Ormonde Mining PLC Final Results for the year ended 31 December 2016 (5325I)

TIDMORM

RNS Number : 5325I

Ormonde Mining PLC

20 June 2017

20 June 2017

Ormonde Mining plc

("Ormonde" or "the Company")

Final Results for the year ended 31 December 2016

DUBLIN & LONDON: 20 June 2017 - Ormonde Mining plc announces its final results for the year ended 31 December 2016.

HIGHLIGHTS FOR THE YEAR AND POST YEAR

   --    Revised construction schedule for the Project agreed between the Project partners, which sees commissioning of a world class tungsten mine in Q3 2018, and aligns first production with independent forecasts of improving tungsten prices 

-- Completion of compulsory land acquisition process resulting in access to and use of all lands required to enable the development of the Barruecopardo Tungsten Project (the "Project")

-- Approvals of equipment and plant construction contracts, thus advancing the Project into an accelerated construction and implementation phase

-- Amendments to the Project's debt facility to take account of the revised construction schedule

-- Ormonde's current managing director, Steve Nicol, to step down at the upcoming AGM to focus fully on development and operations at the Project

-- Successful drilling programme completed which supports the current resource interpretation and demonstrates the potential to extend beyond the nine-year mine life at Barruecopardo through the development of a "Stage 2" underground mine at the Project

Mike Donoghue, Ormonde's Chairman, commented:

"Having revised the Barruecopardo Project schedule during 2016 with the aim of ensuring that the Project comes online into a strengthening tungsten price environment, the Project partners decided in June 2017 to provide the required approvals to enable the Project progress at full speed towards commissioning of a new mine at Barruecopardo during the third quarter of 2018. This exciting development comes after the successful completion, during 2016, of a process whereby all of the lands required to develop the Project were secured, and is set against a backdrop of rising tungsten prices and increasing demand for tungsten concentrates.

"We very much look forward to the coming year, as the Barruecopardo Project is developed to become an essential secure new producer of tungsten concentrates to a market in much need of new sources of primary supply."

Enquiries to:

Ormonde Mining plc

Steve Nicol, Managing Director Tel: [phone]

Capital M Consultants

Simon Rothschild Mob: [phone]

Murray Consultants

Mark Brennock Tel: [phone] Mob: [phone]

Davy Corporate Finance (Nomad / ESM Adviser, Joint Broker and Financial Adviser)

John Frain Tel: [phone]

SP Angel Corporate Finance LLP (Joint Broker)

Ewan Leggat Tel: [phone]

CHAIRMAN'S REVIEW

We are pleased to report that during 2016 your Company successfully advanced the Barruecopardo Project through the compulsory land acquisition stage and into the construction stage. As guided during the year, progress was somewhat reduced compared to original schedules with construction contracts having been rescheduled to run consecutively rather than concurrently. This strategy has proved timely as metal markets are now showing signs of a sustained recovery, leading in June 2017 to the Project company, Saloro SLU ("Saloro"), authorising the issuance of outstanding approvals on various equipment and plant construction contracts, such that Barruecopardo should now be coming on stream into a more favourable global economic environment.

Barruecopardo

During 2016, the Barruecopardo operating subsidiary Saloro SLU completed the acquisition of land for which title was clear and for which lease with option to purchase arrangements were in place. Most of the remaining land blocks required for construction had title or boundary were required to be addressed through the court compulsory acquisition procedures. As this could be a lengthy process, Saloro sought to expedite matters by requesting the Administration in Castilla y Leon to declare the remaining blocks of land as required for the common good and in need of "urgent occupation". This process required a vote of the Regional Legislative Assembly, which was forthcoming. It was most satisfying to see this strong commitment and support from the Government for the Project. A few procedural steps remained after this vote, but by December 2016, Saloro was the legal owner of all of the land required for the development of a mine at Barruecopardo.

As this land acquisition process was being pursued, activity on the engineering design, equipment manufacture contracts and construction contracts was being advanced, albeit at a pace to match the expected land acquisition process. All main, longer lead time, processing plant has been identified and sized and contracts let for manufacture. Procurement of most of the secondary items of plant is similarly well advanced. Fairport Engineering, the company expediting the plant design and procurement, has also been awarded the Plant Construction Management Contract. These activities, when synchronised with the recent decision by Saloro to issue the outstanding approvals on various equipment and plant construction contracts, advances the Project into an accelerated construction and implementation phase, which sees mine plant commissioning during Q3 2018. This timing leaves a healthy interval in which to allow the commodity markets to consolidate their recent gains and move onwards.

A short five-hole exploratory drilling programme around the northern and central section of the proposed Barruecopardo open pit was completed during 2016. The main objective of this programme was to confirm extension to the tungsten mineralisation at depth beneath the main central part of the planned open pit, whilst also following up on a potentially expanded zone of mineralisation under the shallow northern end of the open pit. The results of this initial drilling program were most encouraging, lending support to the concept of a future Stage 2 underground mine at the Project.

