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GCM Resources PLC Interim Results

29/03/2019 7:00am

UK Regulatory (RNS & others)


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RNS Number : 3789U

GCM Resources PLC

29 March 2019

29(th) March 2019

GCM Resources plc

("GCM" or the "Company")

(AIM:GCM)

Interim Results for the six months ended 31 December 2018

GCM Resources plc, an AIM quoted mining and energy company, is pleased to report its interim results for the six months ended 31 December 2018. The Chairman's Statement and the full unaudited interim report are presented below, and will shortly be available at the Company's website www.gcmplc.com.

Chairman's Statement

I'm delighted to report to our shareholders on the Company's performance for the six months ended 31 December 2018. It has been a busy period for the Company and I am pleased with the progress made. We have continued to pursue our strategy of developing a holistic power solution, incorporating the Company's mine proposal as a captive mine with its entire thermal coal production being fed to mine-mouth power plants.

Using the latest highly energy efficient ultra-supercritical thermal power plant technology, the proposed mine would be able to support 6,000MW of thermal power production, which has the potential to be the cheapest power for Bangladesh. Given the scale of this Project, the power generation has been incorporated as three separate power plant projects being developed in phases to suit the mine's ramp up to its planned 15 million tonnes full production.

The new contract with Dyani Corporation (Consultant), agreed in October 2018, paved the way for rapid progress in developing further relationships with Chinese State-owned enterprises during the period. The Company aggressively pursued a relationship with Power Construction Corporation of China Ltd (PowerChina) and a technical pre-feasibility study (PFS) was completed by PowerChina on 6 November 2018 which provided a high-level technical examination on developing water-cooled ultra-supercritical thermal power plants at the proposed mine site, generating 4,000MW.

Three weeks after the PFS was finalised, a memorandum of understanding was agreed with PowerChina, which outlined the framework of the relationship between the two parties as well as assigning broad roles and responsibilities.

On 17 January of this year, both GCM and PowerChina agreed a definitive Engineering, Procurement and Construction Contract (EPC Contract) and a Joint Venture Agreement (First JV Agreement) for 2 x 1,000MW ultra-supercritical thermal power plants (Phase 1). A second Joint Venture Agreement (Second JV Agreement) was signed on 15 March 2019 with PowerChina for the final 2 x 1,000MW ultra-supercritical thermal power plants (Phase 2).

Under the terms of the First JV Agreement and Second JV Agreement, the parties have agreed that subject to a valuation of the power plants and investment appraisal, the Company will be entitled to an 80% interest in the Power Plant, with PowerChina receiving the remaining 20%.

The current status of the strategic relationships can be summarised as follows:

 
                        Partner      Agreements 
 Mine                   The Company is in advanced discussions 
                         with a large international coal mining 
                         company. 
                       -------------------------------------------- 
 First 2,000MW power    CGGC         Joint Development Framework 
  plant                               Agreement (announced 9 March 
                                      2018) and Contract Framework 
                                      Agreement (announced 21 March 
                                      2018). 
                       -----------  ------------------------------- 
 Second 2,000MW power   POWERCHINA   First JV Agreement and EPC 
  plant                               Contract (both announced 
                                      17 January 2019). 
                       -----------  ------------------------------- 
 Third 2,000MW power    POWERCHINA   Second JV Agreement entered 
  plant                               into on 15 March 2019. EPC 
                                      Contract to be confirmed 
                       -----------  ------------------------------- 
 

With the power plant agreements in place, CGGC 2000MW and PowerChina 4,000MW, the proposed captive mine's full thermal coal production will be marketed through appropriate coal off-take agreements.

On behalf to the Company, I would like to express my gratitude to the Consultant for assisting GCM in developing the strategic relationships to date. It is important to recognise the strength of the partners obtained, and the credibility that they bring to the Company's proposals. In 2018, PowerChina ranked 182nd among the Fortune Global 500, and is recognised as 6th among the world's 250 largest global contractors, according to Engineering News-Report. In addition, under the respective Joint Venture Agreement with GCM, PowerChina is seeking to include the Company's proposal in the Belt and Road Initiative managed by the Government of the People's Republic of China.

