Frontier Mining Ltd Interim Results (2486P)

TIDMFML

RNS Number : 2486P

Frontier Mining Ltd

30 September 2013

FRONTIER MINING LTD

("Frontier" or "the Company")

Interims Results for the six months ended 30 June 2013

Frontier Mining (AIM:FML), the AIM listed exploration, development and production Company focused on Kazakhstan, is pleased to announce its Interim Results for the six months ended 30 June 2013.

Operational and Corporate Highlights

   --    Commenced operations in April following harsh winter 
   --    Sberbank increased debt facility by $17.9 million and extended the term until October 2018 
   --    Shipment of copper cathodes began on schedule in the first week of June 

o A total 390 tonnes of copper cathode were shipped during the first 6 months of 2013

o 466 tonnes of Copper produced in the period

-- Adam Moroney hired as an independent degree-qualified consultant with 20 years of SX/EW management and heap leach research experience

-- Optimization of performance of the existing equipment and work to find the optimal operational parameters taking place

-- Construction commenced on an additional four leach pads which will be bring the total number of leach pads to six

   --     Operational performance data: 

o Average sales price of US$7,081 per tonne

o Average cash cost of production, excluding General and Administrative, of US$3,625 per tonne

-- Copper cathode production from Benkala operations is expected to be in the range between 1,700 and 2,100 tones by the end of 2013

-- Contracts secured for sulphuric acid delivery at a discount of 75% to the pricing levels contracted in the previous 12 months

   --    Additional agglomerator purchased to increase ore throughput 

Post period end

-- After a series of tests and trials proposed by Adam Moroney, leach pad stacking height at pad 3 increased from 2.5 meters to 6 meters

   --     Further improvement of the optimum mix for robust agglomerate using different additives 

-- Independent Expert Report (Wardell Armstrong) estimates Baitemir-Beschoku Post Tax NPV of $52.7m taking a discount rate of 10%

-- Lenders to Frontier Mining continue to be supportive of the business, while longer term financial arrangements are secured

Yerlan Aliyev, Chairman and Chief Executive of the Company said:

"Since commencing production in 2013, both management and operational team is working hard and carrying out trials and tests to find the optimal working parameters at Benkala. We have an understanding that the resource size, type of ore, available utilities and infrastructure we put in place enable us to reach required levels of production.

"Baitemir continues to offer significant potential that allows the management to be confident about the future of the company. We were highly encouraged by the findings of an Independent Expert Report, which we commissioned during the first half and published results from in mid July.

"Like any production company going through a commissioning phase, we face challenges such as cash flow, often incredibly hostile environmental conditions, geographical remoteness and unproven equipment.

"The qualification of the team and support of our partners equip us well to meet these challenges, and drive this company towards becoming an established copper producer in the region, achieving long lasting profitability."

For further details please contact:

 
 Frontier Mining 
  Ltd                     Yerlan Minavar       [phone] 
 
 Libertas Capital         Sandy Jamieson 
  (NOMAD)                  Richard Morrison    [phone] 
 
 RFC Ambrian (Broker)     John Harrison        [phone] 
 Walbrook PR              Guy McDougall 
  (Media Enquiries)        Lianne Cawthorne    [phone] 
 Walbrook IR              Paul Cornelius 
  (Investor Enquiries) 
 

Chairman and Chief Executive's Statement

I am pleased to report the first half of 2013 delivered significant operational and corporate progress.

Following a harsh winter customary for the region, we were able to restart production in April and have been working hard on finding optimal parameters for stable operations at Benkala. The first shipments of copper began on schedule in the first week of June and by 30 June we had shipped 390 tonnes of copper cathode. Since commissioning in August of 2012, the Benkala SX-EW plant has produced more than 1,000 tonnes of LME Grade A copper-cathode and shipped and sold approximately 953 tonnes to date. During the period under review, we undertook a series of enhancement and expansion activities across Benkala, which included construction work on an additional four leach pads, which will bring the total number of leach pads up to six.

