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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Patagonia Gold Plc | LSE:PGD | London | Ordinary Share | GB00BF5B8R55 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 31.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMPGD
RNS Number : 9023R
Patagonia Gold PLC
27 September 2017
27 September 2017
Patagonia Gold Plc
("Patagonia" or the "Company")
Half Yearly Financial Statements
for the six months ended 30 June 2017
Patagonia Gold Plc (AIM:PGD), the mining company with gold and silver projects in the southern Patagonia region of Argentina, Chile and Uruguay, is pleased to announce its unaudited interim results for the six months ended 30 June 2017. The Company will host a webcast and presentation on the interim results today at 2.00 p.m. UK time (see below for details).
Financial Highlights
-- Gross revenues of US$12.8 million for H1 2017 (H1 2016: US$21.6 million) on sales of 10,452 oz AuEq at a price of US$1,233.13/oz. This lower figure is a result of delays associated with the technical difficulties at Cap-Oeste which impacted production.
-- Net profit attributable to the Company of US$9.1 million (H12016: US$2.2 million) mainly as a result of the disposal of Cap-Oeste Sur Este (COSE).
Operating Highlights
-- Total production during the first half amounted to 10,452 oz AuEq (H1 2016: 16,889 oz AuEq). The reasons for this reduced figure are twofold: the transition of mining away from Lomada to Cap-Oeste and secondly, the technical difficulties initially encountered due to the high clay content in the ore at Cap-Oeste and the consequent delays while the agglomeration circuit was installed to address this problem.
-- Lower recoveries associated with the technical difficulties contributed to higher than forecast operating costs. It is estimated that recoveries will improve by 15% to 80% as a result of installing the agglomeration circuit.
-- Lomada: Although mining ceased at Lomada in May 2016, production from the leach pads continues with performance during the first half 77% above plan at 3,809 oz Au. Gold production will continue while recoveries remain viable and this is likely until at least the end of the current year.
-- Cap-Oeste:
- Construction of the agglomeration circuit is complete with commissioning having started in July. It is estimated that recoveries will improve to 80% as a result of installing this circuit.
- 455,000 tonnes of ore at 1.65g/t Au and 52g/t Ag were extracted up to the end of July 2017, 5% below forecast owing to adverse weather conditions.
- The Company estimates that approximately 75,000 tonnes of agglomerated ore will be loaded on the pads up until the end of September 2017 after which more accurate guidance for both production and operating costs will be provided.
- Forecast completion date for the first pit shell remains on schedule for December 2017.
-- La Manchuria: JV options are being evaluated to realise cash flow and advance exploration.
-- Sarita: A 23.6km line of IP geophysics has been completed with several high priority targets identified and drill ready for testing before year end.
-- Exploration: Exploration work comprising mainly mapping, sampling and geophysical surveys continues across the Company's property portfolio both in Argentina and Uruguay.
Corporate Highlights
-- Disposal of COSE to a subsidiary of Pan American Silver Corp. (PAAS) at the end of May 2017 for a total consideration of US$15 million, of which half has been paid, with the remainder being deferred to 24 April 2018, plus a 1.5% net smelter return royalty.
-- In April 2017, the Company entered into an exclusive option agreement with a subsidiary of PAAS to acquire the Calcatreu gold asset in Rio Negro ("Calcatreu Option"). This six month option is exercisable at the discretion of Patagonia Gold before 24 October 2017. Due diligence is under way and will be completed within the six month option period.
Christopher van Tienhoven, CEO commented: "Despite the technical challenges we have experienced at Cap-Oeste which are now behind us, the Company has continued to perform in a prudent and efficient manner. Given improved gold prices, more favourable exchange rates and our ongoing commitment to reduce costs wherever possible, we are confident that the setbacks of the last few months have been successfully overcome and that the outlook for the second half is significantly more robust".
The unaudited interims report for the six months ended 30 June 2017 will shortly be available on the Company's website at www.patagoniagold.com.
Webcast Details
The presentation will be made available on the Company's website (www.patagoniagold.com) immediately prior to the webcast.
DATE: Wednesday, 27 September 2017
TIME: 14.00 BST
WEBCAST: http://webcasting.brrmedia.co.uk/broadcast/59bfaa7d6e25824f45f17a6d
A recording of the webcast will subsequently be made available on the Company's website - www.patagoniagold.com.
About Patagonia Gold
Patagonia Gold Plc is a mining company that seeks to grow shareholder value through exploration, development and production of gold and silver projects in the southern Patagonia region of Argentina. The Company is primarily focused on three projects: the flagship Cap-Oeste project, the La Manchuria project and the Lomada heap leach project. Patagonia Gold, indirectly through its subsidiaries or under option agreements, has mineral rights to over 220 properties in several provinces of Argentina, Chile and Uruguay and is one of the largest landholders in the province of Santa Cruz.
For more information, please contact:
Christopher van Tienhoven, Chief Executive Officer
Patagonia Gold Plc
Tel: +54 11 5278 6950
Angela Hallett
Strand Hanson Limited (Nominated Adviser and Broker)
Tel: +44 (0)20 7409 3494
This announcement contains inside information.
patagonia gold plc
Unaudited Condensed Consolidated Interim Financial Statements
(Expressed in U.S. dollars)
For the six months ended June 30, 2017
(Unaudited)
CEO's introduction
I am pleased to present Patagonia Gold Plc's ("Patagonia" or the "Company") unaudited interim report for the six months ended 30 June 2017.
A higher than projected gold price and a more competitive exchange rate, together with our ongoing cost reduction efforts have had a positive effect on the Company.
Revenues for the first six months of the year amounted to US$12.8 million (1H2016: US$21.6 million), below forecast owing mainly to lower initial production from the open pit mine at Cap-Oeste. However, the Company recorded net profits of US$9.1 million (1H2016: US$2.2 million) for the first six months of the year largely owing to the disposal of Cap-Oeste Sur Este project ("COSE"). Excluding the disposal, the Company achieved a net loss of US$3.8 million.
At the end of the period short term debt amounted to US$27.1 million (31 December 2016: US$18.0 million). The increase in the debt position is attributable to the capital cost of the agglomeration circuit and working capital requirements due to lower initial revenues from gold sales as a result of the recoveries issues at Cap Oeste. The outstanding debt is intended to be repaid in full, and surplus cash flow generated, from the increased production from Cap Oeste as this ramps up and achieves its target level of production.
At Lomada de Leiva ("Lomada"), where mining activity ceased in May 2016, operations continue to perform well with production of 3,809 oz of Au during the period, 77% above plan. Production is expected to continue at least until the end of the current year.
At Cap-Oeste, initial recoveries were impacted by the high clay content resulting in lower than expected production in the period with production of 6,643 oz AuEq during the period. However, following the construction of the agglomeration circuit, which was completed in August following the commissioning of the crusher, we should see much improved production at Cap-Oeste going forward as its operation begins to ramp up. The Company believes that the agglomeration circuit will increase overall gold recoveries to 80%, which is considerably above the initial forecast recoveries of 65% without the agglomeration circuit. Production guidance for Cap-Oeste for 2017 is still being estimated but it is expected that it will be below the previous estimate of 68,500 oz AuEq for the year announced on 5 May 2017.
The Company disposed of COSE on 31 May 2017 to a subsidiary of Pan American Silver Corp ("PAAS"), for a total consideration of US$15 million (US$7.5 million of which is deferred to the earlier of 31 May 2018 and the commencement of production), plus a 1.5% net smelter return royalty. This transaction allows PAAS to treat and produce, in its plant, additional ore from the COSE mineral deposit, and provides Patagonia with the opportunity to reduce its net debt position while focusing on new opportunities.
As announced on 25 April 2017, Patagonia entered into an exclusive option with a subsidiary of PAAS to acquire the Calcatreu gold asset in Rio Negro ("Calcatreu") ("Calcatreu Option"). This six month option is exercisable at the discretion of Patagonia before 24 October 2017. The Calcatreu Option represents an excellent opportunity for the Company, as a junior miner, to acquire a near world class project in a mining friendly jurisdiction with approximately 1 million oz AuEq, with good geological potential, enabling the Company to diversify its regional operations and risks. Due diligence is under way and is expected to be complete before the six month option period.
