Final Results

RNS Number : 3310B

Ormonde Mining PLC

16 June 2016

 

 16 June 2016

Ormonde Mining plc

("Ormonde" or "the Company")

Final Results for the year ended 31 December 2015

DUBLIN & LONDON: 16 June 2016 - Ormonde Mining plc announces its final results for the year ended 31 December 2015.

HIGHLIGHTS FOR THE YEAR AND POST YEAR END

·    Robust and flexible USD 99.7 million funding package arranged for the Barruecopardo Project through funds managed by Oaktree Capital Management

·    Detailed engineering works well advanced with orders placed for 100% of the longer lead time (priority 1) equipment and 60% of the medium lead time (priority 2) equipment

·    Construction Management Contract signed with Fairport Engineering Limited

·    85% of land blocks required to commence full project development now owned or in long term rental agreements

·    Compulsory land acquisition of the remaining blocks advancing, following an appeal of an administrative step in the process being resolved in the Project company's favour

·    Optimised construction schedule for the Project agreed between the Project partners, which sees commissioning in late 2017 and aligns first production with independent forecasts of improving tungsten prices

·    Amendments to the Project's debt facility to take account of the new optimised construction schedule agreed with the Project's debt provider

·    Successful drilling programme completed which supports the current resource interpretation and demonstrates the potential to extend the nine year mine life at Barruecopardo through the development of a "Stage 2" underground mine at the Project

Mike Donoghue, Ormonde's Chairman, commented:

"The past year has been a successful one for Ormonde, with the achievement of a $100 million financing package for the Barruecopardo Tungsten Project in what was a very difficult funding market for mining projects. This enabled the Project to advance on multiple fronts, with orders being placed for all of the longer lead time and most of the medium lead time equipment for the Project, the signing of a construction management contract with Fairport Engineering and the completion of a successful drilling program which demonstrated the potential to extend the current nine year mine life of the Project.

 With an updated construction schedule having been recently agreed with our Project partners, which sees commissioning of the mine in late 2017, the next year should be an exciting one for the Company as we develop the Project and move towards first production."  

Enquiries to:

Ormonde Mining plc

Steve Nicol, Managing Director Tel: [phone]

Capital M Consultants

Simon Rothschild Mob: [phone]

Murray Consultants

Mark Brennock  Tel: [phone] Mob: [phone]

Davy Corporate Finance (Nomad / ESM Adviser, Joint Broker and Financial Adviser) Eugenée Mulhern / Roland French Tel: [phone]

SP Angel Corporate Finance LLP (Joint Broker)

Ewan Leggat Tel: [phone]

CHAIRMAN'S REVIEW

For Ormonde Mining, 2015 was a milestone year. Following the granting of the mining concession for the Barruecopardo Tungsten Project ("Project") in late 2014, the scene was set to advance the capital funding stage of the Project to conclusion. During this period, the Board received an unsolicited non-binding proposal with respect to a potential offer for the Company. Following careful consideration, the Board concluded that the proposal lacked substance and substantially undervalued your Company and the Barruecopardo asset. In the end, Shareholders were provided the opportunity to approve the capital funding proposals at an EGM, where Shareholders voted overwhelmingly in favour of the Company's US$100 million funding package, which I am pleased to say was successfully completed in June 2015, thanks to the thoroughness of your management team.  With capital funding successfully in place, this led in turn to the commencement of the detailed engineering and equipment procurement stage of the Barruecopardo Project and to the initiation of the final procedures for land acquisition. 

Barruecopardo

The granting of the mining concession late in 2014 facilitated Ormonde finalising its capital funding proposals in the early months of 2015. The commodity, mining and capital markets were, at that time, in the midst of a cyclical downturn and both conventional sources of mine funding, the project debt markets and the equity markets, were effectively closed to new projects. With this in mind, your Company had engaged Swedbank Norway to advise on what was considered a more flexible debt alternative. Your Board considered that the issuance of a bond in combination with equity from outside the market place was a more realistic and preferable option.

A robust and flexible finance package of equity and debt was eventually negotiated with Oaktree Capital Management, an established US private equity fund, active in Europe, with circa US$100 billion under management. The new equity component from Oaktree was structured as a 70% beneficial interest in Saloro SLU, the Project company which holds the Barruecopardo mining concession, through the provision of a US$44.2 million equity commitment. This level of equity served to ensure a robust funding both in terms of size and mix, facilitating the debt component of US$55.5 million, which included both a prudent contingency and a cost overrun facility, and provided for a conservative debt to equity funding ratio. 

This funding structure, coupled with minority protection clauses, Ormonde's position as manager and the flexibility on debt repayments and distributions, made for a lower risk, realistic, less dilutive, funding package. Your Board brought this package to shareholders for their approval at an EGM in May 2015 and the proposal was approved by 93% of those voting.