Similarly, post the period end in July, we announced the purchase of an additional agglomerator. This agglomerator will enable the Company to achieve higher quality agglomeration, while increasing throughput, by introducing an additional agglomeration step. At the same time, the expected assembly scheme will provide a reserve line for agglomerate production and will ensure stable operation of the crushing and agglomeration complex.

As stakeholders will have seen, we hired Adam Moroney, who is an independent degree-qualified consultant with 20 years of SX/EW management and heap leach research experience. He has reported his findings from Benkala this month and overseen the above mentioned enhancements at Benkala. As a result of cooperation of our operational team with Mr. Moroney, we were able to incrementally increase the current leach pad stacking height of 2.5 meters to 3.5 meters, and then on to 4.2 meters and 6 meters, which was recently completed. The full details of Mr Moroney's assessment, recently released to the market, can be found on the Company's website.

Further technological studies and exploration were undertaken at Baitemir across the latter half of the six months, incorporating drilling, trenching and geophysics, so that the Company could gain further understanding of the resource. Based on historical data provided by our geology team, Wardell Armstrong published non JORC compliant report of review and preliminary valuation of Baitemir. In their report, Wardell Armstrong also undertook an assessment of the Beschoku and Yubileiny deposits to further determine their potential as a satellite feeder for proposed facilities at Baitemir, the results of which were published post period end.

Wardell Armstrong, estimate Baitemir-Beschoku has a Post Tax NPV of $52.7m taking a discount rate of 10%

Corporate

In March, we announced we had increased our Sberbank debt facility by $17.9 million and extended the term until October 2018. Sberbank has provided Frontier with loan facilities since 2011. The additional loan brings the total amount of existing Sberbank facilities to US$52.9 million.

I would like to announce that in addition to our London quote, we intend to apply for the Company's shares to be listed on the Kazak Stock Exchange in order to satisfy the demands of the regulatory requirements in Kazakhstan.

Outlook

We have a large resource, low acid-consuming ore, readily-available and developed utilities and an actively competitive pool of raw materials suppliers.

In terms of Baitemir, the project offers significant potential, which allows us to look into future with confidence, and we will be updating the public with new information as our studies and exploration progress.

Like any production company going through a commissioning phase, we face challenges such as cash flow, at times incredibly hostile environmental conditions and unproven equipment.

Nevertheless, I remain confident the qualification of the team and support of our partners equip us well to meet these challenges, and drive this company towards becoming an established copper producer in the region, achieving long lasting profitability.

 
CONSOLIDATED BALANCE SHEET 
AS OF JUNE 30, 2013 (unaudited) 
US$'s 
 
                                        June 30,                June 30,                   2012 
ASSETS                                    2013                     2012 
--------------------------------  --------------------  -------------------------  -------------------- 
Non-current assets 
Exploration and evaluation 
 costs                                       9,658,223                  8,307,723             9,353,054 
Mine development assets                    188,517,027                188,618,203           187,669,319 
Property, plant and equipment               55,336,898                 49,479,033            55,318,433 
Intangible assets                               66,165                     77,614                76,280 
Advances for long-term 
 assets                                      1,445,228                  8,371,281             5,969,272 
Long-term value added tax 
 receivable                                  5,563,116                  3,754,173             5,488,048 
Restricted cash                                440,019                    369,927               389,593 
      Total Non-current assets             261,026,676                258,977,954           264,263,999 
--------------------------------  --------------------  -------------------------  -------------------- 
Current assets 
Inventory                                   10,314,831                  5,071,373             9,766,274 
Trade receivables                            1,047,650                    247,337               183,759 
Current portion of VAT 
 receivable                                  1,031,819                  1,951,585             1,000,218 
Prepaid expense                              1,187,221                          -             5,246,718 
Other receivables                            1,871,377                     96,259               277,842 
Cash and cash equivalents                    1,423,116                  2,552,123             2,184,083 
      Total Current assets                  16,876,014                  9,918,677            18,658,894 
--------------------------------  --------------------  -------------------------  -------------------- 
TOTAL ASSETS                               277,902,690                268,896,631           282,922,893 
================================  ====================  =========================  ==================== 
 
