Information  X 
Enter a valid email address

Sierra Rutile Ltd (SRX)

  Print      Mail a friend

Monday 05 September, 2011

Sierra Rutile Ltd

Interim Results

RNS Number : 5819N
Sierra Rutile Limited
05 September 2011
 

 

Sierra Rutile Limited

Interim Results

5 September 2011: Sierra Rutile Limited ("SRL") announces its unaudited interim results for the six months ended June 30, 2011 ("the Period").

 

Highlights

·    8% increase in sales to US$20.0 million in H1 2011 (H1 2010: US$18.6 million)

·    H1 2011 rutile production 11.4% lower to 27,149 tonnes (H12010: 30,659 tonnes) due to lower grades being mined as planned

·    H1 2011 zircon concentrate production up 71.5% to4,778 tonnes (H1 2010: 2,786 tonnes)

·    Early repayment of US$17.8 million of the loan from the Government of Sierra Leone ("GOSL Loan")

·    Capital expenditure ("capex") budget of US$14.1 million approvedfor FY 2011.  Focused on improving current operational performance (FY 2010 capex budget: US$4.0 million)

·    Revised JORC-compliant resource statement released of over 600 million tonnes of rutile

·    Maiden JORC compliant resource of 33,000 tonnes of tailings confirmed, containing 1.4% total rare earths ("TREO").  TREO of 2.2% also confirmed in ongoing production of high tension tailings

·    FY 2011 rutile production will be broadly in line with 2010, as per previous guidance

·    FY 2011 zircon concentrate production targets increased to over 7,500 tonnes

·    Strategic review into expansion of production progressing well, with conclusions from external consultants expected to be received by the Company in the fourth quarter of 2011

·    Market fundamentals for rutile, zircon and ilmenite remain strong

 

CEO's Review

 

As expected, rutile production was 13% lower at 27,149 tonnes in the first half of 2011 than in the corresponding period of 2010 due to the position of Dredge D1 ("D1") in a lower grade area on the west side of the pond.  The production problems associated with mining a lower grade area of the deposit were exacerbated by low dredge availability resulting from historical under-investment on essential dredge maintenance.

 

Due to the lower throughput of rutile, the mineral separation plant had the availability to re-process additional historic tailings for additional zircon concentrate production.  As a result, 4,788 tonnes of zircon concentrate were produced compared with 2,786 tonnes in H1 2010.

 

Sales in H1 2011 increased 8% to US$20.0 million compared to US$18.6 million in H1 2010, driven primarily by higher realized prices on rutile sales during the Period(US$571/tonne in H1 2011 vs US$530/tonne in H1 2010).

 

Revenues from rutile sales in the Periodwere negatively impacted as a result of H1 2011 production being used to fulfillegacy contracts that, as announced in December 2010, had rolled over from 2010 and were subject to lower pricing.

 

As previously announced, in May 2011 the Board approved a FY 2011 capex budget of US$14.1 million (FY 2010 capex US$4.0 million) to be spent on essential maintenance and refurbishments to improve production and maximise efficiency at SRL's current operations.  Of this US$14.1million budget, US$5.1million was spent in H1 2011 on a number of upgrades including 12 new banks of spirals on the D1 Wet Plant which have been commissioned and are delivering increased recovery rates.  Additionally, in July 2011, major works to move D1 to a new mining area on the east side of the pond ("East Area") were successfully completed.

 

The maintenance and refurbishment works, which are set to continue through H2 2011, will allow SRL to reduce downtime and maximise dredge availability in the future. 

 

SRL expects production levels to increase during the mining of the East Area due to higher grades and as a result of the increased investment made in operations during the Period.  Accordingly, SRL is confident that FY 2011 rutileproduction will be broadly in line with 2010, as per previous guidance.

 

SRL will continue the increased zircon concentrate production in the second half of the year, and now expects FY 2011 zircon concentrate production to be over the 7,092 tonnes produced in 2010.

 

SRL anticipates 2012 production levels will be significantly above 2011 as the benefits and associated efficiency improvements of maintenance and refurbishment works are fully realised.

