CHINA NONFERROUS GOLD: Interim Results for the Six-Month Period Ended 30 June 2020

TIDMCNG 
 
 

China Nonferrous Gold Limited

('CNG' or the 'Company' and with its subsidiaries the "Group")

Interim Results for the Six-Month Period Ended 30 June 2020

China Nonferrous Gold Limited (AIM:CNG), the gold producer with the operational Pakrut Gold Project ('the Pakrut Project') in the Republic of Tajikistan, today announces its interim results for the six-month period ended 30 June 2020.

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

Highlights

   -- From January to June 2020, a total of 261,268 tons of ore was extracted 
      from the Pakrut gold mine; 344,652 tons of ore was processed at a grade 
      of 2.28 g/t; and 17,411.21 oz gold ingots was poured. 
 
   -- From January to June 2020, the Group sold 14,839.18 oz of gold ingots, 
      achieving sales revenue of US$24.33 million. 
 
   -- Since the outbreak of COVID-19 in Tajikistan on April 30 2020, the 
      Company has taken appropriate steps and effective measures to ensure that 
      staff at protected at site. To date operations at the mine site at Pakrut 
      continue as normal, and there are no confirmed or suspected cases in the 
      Company in Tajikistan or China. 
 
   -- After the outbreak of the Tajikistan epidemic, flights with China have 
      not been opened, the Company has organised a private chartered flight to 
      transport around 45 Chinese employees to Tajikistan from China, which has 
      taken off on 8 August 2020. We therefore remain confident that the annual 
      internal production target can be achieved. 
 

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

China Nonferrous Gold Limited

Yu Lixian, Chairman

Tel: [phone]

WH Ireland Limited (NOMAD & Broker)

Katy Mitchell, James Sinclair-Ford

Tel: [phone]

Blytheweigh (PR)

Tim Blythe

Tel: [phone]

Project Summary

The Pakrut Gold Project, of which CNG has 100 per cent ownership, is situated in Tajikistan approximately 120km northeast of the capital city Dushanbe. Pakrut is located within the Tien Shan gold belt, which extends from Uzbekistan into Tajikistan, Kyrgyzstan and Western China, and which hosts a number of multi-million ounce gold deposits.

About Tajikistan

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

Chairman's Statement

As Chairman of the board, it gives me great pleasure to present the Chairman's statement of the Interim Results for the Six-Month Period Ended 30 June 2020. Following the first year of successful complete production in 2019, the Pakrut gold mine entered steady state production and full operation in 2020, making the Group a significant gold producer in Tajikistan.

From January to June 2020, a total of 261,268 tons of ore was extracted from the Pakrut gold mine During that same six month period:

   -- 344,652 tons of ore was processed; 
 
   -- the average grade of the raw ore was 2.28 g/t; 
 
   -- the recovery rate of processing was 92.07%; 
 
   -- 9,979 tons of concentrate was produced from the processing plant; and 
 
   -- 8,924 tons of concentrate among them was treated in the smelter (the 
      comprehensive recovery rate of smelting was 85.96%) and 17,411.21 oz gold 
      ingots were poured. 
 

From 2020, the gold price began to rise, especially after March 2020, which has benefited the Group. From January to August 2020, the Group sold 21,314.66 oz of gold ingots, achieving sales revenue of US$36.51million (unaudited), with an average sales price of US$1,712.96 / oz. However, there can be no guarantee that these sales will be achieved for the rest of the year.

Financial Results

The Company continued its production and operation work during the first six months of 2020. Administration expenditure was US$8,063,474 (30 June 2019: US$6,306,764). The largest increase is the depreciation expense in relation to PPE mainly because CIP was moved into PPE and its depreciation began in 2019. The operating profit was US$1,503,000 (30 June 2019: US$278,000). Total cash equivalents at the end of the period amounted to US$19,548,292 (30 June 2019: US$16,147,939). As at 30 June 2020, the Group held net liabilities of $20,712,868 (30 June 2019: net liabilities $1,363,000).

Given the limited production and cash balances the Group has been reliant on support from its major shareholder, CNMC, and its associates. In April 2020, the Company drew down US$14.50 million on a new US$30 million loan facility with China Construction Bank (Asia) Corporation Limited, which is being used for general working capital purposes to fund the Pakrut gold mine. On June 30, 2020, the principal amount of CCB Macau's due loan of USD 5 million has been repaid.

The Group commenced full production in January 2019. As mentioned earlier, the Company currently has borrowings of c.US$362m (of which c.US$353m is the principal loan amount and the balance represents accrued interest), the majority of which is due for repayment before June 2021 (and a significant proportion of which is due for repayment before the end of December 2020). The Directors believe that the Company's major shareholder will continue to support the Company but in order to ensure the repayment of existing loans, a broader refinancing is required. Discussions are ongoing and are expected to be completed in the near term. Further updates will be provided when a refinancing package is entered into.