We believe that Cap-Oeste will provide the Company with the cash flow to meet its short term financing commitments and will allow Patagonia to continue expanding its resource base by exploring our core targets in the region: Sarita, Manchuria, the San Jose project in Uruguay as well as advancing the Calcatreu project.
Under the current political and economic scenario, I am confident that Patagonia will succeed in reaching all its operational and exploration goals for the present year. I look forward to keeping all of our shareholders up to date as we advance with our plans to increase shareholder value. We are excited about the future that lies ahead for the Company.
Christopher van Tienhoven
Chief Executive Officer
26 September 2017
OPERATIONS REPORT
The following is a summary of the Company's operations, together with an update on exploration activities for the year to date.
Company's Properties
Mining operations at the Lomada de Leiva gold project (the "Lomada Project" or "Lomada") ceased as of May 2016. However, leaching of the heap leach stocks will continue for as long as gold continues to be recovered and it remains viable to do so and is expected continue to at least the end of the current year.
Following initial lower than expected recoveries from the heap leach pad at Cap-Oeste due to the high clay content of the ore, the Company has installed an agglomeration circuit to improve production. With the arrival in August of the primary impact crusher, capacity has increased to 3,000 tonnes per day of ore agglomerated. Initial tests on a 10,000 tonne parcel which was loaded on to the heap-leach pad have proved to be very successful, with an excellent granulometry and sized distribution produced and consumable consumption within estimated ranges.
In May, the COSE project was sold to Minera Triton Argentina S.A. (a subsidiary of Pan American Silver Corp. "PAAS") for a total consideration of US$15 million plus a 1.5% NSR royalty. Work has already begun on the construction of the decline and the box cut with Minera Triton currently installing camp facilities and mobilising admin and mining personnel to commence underground mining.
Exploration of the El Tranquilo block was halted in November 2015. Exploration in Argentina has been concentrated at La Manchuria and Sarita where extensive geophysics and mapping campaigns have been completed over both areas with several drill targets delineated and ready for advancement. A number of options are currently being evaluated to realise cash flow and advance exploration on the block including the possibility of a joint venture.
Follow up geophysics and geochemical rock chip and soil programmes have also been completed on the Carreta Quemada and Chamizo projects in Uruguay. Drill targets have been identified again at zone 13, Colla and Carreta with the intention to drill these targets in late 2017.
The JORC Code compliant resources delineated as at 31 December 2016 (COSE removed) are listed in the table below:
Hot Features
Premium
Gross Resources (PGSA-Fomicruz)
----------------------------------------------------------------------------------------
MEASURED RESOURCES
----------------------------------------------------------------------------------------
Area Name Measured Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 825,626 1.66 42.81 2.28 44,107 1,136,395 60,577
----------------- ----------- ------ ------ ----- -------- ----------- ----------
TOTAL Measured 825,626 1.66 42.81 2.28 44,107 1,136,395 60,577
----------------- ----------- ------ ------ ----- -------- ----------- ----------
INDICATED RESOURCES
----------------------------------------------------------------------------------------
Area Name Indicated Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
La Manchuria 425,705 2.95 135 4.07 40,380 1,848,211 55,684
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 12,392,738 2.06 59.84 2.92 819,118 23,840,690 1,164,626
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Lomada* 4,000,465 0.48 NA NA 61,919 NA 61,919
----------------- ----------- ------ ------ ----- -------- ----------- ----------
TOTAL Indicated 16,818,908 1.70 47.51 2.37 921,417 25,688,901 1,282,229
----------------- ----------- ------ ------ ----- -------- ----------- ----------
INFERRED RESOURCES
----------------------------------------------------------------------------------------
Area Name Inferred Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
La Manchuria 1,469,020 1.53 49.4 1.92 72,335 2,335,236 90,682
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 8,392,000 1 25.79 1.43 269,000 696,000 385,000
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Lomada 3,412,270 0.672 NA NA 73,726 NA 73,726
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Total Inferred 13,293,290 0.99 8.18 1.32 423,061 3,495,236 565,408
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Net Attributable Resources (PGSA)***
----------------------------------------------------------------------------------------
MEASURED RESOURCES
----------------------------------------------------------------------------------------
Area Name Measured Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 743,063 1.66 42.81 2.28 39,696 1,022,756 54,519
----------------- ----------- ------ ------ ----- -------- ----------- ----------
TOTAL Measured 743,063 1.66 42.81 2.28 39,696 1,022,756 54,519
----------------- ----------- ------ ------ ----- -------- ----------- ----------
INDICATED RESOURCES
----------------------------------------------------------------------------------------
Area Name Indicated Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
La Manchuria 383,135 2.95 135 4.07 36,342 1,663,390 50,116
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 11,153,464 1.82 56.32 2.76 737,206 21,456,621 1,048,163
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Lomada* 3,600,419 0.48 NA NA 55,727 NA 55,727
----------------- ----------- ------ ------ ----- -------- ----------- ----------
TOTAL Indicated 15,181,117 1.78 51.66 2.52 868,875 25,212,511 1,228,706
----------------- ----------- ------ ------ ----- -------- ----------- ----------
INFERRED RESOURCES
----------------------------------------------------------------------------------------
Area Name Inferred Grade (g/t) Metal (oz)
----------------- ----------- --------------------- ---------------------------------
Tonnes Au Ag AuEq Au Ag AuEq**
----------------- ----------- ------ ------ ----- -------- ----------- ----------
La Manchuria 1,322,118 1.53 49.4 1.92 65,102 2,101,712 81,614
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Cap-Oeste 7,552,800 1 25.79 1.43 242,100 626,400 346,500
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Lomada 3,071,043 0.672 NA NA 66,353 NA 66,353
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Total Inferred 11,963,961 0.99 8.18 1.32 380,755 3,145,712 508,867
----------------- ----------- ------ ------ ----- -------- ----------- ----------
Notes:
* Lomada resource has not been depleted during 2016 to take account of production during the period, pending completion of third party estimation. Cap-Oeste pending third party depletion for mined material to end June 2017.
** AuEq oz were calculated on the prevailing Au:Ag ratio at the date of publication of the JORC/43-101 compliant resource reports for the individual projects.
*** The Company holds a 90% interest in PGSA, with the remaining 10% being held by the Santa Cruz government's wholly-owned mining company, Fomento Minero de Santa Cruz Sociedad del Estado ("FOMICRUZ"). The net attributable resource shows the 90% of the Cap-Oeste resource that is attributable to the Company.
COSE resource has removed following completion of its disposal on 31 May 2017.
Argentina
Cap-Oeste Project
The Cap-Oeste Project is the Company's flagship project and is located within a structural corridor extending six kilometres from the La Pampa prospect in the northwest to the Tango prospect in the southeast. To date, the Cap-Oeste deposit has an identified and delineated strike extent of 1.2 kilometres.
A low cost open pit mine with a heap leach processing facility similar to that at Lomada was completed in October 2016. However, as previously announced, initial gold and silver recoveries from the Cap-Oeste pad have been lower than expected due to the lack of percolation of the leaching solution owing to the high clay content in the upper sections of the Cap-Oeste orebody. The Company has sought to address this with the installation of the agglomeration circuit as detailed below. Accordingly, production at Cap-Oeste in the six months to 30 June 2016 were lower than expected with total production of 6,643 oz AuEq (5,788 oz of Au and 61,714 oz of Ag for a total estimated recovery of 29% Au and 10% Ag respectively).
The construction of the agglomeration circuit is now largely complete, with only the installation of the tunnel reclaim conveyor and feeder system to be completed, but this will not impact on production rates or recoveries. The primary impact crusher arrived on site mid-August and the Company estimates that approximately 75,000 tonnes will be agglomerated and loaded to the pad by the end of September. Once this initial load has completed its first leach cycle of 30 days, in November, the Company will provide further guidance on gold and silver production for the remainder of the year.
The Company continues to evaluate a possible pit optimisation as announced on 23 December 2016.
Mining operations are progressing well and only slightly behind schedule owing to a period of adverse weather conditions which affected logistics and operations during July. Approximately 60cm of snowfall and very low temperatures impeded blasting and mining operations for approximately one week. In addition, as announced on 31 August strong winds impacted installations, mining equipment and the main pad liner which have been repaired with the exception of the liner which has been ordered and will be laid down before the end of the year. However, there is sufficient space on the pad to continue production until the repair work is completed.