 

Financial

 

Net loss for the Period was US$14.6 million compared to a loss of US$1.5 million (pre-exceptional items) in H1 2010.  The increased loss in H1 2011 was primarily a result of:

 

·    Increased costs of sales in H1 2011 over H1 2010, driven by a need to increase 
maintenance and outsourcing due to under investment in prior years (US$5.9 million in H1 2011
vs US$4.1 million in H1 2010) and the rise in fuel prices, which led to an increase in fuel costsfrom US$5.1 million in H1 2010 to US$6.9 million in H1 2011

·    Increased administrative expenses from US$2.1 million in H1 2010 to US$4.6 million in H1 2011, due primarily to the increase in the non-cash expenses related to share based payments (H1 2011 US$2.2 million, H1 2010 nil)

·    A US$2.0 million unrealized loss on the exchange of its Euro denominated loan into US$ in H1 2011 compared to a US$5.1 million gain in H1 2011

During the Period net cash absorbed in operating activities was US$7.5 million, of which, US$2.7 million was spent on interest and tax (both paid to the Government of Sierra Leone) and US$4.8 million was deployed as working capital in operations, predominantly in increasing inventory and placing prepayments on long lead time equipment which will be delivered in the second half of 2011. 

 

In addition, SRL spent US$5.1 million on property plant and equipment in the first half of the year, US$ 1.1 millionmore than was spent in the entire preceding year. Accordingly, SRL's cash balance fell from US$28.3 million at 31 December 2010 to US$15.8 million as at 30 June 2011.  However, SRL continues to have sufficient cash on hand and enjoys a strong balance sheet with net assets of over US$116.0 million.

 

In February 2011, SRL's financial position was strengthened, with a successful US$17.8 million capital raising, the proceeds of which were used to make an early repayment of part of the GOSL Loan.  As a result, SRL has no payments of principal to make on the GOSL Loan until 2013, allowing it to maximise funds available for operations during this crucial time in SRL's development.

 

SRL expects operating costs in the second half 2011 to be broadly in line with those in H1 2011 but on higher production volumes and prices.

 

Strategic Review

 

The strategic review is progressing well.  The reports of the consultants engaged to study the various expansion and optimization options (announced in May 2011) are scheduled to be delivered to SRL in Q4 2011 and SRL expects to be in a position to announce the findings of these studies as well as next steps in SRL's expansion and optimization plan once it has considered and evaluated the studies.

 

Markets & Outlook

 

SRL remains encouraged by the market fundamentals for all its products, with short-to-medium term TiO2 feedstock supplies constrained and barriers to entry remaining high.  As a result, SRL expects that rutile prices will continue to increase as demand continues to outstrip supply in 2012.

 

SRL currently has 33,000 tonnes of production of standard grade rutile contracted for delivery in H2 2011 at an average price of US$745 per tonne.  All of SRL's 2012 production is currently uncontracted, allowing SRL to maximise revenues in what is expected to be an unprecedented pricing environment.

 

 

Sierra Rutile Limited

John Sisay, Chief Executive

Tel: +44 (0) 207 321 0000

 

Collins Stewart Europe Limited

Nominated Adviser and Joint Broker

John Prior

Telephone: +44 (0) 20 7523 8350

 

Mirabaud Securities LLP

Joint Broker

Peter Krens

Telephone: +44 (0) 20 7321 2508

 

Aura Financial

Andy Mills / Harry Cameron

Tel: +44 (0) 207 321 0000


SIERRA RUTILE LIMITED AND ITS SUBSIDIARIES




















CONSOLIDATED STATEMENT OF FINANCIAL POSITION - JUNE 30, 2011































Note


June 30, 2011


Dec 31, 2010


June 30, 2010

ASSETS





USD'000


USD'000


USD'000

Non-current assets










Property, plant and equipment



6


110,080


109,940


120,941

Intangible assets





13,158


13,180


13,209

Non-current receivables





727


727


753







123,965


123,847


134,903












Current assets










Inventories





15,251


13,591


16,876

Trade and other receivables





17,864


13,661


15,817

Cash in hand and bank balance





15,842


28,373


27,446







48,957


55,625


60,139












Total assets





172,922


179,472


195,042












EQUITY AND LIABILITIES










Capital and reserves










Share capital



8


269,809


251,963


251,963

Reserves





(135,148)


(123,343)


(127,117)

Owners' interest





134,661


128,620


124,846

Non-controlling interests





(18,659)


(18,064)


-

Total equity





116,002


110,556


124,846












LIABILITIES










Non-current liabilities










Borrowings



9


34,056


43,398


45,141

Retirement benefit obligations





765


729


450

Provision for liabilities and charges




3,261


3,261


3,261







38,082


47,388


48,852












Current liabilities










Trade and other payables





18,658


16,165


21,041

Current tax liabilities





66


275


122

Borrowings



9


114


5,088


181







18,838


21,528


21,344

Total liabilities





56,920


68,916


70,196

Total equity and liabilities





172,922


179,472


195,042

 



