Interim Results

Celtic Resources Holdings PLC 12 September 2007 FOR IMMEDIATE RELEASE 12 September 2007 Celtic Resources Holdings Plc ("Celtic" or "the Company") Interim Results for the six months ended 30 June 2007 FIRST HALF HIGHLIGHTS •Profit before tax for the half year was US$17 million with earnings per share of approximately 29 cents •US$26.5 million received for the sale of Celtic's interest in Miheevskoye Copper Gold project in Russia •Cash at end June and post balance sheet receipt of proceeds from the sale of Celtic interest in Miheevskoye of US$61 million •Suzdal gold production rose 24% in the first half of the year to 30,780 ounces (24,793 ounces first half production 2006). Monthly production has increased from 3,500 ounces in January at 56% overall recovery to approximately 8,500 ounces in both July and August at 76% overall recovery. On track to meet the overall 2007 target production of 83,000 ounces at Suzdal. • US$8 million profit from gold sales for the period (US$3 million in first half of 2006) • US$3 million profits generated by Molyken Molybdenum Joint Venture for the period (nil 2006) • Ongoing assessment of mining opportunities in the Former Soviet Union (FSU) - Particular focus on attractive projects within Kazakhstan which complement the Company's existing portfolio The Company's interim accounts will be distributed to shareholders as soon as practicable and will be available shortly on our website. For further information, please contact: CELTIC RESOURCES HOLDINGS PLC Tel: +44 (0) 207 921 8800 Kevin Foo www.celticresources.com Jonathan Scott-Barrett STRAND PARTNERS LIMITED Tel: +44 (0) 207 409 3494 Simon Raggett, Chief Executive www.strandpartners.co.uk MIRABAUD SECURITIES LIMITED Tel: +44 (0) 207 878 3362 Peter Krens www.mirabaudsecurities.co.uk FOX DAVIES CAPITAL LIMITED Tel: +44 (0) 207 936 5230 Richard Hail, Corporate Finance www.fdcap.com CONDUIT PR Tel: +44 (0) 207 429 6666 Leesa Peters, Jane Stacey www.conduitpr.com Celtic Resources Holdings Plc I am pleased to report to shareholders on a promising first half of 2007. Against a background of volatile financial markets and continuing high metals prices, gold has recently risen above US$700/ounce. We are anticipating record production levels for the group for 2007 of approximately 90,000 ounces, so the timing is excellent. The Directors believe that gold has re-established itself in investors' eyes as a desirable monetary instrument and the Directors believe it will therefore continue to be an extremely solid and widely held investment for the foreseeable future. This is more than amply proven by recent global events. The company remains un-hedged on its production and will continue to do so while current benign market conditions remain and future supply and demand looks balanced. We feel therefore that full exposure to the gold price is in the best interests of our shareholders. Our operating costs per ounce have reduced appreciably and half yearly cash costs at Suzdal were US$346/ounce. Our cash balance at the end of June combined with the proceeds from the sale of Celtic's interest in Miheevskoye in July 2007 totaled US$61 million. This, combined with future expected revenue from operations will assist the Company in maintaining a strong balance sheet and, the Directors believe, will allow us to pay off the majority of our external debt by the year end. Our cash generation will also allow further opportunities for expansion. I am pleased to announce that the Company is currently completing advanced studies on the potential expansion of Suzdal to result in production in excess of 150,000 ounces per year by the end of 2008. The key driver of this growth will be the processing plant, where capacity will be increased, to treat all low grade ores from Suzdal and Zherek and a variety of external concentrates from Kazakhstan and elsewhere. In terms of acquisitions, we announced on 11 September 2007 an exclusive option to acquire 100% of the Lobash gold-copper project in Russia, which could contain more than 2.4 million ounces of gold. In addition, Celtic is actively considering a number of acquisitions which could significantly broaden the production and development base of the Company. We also consider that the molybdenum business, where molybdenum continues to trade at prices in excess of US$30/pound, is an excellent area to be in. Accordingly, we shall be pursuing expansion plans at our Shorskoye molybdenum mine in Kazakhstan and seeking other suitable projects in the FSU to add to our molybdenum portfolio. As a producer, we are already ahead of most of those