- ------------ --------- ------------
Loans (1,315) 18,674 (1,638) 30,755
--------- ------------ --------- ------------
(1,315) 24,870 (1,638) 34,932
--------- ------------ --------- ------------
OOO Trans-Siberian Gold Management
--------- ------------ --------- ------------
Management services (1,423) 120 (1,255) 201
--------- ------------ --------- ------------
Other services - 37 - 45
--------- ------------ --------- ------------
(1,423) 157 (1,255) 246
--------- ------------ --------- ------------
ZAO Trevozhnoye Zarevo
--------- ------------ --------- ------------
Technical services - (1,242) - (1,221)
--------- ------------ --------- ------------
Management services 1,423 (120) 1,255 (201)
--------- ------------ --------- ------------
Loan interest - (4,991) - (3,001)
--------- ------------ --------- ------------
Loans 1,315 (18,674) 1,638 (30,755)
--------- ------------ --------- ------------
2,738 (25,027) 2,893 (35,178)
--------- ------------ --------- ------------
Total - - - -
--------- ------------ --------- ------------
During the year, management consultancy services have been
acquired from Feldi Limited, of which Stewart Dickson is director
and shareholder, for $165,000 (2017: $105,000). There were no
amounts outstanding to Feldi Limited at the year end (2017:
$nil).
There were no other related party transactions.
34 Events after the reporting date
In January 2019, a special interim dividend of $0.052 per share
equating to approximately $5.7 million in aggregate was
declared and paid.
On 23 April 2019, the Russian Federal Agency for Subsoil Use
("Rosnedra") issued a 20-year licence to TZ for the development and
exploration of the Rodnikova deposit for a consideration of $3
million. The Rodnikova deposit is estimated to contain 1 million
oz. of gold with an average grade of 5.3g/t. The Group is currently
devising its exploration field work programme to assess the full
potential of the Rodnikova deposit and options to potentially
initiate early stage production. Taking into consideration the fact
that the Asacha and Rodnikova deposits are believed to have similar
geology, mineralogy and metallurgy, the Company will determine the
suitability of utilising the existing processing techniques and
plant at Asacha for the ore at Rodnikova.
On 2 May 2019, the Company entered into conditional agreements
with two of its major shareholders within UFG Asset Management
("UFG") to buy back 22,894,565 of its existing ordinary shares,
representing approximately 21% of the Company's issued share
capital, by means of an off-market share buyback at a price of 33
pence per share for an aggregate purchase price of GBP7.56 million
(the "Buyback"). The Buyback represents a discount of 42% to the
closing middle market price of a TSG ordinary share on 1 May 2019.
As part of the transaction a further 11,478,410 of the Company's
existing ordinary shares, representing approximately 10.4% of the
Company's issued share capital, will be sold by the same
shareholders to other members of the UFG Group, Directors and to
new investors. The Buyback will be funded out of the Company's
existing distributable profits, facilitated by the repayment of
intra-group indebtedness by the Company's wholly owned subsidiary,
TZ, utilising a new term loan facility of up to RUB 800 million
(approximately GBP9.4 million) which TZ has obtained from VTB Bank.
The share sales, together with the buy back, will reduce the
dominance by UFG of the share register and benefit shareholders as
a whole.
On 31 May 2019, the Company announced an update of the Mineral
Resource Estimate ('MRE') for the Asacha deposit in Kamchatka, Far
East Russia. The MRE for the Asacha deposit was updated by Seequent
UK Ltd ("SUKL") to the end of December 2018. Further information
about the MRE is set out in the Operating and Financial Review.
35 Ultimate controlling party
The ultimate control of TSG lies with the individual investors
in UFG Private Equity Fund I LP, UFG Special Situations Fund LP and
Destin Investment Management Ltd (collectively, UFG). No one
investor is considered to be the ultimate controlling party.
36 Non-IFRS Measures
The Group uses certain measures in this report that are not
defined under IFRS. Non-IFRS financial measures are provided as
additional information to investors to assist them with their
assessment of the Group's financial position and its operating
results. These measures are not in accordance with, or a substitute
for, IFRS, and may be different from or inconsistent with non-IFRS
financial measures used by other companies. These measures are
explained further below:
Cash costs
Cash costs are calculated on a consolidated basis and include
all costs absorbed into cost of sales, excluding mining tax,
depreciation, amortisation and depletion, net of by-product revenue
(silver). Cash costs per ounce of gold sold is calculated by
dividing the aggregate of these costs by total ounces sold.
