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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Nikanor | LSE:NKR | London | Ordinary Share | GB00B182MG48 | ORD USD3.58829097070927 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 410.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:7133D
Nikanor Plc
12 September 2007
12 September 2007
RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007
Nikanor PLC (LSE: NKR), the AIM listed copper and cobalt mining company with
world class assets based in the Democratic Republic of Congo ("DRC"), is pleased
to announce its results for the six months ended 30 June 2007.
Highlights
- Independent report confirms project timetable and $1.8 billion revised cost
- Successful #400 million (approx. $800 million) cash placing increases
total equity raised to $1.2 billion; balance of funding to be raised
through debt finance
- Glencore introduced as strategic investor; legally binding heads of terms
for offtake agreement covering 100% of output
- $1.0 billion cash on balance sheet at end June 2007
- Good project progress - $620 million capex spend authorised, key long-lead
items ordered
- Ramp up of mining at Tilwezembe and concentrate production from Kolwezi
concentrator
- Concentrate sales volumes and inventories affected by bagging capacity,
logistical constraints and a lengthy supply pipeline
Commenting on the results, Executive Chairman Jonathan Leslie said:
"Since the end of December we have achieved a number of crucial milestones, the
most significant of which was securing the equity funding necessary to complete
the KOV project. Our new shareholders include Glencore with whom we have
entered into legally binding heads of terms for offtake arrangements covering
100% of our output. Major orders for long lead items including the mine fleet
have been placed and the transformation of the site is underway. Output from
the Kolwezi Concentrator has improved and we are making progress in accelerating
the supply and despatch of concentrates. In short, we have increased the pace
of development across the Group to meet our target of ramping up production
through 2010."
For further information, please contact:
Nikanor PLC +44 (0)20 7529 5800
Jonathan Leslie, Executive Chairman
Peter Sydney-Smith, Finance Director
Richard Boorman, Head of Investor Relations
Citigate Dewe Rogerson +44 (0)20 7638 9571
Kate Delahunty
George Cazenove
JPMorgan Cazenove +44 (0)20 7588 2828
Joe Seifert
Notes to Editors
Nikanor is a mining group which owns assets in the heart of the African
copperbelt in the Democratic Republic of Congo. The group's key mine is KOV,
containing one of the world's largest high quality copper and cobalt ore bodies.
Nikanor is rehabilitating this proven and well documented brownfield site and
building a major state of the art refining plant to produce 250,000 tonnes per
year of LME A-grade copper cathode and 27,500 tonnes per year of cobalt
products.
Nikanor was admitted to the London Stock Exchange (AIM) on 17 July 2006.
Statement of Results For the Six Months Ended 30 June 2007
The period since the beginning of January has been very eventful, culminating in
the successful $800 million equity placement on 1 June. This placement
completed the Group's equity financing requirement and allowed orders to be
placed for significant long lead items in sufficient time for the project
timeline to be maintained.
Two other significant steps during the period were the independent verification
of revised project costs and the proposed schedule, and the negotiation of an
offtake agreement with Glencore covering 100% of the Group's output.
With respect to our current operations which involve mining at Tilwezembe and
processing at the Kolwezi Concentrator, ore mined and concentrate output
increased. Valuable experience is being gained, particularly with respect to
dealing with local conditions and shipping concentrate across multiple borders
through to the port in South Africa. Insufficient bagging capacity, logistical
constraints, and a lengthy pipeline for concentrate sales were the main reasons
for low sales volumes in the period. We continue to target a major improvement
in concentrate production by year-end and steps have been taken to improve
bagging capacity and reduce logistical bottlenecks.
Funding
At the end of May 2007 the Group announced that it had received a revised direct
capital cost estimate for the project of $1.6 billion in nominal terms including
expected escalation. This represented an increase of approximately $300 million
on the estimate made at the time of the Company's IPO in July 2006. A further
$200 million will be needed for working capital including costs such as
pre-stripping, first fill costs and capitalised overheads. The revised total
project cost of $1.8 billion was reviewed by SRK Consulting and found to be
realistic (see press release dated 25 May 2007). Due to this cost increase, the
Group also announced that it would need to raise additional equity funding.
On 1 June 2007, the Company issued 66.7 million new shares at a price of #6.00
per share (total shares in issue is now 206.55 million). The net proceeds of
this placement were $777 million. 50 million of the new shares were issued to
the diversified natural resources company Glencore, 50% of which were bought on
behalf of Ruwenzori Limited ("Ruwenzori"), a special purpose vehicle managed by
RP Capital. Approximately 4.8 million shares were issued to certain of
Nikanor's founding shareholders, and approximately 11.9 million shares were
issued to other participating institutions. The overall free float fell
slightly from 28% prior to the placement to 25% after.
In conjunction with this placement, the Company and Glencore agreed legally
binding heads of terms for offtake arrangements covering 100% of the Group's
production.
