China Nonferrous Gold Interim Results

 
TIDMCNG 
 
 

30 September 2016

China Nonferrous Gold Limited ??????????

('CNG' or the 'Company')

Interim Results for the Six-Month Period Ended 30 June 2016

China Nonferrous Gold Limited (AIM:CNG), the mineral exploration and development company currently developing the Pakrut Gold Project ('the Pakrut Project') in the Republic of Tajikistan, today announces its interim results for the six-month period ended 30 June 2016.

The results below are available on the Company's website at www.cnfgold.com.

Highlights

 
 
    -- 2,183 metres of tunneling and cuttings at various levels completed by 

the end of August;

 
    -- 11,500 metre of drilling as part of face preparation and 4,497 metres 

of in-fill drilling completed;

 
    -- More than 122,000 tonnes of ore has been extracted during the first 

half of 2016 from above levels and has been stockpiled;

 
    -- Technical enhancements to the plant completed following trial 

production;

 
 
    -- Processing capacity currently at 1700 tonnes per day; 
 
 
    -- 1,777 tonnes of gold concentrate produced and 150,000 tonnes of ore 

stockpiled by the end of August

 
    -- Pakrut operating board strengthened 
 
    -- Debt re-financing of US$120 million with CNMC International Capitals 

Company Limited and post period end up to US$100 million with China

Construction Bank Corporation Macau Branch, both at lower cost

For further information please visit the Company's website (www.cnfgold.com) or contact:

China Nonferrous Gold Limited

David Tang, Managing Director

Tel: [phone]

Investec Bank Plc Jeremy Ellis,

George Price

Tel: [phone]

Blytheweigh

Tim Blythe, Camilla Horsfall

Tel: [phone]

Project Summary

The Pakrut gold project, of which CNG has 100 per cent ownership, is situated in Tajikistan approximately 120km northeast of the capital city Dushanbe. Pakrut is located within the Tien Shan gold belt, which

extends from Uzbekistan into Tajikistan, Kyrgyzstan and Western China, and which hosts a number of multi-million ounce gold deposits.

CNG is transitioning from construction with mining contractors on site developing the underground mine and surface infrastructure to production phase.

About Tajikistan

Tajikistan is a secular republic located in Central Asia. The country is a member of the Commonwealth of Independent States and the Shanghai Cooperation Organisation. Tajikistan hosts numerous operating precious metal mines as well as the largest aluminium smelter in Central Asia. CNG's management team has extensive experience in the mining industry in Tajikistan.

CHINA NONFERROUS GOLD LIMITED Chairman's Statement

Construction and Production

During the first half year of 2016, the Company has made considerable progress on reaching the designed capacity of Pakrut Gold Project.

The tunneling and cuttings at 2110, 2170, 2230 and 2292 levels have reached 2,183 metres by the end of August. 11,500 metres of drilling for face preparation and 4,497 metres of in-fill drilling has been completed across the sub-levels. More than 122,000 tonnes of ore has also been extracted from above levels since the start of 2016.

Throughout the winter after trial production late last year, the Company continued to make effective and successful progress on equipment maintenance and technical modification work for the processing plant and smelting plant in order to complete commissioning work during trial production and reach the design capacity of 2,000 tonnes per day. The processing plant has been continuously running and is currently processing 1,700 tonnes of ore per day. Meanwhile the smelting plant has satisfied the conditions for continuous operation after equipment maintenance and technical modification. By the end of August 2016, the Company had produced 2,175tonnes of concentrate. The smelting of the gold from the concentrate is expected to start in October 2016.

On June 4th, the President of Republic of Tajikistan visited the smelting and processing plant and attended the opening ceremony of the processing plant.

In order to manage the production in a more efficient way, senior operational engineers have been recruited to assist in the transformation of Pakrut from the construction stage to production.

Financial Results

The amount incurred by the Company on development and construction work during the first six months of 2016 was US$39,587,000 (30 June 2015: US$29,673,000). Administration expenditure was US$2,820,560 (30 June 2015: US$1,277,000). The overall loss incurred by the Company was US$3,400,000(30 June 2015: US$1,203,000). Total cash equivalents at the end of the period amounted to US$109,020,000 (30 June 2015: US$13,218,000).