 

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME





FOR THE PERIOD ENDED JUNE 30, 2011



































Note


6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000












Sales





20,045


43,914


18,633

Cost of sales





(26,320)


(48,642)


(21,639)

Gross loss





(6,275)


(4,728)


(3,006)

Other income





189


171


402

Administrative and marketing expenses




(4,633)


(6,395)


(2,091)


















(10,719)


(10,952)


(4,695)












Exceptional item



4


-  


(3,075)


5,336

Finance (costs)/income



5


(3,641)


256


3,199

(Loss)/profit before taxation





(14,360)


(13,771)


3,840












Taxation





(215)


(159)


38












(Loss)/profit for the period/year




(14,575)


(13,930)


3,878












Other Comprehensive Income:





-  


-  


-  

Total comprehensive (loss)/income for the period/year


(14,575)


(13,930)


3,878












(Loss)/profit attributable to:










Owners of the parent





(13,980)


(12,357)


3,878

Non-controlling interests





(595)


(1,573)


-  







(14,575)


(13,930)


3,878












Total comprehensive (loss)/profit attributable to:







Owners of the parent





(13,980)


(12,357)


3,878

Non-controlling interests





(595)


(1,573)


-  







(14,575)


(13,930)


3,878












(Loss)/earnings per share (USD)




















- basic



3(a)


(0.029)


(0.032)


0.010












- diluted



3(b)



(0.032)


0.010


SIERRA RUTILE LIMITED AND ITS SUBSIDIARIES















UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY













FOR THE PERIOD ENDED JUNE 30, 2011























































Attributable to owners of the parent













Share






Non









Share


option


Revenue




controlling


Total







capital


reserve


deficit


Total


interest


equity







USD'000


USD'000


USD'000


USD'000


USD'000


USD'000


















Balance at January 1, 2011





251,963


-  


(123,343)


128,620


(18,064)


110,556

Issue of share capital





17,846


-  


-  


17,846


-  


17,846

Share options





-  


2,175


-  


2,175


-  


2,175

Total comprehensive loss for the period





-  


-  


(13,980)


(13,980)


(595)


(14,575)

At June 30, 2011





269,809


2,175


(137,323)


134,661


(18,659)


116,002



































Balance at January 1, 2010





251,963


-  


(130,995)


120,968


-  


120,968

Total comprehensive loss for the year





-  


-  


(12,357)


(12,357)


(1,573)


(13,930)

Movements





-  


-  


18,837


18,837


(16,491)


2,346

Gain on disposal of shares in subsidiary





-  


-  


        1,172


          1,172


-  


1,172

At December 31, 2010





251,963


-  


(123,343)


128,620


(18,064)


110,556



































Balance at January 1, 2010





251,963


-  


(130,995)


120,968


-  


120,968

Total comprehensive income for the period




             -  


-  


3,878


3,878


-  


3,878

At June 30, 2010





251,963


-  


(127,117)


124,846


-  


124,846


UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS







FOR THE PERIOD ENDED JUNE 30, 2011














































Note


6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000

Operating activities










Cash (absorbed in)/generated from operations


10


(4,843)


9,264


4,842

Interest received





11


71


32

Interest paid





(2,287)


(2,455)


(9)

Tax paid





(424)


(59)


(15)

Net cash (used in)/generated from operating activities


(7,543)


6,821


4,850












Investing activities










Purchase of property, plant and equipment




(5,079)


(3,986)


(2,081)

Net cash used in investing activities




(5,079)


(3,986)


(2,081)












Financing activities










Repayment of borrowings





(17,033)


-  


-  

Net Proceeds from issue of shares





17,846


-  


-  

Net cash from financing activities





813


-  


-  












Net (decrease)/increase in cash and cash equivalents


(11,809)


2,835


2,769












Movement in cash and cash equivalents









At January 1,





28,268


25,892


25,892

(Decrease)/increase





(11,809)


2,835


2,769

Effect of foreign exchange rate changes




(617)


(459)


(1,396)

At June 30 /December 31,



10


15,842


28,268


27,265

 



 

SIERRA RUTILE LIMITED AND ITS SUBSIDIARIES







NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS





FOR THE 6 MONTHS PERIOD ENDED JUNE 30, 2011


















1.

