2012 Full Year Results

RNS Number : 9578A

Central Asia Metals PLC

27 March 2013

 



CENTRAL ASIA METALS PLC

("CAML" or the "Company" or "Group")

2012 Full Year Results

Central Asia Metals plc (AIM:CAML), a copper producing company focused on base metals in Central Asia, today announces its full year results for the 12 months ended 31 December 2012.

Financial highlights:

·      Project revenue of $51.1 million, attributable revenue of $30.7 million (2011: $1.1 million)

·      Operating profit of $15.0 million (2011: loss $6.1 million)

·      Group profit from continuing operations of $10.3 million after tax (2011: loss $5.9 million)

·      Kounrad operations a tier 1 cash cost copper producer

o  Direct cash cost of production, $770 per tonne ($0.35/lb)

o  C1 cash cost of production, $1,562 per tonne ( $0.71/lb)

o  All inclusive cost of production in Kazakhstan, $2,167 per tonne ($0.98/lb)

·      Cash and cash equivalents of $33.8 million as at 31 December 2012 (2011: $16.0 million).

·      No outstanding debt within the Group

·      Interim and special dividend totalling 7.0 pence per share announced on 13 December 2012 and paid on 1 February 2013

·      Proposed final dividend of 3.7 pence per share making a total for 2012 of 10.7 pence per share

Operational highlights:

·      Completed construction of the Kounrad SX-EW plant for $39 million, $8 million below the original budget

·      Total of 6,586 tonnes of copper produced in the first eight months of production

·      Kounrad resources now stated in accordance with JORC Standards with over 600,000 tonnes of contained copper as at 27 March 2013 and anticipated Life of Mine in excess of 25 years

·      Operations continued throughout the winter period

·      Further update on SAT transaction anticipated during Q2 2013

Nick Clarke, Chief Executive Officer of CAML, commented:

"We are extremely pleased to announce our financial results for the period ending 31 December 2012, which reflect the strong operational performance at Kounrad following the completion of the construction programme in late April 2012.  The production of 6,586 tonnes of cathode copper since April 2012 has exceeded our own expectations for the first eight months of production.

The combination of our strong operational performance and low cost of production has resulted in not only our first annual profits for the CAML Group, but also the ability to return funds to our shareholders.  The proposed final dividend of 3.7 pence per share results in a total of 10.7 pence per share returned to shareholders for 2012 operations.  This makes a total return for the year of $16.3 million inclusive of the $2 million spent on the share buyback programme during the year. 

We are also delighted to announce that the Kounrad resource is now stated in accordance with JORC standards, in line with our IPO commitment in September 2010.  Kounrad has over 600,000 tonnes of contained copper, which indicates a Life of Mine in excess of 25 years at the current capacity of 10,000 tonnes of copper per annum.

Test work on the dumps to the west of the current plant remains on-going as does the legal and regulatory work to complete the acquisition of the remaining 40% of the Kounrad project. 

After a successful 2012, we remain focussed on consolidating our success to date and growing the Company both through the potential expansion at Kounrad and by seeking additional growth opportunities.  Our strong cash position and balance sheet provide us with the flexibility to focus on both approaches.  We aim to make a decision on the expansion at Kounrad in Q4 and are confident that the SX-EW plant will achieve its production target of 10,000 tonnes of copper in 2013."

Analyst presentation conference call

There will be an analyst presentation conference call on March 27, 2013 at 09:30 (GMT).  The call can be accessed by dialling [phone] and pin number 4610891.  There will be a replay of the call available on March 28, 2013 at http://www.centralasiametals.com/.  There is a results presentation to accompany the call, also available on the website.

Enquiries:

Central Asia Metals plc                                 Nick Clarke                         [phone]

                                                                                Nigel Robinson

Canaccord Genuity Limited                         Andrew Chubb                 [phone]
 Ross Allister

Mirabaud Securities LLP                                Peter Krens                       [phone]

Pelham Bell Pottinger                                    Charles Vivian                  [phone]

 Lorna Spears     

Notes to Editors

Central Asia Metals plc ("CAML" or the "Company") is an AIM-listed UK company based in London. Its countries of operation are Kazakhstan and Mongolia. CAML is a copper production, precious and base metals exploration and development company with majority stakes in copper, gold and molybdenum projects.  The Company announced its maiden dividend in December 2012.

Chairman and Chief Executive's statement

Dear Shareholders

2012 has proved to be a successful year for the Company during which time the construction of a 10,000 tonne per annum Solvent Extraction-Electro Winning (SX-EW) cathode copper plant at Kounrad in Kazakhstan was completed under budget and the production of copper commenced.  By 31 December 2012, the plant had produced 6,586 tonnes of copper during its first eight months of production and generated project revenues in excess of $51 million. The Board is pleased to propose a final dividend of 3.7 pence per share bringing the total dividend for 2012 to 10.7 pence per share.

Kounrad Operations

Construction work was completed at the Kounrad site in late April 2012 following a 21 month programme with a final capital cost to completion of $39 million, some $8 million below the original budget.   The Company commenced commissioning the plant in early March 2012 and the first cathode copper was produced on 29 April 2012. 

The commissioning and initial ramp up of production progressed smoothly such that the plant achieved 100% operational running time by August 2012 and was producing copper above its designed monthly output. The first 8 months of commissioning, initial ramp up and steady state production tested the resilience of the plant's design, choice of plant equipment and also the quality of the in-house construction process.  During the eight months of production in 2012, the plant produced 6,586 tonnes of copper, 32% above initial production targets with a specification consistently above 99.997%.

The harsh weather conditions experienced at Kounrad during the winter period were always going to provide a significant learning experience. It is a testament to the staff at Kounrad and the design of the plant that copper was consistently produced throughout the winter period. 

During the year, the required exploration works were completed allowing a JORC compliant resource estimate to be established. As a result, the new resource statement has been estimated at 647 million tonnes of mineralised dump material containing an estimated 614,214 tonnes of copper for the Eastern and Western Dumps.  This new JORC resource statement correlates closely to previous estimates and to within 2.1% of the unclassified historical figures as stated in the IPO document of September 2010. The revised JORC resource statement indicates a Life of Mine in excess of 25 years at an anticipated annual production rate of 10,000 tonnes. This Life of Mine excludes any mineralised dump material from the Northern Dumps as a management review of the ownership of those dumps has determined that the majority of this material does not fall within the Kounrad subsoil use contract.

Kounrad Financial Performance

In March 2012, a decision was taken by the CAML Board to appoint Traxys as the off-taker for the distribution and sale of the cathode copper.   As at 31 December 2012, a total of 6,063 tonnes of copper had been transported from site with an average sale price of $7,935 per tonne.  Group revenues of over $30 million during the eight month period, together with the overall cost of producing copper of $5.8 million, enabled the Group to produce profits for the first time.  The C1 unit cash cost of production of $1,562 per tonne ($0.71 / lb.) makes Kounrad an extremely low cost copper producer.

It is the combination of such low costs and the successful commencement of production that has enabled the CAML Board to return significant funds to shareholders during the year.  In total, the Company accounts reflect $11.6 million through a share buyback scheme and the payment of a maiden and special dividend on 1 February 2013.  The Board is now proposing a final dividend for 2012 of 3.7 pence per share which would mean that the Company has paid dividends of 10.7 pence per share since production commenced in April 2012 representing a total return to shareholders for 2012 operations of $16.3 million.  As at 31 December 2012, the Group had $33.8 million of cash in the bank following the repayment to the parent company of $28.4 million from intercompany loans used to finance the Kounrad project.

Kounrad Growth and Ownership

A draft feasibility study is nearing completion for the construction of a second SX-EW plant and the associated infrastructure at Kounrad. A decision will be taken by the Board later in the year following further leach testing of the Western Dumps, hydrological surveys and once the transfer of ownership of the remaining 40% of the project has been completed from the SAT Group to CAML.

The conclusion of the SAT transaction has taken longer than the Board had envisaged due to the local requirements associated with the transfer of the subsoil use contract and finalising project documentation with the SAT Group.  It could take a further 12 months to complete the process and the timing is dependent upon the receipt of the relevant waivers required from the Government of the Republic of Kazakhstan.  The Company will endeavour to complete this process as quickly as the required statutory procedures permit.

Mongolia

The business environment in the country has been challenging during 2012 and as a consequence the Company has been unable to complete the disposal of its non-core assets despite announcing a deal in September 2012. The interested party was unable to raise the required finance although we understand that they remain keen to purchase the assets and discussions continue for a way forward.  An application for a mining licence at Alag Bayan has been submitted to the Mongolian Ministry.  Should the application be successful, all the shareholders in the licence area will need to assess the strategy and commercial arrangements and financing required to further progress the asset.