seeking to participate in this growth market. The Company has successfully completed the integration of the Eureka assets and personnel acquired in December 2006. Celtic is achieving its goals of improving the recovery and production of gold and is on the path to significant and sustainable profitability. The Company can also comfortably fund anticipated drilling programmes to increase proven reserves; a combination that the Directors believe to be unique in companies in our size bracket. Results The Board of Celtic Resources is pleased to announce the Company's results for the half year to 30 June 2007. This is the first set of accounts that the Company has released adopting International Financial Reporting Standards (IFRS) and therefore the format of these results is different to recent reports and there are some changes to the accounting policies details of which are in the notes. I should like to comment briefly on both the figures and on developments in the period since the Annual Report and Accounts for the year ended 31 December 2006 released in mid June 2007 which fully incorporate Eureka Mining Plc. On a group basis, profit before tax for the half year was US$17 million with earnings per share of approximately 29 cents. This is a very satisfying result. At Suzdal, production has steadily increased after a modest first quarter, due mainly to the improving ore grades available for treatment. Plant feed for the first half of the year was 119,286 tonnes at 11.9 g/t Au to produce 31,780 ounces. In the period to the end of August, the Company had treated approximately 164,633 tonnes at 13.9g/t Au to yield 46,793 ounces at about 64% recovery year to date. Importantly, monthly production has increased from 3,500 ounces in January at 56% overall recovery to approximately 8,500 ounces in both July and August at 70% recovery. We are on track to meet our overall 2007 target production of 83,000 ounces from Suzdal and year to end August cash operating costs have reduced to US$334 per ounce. We have received and treated the first 3,000 tonne shipment of gold concentrates from Hellas Gold in Greece and have recently received the second 3,000 tonne shipment. These trials have gone well and we intend to purchase more concentrates from a variety of suppliers. Production at Zherek to 30 June 2007 was 1,950 ounces and to end of August production was 3,000 ounces. We hope to meet the 7,000 ounce target at Zherek for 2007, but oxide ores available for heap leaching are becoming limited. In July 2007, Celtic purchased the 25% minority interest in Zherek LLP for US$660,000 and paid off Zherek's remaining bank debt of US$1.3 million. With 100% ownership of this operation, Celtic is better placed to implement strategies for treating the higher grade sulphide ore resources. Studies have shown that the most favourable long term solution for Zherek is to mine and then transport the sulphide ores 28 kilometres to the Suzdal plant. At Shorskoye, the Company mined 1,060,633 tonnes at 0.165% molybdenum in the first half of the year. At the Stepnogorsk plant the Joint Venture treated 251,378 tonnes at 0.16% molybdenum to produce 694 tonnes of concentrate at 41% molybdenum, containing 694,449 pounds of molybdenum. Recovery was 75% and we remain on schedule to meet our 1.5 million pound target for 2007. On 27 July 2007 Celtic announced the completion of the sale of the Miheevskoye copper-gold project in Chelyabinsk to the Russian Copper Company for US$33 million in cash. Celtic received proceeds of US$26.5 million from this sale on completion with the remaining US$6.5 million being paid to AGL Limited, the joint venture partner in the project. At the 74.5% owned Tominskoye copper project, pre-feasibility studies by the joint venture partners for the future development of this resource are continuing. Celtic has recently received a report from the Russian State Committee on Mineral Resources which has incorporated additional drilling and other data that was obtained since the previously reported resource estimate was compiled. This report shows an increased tonnage on an attributable basis of 283 million tonnes at a reduced average grade of 0.46% to derive an attributable content of 1.29 million tonnes copper which is marginally lower than the 1.4 million tonnes of copper in the previous estimate. Management is currently reviewing the future work programme and strategy on this project with our joint venture partners. Corporate Matters In July 2007, the Company announced the appointment of new advisers. Strand Partners Limited is our new Nominated Adviser and Mirabaud Securities