At 30 June 2007, the Group had $1.04 billion in cash or cash equivalents which
should give sufficient liquidity to take the project forward and provide funding
to the end of 2008. It is planned to raise the balance of funding through bank
and agency debt supported by export credit guarantees and political risk
insurance. The Group is in the process of mandating lead banks to support the
fund raising to permit first draw down by the end of 2008.
KOV Project Progress
The KOV Project is composed of two main elements: the rehabilitation of the
flooded KOV mine, one of the world's largest high quality copper and cobalt
mines, and the construction of a state of the art SX-EW refinery.
First cathode production is scheduled to commence in just over two years' time
(end 2009) and output is expected to approach design capacity by the end of
2010. As part of the independent project cost review undertaken by SRK
Consulting in May 2007, the project schedule was also reviewed and these targets
were affirmed.
Progress on the project has continued in line with the timetable, with the
recent equity issue completed in time to allow the placement of orders with
delivery times that support the project schedule. In total, $850 million of
capex has either been approved or is under negotiation and the Board has already
approved $620 million of this. Details of orders for major long-lead items are
as follows:
* Mills - order placed with Polysius Krupp in July for one 6.1 meter
ball mill and one 8.5 meter SAG mill. Delivery is expected in Q2 2009.
* Electro-winning equipment - order placed with Xstrata in August for
cathodes, automatic cranes, and automatic stripping machines. Delivery
is planned to commence in Q2 2009.
* Mine fleet - $130 million order placed in July with Bartrac for
primary mining equipment and support vehicles manufactured by Caterpillar
and O&K. In total, 53 machines have been ordered. Some support
equipment will be delivered in early 2008 and the first haul trucks and
shovels will be delivered in mid-2008.
* Piling and civils - Letter of award given to China Zhongji Development
Engineering.
* Thickeners - order placed with Delkor in July for the manufacture,
supply and erection of the high lift Thickeners for the process plant.
Delivery is scheduled to commence in Q1 2009.
In addition to these long lead items, a $30 million contract was signed in
February with MCK for the earthworks for the new refinery. This work is ongoing
with the emphasis to prepare the areas for access by the piling and civil
contractor.
The implementation of the three-part dewatering plan continues, with several
piezometer boreholes for monitoring subsurface water conditions and the
refurbishment of four existing boreholes completed. Agitation and slurry pumps
which will be used to remove both water and silt from the pit have been
manufactured and are in transit to the site. The majority of the 17 kilometres
of pipes needed for dewatering are also now on site. The process of assembling
these components will begin in the fourth quarter of this year. Work on four
decantation dams and the silt dam are well-underway. The rigs needed to drill
28 large diameter boreholes are in the DRC and in transit to the site.
The geotechnical drilling at KOV has been completed and a detailed life of mine
plan is being produced. Major pre-stripping activity is scheduled to start in
early 2009.
Infrastructure
Good progress has been made in a number of areas of infrastructure development:
* Electricity supply - as per the MOU signed with SNEL (the Congolese
power utility) in late 2006, the refurbishment of Unit 3 at the Nzilo
hydroelectric power station has been completed and units at Nseke and
Mwadingusha are due to be completed in the first half of 2008. In total, this
will provide more than half of the project's power requirement. A review of
projected power consumption has also been carried out, resulting in a reduced
capacity requirement of 180 MW. Revised negotiations with SNEL for the supply
of the remainder of the power requirement are underway.
* Transport - the Gecamines barge that crosses the Lualaba River has
been refurbished and now makes possible the transport of equipment too large and
heavy to cross the existing bridge.
* Power reticulation - the KOV substation with a 32 MVA transformer was
re-energised in April, and power was restored to the Luilu town by
interconnecting 2 mini substations.
* Accommodation - the first units to house construction employees have
been delivered to site. New management housing is now approaching completion
and the water and sewage treatment plants have been delivered to the site. In
the interim, 23 houses in Kolwezi have been refurbished and are occupied by the
site staff.
* Telecoms / IT - two high masts for VSAT communications have been
erected which now directly link the DCP office in Kolwezi and the Kolwezi
concentrator into Nikanor's international network.
Operations Review - KTK (Kananga, Tilwezembe and Kolwezi concentrator)
The revised management structure put in place earlier this year has resulted in
improved mining performance and rising output from the Kolwezi Concentrator.
Mining activity has been focused at Tilwezembe, with 434,000 tonnes of ore mined
in the six months to June. Ore stockpiles are being built ahead of the upcoming
rainy season.
No mining activity is currently taking place at Kananga following the decision
in March to temporarily cease activity. 114,000 tonnes of ore were mined to the
end of March. Mine costs of $3.4 million have been taken directly to cost of
sales following the suspension of mining.