Outlook

The key objective for 2013 is to produce 10,000 tonnes of copper, maintain tight control over the production costs and to complete the transfer of ownership of the project with the SAT Group.  The CAML Board remain positive about the copper market and the strong cash flows being generated at Kounrad should enable the Company to consider opportunities in new projects whilst continuing to return funds to shareholders through the dividend policy.

Chairman, Nigel Hurst-Brown                                                                                Chief Executive Officer, Nick Clarke                                                                

Operating and Financial Review (OFR)

Business Locations

Kazakhstan Profile

·      Kazakhstan became independent from the Soviet Union in December 1991

·      Kazakhstan has a stable and growing economy with an average growth of 8% per annum since 2000

·      Kazakhstan has extensive mineral and metal resources in the country with well established infrastructure

·      GDP per capita in 2012 was estimated at $13,900

·      Kazakhstan is ethnically and culturally diverse with a population of 16.6 million

·      Kazakhstan is the ninth largest country in the World in terms of area, equivalent in size to Western Europe

Kounrad Copper Production

·      The Company completed construction of the 10,000 tonne per annum SX-EW copper plant in April 2012

·      6,586 tonnes were produced in the first eight months of production generating in excess of $51 million revenue

·      Direct cash cost of production for 2012 of $770 per tonne ($0.35/lb.) and C1 cash cost 1,562 per tonne ($0.71/lb.)

·      The licence is valid until 2034 and the JORC compliant resources are deemed sufficient for 25 years of operations at current production levels

·      The project is jointly owned on a  60:40 basis and CAML has an agreement to purchase the remaining 40% share

 Mongolian Profile

·      Minerals represent more than 80% of Mongolia's exports

·      Mongolia is the 19th largest country in the World by area

·      Mongolia is the most sparsely populated independent country in the World with a population of around 2.75 million people

·      GDP per capita in 2012 was estimated at $5,400

·      Currently there exists a degree of uncertainty in Mongolia around the proposed new draft mining code and also the laws around foreign ownership of mineral assets 

Mongolia Assets 

·      The Group is currently exploring a copper/gold porphyry target at Alag Bayan license area close to the Oyu Tolgoi deposit in the Southern Gobi 

o  Extensive exploration drilling  totalling  12,500 meters

o  Results from the drilling program and other technical studies has been submitted to the Ministry for a 30 year mining licence

·      The Group also owns two other projects that are held for sale

o  Ereen is a 774,000 ounce JORC compliant gold resource in the Gatsuurt region

o  Handgait is a 42,000 tonne JORC compliant  molybdenum resource in the north of Mongolia

o  The local subsidiary has received a claim in relation to a licence for the Ereen project from a minority shareholder demanding the return of the licence. The Company intends to fully defend the claim.

o  Cutfield Freeman & Co  have been appointed to sell the assets

2012 Key Achievements at a glance

Focussing on Copper

Central Asia Metals plc ("CAML" or the "Company") was formed in September 2005 to acquire and develop mineral assets in Central Asia, primarily Kazakhstan and Mongolia.  During 2006 and 2007, the Company acquired six mineral assets in the region and raised funds privately for their development.  During the following years, the focus of the Company was on exploration activity of the various projects.

On 30 September 2010, the Company listed on the AIM Market of the London Stock Exchange (LSE) and successfully raised $60 million.  The funds were primarily allocated for a development of Kounrad project.

The Company's strategy has been to focus on those assets that could be converted from the exploration and development phase into production in a relatively short timescale.   This strategy review resulted in a management decision to sell four out of the six assets at the first opportunity as they were considered either a management distraction or the cost of development that could not be justified at this time. 

Following these strategic decisions, CAML management have focussed their attention almost exclusively on developing the Kounrad copper project in Kazakhstan and building a 10,000 tonne per annum Solvent Extraction-Electro Winning (SX-EW) copper plant.  The Company still retains a copper/gold exploration asset in Mongolia which is, peripheral to the current operational activity of the Group.

Delivering on Our Promises

During 2012, the key objectives for the Group were to complete the construction of a 10,000 tonnes per annum SX-EW plant and to commence commercial copper production at Kounrad.  The targeted production output for 2012 was 5,000 tonnes of cathode copper at C1 production costs below $2,000 per tonne ($0.90/lb.).  The overall assessment of the performance against these targets is summarised below.

Assessment of CAML 2012 Key Business Objectives
OBJECTIVES	ACHIEVEMENTS
Complete construction of SX-EW plant at Kounrad within budget	Completed April 2012
	Capex of $39m, $8m under budget
Produce 5,000 tonnes of copper	6,586 tonnes produced
C1 production costs below $2,000 per tonne	$1,562 per tonne
Completion of field works to enable preparation of JORC compliant resource statement	Field works completed October 2012. JORC compliant resource statement achieved March 2013

·    Constructing a 10,000 tonne per annum SX-EW copper plant at Kounrad

The Kounrad plant construction programme was completed in late April 2012 for a final capital cost of $38.9 million.  This represents a saving of c $8 million against the original estimates determined by the BGRIMM 2010 feasibility study and budgeted at the time of the IPO in September 2010.  The main savings were achieved through the use of in-house construction staff and a strong owner's management team to supervise and control the project, with minimal use of contractors.

·    Strong Production Performance

The first eight months of commissioning, initial ramp up and steady state production has tested the resilience of the plant's design, choice of solvent extraction and electro winning equipment and most importantly the quality of the in-house construction process.  By 31 December 2012, the plant had achieved an average of 97% operational running time after allowing for scheduled maintenance. 

Only three months after the commencement of production, the plant achieved 100% operational running time in August 2012 and at the same time produced over 1,000 tonnes of copper in 30 operating days, some 15% above design.  During the eight months of production in 2012, the plant produced 6,586 tonnes of copper, 32% above the original 2012 target, with a quality specification consistently above 99.997%.  

·    Low Costs of Production

During 2012 the cost of producing cathode copper at the SX-EW plant was $5.8 million which equates to $770 per tonne ($0.35/lb.).  This compares favourably with the comparable numbers at the interim results of $1,058 per tonne ($0.48/lb.).  Allowing for the Kazakhstan Government's Mineral Extraction Tax at 5.7% and the costs of distribution and selling, the C1 cost per tonne is a competitive $1,562 (0.71/lb.).  

Depreciation in the period of $1.4 million and the cost of indirect overheads at Balkhash of $1.8 million result in a total cost for the period of $14.8 million which represents a fully inclusive cost of production per tonne of copper of $2,167 ($0.98 /lb.). 

·    Establishing Kounrad as a JORC Compliant Resource

At the time of the IPO in September 2010, the Company agreed to undertake a programme to transfer the unclassified dump material to a JORC compliant resource statement by Q1 2013.  The exploration works including drilling, trenching and deep pit excavations has been overseen by Wardell Armstrong International (WAI), the Company's retained competent person. 

During the year, the required exploration works were completed allowing a JORC compliant resource estimate to be established. As a result, the new resource statement has been estimated at 647 million tonnes of mineralised dump material containing an estimated 614,214 tonnes of copper for the Eastern and Western Dumps.  This new JORC resource statement correlates closely to previous estimates and to within 2.1% of the unclassified historical figures as stated in the IPO document of September 2010. The revised JORC resource statement indicates a Life of Mine in excess of 25 years at an anticipated annual production rate of 10,000 tonnes. This Life of Mine excludes any mineralised dump material from the Northern Dumps as a management review of the ownership of those dumps has determined that the majority of this material does not fall within the Kounrad subsoil use contract.

Creating Value for Shareholders

·    Selling Copper Cathodes

In the first eight months of production at Kounrad, revenues in excess of $51 million have been generated at the project level.  By 31 December 2012, a total of 97 rail wagons had been dispatched from site, under the off-take arrangement with Traxys.  These shipments contained 6,063 tonnes of copper which was subsequently sold for an average price of $7,935 per tonne. Additionally, 320 tonnes of copper was sold locally.

The basic terms of the off-take arrangements are that the copper is loaded onto rail wagons at the Kounrad site with risks transferring at that stage to Traxys.  These arrangements are beneficial in terms of cash flow to the business as payment can be requested at the time of dispatch from site. Title to the copper transfers on any payment being made by Traxys.

