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Avocet Mining PLC (AVM)

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Tuesday 22 February, 2011

Avocet Mining PLC

Preliminary Results

RNS Number : 6074B
Avocet Mining PLC
22 February 2011
 



 

 

 

 

 

 

Avocet Mining PLC ("Avocet" or "the Company")

 

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

 

 

·        Gold production of 236,396 ounces at a cash cost of US$660 per ounce, compared with 109,548 ounces at US$639 per ounce in the previous year

·        Realised gold price of US$1,174 per ounce1, compared with US$975 per ounce in 2009

·        EBITDA of US$86.3 million, up from US$29.9 million for year ended December 2009, an increase of 189%

·        Profit before tax and exceptionals of US$33.4 million compared with US$10.4 million for year ended December 2009, an increase of 221%

·        Successful ramp up of production at Inata - completed ahead of schedule

·        Inata project finance completion tests passed 31 December 2010

·        Inata life of mine average annual production to increase from 120,000 ounces to 165,000 ounces from 2011

·        Reserves and resources at Inata increased by 25% and 16% respectively - drilling programme underway with the target of doubling reserves by Q3 2011

·        Maiden resource of 561,100 ounces announced at Souma, 20 km from the Inata mine

·        Exploration programme initiated in Guinea including airborne geophysical survey, 48,000 metres RC drilling and 19,000 metres diamond drilling

·        Conditional agreement signed for the sale of South East Asian assets for US$200 million in cash - rights of first refusal have either lapsed unexercised or been assigned to J&Partners; further issues remain to be addressed

·        Net debt reduced from US$42.9 million to US$28.5 million

Period2

12 months ended

31 December 2010

Audited

12 months

Ended

 31 December

 2009

Unaudited

9 months

 ended

31 December

2009

Audited

12 months ended

31 March

 2009

Audited

Total gold production (ounces)

236,396

109,548

82,174

109,919

Average realised gold price (US$/oz)

1,174

975

995

870

Cash production cost (US$/oz)

660

639

650

602

Profit before tax and exceptionals (US$000)

33,394

10,439

7,888

15,004

Profit/(loss) before tax from continuing operations (US$000)

17,475

(8,410)

(7,615)

18,126

EBITDA from continuing and discontinued3 operations (US$000)

86,272

29,928

18,471

22,929

EBITDA from continuing operations (US$000)

54,597

(5,525)

(4,185)

(6,347)

 

1        Includes 51,199 ounces sold into Inata hedge at average price of US$970 per ounce

2     The Company changed its year end from March to December with effect from 31 December 2009

3     On 24 December 2010, the Company announced that it had signed a conditional agreement to sell its assets in South East Asia. The results of these assets have been presented as discontinued for all periods presented. Refer to note 2 for further information

 

Commenting on the preliminary results, Brett Richards, Chief Executive Officer for Avocet, stated:

 

"In my first year of reporting operating and financial results as Chief Executive Officer, I am pleased to be able to report on a strong performance. The Inata mine in Burkina Faso has been developed into Avocet's flagship project, with production and ramp-up achieved ahead of schedule. However, our objectives in and around Inata are still at an early stage.   Our exploration projects in both Burkina Faso and Guinea are progressing well and continue to demonstrate real promise with respect to building a larger business in these regions. During the period, we also announced the conditional sale of our South East Asian assets for US$200 million on 24 December 2010, which, on completion, will allow us to focus our people and resources on becoming a leading West African gold mining and exploration company in 2011 and beyond."

 

 

Avocet will host a conference call on Tuesday 22 February 2011 at 09:30am (London, UK time) to update investors and analysts on its results.

 

Participants may join the call by dialling one of the three following numbers, approximately 10 minutes before the start of the call.

 

From UK: (toll free) 0800 368 1895

From Norway: (toll free) 800 135 47

From rest of world: +44 (0)20 3140 0693

Participant pass code: 175331#

 

A live audio webcast of the call will be available on:

http://mediaserve.buchanan.uk.com/2011/avocet220211/registration.asp

 

A replay of the webcast will be available on the same link from 11am on Tuesday 22 February 2011.

 

 

 

For further information please contact:

 




Avocet Mining PLC

Buchanan Communications  

Ambrian Partners Limited

J.P. Morgan Cazenove

Arctic Securities


Financial PR Consultants         

NOMAD and Joint  Broker

Lead Broker

Financial Adviser

Brett Richards, CEO

Mike Norris, FD

Hans-Arne L'orange, EVP Business Development & Investor Relations

Bobby Morse

Katharine Sutton

Samantha Harrison

Jen Boorer

Michael Wentworth-Stanley

Niklas Kloepfer   

Arne Wenger

 

+44  20 7766 7676

 

+44 20 7466 5000

+44 7872 604783

 

+44 20 7634 4700

 

+44 20 7588 2828

 

+47 2101 3100

www.avocet.co.uk

www.buchanan.uk.com

www.ambrian.com

www.jpmorgancazenove.com

www.arcticsec.no

 

 

Notes to Editors

 

Avocet Mining PLC ("Avocet" or "the Company") is a gold mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM.L) and the Oslo Børs (Ticker: AVM.OL). The Company's principal activities are gold mining and exploration in Burkina Faso (as 90 per cent owner of the Inata gold mine), Malaysia (as 100 per cent owner of the Penjom gold mine, the country's largest gold producer) and Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi).

 

In December 2010 Avocet announced that it had signed a binding agreement for the conditional sale of its South East Asian assets to J&Partners L.P, a private company, for US$200 million. The transaction with J&Partners will leave Avocet as a West African gold producer with a clear strategy for growth in that region. Further details can be found in the press release dated 24 December 2010.

 

 

Background to operations

 

The Inata deposit presently comprises a Mineral Resource of 1.84 million ounces and a Mineral Reserve of 1.08 million ounces. Inata poured its first gold in December 2009 and has now reached a production rate in excess of 13,500 ounces per month. Other assets in West Africa include exploration permits in Burkina Faso (the most advanced being the Souma trend at Bélahouro, some 20 kilometres from Inata, with a Mineral Resource of 561,100 ounces), Guinea and Mali (the most advanced being the Tri-K gold exploration project in Guinea with a Mineral Resource of 666,500 ounces).

 

Penjom is Malaysia's largest gold mine and was developed by Avocet in an area of historic alluvial mining. The mine is located in Pahang State, approximately 120 km north of the country's capital, Kuala Lumpur.

 

North Lanut in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 270,000 ounces since it was commissioned in 2004. North Lanut is located within a Contract of Work, which includes exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. Avocet holds an 80 per cent interest and an Indonesian company, PT Lebong Tandai, owns the remaining 20 per cent.

 

CHAIRMAN'S STATEMENT

 

In my first statement to you as Chairman, I am pleased to be able to report that Avocet has had a strong year, and is well placed strategically to deliver growth into 2011 and beyond.

 

The Company has a new flagship operation at Inata, in Burkina Faso, which, during 2010, completed its commissioning and ramp up to full production smoothly and ahead of schedule.

 

In October 2010, the board met onsite at Inata. I was impressed with the successes that have been achieved in ramping up production over the course of the year. In speaking to the teams on the ground, I heard how they had energetically and methodically overcome the challenges of commissioning a mine in a remote location. I took away a sense of the enthusiasm felt by our employees in respect of Avocet's operations, as well as for the region as a whole. This inspires optimism for the future.

 

Inata represents the foundation on which the Company aims to build a significant operation in West Africa. A series of projects are already underway to deliver growth in the region, including expanding production and mine life at Inata itself, as well as exploration programmes expected to deliver significant increases in resources in Burkina Faso and in Guinea.

 

On 24 December 2010, Avocet announced that it had entered into a conditional agreement to sell its South East Asian assets for US$200 million. We have made progress towards completion of the disposal and while there are still outstanding conditions to completion, our expectation remains that this should occur in the second quarter of this year.  Proceeds from the disposal will be received once the remaining conditionality has been satisfied, and will largely be used to support Avocet's strategic focus of growth in West Africa.

 

In June, Avocet announced its successful listing on the Oslo Børs, a move which will facilitate trading in Avocet shares for our Scandinavian shareholders (who represent a significant proportion of our share capital), as well as providing access to an additional investor base.

 

Gold prices have been consistently strong throughout 2010, with record levels being achieved. The climate of economic uncertainty has affected western economies in particular, and has sustained demand for gold as a safe haven investment, and a protection against inflation. At the same time, jewellery demand in developing countries has been strong (particularly India), and the outlook for gold prices in 2011 remains positive.