Concentrate production has risen from approximately 1,000 tonnes in January to
over 4,000 tonnes in June. Total concentrate production YTD June is 18,200
tonnes at an average grade of 12% copper and 6% cobalt. Production volumes have
recently been constrained by mechanical failures, however, the startup of a
refurbished flotation line and additional milling unit later in the year should
allow us to reach our target of doubling monthly concentrate production by the
end of the year.
Concentrate sales were constrained to 4,800 tonnes in the six months to June due
primarily to insufficient bagging capacity and logistical constraints, which are
being addressed. Concentrate stock levels therefore increased from 4,700 tonnes
in December 2006 to 18,100 tonnes at the end of June 2007.
The average realised price of concentrate sold in the six months to June at
$1,444 per tonne (net of freight and handling costs) was depressed by poor
initial grade quality. Grade quality has improved and net realisation on
current sales is approximately $2,000 per tonne. At these prices the
concentrate stock held has a net realisable value in excess of $36 million at
current prices.
Exploration Drilling
From the inception of the exploration drilling programme, 150 diamond drillholes
covering approximately 23,000 metres have been completed at the Kananga and
Tilwezembe mines.
The results from Tilwezembe have been encouraging, and since April, resource
drilling and mining activity has been focused on this site.
Snowden Mining Industry Consultants (Snowden) recently completed the first phase
of Mineral Resource evaluation for the Tilwezembe mine in accordance with the
SAMREC (2000) code. Tilwezembe now has an Inferred Mineral Resource of 13.1
million tonnes at a grade of 1.59% total copper and 0.65% total cobalt. This
represents an increase of 6.6 million tonnes compared to the previous indicated
resource evaluation of 6 million tonnes.
The deposit remains sub-vertical with increasing copper grades and decreasing
cobalt grades at depth, where the mineralisation indicates increasing amounts of
sulphides. This current evaluation is derived from 48 drill holes spaced on a
50x50 metre grid. A further 33 drill holes, which indicate strong
mineralisation await assay and will be included along with subsequent drilling
in the next Mineral Resource update. This suggests further significant upside
potential. Drilling is continuing.
While the main focus of exploration has been at Tilwezembe, some drilling
continued at Kananga. Exploration to the east has shown disappointing results
with intersects for copper being below an economic mining cut-off.
Consequently, exploration has focused on the western end of Kananga, of which
part of the deposit has been mined out by Gecamines and latterly by DCP. Based
on the current drilling campaign, Snowden estimate that the remaining Inferred
Mineral Resource is 4 million tonnes at 1.44% copper and 0.74% cobalt.
Additional drill holes have been completed but await assay due to our focus on
Tilwezembe. These results, which show good mineralization, will be included in
the next Mineral Resource update.
Results and Commitments
This is the first set of interim accounts since the IPO in July 2006.
Information for the six months to July 2007 is therefore presented for the first
time. Accounting policies for all periods presented are consistent with those
adopted for the year ended 2006 and expected for 2007.
The Group held cash investments of $1.042 billion at 30 June 2007, an increase
of $692 million since the start of the year. Cash investments were all held in
a combination of AAA rated money market funds in accordance with Group treasury
guidelines. The key movements in cash since 1 January 2007 were as follows:
* Receipt in June of net equity proceeds of $777 million
* KTK operations with a net cash outflow of $39 million, increasing the
total investment since September 2006 of re-opening the mine and concentrator to
over $50 million. The outflow consisted of an operating loss of $12 million,
working capital of $24 million, (which includes concentrate and inventory build
up of $14m) and capital expenditure of $3 million.
* Investment in the KOV project of $50 million, including capitalised
overheads of $11 million and working capital of $10 million. Total invested
since the IPO is $75 million.
The Group incurred a loss in the 6 months of $7.6 million compared to a loss of
$13 million in the first six months following listing.
$m
Revenue 9.8
DRC costs (21.7)
Corporate costs (6.6)
Share based payment charge (1.7)
Total costs (30.0)
Operating loss (20.2)
Net Finance income 12.6
Loss attributable to equity holders (7.6)
The operating loss of $20.2 million was due to sales of only $9.8 million from
KTK compared to DRC costs of $21.7 million. DRC overheads in respect of the KOV
Project are capitalised to fixed assets. Exploratory drilling costs at
Tilwezembe of $1.5 million have also been capitalised to fixed assets.
Exploratory drilling costs at Kananga of $1.6 million have been taken directly
to other operating expenses due to the decision taken earlier in the year to
cease mining activity.
Corporate costs including a share based payment charge totalled $8.3 million.
Net finance income, mostly interest income, totalled $12.6 million.
In the 6 month period there was a $13.7 million increase in the value of
concentrate and ore pile stocks. They are stated at cost. Mining costs of $3.4
million at Kananga have been taken directly to cost of sales and not included in
inventory also due to the cessation of mining activity earlier this year. The
respective values of concentrate and ore piles on balance sheet are $8 million
and $8.5 million.
