19 Mar 2010 07:00
CHINA GOLDMINES PLC
("China Goldmines", "CGM", the "Company", or the "Group") (AIM:CGM)
UNAUDITED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTH PERIOD ENDED
31 DECEMBER 2009
China Goldmines announces its unaudited interim financial results for the six months period ended 31 December 2009.
Highlights
| Disposal of 100% interest in Westralian Resources Pty Ltd (WES), on 29 September 2009:
Decision to dispose of the Guanzhuang Gold Project was reached in the context of:
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Financial highlights
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Following the disposal of its gold mining subsidiary on 29 September 2009, CGM is now classified under the AIM Rules, as an investing company. Accordingly, the Company is required to complete an acquisition or acquisitions (or otherwise implement an investing strategy, which will be subject to the approval of shareholders) no later than 28 September 2010. The Company is not subject to the Takeover Code as its securities are admitted to AIM and its place of central management and control is outside the United Kingdom.
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| The interim report for the six month period ended 31 December 2009 will shortly be available on the Company's website at www.chinagoldmines.com. |
For further information contact:
| China Goldmines Plc: | |
| Robert Adair | Tel:+44 1845-537037 Email: robert.adair@chinagoldmines.com |
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Frank Vanspeybroeck |
Tel: +61 8 6216 5200 Email: frank@chinagoldmines.com |
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| Marinko Vidovich | Tel:+61 8 6216 5200 Email: marinko@chinagoldmines.com |
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Brewin Dolphin (Nomad): |
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| Alexander Dewar
| Tel:+44 131 529 0276 Fax:+44 131 529 0246 Email: alexander.dewar@brewinib.co.uk |
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Neil McDonald |
Tel:+44 141 221 7733 Fax:+44 141 221 2666 Email: neil.mcdonald@brewinib.co.uk
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| Threadneedle Communications: |
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| Laurence Read | Tel: +44 20 7653 9855 Email: Laurence.read@threadneedlepr.co.uk |
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Beth Harris |
Tel: +44 20 7653 9853 Email: beth.harris@threadneedlepr.co.uk |
Chairman's Statement
In December 2009, I was appointed to the Board of China Goldmines as a UK resident non-executive chairman with a principal objective of evaluating the best options to achieve maximum value for our existing shareholders.
Having appraised the financial viability of the Guanzhuang Gold Project in the context of continued security breaches, theft and other local community issues and the requirement, in the Directors' opinion to invest at least a further USD$15 million in the project infrastructure, the previous Board took the decision in August 2009 to dispose of the project as the best strategy for preserving shareholder value.
The Company successfully concluded the disposal of its mining operations in China on 29 September 2009 through the sale of Westralian Resources Pty Ltd (WES) to Cosmos Castle Management Limited for a gross consideration of USD$26.3m.
As part of the disposal the Company and its subsidiary Global Resources Ventures Limited ("GRV") provided warranties, jointly and severally, to Cosmos Castle Management Limited and its successors. These warranties, which are set out in the circular dated 1 September 2009 expire on 28 September 2010, save for any antecedent breaches claimed by the acquirer which have not been resolved. They carry an aggregate liability for the Company and GRV limited to US$10m and relate principally to title, financial position and accuracy of accounts: the Company is currently not aware of anything which may lead to a claim. It is reassured that it successfully negotiated the release of $2.2m as announced on 22nd January 2010.
As at 31 December 2009 the Company had net assets of USD$23m, all of a liquid cash nature with minimal liabilities.
The Board is working closely with its Advisors and shareholders to identify opportunities to maximise shareholder value from CGM's strong cash position whilst simultaneously reviewing operational costs through restructuring and downsizing of overseas compliance and corporate costs.
The Company has concluded a strategic review and has put in place a process for assessing new projects within a clearly defined rationale to potentially acquire and build value for shareholders utilising current funds of approximately USD$23m. Any decision regarding specific acquisitions will be subject to shareholder approval and if a suitable proposition is not found a return of capital will be proposed to shareholders.
While CGM's existing expertise is in mining, the Company will also assess assets within the oil and gas sectors, and sectors outside of resources providing certain key parameters are met. Our framework for new projects is as follows:-
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We are examining a range of options and approaches through our own channels together with proposals from outside of the Company and through our Advisors we will evaluate each project on the above criteria. Viable propositions with incumbent management team are being sought with a view that a transaction might be completed by the end of September 2010. Our objective is to examine projects that could quickly derive benefit from deployment of the funds we have at our disposal.