The total ore production of 455,000 tonnes at 1.65g/t Au and 52g/t Ag has been loaded onto the heap leach pad at the end of July. All ore mined from August onwards will be treated through the agglomerator before being loaded on to the heap leach pad and all material that has been loaded onto the pad prior to this date will be agglomerated once higher grade material from the mine is exhausted in early Q1 2018. Machine availability and utilisation has increased and forecast completion dates for the first pit shell remain on schedule for December 2017.
Lomada de Leiva Project
As previously announced, operations at Lomada were suspended in May 2016 with the entire mining fleet and the majority of the workforce relocated to the Cap-Oeste Project. The costs at Lomada were, as a result, significantly reduced when mining operations were suspended.
The Lomada pads continue to operate with production for the first half with 3,809 oz of Au recovered. The Company is assessing whether a finer comminution of the entire pad would increase recoveries before the pads undergo a final flush and rehabilitation work commences. This additional crushing would take place upon completion of the current Cap-Oeste pit design which is expected to be complete by January 2018.
Exploration Update Argentina
The brownfields exploration undertaken at Monte Leon with a view to sourcing additional material to the Cap Oeste heap leach project did not prove up sufficient resources both in terms of grade and tonnage to justify a mining operation that would be economically viable.
At La Manchuria project, a detailed pole-dipole induced polarisation (IP) survey was completed over approximately 3km(2) centred on the known low sulphidation epithermal mineralisation. 3D modelling of the data indicates that resistivity anomalies associated with known mineralisation extend well beyond the area historically drilled. A reverse circulation (RC) drilling programme is proposed to test these targets in the 2nd half of 2017.
The Company continues to evaluate the possibility of a joint venture arrangement for the La Manchuria project with third parties in order to realise some cash flow from the deposit and to increase the exploration spend on existing targets within the Manchuria block. The block is highly prospective with over 145,000 oz AuEq of JORC Code compliant Indicated and Inferred resources already delineated at La Manchuria.
Very extensive ground magnetic and pole-dipole IP geophysical surveys (23.6 line-km) have been completed at the Sarita project, located approximately 10 km NW of Hunt Mining's Mina Martha Ag-Au mine. The project hosts a widespread system of banded low sulphidation Au-Ag veins, encompassing a small rhyolitic dome complex. The geophysical surveys have significantly improved the definition of the vein locations, especially in areas of Quaternary cover and trenching programme has been completed that has verified the vein locations. Drill testing of the priority targets is scheduled before the end of the year.
Reconnaissance mapping and sampling at Los Toldos project has identified brecciated and mineralised epithermal veining with elevated precious metal grades at El Amanecer prospect. A pole-dipole IP survey has been proposed to define drill targets.
A wide spaced pole-dipole IP survey (13.2 line-km) was completed over the Cerro Vasco prospect, located in the northern part of La Paloma block, approximately 18 km west of the Cerro Negro deposit. Widespread alteration, intense silicification and auriferous veining has been identified within the approximately 25km(2) prospect area but much of the area is masked by a thin veneer of Quaternary gravels. Drilling is proposed to be completed before the end of the year. Drilling at the Bandurria prospect has not been possible due to the lack of a surface land agreement.
Reconnaissance mapping and sampling has been completed at Las Lajas project, located in the central part of the Deseado Massif. Two prospective areas of auriferous quartz veining have been defined and a ground magnetic survey was completed over El Licha vein.
A detailed ground magnetic survey was completed over the small Comino cateo located in the western sector of the Deseado Massif. The survey has defined a series of strong lineaments associated with hitherto unrecognised structures.
The Company is in the process of reviewing and rationalising its tenement portfolio with a view to prioritising targets and potentially securing more prospective areas. Regional target generation in Rio Negro province has been undertaken.
Uruguay
Exploration has continued on the San José project as part of the Trilogy JV, where the Company has the option to acquire up to 100% of Trilogy Mining Corporation's dominant land package in the sparsely explored Paleoproterozoic San José Greenstone Belt that shows strong similarities with the Birimian Greenstone Belt in West Africa.
After drilling during late 2016 confirmed the location of a regional auriferous shear zone at the Zona 13 prospect, a programme of pole-dipole IP was completed that has traced the structure a further 2.2 km to the southwest, where it remains open. RC drilling is proposed to test the structure before the end of the year.
IP surveys and geological mapping completed at the Zona 15 prospect have defined a regional shear zone, with extreme geophysical characteristics. It is interpreted to be a graphitic shear, possibly the regional Cufre Shear Zone, and a possible source for the strong gold values historically reported from panned concentrate samples in the vicinity. Two diamond drill holes are proposed to test the shear.
A wide spaced IP survey has been completed at the Carreta Quemada prospect and three trenches have been excavated which have returned broad zones of low-concentration Au mineralisation, but to date, no regional structural control for mineralisation has been identified. Very widespread and elevated Au in panned concentrate soil has been reported from this large prospect but exploration efforts are yet to define a high-grade source for the gold. A potential volcanogenic hosted massive sulphide (VHMS) target has been identified where strong base metal anomalism has been reported from surface sampling of metabasalt.
IP surveying and three trenches have been excavated at the Colla prospect after high grade gold was reported from surface sampling. The trenching exposed an iron oxide rich, muscovite-bearing metaquartzite interpreted as a shear zone that hosts elevated gold concentrations. A pole-dipole IP survey has defined a strong chargeability anomaly coincident with the interpreted shear zone that extends for at least 1.8 km and remains open to the southwest. A regional scale stream sediment sampling programme is in progress and a ground magnetic survey is proposed. Drilling will be undertaken as soon as the required statutory permits are granted.
A ground magnetic survey and geological mapping has been completed at the Nueva Helvecia prospect which appears to have confirmed the location of shear and breccia zones that may be the source of regional panned concentrate gold anomalies. A pole-dipole IP survey is proposed to define drill targets.