 

On behalf of the board, I would like to express my thanks to all Avocet employees for making 2010 a successful year. I very much look forward to working with them as Avocet delivers on its strategy to become a successful mid-tier gold producer to the benefit of all its stakeholders.

 

Russell Edey

 

21 February 2011

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

Avocet entered 2010 with mature producing assets and various stage exploration projects in South East Asia, and a newly constructed mine in Burkina Faso, West Africa.  The year developed quickly into one of watershed change for the Company, as it concentrated on divesting out of South East Asia and laying the platform for building a bigger business in West Africa.

 

As we move into 2011, the Inata mine in Burkina Faso has become our flagship gold mine and is already exceeding its nameplate capacity in steady state production.  In addition, a number of our exploration targets in and around the mine site, and in the Bélahouro district, have already yielded excellent returns, a good omen for our significant exploration programme which will dramatically improve our understanding of the region as a whole.  In Guinea, positive early stage drilling programmes in Q4 2010 mean that an airborne geophysical survey is needed over the large land package known as Tri-K, in order  to prioritise drill targets over a very large area.  This coming year will also see a significant drilling programme conducted on this project in Guinea, so that a comparable assessment of next stage development can be made between Burkina Faso and Guinea in Q4 2011.  Meanwhile, we have negotiated the conditional sale of our South East Asian assets, which, on completion, will deliver approximately US$200 million in cash, which in turn will be largely invested in our fast growth West African assets, particularly in accelerating the growth of not only reserves and resources, but also production of gold ounces.

 

West African operations

 

Inata - Burkina Faso

Year ended 31 December

2006(1)

2007(1)

2008(1)

2009(1)

2010(2)

Production statistics






Ore mined (tonnes)

-

-

-

-

1,879,000

Waste mined (tonnes)

-

-

-

-

11,430,000

Ore and waste mined (tonnes)

-

-

-

-

13,309,000

Ore processed (tonnes)

-

-

-

-

1,759,000

Average ore head grade (g/t Au)

-

-

-

-

2.66

Process recovery rate

-

-

-

-

94%

Gold produced (ounces)

-

-

-

-

137,732

Cash costs (US$/oz)






- mining

-

-

-

-

130

- processing

-

-

-

-

210

- royalties and overheads

-

-

-

-

191

Total cash cost (US$/oz)

-

-

-

-

531

(1)     Avocet acquired a 90% interest in the Inata mine in 2009. The Inata mine commenced production in 2010, therefore there are no comparative periods reported.

(2)     Production statistics are for the year ended 31 December 2010; cash costs are reported for April to December 2010 as commercial production had not been reached in Q1 2010.

 

A considerable amount of work was required to get the Inata commissioning project on track following Avocet's acquisition of Wega Mining in 2009. Since then, milestones have been achieved consistently on or before schedule, and the progress of the mine over the course of 2010 has been a source of considerable pride for Avocet, as well as giving cause for confidence in the ability of our teams to deliver success to similar construction projects in the future.

 

First gold was poured on 20 December 2009. Throughout the first quarter of 2010, Inata was in the ramp up stage and had not reached commercial production. Accordingly, all revenue and costs for the quarter were capitalised and no cash cost is reported for the first quarter. Since 1 April 2010, when commercial production commenced, all revenue and operating costs at Inata have been recognised in the income statement and cash costs are reported from that date.

 

By May, production had reached 10,000 ounces per month, after various bottlenecks in the plant had been resolved. Production for the full year of 137,732 ounces at an average cash cost of US$531 per ounce was significantly better than expectations at the start of the year. This outcome reflects the determination and effort of the teams at site who undertook the work. The initial commissioning phase at Inata was formally concluded on 31 December 2010 after passing a set of physical and economic completion tests based on an evaluation by independent consultants on behalf of the project financiers, Macquarie Bank Limited.

 

The focus at Inata is now to build on this growth. In June 2010 Avocet announced that it was targeting to double Inata's Mineral Reserves by the end of Q3 2011. A 16 per cent increase in Inata's Mineral Resources to 1.8 million ounces was announced in September 2010 following a comprehensive exercise of relogging and remodelling historical drilling results as well as updated drilling data; and a 25 per cent increase in Mineral Reserves to 1.1 million ounces was subsequently announced.  Work is now underway to sustain the expanded plant throughput from its nameplate capacity of 287 tonnes per hour to 340 tonnes per hour, by adding a second elution column to increase the stripping. This will deliver an increase in the plant's capacity from the second half of 2011, allowing average life of mine gold production to increase from 120,000 ounces to 165,000 ounces per annum despite a scheduled decline in grades over the mine life. Mining production also needs to be increased to meet the increased mill throughput capacity and to allow faster waste stripping of the Inata Central and Inata South pits in accordance with a revised mine plan associated with the larger reserve.  A second mining fleet is now fully operational, and a third mining fleet, due to be commissioned in mid-2011, has been ordered to achieve this increase in mining capacity.

 

The outlook at Inata for 2011 is for production of 165,000 ounces.  The addition of a third mining fleet to underpin life of mine (LoM) growth means that cash costs in 2011 are expected to increase from Q2 2011 to Q3 2011, and the year average is expected to be at the upper end of the LoM range of US$525-575 per ounce.

 

 

Exploration - West Africa

 

Exploration in West Africa has focused on a number of prospective areas in Burkina Faso and Guinea, while work is also planned in Mali.

 

In Burkina Faso, an airborne geophysical survey was undertaken in June 2010 to assess potential targets in the Bélahouro District, an area of over 1,600 square kilometres in the north of the country that includes the Inata gold mine. The analysis of the results of this survey was completed in September 2010, and formed the basis of a prioritised drilling programme for the Bélahouro area.

 

In November 2010, following a 22,000 metre drilling programme earlier in the year, Avocet announced a maiden 561,100 ounce resource at the Souma Trend, located 20 kilometres east of the Inata gold mine, increasing the total resources at Bélahouro to 2.4 million ounces.

 

In addition, a 200,000 metre programme of drilling in and around the Inata mine commenced in October 2010, with the target of doubling reserves at Inata by the end of Q3 2011.

 

In Guinea, exploration in the year focused on developing drilling targets at Tri-K in the north east of the country. After the success of the airborne survey at Bélahouro, a similar survey will be undertaken in Q1 2011 to identify the most prospective drilling targets in the Tri-K block. The results of this survey will be used to further identify priority targets for an extensive drilling programme that commenced in late 2010 and will continue throughout 2011. Drilling will aim to expand the 0.7 million ounce resource at Koulékoun and develop a maiden resource at Balandougou by mid-2011.

 

South East Asia Operations

 

Gold production at Penjom in Malaysia was lower than the previous year due to lower grade, and waste stripping requirements. Total gold production for the year was 51,084 ounces, at a cash cost of US$944 per ounce, reflecting higher mining costs as mining continued to operate in tight, restricted areas, as well as the requirement for an extensive waste stripping program in Q2 2010 and Q4 2010 in an effort to access the ore bodies in the Janik and Jalis pit areas.  At North Lanut in Indonesia, gold production in the year of 47,580 ounces was slightly higher than the previous year due to higher grades processed and refined leach pad management techniques.  Cash costs of US$674 per ounce increased from US$550 per ounce in the previous year, reflecting additional leach pad management costs and a full year of mining at two pits and at greater depth. Exploration in South East Asia focused on the Doup and Seruyung projects, with drilling at both properties in the second half of the year following preparation during the first half.