·    Achieving Profitability

The combination of the low costs of production and the strong production performance since late April 2012, has resulted in the Group announcing its first profits.  The consolidated net profit after taxation of the Group in respect of the year ended 31 December 2012 amounted to $9.8 million (2011: loss $11.2 million). 

On a consolidated level, the Group's 60% share of the Kounrad project revenue was $30.7 million (2011: $1.1 million) and this generated a gross profit of $24.9 million (2011:  $0.1 million).  Profit after tax from continuing operations of $10.3 million (2011: loss $5.9 million) after just eight months of production at Kounrad is a strong financial performance by the Group.

·    Strong Balance Sheet and Cashflows

The total assets of the Group as at 31 December 2012 amounted to $91.6 million (2011: $69.4 million) with the main increase coming from increased cash resources derived from the sales of copper during the period.  Overall there was an increase in net cash to $33.8 million (2011: $16.0 million) across the Group with $28.2 million (2011: $15.5 million) held in the UK.

The Kounrad project was financed 100% by equity and the funds raised in London were then loaned to the operating subsidiaries for the capital expenditure and other associated costs.  These loans within the Group are now being repaid to London following the successful production of copper at Kounrad.  During 2012, there was a net repayment of $21.3 million and it is anticipated that the loans will be fully repaid by the end of Q1 2014. 

·    Experienced Management and Board

The CAML senior management team has over 70 years of mining experience and over the past 3 years during the development of the Kounrad project this has proved crucial in the delivery of the IPO commitments.  The Company operates in an operationally challenging part of the World and it is their ability to address problems and find solutions as they arise that has helped to deliver copper production at Kounrad in line with the Group's commitments.

The growing skills shortage within the mining industry means that securing the services of a loyal, skilled and dedicated professional management team is crucial to CAML's success.  The remuneration policy is designed to be competitive and maintain the loyalty of its current management as well as attracting the best talent whenever the situation requires.

·    Corporate and Social Responsibility (CSR)

The Company has always been keenly focussed on ensuring that the environmental and social aspects of its operation are managed to the highest possible standards.  In recognition of this responsibility, a CSR Committee was established by the CAML Board in Q2 2012.  The Committee is tasked with co-ordinating and managing all the CSR activities across the Group.  A Group CSR policy has been developed and a copy of it can be found on the CAML website at www.centralasiametals.com. 

During the construction of the plant, a total of 804,842 man-hours, including sub-contractors, were worked with no lost time injuries and this safety conscious approach has continued into production with induction and refresher courses conducted for all new and existing employees. The Company also continues to build on the already constructive and positive relations with the Kounrad community and authorities by donating generously to local causes.  Further 218,387 man-hours were worked with no lost production since commissioning of the plant.

·    Managing the Business Risks

CAML management have successfully dealt with the technical, delivery and financial risks associated with the Kounrad project.  The successful commissioning of the plant and production of 6,586 tonnes of copper during the year has clearly demonstrated these risks have been mitigated.  The construction of the SX-EW plant for c $8 million under the planned costs and the cash flows generated from the initial sales of copper have also reduced the financial risks associated with the project.  Despite these successes, the management remain vigilant and are constantly monitoring the risks associated with the operations.

Returning Value to Shareholders

·    Share Buy Back Programme 

In early July 2012, the Company commenced a share buyback scheme with some of the funds that were being generated from the sales of copper on site at Kounrad.  As at 31 December 2012 1,318,929 shares had been purchased at a value weighted average price of 93.059 pence.  During the buyback programme the share price responded by increasing from around 69 pence in July 2012 to around 97 pence per ordinary share in early December 2012.   

·    CAML Dividend Policy

The CAML Board agreed in early December 2012 to commence the payment of dividends to its shareholders owing to the combination of a strong operational performance at Kounrad during 2012 and the resilient copper price.  Whilst the agreed dividend policy was to distribute annually a minimum of 20% of attributable revenue, the Company targeted 30% of the attributable revenue for 2012.  The Board also decided that it was appropriate to return some of the savings made arising from the Kounrad project capital programme by way of a special dividend.

A special dividend of 3.7 pence per ordinary share and an interim dividend of 3.3 pence per ordinary share were both announced on 13 December 2012 and paid on 1 February 2013.   The Board proposes a final dividend for 2012 of 3.7 pence per ordinary share to be approved at the AGM bringing total dividends to 10.7 pence per ordinary share for the year.

Looking to future growth

The strategy of the Company looking forward beyond 2012 is focussed on increasing copper production output, either through organic growth at Kounrad or the consideration of other potentially profitable opportunities which may present themselves to management.  Whilst the Company started out with a focus on a geographical region in Central Asia, the strategy moving forward will not be constrained by such considerations and may well consider opportunities in other jurisdictions around the World.  The key objectives of the Group for 2013 are the following;

·      produce 10,000 tonnes of copper;

·      maintain tight control over the production costs;

·      complete the transfer of 40% ownership of the project to the Group,  and

·      sell the assets held for sale for a reasonable consideration and obtain the mining licence at Alag Bayan.

Kounrad Operational Review  

Dump Leaching and Irrigation of the dumps

The site consists of two areas separated by the Kounrad open pit, namely the Eastern and Western Dumps.  The mineralised material to be leached in the current phase of the project is that contained within the Eastern Dumps. 

Based on an estimated recovery rate from the testwork conducted within the Eastern Dumps, management estimate that there is sufficient resource for in excess of eight years of operations at the current planned output of 10,000 tonnes per annum.   

A total of nine kilometres of irrigation distribution piping and over 700 kilometres of drip irrigation piping have been installed on dump 9-10.   The piping is laid out on the dumps in a structured manner to enable management to isolate and manage specific areas, known as leach cells, throughout the year.  Each leach cell varies in size, according to the dump height and contained copper grade.  Typically the cells measure 10 hectares (100,000 m²) and are leached for a period of up to 6 months.

At the base of dumps 6 and 9-10, a 2 kilometre HDPE-lined solution interceptor trench has been constructed.   On a continuous basis, the copper bearing pregnant leach solution (PLS) is collected in the collector trenches following the irrigation of the dumps with diluted sulphuric acid solution, known as raffinate.   The PLS is then pumped into a series of storage ponds at the SX-EW plant for processing and plating of the copper.

During 2012 all of the leaching activity was concentrated on dump 9-10.  The average area under leach at any one time during 2012 was slightly more than 40 hectares and the irrigation solution application rate varied on a monthly basis between 2 to 3.4 litres per square metre per hour. 

Following on from the three years of mini plant operations on a section of dump 6 during the feasibility study and design phase, a leaching curve was developed to predict the amount of copper deemed recoverable from each of the dumps over a six month time period.  This was based on the assumed tonnage of mineralised material under leach within the dump and also the estimated grades of copper.

Whilst is not definitive, the leaching curve provides a basis for the management of the leaching process on the dumps and the expected rate of recovery of copper from any particular cell.

Since the start of commercial operations, monthly reconciliations have been prepared to compare the actual recovery of copper against this predictive tool. As the graph illustrates, the achieved results to 31 December 2012 have indicated that the recovery of copper has reached 80% of the predicted quantity over 253 days, being about 10% more than the model forecasts. With at least a further two, possibly three, more months of active leaching to be completed on dump 9-10, this data provides a good degree of confidence that the recovery targets for the dumps will be achieved.

It is anticipated that dump 9-10 will be exhausted during the first half of 2013 and consequently leaching is scheduled to commence on dump 6 in early Q2 2013.  In order to facilitate this, a 1.5 km extension to the existing solution interceptor trench was completed in summer 2012, encompassing the entire periphery of dump 6 and the whole surface of the dump has been laid with irrigation piping. 

Kounrad SX-EW plant

Construction took 21 months to complete during which time a total of 4,206 m³ of steel re-enforced concrete was poured and 725 tonnes of structural steel erected.  The construction of the plant also utilised a total of 804,842man-hours, including sub-contractors, with no lost time injuries. 

The construction programme was completed for a final capital cost of $38.9 million which represented a saving of c $8 million against the original capital estimates determined by the BGRIMM 2010 feasibility study.  The main capital savings were achieved through the use of in-house management and construction staff in the execution of the project.  The Group continues to manage the project by maintaining a strong owner's team and all aspects of the planning and implementation of the project are co-ordinated and controlled centrally where feasible.