Net assets at 30 June 2007 rose to $1.166 billion, due principally to the
increased level of cash investments. Fixed assets more than doubled to $88
million consisting of KOV and KTK capital spending, capitalised overheads and
the creation of a $1.5 million asset in relation to the environmental provision
set up under IAS37. Inventory increased by $17 million to $21.5 million, mostly
the result of ore and concentrate buildup. Trade and other receivables rose
$23.5 million to $33.9 million due mostly to higher levels of pre-payments in
support of DRC purchase agreements.
DRC Government
Towards the end of March 2007, the DRC Ministry of Mines announced that it had
suspended all negotiations relating to new mining agreements and would set up a
commission to review all existing agreements. The review process, which focuses
on the legality of each agreement and the verification of developments at each
site, was originally expected to last until mid-July. Recent statements suggest
that the review process may be extended to December 2007. We have responded to
information requests from the commission and have hosted a visit to our
operations and community projects.
Personnel
At the end of July DCP had approximately 1,400 employees, the majority of whom
were former Gecamines workers. The Group's focus has shifted from hiring to
education and training programmes in order that the transition from project to
production in late 2009 is as smooth as possible.
There were several work stoppages by DCP employees in early August. This
industrial action was linked to annual salary negotiations and changes to
working practices.
In the period since December, Nikanor's operational and project management teams
have also been substantially strengthened to cater for the rapid increase in
ordering activity and material flowing into the DRC as well as increasing
production volumes from KTK. These appointments include:
* Chief Operating Officer - Fernando Fernandez
* Project Oversight - Peter Watermeyer
* Project Director - Colin Healy
* Head of Sales and Marketing - Shaun McCurdy
* DCP Chief Financial Officer - Jackie Callaway
Board Changes
There was one change to the board during the period - on 27 June, Dr. Eric
Lilford was replaced by Stephen Oke as the nominee of BSG Resources Ltd, acting
through Oakey Invest Holdings Inc.
Corporate Social Responsibility (CSR)
Our primary goal with respect to CSR is that the social and economic benefits
from our activities should endure beyond the life of the mine. The DCP
Foundation, modelled on similar successful structures at other mining companies,
is the main vehicle for achieving this goal. The four key areas of focus for
the foundation are health, education, agriculture, and small business
development.
Since January, the DCP Foundation has completed a number of important projects
including:
* Refurbishing and restocking the pharmacy at the main Kolwezi State
Hospital
* Rebuilding broken sections of the Kolwezi Methodist School and
refurbishing the classrooms
* Restoring electricity and water to the Luilu township
* Restoring and maintaining the water supply to the Musonoi village
* Implementing the malaria prevention programme including distributing
mosquito nets to the families of all DCP workers and hosting malaria
education classes for Kolwezi communities
Some of the current projects underway include:
* Providing water for the main Kolwezi hospital which includes drilling
several boreholes and putting water pumping and storage infrastructure
in place
* Refurbishing one of the wards at the main Kolwezi hospital
* Building a new school for Tilwezembe Village to serve approximately
1,000 students. This project is being undertaken using local labour
and materials, including traditional hand-made bricks purchased from
local suppliers
* Refurbishing of the state owned Athenee high school in Kolwezi
Outlook
In the almost 14 months since Nikanor's IPO, considerable progress has been
achieved taking the KOV project forward in terms of engineering, placing of
orders and early capital spending. In addition, KTK is up and running and
current low sales are expected to improve. From this solid base which includes
invaluable experience gained in dealing with local conditions, the pace of
change is expected to visibly increase in the coming months as we move from
planning to implementation.
The fresh equity raised in June means that some two-thirds of the project cost
has been funded. This important step also meant that we could place orders for
major long-lead items within a timeframe that supports our target of first
cathode production by the end of 2009. With the added security expected to be
provided by the offtake arrangements with Glencore, we are now making progress
on arranging debt funding for completion during 2008.
Independent review report to Nikanor plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated interim
balance sheet as at 30 June 2006 and the related consolidated interim statements
of income, cash flows and changes in shareholders' equity for the six months
then ended and related notes. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM rules.
The AIM rules require that the accounting policies and presentation applied to
the interim figures should be consistent with those applied in preparing the
preceding annual accounts except where any changes, and the reasons for them,
are disclosed.