Tungsten market

As the impediments to mine development are progressively removed and we advance construction, it is perhaps timely to look forward at the commodity markets and pricing. Tungsten pricing has traditionally followed the business cycle and, given the long lead times for mining projects, the base metal market may be a useful guide to the market place. Copper had undergone a long decline from $10,000/t in 2011 to around $4,500/t in late 2015, but a recovery kicked in during 2016 and pricing is now approaching the $6,000/t level. There has also been recoveries in the prices of other base metals including zinc, lead, tin, and to a lesser extent nickel and aluminium.

Clearly, the overall story is that Barruecopardo is now being developed in a time of metal price recovery.

In looking at the standalone tungsten market, the situation at the start of 2016 was somewhat confusing. The largest tungsten producer in the west, the Canadian mine Cantung, closed in 2015 and a number of the larger tungsten mines were clearly struggling with limited reserves, technical issues and profitability. Moreover, practically all advanced or resource based tungsten projects, previously being touted for development, were either abandoned or effectively mothballed. Against this background, there was an upswing in tungsten APT prices from $160/mtu early in 2016 to $220/mtu in May before dropping back to around $180/mtu during August 2016. The reason for this became more evident as the year progressed. The forecast primary supply shortage was indeed developing, with tungsten concentrates very clearly being sought as feedstock by the main APT producers, but it was equally clear that there was a surplus of APT in the market place, depressing prices. As industry practice is that mine produced concentrates are priced relative to the APT prices, anomalies in the latter are imposed on the former.

It became clear that until the surplus of APT, presumably largely produced pre-2016 from China, is consumed, that the fundamental true market supply-demand realities, based on primary mine production, would not dictate pricing. This process appears to be underway; tungsten APT prices have seen a slow but steady increase to its current level of $223/mtu, with many indicators now pointing towards a sustained increase in the tungsten price into the future. What is clear is that tungsten concentrates are in tight supply and are likely to become tighter as global economic activity increases and no new tungsten mines are developed. China's efforts to tighten up its tungsten industry, to enforce a crackdown on illegal mining and to ensure cut-backs in tungsten mine production, will also tend to reinforce this trend. In summary, tungsten supply-demand dynamics and pricing now look more favourable in advance of Barruecopardo coming on stream.

Other Projects

The focus of your Company during the year has been the advancement of the Barruecopardo Project. The Company's Gold projects are being maintained, whilst the La Zarza Project remains under a review of disinvestment options with the directors deciding it appropriate for the holding value of this asset to be impaired by EUR2 million, to a book value of EUR3 million, to reflect their current assessment of the asset's present value.

Corporate and Financials

The Company has reported a loss for the year of EUR2.41M, compared with a profit of EUR2.07M for 2015. Although the Group made a small operating profit for the year, however the effects of the EUR2M impairment of its La Zarza asset and the share of loss in its associate investment (the Barruecopardo Joint Venture B.V., in which the Barruecopardo Project is held, and which is incurring losses during the Project's developed stage), resulted in the reported loss for the period.

Finally, I would like to thank shareholders, management, staff and other stakeholders for your support during the last year; we believe there is long-term value to be realised through the Barruecopardo asset and we thank you for your patience as we journey towards First Production.

Michael J. Donoghue

Chairman

Consolidated Statement of Comprehensive Income

Year ended 31 December 2016

 
                                              2016       2015 
                                          EUR000's   EUR000's 
 
Turnover - Continuing operations             1,000        527 
Administrative expenses                      (856)    (1,443) 
Investment Income                                       3,397 
Impairment of intangible asset             (2,000) 
                                       -----------  --------- 
Operating profit/(loss)                    (1,856)      2,481 
Interest receivable and similar                  -          - 
 income 
Finance costs                                            (42) 
                                       -----------  --------- 
Profit/loss for the year before 
 taxation                                  (1,856)      2,439 
Taxation                                       (1)          - 
                                       -----------  --------- 
Profit/loss for the year after 
 taxation                                  (1,857)      2,439 
Group share of loss on associate 
 investment                                  (552)      (368) 
                                       -----------  --------- 
Total comprehensive income/(loss) 
 for the year                              (2,409)      2,071 
                                       ===========  ========= 
 
EARNINGS PER SHARE 
Basic earnings /(loss) per ordinary 
 share                                 (EUR0.0051)  EUR0.0044 
                                       ===========  ========= 
Diluted earnings /(loss) per 
 ordinary share                        (EUR0.0051)  EUR0.0044 
                                       ===========  ========= 
 