With funding in place, Saloro staff spent the latter half of 2015 pursuing the engineering design and plant procurement stage of the Project. Fairport Engineering, who had previously been awarded the detailed engineering contract, was authorised to commence this work, with initial emphasis being on advancing  sufficient design work to be in a position to table tender documents for all the priority 1 and priority 2 processing plant equipment and to enter supply, or supply and construct, negotiations with relevant equipment manufacturers. This stage of the work was largely completed early in 2016, with 100% of the larger, longer lead-time equipment orders (priority 1) and 60% of the medium lead-time equipment (priority 2) orders placed.

During this period Saloro also awarded Fairport Engineering the construction management contract for the Project. Considerable site preparation works were also initiated under the direction of Saloro staff.

Land access was also a key focus during the year. At the start of the year approximately 85% of the land blocks required to commence construction of the Project were held under "Option to Purchase Agreements" (or long term rental agreements for the 10% of municipal lands), with virtually all of these options exercised and the blocks passing to the ownership of Saloro by the end of 2015.  Those remaining are proceeding through due process. Compulsory land acquisition commenced early in the year on the 15% of land blocks for which Option to Purchase Agreements had not been signed by that stage (although some of these have since been purchased by Saloro).

A step in the administrative process for the compulsory acquisition was appealed by a third party late in the year and this appeal has been rejected at the initial administrative appeal level, reinforcing the Company's belief that the basis of the appeal is entirely without merit. Avenues exist, however, for a subsequent appeal to be launched at an administrative court, a fact which has been taken into consideration by the Project partners in the approval and adoption of an optimised construction schedule for the Project which sees commissioning in late 2017. In line with this optimisation of the Project schedule, Saloro has completed negotiations with the Project's majority owner and debt provider in relation to amending the debt facility agreement to reflect the new and extended schedule. It is important to note that this optimised schedule also aligns first production with what is being forecast by independent third parties to be a more positive tungsten price environment, reducing risk and optimising project returns.

Late in 2015 Saloro decided to initiate a limited drilling programme with the objective of confirming extensions to the mineralisation at depth beneath the main central part of the planned nine year open pit, whilst also following up a potentially expanded zone of mineralisation under the shallow northern end of the pit which, was identified by drilling in 2012. It was pleasing to see that the main objective was realised, with the central zone mineralisation continuing with depth, suggesting that the objective of the Saloro partners to eventually develop Barruecopardo into a long life underground mine appears well based. Activities to further support this belief will be advanced during the development and early production stages.      

Tungsten market

Turning to the tungsten market; 2015 saw this market succumb to the general cyclical downturn the commodity markets have endured since 2011, with the price per metric tonne unit (mtu) of tungsten trioxide falling to a low of US$162 in January 2016. More recently, with prices trending upwards in recent months to stand at $210/mtu in mid-June 2016, independent price forecasts are more optimistic. This price rise has coincided with a general commodity market upturn seen over this period. The tungsten price remains driven by supply-demand considerations, with demand being effected during 2015 by lower global GDP growth and a temporary fall in demand in certain industries, particularly in the mining and oil/gas sectors, where a significant reduction in US demand was seen arising from a major reduction in the number of drill rigs in operation as low oil prices took effect. This temporary reduction, which would be expected to reverse as oil prices increase, was partly offset by strong growth in the automotive and aerospace industry.

Supply is also increasingly being constrained by an agreed cut-back in production by the eight largest tungsten mining groups in China, which could progressively start to limit market supply in 2016, and by higher cost mine closures and the deferral of new mining projects.

Other Projects

Whilst the primary focus of your Company during the year has been the advancement of the Barruecopardo Project, the Company's other projects are being maintained in good order.

Activity on our gold properties in Salamanca and Zamora Provinces in Spain (in joint venture with Aurum Mining plc) was necessarily minimal during 2015, but early in 2016 the joint venture partners commissioned an independent review of the exploration works carried out to date on these properties, with this review both reaffirming the potential of these projects to host significant gold mineralisation, whilst at the same time identifying potential new drilling targets.

At La Zarza, we continue to explore avenues to divest this project.

Corporate and Financials

It was with great sadness, in September 2015 that we reported the death of Dr Kerr Anderson, a founder and leading figure in Ormonde. The contribution that Kerr made to the Company was invaluable and he is sadly missed by all at the Company.

In October 2015, Ormonde made a number of changes to its management team, with Mr. Steve Nicol and Mr. Paul Carroll being appointed to the positions of Managing Director and Chief Financial Officer respectively, and I welcome them in their new positions. Before taking these positions, both executives had served in senior management positions within the Company.  As management to both Saloro and Ormonde, they are responsible for driving Barruecopardo forward into production. I must also welcome Mr. Jonathan Henry as a non-executive director of Ormonde, who brings widespread experience in the capital markets together with prior experience in the tungsten industry.                                 

The Company has reported a profit for the year of €2.07M, compared with a loss of €1.63M for 2014. A gain of €3.4 million was recorded on the disposal of the Company's subsidiary interest in Saloro as part of the Oaktree financing of Saloro.  The year also saw first operating income for the Company with €557k in management fee income being received in relation to services provided to Saloro since the closing of the Saloro financing on 19 June 2015 to year end.  These items were offset principally by administration expenses of €1.44 million (a reduction on the €1.62 million costs from 2014), and a loss on associate investment (Ormonde's share of Saloro loss) of €368k. 