Matthew Boyes
Chief Operating Officer
26 September 2017
Condensed Consolidated Interim Statement of Comprehensive Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Note (unaudited) (unaudited) (audited)
--------------------------------- ----- ------------ ------------ ------------
$'000 $'000 $'000
Continuing operations
Revenue 12,847 21,601 30,041
Cost of sales (6,006) (11,998) (14,862)
------------ ------------ ------------
Gross profit 6,841 9,603 15,179
--------------------------------- ----- ------------ ------------ ------------
Project sale 15,000 - -
Project cost of sale (1,048) - -
------------ ------------ ------------
Gain on sale of project 13,952 - -
--------------------------------- ----- ------------ ------------ ------------
Exploration costs (1,056) (1,162) (2,344)
--------------------------------- ----- ------------ ------------ ------------
Administration costs
Share-based payments
charge 23 (16) (44) (67)
Other administrative
costs 5 (6,100) (4,186) (8,679)
--------------------------------- ----- ------------ ------------ ------------
(6,116) (4,230) (8,746)
Finance income 43 16 61
Finance costs (1,230) (617) (1,976)
Profit before taxes 12,434 3,610 2,174
--------------------------------- ----- ------------ ------------ ------------
Income tax charge (2,286) (1,142) (1,122)
-----
Profit for the period 10,148 2,468 1,052
--------------------------------- ----- ------------ ------------ ------------
Attributable to non-controlling
interest 20 1,003 277 140
Attributable to equity
share owners of the parent 9,145 2,191 912
10,148 2,468 1,052
Other comprehensive income
(loss)
Items that will not be
reclassified to profit
or loss:
(Loss) / Gain on revaluation
of available-for-sale
financial assets (1) 17 27
Items that may be reclassified
subsequently to profit
or loss:
Exchange loss on translation
of foreign operations (1,241) (1,614) (1,985)
--------------------------------- ----- ------------ ------------ ------------
Other comprehensive loss
for the period (1,242) (1,597) (1,958)
--------------------------------- ----- ------------ ------------ ------------
Total comprehensive income
/ (loss) for the period 8,906 871 (906)
--------------------------------- ----- ------------ ------------ ------------
Total comprehensive income
/ (loss) for the period
attributable to:
Non-controlling interest 1,003 277 140
Owners of the parent 7,903 594 (1,046)
--------------------------------- ----- ------------ ------------ ------------
8,906 871 (906)
--------------------------------- ----- ------------ ------------ ------------
Net profit / (loss) per
share 7
Basic profit / (loss)
per share 0.006 0.002 0.001
Diluted profit / (loss)
per share 0.006 0.002 0.001
--------------------------------- ----- ------------ ------------ ------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Financial Position
As at As at As at
30 June 30 June 31 December
2017 2016 2016
Note (unaudited) (unaudited) (audited)
--------------------------- ----- ------------ ------------ ------------
ASSETS $'000 $'000 $'000
Non-current assets
Property, plant
and equipment 9 17,565 10,884 15,628
Mineral properties 8 9,694 5,425 11,716
Mining rights 10 3,438 3,538 3,488
Available-for-sale
financial assets 13 32 22 31
Investments 13 - 325 -
Other receivables 11 4,396 6,176 7,687
Deferred tax asset 1,782 3,691 3,753
36,907 30,061 42,303
--------------------------- ----- ------------ ------------ ------------
Current assets
Inventory 14 17,998 2,593 10,163
Trade and other
receivables 12 13,795 5,574 2,044
Cash and cash equivalents 15 809 2,304 735
32,602 10,471 12,942
--------------------------- ----- ------------ ------------ ------------
Total assets 69,509 40,532 55,245
--------------------------- ----- ------------ ------------ ------------
LIABILITIES
Current liabilities
Short-term loans 17 27,075 11,482 18,010
Trade and other
payables 17 8,847 7,577 9,397
35,922 19,059 27,407
--------------------------- ----- ------------ ------------ ------------
Non-current liabilities
Long-term loans 18 5,069 1,386 8,201
Provisions 18 1,012 525 1,052
6,081 1,911 9,253
--------------------------- ----- ------------ ------------ ------------
Total liabilities 42,003 20,970 36,660
--------------------------- ----- ------------ ------------ ------------
EQUTIY
Share capital 19 20,643 20,847 19,587
Share premium account 138,700 142,450 131,602
Currency translation
reserve 8,829 5,260 18,991
Share-based payment
reserve 14,938 15,616 14,282
Accumulated losses (156,184) (164,325) (165,454)
--------------------------- ----- ------------ ------------ ------------
Equity attributable
to shareholders
of the parent 26,926 19,848 19,008
--------------------------- ----- ------------ ------------ ------------
Non-controlling
interest 20 580 (286) (423)
Total equity 27,506 19,562 18,585
--------------------------- ----- ------------ ------------ ------------
Total liabilities
and equity 69,509 40,532 55,245
--------------------------- ----- ------------ ------------ ------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Changes in Equity
(Unaudited)
Equity attributable to shareholders
of the parent
--------------------------------------------------------------------------------------------------------------------
Share Currency Share-based Total Non-
Share premium translation payment Accumulated attributable controlling Total
capital account reserve reserve losses to owners interests equity
Note $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
At 1 January
2016 15,690 154,090 (11,746) 17,238 (166,553) 8,719 (563) 8,156
Changes in
equity for
first
six months
of 2016
Share-based
payment 23 - - - 44 - 44 - 44
Issue of
share capital
Issue by
placing 19 7,186 3,593 - - - 10,779 - 10,779
Transaction
costs of
placing - (287) - - - (287) - (287)
Lapse of
options - - - (20) 20 - - -
Exchange
differences
on
translation
to dollars (2,029) (14,946) 18,621 (1,646) - - - -
Transactions
with owners 5,157 (11,640) 18,621 (1,622) 20 10,536 - 10,536
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
Profit for
the period - - - - 2,191 2,191 277 2,468
Other
comprehensive
income
(loss):
Revaluation
of available-
for-sale
financial
assets - - - - 17 17 - 17
Exchange
differences
on
translation
to dollars - - (1,615) - - (1,615) - (1,615)
Total
comprehensive
income
(loss) for
the period - - (1,615) - 2,208 593 277 870
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
At 30 June
2016 20,847 142,450 5,260 15,616 (164,325) 19,848 (286) 19,562
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
At 1 January
2016 15,690 154,090 (11,746) 17,238 (166,553) 8,719 (563) 8,156
Changes in
equity for
year
ended 31
December
2016
Share-based
payment 23 - - - 67 - 67 - 67
Issue of
share capital
Issue by
placing 19 7,186 3,593 - - - 10,779 - 10,779
Transaction
costs of
placing - (287) - - - (287) - (287)
Issue in
lieu of
payables 399 377 - - - 776 - 776
Lapse of
options - - - (160) 160 - - -
Exchange
differences
on
translation
to dollars (3,688) (26,171) 32,722 (2,863) - - - -
Transactions
with owners 3,897 (22,488) 32,722 (2,956) 160 11,335 - 11,335
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
Profit for
the year - - - - 912 912 140 1,052
Other
comprehensive
income
(loss):
Revaluation
of available-
for-sale
financial
assets - - - - 27 27 - 27
Exchange
differences
on
translation
to dollars - - (1,985) - - (1,985) - (1,985)
Total
comprehensive
income
(loss) for
the period - - (1,985) - 939 (1,046) 140 (906)
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
At 31 December
2016 19,587 131,602 18,991 14,282 (165,454) 19,008 (423) 18,585
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
Changes in
equity for
first
six months
of 2017
Share-based
payment 23 - - - 16 - 16 - 16
Lapse of
options - - - (126) 126 - - -
Exchange
differences
on
translation
to dollars 1,056 7,098 (8,920) 766 - - - -
Transactions
with owners 1,056 7,098 (8,920) 656 126 16 - 16
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
Profit for
the period - - - - 9,145 9,145 1,003 10,148
Other
comprehensive
income
(loss):
Revaluation
of available-
for-sale
financial
assets - - - - (1) (1) - (1)
Exchange
differences
on
translation
to dollars - - (1,242) - - (1,242) - (1,242)
Total
comprehensive
income
(loss) for
the period - - (1,242) - 9,144 7,902 1,003 8,905
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
At 30 June
2017 20,643 138,700 8,829 14,938 (156,184) 26,926 580 27,506
--------------- ----- -------- ----------------- -------------------- ------------------------ ------------------------ ------------- -------------------- ------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Cash Flows
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note $'000 $'000 $'000
------------------------------- ------- ------------ ------------ ------------
Operating activities
Net profit (loss) for
the period 12,434 2,468 2,174
Adjustments for:
Finance income 13 (43) (16) (61)
Finance costs 1,230 617 1,976
Depreciation and amortization 8,9&10 1,588 1,262 2,587
Non-cash adjustments - - (179)
Share issue in lieu
of payables - - 776
Increase in inventory (7,835) (340) (7,910)
Increase in trade and
other receivables (8,460) (3,528) (1,509)
Decrease in deferred
tax asset 1,971 1,099 1,037
(Decrease)/increase
in trade and other payables 17 (2,836) 1,206 2,755
(Decrease)/increase
in provisions 18 (40) (82) 445
Taxes paid - - (672)
Share-based payments
charge 23 16 44 67
Net cash used in operating
activities (1,975) 2,730 1,486
------------------------------- ------- ------------ ------------ ------------
Investing activities
Finance income 43 16 61
Purchase of property,
plant and equipment (3,944) (6,373) (12,521)
Additions to mineral
properties (271) (2,746) (9,931)
Increase in investments - (325) -
Proceeds from disposal 9 871 - 49
Net cash used in investing
activities (3,301) (9,428) (22,342)
------------------------------- ------- ------------ ------------ ------------
Financing activities
Finance costs (1,230) (617) (1,976)
Increase in loans 17&18 22,320 15,925 38,167
Repayment of loans 17&18 (16,220) (16,960) (25,609)
Proceeds from issue
of share capital 19 - 10,779 10,779
Transaction costs of
placing 19 - (287) (287)
Net cash from financing
activities 4,870 8,840 21,074
------------------------------- ------- ------------ ------------ ------------
Net (decrease)/increase
in cash and cash equivalents (406) 2,142 218
Cash and cash equivalents
at beginning
of year 735 1,694 1,694
Effects of exchange
rate fluctuations on
cash and cash equivalents 480 (1,532) (1,177)
Cash and cash equivalents
at end of period 15 809 2,304 735
------------------------------- ------- ------------ ------------ ------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
.