 

Penjom - Malaysia

Years ended 31 December

2006

2007

2008

2009

2010

Production statistics






Ore mined (tonnes)

413,000

547,000

618,000

972,000

420,000

Waste mined (tonnes)

17,767,000

15,759,000

17,045,000

17,243,000

15,494,000

Ore and waste mined (tonnes)

18,180,000

16,306,000

17,663,000

18,215,000

15,914,000

Ore processed (tonnes)

567,000

587,000

692,000

725,000

746,000

Average ore head grade (g/t Au)

         6.07

        4.95

      3.83

          3.24

2.56

Process recovery rate

92%

90%

87%

83%

83%

Gold produced (ounces)

101,977

84,463

74,332

62,654

51,084

Cash costs (US$/oz)






- mining

203

213

317

416

577

- processing

73

96

142

181

237

- royalties and overheads

58

72

88

108

130

Total cash cost (US$/oz)

334

381

547

705

944

 

 

North Lanut - Indonesia

 

Years ended 31 December

2006

2007

2008

2009

2010

Production statistics






Ore mined (tonnes)

1,122,000

2,144,000

1,313,000

1,430,000

1,356,000

Waste mined (tonnes)

1,814,000

1,397,000

1,181,000

2,290,000

1,536,000

Ore and waste mined (tonnes)

2,936,000

3,541,000

2,494,000

3,720,000

2,892,000

Ore leached (tonnes)

1,104,000

1,912,000

1,263,000

1,282,000

1,301,000

Average ore head grade (g/t Au)

         1.80

          2.46

          2.10

          1.69

         1.87

Process recovery rate

76%

49%

52%

67%

61%

Gold produced (ounces)

48,398

73,336

44,041

46,894

47,580

Cash costs (US$/oz)






- mining

162

144

242

289

347

- processing

63

64

162

137

173

- royalties and overheads

94

78

150

124

154

Total cash cost (US$/oz)

319

286

554

550

674

 

 

During 2010 we conducted a strategic review of our South East Asia assets with the aim of ensuring these assets deliver the maximum value for the Group, and concluded that this aim would best be achieved through a cash sale, allowing the Company to focus on growth in West Africa.  After a structured process during the second half of the year we announced the conditional sale of our assets in South East Asia to J&Partners, L.P., for a cash consideration of US$200 million.  At 10 February 2011, being the expiry date for notification of exercise by minority interests of their rights of first refusal over certain of the sale assets, these rights had either lapsed unexercised or been assigned to J&Partners; further issues remain to be addressed.   J&Partners, L.P. is a mining fund established by Mr Jimmy Budiarto, a member of the Indonesian family that in November 2009 sold its interest in Indonesia's second largest mining contractor, PT Bukit Makmur Mandiri Utama (BUMA).  With its experience of mining in Indonesia we are confident that J&Partners, L.P. will be able to develop the assets to their fullest potential, working with the high quality operational and exploration workforce that has enabled Penjom and North Lanut to produce over 1.5 million ounces over their mine lives to date and grow a resource base of 3.3 million ounces.

 

Financial results

 

During 2009, the Group changed its year end from 31 March to 31 December, with the result that the previous audited financial statements were for the nine months 31 December 2009.

 

Following the signing of the conditional agreement to sell the Group's assets in South East Asia, the operating results of these assets have been presented in the consolidated income statement as discontinued for the current and comparative periods, and as a disposal group in the current period statement of financial position, as required by International Financial Reporting Standards (IFRS). The assets and liabilities of the disposal group are presented separately in the consolidated statement of financial position in the current period. A detailed analysis of the results, assets, and cash flows of the disposal group is presented in the segmental information.

 

The Group reported a profit before tax from continuing and discontinued operations for the year ended 31 December 2010 of US$33.5 million, compared with a loss of US$10.6 million for the nine months ended 31 December 2009. Before exceptional items, profit before tax in the year was US$33.4 million, compared with US$7.9 million for the nine months ended 31 December 2009.  Exceptional items in 2010 included US$2.4 million of costs relating to the Oslo Børs listing in June, as well as net profit of US$2.7 million generated through the divestment of non-core assets (including the Houndé licences in Burkina Faso, and the Company's investments in Merit Mining, Dynasty Gold Corporation, and Monument Mining). 

 

During the year, the Company sold 234,949 ounces at an average realised gold price of US$1,174 per ounce, compared to 111,279 ounces at US$975 per ounce in the year ended 31 December 2009. 2010 gold sales included 51,199 ounces delivered into the Inata hedge book at a price of US$970 per ounce. 

 

The average cash costs of the Group increased from US$639 per ounce for the year ended 31 December 2009 to US$660 per ounce for the year ended 31 December 2010. This increase was driven largely by an 18 per cent fall in production at Penjom, while additional mining costs were incurred at both South East Asian operations as a result of operating in more mature, deeper pits.  The Group's EBITDA and profit before tax is stated after charging share based payments totalling US$8.6 million, largely awarded in accordance with the Company's share bonus plan.  The awards arose as a result of the Company's share price appreciation, relative to the FTSE Gold Mines Index, over two periods: 1 April 2009 to 31 March 2010 and 1 April 2010 to December 2010. Owing to the Company's change in year end, awards for both of these periods fell into the income statement of 2010.  The taxation charge of US$15.3 million in 2010 principally reflects deferred tax charges totalling US$10.9 million.  At Inata, although no cash tax is currently payable, the adoption of a new mine plan in response to the reserve increase announced in September 2010, combined with higher gold prices, means that higher tax will be payable later in the mine life, resulting in an increase in deferred tax charge during Q4 of US$9.6 million. 

 

Net cash generated by all operations in the year totalled US$63.0 million, compared to US$17.1 million in the nine months to December 2009, while divested non-core assets generated a total of US$9.9 million.  This funded capex totalling US$49.1 million, capitalised exploration costs of US$12.7 million, and debt repayments of US$12.0 million.

 

Net debt at the start of the year of US$42.9 million (consisting of US$47.1 million in cash and US$90.0 million of debt), decreased over the period by US$14.4 million to US$28.5 million (US$49.5 million of cash and US$78.0 million of debt).

 

Debt repayments of US$12.0 million were made in the year, reducing the Macquarie Bank loan from US$65 million to US$53 million at 31 December 2010.

 

People

 

Having been appointed to the role as Chief Executive Officer of Avocet during a period of major change, I have been extremely fortunate to enjoy the support of a dedicated, experienced, and highly motivated team, from the Executive Committee to the operational teams on site. I would like to personally thank all Avocet employees for their hard work during 2010.

 

Brett Richards

21 February 2011

 

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010



Year ended 31 December 2010

Nine months ended 31 December 2009


note

Continuing operations

Discontinued operations

  

Total

Continuing operations

Discontinued operations

 

Total



US$000

US$000

US$000

US$000

US$000

US$000

Revenue

3

132,779

121,814

254,593

-

82,945

82,945

Cost of sales

3

(95,135)

(105,533)

(200,668)

(17)

(70,785)

(70,802)









Gross profit


37,644

16,281

53,925

(17)

12,160

12,143

Administrative expenses


(7,040)

-

(7,040)

(2,859)

(93)

(2,952)

Share based payments


(8,625)

-

(8,625)

(1,337)

-

(1,337)

Exploration impairments

5

-

-

-

(3,363)

(7,123)

(10,486)

Deferred stripping impairment

5

-

-

-


(7,957)

(7,957)

Operating profit/(loss)


21,979

16,281

38,260

(7,576)

(3,013)

(10,589)

Profit on disposal of investments

5

2,669

-

2,669

-

-

-

Loss on disposal of property, plant and equipment

5

-

(151)

(151)

-

-

-









Finance items








Exchange (losses)/gains


(49)

-

(49)

44

-

44

Finance income


5

-

5

393

-

393

Finance expense


(4,766)

-

(4,766)

(476)

-

(476)

Expenses of listing on Oslo Børs

5

(2,363)

-

(2,363)

-

-

-

Net finance items - discontinued operations


-

(56)

(56)

-

73

73

Profit/(loss) before tax


17,475

16,074

33,549

(7,615)

(2,940)

(10,555)









Analysed as:








Profit/(loss) before taxation and exceptional items

4

17,169

16,225

33,394

(4,252)

12,140

7,888

Exceptional items

5

306

(151)

155

(3,363)

(15,080)

(18,443)

Profit/(loss) before taxation


17,475

16,074

33,549

(7,615)

(2,940)

(10,555)









Taxation


(12,021)

(3,316)

(15,337)

(609)

(1,479)

(2,088)









Profit/(loss) for the period


5,454

12,758

18,212

(8,224)

(4,419)

(12,643)

Attributable to:








Equity shareholders of the parent company


3,997

10,633

14,630

(8,224)

(4,808)

(13,032)

Non-controlling interest


1,457

2,125

3,582

-

389

389



5,454

12,758

18,212

(8,224)

(4,419)

(12,643)









Earnings per share:

6







Basic earnings per share (cents per share)


2.04

5.43

7.47

(4.81)

(2.82)

(7.63)

Diluted earnings per share (cents per share)


2.02

5.37

7.39

(4.81)

(2.82)

(7.63)









EBITDA(1)


54,597

31,675

86,272

(4,185)

22,656

18,471

 

 

(1)     EBITDA represents earnings before exceptional items, finance items, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2010



Year ended 31 December 2010

Nine months ended 31 December 2009


note

Continuing operations

Discontinued operations

   Total

Continuing operations

Discontinued operations

Total



US$000

US$000

US$000

US$000

US$000

US$000

Profit/(loss) for the financial period


5,454

12,758

18,212

(8,224)