GENERAL INFORMATION











Sierra Rutile Limited (SRX) is a limited liability company incorporated and domiciled in the British Virgin Islands.  The address of its registered office is at P.O.Box 4301, Trinity Chambers, Road Town, Tortola, British Virgin Islands.












2.

BASIS OF PREPARATION











The financial information presented herein does not represent statutory accounts. The Group's statutory financial statements for the year ended December 31, 2010 were prepared in accordance with International Financial Reporting Standards (IFRS) and under the historical cost convention. The auditors, BDO & Co, reported on those accounts and their report was unqualified. 

A copy of the 2010 Annual Report, including the auditors' report referred to above, is available on the Company's website: www.sierra-rutile.com.

These condensed 6 months financial statements have not been audited or reviewed by the independent auditors pursuant to the Auditing Practices Board guidance on the "Review of Interim Financial Information".  The accounting policies used in the preparation of the unaudited financial statements are consistent with those used in the annual financial statements for the year ended December 31, 2010, except for the adoption of relevant amendments to published Standards, Standards and Interpretations issued now effective.  The interim financial statements comply with IAS 34.












3.

(LOSS)/EARNINGS PER SHARE
















6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD


USD


USD












(a)

Basic (loss)/earnings per share






















(Loss)/profit attributable to equity holders of the group (thousand)


(13,980)


(12,357)


3,878













Weighted average number of ordinary shares in issue


483,020,811


385,864,075


385,864,075













Basic (loss)/earnings per share





(0.029)


(0.032)


0.010












(b)

Diluted (loss)/earnings per share






















(Loss)/profit attributable to equity holders of the group used to determine diluted (loss)/earnings per share (thousand)


(13,980)


(12,357)


3,878













Number of shares











Weighted average number of ordinary shares in issue


483,020,811


385,864,075


385,864,075


Adjustments for (i) New placement





-  


-  


-  


(ii) share options





-  


-  


-  


Weighted average number of ordinary shares for diluted








(loss)/profit per share





483,020,811


385,864,075


385,864,075













Diluted (loss)/earnings per share





(0.029)


(0.032)


0.010

 

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS



FOR THE 6 MONTHS PERIOD ENDED JUNE 30, 2011



























4.

EXCEPTIONAL ITEMS






















At June 30, 2010, profit before tax included a net amount of USD 5.336 m representing compensation received from re-insurers of Sierra Rutile Limited (''SRL'') and payment of associated costs.  This followed the final settlement agreement reached with all insurers in SRL's legal action relating to the capsize of Dredge D2 in July 2008. Under the terms of the final settlement agreement, SRL received a total of USD 7.500 m from the remaining insurers.  Out of this amount, professional fees associated with the claim amounting USD 2.164 m were paid and provided for.












5.

FINANCE (COSTS)/INCOME
















6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010


Net finance costs





USD'000


USD'000


USD'000













Interest expense:











- Government of Sierra Leone loan


(1,616)


(4,040)


(1,862)


- Bank overdrafts





(12)


(150)


(9)


- Others





-  


(88)


-  


Total borrowing costs





(1,628)


(4,278)


             (1,871)


Net foreign exchange transaction(losses)/gains

(2,013)


4,534


5,070







(3,641)


256













6.

PROPERTY, PLANT & EQUIPMENT












6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000













Balance at the beginning of the period/year

109,940


123,933


123,933


Additions





5,079


3,986


2,081


Impairments





-  


(7,844)


-  


Depreciation charge





(4,939)


(10,135)


(5,073)


Balance at the end of the period/year


110,080


109,940


120,941























7.

CAPITAL COMMITMENTS
















6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000


Property, plant and equipment acquisition contracted for at the end of the reporting period but not yet incurred:

2,816


2,146


259












(a)

Sierra Rutile Limited (SRL), a subsidiary operating in Sierra Leone, entered into the above capital commitments.

 

 



 

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS





FOR THE 6 MONTHS PERIOD ENDED JUNE 30, 2011





8.

SHARE CAPITAL










Number of shares


6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010

(a)

Issued Ordinary Shares



USD'000


USD'000


USD'000


Balance at the beginning of the period

385,864,075


251,963


251,963


251,963


Shares Issued during the period at GBp 10 each

113,660,925


17,846


-  


-  


Balance at the end of the period

499,525,000


269,809


251,963


251,963











The company completed a placing of 113,660,925 at 10 pence per share on 23rd February 2011.