The financial information on pages [7 to 10] represent the results of the parent company Patagonia Gold Plc ("Patagonia Gold" or the "Company") and its subsidiaries, collectively known as the "Group".
1. Basis of preparation
Patagonia Gold Plc is a company registered in England and Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.
These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and with the Companies Act 2006 applicable to companies reporting under IFRS. The Group's unaudited condensed consolidated interim financial statements have also been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB"). This condensed consolidated financial information does not comprise statutory financial statements within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 December 2016 were approved by the Board of Directors on 27 March 2017. These financial statements which contained an unqualified audit report under Section 495 of the Companies Act 2006, with an emphasis of matter paragraph on the carrying value of investments in subsidiary companies, did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006, and have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.
The accounting policies applied in these condensed consolidated interim financial statements are consistent with those used in the annual consolidated financial statements for the year ended 31 December 2016. These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. There has been no change in critical accounting estimates from year-end.
2. Going concern
The attached financial statements are prepared on a going concern basis. Having assessed the revised cash flow projections after the COSE project disposal through September 2019, the Directors believe this basis to be appropriate for the following reasons.
Patagonia has successfully transformed itself from a pure exploration company to a fully fledged producer. Until Lomada started commercial production in 2013, Patagonia Gold's focus was exploration work in its portfolio of properties in Chubut, Rio Negro and Santa Cruz. The Company started a small heap leach operation at Lomada which had a relatively short life and in May 2016 the mining operation was suspended. The Lomada pad continues to produce gold at approximately 20 ounces per day and the Company has decided to leave the pad irrigating for the time being until the process becomes unviable.
Anticipating the end of the Lomada mine, the Company advanced the Cap-Oeste project through the construction of a heap leach operation similar to the one at Lomada.
With initial recoveries lower than estimated, the Company completed the installation of an agglomeration circuit to improve recovery rates which started commissioning in mid-July. With the agglomeration circuit now operating at 100% capacity the Directors believe that the cash flow generated from this project will be sufficient to meet its obligations and continue to lower the Company's debt position, while at the same time enabling it to continue with its exploration activities. In addition, with the proceeds from the disposal of the COSE project, Patagonia has lowered its debt requirements.
Considering the nature of the Group's current and planned activities and the excellent opportunity of the Calcatreu Option for the Company, the Directors have therefore concluded that the financial statements should be prepared on a going concern basis.
3. Recent accounting pronouncements
The following IFRS standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 January 2017 or later periods. The Company has not implemented early adoption:
-- IFRS 9 'Financial Instruments', effective for annual periods beginning on or after 1 January 2018. The amendments to IFRS 9 introduce extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new "expected credit loss" model for the impairment of financial assets;
-- IFRS 15 'Revenue from contracts with customers', IFRS presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts' and several revenue-related interpretations. Management do not consider that this will have a significant impact on the Group's financial statements; and
-- IFRS 16 'Leases', effective for annual periods beginning on or after 1 January 2019. IFRS 16 replaces IAS 17. It completes the IASB's project to overhaul lease accounting. Leases will be recorded on the statement of financial position in the form of right-of-use asset and a lease liability.
The effect of the new standards and interpretations have been considered by management and are not expected to result in a material adjustment to the consolidated financial statements.
4. Segmental analysis
Management do not currently regard individual projects as separable segments for internal reporting purposes with the exception of the Lomada Project, which commenced commercial production in Q3 2013 and the Cap-Oeste Project where construction work has been completed. All revenue in the period is derived from sales of gold and silver.
The Group's net profit and its geographic allocation of total assets and total liabilities may be summarised as follows:
Net profit/(loss)
Six months Six months
ended ended Year ended
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
-------------------- ----------- ----------- ------------
Argentina and
Chile (1) (8,763) (6,542) (12,542)
United Kingdom (808) (385) (631)
Argentina - Lomada
Project 2,497 9,395 14,229
Argentina - Cap
Oeste Project 3,270 - (4)
Argentina - COSE
Project (2) 13,952 - -
10,148 2,468 1,052
-------------------- ----------- ----------- ------------
(1) Segment represents other exploration projects.
(2) On 31 May 2017, the Company sold the COSE project for US$ 15 million with costs of sale of US$ 1.048 million.
Total assets
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
----------------------- -------- -------- ------------
Argentina, Uruguay
and Chile (1) 8,792 20,760 12,862
Argentina - Lomada
Project 1,915 9,374 7,078
United Kingdom 1,264 998 994
Argentina - COSE
Project 7,506 962 905
Argentina - Cap-Oeste
Project 50,032 8,438 33,406
69,509 40,532 55,245
----------------------- -------- -------- ------------
(1) Segment represents other exploration projects.
Total liabilities
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
----------------------- -------- -------- ------------
Argentina, Uruguay
and Chile (1) 23,569 13,972 20,449
Argentina - Lomada
Project 795 2,389 834
United Kingdom 10,359 950 6,892
Argentina - COSE - - -
Project
Argentina - Cap-Oeste
Project 7,280 3,659 8,485
42,003 20,970 36,660
----------------------- -------- -------- ------------
(1) Segment represents other exploration projects.
The Group's geographic allocation of exploration costs is as follows:
Six months Six months
ended ended Year ended
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
Argentina (1) 1,056 1,162 2,115
Uruguay - - 229
1,056 1,162 2,344
--------------- ----------- ----------- ------------
(1) Segment represents exploration projects other than the Lomada Project, Cap-Oeste Project and the COSE Project.
From 1 September 2010 onwards, expenditures incurred at the Lomada Project are capitalised and disclosed as mineral properties - mining assets (See Note 8). From 1 April 2011 certain costs are included in inventory.
From 1 January 2016 onwards, expenditures incurred at the Cap-Oeste Project are capitalised and disclosed as mineral properties - mining assets (See Note 8). From 1 October 2016 certain costs are included in inventory.
Exploration costs incurred at all the other projects are written off to the statement of comprehensive income in the period they were incurred.
5. Other administrative costs
Six months Six months
ended ended Year ended
30 June 30 June 31 December
(Thousands of $) 2017 2016 2016
---------------------------- ----------- ----------- ------------
General and administrative 2,136 1,277 2,598
Argentine statutory
taxes 329 347 1,036
Professional fees 237 315 674
Payments under operating
leases 56 61 109
Foreign currency loss 2,919 1,459 2,616
Parent and subsidiary
company Directors'
remuneration 140 310 444
Profit on sale of assets - (71) (68)
Depreciation charge 1,538 1,214 2,487
Amortisation of mining
rights 50 50 100
Depreciation allocated
to inventory (1,412) (845) (1,565)
Depreciation allocated
to mineral properties - (83) -
VAT expense/(income) 33 94 114
Consultancy fees 74 58 134
6,100 4,186 8,679
---------------------------- ----------- ----------- ------------
6. Remuneration of Directors and key management personnel
Parent company Directors' emoluments:
Six months Six months
ended ended Year ended
(Thousands 30 June 31 December
of $) 30 June 2017 2016 2016
------------ ------------- ----------- ------------
Directors
fees 23 193 208
Salaries 60 125 182
83 318 390
------------ ------------- ----------- ------------
In the six months ended 30 June 2017, the highest paid Director received $60 thousand (six months ended 30 June 2016: $125 thousand). This amount does not include any share-based payments charge.
Key management personnel emoluments:
Six months Six months
ended ended Year ended
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
----------------------- ----------- ----------- ------------
Share-based payments
charge 18 44 67
Salaries 60 160 273
Other compensation,
including
short-term benefits 23 258 268
101 462 608
----------------------- ----------- ----------- ------------
7. Profit / (Loss) per share
The calculation of basic and diluted earnings per share is based on the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
----------------------------------- -------------- --------------
Profit after tax
(Thousands of $) 9,145 2,191 912
Weighted average
number of shares 1,587,749,605 1,556,918,389 1,391,295,477
Basic and diluted
profit per share
($) 0.006 0.002 0.001
-------------------- -------------- -------------- --------------
At 30 June 2017, there were 93,183,000 (30 June 2016: 94,958,000; 31 December 2016: 93,508,000) share options in issue, which would have a potentially dilutive effect on the basic profit per share in the future.
During 2016, the 24,705,000 warrants that were in issue at 30 June 2016 expired without being exercised.