Outlook

With the normal production and operation of Pakrut gold mine, the Company is confident in its ability to achieve the production target of 680,000 tons of ore set at the beginning of this year. This is considered a prudent target in light of the uncertainties presented by the COVID pandemic.

The Company is continuing to enhance its production capacity. Whilst improving production, the Company is also focusing on perfecting and improving the smelting process by reducing production costs, increasing recovery rates and improving competitiveness.

While we have taken big strides in the production and operation of the Pakrut gold mine and achieved much, there are still challenges to overcome and targets to meet, all of which I am confident to accomplish in the coming months.

Overall, however, the uncertainty created by the COVID-19 pandemic on production and operations still exists in Tajikistan, and the long term effects are difficult to predict and estimate.

I would like to take this opportunity to thank all our employees, management and advisers for their continued hard work in 2020. I would also like to extend my thanks to all our stakeholders for their continued backing over the years. I very much look forward to updating our shareholders further on the mine developments, production levels, new strategy and direction.

Yu Lixian

Chairman

30 September 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 JUNE 2020

 
                         Unaudited          Unaudited        Audited 
                                            Six months 
                         Six months ended    ended 30 June   Year ended 31 
                         30 June 2020        2019            December 2019 
                   Note  US$'000            US$'000          US$'000 
 
Revenue                  24,329             20,881           49,157 
Cost of sales            (14,134)           (13,582)         (32,842) 
Gross profit             10,195             7,299            16,315 
 
Other Operating 
 income                  -                  -                116 
Administrative 
 and other 
 expenses                (8,063)            (6,307)          (16,337) 
(Loss)/Gain on 
 foreign 
 exchange                (629)              (714)            (905) 
Other operating 
 expenses                -                  -                (136) 
 
Operating 
 profit/(loss)           1,503              278              (947) 
Interest income          50                 218              270 
Finance costs            (8,465)            (9,812)          (20,796) 
                                                             - 
Loss before Tax          (6,927)            (9,316)          (21,473) 
 
Income tax               -                  (243)            (508) 
Loss for the 
 period 
 attributable to 
 owners                  (6,927)            (9,559)          (21,981) 
of the Company 
Other 
comprehensive 
income                   -                  -                - 
Total 
 comprehensive 
 income for the 
 period 
 attributable to 
 owners of the 
 Company                 (6,927)            (9,559)          (21,981) 
 
Earnings per 
Share 
Basic and diluted 
 (cents)           3     (1.81)             (2.49)           (5.75) 
 

All of the activities of the Group are classified as continuing.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

 
                       Unaudited          Unaudited          Audited 
                       30 June            30 June 2019       31 December 
                       2020US$'000        US$'000            2019US$'000 
Non-Current 
Assets 
Property, plant 
 and equipment     5   400,701            410,826            402,548 
Total Non-Current 
 Assets                400,701            410,826            402,548 
 
Current Assets 
Inventories            17,035             4,248              16,856 
Trade and other 
 receivables           6,373              6,912              4,766 
Cash and cash 
 equivalents           19,548             16,148             11,120 
Total Current 
 Assets                 42,956             27,308            32,743 
 
Non-Current 
Liabilities 
                   4 
Borrowings          4  (18,586)           (78,650)           (103,586) 
Provisions for 
 other 
 liabilities and 
 charges               (913)              (157,725)          (913) 
Total Non-Current 
 Liabilities           (19,499)           (236,375)          (104,499) 
 
 
Current 
Liabilities 
 
Borrowings         4    (362,077)          (837)             (267,527) 
Trade and other 
 payables              (82,792)           (202,285)          (77,050) 
Total Current 
 Liabilities           (444,870)          (203,122)          (344,577) 
Total Liabilities      (464,369)          (439,497)          (311,843) 
Net Liabilities        (20,712)           (1,363)            (13,785) 
 
Capital And 
Reserves 
Share Capital          38                 38                 38 
Share premium          65,901             65,901             65,901 
Other reserves         10,175             10,175             10,175 
Retained earnings      (96,826)           (77,477)           (89,899) 
Total Equity           (20,712)           (1,363)            (13,785) 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