(4,419)

(12,643)

Exchange differences on translation


-

-

-

-

19

19

Disposal of other financial assets

5

2,240

-

2,240

-

-

-

Revaluation of other financial assets

5

12,629

-

12,629

1,321

-

1,321

Total comprehensive income/(expense) for the period


20,323

12,758

33,081

(6,903)

(4,400)

(11,303)









Attributable to:








Equity holders of the parent


18,866

10,633

29,499

(6,479)

(5,213)

(11,692)

Non-controlling interest


1,457

2,125

3,582

(424)

813

389



20,323

12,758

33,081

(6,903)

(4,400)

(11,303)

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION




At 31 December 2010





Note

31 December 2010

31 December 2009



US$000

US$000

Non-current assets




Goodwill

2

-

10,331

Intangible assets

7

11,091

18,059

Property, plant and equipment

8

239,979

299,793

Other financial assets

9

20,293

9,428

Deferred tax assets

10

1,459

5,866



272,822

343,477

Current assets




Inventories

11

20,379

31,266

Trade and other receivables

12

16,157

14,899

Cash and cash equivalents


49,523

47,056



86,059

93,221





Assets of disposal group classified as held for sale

2,3

125,550

-





Current liabilities




Trade and other payables


28,430

45,186

Current tax liabilities


-

2,507

Other financial liabilities

14

24,000

-



52,430

47,693





Liabilities included in disposal group held for sale

2,3

45,432

-





Non-current liabilities




Other financial liabilities

14

54,000

90,000

Deferred tax liabilities

10

9,593

4,625

Other liabilities

13

3,737

17,004



67,330

111,629

Net assets


319,239

277,376

Equity




Issued share capital


16,086

15,904

Share premium


144,571

142,778

Other reserves


30,632

11,321

Retained earnings


118,606

101,611

Total equity attributable to the parent


309,895

271,614

Non-controlling interest


9,344

5,762

Total equity


319,239

277,376

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2010


Share capital

Share premium

Other reserves

Retained earnings

Total attributable to the parent

 

Non-controlling interest

Total equity

 


US$000

US$000

US$000

US$000

US$000

US$000

US$000

 









 

At 1 April 2009

9,904

53,400

9,556

113,541

186,401

5,373

191,774

 

(Loss)/profit for the period

-

-

-

(13,032)

(13,032)

389

(12,643)

 

Exchange differences on translation of foreign operations

-

-

19

-

19

-

19

 

Revaluation of other financial assets

-

-

1,321

-

1,321

-

1,321

 

Total comprehensive income for the period

-

-

1,340

(13,032)

(11,692)

389

(11,303)

 

Share based payments

-

-

-

1,337

1,337

-

1,337

 

Issue of shares

6,000

89,378

-

-

95,378

-

95,378

 

Gains on issue from treasury shares

-

-

-

(235)

(235)

-

(235)

 

Movements on investments in treasury and own shares

-

-

425

-

425

-

425

 

At 31 December 2009

15,904

142,778

11,321

101,611

271,614

5,762

277,376

 

Profit for the year

-

-

-

14,630

14,630

3,582

18,212

 

Disposal of other financial assets

-

-

2,240

-

2,240

-

2,240

 

Revaluation of other financial assets

-

-

12,629

-

12,629

-

12,629

 

Total comprehensive income for the year

-

-

14,869

14,630

29,499

3,582

33,081

 

Share based payments

-

-

-

4,356

4,356

-

4,356

 

Issue of shares

182

1,793

-

-

1,975

-

1,975

 

Movement on investments in treasury and own shares

2,873

2,873

-

 

Loss on issue from  treasury and own shares

-

-

-

(422)

(422)

-

(422)

 

Transfer between reserves

-

-

1,569

(1,569)

-

-

-

 

At 31 December 2010

16,086

144,571

30,632

118,606

309,895

9,344

319,239

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2010


Year ended 31 December 2010

Nine months ended 31 December 2009


note

Continuing operations

Discontinued operations

Total

Continuing operations

Discontinued operations

Total

Profit/(loss) for the period


US$000

US$000

US$000

US$000

US$000

US$000

Cash flows from operating activities








Profit/(loss) for the period


5,454

12,758

18,212

(8,224)

(4,419)

(12,643)

Adjusted for:








Depreciation of non-current assets

8

32,618

15,394

48,012

28

10,589

10,617

Exceptional non-cash items

15

-

-

-

3,363

15,080

18,443

Deferred stripping adjustment


-

-

-

-

6,032

6,032

Share based payments


8,625

-

8,625

1,337

-

1,337

Provisions


-

972

972

-

2,874

2,874

Taxation in the income statement


12,021

3,316

15,337

609

1,479

2,088

Non-operating items in the income statement

15

4,568

102

4,670

39

(73)

(34)



63,286

32,542

95,828

(2,848)

31,562

28,714

Movements in working capital








(Increase)/decrease in inventory


(11,495)

840

(10,655)

(8,884)

(4,115)

(12,999)

Increase in trade and other receivables


(14,007)

(699)

(14,706)

(1,000)

(1,460)

(2,460)

(Decrease)/increase in trade and other payables


(2,248)

(885)

(3,133)

4,049

(165)

3,884

Net cash generated by operations


35,536

31,798

67,334

(8,683)

25,822

17,139

Interest received


5

100

105

393

32

425

Interest paid


(5,170)

(8)

(5,178)

(476)

(34)

(510)

Income tax received


-

772

772

-

-

-

Net cash generated by operating activities


30,371

32,662

63,033

(8,766)

25,820

17,054

Cash flows from investing activities








Payments for property, plant and equipment

8

(43,978)

(5,139)

(49,117)

(42,788)

(4,059)

(46,847)

Inata pre-commercial revenues capitalised

8

21,495

-

21,495

-

-

-

Inata pre-commercial costs capitalised

8

(14,296)

-

(14,296)

-

-

-

Deferred consideration paid


-

(2,167)

(2,167)

(927)

-

(927)

Exploration and evaluation expenses

7

(10,170)

(2,564)

(12,734)

(2,881)

(6,032)

(8,913)

Net cash movement on purchase of subsidiary


-

-

-

(21,143)

-

(21,143)

Net cash movement on disposal of subsidiary and investments

5

9,920

-

9,920

 1,095

-

 1,095

Rehabilitation costs


-

(1,518)

(1,518)

-

-

-

Net cash used in investing activities


(37,029)

(11,388)

(48,417)

(66,644)

(10,091)

(76,735)

Cash flows from financing activities








Expenses of listing on Oslo Børs

5

(2,363)

-

(2,363)

-

-

-

Proceeds from issue of equity shares


2,265

-

2,265

-

-

-

Loans (repaid)/received


(12,000)

-

(12,000)

34,200

-

34,200

Net cash flows from financing activities


(12,098)

-

(12,098)

34,200

-

34,200

Net cash movement


(18,756)

21,274

2,518

(41,210)

15,729

(25,481)

Intercompany transfers


21,134

(21,134)

-

14,796

(14,796)

-

Exchange (losses)/gains


(49)

(2)

(51)

44

75

119

Reclassification of cash not held for sale


17,731

(17,731)

-

-

-

-

Total increase/(decrease) in cash and cash equivalents


20,060

(17,593)

2,467

(26,370)

1,008

(25,362)

Cash and cash equivalents at start of the period


29,463

17,593

47,056

55,833

16,585

72,418

Cash and cash equivalents at end of period


49,523

-

49,523

29,463

17,593

47,056

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2010

 

1.     Basis of preparation

The Group financial statements consolidate those of the Company and of its subsidiary undertakings; the consolidated financial statements have been prepared in accordance with IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union at 31 December 2010.

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.  The consolidated statement of financial position at 31 December 2010 and the consolidated income statement, consolidated cash flow statement and other primary statements and associated notes (excluding note 16) for the year then ended have been extracted from the Group's statutory financial statements for the year ended 31 December 2010 (which have not yet been filed with Companies House) upon which the auditor's opinion is unqualified, and does not include any statement under Section 498 (2) or (3) of the Companies Act 2006.

 

2.     Disposal group classified as held for sale and discontinued operations

 

On 24 December 2010, the Company announced that it had signed a binding agreement for the conditional sale of its South East Asian assets for cash consideration of US$200 million. The South East Asian assets include the Penjom mine in Malaysia; the North Lanut mine and Bakan project in North Sulawesi, Indonesia; and a number of exploration properties in Indonesia. Completion is conditional on government agency approvals and other conditions precedent. The transaction was also subject to certain rights of first refusal ("ROFR") held by minority interest parties. At 10 February 2011, being the expiry date for notification of exercise by minority interests of their rights of first refusal over certain of the sale assets, these rights had either lapsed unexercised or been assigned to J&Partners; further issues remain to be addressed.