Limited is the Company's lead broker, with Fox-Davies Capital acting as co-broker. We look forward to working with these new advisers to best position the Company and enhance shareholder value. The board, following the absorption of the Eureka personnel, has brought key management and staff compensation packages into line with industry standards, in order to retain and incentivise all of those employees who contribute so much to the success of your Company. During July 2007, Serdar Karliev tendered his resignation as a Director of the Company, due to a change in personal circumstances. I would like to thank him on behalf of the Company and the Celtic Board for his contribution during the period of his appointment. The Board is glad to welcome a new major shareholder Bluecone Limited, (a subsidiary of Severstal Resurs) which now holds 22% of the Company's issued ordinary share capital and the Board looks forward to building on this new relationship over the coming months. Finally, I would like to re-state our commitment to the FSU, as we continue to believe that opportunities in gold and base metals in Kazakhstan and Russia abound. We are reviewing a variety of projects at present and intend to use our strong production growth at Suzdal, our edge in FSU experience and technology for refractory gold ores combined with a very strong balance sheet to meet our stated objectives. Peter Hannen 11 September 2007 Chairman Celtic Resources Holdings Plc Condensed unaudited consolidated income statement For the half year ended 30 June 2007 30 June 30 June 2007 2006 Notes $000 $000 CONTINUING OPERATIONS ----------------------------- ------ --------- --------- REVENUE 2 23,718 17,335 Cost of sales (14,938) (11,949) ----------------------------- ------ --------- --------- Gross profit 8,780 5,386 Investment revenue 998 452 Other gains and losses 3 14,648 44,472 Share of profits of joint venture 3,192 - Administration expenses (9,517) (8,066) Finance costs (985) (2,374) ----------------------------- ------ --------- --------- profit before tax 17,116 39,870 Income tax expense 4 (1,184) (1,366) ----------------------------- ------ --------- --------- profit for the year 2 15,932 38,504 ----------------------------- ------ --------- --------- Attributable to: Equity holders of the parent 16,013 38,419 Minority interest (81) 85 ----------------------------- ------ --------- --------- 15,932 38,504 ----------------------------- ------ --------- --------- EARNINGS PER SHARE ----------------------------- ------ --------- --------- US Cents US Cents ----------------------------- ------ --------- --------- From continuing operations ----------------------------- ------ --------- --------- Basic 28.67 84.46 Diluted 28.58 74.04 ----------------------------- ------ --------- --------- Celtic Resources Holdings Plc Condensed unaudited consolidated balance sheet As at 30 June 2007 30 June 2007 31 December 2006 As restated Notes $000 $000 --------------------- ------ ---------- ------------ ASSETS Non- current assets Property, plant and equipment 57,603 58,511 Intangible assets 5 32,131 45,000 Joint venture interests 6 14,179 10,987 Financial assets 7 6,350 7,801 --------------------- ------ ---------- ------------ Total non-current assets 110,263 122,299 --------------------- ------ ---------- ------------ Current assets Inventories 28,190 21,980 Trade and other receivables 65,064 25,478 Financial assets 7 1,517 - Cash and bank balances 34,430 53,313 --------------------- ------ ---------- ------------ Total current assets 129,201 100,771 --------------------- ------ ---------- ------------ TOTAL ASSETS 2 239,464 223,070 --------------------- ------ ---------- ------------ Equity and liabilities --------------------- ------ ---------- ------------ Capital and reserves --------------------- ------ ---------- ------------ Issued capital 15,955 15,950 Reserves 118,149 118,277 Retained earnings 64,750 48,817 --------------------- ------ ---------- ------------ Equity attributable to equity holders of the parent 198,854 183,044 Minority interests 4,484 969 --------------------- ------ ---------- ------------ Total equity 203,338 184,013 --------------------- ------ ---------- ------------ Non-current liabilities --------------------- ------ ---------- ------------ Borrowings 3,639 3,970 --------------------- ------ ---------- ------------ Other financial liabilities 1,777 1,891 --------------------- ------ ---------- ------------ Deferred tax liabilities 3,555 4,783 --------------------- ------ ---------- ------------ Provisions 1,142 1,142 --------------------- ------ ---------- ------------ Total non-current liabilities 10,113 11,786 --------------------- ------ ---------- ------------ Current liabilities Trade and other payables 17,140 9,955 Borrowings 7,669 14,890 Current tax liabilities 1,204 2,426 --------------------- ------ ---------- ------------ Total current liabilities 26,013 27,271 --------------------- ------ ---------- ------------ Total liabilities 2 36,126 39,057 --------------------- ------ ---------- ------------ TOTAL EQUITY AND LIABILITIES 239,464 223,070 --------------------- ------ ---------- ------------ Celtic Resources Holdings Plc Condensed unaudited consolidated statement of changes in equity For the half year ended 30 June 2007 Issued Reserves Retained Total capital earnings $000 $000 $000 $000 ----------------------- ------- -------- ------- ------- 1 January 2007 15,950 114,368 52,128 182,446 Effects of changes in accounting policies Transfer from profit and loss account - 1,379 (1,379) - Change in accounting for available for sale investments - 4,206 - 4,206 Change in accounting for other financial liabilities (482) (482) Income tax - (1,676) 81 (1,595) Minority interest in adjustment arising from change in accounting for other financial liabilities after tax 47 47 Change in accounting for deferred tax (1,578) (1,578) ----------------------- ------- -------- ------- ------- As restated 15,950 118,277 48,817 183,044 ----------------------- ------- -------- ------- ------- Surplus on translation of accounts of subsidiaries into US dollars 568 568 Change in value of available for sale investments (1,255) (1,255) Income tax 207 207 Attributable to minority interests (35) (35) Shares issued for cash on exercise of options 5 15 - 20 Shares vested in beneficiaries by the trustees of the Celtic Resources Employee Benefit Trust 372 (80) 292 Profit for the period 16,013 16,013 ----------------------- ------- -------- ------- ------- 15,955 118,149 64,750 198,854 ------- -------- ------- ------- Celtic Resources Holdings Plc Condensed unaudited consolidated cash flow statement For the half year ended 30 June 2007 -------- -------- 30 June 2007 30 June 2006 $000 $000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES ------------------------------- -------- -------- Profit for the year 15,932 38,504 Income tax expense recognised in the profit 1,184 1,366 Finance costs recognised in the profit 985 2,374 Investment revenue recognised in the profit (998) (452) Profit on sale of investment (11,244) (36,666) Depreciation and amortisation of non current assets 7,392 2,969 Profit on sale of property, plant and equipment (16) - Foreign exchange gain (2,277) 669 Shares vested by the Employee Benefit Trust 292 - ------------------------------- -------- -------- 11,250 8,764 ------------------------------- -------- -------- Movements in working capital ------------------------------- -------- -------- Increase in trade and other receivables (38,841) (4,702) Increase in inventories (6,210) (2,700) Increase in trade and other payables 6,971 2,142 ------------------------------- -------- -------- Cash generated by operations (26,830) 3,504 ------------------------------- -------- -------- Interest paid (885) (2,374) Income taxes paid (3,257) (2,178) ------------------------------- -------- -------- Net cash generated by operating activities (30,972) (1,048) ------------------------------- -------- -------- Cash flows from investing activities Proceeds on sale of investments net of costs 28,718 76,289 Payments for investments (1,828) - Interest received 998 452 Proceeds of sale of property, plant and equipment 79 - Payments for property, plant and equipment (1,137) (12,380) Payments for intangible assets (4,017) (17) Profits retained by joint venture (3,192) - Secured loan to Victoria Oil & Gas Plc - (6,000) ------------------------------- -------- -------- Net cash generated by investing activities 19,621 58,344 ------------------------------- -------- -------- Cash flows from Financing activities ------------------------------- -------- -------- Proceeds from issues of equity shares 20 5,059 Net repayment of borrowings (7,552) (2,071) ------------------------------- -------- -------- Net cash used in financing activities (7,532) 2,988 ------------------------------- -------- -------- Net increase in cash and cash equivalents (18,883) 60,284 ------------------------------- -------- -------- Cash and cash equivalents at the beginning of the period 53,313 10,532 ------------------------------- -------- -------- Cash and cash equivalents at the end of the period 34,430 70,816 ------------------------------- -------- -------- Celtic