8. Mineral properties
Assets
Surface in the
course
Mining rights of
(Thousands of
$) assets acquired construction Total
---------------------- ------------------- ---------------------- ---------------- -------
Cost
At 1 January 2016 2,302 1,220 1,099 4,621
Additions - - 2,746 2,746
Disposals - - - -
Exchange differences (269) (165) (149) (583)
----------------------
At 30 June 2016 2,033 1,055 3,696 6,784
---------------------- ------------------- ---------------------- ---------------- -------
Additions 7,185 - - 7,185
Disposals - - - -
Transfers 2,736 - (2,736) -
Exchange differences (158) (62) (55) (275)
---------------------- ------------------- ---------------------- ---------------- -------
At 31 December
2016 11,796 993 905 13,694
---------------------- ------------------- ---------------------- ---------------- ------- At 1 January 2017 11,796 993 905 13,694 Additions 271 - - 271 Disposals - - (871) (871) Exchange differences (404) (37) (34) (475) At 30 June 2017 11,663 956 - 12,619 ---------------------- ------------------- ---------------------- ---------------- ------- Amortization At 1 January 2016 1,341 - - 1,341 Charge for the period 208 - - 208 Exchange differences (190) - - (190) ---------------------- At 30 June 2016 1,359 - - 1,359 ---------------------- ------------------- ---------------------- ---------------- ------- Charge for the period 76 - - 76 Exchange differences 543 - - 543 ---------------------- ------------------- ---------------------- ---------------- ------- At 31 December 2016 1,978 - - 1,978 ---------------------- ------------------- ---------------------- ---------------- ------- At 1 January 2017 1,978 - - 1,978 Charge for the period 47 - - 47 Exchange differences 900 - - 900 At 30 June 2017 2,925 - - 2,925 ---------------------- ------------------- ---------------------- ---------------- ------- Net book value At 30 June 2016 674 1,055 3,696 5,425 ---------------------- ------------------- ---------------------- ---------------- ------- At 31 December 2016 9,818 993 905 11,716 ---------------------- ------------------- ---------------------- ---------------- ------- At 30 June 2017 8,738 956 - 9,694 ---------------------- ------------------- ---------------------- ---------------- -------
Mining assets
The Lomada Project completed the trial heap leach phase and entered full commercial production in Q3 2013. From 1 September 2010, all development costs incurred in respect of the project have been capitalised as mineral properties - mining assets. The revenue received from the sale of gold and silver recovered from the Lomada trial heap phase was offset against the capitalised costs of Lomada Project development in compliance with IAS 16. Amortisation is charged based on the unit-of-production method.
The Company completed the development of Cap-Oeste Project in September 2016, entering into production in the last quarter of the year. As a result of the experience gained at Lomada, no trial production period was required at Cap-Oeste. Revenue from commercial production was therefore recognised from the outset. The development expenditure capitalised will be amortised based on the unit of production method.
Trilogy Mining Corporation
In January 2016, Patagonia Gold entered into an earn-in agreement with Trilogy Mining Corporation ("Trilogy") in relation to the San José Project in Uruguay. This agreement with Trilogy represents a great opportunity to acquire additional gold projects with good geological potential in a new jurisdiction, enabling the Company to diversify its regional operations and risks. This has been recognised within mining assets additions at a cost of $1.071 million. No fair value has been attributed to the future potential investment or earn-in at this stage, the Directors consider it to be too early to ascribe any value to this. The Directors have considered and concluded that no impairment in value is needed at 30 June 2017. This investment was made directly by the parent Company and is therefore reflected in the parent Company balance sheet as well as that of the Group.
Surface rights
The Company owns the surface rights to over 63,000 hectares of land encompassing the Estancia La Bajada, Estancia El Tranquilo and the Estancia El Rincon.
The Company has clear title and outright ownership over Estancia La Bajada and Estancia El Tranquilo. There is a back in right granted to the sellers under Estancia El Rincon's title deed whereby the Company irrevocably committed to resell the estancia to its former owner in the event that two consecutive years elapse without mining activities. Current activity on this estancia includes the Lomada project.
Assets in the course of construction
From 1 March 2011 to 31 May 2017, exploration costs on the COSE Project were capitalised as mineral properties - assets in the course of construction. On 31 May 2017, the Company completed the sale of the COSE project to a subsidiary of Pan American Silver Corp. for a total consideration of US$15 million.
9. Property, plant and equipment
Office
equipment Machinery Improvements
and and and
(Thousands
of $) vehicles equipment Buildings Plant advances Total
-------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
Cost
At 1 January
2016 548 5,309 512 5,922 32 12,323
Additions 351 299 - 19 5,704 6,373
Transfers - 28 - - (28) -
Disposals (52) - - - - (52)
Exchange
differences (31) (718) (70) (801) (5) (1,625)
--------------
At 30 June
2016 816 4,918 442 5,140 5,703 17,019
-------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
Additions 461 5,197 - 4,229 - 9,887
Transfers - - - - - -
Disposals - - - - - -
Exchange
differences (64) (271) (25) (300) (3,738) (4,398)
-------------- ----------------
At 31
December
2016 1,213 9,844 417 9,069 1,965 22,508
-------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
At 1 January
2017 1,213 9,844 417 9,069 1,965 22,508
Additions 13 315 - 45 3,571 3,944
Transfers - 665 - - (665) -
Disposals - - - - - -
Exchange
differences (31) (371) (16) (341) (74) (833)
At 30 June
2017 1,195 10,453 401 8,773 4,797 25,619
-------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
Depreciation
At 1 January
2016 331 1,742 43 3,880 - 5,996
Disposals (52) - - - - (52)
Charge for
the period 54 270 5 675 - 1,004
Exchange
differences (4) (247) (7) (555) - (813)
--------------
At 30 June
2016 329 1,765 41 4,000 - 6,135
-------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
Disposals - - - - - -
Charge for
the period 95 589 4 511 - 1,199
Exchange
differences (62) (139) (1) (252) - (454) -------------- ---------------- At 31 December 2016 362 2,215 44 4,259 - 6,880 -------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------ At 1 January 2017 362 2,215 44 4,259 - 6,880 Disposals - - - - - - Charge for the period 100 763 4 624 - 1,491 Exchange differences (4) (121) (2) (190) - (317) At 30 June 2017 458 2,857 46 4,693 - 8,054 -------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------ Net book value At 30 June 2016 487 3,153 401 1,140 5,703 10,884 -------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------ At 31 December 2016 851 7,629 373 4,810 1,965 15,628 At 30 June 2017 737 7,596 355 4,080 4,797 17,565 -------------- ---------------- --------------- ---------------- ------------------ ------------------- ------------------
Improvements and advances relate to the development and modification of plant, machinery and equipment, including advance payments. Additions in 2016 represented advance payments relating to the agglomeration circuit that started commissioning in mid-July 2017.
10. Mining rights (Thousands of $) Amount ------------------------- ------------------- At 1 January 2016 3,588 Additions - Amortisation charge for the period (50) Exchange differences - At 30 June 2016 3,538 -------------------------- ------------------- At 1 January 2016 3,588 Additions - Amortisation charge for the year (100) Exchange differences - At 31 December 2016 3,488 -------------------------- ------------------- At 1 January 2017 3,488 Additions - Amortisation charge for the period (50) Exchange differences - At 30 June 2017 3,438 -------------------------- -------------------
On 14 October 2011, Patagonia Gold, PGSA and Fomicruz entered into a definitive strategic partnership agreement in the form of a shareholders' agreement ("Fomicruz Agreement") to govern the affairs of PGSA and the relationship between the Company, PGSA and Fomicruz. Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine approximately 100,000 hectares of Fomicruz's mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA. The Fomicruz Agreement establishes the terms and conditions of the strategic partnership for the future development of certain PGSA mining properties in the Province. The Company will fund 100% of all exploration expenditures on the PGSA properties to the pre-feasibility stage, with no dilution to Fomicruz. After feasibility stage is reached, Fomicruz is obliged to pay its 10% share of the funding incurred thereafter on the PGSA properties, plus annual interest at LIBOR +1% to the Company. Such debt and interest payments will be guaranteed by an assignment by Fomicruz of 50% of the future dividends otherwise payable to Fomicruz on its shares. Over a five year period, the Company through PGSA is required to invest $5.0 million in exploration expenditures on the properties contributed by Fomicruz, whose rights to explore and mine were contributed to PGSA as part of the Fomicruz Agreement. The Company will manage the exploration and potential future development of the PGSA properties.