 

The signing of the agreement to sell the Group's South East Asian assets concluded a strategic review of these assets that had been undertaken during 2010. The outcome of this process was a conclusion that the sale of these assets was the best way of delivering value to shareholders from the South East Asian business. Therefore, in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, all of the assets and liabilities of the Indonesian and Malaysian operations, apart from cash, have been treated as a disposal group and are disclosed separately on the balance sheet. Prior to the reclassification, management reviewed the carrying values and recognition of assets and liabilities respectively, and no adjustments have been required to measure assets and liabilities at the lower of carrying value or fair value less costs to sell.

 

The disposal will be on a debt-free cash-free basis, and therefore the cash held in the Indonesian and Malaysian entities at 31 December 2010 has been treated as Group cash and cash equivalents and does not form part of held for sale assets.

 

The results of the Malaysian and Indonesian operations have been treated as discontinued operations and presented separately in the income statement for both the current and comparative period.

 

The disposal group comprises all operations that are classified as the Malaysian and Indonesian segments for the purposes of segmental reporting under IFRS 8. The internal reporting of the results of these operations to management remains unchanged. Therefore, the results of these segments remain included in the segmental analysis presented in Note 15 and provide an analysis of the net profit from discontinued operations as presented in the consolidated income statement, and the composition of disposal group assets and liabilities. The segmental cash flow statement in Note 3 provides an analysis of operating cash flows attributable to discontinued operations, and cash spent on investing activities.

 

The goodwill and deferred consideration recognised in the consolidated statement of financial position at 31 December 2009 relates to Avocet's 80 per cent interest in the Indonesian company PT Avocet Bolaang Mongondow. The goodwill and deferred consideration relate to the disposal group held for sale, therefore the respective carrying values at the period end have been included in the assets and liabilities of the disposal group held for sale. Prior to the transfer to the disposal group, the recoverability of the goodwill was assessed by reference to the recoverable amount of PT Avocet Bolaang Mongondow and no impairment was required.

 

3.     Segmental Reporting

 

For the year ended 31 December 2010

Continuing operations

Discontinued operations




UK

West Africa

Total

Malaysia

Indonesia

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

INCOME STATEMENT









Revenue


-

132,779

132,779

63,387

58,427

121,814

254,593

Cost of Sales


503

(95,638)

(95,135)

(59,706)

(45,827)

(105,533)

(200,668)

Cash production costs:


-







- mining


-

(15,321)

(15,321)

(29,454)

(16,501)

(45,955)

(61,276)

- processing


-

(24,719)

(24,719)

(12,097)

(8,242)

(20,339)

(45,058)

- overheads


-

(15,274)

(15,274)

(2,222)

(6,988)

(9,210)

(24,484)

- royalties


-

(7,304)

(7,304)

(4,443)

(334)

(4,777)

(12,081)




(62,618)

(62,618)

(48,216)

(32,065)

(80,281)

(142,899)

Changes in inventory


-

3,977

3,977

(2,785)

823

(1,962)

2,015

Other cost of sales

(a)

627

(4,503)

(3,876)

(2,899)

(4,997)

(7,896)

(11,772)

Depreciation and amortisation

(b)

(124)

(32,494)

(32,618)

(5,806)

(9,588)

(15,394)

(48,012)

Gross profit/(loss)


503

37,141

37,644

3,681

12,600

16,281

53,925










Administrative expenses and share based payments


(15,665)

-

(15,665)

-

-

-

(15,665)

Operating (loss)/profit


(15,162)

37,141

21,979

3,681

12,600

16,281

38,260

(Loss/)profit on disposal of investments and PPE


(2,395)

5,064

2,669

(136)

(15)

(151)

2,518

Net finance items


(3,759)

(3,414)

(7,173)

(133)

77

(56)

(7,229)

(Loss)/profit before taxation


(21,316)

38,791

17,475

3,412

12,662

16,074

33,549

Analysed as:









(Loss)/profit before tax and exceptional items


(16,558)

33,727

17,169

3,548

12,677

16,225

33,394

Exceptional items


(4,758)

5,064

306

(136)

(15)

(151)

155

Taxation


(2,428)

(9,593)

(12,021)

(25)

(3,291)

(3,316)

(15,337)

(Loss)/profit for the period


(23,744)

29,198

5,454

3,387

9,371

12,758

18,212

Attributable to:









Non-controlling interest


-

1,457

1,457

-

2,125

2,125

3,582

Equity shareholders of parent company


(23,744)

27,741

3,997

3,387

7,246

10,633

14,630










EBITDA

(c)

(15,038)

69,635

54,597

9,487

22,188

31,675

86,272

 

(a)   Other cost of sales represents costs not directly related to production, including exploration expenditure not capitalised;

(b)   Includes amounts in respect of the amortisation of closure provisions at Inata, Penjom and North Lanut;

(c)   EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation.

 

 

 



Continuing operations

Discontinued operations


At 31 December 2010


UK

West Africa

Total

Malaysia

Indonesia

 

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

STATEMENT OF FINANCIAL POSITION


















Non-current assets


2,280

270,542

272,822

43,076

51,537

94,613

367,435

Inventories


-

20,379

20,379

9,724

11,817

21,541

41,920

Trade and other receivables


733

15,424

16,157

2,029

7,367

9,396

25,553

Cash and cash equivalents


12,812

18,980

31,792

4,963

12,768

17,731

49,523

Reclassification of cash not held for sale

(f)

17,731

-

17,731

(4,963)

(12,768)

(17,731)

-

Total assets


33,556

325,325

358,881

54,829

70,721

125,550

484,431

Current liabilities


(3,888)

(48,542)

(52,430)

(8,960)

(9,681)

(18,641)

(71,071)

Non-current liabilities


(25,430)

(41,900)

(67,330)

(10,594)

(16,197)

(26,791)

(94,121)

Total liabilities


(29,318)

(90,442)

(119,760)

(19,554)

(25,878)

(45,432)

(165,192)

Net assets


4,238

234,883

239,121

35,275

44,843

80,118

319,239










For the year ended 31 December 2010


UK

West Africa

Total

Malaysia

Indonesia

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

CASH FLOW STATEMENT


















(Loss)/profit for the period


(23,744)

29,198

5,454

3,387

9,371

12,758

18,212

Adjustments for non-cash items

(d)

17,395

40,437

57,832

5,977

13,807

19,784

77,616

Movements in working capital


84

(27,834)

(27,750)

920

(1,664)

(744)

(28,494)

Net cash (used in)/generated by operations


(6,265)

41,801

35,536

10,284

21,514

31,798

67,334

Net interest received


(1,162)

(4,003)

(5,165)

22

70

92

(5,073)

Net tax (paid)/received


-

-

-

(52)

824

772

772

Purchase of property, plant and equipment


(65)

(36,714)

(36,779)

(2,979)

(2,160)

(5,139)

(41,918)

Deferred exploration expenditure


(299)

(9,871)

(10,170)

-

(2,564)

(2,564)

(12,734)

Other cash movements

(e)

3,157

15,750

18,907

(12,886)

(11,935)

(24,821)

(5,914)

Reclassification of cash not held for sale

(f)

17,731

-

17,731

(4,963)

(12,768)

(17,731)

-

Total increase/(decrease) in cash and cash equivalents


13,097

6,963

20,060

(10,574)

(7,019)

(17,593)

2,467

 

(d)   Adjustments for non-cash items include depreciation and amortisation, share based payments, movement in provision, taxation in the income statement and non-operating items in the income statement;

(e)   Other cash movements include deferred consideration paid, cash flows from financing activities, and exchange losses;

(f)   The sale of South East Asian subsidiaries is for a debt-free cash-free consideration. Therefore, cash held in Malaysian and Indonesian subsidiaries at 31 December 2010 has been excluded from the held for sale assets, and reported as Group cash in the consolidated statement of financial position.