In conjunction with its strategic partners, the Company has been working tirelessly to finalise a formal proposal to the Government of Bangladesh for their consideration. I am pleased to see the recently reported public comments by a number of ministers in favour of domestic coal development.

Financials

GCM incurred a loss after tax of GBP1,844,000 for the six months ended 31 December 2018 (31 December 2017: loss after tax of GBP1,902,000). The most significant expenditure during the period was pre-development expenditure while administrative expenses for the six months ended 31 December 2018 were GBP335,000 (31 December 2017: GBP290,000) and capitalised Project expenditure for the period was GBP275,000 (31 December 2017: GBP183,000).

During the period, GCM agreed an extension in the short-term loan facility with Polo Resources Limited, the Company's second largest shareholder. The short-term loan facility has been increased by GBP1.2 million in exchange for permitting the outstanding loan balance and accrued interest to be repaid by issuing new ordinary shares in the Company at a conversion price of 11 pence per share. The loan facility continues to attract an interest rate of 12% per annum and may be repaid in shares as mentioned, or in cash, with Polo Resources Limited giving 90 days' notice.

The Company has been in discussions with a number of parties interested in providing equity financing to GCM. Over the next six months the Company will seek new investment to strengthen GCM's financial position and provide future funding. Until such time, there remains a material uncertainty which may cast doubt as to the Group's ability to continue as a going concern. The directors remain confident that sufficient funding will be obtained as and when required. As such the financial statements have been prepared on a going concern basis. Please refer to the accounting policy note on going concern (page 8) for further information.

Outlook

Over the coming months, the GCM team is looking forward to progressing negotiations with a large international coal mining company to partner with the Company in mine development, to work with its partners to finalise the submission to the Government, and then consult with the Government to finalise an agreeable proposition which is amenable to all parties.

The Company's strategy is to deliver a breakthrough long-term sustainable project for the Government and people of Bangladesh, providing the lowest cost electricity in the country by combining the Company's coal mine proposal with mine mouth power plants generating 6,000MW and at the same time ensuring quantifiable social, environmental and economic benefits.

I would like to thank our shareholders for their ongoing confidence and support. I would also like to thank our staff for their dedication and hard work.

Datuk Michael Tang PJN

Executive Chairman

Interim Consolidated Income Statement

 
                                    6 months     6 months   Year ended 
                                    ended 31     ended 31      30 June 
                                    December     December         2018 
                                        2018         2017      audited 
                                   unaudited    unaudited       GBP000 
                                      GBP000       GBP000 
 Operating expenses 
 Pre-development 
  expenditure                        (1,427)      (1,527)      (4,515) 
 Exploration and 
  evaluation costs                      (14)         (22)         (44) 
 Administrative expenses               (335)        (290)        (601) 
-------------------------------  -----------  -----------  ----------- 
 Operating loss                      (1,776)      (1,839)      (5,160) 
 
 Finance costs                          (68)         (63)        (191) 
-------------------------------  -----------  -----------  ----------- 
 Loss before tax                     (1,844)      (1,902)      (5,351) 
 
 Taxation                                  -            -            - 
 
 Loss and total comprehensive 
  income for the period              (1,844)      (1,902)      (5,351) 
-------------------------------  -----------  -----------  ----------- 
 
 
 
 Earnings per share 
 Basic loss per share (pence)       (1.9p)   (2.3p)   (6.1p) 
 Diluted loss per share (pence)     (1.9p)   (2.3p)   (6.1p) 
 

Interim Consolidated Statement of Changes in Equity

 
                               Share      Share          Share   Accumulated     Total 
                             capital    premium          based        losses 
                                        account       payments 
                                                   not settled 
 
                              GBP000     GBP000         GBP000        GBP000    GBP000 
 Balance at 1 July 2017        7,815     46,165            618      (16,189)    38,409 
 
 Total comprehensive 
  loss                             -          -              -       (5,351)   (5,351) 
 Share issuances               1,996      4,319              -             -     6,315 
 Share based payments              -          -              7             -         7 
 
 Balance at 30 June 2018       9,811     50,484            625      (21,540)    39,380 
 
 Total comprehensive 
  loss                             -          -              -       (1,844)   (1,844) 
 Share issuances                  10          8              -             -        18 
 Share based payments              -          -              4             -         4 
 