At a corporate level we have undergone significant changes. The Board would like to acknowledge its thanks and appreciation to the many staff who demonstrated high levels of commitment and professionalism to the Guanzhuang Gold Project and particularly to Mr Clive Donner the former chairman and Dr Evan Kirby, non executive director, for their contribution to the Company since incorporation.
Robert Adair
Non Executive Chairman
| Financial Review
The Group recorded a consolidated profit for the six month period ending 31 December 2009 of USD$3.1m after crediting foreign exchange gains of USD$4.9m and profit on discontinued operations of USD$0.3m. In the corresponding period to 31 December 2008 the Group recorded a loss of USD$19.3m. Discontinued operations represents the Hunan Westralian Mining Company Ltd (HWM) and Westralian Resources Pty Ltd (WES) subsidiaries that were disposed of together with costs incurred post disposal that relate to the disposed mining activities, plus the impairments that were recognised in writing off capitalised mining expenditure. International Accounting Standards require the results of discontinued operations to be shown separately on the face of the consolidated statement of comprehensive income. Higher than expected operational expenses associated with office expenses and professional fees (USD$1.1m) include one non recurring fee directly relating to the disposal of the subsidiaries (USD$0.6m). The Cash position at 31 December 2009 was USD$21m with no long term debts or borrowings and the Group had net assets of USD$23m. At 28 February 2010 the cash position was USD$23m. The majority of cash balances are currently held in USD$.
Marinko Vidovich Chief Financial Officer
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Financial Results
| Consolidated Statement Of Comprehensive Income For The Half-Year Ended 31 December 2009 |
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| Note | Six Months Ended 31 December 2009 US$'000 Unaudited | Six Months Ended 31 December 2008 US$'000 Unaudited | Year Ended 30 June 2009 US$'000 Audited |
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CONTINUING OPERATIONS |
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| Salaries and employee benefits |
| (362) | (441) | (717) |
| Office expenses and professional fees |
| (1,162) | (561) | (868) |
| Consulting expenses |
| (293) | (405) | (716) |
| Travel and accommodation expenses |
| (160) | (149) | (215) |
| Other expenses |
| (213) | (153) | (543) |
| OPERATING LOSS |
| (2,190) | (1,709) | (3,059) |
| Foreign exchange gains/(losses) |
| 4,922 | (18,164) | (11,413) |
| Financial income |
| 4 | 330 | 349 |
| PROFIT/(LOSS) BEFORE TAX |
| 2,736 | (19,543) | (14,123) |
| Tax | 2 | - | - | - |
| PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS |
| 2,736 | (19,543) | (14,123) |
| DISCONTINUED OPERATION |
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| Profit/(loss) for the period from discontinued operation | 4 | 349 | 226 | (22,081) |
| PROFIT/(LOSS) FOR THE PERIOD |
| 3,085 | (19,317) | (36,204) |
| OTHER COMPREHENSIVE INCOME |
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| Exchange differences on translation of foreign operations |
| (3,611) | 10,548 | 5,682 |
| Exchange gain recognised on disposal of foreign operations |
| (4,935) | - | - |
| OTHER COMPREHENSIVE INCOME FOR THE PERIOD (NET OF TAX) |
| (8,546) | 10,548 | 5,682 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
| (5,461) | (8,769) | (30,522) |
| Profit/(loss) for the period attributable to: |
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| Equity holders of the parent |
| 3,085 | (19,309) | (36,204) |
| Non-controlling interest |
| - | (8) | - |
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| 3,085 | (19,317) | (36,204) |
| Total comprehensive income attributable to: |
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| Equity holders of the parent |
| (5,461) | (8,761) | (30,522) |
| Non-controlling interest |
| - | (8) | - |
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| (5,461) | (8,769) | (30,522) |
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| From continuing and discontinued operations |
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| Basic and diluted earnings/(loss) per share (cents) | 3 | 6.4 | (39.8) | (74.7) |
| From continuing operations |
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| Basic and diluted earnings/(loss) per share (cents) | 3 | 5.6 | (40.3) | (27.6) |
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated Statement Of Changes In Equity For The Half Year Ended 31 December 2009
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| Attributable to Members of China Goldmines |
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Share Capital USD$'000 | Share Premium Reserve USD$'000 | Foreign Exchange Reserve USD$'000 |
Other Reserves USD$'000 |
Retained Earnings USD$'000 |
Total USD$'000 | Non-controlling interest USD$'000 |
Total Equity USD$'000 | ||
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Balance at 1 July 2008 | 920 | 66,170 | (1,432) | 61 | (6,671) | 59,048 | (12) | 59,036 | ||