Finally, I would like to thank shareholders for their support during the last year; a period where considerable success was achieved in advancing Barruecopardo towards production.

Michael J. Donoghue

Chairman

Consolidated Statement of Comprehensive Income

Year ended 31 December 2015

		2015		2014
		€000's		€000's
Turnover - Continuing operations		527		-
Administrative expenses		(1,443)		(1,625)
Investment Income		3,397		-
Operating profit/(loss)		2,481		(1,625)
Interest receivable and similar income		-		4
Finance costs		(42)
Profit/loss for the year before taxation		2,439		(1,621)
Taxation		-		(5)
Profit/loss for the year after taxation		2,439		(1,626)
Group share of loss on associate investment		(368)		-
Total comprehensive income/(loss) for the year		2,071		(1,626)
EARNINGS PER SHARE
Basic earnings/(loss) per ordinary share		€0.0044		(€0.0036)
Diluted earnings/(loss) per ordinary share		€0.0044		(€0.0036)

Consolidated Statement of Financial Position

As at 31 December 2015

		2015		2014
		€000's		€000's
ASSETS
NON-CURRENT ASSETS
Intangible assets		5,279		18,535
Property, plant and equipment		1		1
Investments		16,579		-
		21,859		18,536
CURRENT ASSETS
Trade and other receivables		35		222
Cash and cash equivalents		653		511
Total Current Assets		688		733
TOTAL ASSETS		22,547		19,269
EQUITY AND LIABILITIES
EQUITY
Issued share capital		13,485		13,485
Share premium account		29,932		29,932
Share based payment reserve		837		837
Capital conversion reserve fund		29		29
Capital redemption reserve fund		7		7
Foreign currency translation reserve		1		1
Retained loss		(22,089)		(25,234)
Equity attributable to Owners of the Company		22,202		19,057
CURRENT LIABILITIES
Trade and Other Payables		345		212
Total Current Liabilities		345		212
Total Liabilities		345		212
TOTAL EQUITY AND LIABILITIES		22,547		19,269

Consolidated Statement of Cash Flows

Year ended 31 December 2015

		2015		2014
		€000's		€000's
CASHFLOWS FROM OPERATING ACTIVITIES
Profit/(Loss)for the year before taxation		2,439		(1,621)
Adjustments for:
Depreciation		-		2
Finance costs recognised in profit or loss		42		-
Investment revenue recognised in profit or loss		-		(4)
Cashflow from operating activities		2,481		(1,623)
MOVEMENT IN WORKING CAPITAL
Movement in debtors		186		172
Movement in creditors		133		(59)
Income taxes paid		-		(5)
Net cash generated by/(used in) operating activities		2,800		(1,515)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest Paid		(42)		-
Proceeds of issue of share capital		-		2,383
Other equity movement		1,074		-
Cashflow from financing activities		3,832		868
CASH FLOWS FROM INVESTING ACTIVITIES
Net expenditure on intangible assets		(16)		(1,408)
Movement of property, plant and equipment		-		(2)
Interest received		-		3
Acquisitions and disposals		(3,306)		-
Net cash (used in) investing activities		(3,322)		(1,407)
Share of loss in associate		(368)		-
Cashflow from investing activities		(3,690)		(1,407)
NET INCREASE /(DECREASE) IN CASH AND CASH EQUIVALENTS		142		(539)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		511		1,050
CASH AND CASH EQUIVALENTS AT END OF YEAR		653		511

Consolidated Statement of Changes in Equity

Year ended 31 December 2015

			Share
			Based
	Share	Share	Payment	Other	Retained
	Capital	Premium	Reserve	Reserves	Losses	Total
	€000's	€000's	€000's	€000's	€000's	€000's
Balance at 1 January 2014	12,197	28,837	837	37	(23,608)	18,300
Loss for the year	-	-	-	-	(1,626)	(1,626)
Recognition of share based payments	-	-	-	-	-	-
Proceeds of share issue	1,288	1,095	-	-	-	2,383
Balance at 31 December 2014	13,485	29,932	837	37	(25,234)	19,057
Balance at 1 January 2015	13,485	29,932	837	37	(25,234)	19,057
Profit for the year	-	-	-	-	2,071	2,071
De-recognition of subsidiaries	-	-	-	-	1,074	1,074
Proceeds of share issue	-	-	-	-	-	-
Balance at 31 December 2015	13,485	29,932	837	37	(22,089)	22,202

1. The basic earnings/(loss) per share and the diluted earnings/(loss) per share have been calculated on a profit after taxation of €2,071,000 (2014: loss of €1,626,000) and a weighted average number of Ordinary Shares in issue for the year of 472,507,482 (2014: 455,692,724) for the basic earnings/(loss) per share and 472,507,482 (2014: 457,108,369) for the diluted earnings/(loss) per share.

 

END

 

 

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