Consolidated Statement of Financial Position

As at 31 December 2016

 
                                       2016      2015 
                                   EUR000's  EUR000's 
ASSETS 
 
NON-CURRENT ASSETS 
Intangible assets                     3,300     5,279 
Property, plant and equipment             -         1 
Investments                          16,027    16,579 
                                   --------  -------- 
                                     19,327    21,859 
CURRENT ASSETS 
Trade and other receivables              36        35 
Cash and cash equivalents               694       653 
                                   --------  -------- 
Total Current Assets                    730       688 
TOTAL ASSETS                         20,057    22,547 
                                   ========  ======== 
 
EQUITY AND LIABILITIES 
 
EQUITY 
Issued share capital                 13,485    13,485 
Share premium account                29,932    29,932 
Share based payment reserve             837       837 
Capital conversion reserve fund          29        29 
Capital redemption reserve fund           7         7 
Foreign currency translation 
 reserve                                  1         1 
Retained loss                      (24,497)  (22,089) 
                                   --------  -------- 
Equity attributable to Owners 
 of the Company                      19,795    22,202 
 
CURRENT LIABILITIES 
Trade and Other Payables                264       345 
                                   --------  -------- 
Total Current Liabilities               264       345 
                                   --------  -------- 
 
Total Liabilities                       264       345 
                                   --------  -------- 
TOTAL EQUITY AND LIABILITIES         20,057    22,547 
                                   ========  ======== 
 

Consolidated Statement of Cash Flows

Year ended 31 December 2016

 
                                              2016       2015 
                                          EUR000's   EUR000's 
 CASHFLOWS FROM OPERATING ACTIVITIES 
 
 Profit /(Loss)for the year before 
  taxation                                 (1,856)      2,439 
 
 Adjustments for: 
 Depreciation                                    1          - 
 Impairment of intangible asset              2,000 
 Finance costs recognised in profit 
  or loss                                        -         42 
 Cashflow from operating activities            145      2,481 
 MOVEMENT IN WORKING CAPITAL 
 Movement in debtors                           (1)        186 
 Movement in creditors                        (82)        133 
 Income taxes paid                               -          - 
                                         ---------  --------- 
 Net cash generated by/(used in) 
  operating activities                          62      2,800 
 
 CASH FLOWS FROM FINANCING ACTIVITIES 
 Interest Paid                                   -       (42) 
 Proceeds of issue of share capital              -          - 
 Other equity movement                           -      1,074 
                                         ---------  --------- 
 Cashflow from financing activities             62      3,832 
 
 CASH FLOWS FROM INVESTING ACTIVITIES 
 Net expenditure on intangible 
  assets                                      (21)       (16) 
 Movement of property, plant and                 -          - 
  equipment 
 Interest received                               -          - 
 Acquisitions and disposals                    552    (3,306) 
                                         ---------  --------- 
 Net cash (used in) investing 
  activities                                   531    (3,322) 
 Share of loss in associate                  (552)      (368) 
                                         ---------  --------- 
 Cashflow from investing activities           (21)    (3,690) 
 
 NET INCREASE /(DECREASE) IN CASH 
  AND CASH EQUIVALENTS                          41        142 
 CASH AND CASH EQUIVALENTS AT 
  BEGINNING OF YEAR                            653        511 
                                         ---------  --------- 
 CASH AND CASH EQUIVALENTS AT 
  END OF YEAR                                  694        653 
                                         =========  ========= 
 

Consolidated Statement of Changes in Equity

Year ended 31 December 2016

 
                                              Share 
                                              Based 
                        Share       Share   Payment     Other  Retained 
                                                            s         s         s 
                        Capital   Premium   Reserve  Reserves    Losses     Total 
 
                       EUR000's  EUR000's  EUR000's  EUR000's  EUR000's  EUR000's 
 
Balance at 1 January 
 2015                    13,485    29,932       837        37  (25,234)    19,057 
Profit for the 
 year                         -         -         -         -     2,071     2,071 
De-recognition 
 of subsidiaries              -         -         -         -     1,074     1,074 
Balance at 31 
 December 2015           13,485    29,932       837        37  (22,089)    22,202 
                       --------  --------  --------  --------  --------  -------- 
 
 
 
Balance at 1 January 
 2016                    13,485    29,932       837        37  (22,089)    22,202 
Loss for the year             -         -         -         -   (2,409)   (2,409) 
Balance at 31 
 December 2016           13,485    29,932       837        37  (24,498)    19,793 
                       --------  --------  --------  --------  --------  -------- 
 
 

1. The basic earnings /(loss) per share and the diluted earnings/(loss) per share have been calculated on a loss after taxation of EUR2,409,000 (2015: profit of EUR2,071,000) and a weighted average number of Ordinary Shares in issue for the year of 472,507,482 (2015: 472,507,482) for the basic earnings /(loss) per share and 472,507,482 (2015: 472,507,482) for the diluted earnings/(loss) per share.

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June 20, 2017 02:00 ET (06:00 GMT)