AS AT 30 JUNE 2020

 
                      Unaudited             Unaudited             Audited 
                                                                  Year ended31 
                      Six months ended 30   Six months ended 30    Dec 2019 
                      June 2020 US$'000     June2019 US$'000       US$'000 
Cash flows from 
Operating 
Activities 
Loss before income 
 tax                  (6,927)               (9,316)               (21,473) 
Adjustments for: 
Finance income        (50)                  (218)                 (270) 
Finance cost          8,465                 9,812                 20,796 
Depreciation          3,741                 5,056                 7,722 
Foreign exchange      -                     -                     905 
Impairment            -                     -                     - 
Change in working 
capital: 
Inventory             178                   13,095                487 
Trade and other 
 receivables          (1,620)               (2,217)               (904) 
Trade and other 
 payables             (11,054)              (4,653)               (7,039) 
Other current assets  (13)                  (988)                 (154) 
Other current 
 liabilities          353                   1,109                 3,554 
Tax paid                                    (244)                 - 
Net cash flows from 
 Operating 
 Activities           2,906                 11,436                3,624 
 
Cash flows from 
Investing 
Activities 
Purchase of 
 property, plant and 
 equipment            (1,892)               (6,198)               (5,842) 
Payments for mining 
rights and 
construction in 
progress              -                     -                     - 
Disposal of PPE       -                     -                     - 
 Interest received     50                    218                   270 
 
Net cash used in 
 Investing 
 Activities           (1,840)               (5,980)               (5,572) 
 
Cash flows from 
Financing 
Activities 
Proceeds from 
 borrowings           14,550                20,000                20,000 
Repayment of 
 borrowings           (5,000)               (5,000)               (10,000) 
Interest paid         (2,186)               (12,671)              (5,295) 
 
Net Cash (used 
 in)/from Financing 
 Activities           7,364                 2,329                 4,705 
 
Net 
 Increase/(Decrease) 
 in Cash and Cash     8,428                 7,785                 2,757 
Equivalents 
Cash and cash 
equivalents at 
beginning of the 
period                 11,120                8,363                 8,363 
Cash and cash 
 equivalents at end 
 of the period        19,548                16,148                11,120 
 
 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 JUNE 2020

 
                                 Share    Share    Other    Retained  Total 
                                 capital  premium  reserve  earnings  equity 
                                 US$'000  US$'000  US$'000  US$'000   US$'000 
 
Balance at 1 January 2019        38       65,901   10,175   (67,918)  8,196 
 
Loss and total comprehensive 
 income for the period           -        -        -        (9,559)   (9,559) 
 
Balance at 30 June 2019          38       65,901   10,175   (77,477)  (1,363) 
 
Loss and total comprehensive 
 income for                      -        -        -        (12,442)  (12,442) 
the period 
Balance at 31 December 2019 
 (audited)                       38       65,901   10,175   (89,899)  (13,785) 
 
 
Balance at 1 January 2020        38       65,901   10,175   (89,899)  13,785) 
 
Loss and total comprehensive 
 income for the period           -        -        -        (6,927)   (6,927) 
 
Balance at 30 June 2020 
 (unaudited)                     38       65,901   10,175   (96,826)  (20,712) 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHSED 30 JUNE 2020

1. Accounting Policies

i) Basis of preparation

China Nonferrous Gold Limited (the "Company") is a company registered in the Cayman Islands. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2020 comprise the result of the Company and its subsidiaries (together referred to as the "Group") and have been prepared in accordance with the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statement" in preparing these interim financial statements.

The consolidated interim financial information for the period 1 January 2020 to 30 June 2020 is unaudited and has not been reviewed in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. In the opinion of the Directors the condensed interim financial information for the period presents fairly the financial position, and results from operations and cash flows for the period in conformity with the generally accepted accounting principles consistently applied.

The condensed interim financial information incorporates unaudited comparative figures for the interim period 1 January 2019 to 30 June 2019 and extracts from the audited financial statements for the year to 31 December 2019. The financial information contained in this interim report does not constitute statutory accounts.

The comparatives for the full year ended 31 December 2019 are not the Company's full statutory accounts for that year. A copy of the accounts for that year have been delivered to members. The auditor's report on those financial statements was unqualified.

The interim report has not been audited or reviewed by the Company's auditor. The key risks and uncertainties and critical accountancy estimates remain unchanged from 31 December 2019 and the accounting policies adopted are consistent with those used in the preparation of its financial statements for the year ended 31 December 2019.

ii) Cyclicality

The interim results for the six months ended 30 June 2020 are not necessarily indicative of the results to be expected for the financial year 2020. The operations of China Nonferrous Gold Limited may be subject to seasonal variations depending on the severity of snowfall levels at the mine site. Severe levels may impact the ability to continue operations and result in damage to the mine site.

2. Going Concern

The Interim Financial Statements have been prepared assuming the Company will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws and regulations.