Pursuant to IFRS 2 Share-based Payment, the mining rights acquired have been measured by reference to the estimated fair value of the equity interest given to Fomicruz. Management has estimated the fair value of the 10% interest in PGSA acquired by Fomicruz, on or about 14 October 2011 at $4.0 million. In determining this fair value estimate, management considered many factors including the net assets of PGSA and the illiquidity of the 10% interest. This amount has been recorded as an increase in the equity of PGSA and as a mining right asset. In the consolidated financial statements, the increase in equity in PGSA has been recorded as non-controlling interest. The initial share of net assets of PGSA ascribed to the non-controlling interest amounted to $4.0 million.
Management do not consider there to be any indications of impairment and no review of the carrying value has been undertaken.
The mining rights acquired by PGSA are for a forty-year period from the date of the agreement. As indicated above, these mining rights have been recorded as an intangible asset and are amortised on a straight-line basis over forty years commencing in 2012.
11. Other receivables
Non-current assets
As at As at As at
(Thousands of 30 June 31 December
$) 30 June 2017 2016 2016
------------------- ------------- -------- ------------
Recoverable VAT 3,939 5,878 7,388
Other receivables 457 298 299
4,396 6,176 7,687
------------------- ------------- -------- ------------
The Directors have considered in year and post year-end approvals set by the Mining Secretary in Argentina and consider the VAT receivable as at 30 June 2017 to be recoverable in full and no provision is considered necessary. Good progress has been made during 2017 to recover VAT receivables that arose in prior years. The VAT balances arising are largely due to the Group in less than one year and the Directors are confident that an element of the balances will be recovered in this time period. These amounts have been classified as a non-current asset as there remains uncertainty over the exact timing of recovery, as management's on-going dialogue with the government indicate that approval by the Mining Secretary and receipt of some of the funds may require a time frame of more than one year.
12. Trade and other receivables
Current assets
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
------------------- -------- -------- ------------
Other receivables 481 587 589
Sale of project
(COSE) 7,500 - -
FOMICRUZ (1) 454 3,011 -
Prepayments and
accrued income 20 21 22
UK Recoverable
VAT 3 7 1
ARG Recoverable
VAT 5,337 1,948 1,432
13,795 5,574 2,044
------------------- -------- -------- ------------
(1) See Note 10.
All trade and other receivable amounts are short-term.
The carrying value of all trade and other receivables is considered a reasonable approximation of fair value.
There are no past due debtors.
13. Available-for-sale financial assets, finance income and Investments
Available-for-sale financial assets
The Company holds available-for-sale financial assets in listed equity securities that are publically traded on the AIM market. Fair values have been determined by reference to their quoted bid prices at the reporting date. The following unrealised losses are included in accumulated other comprehensive income.
As at As at As at
30 June 30 June 31 December
(Thousands of $) 2017 2016 2016
----------------------- -------- -------- ------------
Opening balance 31 7 7
Profit for the period 1 15 24
Closing balance 32 22 31
----------------------- -------- -------- ------------
The following table presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:
(Thousands Level Level Level of $) 1 2 3 Total ------------------- ------ ------ ------ ------ As at 30 June 2017 Listed securities 32 - - 32 ------------------- ------ ------ ------ ------ As at 30 June 2016 Listed securities 22 - - 22 ------------------- ------ ------ ------ ------ As at 31 December 2016 Listed securities 31 - - 31 ------------------- ------ ------ ------ ------
Finance Income
As at As at As at
30 June 30 June 31 December
(Thousands of $) 2017 2016 2016
------------------- -------- -------- ------------
Bank Interest 43 16 61
Investment income - - -
Finance income 43 16 61
------------------- -------- -------- ------------
14. Inventory
Inventory comprises gold held on carbon and in the pile, plus consumables, and is valued by reference to the costs of extraction, which include mining and processing activities. Inventory and work in process is valued at the lower of the costs of extraction or net realisable value. Inventories sold are measured by reference to the weighted average cost.
15. Cash and cash equivalents
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
--------------------- -------- -------- ------------
Bank and cash
balances 725 2,242 657
Short-term deposits 84 62 78
809 2,304 735
--------------------- -------- -------- ------------
16. Finance lease obligations
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
----------------- -------- -------- ------------
Within one year 27,075 11,482 18,010
Within two to
three years 5,070 1,386 11,240
32,145 12,868 29,250
----------------- -------- -------- ------------
At 30 June 2017 PGSA had finance lease agreements for thirteen Toyota vehicles, two Ford F-400 trucks, one Sprinter passenger van and one Volvo truck.
17. Trade and other payables
Current liabilities
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
------------------ -------- -------- ------------
Trade and other
payables 8,416 6,671 8,951
Income tax 276 - 271
Short term loans 27,075 11,482 18,010
Other accruals 155 906 175
35,922 19,059 27,407
------------------ -------- -------- ------------
The carrying values of trade and other payables are considered to be a reasonable approximation of fair value.
The Group takes short term loans for the purpose of financing ongoing operational requirements. The Group's short term loans are denominated in USD and are at fixed rates of interest. Loans are provided from a range of banks.
18. Long term loans and provisions
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
----------------- -------- -------- ------------
Long term loans 5,069 1,386 8,201
Provisions 1,012 525 1,052
6,081 1,911 9,253
----------------- -------- -------- ------------
The Group takes long term loans for the purpose of financing ongoing operational requirements. The Group's long term loans granted to PGSA are denominated in $ and are at fixed rates of interest. Long term loans are provided by an Argentinian bank and backed by a Letter of Guarantee from the Company.
The carrying values of the provisions are considered to be a reasonable approximation of fair value. The timing of any resultant cash outflows are uncertain by their nature. The movement in the provisions are comprised of the following:
Reclamation
and
(Thousands remediation
of $) provision(i) Tax provision(ii) Other(iii) Total
---------------------- -------------- ------------------ ----------- ------
Balance at
1 January 2017 861 161 30 1,052
Net additions - - - -
Use of allowance - - - -
Exchange differences (32) (6) (2) (40)
Balance at
30 June 2017 829 155 28 1,012
---------------------- -------------- ------------------ ----------- ------
(i) Reclamation and remediation provision relates to the environmental impact of works undertaken at the balance sheet date.
(ii) Tax provision for withholding tax on foreign suppliers.
(iii) Provision for road traffic accident. In October 2011 and March 2012, following a fatal road traffic accident in Argentina, compensation claims were made outside of the life insurance policy held by PGSA. These are non-judicial claims against PGSA that have been partially settled through a mediation process among PGSA, the automobile insurance company, and the claimants. According to those settlement agreements, the automobile insurance company paid the agreed compensations to the claimants, while PGSA committed to afford some of the court expenses and settlement fees. On 7 October 2014, PGSA was notified of the judicial complaint for compensation for moral damages, loss of economic aid, and expenses, filed by the inheritors of one of the victims against PGSA, amounting to US$0.13 million (AR$2.1 million) plus interest. As at 30 June 2017, although the plaintiff claims compensation relating to loss of economic aid and expenses, those items have already been covered under an out-of-court previous settlement by the labour risk insurance company of PGSA. As at that date, the claim remains partially outstanding with respect to the moral damages item and a provision of US$28.5 thousand (AR$470 thousand) has been recorded.
19. Share capital
Authorised
Issued and fully paid ordinary
shares of 1p each Number of
ordinary
($0.013) shares Amount
------------------------------------ ------------------------- ---------------------
At 1 January 2016 1,059,955,427 $ 15,690
Issue by placing 496,962,962 7,186
Exchange difference on translation
to $ - (2,029)
At 30 June 2016 1,556,918,389 $ 20,847
------------------------------------ ------------------------- ---------------------
At 1 January 2016 1,059,955,427 $ 15,690
Issue by placing 496,962,962 7,186
Issue in lieu of professional
fees 666,666 12
Issue in lieu of Director's
fees 30,164,550 387
Exchange difference on translation
to $ - (3,688)
At 31 December 2016 1,587,749,605 $ 19,587
------------------------------------ ------------------------- ---------------------
At 1 January 2017 1,587,749,605 $ 19,587
Exchange difference on translation
to $ - 1,056
At 30 June 2017 1,587,749,605 $ 20,643
------------------------------------ ------------------------- ---------------------
20. Non-controlling interest
GROUP
(Thousands of $) Amount --------------------------- ------ At 1 January 2017 (423) Share of operating profits 1,003 ----------------------------- ------ At 30 June 2017 580 ----------------------------- ------
On 14 October 2011, Patagonia Gold, PGSA and Fomicruz entered into the Fomicruz Agreement (Note 10). Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine approximately 100,000 hectares of Fomicruz's mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA.