This interim report has been prepared in accordance with the International
Accounting Standard 34, 'Interim financial reporting'.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the AIM rules and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
PricewaterhouseCoopers LLP
Chartered Accountants
London
12 September 2007
Consolidated Income Statement
6m ended 6m ended 12m ended
June December December
2007 2006 2006
Notes $'000 $'000 $'000
Revenue 3 9,763 - 1,678
Cost of sales (13,288) - (5,369)
Gross loss (3,525) - (3,691)
Selling and distribution costs (869) - (388)
Administration expenses (11,217) (850) (13,398)
Other operating expenses (4,442) (69) (6,619)
Operating loss (20,053) (919) (24,096)
Finance income 5 13,589 24 10,412
Finance Costs 5 (1,014) (127) (276)
Net finance income/(cost) 12, 575 (103) 10,136
Loss before income tax (7,478) (1,022) (13, 960)
Income tax expense 6 (83) - (35)
Loss for the year (7,561) (1,022) (13, 995)
Attributable to:
Equity holders of the Company (7,561) (1,022) (13, 995)
Minority Interests - - -
Loss per share for loss attributable to equity holders of the
Company during the year (expressed US cents per share)
Basic (5) (1) (12)
Diluted (5) (1) (12)
The notes on pages 15 to 19 are an integral part of the interim financial
information.
CONSOLIDATED BALANCE SHEET
At 30 At 30 At 31
June June December
2007 2006 2006
Notes $'000 $'000 $'000
Assets
Non-current assets
Property, plant and equipment 7 88,636 3,351 43,692
Intangible assets - 19,198 -
88,636 22,549 43,692
Current assets
Inventories 21,526 36 4,590
Trade and other receivables 33,857 22 10,400
Cash and cash equivalents 8 1,041,659 2,241 349,710
1,097,042 2,299 364,700
Total assets 1,185,678 24,848 408,392
LIABILITIES
Current liabilities
Trade and other payables (18,069) (4,184) (13,149)
Shareholder loans - (25,220) -
Current tax liabilities (118) - (35)
(18,187) (29,404) (13,184)
Net current assets/(liabilities) 1,078,855 (27,105) 351,516
Non current liabilities
Provisions 11 (1,500) - -
(1,500) - -
Total liabilities (19,687) (29,404) (13,184)
Net assets/(liabilities) 1,165,991 (4,556) 395,208
EQUITY
Capital and reserves attributable to
equity holders of the Company
Share capital 2,066 1,000 1,399
Share premium 1,181,365 - 405,423
Share based payment reserve 2,521 - 786
Accumulated deficit (19,961) (5,555) (12,400)
Total equity attributable to parent 1,165,991 (4,555) 395,208
Minority interest in equity - - -
Total equity 1,165,991 (4,555) 395,208
The notes on pages 15 to 19 are an integral part of the interim financial
information
The interim financial information on pages 11 to 19 was approved by the Board
of Directors on 11 September 2007 and was signed on its behalf by:
Jonathan Leslie Peter Sydney-Smith
Executive Chairman Finance Director
Consolidated Statement of changes in equity
Attributable to equity holders of the Company
Share based Minority Total
Share Share payment Accumulated Total Interests equity
capital Premium reserve Deficit
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2006 1,000 - - (1,159) (159) - (159)
Loss for the 6 months to June 2006 - - - (1,022) (1,022) - (1,022)
Transaction costs associated - - - (3,374) (3,374) - (3,374)
With issue of shares (A)
Balance at 30 June 2006 1,000 - - (5,555) (4,555) - (4,555)
Shares issued pursuant to 396 433,661 - - 434,057 - 434,057
admission to the Company
Transaction costs associated - (24,864) - - (24, 864) - (24,864)
with issue of shares
Loss for the period - - - (12,973) (12,973) - (12,973)
Share base payments 3 - 3,540 - 3, 543 - 3,543
Transfers - (3,374) (2,752) 6,128 - - -
Balance at 31 December 2006 1,399 405,423 786 (12,400) 395, 208 - 395,208
Issue of ordinary shares 667 796,050 - - 796, 717 - 796,717
Transaction costs associated - (20,108) - - (20, 108) - (20, 108)
with issue of shares
Loss for period - - - (7,561) (7,561) - (7,561)
Share based payments - - 1,735 - 1,735 - 1,735
Balance at 30 June 2007 2,066 1,181,365 2,521 (19,961) 1, 165,991 - 1,165,991
A. The Group was successfully admitted to AIM on 17 July 2006. $28,238,000 of
attributable admission costs were capitalised to share premium against proceeds
received. At 30 June 2006 $3,374,000 of attributable costs were accrued.
These were taken directly to retained earnings at 30 June 2006 and transferred
to share premium on successful admission.