Commissioning and initial ramp up of production

By the beginning of April 2012, the dry testing and commissioning activities commenced.  This pre-production testing was overseen and supervised by commissioning engineers from Australia, PPM Solutions Pty Ltd, who have significant experience in the start-up of SX-EW plants worldwide.  The Company had completed all of the initial commissioning tests by mid-April in readiness for the introduction of the first copper rich pregnant leach solutions into the SX-EW plant.  The initial copper extraction efficiency from PLS within the solvent extraction (SX) circuit was recorded at 89% and within a matter of days the entire extraction, washing, stripping and electro-winning circuits were operating 24 hours per day under steady state conditions. Copper plating on to the stainless steel cathodes commenced on 23 April and by 29 April 2012, the first harvest of copper occurred resulting in the production of 33 tonnes of copper cathode plates.

This commissioning period allowed all components of the circuit, both within the SX and EW sections, to be fully tested at maximum design capacity parameters.  This final testing phase proved to be a success and all of the design parameters were either met in full or exceeded by August 2012.

Winter operations

The harsh weather conditions experienced at Kounrad during the winter period were always going to provide a significant learning experience with large amounts of solution flow at very low temperatures. With this in mind an 8.4MW coal fired boiler house was included in the plant design to heat the solutions. During December 2012, the dawn temperatures fell to minus 32 degrees Celsius for a 10 day period. Throughout this period the plant was able to continue operations and it is a testament to the staff at Kounrad and the design of the plant that, despite such low temperatures, in excess of 1,000 tonnes of copper was produced in November and December. 

Resources Update

At the time of the IPO in September 2010, the Company agreed to undertake a programme to transfer the unclassified mineralised dump material to a JORC compliant resource statement by Q1 2013.  Between 2007 and 2012, significant drilling and sampling works have been undertaken on the Kounrad dumps to achieve this objective, and most recently the work has been overseen by WAI. 

This site work comprised a total of 132 boreholes, totalling 4,176 metres on a 200m grid.  Following the drilling programme, a total of 1,370 samples were collected for analysis which was undertaken by the local State certified laboratory in Ust Kamenogorsk.  In order to guarantee the quality of the work, 70 duplicate and standard samples were also cross checked by ALS Laboratories in Moscow.

In addition to the above, material from 20 pits was excavated, surveyed and weighed in order to make an accurate assessment of the bulk density of the mineralised material.  This recent site work, combined with all the additional data accumulated during the period 2007-2010, has resulted in a resource database consisting of 325 boreholes, 7,426 metres of drilling, 150 sub-surface test pits, 1,400 metres of trenching and 3,702 assays.  This data formed the basis of the WAI 2013 JORC Resource Statement.

The results of all this work are summarised below;

WAI 2013 Resource Estimate - JORC Code (2004)					Comparison, at IPO
Resource type	Category	Quantity, Mt	Grade, %	Contained copper, kt	Contained copper, kt
Eastern Dumps
Oxide	Indicated	89.7	0.10	85.8
	Inferred	79.6	0.10	81.7
Total		169.3		167.5	173.7
Western Dumps
Sulphide	Indicated	275.4	0.10	276.2
	Inferred	169.4	0.09	160.3
Mixed	Indicated	20.9	0.03	6.2
	Inferred	12.1	0.03	4.0
Total		477.8		446.7	456.8
Eastern and Western Total		647.1		614.2	630.5
Northern Dumps
Mixed	Indicated	3.0	0.04	1.3
	Inferred	2.9	0.05	1.4
Total		5.9		2.7	105.9
Grand Total		653.0		616.9	736.4

Inaccuracies may be due to rounding.

During the year, the required exploration works were completed allowing a JORC compliant resource estimate to be established. As a result, the new resource statement has been estimated at 647 million tonnes of mineralised dump material containing an estimated 614,214 tonnes of copper for the Eastern and Western Dumps.  This new JORC resource statement correlates closely to previous estimates and to within 2.1% of the unclassified historical figures as stated in the IPO document of September 2010. The revised JORC resource statement indicates a Life of Mine in excess of 25 years at an anticipated annual production rate of 10,000 tonnes. This Life of Mine excludes any mineralised dump material from the Northern Dumps as a management review of the ownership of those dumps has determined that the majority of this material does not fall within the Kounrad subsoil use contract.

The results of the drilling and assaying campaigns, particularly during 2011 and 2012, have highlighted that the original categorisation of the differing mineralised materials during the open pit operational life may no longer be applicable, or actually important. According to the original classifications material identified as "mixed" contained between 10 to 20% acid soluble copper, whilst "sulphides" contained less than 10% acid soluble copper. The assay results show that this is no longer the case, with acid soluble assays in a "mixed" dump averaging around 45% and with similar values being determined in some of the "sulphide" dumps.  It is highly likely that these higher than anticipated levels of soluble copper are due to the natural and continuously active natural oxidation conditions occurring within the dumps over a 70-80 year time frame.

For the Eastern dumps, the JORC compliant Indicated and Inferred resources of 167,539 tonnes of in-situ copper are anticipated to support an operational life of at least 8 years at an extraction rate of 10,000 tonnes per annum.  A further 17 years of operational life is estimated from the mineralised material in the Western dumps which has a JORC compliant Indicated and Inferred resources of 446,675 tonnes of in-situ copper.

Concurrently with the commitment to confirm a JORC compliant resource for the Kounrad dumps, the same sample data from the drilling and trenching is being used to determine the resource base by the Kazakhstan State Reserve Committee "GKZ" classification methodology.  This data is part of the requirements to convert the exploration licence for the whole site into a mining licence and thereby place all of the resources within the project's SUC onto the approved State balance of geological resources.   The SUC is valid until August 2034.

At present 81,125 tonnes of approved copper reserves (C1 category) are registered on the Republic of Kazakhstan State balance of geological resources. These resources are located in the Eastern Dumps, numbers 6, 7 and 9-10.  All of the remaining mineralised materials on the Eastern Dumps are in the process of being transferred on to the State balance.

Copper Sales

In March 2012, a decision was taken by the CAML Board to appoint Traxys as the off-taker for the distribution and sale of the copper cathodes from the Kounrad SX-EW plant. The first copper cathodes were collected from the plant site railway siding in June 2012 and by the end of that month 22 rail wagons had been despatched from the site carrying a total of 1,386 tonnes of copper cathodes destined for the Turkish markets.

By 31 December 2012, a total of 97 rail wagons had been moved by rail from site, under the off-take arrangement with Traxys, containing 6,063 tonnes of copper cathodes.  All the copper was sold into the Turkish market and was shipped via the Russian port of Novorossisysk and onwards by sea.  The average sale price achieved for the copper was $7,935 per tonne.

The basic terms of the off-take arrangements are that the copper cathodes are loaded onto rail wagons at the Kounrad site and once the necessary paperwork is completed, responsibility for the copper is transferred to Traxys for onward distribution to the end customers.  The value of the copper is determined by reference to the London Metal Exchange (LME) prices and the seller is free to determine the date for fixing the price within 3 months prior to and 30 days post-delivery.

The payment for the copper cathodes can also be requested by the seller at the time of delivery, albeit interest is charged on the advance payments until the earlier of such time as Traxys has received payment and 90 days from the date of dispatch.  The costs of the distribution and all other logistics costs are borne by the seller of the copper. Upon any payment being made by Traxys for the copper, title is transferred to Traxys.

The Company also sold 320 tonnes of copper locally.

Acquisition of 40% in Kounrad project

In January 2012 SEC Sary Arka, the JV partner in the Kounrad project announced that SAT Group (CAICC) had won a tender to acquire Sary Arka interest in the Kounrad project.

In January 2012, the Company signed a legally binding agreement with the SAT Group, based in Kazakhstan, for the purchase of the additional 40% of the Kounrad project not currently owned by the Group.  The regulatory processes required to transfer the ownership commenced in March 2012 with the submission by the Company and the SAT Group, in conjunction with SEC Sary Arka, of all the required documentation for the first stage of the transaction.

During 2012, the regulatory bodies of the government of the Republic of Kazakhstan approved the transfer of the 40% interest in the project from SEC Sary Arka to the SAT Group (CAICC). The 40% ownership in Kounrad Copper Company LLP was transferred from SEC Sary Arka to the SAT Group (CAICC) in December 2012, however the interest in the SUC and JOA has not yet been transferred. Once this transaction is completed, the transfer to the Group can begin.

The value agreed between the parties for the exchange was a consideration of 8,616,593 ordinary shares in the Company.  At the time of agreeing the deal in January 2012 this would have resulted in the SAT Group becoming a 9.1% shareholder in the enlarged Company once the transactions are completed.  Due to the Company share buy-back programme this consideration will now result in the SAT Group becoming interested in 9.85% of the voting rights of the enlarged Company once the transactions are completed.