 Balance at 31 December 
  2018 (unaudited)             9,821     50,492            629      (23,384)    37,558 
-------------------------  ---------  ---------  -------------  ------------  -------- 
 
 
 
   Balance at 1 July 2017    7,815   46,165   618   (16,189)    38,409 
 
 Total comprehensive 
  loss                           -        -     -    (1,902)   (1,902) 
 Share issuances             1,003    2,265     -          -     3,268 
 Share based payments            -        -     4          -         4 
 
 Balance at 31 December 
  2017 (unaudited)           8,818   48,430   622   (18,091)    39,779 
--------------------------  ------  -------  ----  ---------  -------- 
 

Interim Consolidated Balance Sheet

 
                                         31 December   31 December    30 June 
                                                2018          2017       2018 
                                Notes      unaudited     unaudited    audited 
                                              GBP000        GBP000     GBP000 
 Current assets 
 Cash and cash equivalents                       168         1,507        446 
 Receivables                                      65            40         37 
---------------------------  --------  -------------  ------------  --------- 
 Total current assets                            233         1,547        483 
 
 Non-current assets 
 Property, plant 
  and equipment                                   20            24         23 
 Intangible assets                  3         40,912        40,362     40,637 
 Receivables                                       -             -          - 
 Total non-current 
  assets                                      40,932        40,386     40,660 
 
 Total assets                                 41,165        41,933     41,143 
---------------------------  --------  -------------  ------------  --------- 
 
 Current liabilities 
 Payables                           4        (1,960)         (940)      (484) 
 Borrowings                         5        (1,647)       (1,214)    (1,279) 
---------------------------  --------  -------------  ------------  --------- 
 Total current liabilities                   (3,607)       (2,154)    (1,763) 
 
 Total liabilities                           (3,607)       (2,154)    (1,763) 
---------------------------  --------  -------------  ------------  --------- 
 
 Net assets                                   37,558        39,779     39,380 
---------------------------  --------  -------------  ------------  --------- 
 
 
 
 Equity 
 Share capital            6      9,821      8,818      9,811 
 Share premium account    6     50,492     48,430     50,484 
 Other reserves                    629        622        625 
 Accumulated losses           (23,384)   (18,091)   (21,540) 
-----------------------      ---------  ---------  --------- 
 Total equity                   37,558     39,779     39,380 
-----------------------      ---------  ---------  --------- 
 

Datuk Michael Tang PJN

Chairman

Interim Consolidated Statement of Cash Flows

 
                                               6 months     6 months   Year ended 
                                               ended 31     ended 31      30 June 
                                               December     December         2018 
                                                   2018         2017      audited 
                                              unaudited    unaudited       GBP000 
                                                 GBP000       GBP000 
-----------------------------------------                             ----------- 
 Cash flows used in operating 
  activities 
 Loss before tax                                (1,844)      (1,902)      (5,351) 
 Adjusted for: 
    Non-cash pre-development expenditure          1,427        1,527        4,515 
    Non-cash finance costs                           68           63          191 
    Other non-cash expenses                           -            -            - 
-----------------------------------------   -----------  -----------  ----------- 
                                                  (349)        (312)        (645) 
 Movements in working 
  capital: 
    (Increase)/decrease in operating 
     receivables                                   (30)            4           10 
    Increase/(decrease) in operating 
     payables                                        51        (106)        (515) 
------------------------------------------  -----------  -----------  ----------- 
 Cash used in operations                          (328)        (414)      (1,150) 
 
 Net cash used in operating activities            (328)        (414)      (1,150) 
 
 
 
 Cash flows from investing activities 
 Payments for intangible 
  assets                                          (268)        (209)        (470) 
 Payments for property, plant 
  and equipment                                       -            -          (1) 
------------------------------------------  -----------  -----------  ----------- 
 Net cash generated from investing 
  activities                                      (268)        (209)        (471) 
 
 
 
 Cash flows from financing activities 
 Issue of ordinary 
  share capital                                      18        2,000        2,000 
 Share issue costs                                    -        (200)        (200) 
 Proceeds from borrowing                            300          150          150 
 Interest paid                                        -            -         (63) 
 Net cash from financing activities                 318        1,950        1,887 
 
 
 
 Total (decrease)/increase in 
  cash and cash equivalents                       (278)        1,327          266 
 
 Cash and cash equivalents at 
  the start of the period                           446          180          180 
------------------------------------------  -----------  -----------  ----------- 
 Cash and cash equivalents at 
  the end of the period                             168        1,507          446 
------------------------------------------  -----------  -----------  ----------- 
 

Notes to the Interim Condensed Consolidated Financial Statements

   1.     Accounting policies 

GCM Resources plc (GCM) is domiciled in England and Wales, was incorporated as a Public Limited Company on 26 September 2003 and admitted to the London Stock Exchange Alternative Investment Market (AIM) on 19 April 2004.