Consolidated cash flow statement
6m ended 6m ended 12m ended
June December December
2007 2006 2006
Notes $'000 $'000 $'000
Cash flows from operating activities 10 (59,681) (342) (26,578)
Interest(paid)/received - - (148)
Net cash flows used in operating activities (59,681) (342) (26,726)
Cash flows from investing activities
Interest received 10,733 24 8,683
Purchase of intangible assets - (4,516) 5,744
Purchase of property, plant and equipment (37,499) (3,111) (19,014)
Net cash flows used in investing activities (26,766) (7,603) (16,075)
Cash flows from financing activities
Proceeds from issue of ordinary shares 796,717 - 434,060
Transaction costs associated with issue of shares (20,108) - (28,238)
Issue of shareholder loans - 8,656 9,646
Repayment of shareholder loans - - (26,083)
Net cash flows used in financing activities 776,609 8,656 389,385
Net increase in cash and cash equivalents 690,162 711 346,584
Cash and cash equivalents at the beginning of the year 349,710 1,530 1,530
Exchange gains on cash 1,787 - 1,596
Cash and cash equivalents at the end of the year 1,041,659 2,241 349,710
The notes on pages 15 to 19 are an integral part of the interim financial
information.
In the period prior to the Company being admitted to AIM on 17 July, in addition
to the cash loans from shareholders, certain expenditure was incurred by the
shareholders on behalf of the Group. Such expenditure is not reflected in the
Group's cash flows from investing activities or cash flows from financing
activities but is reflected in the movements in borrowings from shareholders.
Notes to consolidated financial INFORMATION
1 General information
Nikanor PLC (the 'Company') is a public limited company incorporated in the Isle
of Man. The Company's registered address is 15-19 Athol Street, Douglas, Isle of
Man, IM1 1LB.
The Group's operations are primarily conducted through the Company's principal
subsidiary, Democratic Republic of Congo Copper and Cobalt Project S.a.r.l ("DCP
"). The purpose of DCP is to hold the mining and exploration permits issued by
the Government of the Democratic Republic of Congo ("DRC") and to explore,
reconstruct and develop the copper and cobalt mines of KOV, Kananga and
Tilwezembe in accordance with the terms and conditions of the agreement entered
into between Global Enterprises Corporate Ltd ("GEC") (a wholly owned subsidiary
of the Company) and La Generale des Carrieres et des Mines ("Gecamines"). Under
this agreement, GEC holds 75% of DCP while Gecamines holds 25% of DCP.
On 17 July 2006 the Company acquired a 100% interest in GEC as a result of a
share exchange representing a combination of businesses under common control.
Accounting for the share exchange agreement relating to the acquisition of GEC
On 12 July 2006, the Company entered into a sale and purchase agreement with its
shareholders, pursuant to which the shareholders agreed to transfer their shares
in GEC to the Company in exchange for the issue and allotment by the Company
conditional on, and with effect from Admission, of 999,999,990 ordinary shares
to the shareholders, pro rata to the shareholders' shareholding in GEC.
As this transaction involved the combination of businesses under common control,
merger accounting has been applied in the presentation of the consolidation
financial statements for all periods presented which present the results of the
Group as if the Company had always been the parent company of GEC
2 Basis of preparation
The financial information included in this report is unaudited and has been
prepared in accordance with IAS 34 Interim Financial Reporting.
The financial information for the year ended 31 December 2006 does not
constitute statutory accounts. This information was derived from the statutory
accounts the year ended 31 December 2006, a copy of which has been delivered to
the Registrar of Companies. The auditor's report on those accounts was
unqualified.
The interim financial information has been prepared under the historical cost
convention.
The accounting policies adopted are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2006, except for the following new standards and interpretations
adopted from the 1 January 2007:
* IFRIC 9 'Reassessment of Embedded Derivatives'
There has been no material impact on the Group by adopting this standard.
In preparing the interim financial information the Group has adopted all the
existing accounting standards issued by the IASB and all the existing
interpretations issued by the IFRIC as at 30 June 2007 with the exception of:
* IFRS 7 'Financial Instruments: Disclosures' and consequential amendments
to IAS 1 'Presentation of Financial Statements', effective from 1 January
2007
* IFRS 8 'Operating Segments' - effective from 1 January 2009
3 Revenue
All revenue is derived from the sale of copper and cobalt in concentrate form.
At each reporting date open provisionally priced sales are marked-to-market
based on London Metal Exchange ('LME') forward prices for copper and spot London
Metals Bulletin ('LMB') prices for cobalt, with adjustments being recorded in
revenue in the income statement and trade debtors in the balance sheet. The
marked-to-market loss for the period was $70,000, (prior period $nil, year to
December 2006, gain of $120,000).
4 Segmental information
Primary reporting format - business segment
The Group's primary format for segment reporting is business segments. The
operations of the Group which involve the production and processing of copper
and cobalt are managed as one business. The products are subject to the same
risks and returns, exhibit similar long-term financial performance and are sold
through the same distribution channels. One business segment is therefore
identified as a reportable segment.
Geographic segment
The Group's principal operations are in the Democratic Republic of Congo which
is a single geographic segment.
Business and geographic segment disclosures are not provided here as they are
not different from those presented in the primary financial statements and
supporting notes.