| Exchange differences on translation of foreign operation | - | - | 10,548 | - | - | 10,548 | - | 10,548 | ||
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Net income/(expense) recognised directly in equity | - | - | 10,548 | - | - | 10,548 | - | 10,548 | ||
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Loss for the half-year | - | - | - | - | (19,309) | (19,309) | (8) | (19,317) | ||
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Total comprehensive income for the period | - | - | 10,548 | - | (19,309) | (8,761) | (8) | (8,769) | ||
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Balance at 31 December 2008 Unaudited | 920 | 66,170 | 9,116 | 61 | (25,980) | 50,287 | (20) | 50,267 | ||
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Exchange differences on translation of foreign operation | - | - | (4,867) | - | - | (4,867) | - | (4,867) | ||
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Net income/(expense) recognised directly in equity | - | - | (4,867) | - | - | (4,867) | - | (4,867) | ||
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Loss for the half-year | - | - | - | - | (16,895) | (16,895) | 8 | (16,887) | ||
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Total comprehensive income for the period | - | - | (4,867) | - | (16,895) | (21,762) | 8 | (21,754) | ||
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Balance at 30 June 2009 Audited | 920 | 66,170 | 4,249 | 61 | (42,875) | 28,525 | (12) | 28,513 | ||
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Exchange differences on translation of foreign operation | - | - | (3,611) | - | - | (3,611) | - | (3,611) | ||
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Realisation of reserves on disposal of foreign operations | - | - | (4,935) | - | - | (4,935) | 12 | (4,923) | ||
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Net income/(expense) recognised directly in equity | - | - | (8,546) | - | - | (8,546) | 12 | (8,534) | ||
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Profit for the half-year | - | - | - | - | 3,085 | 3,085 | - | 3,085 | ||
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Total comprehensive income for the period | - | - | (8,546) | - | 3,085 | (5,461) | 12 | (5,449) | ||
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Balance at 31 December 2009 Unaudited | 920 | 66,170 | (4,297) | 61 | (39,790) | 23,064 | - | 23,064 | ||
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement of Financial Position As At 31 December 2009 |
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| 31 December 2009 US$'000 Unaudited | 31 December 2008 US$'000 Unaudited | 30 June 2009 US$'000 Audited |
| NON-CURRENT ASSETS |
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| Intangible assets | - | 613 | 6 |
| Mining properties | - | 36,231 | 21,385 |
| Property, plant and equipment | 47 | 3,569 | 2,351 |
| Trade and other receivables | - | 315 | 320 |
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| 47 | 40,728 | 24,062 |
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| CURRENT ASSETS |
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| Inventories | - | 1,215 | 1,247 |
| Trade and other receivables | 3,050 | 711 | 151 |
| Cash and cash equivalents | 21,032 | 10,316 | 6,192 |
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| 24,082 | 12,242 | 7,590 |
| TOTAL ASSETS | 24,129 | 52,970 | 31,652 |
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| CURRENT LIABILITIES |
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| Trade and other payables | (1,065) | (2,703) | (3,139) |
| TOTAL LIABILITIES | (1,065) | (2,703) | (3,139) |
| NET ASSETS | 23,064 | 50,267 | 28,513 |
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| EQUITY |
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| Share capital | 920 | 920 | 920 |
| Share premium account | 66,170 | 66,170 | 66,170 |
| Foreign exchange reserve | (4,297) | 9,116 | 4,249 |
| Other reserves | 61 | 61 | 61 |
| Retained earnings | (39,790) | (25,980) | (42,875) |
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY | 23,064 | 50,287 | 28,525 |
| Non-controlling interest | - | (20) | (12) |
| TOTAL EQUITY | 23,064 | 50,267 | 28,513 |
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
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Consolidated Statement Of Cashflows For The Half-Year Ended 31 December 2009
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| Six Months Ended 31 December 2009 US$'000 Unaudited | Six Months Ended 31 December 2008 US$'000 Unaudited | Year Ended 30 June 2009 US$'000 Audited |
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Operating loss from operations | (3,503) | (3,793) | (25,881) |
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| Adjustments for: |
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| Depreciation and impairment of property, plant and equipment | 230 | 231 | 803 |
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| Amortisation and impairment of intangibles | 7 | 7 | 19,081 |
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| Exploration and development expenditure | - | 1,352 | - |