In the first half of 2016, new debt financing totaling US$220 million was secured from the China Nonferrous Mining Group and the Construction Bank of China. The new loans were used settle the ICBC loan balance and part of the previous shareholder loan balance in order to maximise the Company's cash position and reduce financing costs. As at 30 June 2016 the Company's outstanding debt balance consisted of US$311 million with $211 million owed to China Nonferrous Metals Int'l Mining Co., Ltd("CNMIM") and CNMC International Capitals Company Limited. Post period end the Company paid down $55 million of the CNMIM loan.

Outlook

The Company remains focused on the transformation of the Pakrut Gold Project from construction to production and is on course to reach design capacity of 2,000 tonnes per day for processing within the second half of 2016. The recruitment of more senior operational engineers will be conducted in due course while Pakrut is transforming from construction stage to operation.

The permanent camp at site is expected to be completed before winter and construction of the new tailings dam is expected to begin shortly.

I would like to take this opportunity to thank all of our employees, management and advisors for their continued effort in 2016 and thank our shareholders for their continued support. I very much look forward to updating our shareholders on the mine production and gold pour.

Wu Xiang

Non-Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIXMONTHSED 30 JUNE 2016

CHINA NONFERROUS GOLD LIMITED

 
                   Unaudited         Unaudited         Audited 
                   Six months ended  Six months ended  Year ended 31 
                   30 June 2016      30 June 2015      December 
                                                       2015 
                   US$'000           US$'000           US$'000 
Revenue 
Interest income    3                 1                 4 
Administrative     (2,821)           (1,277)           (3,166) 
and 
other expenses 
Foreign exchange   (550)             80                (2,988) 
(losses)/ gains 
Finance costs      (32)              (7) 
Loss before Tax    (3,400)           (1,203)           (6,150) 
Income tax         -                 -                 - 
Loss after Tax     (3,400)           (1,203)           (6,150) 
Total              -                 -                 - 
comprehensive 
income 
-Total             (3,400)           (1,203)           (6,150) 
comprehensive 
income 
for the period 
attributable 
to owners 
of the Company 
Earnings per 
Share 
-Basic and         (0.89)            (0.31)            (0.0161) 
diluted 
(US cents) 
 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

CHINA NONFERROUS GOLD LIMITED

 
                      Unaudited     Unaudited             Audited 
                      30 June 2016  30 June 2015 US$'000  31 December 2015 
                      US$'000                             US$'000 
Non-current 
Assets 
Intangible assets                   -                     - 
Mine                  284,077       157,005               244,529 
under 
construction 
Prepayments for       565           2,689                 - 
property, 
plant 
and equipment 
Property, plant       10,573        11,340                11,624 
and equipment 
Total Non-Current     295,215       171,034               256,153 
Assets 
Current Assets 
Inventories           40,164        34,776                39,390 
Trade and other       2,571         173                   1,010 
receivables 
Cash and cash         109,020       13,218                2,213 
equivalents 
Total Current         151,755       48,167                42,613 
Assets 
Non-Current 
Liabilities 
Payables for          (73,534)      -                     - 
property, 
plant 
and equipment 
Provision for         -             (593)                 (646) 
other 
liabilities 
and charges 
Trade and other       -             -                     - 
payables 
Borrowings            (275,000)     (134,877)             (56,437) 
Total Non-Current     (348,534)     (135,470)             (57,083) 
Liabilities 
Current 
Liabilities 
Trade and Other       (46,940)      (5,628)               (74,204) 
payables 
Borrowings            (20,000)      (20,687)              (132,583) 
Total Current         (66,940)      (26,315)              (206,787) 
Liabilities 
Net                   84,815        21,852                (164,174) 
Current 
Assets(Liabilities) 
Net Assets            31,496        57,416                34,896 
Total Assets          380,030       192,886               91,979 
Less Current 
Liabilities 
Capital And 
Reserves 
Capital               38            38                    38 
Share premium         65,901        65,901                65,901 
Other reserves        10,175        10,175                10,175 
Retained earnings     (44,618)      (18,698)              (41,218) 
Total Equity          31,496        57,416                34,896 
Total Equity and      446,970       219,201               298,766 
Liabilities 
 