This unaudited interim report was authorised for issue by the Directors on 29 March 2019, and the Interim Consolidated Balance Sheet was signed on the Board's behalf by Datuk Michael Tang PJN.

Basis of preparation

The annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 June 2018 and applied in accordance with the Companies Act 2006.

The interim condensed consolidated financial statements for the six months ended 31 December 2018 have been prepared using the same policies and methods of computation as applied in the financial statements for the year ended 30 June 2018. The financial information contained herein does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 and is unaudited. The figures for the year ended 30 June 2018 have been extracted from the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and contained an unqualified auditors' report which included an emphasis of matter concerning significant doubt over the ability for the Group to continue as a going concern and did not include a statement under section 498(2)(a) or (b), or section 498(3) of the Companies Act 2006.

Political and economic risks - carrying value of intangible asset

The principal asset is in Bangladesh and accordingly subject to the political, judicial, fiscal, social and economic risks associated with operating in that country.

The Group's principal project relates to thermal coal and semi-soft coking coal, the markets for which are subject to international and regional supply and demand factors, and consequently future performance will be subject to variations in the prices for these products.

GCM, through its subsidiaries, is party to a Contract with the Government of Bangladesh which gives it the right to explore, develop and mine in respect of the licence areas. The Group holds a mining lease and exploration licences in the Phulbari area covering the prospective mine site. The mining lease has a 30-year term from 2004 and may be renewed for further periods of 10 years each, at GCM's option.

In accordance with the terms of the Contract, GCM submitted a combined Feasibility Study and Scheme of Development report on 2 October 2005 to the Government of Bangladesh. Approval of the Scheme of Development from the Government of Bangladesh is necessary to proceed with development of the mine. GCM continues to await approval.

The Group has received no notification from the Government of Bangladesh (Government) of any changes to the terms of the Contract. GCM has received legal opinion that the Contract is enforceable under Bangladesh and International law, and will consequently continue to endeavour to receive approval for development.

Accordingly, the Directors are confident that the Phulbari Coal and Power Project (Project) will ultimately receive approval, although the timing of approval remains in the hands of the Government. To enhance the prospects of the Project, GCM has engaged in a strategy to align the Project with the needs and objectives of the Government. The Government seeks to rapidly expand the country's power generation, including the increase in coal fired power generation from the current 250MW to approximately 20,000MW. The Group's strategy is to combine the planned coal mine with 6,000MW power plants in conjunction with large Chinese State-owned engineering enterprises.

Until approval of the Scheme of Development from the Government of Bangladesh is received there is continued uncertainty over the recoverability of the intangible mining assets. The Directors consider that it is appropriate to continue to record the intangible mining assets at cost, however if for whatever reason the Scheme of Development is not ultimately approved the Group would impair all of its intangible mining assets, totalling GBP40,912,000 as at 31 December 2018.

Going concern

As at 31 December 2018 the Group's financial resources were GBP168,000 as well as GBP900,000 unutilised short-term loan facility, whilst current cash liabilities were GBP2,120,000 (non-cash current liabilities of GBP1,487,000). The unutilised portion of the loan facility is to be drawn down in three quarterly instalments.

In order to support its operating expenses for a period of at least 12 months and discharge its current liabilities as and when they fall due, the Company will need to obtain further financial resources through debt or equity financing. The Company has been in discussions with a number of parties interested in providing equity investment. The Directors are confident that the necessary financial resources will be raised as and when required. The financial statements continue to be prepared on a going concern basis. However, until such time that sufficient funds are raised, there remains a material uncertainty which may cast doubt as to the Group's ability to continue as a going concern.