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| Net exchange differences | (2,257) | 760 | (334) |
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| Operating cash flows before movements in working capital, net of effects from sale of subsidiaries | (5,523) | (1,443) | (6,331) |
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| (Increase)/decrease in receivables | (106) | (352) | 484 |
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| (Increase) in inventories | - | (854) | (742) |
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| (Decrease)/increase in trade and other payables | (151) | 1,262 | 1,423 |
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Net cash outflow from operating activities | (5,780) |
(1,387) | (5,166) |
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| INVESTING ACTIVITIES |
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| Proceeds on sale of subsidiaries, net of cash disposed | 21,103 | - | - |
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| Payments for environmental deposits | - | - | (15) |
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| Purchases of property, plant and equipment | (81) | (2,487) | (1,529) |
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| Payments for licences, exploration and development expenditure | (235) | (4,362) | (8,940) |
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| Interest received | 5 | 344 | 365 |
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| Net cash inflow/(outflow) from investing activities | 20,792 | (6,505) | (10,119) |
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| Net increase/(decrease) in cash and cash equivalents | 15,012 | (7,892) | (15,285) |
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| Cash and cash equivalents at the beginning of the period | 6,192 | 25,147 | 25,147 |
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| Movements in foreign exchange rate | (172) | (6,940) | (3,670) |
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| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 21,032 | 10,315 | 6,192 |
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The above consolidated statement of cashflows should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Information
NOTE 1(a): GENERAL INFORMATION
The financial information set out in this report does not constitute full accounts for the purposes of Section 434 of the Companies Act 2006. The interim accounts for the six months ended 31 December 2009 and 31 December 2008 are unaudited. The comparative figures for the financial year ended 30 June 2009 are not the Company's statutory accounts for the financial year but are abridged from those accounts which have been reported on by the Company's auditors, whose report on the consolidated financial statements prepared under International Financial Reporting Standards, was unqualified. The interim accounts have been prepared on the basis of the accounting policies set out in the annual financial statements of the Group for the year ended 30 June 2009, except for the impact of the adoption of the Standards and Interpretations described below.
IAS 1 (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009). The revised Standard has introduced a number of terminology changes (including revised titles for the interim financial results) and has resulted in a number of changes in presentation and disclosure. However, the revised Standard has had no impact on the reported results or financial position of the Group.
NOTE 1(b): REVENUE
Revenue for the period ended 31 December 2008 is stated before capitalisation of pre-production revenue. The balance as at 30 June 2009 represents all necessary adjustments to capitalise these amounts in accordance with International Accounting Standard 16.
NOTE 2: TAXATION
No liability to tax is expected to have arisen during this period.
NOTE 3: EARNINGS PER SHARE
The calculation of the earnings/(loss) per share is based on the following data:
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| Six Months Ended 31 December 2009 US$'000 Unaudited | Six Months Ended 31 December 2008 US$'000 Unaudited | Year Ended 30 June 2009 US$'000 Audited |
| Profit/(Loss) |
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| From continuing and discontinued operations |
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| Profit/(Loss) used in calculating basic and diluted loss per share for the period attributable to the equity holders of the parent | 3,085 | (19,309) | (25,881) |
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| From continuing operations |
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| Profit/(Loss) used in calculating basic and diluted loss per share for the period attributable to the equity holders of the parent | 2,736 | (19,543) | (14,123) |
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| Number of shares |
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| Weighted averge number of ordinary shares for the purpose of basic and diluted earnings/(loss) per share | 48,475 | 48,475 | 48,475 |
The above figures are not affected by any dilutive share options as no share options have been issued in the period.