2018 2017
$'000 $'000
Cost of sales 37,872 30,737
------- -------
Adjustments for:
------- -------
By-product revenue (silver) (1,647) (756)
------- -------
Mining tax (2,381) (1,850)
------- -------
Depreciation/depletion of owned property, plant
and equipment (9,968) (7,964)
------- -------
Loss on disposal of property, plant and equipment (148) (248)
------- -------
Cash Cost 23,728 19,919
------- -------
Gold sold (oz.) 45,956 33,870
------- -------
Cash Cost ($) per oz. gold 516 588
------- -------
Earnings Before Interest, Tax, Depreciation and Amortisation
("EBITDA")
EBITDA is calculated on a consolidated basis as net
profit/(loss) for the period excluding income tax expense, finance
expense, finance income, foreign exchange movements, depreciation,
amortisation and depletion, and impairment charges.
2018 2017
$'000 $'000
Revenue 59,769 43,447
-------- --------
Adjustments for:
-------- --------
Cost of sales (37,872) (30,737)
-------- --------
Administrative expenses (8,393) (7,392)
-------- --------
Other operating income 279 411
-------- --------
Depreciation/depletion of owned property, plant
and equipment 9,968 7,964
-------- --------
Loss on disposal of property, plant and equipment 148 248
-------- --------
EBITDA 23,899 13,941
-------- --------
All-In Sustaining Costs ("AISC")
AISC reflect the full costs of keeping the mine in business and
include adjusted operating expenditure, sustaining corporate and
administrative expenditure, and sustaining capital and exploration
expenditure. It excludes non-sustaining costs related to new
operations and costs that are not related to current operations, as
well as taxes, finance costs and working capital adjustments.
2018 2017
$'000 $'000
Cash costs 23,728 19,919
------- ------
Adjustments for:
------- ------
Mining tax 2,381 1,850
------- ------
Administrative expenses 8,393 7,392
------- ------
Ore stock inventory (reversal)/impairment (4,028) 1,862
------- ------
Purchase of intangible assets - 501
------- ------
Purchase of property, plant and equipment 17,816 14,192
------- ------
Non-sustaining exploration expenditure (210) (393)
------- ------
Accretion of restoration costs 131 94
------- ------
AISC 48,211 45,417
------- ------
Gold sold (oz.) 45,956 33,870
------- ------
AISC ($) per oz. gold 1,049 1,341
------- ------
Company Information
Directors
Charles Ryan
Non-Executive Chairman
Alexander Dorogov
Chief Executive Officer
Eugene Antonov
Chief Operating Officer
Robert Sasson
Non-Executive Director
Stewart Dickson
Non-Executive Director
Lou Naumovski
Non-Executive Director
Florian Fenner
Non-Executive Director
Secretary
Simon Olsen
Company number
01067991
Registered office
39 Parkside
Cambridge
United Kingdom
CB1 1PN
UK - Head office
Trans-Siberian Gold plc
P.O. Box 278
St. Neots
PE19 9EA
United Kingdom
Russia - Moscow office
Trans-Siberian Gold Management, LLC (TSGM)
Office 55
Leninskiy Prospect 15A
119071 Moscow
Russian Federation
Independent Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Telephone: +44 (0)20 7583 5000
Nominated Adviser & Corporate Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Telephone: +44 (0)20 7614 5900
Bankers
National Westminster Bank PLC
City of London Office
PO Box 12258
1 Princes Street
London
EC2R 8PA
Solicitors
IBB Solicitors
Capital Court
30 Windsor Street
Middlesex
UB8 1AB
Telephone: +44 (0)84 5638 1381
Registrar
Link Asset Services
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0GA
Telephone: 0871 664 0300
International: +44 208 639 3399
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKQDBBBKBDAK
(END) Dow Jones Newswires
June 05, 2019 02:00 ET (06:00 GMT)
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