Upon achieving approval of the Phulbari Coal and Power Project, significant additional financial resources will be required to proceed to development.

   2.     Segment analysis 

The Group operates in one segment being the exploration and evaluation of energy related projects. The only significant project within this segment is the Phulbari Coal and Power Project in Bangladesh.

   3.     Intangibles 

During the period intangibles increased by GBP275,000 (December 2017: increase of GBP183,000). The increase is due to capitalised mining exploration and evaluation expenditure relating to the Phulbari Coal and Power Project in Bangladesh.

   4.     Payables 
 
                            31 December   31 December    30 June 
                                   2018          2017       2018 
                              unaudited     unaudited    audited 
                                 GBP000        GBP000     GBP000 
----------------------- 
 
 Trade payables                   1,711           319        309 
 Related party accrued 
  payable                            99           471         25 
 Transaction costs 
  payable                           150           150        150 
 
                                  1,960           940        484 
 -----------------------  -------------  ------------  --------- 
 
 

The trade payables of GBP1,711,00 at 31 December 2018 includes GBP1,487,000 non-cash costs relating to power plant pre-development expenditure, which will be settled by the issuance of new ordinary shares in the Company.

The related party accrued payable of GBP99,000 at 31 December 2018 relates to accrued fees owing to the management services company of the Executive Chairman of the Company, Datuk Michael Tang PJN.

   5.     Borrowings 
 
                                    31 December   31 December    30 June 
                                           2018          2017       2018 
                                      unaudited     unaudited    audited 
                                         GBP000        GBP000     GBP000 
 
 
 Short-term loan facility from 
 related party                            1,647         1,214      1,279 
 
                                          1,647         1,214      1,279 
 -------------------------------  -------------  ------------  --------- 
 

GCM is party to a GBP2,300,000 short-term loan facility with its second largest shareholder, Polo Resources Limited. As at 31 December 2018 the Company owed GBP1,647,000, comprising GBP1,400,000 loan balance and accrued finance costs on borrowings of GBP247,000. The principle terms of the short-term loan are 12% per annum interest rate on the loan balance and repayment within 90 days upon request. Alternatively, the lender may request repayment by the issuance of new ordinary shares in the Company at 11 pence per share. The Company may elect to repay at any time giving 60 days' notice.

   6.     Share issues 

On 6 December 2018 100,000 shares were awarded to Mr Nik Raof Daud (17.9 pence per share), in appreciation of his services as non-executive director.

   7.     Post-balance sheet events 

Consultancy success fees

The Company and its strategic partner Power Construction Corporation of China Ltd (PowerChina) signed a definitive Engineering, Procurement and Construction Contract and a Joint Venture Agreement for 2 x 1,000MW ultra-supercritical thermal power plants (PowerChina Agreements).

In accordance with the terms of a consulting agreement, a success fee equal to 6% of the issued capital of the Company is due to the consultant for the achievement of the PowerChina Agreements. The fee is payable by the issuance of shares within five business days of the Agreements being executed. In accordance with the with International Accounting Standard IAS 10 Events After the Reporting Period the financial statements contained in this December 2018 Interim Report have not been adjusted to reflect this.

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.

For further information:

 
 GCM Resources plc                 Strand Hanson Limited 
  James Hobson                      Nominated Adviser and Broker 
  Finance Director                  Stuart Faulkner 
  +44 (0) 20 7290 1630              Rory Murphy 
                                    James Dance 
                                    +44 (0) 20 7409 3494 
 
 GCM Resources plc 
 Tel: +44 (0) 20 7290 1630 
 info@gcmplc.com; www.gcmplc.com 
 

About GCM Resources

GCM Resources plc (LON:GCM), the AIM listed mining and energy company, has identified a high quality coal resource of 572 million tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project (the Project) in north-west Bangladesh.

Utilising the latest highly energy efficient power generating technology the Phulbari coal mine is capable of supporting power plants of up to 6,000MW. GCM is awaiting approval from the Government of Bangladesh to develop the Project. The Company has a strategy of combining the Company's mine proposal with up to 6,000MW of power generation, together with credible, internationally recognised strategic partners. GCM aims to deliver a practical power solution to provide the cheapest electricity in the country, in a manner amenable to the Government of Bangladesh.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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