The final destination of all Group sales is China.
5 Finance income and finance costs
6m ended 6m ended 12m ended
June December December
2007 2006 2006
$'000 $'000 $'000
Finance income
Interest receivable 10,733 24 8,683
Foreign exchange gains 2,856 - 1,729
Finance costs
Interest payable - (127) (148)
Foreign exchange losses (1,014) - (128)
Net foreign exchange gains 1,842 - 1,601
Net finance income/ (cost) 12,575 (103) 10,136
Interest capitalised in the current year was $nil, prior year $nil.
6 Income tax expense
Major components of income tax expense for the periods presented are:
6m ended 6m ended 12m ended
June December December
2007 2006 2006
$'000 $'000 $'000
Current income tax
Foreign tax 83 - 35
83 - 35
Income tax expense 83 - 35
Effective tax rate (1%) (0%) (0.25%)
6m ended 6m ended 12m ended
June December December
2007 2006 2006
$'000 $'000 $'000
Loss before taxation (7,478) (1,022) (13,960)
At statutory DRC rate of 30% (2,243) (307) (4,188)
Expenses not deductable 225 95 494
Overseas rate differences 15 - (2)
Other timing differences not recognised (315) 16 11
Losses carried forward not recognised 5,746 196 4,574
Income taxed at a lower rate (3,345) - (854)
At effective rate 83 - 35
7 PROPERTY, PLANT AND EQUIPMENT
Mine Fixtures Closure &
development and restoration
assets Land and Motor fittings Plant and Work in provision
buildings vehicles equipment Progress Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At January 2006 - 58 263 9 - - - 330
Additions at cost 14,213 591 654 338 3,804 3,547 - 23,147
Transfers from intangible 20,247 - - - - - - 20,427
assets
At 31 December 2006 34,640 649 917 347 3,804 3,547 - 43,904
Additions at cost 33,145 60 1,299 2,882 2,240 4,190 1,500 45,316
At 30 June 2007 67,785 709 2,216 3,229 6,044 7,737 1,500 89, 220
Depreciation - - 32 4 - - - 36
At 1 January 2006
Depreciation charge - 7 140 29 - - 176
At 31 December 2006 - 7 172 33 - - - 212
Depreciation charge - 6 118 248 - - - 372
At 30 June 2007 - 13 291 281 - - - 584
Net book value
At 1 January 2006 - 58 231 5 - - - 294
At 31 December 2006 34,640 642 745 314 3,804 3,547 - 43,692
At 30 June 2007 67,785 696 1,926 2,948 6,044 7,737 1,500 88,636
All Mine Development Assets relate to the KOV project. No depreciation has been
charged to date as the project has not yet reached commercial production. Plant
and equipment also includes $2 million in relation to the KOV project which is
not depreciated. Also included in Plant and equipment are KZC leasehold
improvement costs of $4 million, ($1.5 million addition in the 6 month period to
June 2007).
8 Cash and cash equivalents
6m ended 6m ended 12m ended
June June December
2007 2006 2006
$'000 $'000 $'000
Cash at bank and in hand 1,041,659 2,241 349,710
On 6 June 2007 equity proceeds of #390 million (after professional costs) were
received following the issuing of 66.7 million new ordinary shares. The majority
of proceeds were exchanged into US Dollars, the currency in which the majority
of the project and operating costs not yet committed will be in US Dollars. This
reduced exposure to foreign exchange rate risk. Limited amounts of funds are
held in Euros and Rand to match project costs in those currencies.
All funds are invested in AAA funds with a maximum in any fund of $250 million.
9 Share capital
As described in note 1, merger accounting has been applied in the presentation
of the consolidated financial information. This method presents the results of
the Group as if the Company had always been the parent company. This has the
effect that although the Company was not incorporated until 26 June 2006, the
ordinary share capital shown throughout the periods of the consolidated
financial statements is that of the Company resulting from the share exchange
with the previous shareholders of Global Enterprises Corporate Ltd. The share
exchange occurred on 11 July 2006.
On 17 July 2006 the Company issued 36 million ordinary shares at #6 pursuant to
the Company listing on the Alternative Investment Market. On 11 August 2006 an
over-allotment option was exercised in full and an additional 3.6 million shares
were issued at #6.
On 1 June 2007 the Company issued 66.7 million ordinary shares at #6. Glencore
International AG Limited was allocated 50 million shares, 50% of which were
applied for on behalf of Ruwenzori Limited. Ruwenzori is a special purpose
vehicle managed by RP Capital Partners in which a major shareholder is a
discretionary trust, in which Dan Gertler is a potential ultimate beneficiary
(the Dan Gertler Family Trust). The placing represents 32% of the enlarged
share capital.