 

 

 

For the nine months ended 31 December 2009


Continuing operations

Discontinued operations




UK

West Africa

Total

Malaysia

Indonesia

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

INCOME STATEMENT









Revenue


-

-

-

46,045

36,900

82,945

82,945

Cost of Sales


(17)

-

(17)

(43,555)

(27,230)

(70,785)

(70,802)

Cash production costs:









- mining


-

-

-

(19,500)

(10,579)

(30,079)

(30,079)

- processing


-

-

-

(8,544)

(5,146)

(13,690)

(13,690)

- overheads


-

-

-

(1,809)

(4,299)

(6,108)

(6,108)

- royalties


-

-

-

(3,227)

(250)

(3,477)

(3,477)



-

-

-

(33,080)

(20,274)

(53,354)

(53,354)

Deferred stripping adjustment


-

-

-

(6,032)

-

(6,032)

(6,032)

Changes in inventory


-

-

-

2,643

1,615

4,258

4,258

Other cost of sales

(a)

11

-

11

(2,841)

(2,227)

(5,068)

(5,057)

Depreciation and amortisation

(b)

(28)

-

(28)

(4,245)

(6,344)

(10,589)

(10,617)

Gross (loss)/profit


(17)

-

(17)

2,490

9,670

12,160

12,143










Administrative expenses and share based payments


(4,196)

-

(4,196)

(40)

(53)

(93)

(4,289)

Deferred stripping impairment


-

-

-

(7,957)

-

(7,957)

(7,957)

Exploration impairment


(2,742)

(621)

(3,363)

-

(7,123)

(7,123)

(10,486)

Operating (loss)/profit


(6,955)

(621)

(7,576)

(5,507)

2,494

(3,013)

(10,589)

Net finance items


(39)

-

(39)

10

63

73

34

(Loss)/profit before taxation


(6,994)

(621)

(7,615)

(5,497)

2,557

(2,940)

(10,555)

Analysed as:









(Loss)/profit before tax and exceptional items


(4,252)

-

(4,252)

2,460

9,680

12,140

7,888

Exceptional items


(2,742)

(621)

(3,363)

(7,957)

(7,123)

(15,080)

(18,443)

Taxation


(609)

-

(609)

1,200

(2,679)

(1,479)

(2,088)

Loss for the period


(7,603)

(621)

(8,224)

(4,297)

(122)

(4,419)

(12,643)

Attributable to:









Non-controlling interest


-

-

-

-

389

389

389

Equity shareholders of parent company


(7,603)

(621)

(8,224)

(4,297)

(511)

(4,808)

(13,032)

EBITDA

(c)

(4,185)

-

(4,185)

6,695

15,961

22,656

18,471

(a)   Other costs of sales represents costs not directly related to production, including exploration expenditure not capitalised;

(b)   Includes amounts in respect of the amortisation of closure provisions at Penjom and North Lanut.

(c)   EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation.

 

 

At 31 December 2009


Continuing operations

Discontinued operations




UK

West Africa

Total

Malaysia

Indonesia

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

STATEMENT OF FINANCIAL POSITION


















Non-current assets


15,873

237,221

253,094

38,762

51,621

90,383

343,477

Inventories


-

8,884

8,884

11,815

10,567

22,382

31,266

Trade and other receivables


1,086

1,866

2,952

2,415

9,532

11,947

14,899

Cash and cash equivalents


17,446

12,017

29,463

10,574

7,019

17,593

47,056

Total assets


34,405

259,988

294,393

63,566

78,739

142,305

436,698

Current liabilities


2,334

28,005

30,339

10,617

6,737

17,354

47,693

Non-current liabilities


28,230

66,768

94,998

5,112

11,519

16,631

111,629

Total liabilities


30,564

94,773

125,337

15,729

18,256

33,985

159,322

Net assets


3,841

165,215

169,056

47,837

60,483

108,320

277,376










For the nine months ended

31 December 2009


UK

West Africa

Total

Malaysia

Indonesia

Total

TOTAL



US$000

US$000

US$000

US$000

US$000

US$000

US$000

CASH FLOW STATEMENT


















Loss for the period


(7,603)

(621)

(8,224)

(4,297)

(122)

(4,419)

(12,643)

Adjustments for non-cash items

(d)

4,755

621

5,376

19,445

16,536

35,981

41,357

Movements in working capital


(4,672)

(1,163)

(5,835)

(4,229)

(1,511)

(5,740)

(11,575)

Net cash (used in)/generated by operations


(7,520)

(1,163)

(8,683)

10,919

14,903

25,822

17,139

Net interest (paid)/received


(83)

-

(83)

(10)

8

(2)

(85)

Purchase of property, plant and equipment


(262)

(42,526)

(42,788)

(1,657)

(2,402)

(4,059)

(46,847)

Deferred exploration expenditure


(1,663)

(1,218)

(2,881)

(3,560)

(2,472)

(6,032)

(8,913)

Other cash movements

(e)

(28,859)

56,924

28,065

(6,172)

(8,549)

(14,721)

13,344

Total (decrease)/increase in cash


(38,387)

12,017

(26,370)

(480)

1,488

1,008

(25,362)

 

(d)  Adjustments for non-cash items include depreciation and amortisation, exploration impairment, deferred stripping adjustments, deferred stripping impairment, share based payments, movement in provision, taxation in the income statement and non-operating items in the income statement;

(e)  Other cash movements include cash flows from financing activities, deferred consideration payments, cash movements on purchase and disposal of subsidiaries, and exchange losses.

 

 

4.     Profit before taxation and exceptional items

 

Profit before taxation and exceptional items is calculated as follows:

 

 

 

 


31 December 2010
(12 months)

31 December 2009
(9 months)



US$000

US$000

Operating profit/(loss)


38,260

(10,589)

Add back deferred stripping impairment


-

7,957

Add back exploration impairments


-

10,486

Exchange (losses)/gains - continuing operations


(49)

44

Exchange (losses)/gains - discontinued operations


(154)

75

Net finance expense- continuing operations


(4,761)

(83)

Net finance income/(expense) - discontinued operations


98

(2)

Profit before tax and exceptional items


33,394

7,888

 

 

 

5.     Exceptional items

 



31 December 2010
(12 months)

31 December 2009
(9 months)



US$000

US$000

Profit on disposal of Merit Mining


1,808

-

Profit on redemption of debenture in Merit Mining


3,138

-

Loss on disposal of other financial assets


(7,341)

-

Disposal of non-core exploration licences


5,064

-

Profit on disposal of investments


2,669

-

Loss on disposal of property, plant and equipment


(151)

-

Expenses of listing on Oslo Børs


(2,363)

 -

Exploration impairments


-

(10,486)

Deferred stripping impairment


-

(7,957)

Exceptional profit/(loss) before taxation


155

(18,443)

Taxation


-

2,228

Exceptional profit/(loss) after taxation


155

(16,215)

Minority interest


-

51

Attributable to equity shareholders of the parent


155

(16,164)

 

Disposal of Merit Mining Corporation and Profit on redemption of debenture

 

On 13 November 2009, Avocet announced that it had entered into a conditional agreement with Infinity Gold Mining Inc. ("Infinity") to sell its entire interest in Merit Mining Corporation ("Merit"), a non-core subsidiary acquired as part of the Wega Mining takeover. Although the agreement represented a binding commitment by Infinity to acquire 100 per cent of Avocet's interest, completion of the transaction was conditional on a number of future events and payments, which did not occur. At 31 December 2009, approximately US$1.0 million had been received, which was non-refundable in the event that the sale was not completed. Following the fair value review of all Wega Mining assets, the book value of these assets at acquisition had been adjusted to US$1.0 million, and the disposal therefore gave rise to no profit or loss.

 

 

During 2010, the agreement with Infinity lapsed due to completion conditions being unfulfilled. In November 2010, Avocet completed the disposal of its entire interest in Merit to a different party, realising an exceptional gain on disposal of US$1.8 million.

 

During 2010 Merit repaid a debenture to Wega Mining AS, a wholly owned subsidiary of Avocet. At the time of the acquisition of the Wega group it was not considered likely that Merit would have the resources to settle the debenture. Following the investment of approximately C$16 million in Merit by Hong Kong Huakan Investment Co Ltd, the repayment was possible, and the gain of US$3.1 million has therefore been classified as exceptional.

 

Loss on disposal of other financial assets

 

Avocet disposed of all of the shares it held in Dynasty Gold Corp in June 2010, and completed the disposal of all of the shares it held in Monument Mining in November 2010. These financial assets had been accounted for as available for sale investments in accordance with IAS39, and were recorded in the statement of financial position at fair value, with movements in fair value recognised in equity. On disposal of the shares, accumulated losses of US$7.3 million previously recognised in equity were transferred to the income statement and recognised in the loss on disposal.