 
SHAREHOLDERS' EQUITY AND LIABILITIES 
Shareholders' equity 
Share capital                              18,609,140                 18,609,140           18,609,140 
Additional paid-in-capital                191,334,243                191,334,243          191,334,243 
Option premium on convertible 
 notes                                        120,993                          -              120,993 
Accumulated deficit                      (64,692,206)               (52,890,188)         (60,042,983) 
Total equity                              145,372,170                157,053,195          150,021,393 
--------------------------------  -------------------  -------------------------  ------------------- 
Non-current liabilities 
Borrowings                                 58,969,768                 47,567,788           47,581,084 
Site restoration provision                  2,639,841                  1,340,545            2,665,162 
Other financial liabilities                 4,345,182                  1,480,717            4,271,870 
Due to US Trade and Development 
 Agency                                       340,000                    340,000              340,000 
Deferred tax liability                     34,871,818                 34,923,866           34,871,818 
Total non-current liabilities             101,166,609                 85,652,916           89,729,934 
--------------------------------  -------------------  -------------------------  ------------------- 
Current liabilities 
Trade accounts payable                        737,573                 11,615,254           10,041,126 
Borrowings                                 24,277,787                 13,439,644           26,370,065 
Other financial liabilities                 2,993,612                     51,724            3,252,233 
Other current liabilities                   3,354,939                  1,083,898            3,508,142 
Total current liabilities                  31,363,911                 26,190,520           43,171,566 
--------------------------------  -------------------  -------------------------  ------------------- 
TOTAL SHAREHOLDERS' EQUITY 
 AND LIABILITIES                          277,902,690                268,896,631          282,922,893 
================================  ===================  =========================  =================== 
 
 
CONSOLIDATED STATEMENT OF INCOME 
For the six month period ended June 30, 2012 (unaudited) 
US$'s 
 
                                              June 30,                   June 30,                     2012 
                                                 2013                       2012 
------------------------------------  -------------------------  -------------------------  ------------------------- 
 
Revenue                                               2,761,662                          -                  5,372,018 
Cost of sales                                       (1,646,407)                          -                (5,208,375) 
Gross profit                                          1,115,255                          -                    163,643 
------------------------------------  -------------------------  -------------------------  ------------------------- 
 
Selling, general and administrative 
 expenses                                           (1,934,637)                (2,020,629)                (6,777,102) 
Operating profit/ (loss)                              (819,382)                (2,020,629)                (6,613,459) 
------------------------------------  -------------------------  -------------------------  ------------------------- 
 
Finance costs                                       (3,865,561)                (1,829,469)                (5,112,819) 
Gain from derivative financial 
 instrument                                                   -                          -                     37,595 
Foreign exchange loss, 
 net                                                  (356,379)                  (295,927)                   (37,313) 
Impairment loss                                         421,484                          -                    418,386 
Loss from sales of asset                            (1,588,003)                          -                          - 
Income from sales of asset                            1,569,300                          -                          - 
Other expenses, net                                    (10,681)                     21,572                   (45,452) 
Income from operations                              (4,649,222)                (4,124,453)               (11,353,062) 
------------------------------------  -------------------------  -------------------------  ------------------------- 
 
Taxation                                                      -                          -                     75,814 
 
Net income from continuing 
 operations                                         (4,649,222)                (4,124,453)               (11,277,248) 
====================================  =========================  =========================  ========================= 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS 
For the six month period ended June 30, 2012 
(unaudited) 
US$'s 
 