Feasibility on second SX-EW plant

A feasibility study is nearing completion on a second SX-EW plant at Kounrad. Metallurgical testing is still being undertaken, the results so far have confirmed that acid leaching of the Western dumps show recovery up to 45% of the contained copper compared to previous estimates of 40%. These results correlate closely with the acid soluble copper assays returned from the analysis of over 2,200 samples from drilling conducted on the dumps in 2011 and 2012.

In addition, the results of these tests correlates closely with the calculated recoveries obtained from the pilot plant operations on the sulphide dumps conducted over the period July to December 2011. A recovery of 45% was calculated based upon a borehole head grade sample and the PLS and raffinate solutions treated and generated through the pilot plant over this period.

Column leaching testwork continues to establish predictive leach recovery curves and determine reagent consumptions. Additionally, during 2013 geophysics and geotechnical surveys will be undertaken.

Operational Review - Mongolia

Alag Bayan 

The 39.4km² Alag Bayan licence (3,941 hectares) is located in the middle of Mongolia's prolific copper-gold porphyry mineralisation trend, approximately 100km from the Oyu Tolgoi copper/gold deposit and 80km from the Tsagaan Suvarga copper deposit. In late March 2012, the Company secured a 1 year extension to the Alag Bayan exploration licence which is due to expire in April 2013. 

Based on all the previous exploration work conducted on site, including the Induced Polarisation surveys, CAML has worked with its partner Ibex Mongolia LLC during 2012 to assess the best approach to a limited drilling campaign in order to obtain a mining licence by April 2013.  The drilling work commenced on site in October 2012 and was completed having drilled a further 800m by late November 2012 in order to submit an application for a mining license.  On completion of this work, a total of 12,500 metres has been drilled on the licence area.  The mining licence submission was made to the Ministry on 26 March 2013. 

During 2012, Ibex Mongolia LLC fulfilled the terms of an agreement by drilling 7 holes totalling 3,529 meters for the Alag Bayan project whereby CAML would transfer 35% of its holding to Ibex Mongolia LLC. Due to the current legal uncertainties in Mongolia surrounding the transfer of any share ownership in companies in the mining industry to foreign investors, this 35% holding has not yet been transferred to Ibex Mongolia LLC.

Should the mining application be successful, all parties, including the 30% minority shareholders, will need to assess the strategy and commercial arrangements and financing required to further develop the asset.   

Assets held for sale 

CAML is currently holding two projects for sale in Mongolia, namely Ereen and Handgait.  The Company appointed Cutfield Freeman & Co, an M&A specialist, to oversee the sale process in February 2012.  A targeted marketing campaign was conducted during Q2 2012 and a number of interested purchasers were shortlisted for a more detailed review of the assets.

In September 2012, an offer was received from Mongolian Resource Corporation Limited ("MRC") of Australia for all of the Group's Mongolian assets except Alag Bayan.  The offer lapsed in early November 2012 due to MRC's inability to raise the required finance. Despite this, CAML management understand that MRC remain keen to purchase the assets and discussions continue between the parties for a way forward. 

Overall, the sale process is taking longer than planned due to the current difficulty for companies to raise project and equity finance in general, but also more particularly in relation to Mongolian legislation.  There is currently a degree of uncertainty in Mongolia around the proposed new draft mining law and also the legislation around foreign ownership of assets in the mining sector. 

In Q1 2013, ZunnMod UUL Ltd (the operating subsidiary for the Ereen project) received a claim filed in a local court in Mongolia from Songold LLC (one of ZMU minority shareholders) seeking the annulment of the agreement by which ZMU purchased the licence 2616A  for the Ereen project from Songold LLC.  ZunnMod UUL Ltd has received legal advice on the claim and believes that the claim is without merit. ZunnMod UUL Ltd intends to fully defend its position in court and
looks forward to resolving this matter as soon as possible.

Financial Review

Income Statement

The consolidated net profit after taxation of the Group in respect of the year ended 31 December 2012 amounted to $9.8 million (2011: loss $11.2 million). The Group commenced copper production at Kounrad during the year which has been transformational for the income statement so like-for-like comparisons with previous years are of little value. 

During the year a total of 6,383 tonnes of copper cathodes were sold at Kounrad which generated a project revenue in excess of $51 million for the 8 months of production.  On a consolidated level, allowing for CAML's 60% ownership of the project, CAML Group's revenue was $30.7 million (2011: $1.1 million).  The consolidated costs of production were $5.8 million (2011: $1 million) resulting in a gross profit for the Group of $24.9 million (2011: $0.1 million).

The costs of shipping the cathodes to the end consumer during the first eight months of production was $1.3 million (2011: nil) whilst General and Administrative costs across the Group were $8.5 million (2011: $5.4 million).  Profit before tax was $14.8 million (2011: loss of $5.9 million) and the estimated corporation tax liability for Kounrad at a consolidated level was $4.5 million (2011: nil) leaving a profit after tax from continuing operations of $10.3 million (2011: loss $5.9 million).

Following a strategic review of the Group's projects, four of the Group's subsidiaries are currently held for sale and the loss of $0.5 million (2011: $5.3 million) reduces the Group profit for the year to $9.8 million (2011: loss $11.2 million).

The profit per share was $0.11 (2011: loss per share $0.13).

Balance Sheet

The total assets of the Group as at 31 December 2012 amounted to $91.6 million (2011: 69.4 million) with the main increase coming from increased cash resources derived from the sales of copper during the period.  Overall there was an increase in net cash to $33.8 million (2011: $16.0 million) across the Group with $28.2 million (2011: $15.5 million) being held by the Company in London. During the year the Group's subsidiaries in Kazakhstan commenced the repayment of the loans used to finance the capital expenditure on the Kounrad construction project following the successful first production of copper at the site.

On a project basis, the property, plant and equipment reflects a book value of c $33.8 million which represents the main SX-EW plant capital expenditure incurred since September 2012.  Depreciation on the SX-EW plant assets commenced on 1 July 2012 following the commissioning of the project and on a project basis the depreciation charge for this period was c $2.2 million, $1.4 million on a consolidated basis. 

The Company's loans to related parties within the Group decreased to $45.4 million (2011: $73.6 million). This effectively breaks down into $32.1 million (2011: $56.6 million) loaned to subsidiaries in Kazakhstan and $13.3 million (2011: $17.0 million) loaned to subsidiaries in Mongolia.  It is expected that the recoveries of the Kazakhstan inter-company loans will be completed by the end of Q1 2014 whilst the Mongolian inter-company loan repayments are dependent upon the successful sale of the assets held for sale in the short term. 

The main increase in trade payables was $9.8 million (2011: nil) for the CAML Group dividends and $4.2 million (2011: nil) for the provision of corporate tax incurred at Kounrad Copper Company LLP.

There was no change to the Company's equity position other than the purchase of shares under the buyback scheme.   The purchased shares are currently held in Treasury pending their cancellation or use within the Company's employee share option schemes.

Share Buy Back Programme 

In early July 2012, the Company commenced a share buyback scheme with some of the funds that were being generated from the sales of cathode copper on site at Kounrad.  The Board decided to initiate a share buyback scheme due to the low share price at the time which it was felt did not reflect the true value of the business.

Following shareholder approval at the 31 May 2012 AGM, the decision was taken to commence the programme on 2 July 2012.  Authority was granted for the purchase of up to 4,300,000 shares which represented approximately 5% of the Company's issued share capital.

As at 31 December 2012, 1,318,929 shares had been purchased at a value weighted average price of 93.059 pence.  A total of $1,982,677 was spent on the purchases.  The shares are currently held in Treasury pending their cancellation or possible use in the Company employee share scheme.

During the buyback programme the share price responded by increasing from 69 pence in July 2012 to 97 pence in early December 2012.  The last purchase of shares was on 5 December 2012.

CAML Dividend Policy

Following on from the share buyback programme during H2 2012 and as a result of the strong cash flows being generated from the sales of cathode copper, the CAML Board took a decision in early December 2012 to commence the payment of dividends to its shareholders.  The combination of a strong operational performance at Kounrad during 2012 and the resilient copper price, prompted the decision to commence paying annual dividends.  A decision was also taken on the payment of a special dividend due to the significant cost savings made against the SX-EW plant's capital budget.

Prior to announcing the dividend policy, a detailed review of the Company's cash flows was reviewed and sensitivity analysis performed on the results.  The potential capital expenditure for the construction of a second plant on site was allowed for in the analysis in order to ensure that such an outlay could be financed in addition to possible future dividend payments.