 

Disposal of  non-core exploration licences

 

On 5 October 2010 Avocet completed the disposal of Houndé Group of licences in exchange for 10,300,000 shares in Avion Gold Corporation ("Avion"). An exceptional gain on disposal of US$5.1 million was realised. The shares in Avion are accounted for as an available for sale asset and are measured at fair value, with gains or losses on re-measurement recognised in equity.

 

Oslo listing costs

 

On 16 June 2010 Avocet announced its successful listing on Oslo Børs. Costs of the listing, which were not directly attributable to new shares issued, are treated as exceptional costs in the period. These included US$1.8 million of Stamp Duty Reserve Tax costs following the transfer of existing Avocet shareholders from UK-based registration system to the Norwegian VPS share registration system.

 

 

Exploration impairments

 

Following evaluation of the exploration portfolio, the decision was taken in December 2009 to impair US$10.5 million of deferred exploration expenditure on projects that the Company did not believe would become mining projects. US$7.1 million of this impairment related to operations that are now presented as discontinued.

 

 

Impairment of capitalised deferred stripping cost

 

In September 2009, an impairment of deferred stripping costs previously capitalised was made on the basis that the grades and recoveries of the ore that had been stripped in earlier years proved significantly lower than estimated at the time when the stripping costs were deferred. There are currently no deferred stripping costs recognised in the statement of financial position.

 

 

 

6.     Earnings Per Share

 

Earnings per share are analysed in the table below, which also shows earnings per share after adjusting for exceptional items.

 


31 December 2010 
(12 months)

31 December 2009
(9 months)


Shares

Shares

Weighted average number of shares in issue for the period



- number of shares with voting rights

195,802,466

170,883,476

- effect of share options in issue

2,231,799

158,123

- total used in calculation of diluted earnings per share

198,034,265

171,041,599




US$000

US$000

Earnings per share from continuing operations



Profit/(loss) for the period from continuing operations

5,454

(8,224)

Adjustments:



Less minority interest

(1,457)

-

Profit/(loss) for period attributable to equity shareholders of the parent

3,997

(8,224)



Earnings per share



- basic (cents per share)

2.04

(4.81)

- diluted (cents per share)

2.02

(4.81)

 

Earnings per share from continuing operations before exceptional items



Profit/(loss) for period attributable to equity shareholders of the parent

3,997

(8,224)

Adjustments:



Less exceptional profit on disposal

(2,669)

-

Add back expenses of listing on Oslo Børs

2,363

-

Add back exploration impairment

-

3,363

Profit/(loss) for the period attributable to equity shareholders of the parent from continuing operations before exceptionals

3,691

(4,861)

Earnings per share



- basic (cents per share)

1.89

(2.84)

- diluted (cents per share)

1.86

(2.84)




 

 


31 December 2010
(12 months)

31 December 2009
(9 months)





US$000

US$000

Earnings per share from discontinued operations



Profit/(loss) for the period from discontinued operations

12,758

(4,419)

Adjustments:



Less minority interest

(2,125)

(389)

Profit/(loss) for period attributable to equity shareholders of the parent

10,633

(4,808)



- basic (cents per share)

5.43

(2.82)

- diluted (cents per share)

5.37

(2.82)




Earnings per share from discontinued operations before exceptional items



Profit/(loss) for period attributable to equity shareholders of the parent

10,633

(4,808)

Adjustments:



Add back loss on disposal of assets

151

-

Add back exploration impairment

-

7,123

Add back deferred stripping impairment

-

7,957

Less tax on deferred stripping impairment

-

(2,228)

Less minority interest on exploration impairment

-

(51)

Profit for the period attributable to equity shareholders of the parent from discontinued operations before exceptionals

10,784

7,993

Earnings per share



- basic (cents per share)

5.51

4.68

- diluted (cents per share)

5.45

4.68

 

 

7.     Intangible Assets

 



31 December

2010

(12 months)

31 December

2009

 (9 months)




US$000

At 1 January/April


18,059

32,422

Additions


12,734

8,913

Assets acquired from Wega Mining (after fair value adjustments)


-

5,811

Transfers to tangible fixed assets


-

(15,168)

Disposals

5

(2,600)

(3,165)

Other transfers


-

(268)

Exploration impairments

5

-

(10,486)

Transferred to disposal group


(17,102)

-

At 31 December


11,091

18,059

 

 

During the year the Group disposed of the Houndé licences, which were acquired as part of the Wega group in 2009. The fair value of the licences, as attributed on acquisition, was US$2.6 million. For further information, refer to note 5.

 

At 31 December 2009, the Company completed a review of its exploration portfolio, with a view to focusing exploration activity onto its most prospective projects. As a result of this exercise, US$10.5 million of capitalised exploration costs, relating to projects that the Company did not intend to actively pursue, as well as generative costs, were impaired. The largest of these projects were those prospects acquired as part of the Banda licences in Indonesia.

 

All intangible assets relating to projects in Indonesia have been included in the assets of the disposal group held for sale.

 

Year end balances are analysed as follows:

 

 



31 December 2010

31 December 2009



US$000

US$000

Malaysia


-

-

Indonesia


-

14,812

West Africa


11,091

3,247



11,091

18,059

 

 

8.     Property, Plant And Equipment

 


Mining property and plant

Office equipment


Year ended 31 December 2010

Malaysia

Indonesia

West Africa

UK

Total


US$000

US$000

US$000

US$000

US$000

Cost






At 1 January 2010

100,006

56,289

233,974

505

390,774

Additions

2,979

2,160

43,913

65

49,117

Closure provisions

5,456

1,554

1,539

-

8,549

Inata pre-commercial revenues

-

-

(21,495)

-

(21,495)

Inata pre-commercial costs

-

-

14,296

-

14,296

Disposals

(874)

-

-

-

(874)

Transfer to disposal group held for sale

(107,567)

(60,003)

-

-

(167,570)







At 31 December 2010

-

-

272,227

570

272,797

Depreciation






At 1 January 2010

60,720

30,061

-

200

90,981

Charge for the year

5,806

9,588

32,494

124

48,012

Disposals

(584)

-

-

-

(584)

Transfer to disposal group held for sale

(65,942)

(39,649)

-

-

(105,591)

At 31 December 2010

-

-

32,494

324

32,818

Net Book Value at 31 December 2010            

-

-

239,733

246

239,979

Net Book Value at 31 December 2009

39,286

26,228

233,974

305

299,793

 

All costs and revenues at Inata between 1 January and 31 March 2010 related to the testing and development phase, prior to the commencement of commercial operations. Therefore, these costs and revenues have been capitalised as part of mining property, plant and equipment. From 1 April 2010, all revenues and operating expenses in respect of mining operations at Inata have been recognised in the income statement.

 

The transfer to disposal group assets held for sale represents the net book value of the assets which are subject to the conditional agreement for sale of all of Avocet's South East Asian assets (Note 2). The net book value of US$62.0 million is included in the balance of the disposal group held for sale.

 

The addition in respect of closure provisions reflects increases during the year in anticipated closure liabilities at the Group's operations.  On the recognition or increase of a provision, an addition is made to property, plant and equipment of the same amount. The cost of this addition is charged against profits on a unit of production basis over the life of the mine.  The total charge to the income statement for both continuing and discontinued operations for the period ended 31 December 2010 in respect of mine closure provisions was US$1.7 million (nine months ended 31 December 2009: US$1.7 million) which is included in the Group's depreciation charge.

 


Mining property and plant

Office equipment


 

Nine months ended

31 December 2009

Malaysia

Indonesia

West Africa

UK

Total


US$000

US$000

US$000

US$000

US$000

Cost






At 1 April 2009

102,605

48,452

-

211

151,268

Deferred stripping adjustment

(6,032)

-

-

-

(6,032)

Deferred stripping impairment

(7,957)

-

-

-

(7,957)

Additions

1,657

2,402

42,526

262

46,847

Transfers from intangibles

9,733

5,435

-

-

15,168

Acquisitions

-

-

195,679

32

195,711

Closure provisions

-

-

1,768

-

1,768

Disposals

-

-

(5,999)

-

(5,999)

At 31 December 2009

100,006

56,289

233,974

505

390,774

Depreciation






At 1 April 2009

56,475

23,717

-

172

80,364

Charge for the year

4,245

6,344

-

28

10,617

At 31 December 2009

60,720

30,061

-

200

90,981

Net Book Value at 31 December 2009

39,286

26,228

233,974

305

299,793

Net Book Value at 31 March 2009

46,130

24,735

-

39

70,904

 

 

9.     Other Financial Assets



31 December 2010
(12 months)

31 December 2009
(9 months)



US$000

US$000

At 1 January/April


9,428

7,239

Additions


7,664

132

Disposals


(9,428)

(1)

Fair value adjustment


12,629

2,058

At 31 December


20,293

9,428

 

Other financial assets disposed of during the year represented the Company's interests of 19 per cent in Dynasty Gold Corporation (Dynasty) and 15 per cent in Monument Mining Limited, both companies listed on the TSX Venture Exchange in Canada. These investments were accounted for as other financial assets rather than equity accounted as associates, on the basis that the Company was not in a position to exercise significant influence over the activities of, and had no board representation in, either company.

