Goldplat plc (LON:GDP), the AIM listed gold producer, with international gold recovery operations located in South Africa and Ghana and a gold mine in Kenya, announced this morning its unaudited interim results for the six months ended 31 December 2019.
Overview
· The group reports a return to operating profitability for the first six months ended 31 December 2019 of £2,221,000 (31 December 2018: Operating loss £653,000)
· The group profit for the six months ended 31 December 2019, excluding unrealised intragroup foreign exchange losses on intercompany loan balances, was £1,032,000 (31 December 2018: Loss, excluding intragroup foreign exchange losses on intercompany balances, £1,214,000)
· The group has intercompany loans denominated in USD which differ from the parent company and its various subsidiaries reporting currencies. The strengthening of GBP and weakening of the Ghana Cedi contributed the most to the group’s unrealised intragroup foreign exchange loss for the six months to 31 December 2019 of £333,000 (31 December 2018: unrealised intragroup foreign exchange profit, £279,000)
· With the increase in profits the group also reported an increase in taxation for the six months ended 31 December 2019 to £918,000 (31 December 2018: £98,000). Included in the taxation expense is dividend taxation paid on the declaration of dividends from GPL to support the group cash flows. The dividend taxation paid for the six months ended 31 December 2019 was £190,000 (31 December 2018: £200,000)
· The South African operation performed strongly and achieved an operating profit for the six months ended 31 December 2019 of £2,659,000 (31 December 2018: £752,028). A pre-treatment facility has been added at a cost of £70,000 which enables the company to treat lower grade material with a higher degree of contamination.
· Performance at the Ghana operation improved as the company’s marketing and sourcing efforts gained momentum and achieved an operating profit for the six months ended 31 December 2019 of £151,000 (31 December 2018: operating loss £241,449).
· Operating losses at Kilimapesa have been reduced, year on year, for the six months ended 31 December 2019 to £301,000 (31 December 2018: Operating loss £686,845) while we have continued to hold discussions with funding partners to re-capitalize this valuable asset.
· The continuing focus on operational excellence was enhanced by higher gold price in this period.
· During the six-month period, £523,000 of VAT reclaims have been paid by the Kenyan Revenue Authorities.
· Cost reductions and improved operational efficiencies remain an area of focus.
· Improvement in plant operational efficiencies in South Africa have not only reduced costs but improved gold recovery.
· Some of the cost savings have been invested into material sourcing initiatives and increasing physical security in South Africa.
· The Tailings Storage facility (‘TSF’) in South Africa has been structurally supported at a planned cost of £250,000 of which £123,000 has been spent in the first half of FY 2020. This expenditure will increase the life of the TSF whilst we investigate the design of a new TSF.
Chairman’s Statement
I am delighted to report that Goldplat continues to deliver effectively on its stated strategic objectives at its operating subsidiaries. Our portfolio of core assets consists of two gold recovery operations in South Africa and Ghana, which recover gold from by-products of the mining process, thereby providing mines with an environmentally-friendly and cost-efficient way of removing waste material, and the Kilimapesa Gold Mine in Kenya, currently under care and maintenance.
We remain committed to our strategy of increasing long term visibility of earnings in the recovery businesses through key initiatives and finding an investment partner or buyer for Kilimapesa. These key initiatives include:
· improving our gold recoveries from lower grade contaminated material, effectively reducing the grade of the material we will be able to process economically. Reserves of lower grade materials are more readily available and help to alleviate the sourcing risk;
· Building strategic partnerships within the mining industry;
· Evaluating the investment into a larger tailings storage facility and additional mill and leaching capacity to enable us to reprocess our current TSF;
· Increased investment into sourcing initiatives and test work on a wider range of materials, including PGM discards.
Revenues for the six months ended 31 December 2019 of £12,462,000 represent a 3% decrease on the same period last year (six months ended 31 December 2018: £12,843,000), as a result of Kilimapesa Mine being placed under care and maintenance. The revenues for the six months ended 31 December 2019 on the recovery operations increased by 10% to £11,759,000 (31 December 2018: £10,684,000). In line with this, I am pleased to report a turnaround to operating profit to £2,221,000 (six months ended 31 December 2018: loss of £653,000).
The net finance cost of £180,000 for the six months ended 31 December 2019 (31 December 2018: £200,000) includes £41,000 (31 December 2018: £70,000) interest paid on the renewed Scipion loan.
The profit after taxation of £669,000 (31 December 2018: loss £935,000) was negatively impacted by unrealised intragroup foreign exchange losses on intercompany loans balances for the six months ended of £333,000
(31 December 2018: £279,000). The group has intercompany loans dominated in USD which differ from its reporting currencies. The strengthening of the GBP and weakening of the Ghana Cedi contributed the most to the unrealised intragroup foreign exchange loss for the six months.