 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHSED 30 JUNE 2016

CHINA NONFERROUS GOLD LIMITED

 
                     Unaudited                      Unaudited                      Audited 
                     Six months ended 30 June 2015  Six months ended 30 June 2014  Year ended 31 December 2015 
                     US$'000                        US$'000                        US$'000 
Cash Flows 
from 
Operating 
Activities 
Loss before          (3,400)                        (1,203)                        (6,150) 
tax 
Adjustments 
for: 
Interest             -                              -                              (4) 
income 
Depreciation         908                            5                              542 
Share based 
payments 
Finance costs        -                              7                              - 
Operating            (2,492)                        (1,191)                        (5,612) 
cash 
flows 
before 
movements 
in working 
capital 
Advance to           243                            (1,973)                        - 
suppliers 
Trade and            (46)                           160                            39 
other 
receivables 
(increase) 
/ decrease 
Other                43,688                         (8,574)                        49,615 
payables 
(decrease) 
/ increase 
Decrease(increase) 
in Inventory 
Cash used in         41,393                         (11,577)                       49,615 
operations 
Income tax           -                              - 
paid 
Net Cash used        41,393                         (11,577)                       44,042 
in Operating 
Activities 
Cash flows 
from 
Investing 
Activities 
Payments for         - 
intangible 
assets 
Payments for         (61)                           (2,153)                        (2,282) 
property, 
plant 
and equipment 
Payments for         (38,752)                       (17,476)                       (111,999) 
construction 
in 
progress and 
mining 
rights 
Increase             (774)                          (10,044)                       (14,658) 
in 
Inventories 
Interest             -                              -                              4 
received 
Net cash used        (39,587)                       (29,673)                       (128,935) 
in Investing 
Activities 
Cash flows 
from 
Financing 
Activities 
Proceeds from        -                              190                            190 
issue 
of shares 
Proceeds from        240,000                        46,235                         110,909 
borrowings 
Repayment of         (135,000)                      (10,229)                       (31,375) 
borrowings 
Interest paid                                                                      (10,890) 
Net                  105,000                        36,196                         68,834 
Cash 
from/(used 
in) 
Financing 
Activities 
Net Decrease         106,806                        (5,054)                        (16,059) 
in Cash 
and 
Cash 
Equivalents 
Cash and cash        2,213                          18,272                         18,272 
equivalents 
at 
beginning of 
the period 
Cash and cash        109,019                        13,218                         2,213 
equivalents 
at end of the 
period 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 JUNE 2016

CHINA NONFERROUS GOLD LIMITED

 
                          Share    Share    Other    Retained  Total 
                          capital  premium  reserve  earnings  equity 
                          US$'000  US$'000  US$'000  US$'000   US$'000 
Balance at 1              38       65,711   10,175   (17,495)  58,429 
January 2015 
Loss and total            -        -        -        (1,203)   -1,203 
comprehensive 
income for the period 
Issue of shares           -        190      -        -         190 
in respect of 
exercise of share 
options 
Balance at 30 June 2015   38       65,901   10,175   (18,698)  57,416 
Balance at 1              38       65,901   10,175   (41,218)  34,896 
January 2016 
Loss and total            -        -        -        (3,400)   -3,400 
comprehensive 
incomefor the period 
Loss and total 
comprehensive 
incomefor the period 
Balance at 30 June 2015   38       65,901   10,175   (44,618)  31,496 
 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHSED 30 JUNE 2016

1. Accounting Policies

These unaudited condensed interim financial statements were approved for issue by the China Nonferrous Gold Limited Board of Directors on 28 September 2016.

These condensed interim financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS). The financial information has been prepared under the historical cost convention.

These condensed interim financial statements do not constitute statutory accounts.

As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these condensed interim financial statements.

The Group has applied consistent accounting policies in preparing the condensed interim financial statements for the six months ended 30 June 2016 and the comparative information for the six months ended 30 June 2015 and the financial statements for the year ended 31 December 2015 and the financial statements for the year ended 31 December 2015.

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2015 Annual Report and Financial Statements, a copy of which is available on the Group's website: www.cnfgold.com.