 

On disposal, accumulated losses previously recognised in equity were recognised in the income statement as an exceptional loss (note 5).

 

Additions during the year represent 10,300,000 shares in Avion Gold Corporation, acquired as consideration for the disposal of the Houndé group of licences (note 5). This shareholding does not enable Avocet to exercise significant influence over the activities of Avion. Therefore, the shares are accounted for as an available for sale financial asset and are measured at fair value, with gains or losses on re-measurement recognised in equity.

 

10.  Deferred tax

 

At 31 December 2010 the Company had deferred tax assets of US$1.5 million, a decrease of US$4.4 million compared to 31 December 2009. This reduction reflects transfer of US$2.0 million of deferred tax assets to the assets held for sale in respect of Malaysian operations. US$2.4 million of the reduction relates to a reassessment of the extent to which deferred tax assets might be recoverable against future taxable profits in the UK, following the agreement to sell the Group's assets in South East Asia.

 

At 31 December 2010 the Company had deferred tax liabilities of US$9.6 million in relation to continuing operations. This liability was recognised in relation to temporary differences on Inata mine development costs and property, plant, and equipment following the extension of the life of mine plan.

 

Deferred tax liabilities of US$4.0 million in relation to temporary differences on property, plant and equipment at Penjom are included in liabilities of the disposal group held for sale.

 

 

11.  Inventories

Inventories of US$20.4 million at 31 December 2010 include US$11.6 million in respect of critical spares and consumables at Inata, US$3.3 million of gold in circuit, US$4.5m of ore in stockpiles and US$1.0 millions of finished goods.

 

 

12.  Trade and other receivables

 

Trade and other receivables at 31 December 2010 include US$8.4 million of deposits and US$4.3 million of recoverable VAT in respect of Inata, prepayments of US$1.5 million, and other receivables of US$2.0 million.

 

 

13.  Other liabilities

 

Other non-current liabilities at 31 December 2010 include US$3.3 million of mine closure provisions at Inata and US$0.4 million of post retirement benefits following the closure of a US subsidiary no longer owned by the Group.

 

 

14.  Other financial liabilities

 

Other financial liabilities include a project finance facility with Macquarie Bank Limited, which was acquired through the Company's takeover of Wega Mining in 2009. US$12 million of loan repayments were made during the year, and the balance outstanding at 31 December 2010 was US$53 million. A further US$24 million of loan repayments are due in 2011, and are presented within current liabilities.

 

Other financial liabilities also include a US$25 million corporate revolving facility with Standard Chartered Bank. The loan is repayable in full by 31 March 2012, and is included in non-current liabilities. 

 

 

 

15.  Notes to the cash flow statement

 

Non cash and non operating items in the income statement

 

In arriving at net cash flow from operating activities, the following exceptional non-cash items and non-operating items in the income statement have been adjusted for:

 

Exceptional non-cash items

 



31 December 2010

(12 months)

31 December 2009

(9 months)



US$000

US$000

Exploration impairments


-

10,486

Deferred stripping impairment

-

7,957



-

18,443

 

 

Non-operating items in the income statement

 



31 December 2010

(12 months)

31 December 2009

(9 months)



US$000

US$000

Profit on disposal of investments


(2,669)

-

Loss on disposal of property, plant and equipment

151

-

Expenses of listing on Oslo Børs

2,363

-

Exchange losses/(gains) - continuing operations


113

(119)

Finance income - continuing operations


(5)

(425)

Finance expense - continuing operations


4,766

510

Net finance items - discontinued operations


(49)

-

Non-operating items in the income statement


4,670

(34)

 

 

16.  Unaudited condensed quarterly consolidated income statement and proforma income statement for 2009

 

The following table presents an analysis of the 2010 results by quarter. This analysis has not been audited.

 

The Group changed its year end from 31 March to 31 December, with effect from 31 December 2009 in line with the regulatory December year end applicable to the Inata project in Burkina Faso and other subsidiaries in West Africa. As a result of this decision, the accounting period ended 31 December 2009 was nine months in duration.  The following table shows, for comparison purposes, an indication of the Income Statement for the twelve month period ended 31 December 2009, with the results of continuing and discontinued operations presented separately. These figures have neither been audited nor reviewed by the Group auditors.

  

INCOME STATEMENT
For the year ended 31 December 2010
 
 
Q1 2010
(Unaudited)
Q2 2010
(Unaudited)
Q3 2010
(Unaudited)
Q4 2010 (Unaudited)
2010
(Audited)
Pro forma
31 December 2009
(12 months)
(Unaudited)
 
 
 
US$000
US$000
US$000
US$000
US$000
US$000
 
Revenue
 
 
 
 
 
 
 
 
Continuing operations
 
-
36,604
44,299
51,876
132,779
-
 
Discontinued operations
 
27,170
28,280
33,190
33,174
121,814
108,757
 
 
 
27,170
64,884
77,489
85,050
254,593
108,757
 
Cost of sales
 
 
 
 
 
 
 
 
Continuing operations
 
(938)
(24,201)
(34,535)
(35,461)
(95,135)
17
 
Discontinued operations
 
(22,995)
(25,049)
(26,058)
(31,431)
(105,533)
(92,925)
 
 
 
(23,933)
(49,250)
(60,593)
(66,892)
(200,668)
(92,908)
 
Gross profit
 
3,237
15,634
16,896
18,158
53,925
15,849
 
Administrative expenses –continuing operations
 
(1,664)
(1,157)
(2,363)
(1,856)
(7,040)
(4,020)
 
Administrative expenses – discontinued operations
 
-
-
-
-
-
(93)
 
Share based payments – continuing operations
 
(1,576)
(1,572)
(312)
(5,165)
(8,625)
(1,553)
 
Exploration impairments – continuing operations
 
-
-
-
-
-
(3,003)
 
Exploration impairments – discontinued operations
 
-
-
-
-
-
(7,106)
 
Deferred stripping impairment
 
-
-
-
-
-
(7,957)
 
Operating (loss)/profit
 
(3)
12,905
14,221
11,137
38,260
(7,883)
 
Profit on disposal of investments – continuing operations
 
-
1,986
-
683
2,669
-
 
Loss on disposal of property, plant and equipment – discontinued operations
 
-
-
-
(151)
(151)
-
 
Finance items – continuing operations
 
 
 
 
 
 
 
 
Exchange gains/(losses)
 
35
(152)
318
(250)
(49)
25
 
Finance income
 
-
-
-
5
5
600
 
Finance expense
 
-
(1,380)
(1,540)
(1,846)
(4,766)
(476)
 
Expenses of listing on Oslo Børs
 
-
(2,363)
-
-
(2,363)
-
 
Net finance items – discontinued operations
 
164
(96)
309
(433)
(56)
107
 
Profit/(loss) before tax
 
196
10,900
13,308
9,145
33,549
(7,627)
 
Analysed as:
 
 
 
 
 
 
 
 
Profit before taxation and exceptional items
 
196
11,277
13,308
8,613
33,394
10,439
 
Exceptional items
 
-
(377)
-
532
155
(18,066)
 
Profit/(loss) before taxation
 
196
10,900
13,308
9,145
33,549
(7,627)
 
Taxation
 
 
 
 
 
 
 
 
Continuing operations
 
1,187
(2,060)
-
(11,148)
(12,021)
1,539
 
Discontinued operations
 
(79)
(1,521)
(452)
(1,264)
(3,316)
(4,823)
 
 
 
1,108
(3,581)
(452)
(12,412)
(15,337)
(3,284)
 
Profit/(loss) for the period
 
 
 
 
 
 
 
 
(Loss)/profit from continuing operations
 
(2,956)
5,705
5,867
(3,162)
5,454
(6,412)
 
Profit/(loss) from discontinued operations
 
4,260
1,614
6,989
(105)
12,758
(4,499)
 
Profit/(loss) for the period
 
1,304
7,319
12,856
(3,267)
18,212
(10,911)
 
 

 


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