The dividend policy agreed by the Board was announced on 13 December 2012 and is based on the annual dividend being calculated as a percentage of the attributable revenues earned from its SX-EW copper project at Kounrad, Kazakhstan.  A minimum level of 20% of such revenues has been agreed by the CAML Board subject to the Company's cash reserves providing a dividend cover of  three times or greater. The payments will be will be made by means of an interim and final dividend.

Due to strong cash-flows generated by the Kounrad project during 2012, the Company set a target for 2012 to distribute 30% of the attributable revenue.  A special dividend of 3.7 pence per ordinary share and an interim dividend of 3.3 pence per ordinary share were both announced on 13 December 2012 and paid on 1 February 2013.   

The Directors recommend a final dividend for the year ended 31 December 2012 of 3.7 pence per ordinary share which, subject to the approval of shareholders, will be  payable on 29 May 2013 to those shareholders on the Company's register on 26 April 2013.

Assessment of the Business Risks

The principal risks currently identified in the Group as a whole are:

Production & Resources

The decision to develop the plant is based on the results of a feasibility study which used estimates of expected project economic returns. These estimates were based on various assumptions relating to the future copper price, the anticipated tonnage, grades and metallurgical characteristics of the ore to be processed together with the anticipated recovery rates.

The initial feasibility study and assessment of the resources available at Kounrad was based on historical data available at the time.  In order to mitigate that risk, management have spent over two years since the IPO conducting testwork and drilling on the dumps to convert the resource to a JORC compliant standard. This work was completed by the end of Q1 2013 and, whilst this does not guarantee that the metal will be recovered from the dumps, it helps to improve confidence in the quantity of mineralised material that is available.  Additional testwork on the geohydrology and leaching characteristics of the dumps has also been conducted by management during this time in order to better understand their performance and response to the leaching process.

The initial decision to develop the plant was also based on an assessment of the cash costs of operating the plant and the required sustaining capital.  In order to mitigate all of these risks, management are constantly monitoring the performance of the plant now that it has been successfully built and commissioned.

Joint Ownership Arrangements

Operations at Kounrad are governed by a Joint Operating Agreement (JOA) on a 60:40 basis.  Per the agreement, both parties to the agreement have an equal vote in respect of certain issues.  If the parties are unable to reach an agreement on key issues then there is a risk of an impact on the overall operational performance and potentially the viability of the project.  In order to mitigate this risk, the Company works hard to ensure that it maintains a good working relationship with its local partners and meets regularly with the management to discuss operations and resolve any issues.

Political

The Company operates in areas of the world that are subject to political risk due to the impact of changing legislation on the operating and exploration environments that are imposed and changed by the ruling parties within the countries.  The Company manages this risk by complying with all the relevant legislation and working at maintaining close ties with government contacts within the countries.  Whilst current indications are that suitably favourable conditions for business will continue for the foreseeable future, the risk remains that the legal, economic and political background in the countries in which the Company operates could change for the worse.

Licences and permitting

The risks associated with gaining and maintaining appropriate permits and licences to construct and subsequently operate a copper production facility in Kazakhstan are recognised by the Company, in particular the subsoil use contract is material for operations at Kounrad. The Directors believe they have sufficient experience gained within the country and the appropriate in-country personnel to manage this risk. 

Environmental

Risks to the environment are taken seriously by the Company together with high standards for protecting its staff on site and all potential visitors to its sites.  The Company has obtained all requisite environmental permits and licences for its operations and the Directors are aware that they must maintain high environmental standards across all the Company's activities.  During 2012, the Company formed a Corporate and Social Responsibility (CSR) Committee to oversee the environmental issues. 

Financial

The Company is exposed to a number of financial risks and details of those considered significant by the Directors and the management actions and policies undertaken to mitigate such risks are contained in note 3 of the notes to the consolidated financial statements.

Corporate and Social Responsibilities

The Environment

A Corporate and Social Responsibility (CSR) Committee was set up by the CAML Board in June  2012 to ensure that the correct emphasis was factored into the social and environmental responsibilities that the Company had in its business locations, particularly Kounrad.  During 2012, the Company has focussed a lot of effort into the development and implementation of its local environmental policies.  A Group CSR policy has been developed and a copy of it can be found on the CAML website at www.centralasiametals.com. 

The policy is an integral part of an EnvironmentManagement System (EMS) based on the internationally recognised environmental standard of ISO14001.  The ISO standard has been developed to assist companies in minimising the impact of their operations on the environment, comply with applicable laws and regulations and provide scope for continual improvement.

In order to achieve the required standards as directed by the CAML Board, the first steps were to enhance the resources of the environment team and develop a suitable planning and monitoring system.  A dedicated environmental manager was appointed and the overall team numbers increased by the recruitment of a hydro-geologist and two field technicians.   The team is charged with ensuring the companies are in compliance with Kazakh law, ensure that the required monitoring and reporting is undertaken and that a comprehensive environmental management system is developed and implemented.

Independent expert advice was also provided through the services of North Coast Consulting Limited (NCC), who were commissioned by CAML to undertake a review of the measures required by the Group to achieve the desired standards at the Kounrad project.  The improvements and recommendations suggested by NCC were discussed by the CSR Committee and CAML Board following a site visit to the Company's leaching operations at Kounrad.  The outcome was an action plan to ensure operations in line.

Environmental Monitoring programme

The monitoring programme for the Kounrad site has been approved by the local regulatory authorities and the CAML Board.  The monitoring is conducted by a combination of external local specialists, as required by Kazakhstan Law, and our own environmental team.  The monitoring of flora & fauna, soils, air, surface waters and ground-waters at the Kounrad site is a requirement of the authorities and undertaken quarterly.

The monitoring of groundwater quality is a key focus at the Kounrad site.  The area of the Kounrad site currently being leached, the Eastern Dumps area, is surrounded by 3 concentric rings of monitoring boreholes.  The first ring of 38 boreholes was drilled at a distance of 50m from the dumps with the holes at a distance of 50m apart.  The second ring of 22 boreholes was drilled at a distance of 100m from the dumps with the holes at a distance of 200m apart.  The third ring of boreholes comprises of 14 boreholes located hydraulically down-gradient of the dumps.  

There boreholes act as monitoring wells and in the event of any solution leakage become capture and abstraction wells. In addition to the regular monitoring of the boreholes, samples are also taken on a regular basis from the manholes and drainage system that surrounds the SX-EW plant site.  Samples are analysed in the onsite laboratory, allowing site management to react as necessary to any non- compliant results.  

The Local Community

CAML strives to maintain good working relationships with its local partners in all its areas of operations,  The Company recognises that the local communities in the areas that it operates are key stakeholders in the projects and is committed to implementing good working relationships.

During 2012, the Company built on the already constructive and positive relations with the communities and local authorities in the area.  The local Akims, equivalent to a regional mayor, were the guests of honour for the Company's opening ceremony of the project in May 2012.  During the year, the Company provided assistance to the victims of a house fire in the Kounrad village and for a child from the Kounrad village to undergo medical treatment.  The Company also responded to a number of other local requests for support and total estimated donations came to $38,928.  

The Company has always helped the local community where possible but in order to formalise the process, a Social Management System (SMS) was developed in 2012.  This involved a general review of the Company's existing system by a firm of external consultants resulting in a programme of objectives and targets to be implemented during 2013.  A central component of the SMS is the development of a stakeholder engagement plan which will clarify who the main stakeholders are and how the Company should be communicating with these individuals and organisations.

Health and Safety on Site

During the construction of the plant, a total of 804,842 man-hours, including sub-contractors, were worked with no lost time injuries.  Management is keenly focussed on the health and safety of our employees, ensuring that full and effective protective work clothing is provided and that safety induction and refresher course are conducted for all new and existing employees. The company employs two full time, qualified health and safety personnel to oversee the specific safety requirements of both Sary Kazna LLP and Kounrad Copper Company LLP in full compliance with Kazakhstan regulations.

Given the nature of the SX-EW plant, an independent safety audit was conducted on site by a safety consultant specialising in petro-chemical type plant.  The audit was completed in July 2012 and the findings were circulated to senior management resulting in a plan of action to develop and address all of the issues identified. As at 31 December 2012, all recommendations had been implemented.  On a regular basis, the site is also subject to unannounced safety inspections by the local emergency committee department. 

The plant site has a fully equipped first aid and rapid response medical facility.  This is staffed by qualified nursing personnel 24 hours per day, seven days per week. Their role is to ensure that any minor medical treatments can be given as and when required, as well as being able to respond to any emergency situation. Additionally, the plant maintains an ambulance on site at all times in the event of an emergency requiring urgent transfer to the local hospital in Balkhash. One of the other functions of the nursing team is the mandatory screening of all personnel starting shift work for alcohol levels, with a zero alcohol limit being a key safety aspect for the plant. 