(b)

Share options

Exercise Price


6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010


Total Outstanding Options as at reporting date

GBp 12.50-75.50


19,445,000


475,000


475,000


Number of Options issued during the period

GBp 12.50-20.00


19,295,000


-  


 -  


Number of Options exercised during the period



 -  


                    -  


                  -  


Number of Options vested during the period

GBp 12.50-20.00


8,748,750


483,333


483,333


Number of Options to vest during the financial year

GBp 12.50-20.00


9,647,500






Number of Options to vest within one year

GBP 12.50


898,750






Number of Options to vest after one year



                  -  


                    -  


                  -  










9.

BORROWINGS



6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010

a.

Analysis of Borrowings by Creditor



 USD'000


 USD'000


 USD'000











Government of Sierra Leone



           34,170


              48,381


45,141


Others



                  -  


                  105


181





           34,170


              48,486


45,322

b.

Government of Sierra Leone (GoSL)









Balance at the end of the period



           34,170


               48,381


45,141


Repayment of principal amount



17,033


                    -  



c.

Analysis of GoSL's borrowing repayment due dates









Up to the end of Financial Year


within 1 year after Fin. Year


Between 1-2 years after Fin. Year


Between 2 -5 years after Fin. Year



 USD'000


 USD'000


 USD'000


 USD'000


Government of Sierra Leone

114


                  -  


8,169


25,887


The GoSL Loan is denominated in EURO. The company paid EUR 13.0 million of the outstanding balance of the loan on the 11th March 2011, made up of EUR 12.3 million principal amount and EUR 0.7 million interests.

 



 

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS



FOR THE 6 MONTHS PERIOD ENDED JUNE 30, 2011



10.

NOTES TO THE STATEMENT OF CASH FLOWS

6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000

(a)

Cash (absorbed in)/generated from operations






(Loss)/profit for the period/year before tax


(14,360)


(13,771)


3,840


Adjustments for:











Depreciation on property, plant and equipment

              4,939


               10,135


              5,074


Amortisation of intangible assets


                  22


                    63


                  34


Interest income





                 (11)


                   (71)


                 (32)


Interest expense





              2,241


                4,278


              1,871


Exchange loss/(gain) on borrowings


              2,869


               (4,993)


(6,153)


Foreign currency translation difference


                 617


                   459


              1,396


Share option expensed





              2,175


                    -  


                  -  


Profit on disposal of shares in subsidiary


                  -  


                    -  


               (331)


Impairment of Dredge D3





                  -  


                7,844


                  -  


Prepayments written off





                  -  


                    26


                  -  


Increase/(decrease) in provision for retirement benefit obligations

                  36


                    70


               (209)







            (1,472)


               4,040


             5,490


Changes in working capital











-inventories





(1,660)


2,497


(788)


-trade and other receivables





(4,204)


3,145


                989


-trade and other payables





              2,493


                  (418)


               (849)


Cash (absorbed in)/generated from operations

            (4,843)


               9,264


             4,842












(b)

Cash and cash equivalents





6 months to June 30, 2011


Year ended December 31, 2010


6 months to June 30, 2010







USD'000


USD'000


USD'000


Cash in hand and at bank





4,374


6,836


7,482


Bank overdraft





-  


(105)


(181)


Short term bank deposits





11,468


21,537


19,964


Cash and cash equivalents





15,842


28,268


27,265

11.

EVENTS AFTER THE REPORTING PERIOD








Events after the reporting period are disclosed only to the extent that they relate directly to the interim financial statements and are material in effect. As at the date of issuing this set of interim financial statements, there was no material event after the reporting period which need to be disclosed.

12.

RELATED PARTY TRANSACTIONS







The following related party transactions took place during the reporting period:



a.

Grant of 15,295,000 share options to Directors, Senior Officers and Advisors of the company with exercise prices varying between GBp 12.50 and GBp 20.00.

b.

The reporting entity made cash advances amounting to USD 25.7 million to the operating subsidiary, Sierra Rutile Limited, out of which USD 18.7 million was used to repay GoSL loan and interests.

c.

The operating subsidiary, Sierra Rutile Limited, entered into an agreement to purchase mining equipment for USD 170,770 from Swanmet (Singapore) Pte Ltd (Swanmet). Swanmet is an entity which was controlled by PALA AG at the time of the purchase. PALA AG held and continues to hold 38.2% of Sierra Rutile Limited's issued share capital.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR DKBDDOBKDCCK