The fair value of the rights to explore and mine approximately 100,000 hectares has been estimated by management at $4.0 million in accordance with IFRS 2 Share-based Payments. This amount has been recorded as an increase in the equity of PGSA and as mining rights. In the consolidated financial statements, the increase in equity of PGSA has been recorded as non-controlling interest.
The share of operating profit (losses) relates to Lomada de Leiva which commenced production in 2013.
The share of operating profits relates to Lomada de Leiva which commenced production in 2013 and Cap-Oeste which commenced production in 2016.
21. Operating lease commitments
At the balance sheet date, the Group had outstanding annual commitments under non-cancellable operating leases. The totals of future minimum lease payments under non-cancellable operating leases for each of the following periods are:
As at As at As at
(Thousands of 30 June 30 June 31 December
$) 2017 2016 2016
------------------ -------- -------- ------------
Operating leases
which expire:
Within one year 141 76 32
Within two to
five years 168 11 12
After five years - - -
309 87 44
------------------ -------- -------- ------------
The Group has a number of operating lease agreements involving office and warehouse space with maximum terms of three years.
22. Related parties
During the period, the following transactions were entered into with related parties:
Six months Six months
ended ended Year ended
(Thousands of Notes 30 June 30 June 31 December
$) 2017 2016 2015
--------------- ------- ----------- ----------- ------------
Cheyenne S.A. (i) - 12 11
Agropecuaria
Cantomi S.A. (ii) 39 58 92
--------------- ------- ----------- ----------- ------------
(i) During the period the Group paid Cheyenne S.A. ("Cheyenne") for the provision of a private plane to facilitate occasional travel to outlying areas for Directors and senior employees. Cheyenne is a related party because Carlos J. Miguens, the Company's Chairman, is a shareholder of Cheyenne.
(ii) During the period the Group paid Agropecuaria Cantomi S.A. ("Agropecuaria") for the provision of an office in Buenos Aires. Agropecuaria is a related party because Carlos J. Miguens, the Company's Chairman, is a director and a shareholder of Agropecuaria.
23. Share-based payments
The Group operates a share option plan under which certain employees and Directors have been granted options to subscribe for ordinary shares of the Company.
The number and weighted average exercise prices of share options are as follows:
30 June 2017 31 December 2016
------------------------------------------ ------------------------------------------
Weighted Weighted
average average
Number Number
exercise price of exercise price of
pence $ options pence $ options
------------------- ------------ -------------- ------------ ------------ -------------- ------------
Outstanding
at the beginning
of the period 14.01 $0.171 93,508,000 13.97 $0.207 95,158,000
Granted during - - - - - -
the period
Exercised during - - - - - -
the period
Lapsed during
the period 8.11 0.102 (1,450,000) 11.63 0.143 (1,650,000)
------------------- ------------ -------------- ------------ ------------ -------------- ------------
Outstanding and
exercisable at
the end of the
period 14.10 $0.183 92,058,000 14.01 $0.171 93,508,000
------------------- ------------ -------------- ------------ ------------ -------------- ------------
Options outstanding at 30 June 2017 have an exercise price in the range of $0.033 (2.50p) per option to $0.806 (62.00p) per option and a weighted average contractual life of 4.6372 years.
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes model. Details of contractual life and assumptions used in the model are disclosed in the table below.
Six months
ended Year ended
30 June 31 December
2017 2016
-------------------------------- --------------- ---------------
Weighted average share price 2.50p ($0.033) 2.50p ($0.031)
Exercise price 2.50p ($0.033) 2.50p ($0.031)
Expected volatility (expressed
as a percentage used in the
modelling under Black-Scholes
model) 52.00% 52.00%
Dividend yield nil nil
Option life (maximum) 10 years 10 years
Risk free interest rate (based
on national government bonds) 0.5% 0.5%
-------------------------------- --------------- ---------------
The expected volatility is wholly based on the historic volatility (calculated based on the weighted average remaining life of the share options).
All options are share settled and there are no performance conditions attached to the options.
Amounts expensed for the year from share-based payments are as follows:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
(Thousands of $) 2017 2016 2016
--------------------------- ----------- ----------- ------------
Part vested options
granted in prior periods 16 44 67
----------- -----------
16 44 67
--------------------------- ----------- ----------- ------------
The share-based payments charge is a non-cash item.
The total number of options over ordinary shares outstanding at 30 June 2016 was as follows:
Remaining
Exercise contractual
Date of No of price life
grant Employees entitled options (pence) (years)
-------------- ------------------------ ----------- --------- -------------
3 June 2008 Director and employees 1,125,000 8.0 0.92
9 June 2009 Employees 1,175,000 12.0 1.94
23 June Directors and
2009 senior management 17,913,000 12.25 1.98
17 June Directors and
2010 employees 5,850,000 15.00 2.97
1 August
2010 Employee 300,000 15.00 3.09
10 February
2011 Directors 5,500,000 11.00 3.62
21 February
2011 Senior management 800,000 11.00 3.65
9 May 2011 Employees 500,000 43.50 3.86
Directors and
13 May 2011 senior management 4,400,000 11.00 3.87
24 May 2011 Senior management 1,000,000 39.00 3.90
10 June
2011 Employees 1,250,000 11.00 3.95
10 June
2011 Employees 925,000 40.00 3.95
15 August
2011 Employee 200,000 62.00 4.13
1 September
2011 Senior management 500,000 11.00 4.17
1 November
2011 Directors 750,000 11.00 4.34
1 November
2011 Directors 750,000 50.25 4.34
6 December
2011 Employee 20,000 54.00 4.44
31 January Directors and
2012 senior management 4,500,000 11.00 4.59
1 July 2012 Senior management 1,500,000 25.00 5.00
3 December Senior management
2012 and employees 3,000,000 22.75 5.43
9 January
2013 Directors 14,500,000 22.75 5.53
27 February
2013 Senior management 1,000,000 15.50 5.66
12 September
2013 Directors 750,000 11.00 6.20
19 September Director and senior
2013 manager 6,000,000 11.75 6.22
10 October
2013 Employees 850,000 11.75 6.28
25 July Director and senior
2014 manager 7,000,000 7.875 7.07
31 March
2015 Senior management 10,000,000 2.50 7.75
-------------- ------------------------ ----------- --------- -------------
Total 92,058,000
---------------------------------------- ----------- --------- ------------- 24. Financial commitments
Property, plant and equipment
During the period the Group entered into purchase commitments totalling $0.2 million (31 December 2016: $0.7 million) related to the purchase of a Volvo truck, instalments are payable to the vendor over 37 instalments.
Barrick Agreement
In March 2011, Patagonia Gold agreed with the Barrick Sellers to amend the original property acquisition agreement regarding the Cap-Oeste, COSE, Manchuria and Lomada gold and silver deposits, whereby the "Back in Right" was exchanged for a 2.5% NSR royalty, effective immediately. The NSR royalty does not apply to the Company's Santa Cruz properties acquired outside the Barrick Agreement, or to those acquired in the Fomicruz Agreement. A liability for potential future NSR payments has not been recognised since the Company is unable to reliably measure such a liability as the project has not yet commenced production and there is no certainty over the timing of potential future production.
A further cash payment of $1.5 million will become payable to Barrick upon the delineation of 200,000 ounces or greater of gold or gold equivalent NI 43-101 Indicated resource on the La Paloma Property Group.
25. Contingent liability
There were no contingent liabilities at either 30 June 2017 or 31 December 2016.
26. Subsequent events
There have been no significant subsequent events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFMTTMBMTTAR
(END) Dow Jones Newswires
September 27, 2017 02:01 ET (06:01 GMT)
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