NOTE 4: DISCONTINUED OPERATION
(a) Description
On 26 August 2009 the Company's 100% owned subsidiary, Global Resources Ventures Limited ("GRV"), signed a Share Purchase Agreement with Cosmos Castle Management Limited, a company incorporated in the British Virgin Islands, to sell all of the issued securities of Westralian Resources Pty Ltd ("Westralian"). Settlement of the sale occurred on 30 September 2009, from which date Westralian and its 80% owned subsidiary Hunan Westralian Mining Co. Ltd ceased to be consolidated into the Group.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below.
(b) Financial performance and cash flow information
The financial performance and cash flow information presented are for the three months ended 30 September 2009 and the half-year ended 31 December 2008.
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| Period Ended 30 September 2009 US$'000 Unaudited | Six Months Ended 31 December 2008 US$'000 Unaudited | Year Ended 30 June 2009 US$'000 Audited |
| Revenue | - | 235 | 397 |
| Expenses | (1,313) | (2,319) | (23,218) |
| Operating loss | (1,313) | (2,084) | (22,821) |
| Foreign exchange (losses)/gains | (1) | 2,295 | 724 |
| Financial income | - | 15 | 16 |
| Profit/(loss) before income tax | (1,314) | 226 | (22,081) |
| Income tax expense | - | - | - |
| Profit/(loss) after income tax expense of discontinued operation | (1,314) | 226 | (22,081) |
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| Gain on deconsolidation of subsidiaries before income tax | 1,663 | - | - |
| Income tax expense | - | - | - |
| Gain on deconsolidation of subsidiaries after income tax | 1,663 | - | - |
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| Profit/(loss) from discontinued operation | 349 | 226 | (16,841) |
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| Net cash outflow from ordinary activities | (1,314) | (4,881) | (5,096) |
| Net cash inflow/(outflow) from investing activities (2009 includes a net inflow of $21,102,728 from the sale of the subsidiaries) | 20,787 | (2,482) | (6,935) |
| Net cash inflow from financing activities | - | 3,927 | 8,381 |
| Net increase/(decrease) in cash generated by the discontinued operation | 19,473 | (3,436) | (3,650) |
(c) Details of the sale of subsidiaries
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| Period Ended 30 September 2009 US$'000 Unaudited | Six Months Ended 31 December 2008 US$'000 Unaudited | Year Ended 30 June 2009 US$'000 Audited |
| Consideration received or receivable: |
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| Net cash (after costs of disposal) | 21,589 | - | - |
| Amount held on trust until 31 December 2009 | 2,128 | - | - |
| Total disposal consideration | 23,717 | - | - |
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| Carrying amount of net assets sold | (23,751) | - | - |
| Impairment of intercompany loans on deconsolidation | (5,063) | - | - |
| Accumulated losses disposed on deconsolidation | 6,760 | - | - |
| Gain on sale and deconsolidation before income tax | 1,663 | - | - |
| Income tax expense | - | - | - |
| Gain on sale and deconsolidation after income tax | 1,663 | - | - |
In accordance with the terms of the sale agreement, $2.9 million was being held on trust for three months from the date of settlement which could be met against certain expenses of the business sold. Management estimated that expenses of $771,454 were satisfied by the amounts held on trust, resulting in the net funds being received during January 2010.
At 30 June 2009 the carrying value of mining properties and other consolidated assets were impaired to reflect the disposal of the subsidiaries. A total write-down of $18,388,341 was recognised against the mining properties of the disposed subsidiaries, with the amount reported below being net of this impairment.
The carrying amounts of assets and liabilities at the date of sale/deconsolidation (30 September 2009) were:
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| 30 September 2009 US$'000 Unaudited |
| Cash |
| 486 |
| Trade and other receivables |
| 442 |
| Plant and equipment |
| 2,130 |
| Mining properties |
| 22,728 |
| Total assets |
| 25,786 |
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| Trade and other payables |
| (2,035) |
| Total liabilities |
| (2,035) |
| Net assets |
| 23,751 |
NOTE 5: CONTINGENCIES
There has been no change in contingent liabilities or contingent assets since the last annual reporting date.
NOTE 6: SUBSEQUENT EVENTS
No matter or circumstance has arisen since 31 December 2009, which has significantly affected, or may significantly affect the operations of the group, the result of those operations, or the state of affairs of the group in subsequent financial years.