Consolidated Income Statement for the year ended 31 December

			Group
		2012	2011
		$	$
Continuing operations
Revenue		30,656,304	1,121,361
Cost of Sales		(5,769,648)	(974,487)
Gross Profit		24,886,656	146,874
Distribution and Selling costs		(1,289,934)	(6,945)
General and Administrative Expenses		(8,508,797)	(5,403,827)
Other Income		316,865	4,301
Foreign exchange rate Loss		(409,315)	(873,268)
Operating Profit / (Loss)		14,995,475	(6,132,865)
Finance Income		7,898	231,875
Finance Costs		(220,048)	(40,745)
Profit / (Loss) before Income Tax		14,783,325	(5,941,735)
Income Tax		(4,477,043)	-
Profit / (Loss) from continuing operations		10,306,282	(5,941,735)
Discontinuing operations
Loss from discontinuing operations		(511,990)	(5,251,189)
Profit / (Loss) for the year		9,794,292	(11,192,924)
Profit / (Loss) Attributable to:
- Owners of the parent		9,794,292	(11,192,924)
Earnings per share from continuing and discontinued operations attributable to owners of the parent during the year (expressed in $US per share)		-	-
From continuing operations		0.12	(0.07)
From discontinued operations		(0.01)	(0.06)
From profit / (loss) for the year		0.11	(0.13)
Diluted earnings per share
From continuing operations		0.12	(0.07)
From discontinued operations		(0.01)	(0.06)
From profit / (loss) for the year		0.11	(0.13)

Consolidated Statement of Comprehensive Income for the year ended 31 December

			Group
		2012	2011
		$	$
Profit/ (Loss) for the year		9,794,292	(11,192,924)
Other comprehensive income:
Currency translation differences		(1,355,024)	1,251,252
Other comprehensive Income for the year, net of tax		(1,355,024)	1,251,252
Total comprehensive Income for the year		8,439,268	(9,941,672)
Attributable to:
- Owners of the parent		8,439,268	(9,941,672)
- Non-controlling interests		-	-
Total comprehensive Income for the year		8,439,268	(9,941,672)

During 2012 the Group had no balances attributable to non-controlling interests (2011: nil).

Statements of Financial Position at 31 December

			Group	Company
		2012	2011	2012	2011
		$	$	$	$
Assets
Non-Current Assets
Property, Plant and Equipment		20,287,222	22,462,165	9,543	6,624
Intangible Assets		7,473,875	8,899,230	1,000,000	1,000,000
Investments		4,006,244	-	5,042,031	485,787
Trade and Other Receivables		12,342,849	12,348,934	45,403,170	73,615,395
		44,110,190	43,710,329	51,454,744	75,107,806
Current Assets
Inventory		2,591,729	541,343	-	-
Trade and Other Receivables		2,885,214	720,172	212,862	202,435
Cash and Cash Equivalents		33,854,558	16,042,897	28,230,933	15,490,536
		39,331,501	17,304,412	28,443,795	15,692,971
Assets of the disposal group classified as held for sale		8,130,838	8,423,526	100,000	100,000
		47,462,339	25,727,938	28,543,795	15,792,971
Total assets		91,572,529	69,438,267	79,998,539	90,900,777
Equity attributable to owners of the parent
Ordinary Shares		861,659	861,659	861,659	861,659
Share Premium		61,431,533	61,431,533	61,431,533	61,431,533
Treasury Shares		(4,236,232)	(2,303,803)	(4,236,232)	(2,303,803)
Other Reserves		2,963,082	4,716,650	2,835,216	3,237,305
Retained Earnings		10,008,806	872,316	7,994,686	27,243,542
		71,028,848	65,578,355	68,886,862	90,470,236
Non-controlling Interests		-	-	-	-
Total Equity		71,028,848	65,578,355	68,886,862	90,470,236
Liabilities
Non-Current Liabilities
Obligations under finance leases		-	26,390	-	-
Provision for Liabilities and Charges		2,138,728	2,138,753	-	-
Borrowings		150,000	-	-	-
		2,288,728	2,165,143	-	-
Current Liabilities
Obligations under finance leases		19,378	50,056	-	-
Trade and Other Payables		17,458,821	1,203,013	11,111,677	430,541
		17,478,199	1,253,069	11,111,677	430,541
Liabilities of disposal group classified as held for sale		776,754	441,700	-	-
		18,254,953	1,694,769	11,111,677	430,541
Total Liabilities		20,543,681	3,859,912	11,111,677	430,541
Total Equity and Liabilities		91,572,529	69,438,267	79,998,539	90,900,777

Consolidated Statement of Changes in Equity for the year ended 31 December

		Ordinary shares	Share Premium	Treasury Shares	Other Reserves	Retained Earnings	Total Equity
		$	$	$	$	$	$
At 1 January 2011		861,659	61,431,533	(2,303,803)	7,065,143	7,675,575	74,730,107
Total comprehensive income		-	-	-	1,251,252	(11,192,924)	(9,941,672)
Disposal of Tochtar		-	-	-	(3,786,540)	4,389,666	603,126
Transactions with owners
Stock option grants		-	-	-	186,795	-	186,795
At 31 December 2011		861,659	61,431,533	(2,303,803)	4,716,650	872,316	65,578,355
Total comprehensive income		-	-	-	(1,355,024)	9,794,292	8,439,268
Transfer of interest in JV1		-	-	-	-	8,167,571	8,167,571
Transactions with owners
Stock option grants		-	-	-	504,601	-	504,601
Forfeited options		-	-	-	(125,785)	-	(125,785)
Reversal of stock option grants					(777,360)	777,360	-
Purchase of own shares		-	-	(1,982,677)	-	-	(1,982,677)
Dividend		-	-	-	-	(9,602,733)	(9,602,733)
Sale of treasury shares		-	-	50,248	-	-	50,248
At 31 December 2012		861,659	61,431,533	(4,236,232)	2,963,082	10,008,806	71,028,848

¹ Arising from Joint Venture accounting caused by the commissioning of the Kounrad project.

Company Statement of Changes in Equity for the year ended 31 December

		Ordinary shares	Share Premium	Treasury Shares	Other Reserves	Retained earnings	Total Equity
		$	$	$	$	$	$
At 1 January 2011		861,659	61,431,533	(2,303,803)	3,278,603	33,557,903	96,825,895
Total comprehensive income		-	-	-	(228,093)	(6,314,361)	(6,542,454)
Transactions with owners
Stock option grants		-	-	-	186,795	-	186,795
At 31 December 2011		861,659	61,431,533	(2,303,803)	3,237,305	27,243,542	90,470,236
Total comprehensive income		-	-	-	(3,545)	(10,423,483)	(10,427,028)
Transactions with owners
Stock option grants		-	-	-	504,601	-	504,601
Forfeited options		-	-	-	(125,785)	-	(125,785)
Reversal of stock option grants					(777,360)	777,360	-
Purchase of own shares		-	-	(1,982,677)	-	-	(1,982,677)
Dividend		-	-	-	-	(9,602,733)	(9,602,733)
Sale of treasury shares		-	-	50,248	-	-	50,248
At 31 December 2012		861,659	61,431,533	(4,236,232)	2,835,216	7,994,686	68,886,862