Critical accounting estimates and judgements

The preparation of consolidated interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in the Group's 2015 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed during the interim period.

The functional currency of the Group is US dollars and accordingly the amounts in the interim results are denominated in that currency.

Basis of Consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and all Group undertakings. These are adjusted, where appropriate, to conform to Group accounting policies. Subsidiaries are all entities over which the Group has control which is where the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All significant intercompany transactions and balances between group undertakings are eliminated on consolidation.

Subsidiaries are consolidated from the date on which control is transferred to the Group, and continue to be consolidated until the date when such control ceases.

Mines under construction

Expenditure is transferred from "Exploration and evaluation" assets to mining rights within "Mines under construction" once the work completed to date supports the future development of the property and such development receives the requisite approvals. All subsequent expenditure on technically and commercially feasible sites is capitalised within mining rights.

All expenditure on the construction, installation or completion of infrastructure facilities is capitalised as construction in progress within "Mines under construction". Once production starts, all assets included in "Mines under construction" will be transferred into "Property, Plant and Equipment" or "Producing mines". It is at this point that depreciation / amortization commences over its useful economic life.

Mines under construction are stated at cost. The initial cost comprises transferred exploration and evaluation assets, construction costs, infrastructure facilities, any costs directly attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation, and, for qualifying assets, borrowing costs. Costs are capitalized and categorized between mining rights and construction in progress respectively according to whether they are intangible or tangible in nature.

Property, plant and equipment

Property, plant and equipment (other than construction in progress) is stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation of property, plant and equipment (other than construction in progress) is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives using the following rates per annum:

Plant and machinery - 20%, Motor vehicles - 20%, Office furniture and equipment - 20%.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for a prospective basis.

Impairment losses on tangible and intangible assets

Exploration and evaluation assets and mines under construction are assessed for impairment annually or where there is an indication that an asset or cash generating unit ("CGU") may be impaired. If an indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's or CGU's recoverable amount. The recoverable amount is the higher of an asset's or CGU's fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset/CGU is considered impaired and is written down to its recoverable amount. The Group bases its impairment calculation on detailed budgets and forecasts based on the life-of-mine plans.

The assessment is carried out by allocating exploration and evaluation and mines under construction assets to CGUs which are based on specific projects and geographical areas. Where exploration for and evaluation of mineral resources in CGUs does not lead to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities at the unit, the associated expenditure will be written off to profit or loss. Exploration and evaluation assets are impaired when the Group's right to explore in an area has expired.

2. Earnings per Share

Basic earnings per share are based on the weighted average number of ordinary shares issued during the half year of 2016: 382,392,292 (2015: 381,407,570). There is no difference between basic and diluted earnings per share as the Company is loss making.

3. Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in Annual report for the year ended 31 December 2015 which can be found on the Company's website. The accounting policies include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposure to liquidity risk. During the period the following refinancing steps have been undertaken by the Company:

On 6th May 2016 the Group obtained a loan with CNMC International Capitals Company Limited ("CNMC"), an associate of CNMIM of US$120 million ("CNMC Loan"). This loan has been used to refinance the loan facility with ICBC. The CNMC Loan is repayable on 31 December 2018 and includes an annual fixed interest rate of 4% on the amount drawn down, payable in arrears. On 27th June 2016 the Group drew down a further loan of US$19,114,809 from CNMIM for working capital purposes.

On 1st July the Group announced an agreement with the China Construction Bank Corporation Macau Branch for a loan facility of up to USD$ 100 million ("CCBC loan"). This loan has been used to refinance the Company's 2012 loan with CNMIM and also for working capital purposes. The CCBC loan is for a maximum of 5 years and is repayable 60 months from the date of first drawdown. The annual interest rate is 2.1% plus 3 month LIBOR.

As at the date of approval of these interim statements, and based upon the budgeted levels of expenditure, the refinancing undertaken, Board approved cash flow forecasts and expected production dates, the Directors are satisfied that the Group has sufficient cash and loan facilities to finance the Group's operating expenses and any further development and construction of the Pakrut Gold Project that is required.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence and thus they continue to adopt the going concern basis of accounting in preparing the interim results.

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September 30, 2016 02:00 ET (06:00 GMT)