Resources Holdings Plc Selected explanatory notes to the condensed unaudited interim financial statement For the half year ended 30 June 2007 1 Accounting policies The group has adopted the new and revised Standards and Interpretations issued by the International Accounting Standards Board (ISAB) and the International Financial Reporting Interpretations Committee (IFRIC) of the ISAB that are relevant to its operations and effective for its reporting periods beginning on 1 January 2007. The adoption of these new and revised Standards and Interpretations has resulted in changes to the group's accounting policies in the following areas that have affected the amounts reported for the current and prior periods: Available for sale (AFS) financial assets Listed shares held by the group that are traded in an active market are classified as AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve. They had previously been included at cost. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences but deferred tax assets on temporary differences are recognised only to the extent that it is probable that taxable profits will be available to facilitate their utilisation. The adoption of the balance sheet liability method has changed the values reported in the accounts on timing differences and required the introduction of provisions on the exchange differences arising on the translation of the financial statements of foreign operations into US dollars. Reinstatement provision Reinstatement provisions are established to recognise the estimated present value of the costs necessary to meet the obligations created by activities to date under the licences to operate mines. The adoption results in a charge against earnings of the change in the estimated value offset by payments determined by reference to production which the licences require to be paid into a reinstatement fund during the period. Previously the payments to the fund were charged against earnings. Other financial liabilities Other financial liabilities are reported at their estimated present value. The adoption results in a charge against earnings of the change in the estimated value offset by payments made in the period. Previously the liabilities had been reported at their gross value reduced by payments made without any charge against earnings. In all other respects the report has been compiled using the same accounting policies and methods of computation as were for the annual financial statements for the year ended 31 December 2006. It is presented in US Dollars which is the reporting currency of the Group. 2. Segment information For management purposes, the group is organised into two major operating divisions - gold and base metals. These divisions are the basis on which the group reports its primary segment information. The principal activities of each division are: Gold - the production of gold from ore extracted from the group's owned properties and from acquired concentrates and sale of gold properties and the development of properties for future production Base metals - the production of base metals, currently Copper and Molybdenum, from ore extracted from the group's owned properties and from joint venture interests and the development of properties for future production. Segment revenues Half year to Half year to 30 June 2007 30 June 2006 $000 $000 --------------------------- ----------- ----------- Gold 21,725 17,335 Base metals - Other 1,993 - --------------------------- ----------- ----------- 23,718 17,335 ----------- ----------- All revenues are from continuing operations. Segment result --------------------------- ----------- ----------- Half year to Half year to 30 June 2007 30 June 2006 $000 $000 --------------------------- ----------- ----------- Gold 7,857 3,201 Base metals 2,982 - --------------------------- ----------- ----------- 10,839 3,201 ----------- ----------- Unallocated 6,277 36,669 --------------------------- ----------- ----------- Profit before tax 17,116 39,870 --------------------------- ----------- ----------- Income tax expense (1,184) (1,366) --------------------------- ----------- ----------- Profit for the period 15,932 38,504 --------------------------- ----------- ----------- Segment assets and liabilities Assets Liabilities ---------- ---------- ---------- ---------- Half year to 31 December Half year to 31 December 30 June 2007 2006 30 June 2007 2006 $000 $000 $000 $000 ----------------- ---------- ---------- ---------- ---------- Gold 125,796 115,318 23,583 20,111 Base metals 29,531 34,262 567 3,257 ----------------- ---------- ---------- ---------- ---------- 155,327 149,580 24,150 23,368 ----------------- ---------- ---------- ---------- ---------- Unallocated 84,137 73,490 11,976 15,689 ----------------- ---------- ---------- ---------- ---------- 239,464 223,070 36,126 39,057 ----------------- ---------- ---------- ---------- ---------- Other segment information Gold Base metals ---------- ---------- ----------- ----------- Half year to Half year to Half year to Half year to 30 June 2007 30 June 2006 30 June 2007 30 June 2006 $000 $000 $000 $000 ----------------- ---------- ---------- ----------- ----------- Acquisition of segment assets 17,020 5,331 (4,726) - Depreciation & amortisation of segment assets 7,365 3,052 5 - ----------------- ---------- ---------- ----------- ----------- Geographical segments The Group's two divisions operate in Kazakhstan and Russia. In Kazakhstan it produces gold from ore extracted from its own mines and from acquired concentrates and it is party to a joint venture which produces Molybdenum. In Russia it is developing a Copper producing property. Revenue Segment assets Acquisition of segment assets --------- --------- ------- --------- --------- ---------- Half year to Half year to 30 June 31 December Half year to Half year to 30 June 2007 30 June 2006 2007 2006 30 June 2007 30 June 2006 $000 $000 $000 $000 $000 $000 -------- --------- --------- ------- --------- --------- ---------- Kazakhstan 21, 725 17,335 140,449 128,825 20,079 5,331 Russia - - 14,375 20,755 (6,380) - Other 1,993 - 84,640 73,490 15,378 - --------- --------- --------- ------- --------- --------- ---------- 23,718 17,335 239,464 223,070 29,077 5,331 --------- --------- ------- --------- --------- ---------- 3. Other gains and losses Half year to Half year to 30 June 2007 30 June 2006 $000 $000 ---------------- ---------------- Gain on disposal of investments 11,244 36,666 Foreign exchange gains 3,339 7,806 Profit on sale of property, plant and 16 - equipment Other 49 - ---------------- ---------------- 14,648 44,472 ---------------- ---------------- 4. Income tax expense The income tax charge is lower than UK Corporation Tax on the group profit for the half year because - the group's share of profits of joint venture are reported net of tax - the gain on the investment disposal is tax exempt. 5. Intangible assets The Group's activities include prospecting for and production of gold and other minerals in Kazakhstan and are therefore subject to a number of significant potential risks including: 1.1 Price fluctuations Uncertainties over development and operational costs and commodity prices. 1.2 Operational and environmental risks Political and legal risks, including arrangements with governments for licences, profit sharing and taxation funding developments. The value of the Group's investment is dependent on the successful development of mineral reserves, which is affected by these and other risks. 6. Joint venture interests The group has a joint venture with Stepnogorsky Gorno-Khimichesky Kombinat LLP (SGKH) for the production of Molybdenum from the Shorskoye Project. The venture is conducted through MolyKen LLP a company in which each partner has a 50% interest. MolyKen LLP owns the entire capital of Ar-Man LLP, the company which holds the licence to the property. 30 June 2007 31 December 2006 $000 $000 ------------- ------------- Share of gross assets 21,725 18,794 Share of gross liabilities (7,546) (7,807) ---------------- ------------- ------------- 14,179 10,987 ------------- ------------- 7. Financial assets Available for sale investments carried at fair value Current Non-current 30 June 2007 31 December 30 June 2007 31 December 2006 2006 $000 $000 $000 $000 ------------------ -------- --------- -------- --------- Victoria Oil & Gas Plc (i) - - 6,350 7,801 Tamaya Resources Limited (ii) 1,517 - - - ------------------ -------- --------- -------- --------- 1,517 - 6,350 7,801 -------- --------- -------- --------- (i) The Company owns 6,902,618 ordinary shares of £0.005 each in Victoria (5.37%) and has an option to acquire 250,000 ordinary shares at 90p each before 31 December 2007. 6,650,618 ordinary shares have been loaned to Jeffries International Limited until 11 October 2007. (ii) The group holds 6,700,000 ordinary shares in Tamaya Resources Limited which are the balance, after sales in the period, of the shares acquired in exchange for the transfer of ownership of some plant which was surplus the requirements. This information is provided by RNS The company news service from the London Stock Exchange

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