In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the twelve months from the date of approval of the Interim Financial Statements. This information includes:

   -- Management prepared cash flow projections; 
 
   -- Estimations as to when full production will commence and first revenues 
      will be generated and associated cash flows will occur; 
 
   -- The ability to complete the mine site work within the stated timeframe 
      and budget; 
 
   -- Sources of funding from external sources; 
 
   -- Settle financial obligations as they fall due; 
 
   -- The continued financial support of the considered controlling party; and 
 
   -- The ability of management to renegotiate current financing arrangements 
      as was achieved in June 2020 in respect of the loan with China Nonferrous 
      Metals International Mining Co. Ltd. 
 
   -- The ultimate parent will continue to support the Group and therefore the 
      directors believe that funding and financial support will be forthcoming 
      if required although this is not guaranteed. 
 

As at the date of approval of these interim statements, and based upon consideration of the above, the Directors are satisfied that the Group has sufficient cash and loan facilities to finance the Group's operating expenses and any further development and construction of the Pakrut Gold Project that is required. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence and thus they continue to adopt the going concern basis of accounting in preparing the interim results.

3. Earnings per Share

 
                                           June 2020  June 2019  December 2019 
 
Basic and diluted earnings per             (1.81) 
share(cents)                                           (2.49) 
 
                                                                  (5.75) 
 
 

The basic earnings per share is calculated by dividing the loss attributable to equity holders after tax of US$6,927,214 (30 June 2019: US$9,558,940) by the weighted average number of shares in issue and carrying the right to receive dividend. For all the periods disclosed up to 2020, the total number of shares remain unchanged being 382,392,292 shares.

4. Borrowings

 
                                    June 2020  June 2019  December 2019 
                                    US$000     US$000     US$000 
 
Bank borrowings                     104,550    100,000    95,000 
Other loans                         276,113    260,010    276,113 
Less: unamortised borrowing costs   -          -          - 
Total                               380,663    360,010    371,113 
 
Non-current portion                 18,586     202,285    103,586 
 
Current portion                     362,077    157,724    267,527 
 

The fair value of borrowings equals their carrying amounts, as the impact of discounting is not significant.

In April 2020, the Company drew down US$14.50 million on a new US$30 million loan facility with China Construction Bank (Asia) Corporation Limited, which is being used for general working capital purposes to fund the Pakrut gold mine.

The Company extended the repayment period of loans in place with CNMC Trade Company Limited (CNMC Trade), totalling US$146.50 million, to December 2020. The Company currently has total debt facilities (including banking facilities), before interest, of c.US$353.7 million (being the US$341m announced in July 2020, plus the CNMIM loan of US$12.7m).

5. Property, Plant and Equipment

 
                       Office 
                       furniture 
                       and        Motor      Plant and   Producing  Assets under 
               Land    equipment  vehicles   machinery   Mines      construction  Total 
               US$000  US$000     US$000     US$000      US$000     US$000         US$000 
Cost 
 
At 1 January 
 2019          32      755        10,772     14,990      -          -             26,549 
Additions      -       152        -          2,129       -          3,561         5,842 
Transfer       -       -          -          -           398,639    761           399,400 
Disposals      -       (320)      (2,074)    -           -          -             (2,394) 
 
At 31 
 December 
 2019          32      587        8,698      17,119      398,639    4,322         429,396 
 
Additions      -       -          -          -           1,892      -             - 
Transfers      -       -          -          -           4,322      (4,322)       - 
Disposals      -       -          -          -           -          -             - 
 
At 30 June 
 2020          32      587        8,698      17,119      404,853    -             429,396 
 
Accumulated 
Depreciation 
At 1 January 
 2019          -       611        7,909      10,607      -          -             19,127 
Charge for 
 the period    -       31         392        869         8,823      -             10,116 
Disposals      -       (320)      (2,074)    -           -          -             (2,394) 
 
At 31 
 December 
 2019          -       322        6,227      11,476      8,823      -             26,849 
Charge for 
 the period            18         1,262      1,360       1.101                    3,741 
Disposals      -       -          -          -           -                        - 
 
At 30 June 
 2020          -       340        7,489      12,836      9,924                    30,589 
 
Net Book 
Value 
At 30 June 
 2020          32      247        1,209      4,283       394,929    -             400,701 
At 31 
 December 
 2019          32      265        2,471      5,643       389,816    4,322         402,548 
 

As the mine started full production from January 2019, all assets included in 'Mines under construction' are transferred to 'Producing mines' as part of Property, Plant and Equipment. Therefore, as at 31 December 2019 and 30 June 2020, there is nil balance being carried forward for 'Mines under construction'. Total depreciation is $3,741,760 for the 6 months period.

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China Nonferrous Gold Limited

 
    SOURCE: China Nonferrous Gold Limited 
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