Statements of Cash flows for the year ended 31 December 2012

		Group		Company
		As at 31 December		As at 31 December
		2012	2011	2012	2011
		$	$	$	$
Cash Flows from Operating Activities
Cash Generated from operations		28,037,340	(13,718,855)	(4,795,883)	(5,804,808)
Interest Paid		(360,802)	(42,171)	(9,092)	(7,176)
Income Tax Paid		(9,137)	-	-	-
Receipt  from sale of Kenes		200,000	-	-	-
Net Cash Generated from Operating Activities		27,867,401	(13,761,026)	(4,804,975)	(5,811,984)
Cash Flows from Investing Activities
Profit on sale of subsidiary Ereen (lost buyer deposit)		100,000	250,000	100,000	250,000
Payment to minorities Tochtar		(500,000)	-	-	-
Proceeds from sale of subsidiaries		-	825,000	-	825,000
Purchases of Property, Plant and Equipment		(5,438,395)	(17,665,403)	(11,466)	(8,800)
Proceeds from sale of Property, Plant and Equipment		31,100	356,877	-	-
Purchase of Intangible Assets		(1,149,592)	(1,752,874)	(550,000)	(342,869)
Investment in Kounrad project		(1,267,235)	-	(1,267,235)	-
Loans to JV Partners / Subsidiaries		-	-	21,256,326	(24,254,459)
Interest Received		14,774	277,555	-	131,130
Net Cash used in Investing Activities		(8,209,348)	(17,708,845)	19,527,626	(23,399,998)
Cash Flows from Financing Activities
Receipt of third party loan - Alag Bayan		150,000	-	-	-
Purchase of treasury shares		(1,982,677)	-	(1,982,677)	-
Net Cash used in Financing Activity		(1,832,677)	-	(1,982,677)	-
Effect of foreign exchange rates on cash and cash equivalents		2,865	147,110	423	(30,725)
Net Increase / (Decrease) in Cash and Cash Equivalents		17,828,242	(31,322,761)	12,740,397	(29,242,707)
Cash and Cash Equivalents at the Beginning of the Year		16,042,897	47,365,658	15,490,536	44,733,243
Cash and Cash Equivalents at the End of the Year		33,871,139	16,042,897	28,230,933	15,490,536

Notes to the financial information

Basis of Preparation

The Group's consolidated financial statements have been prepared in accordance with International Finance Reporting standards ("IFRS") as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.  The consolidated financial statements have been prepared under the historical cost  convention with the exception of assets held for sale which have been held at fair value.  The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2012.  The Group financial statements are presented in US Dollars ($).

1.  Revenue

Group	2012	2011
	$	$
Main plant
International customers	28,885,462	-
Domestic customers	1,503,704	-
	30,389,166	-
Pilot plant
International customers	267,138	1,121,361
	267,138	1,121,361
Total	30,656,304	1,121,361

2.  Cost of sales

Group	2012	2011
	$	$
Main plant
Mineral extraction tax at 5.7%	1,799,086	-
Reagents and materials	1,445,548	-
Depreciation and amortisation	941,316	-
Employee benefit expense	908,847	-
Consulting and other services	326,631	-
	5,421,428	-
Pilot plant	348,220	974,487
Total	5,769,648	974,487

3.  Selling and Distribution costs

Group	2012	2011
	$	$
Main plant
Transportation costs	1,111,936	-
Taxes and duties	114,342	-
Employee benefit expense	10,473	-
Depreciation and amortisation	6,332	-
Other expenses	45,234	-
	1,288,317	-
Pilot plant	1,618	6,945
Total	1,289,934	6,945

4.  General and administrative expenses

Group	2012	2011
	$	$
Employee benefit expense	4,814,512	2,172,324
Office related costs	1,253,876	1,065,716
Consulting and other services	1,347,573	954,697
Taxes and duties	551,424	999,626
Share based payments	504,601	186,795
Depreciation and amortisation	36,811	31,614
Total from continuing operations	8,508,797	5,410,772
Total from discontinuing operations	531,720	701,842
Total	9,040,517	6,112,614

5.  Property, Plant and Equipment

	Mining Property	Construction in progress	Plant and  Equipment	Motor Vehicles and Office Equipment	Total
Group	$	$	$	$	$
Cost
At 1 January 2011	579,407	4,397,589	1,669,392	1,013,486	7,659,874
Additions	8,614	15,138,404	2,196,195	330,805	17,674,018
Disposals	(322,791)	(640)	(153,844)	(297,614)	(774,889)
Transferred to disposal group classified as held for sale	(239,647)	-	-	(175,615)	(415,262)
Exchange Difference	(25,583)	(178,846)	(22,822)	(43,231)	(270,482)
At 31 December 2011	-	19,356,507	3,688,921	827,831	23,873,259
Additions	-	5,111,130	-	327,265	5,438,395
Disposals	-	-	(127,653)	(102,673)	(230,326)
Transfers		(20,372,905)	20,372,905	-	-
Change in JV accounting	-	(4,090,011)	(2,354,835)	(201,318)	(6,646,164)
Exchange Difference	-	39,303	37,113	12,198	88,614
At 31 December 2012	-	44,024	21,616,451	863,303	22,523,778
Accumulated Depreciation
At 1 January 2011	79,733	-	553,648	532,728	1,166,109
Provided during the year	16,137	-	681,478	207,828	905,443
Disposals	-	-	(151,877)	(266,135)	(418,012)
Transferred to disposal group classified as held for sale	(87,988)	-	-	(110,573)	(198,561)
Exchange Difference	(7,882)	-	(10,822)	(25,181)	(43,886)
At 31 December 2011	-	-	1,072,427	338,667	1,411,094
Provided during the period	-	-	1,173,700	155,290	1,328,990
Disposals	-	-	(117,647)	(81,579)	(199,226)
Change in JV accounting	-	-	(186,421)	(99,863)	(286,284)
Exchange Difference	-	-	(16,450)	(1,568)	(18,018)
At 31 December 2012	-	-	1,925,609	310,947	2,236,556
NBV at 1 January 2012	-	19,356,507	2,616,494	489,164	22,462,165
NBV at 31 December 2012	-	44,024	19,690,841	552,356	20,287,222

6.  Intangible Assets

	Deferred Exploration and Evaluation costs	Mining Licences and Permits	Computer Software	Total
Group	$	$	$	$
Cost
At 1 January 2011	10,426,366	2,563,836	79,711	13,069,913
Additions	1,635,110	999,946	9,443	2,644,499
Disposals	(2,397,870)	(152,124)	(64,324)	(2,614,318)
Transferred to disposal group classified as held for sale (note 20)	(3,300,000)	-	-	(3,300,000)
Exchange Difference	(862,306)	-	(209)	(862,515)
At 31 December 2011	5,501,300	3,411,658	24,621	8,937,579
Additions	1,066,542	49,420	33,630	1,149,592
Disposals	(23,379)	(63,751)	-	(87,130)
Change in JV accounting	-	(2,351,208)	(5,148)	(2,356,356)
Exchange Difference	(136,928)	3,916	4,029	(128,983)
At 31 December 2012	6,407,535	1,050,035	57,132	7,514,703
Accumulated Amortisation
At 1 January 2011	7,642	14,582	71,540	93,764
Provided during the year	-	2,989	6,007	8,996
Disposal	-	(12)	(64,324)	(64,336)
Exchange Difference	-	-	(75)	(75)
At 31 December 2011	7,642	17,559	13,148	38,349
Provided during the year	-	364	31,321	31,685
Disposal	(7,642)	(20,861)	-	(28,503)
Change in JV accounting	-	-	(2,993)	(2,993)
Exchange Difference	-	3,799	(1,509)	2,290
At 31 December 2012	-	861	39,966	40,828
NBV at 1 January 2012	5,493,658	3,394,099	11,473	8,899,230
NBV at 31 December 2012	6,407,535	1,049,175	17,166	7,473,875

7.  Trade and Other Receivables

	Group			Company
	31 Dec 12	31 Dec 11		31 Dec 12	31 Dec 11
	$	$		$	$
Trade and Other Receivables, net	2,175,531	1,815,942		113,591	103,608
Receivables from related parties	12,340,249	10,787,990		45,403,170	73,615,395
Prepayments	712,283	465,174		99,271	98,827
	15,228,063	13,069,106		45,616,032	73,817,830
Less: non - current portion
Trade and Other Receivables	(2,600)	(1,560,944)		-	-
Receivables from related parties	(12,340,249)	(10,787,990)		(45,403,170)	(73,615,395)
Current Portion	2,885,214	720,172		212,862	202,435

8.  Trade and Other Payables

	Group			Company
	31 Dec 12	31 Dec 11		31 Dec 12	31 Dec 11
	$	$		$	$
Trade Payables	2,040,117	1,008,203		1,349,199	350,604
Dividends payable	9,602,733	-		9,602,733	-
Corporation tax, social security and other taxes	5,815,971	194,810		159,745	79,937
	17,458,821	1,203,013		11,111,677	430,541

This condensed consolidated set of audited financial information does not comprise statutory accounts within the meaning of section 434 of the companies act 2006. Statutory accounts for the year ended 31 December 2012 were approved by the Board of Directors on the 27 March 2013, and will be delivered to the Registrar of Companies. The financial information for financial ended 31 December 2011 has been extracted from the Annual Report and Accounts for that year as filled with the Registrar of Companies. The Auditors, PricewaterhouseCoopers LLP have given an unqualified report under chapter 3 of part 16 of the Companies Act 2006 in respect of the year ended 31 December 2012.

 

END

 

 

FR UNVOROBAOUUR