                                    June 30, 2013                 June 30, 2012                      2012 
OPERATING ACTIVITIES: 
Loss for the year                             (4,649,222)             (4,124,453)                 (11,353,062) 
Adjustments for non cash 
flow 
items: 
Income tax expense 
recognised 
in profit and loss                                      -                             -                              - 
Depreciation of property 
 and 
 equipment                               2,567,603                         778,169                    4,773,120 
Amortization of intangible 
 assets                                         4,728                                 -                    15,588 
Change in bad debt 
 provision                                              -                             -                  319,264 
Loss/ (gain) from disposal 
 of intangible assets                                   -                             -                              - 
Reverese of provision VAT 
 recoverable                                            -                             -                  (11,125) 
Impairment loss                                         -                             -                              - 
Revaluation gain, net                                   -                             -                              - 
Loss from sale of asset                       (1,588,003)                             -                (418,386) 
Loss from financial 
 liability 
 at fair value                                          -                             -                  (37,595) 
Finance costs                                           -               1,829,469                     5,112,819 
Foreign exchange loss                           (210,630)                             -               1,532,163 
Effect of financial 
instrument 
recognition at FV                                       -                             -                              - 
Operating cash flows before 
 movement in working 
 capital                                      (3,875,523)             (1,516,815)                        (67,214) 
                             ----------------------------  ----------------------------  ----------------------------- 
 
Increase in value added tax 
 receivable                                     (106,669)             (1,803,016)                   (2,574,399) 
Increase in inventory                           (548,557)             (4,837,230)                   (9,532,131) 
Decrease in trade accounts 
 receivable                                     (863,891)                (209,561)                     (145,983) 
Increase in advances and 
 prepaid 
 expenses                                4,059,497                                    -             (5,246,718) 
Increase in other 
 receivable                                   (1,593,536)                  (54,422)                    (236,005) 
Increase/(decrease) in 
 accounts 
 payable                                      (9,303,553)               1,855,139                        281,011 
Increase/(decrease) in 
 other 
 current liabilities                            (153,203)             (3,587,620)                     1,675,261 
Cash outflows from 
 operating 
 activities before tax and 
 interest 
 paid                                        (12,385,435)           (10,153,525)                  (15,846,177) 
                             ----------------------------  ----------------------------  ----------------------------- 
 
Payment of interest                           (2,533,023)               1,084,062                   (4,410,974) 
 
NET CASH USED FROM 
 OPERATING 
 ACTIVITIES                                  (14,918,459)             (9,069,463)                 (20,257,151) 
                             ----------------------------  ----------------------------  ----------------------------- 
 
INVESTING ACTIVITIES: 
Increase in exploration and 
 evaluation costs                               (305,169)                (634,838)                  (1,680,169) 
Increase in mine 
 development 
 costs                                          (847,708)             (1,986,109)                   (1,865,233) 
Purchase of property, plant 
 and equipment                                (2,988,849)           (12,440,094)                  (17,376,454) 
Purchase of intangible 
 assets                                         5,387                      (65,274)                      (79,528) 
Proceed from sale of 
 property, 
 plant and equipment                     1,990,784                                    -                  418,386 
Increase in advances for 
 long-term 
 assets                                  4,524,044                      1,449,372                     3,532,117 
Restricted cash deposit                          (50,426)                    (7,880)                     (27,546) 
NET CASH USED IN INVESTING 
 ACTIVITIES                              2,328,063                  (13,684,823)                  (17,078,427) 
                             ----------------------------  ----------------------------  ----------------------------- 
 
 
 
FINANCING ACTIVITIES: 
 
Receipt of loans from related 
 parties                                                     -             24,706,695                      8,945,384 
Receipt of loans from financial 
 instirutions (Sberbank)                    11,388,684                       1,600,000                   25,043,954 
Receipt from notes and other 
 loans                                           440,745                                   -               6,600,000 
Repayment of loans to related 
 parties                                                     -             (2,501,037)                   (2,570,427) 
NET CASH FLOWS FROM FINANCING 
 ACTIVITIES                                 11,829,429                     23,805,658                    38,018,911 
                                  ----------------------------  ----------------------------  ----------------------- 
 
Net increase/(decrease) in 
 cash and cash equivalents                      (760,967)                    1,051,373                        683,333 
Cash and cash equivalents at 
 the beginning of year                        2,184,083                      1,500,750                     1,500,750 
 
Cash and cash equivalents at 
 the end of year                              1,423,116                      2,552,123                     2,184,083 
                                  ============================  ============================  ======================= 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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