Number $'000
Authorised (on incorporation on 26 June 2006)
Ordinary shares of $0.01 each 1,000,000,000 10,000
Ordinary shares issued and fully paid
At 1 January 2006 100,000,000 1,000
Shares issued pursuant to the Company's admission 39,600,000 396
Issued under share scheme 250,000 3
At 31 December 2006 139,850,000 1,399
Shares issued in respect of equity financing 66,700,000 667
At 30 June 2007 206,550,000 2,066
10 Cash flow analysis
Reconciliation of profit before tax to cash flow from operating activities
6m ended 6m ended 12m ended
June December December
2007 2006 2006
$'000 $'000 $'000
Loss before income tax (7,478) (1,022) (13,961)
Adjusted for:
Interest received (10,733) (24) (8,683)
Interest paid - 127 148
Depreciation 372 54 176
Share option expense 1,735 - 3,540
Foreign exchange gains (1,829) - (1,602)
Increase in inventories (16,934) (36) (4,590)
Increase in debtors (23,410) (22) (10,400)
Increase/(decrease) in creditors(1)(B) (1,404) 581 8,794
Cash outflow from operating activities (59,681) (342) (26,578)
B. Accrued admission costs included at 30 June 2006 were taken straight to
equity and are therefore not reflected in the income statement or working
capital. See statement of changes in equity.
11 Provisions for liabilities and charges
The Group has an obligation to incur restoration, rehabilitation and
environmental costs when environmental disturbance is caused by the development
of a mining property. These costs are incurred at the end of the relevant
operation.
A provision is recognised for the present value of such costs. Provision is not
provided for additional obligations expected to arise from future disturbance.
It is anticipated that these costs will be incurred over a period of 7-30 years.
A provision of $1,500,000 has been included in the 6 month period to 30 June
2007.The estimated provision has been discounted at approximately 5%, being an
estimate of the risk free, pre-tax cost of borrowing.
12 Contingent liabilities
The Group receives various regulatory inspections and reviews from tax
authorities in the DRC, some of which include claims for monies owed. The Group
assesses these on a case by case basis. There are no material cases or
contingent liabilities outstanding against the Group, prior periods $nil.
13 Related party disclosures
Identification of related parties
The Group has related party relationships with its majority shareholders and
some related companies.
On 1 June 2007 the Company issued 66.7 at #6 million shares in respect of
additional equity financing. Of these 66.7 million shares 3 million were issued
to Oakey Investment Holdings Inc, a major shareholder. The value of this
transaction was US $6 million. 1.83 million were issued to Pitchely Properties
Limited, a major shareholder. The value of this transaction was US$ 3.7 million.
The Group was initially funded by founding shareholder loans which were repaid
in full during the year ended December 2006, an amount of $26,231,000 was
repaid, including interest of $148,000
The following companies provided services to the Group during the period and
have been identified as related parties:
- BSG Resources Transitional Service Agreement: Oakey Investment Holdings, a
major shareholder, is a subsidiary of BSG Resources, ('BSGR'). The Group and
Resource Advisory Services Limited entered into a Transitional Services
Agreement prior to admission on to AIM and six months post admission. This
support has now ceased and no significant work was taken post August 2006.
- Bateman Engineering N.V: Rt Hon Earl of Balfour (non-executive director of
the Group) is a non-executive director of Bateman Engineering N.V, a company in
the BSG Resources Group. Bateman has been engaged to undertake certain projects.
- DEM Mining: Dan Gertler holds an interest in the shares in DEM mining and has
a beneficial interest in the Company. DEM have been contracted to drill, mine
and transport ore from the Tilwezembe mine to the crusher at the KZC plant.
- Virtus Trust: Rt Hon Earl of Balfour (non-executive director) holds an
interest in the shares of Virtus Trust which provided accounting and
treasury-related services to the Group. With the exception of some minor
residual services, the accounting and treasury related services have ceased.
- Gecamines: Gecamines has a 25% minority interest in DCP, a Group subsidiary.
DCP is required to make lease payments to Gecamines. In addition, DCP purchases
goods and services from Gecamines in the normal course of business.
- Glencore: Glencore holds 12.6% in the Company. During the period, Glencore
entered into a 100% offtake agreement with the Company. Sales under this offtake
agreement will commence in the second half of 2007.
The following table provides the total amount of transactions entered into
between related parties:
6m ended 6m ended 12m ended
June June December
2007 2006 2006
$'000 $'000 $'000
Amount owed to related parties
Oakey Investment Holdings Inc. - 23,741 -
Kennon Management Inc. - 1,479 -
Bateman - - 1,921
- 25,220 1,921
Purchases from parties
DEM Mining 11,511 - 590
Bateman 6,870 - 6,190
BSGR 238 455 605
Virtus Trust 89 - 122
Gecamines 342 - 25
19,050 455 7,533
14 Post balance sheet events
There were no post balance sheet events.
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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