With the increase in profits the group also reported an increase in taxation for the six months ended 31 December 2019 to £918,000 (31 December 2018: £98,000). Included in the taxation expense is dividend taxation paid on the declaration of dividends from GPL to support the group cash flows. The dividend taxation paid for the six months ended 31 December 2019 was £190,000 (31 December 2018: £200,000).
During the period the US$2 million uncommitted, on-demand, revolving pre-export loan facility with Scipion was renewed which is providing increased flexibility in the sourcing initiatives in West Africa and further abroad. During the period, US$1.2 million was drawn down for these purposes and will be repaid by the end of April 2019.
Cash and cash equivalents at the end of the period stood at £2,070,000 (31 December 2018: £1,000,000).
Goldplat Recovery (Pty) Ltd (‘GPL’)
GPL had a very strong operational performance and recorded sales during the six months ended 31 December 2019 of £9,486,000 (six months ended 31 December 2018: £8,817,842). Operating profits for the six months ended 31 December 2019 of £2,659,000 increased by 254% (six months ended 31 December 2018: £752,028), and reflects the contribution of the abovementioned interventions and a higher gold price.
Towards the end of the 1st Quarter, GPL started the construction of the first stage of a pre-treatment facility to the largest Carbon in Leach (‘CIL’) section at a cost of £70,000. The purpose of the pre-treatment facility is to improve recoveries and margins on lower grade contaminated material and together with efforts to reduce operating costs, should allow us to source and profitably process lower grade contaminated material. This project has been completed on time, on budget and the new facility is currently being commissioned.
Our TSF is approaching full capacity in its current form and so we planned to spend £250,000 during the 2nd quarter to structurally support and increase its life by a further 12 to 18 months. Capital expenditure on this project at 31 December 2019 was £123,000 and has since been completed at the original budgeted cost of £250,000.
Gold Recovery Ghana (‘GRG’)
Activities at GRG continued to increase during the 2nd Quarter, achieving sales of £2,273,000 during the six months ended 31 December 2019 (31 December 2018 – £1,865,957) resulting in a turnaround from an operating loss during the six months ended 31 December 2018 of £241,449 to a profit of £151,000.
The sourcing of material improved further in the 2nd quarter with material being received from Ghana and other West African countries as well as from South America. We remain positive that material from Burkina Faso and the Ivory Coast will also become available. The sourcing of material remains paramount and we continue to work towards our objective to be the preferred processor of material from the Economic Community of West African States (ECOWAS).
GRG’s Gold license, which has to be renewed every three years, has been approved for a further term up to December 2022.
We are continuing exploring the opportunities for toll treating lower grade material from artisanal sources in Ghana. This potential new revenue stream will be subject to obtaining support from The Minerals Commission of Ghana. We have incorporated a company specifically for this purpose so that we can keep our free zone activities ring fenced.
Kilimapesa Gold (‘KPG’)
The mining operation remains on care and maintenance whilst we seek an investment partner to inject funds directly into KPG or the assets.
The processing of artisanal tailings continues and operating losses are lower than would have been under full care and maintenance.
KPG has reduced liabilities to creditors by £521,000 during the six months ended 31 December 2019, mainly from the recovery of previously unpaid VAT reclaims. During the six-month period, £523,000 of VAT reclaims have been paid by the Kenyan Revenue Authorities.
We are pleased that we have support from the Kenyan Government and that the status of our permits and licenses has not been affected by our decision to halt underground mining and that the local community continues to receive some benefit from KPG’s activities.
Operating losses reduced circa 56%, year on year, to £301,000 for the six months ended 31 December 2019 (six months ended 31 December 2018: Loss £686,845). The cash utilized in operating activities before working capital changes for the six months ended 31 December 2019 was £141,000 (six months ended December 2018 – £388,545). There has been no capital expenditure incurred.
Anumso Gold Corp (‘Anumso’)
We have agreed with our Joint Venture partner at Anumso, Desert Gold (Ashanti Gold and Desert Gold merged towards the end of September 2019), to seek a buyer for the Anumso gold project. We have had discussions with a potential buyer and will announce the outcome in due course.
Post-Period End
Progress can be reported subsequent to 31 December 2019 on the following:
· The construction of the pre-treatment facility at one of the CIL circuits at GPL has been completed and the facility is being commissioned, with all indications being that it has increased, as planned, the gold recoveries and margins of the large contaminated stockpile we have on site, improving visibility of material supplies for next 18 to 24 months.
· The construction of a buttress around the TSF has been completed, structurally improving the TSF and extending the life of the TSF by 12 to 18 months.
· Application has been filed for a new tailing’s facility, at GPL, adjacent to our current facility and we will update the market on cost and timelines before end of June 2020.
Outlook
The progress made on key initiatives to increase long term visibility of earnings in the recovery businesses, specifically improved recovery on lower grade contaminated material and strengthened relationships within mining industry, are encouraging. Although monthly production levels are still dependent on sourcing of quality material, we are confident that at current higher gold prices, we will remain profitable for remainder of the year.
