Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 1
Avocet Mining PLC unaudited results for the quarter ended 31 March 2013
Q1 production at Inata in line with life of mine plan: 30,481 oz (Q4 2012: 30,909 oz)
produced at a total cash cost (including royalties) of US$1,169 per oz (Q4 2012: US$1,246
per oz).
Full year guidance remains 135,000 oz at a total cash cost of $1,100 per oz
EBITDA of US$6.7 million (Q4 2012: US$5.3 million) reflecting sale of 28,751 oz during
quarter
Cash outflow from operating activities US$15.4 million. Excluding US$20.2 million buyback of
forward contracts, positive cash generated from operating activities of US$4.8 million (Q4
2012: US$16.4 million)
Gold hedge restructured - total forward contracts reduced by 29,020 oz and remainder
rescheduled to be cleared 18 months earlier at 31 December 2016
Loan agreement with affiliate of largest shareholder, Elliott Management, to finance feasibility
study at Tri-K and corporate costs for remainder of 2013
Revised Inata Ore Reserves announced in quarter - reduction to 0.9 million ounces, based on
US$1,200/oz pit shells
KEY FINANCIAL METRICS1
Period
Quarter ended 31 March
2013 Unaudited
Quarter ended 31 December
2012 Unaudited
Quarter ended 31 March
2012 Unaudited
Year ended 31 December
2012 Audited
Gold production (ounces) 30,481 30,909 38,296 135,189
Average realised gold price (US$/oz) 1,422 1,468 1,543 1,491
Total cash production cost (US$/oz) 1,169 1,246 850 1,000
Profit/(loss) before tax and exceptional items (US$000) 181 (4,699) 20,839 18,275
(Loss)/profit before tax (US$000)2 (44,792) (139,999) 20,839 (117,025)
(Loss)/earnings per share (US cents per share) (20.30) (53.23) 6.33 (46.57)
EBITDA3 (US$000) 6,748 5,282 28,101 48,343
Net cash generated by operating activities (US$000) (15,374) 16,401 13,852 52,381
1 Key Financial Metrics are presented for continuing operations only, and represent results excluding the Group’s former operations in South East Asia. 2 Q1 2013 includes net US$45.0 million of exceptional items: US$20.2 million cost of hedge buy-back; US$96.6 million loss on initial recognition of forward contracts; US$72.2 million gain on reversal of impairment; and US$0.3 million cost of impairment of discontinued Mali projects. See note 3 for further details. 3 EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 2
David Cather, Chief Executive Officer, commented:
“The recent revision to the input assumptions behind our Ore Reserves at Inata and the resulting
revised life of mine plan provides us with a more conservative platform on which to operate.
Inata’s Q1 production was a solid first step in achieving this year’s targets, with mining now moving
to include the Minfo pit as a source of higher grade ore for the rest of the year. Our focus at Inata
will also be on operating improvements in order to achieve better plant recoveries and throughputs.
We are on track to meet guidance of 135,000 ounces of production for the year, and by year end
we will have a greatly reduced hedge book.
Our Souma Project will add to these achievements by presenting an opportunity to enhance Inata’s
cash flows as a satellite operation and to extend its mine life. In Guinea, by year end we will also
have advanced our Tri-K Project through the milestones of a feasibility study and maiden reserve
estimate. Delivery on these key areas will serve to rebuild the Company’s asset base and enable us
to realise shareholder value.
Recent gold price volatility is a key concern of investors at present, and whilst we cannot control
the gold price, this has underlined the importance of our ongoing cost improvement initiatives and
conservative approach to mining at Inata – exemplified by our decision in March to rebase our
reserves on a gold price of US$1,200 per ounce.”
Management Conference Call
The Company will host a conference call for investors and analysts at 9am (UK) on Thursday
2 May 2013.
Dial in details are as follows:
UK: 08444 933800
Norway: 21563013
Alternative number: +44 (0)1452 555 566
Conference ID # 58502724
A recording of the conference call will also be made available on the Avocet website later on the
same day.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC Pelham Bell Pottinger Financial PR Consultants
J.P. Morgan Cazenove Corporate Broker
Arctic Securities Financial Adviser &
Market Maker
SEB Enskilda Financial Adviser &
Market Maker
David Cather, CEO
Mike Norris, FD
Rob Simmons, IR
Daniel Thöle
Michael Wentworth-Stanley
Arne Wenger
Petter Bakken
Fredrik Cappelen
+44 20 7766 7676 +44 20 7861 3232 +44 20 7742 4000
+47 2101 3100 +47 2100 8500
NOTES TO EDITORS
Avocet Mining is a gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L)
and the Oslo Børs (ticker: AVM.OL). The Company’s principal activities are gold mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The deposit at Inata currently comprises a Mineral Resource of 4.7 million ounces and an Ore Reserve of 0.9 million ounces. The Inata Gold Mine poured its first gold in December 2009 and produced 135,189 ounces of gold in 2012. Other assets in Burkina Faso include eight exploration permits surrounding the Inata Gold Mine in the broader Bélahouro region. The most advanced of these projects is Souma, some 20 kilometres from the Inata Gold Mine, where there is a Mineral
Resources estimate of 0.8 million ounces.
In Guinea, Avocet owns exploration licences in the north east of the country. Mineral Resource development has been ongoing since 2005 and the Tri-K project is the most advanced, which currently has a Mineral Resource estimate of 3.2 million ounces and where a feasibility study is underway.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 3
CHIEF EXECUTIVE OFFICER’S REVIEW
During Q1, the Company made significant progress in the restructuring of its finances, and is now
funded for the 2013 work programme that will focus on optimising the Inata operation and
demonstrating value from Souma and Tri-K. Operations at Inata are progressing in line with
guidance for the year. We are encouraged by Souma’s potential as a satellite deposit, whilst we
are examining the effect it could have on the longer term economics at Inata.
In March 2013, the process to reassess Inata’s reserve concluded with a decrease from 1.8 million
ounces to 0.9 million ounces. This reduction was partly driven by the conservative approach we
have adopted in managing our assets, exemplified by the use of a lower gold price of US$1,200 per
ounce and the assumption of no additional major investment to achieve this production schedule.
In addition to the reduction in the assumed gold price and depletion during 2012, the key drivers
behind this decrease in reserves were metallurgy and ore hardness, both of which have proved
more challenging than estimated in the previous reserve.
The reserve reduction resulted in lower production forecasts over the life of mine, and required the
Company’s hedge book with Macquarie Bank Limited to be restructured. Consequently Avocet
bought back 29,020 hedged ounces at a cost of US$20 million, and shortened the period over which
the remaining 144,230 ounces are to be delivered by 18 months to 31 December 2016.
The hedge restructure utilised cash that would otherwise have been used to advance the
Company’s growth projects. As a result, a US$15 million loan was agreed with Manchester
Securities Corp, an affiliate of our largest shareholder, Elliott Management (‘Elliott’), to be drawn
down in three tranches (the ‘Elliott loan’). Being a transaction with a related party, the second and
third tranches of this loan, which are to be secured over Avocet’s assets in Guinea and will include
the provision of 4 million warrants at 40 pence per share, will require shareholder approval at a
General Meeting (‘GM’), which is scheduled for 28 May 2013. To this end, a circular will be issued to
our shareholders today outlining details of this proposal, and comes with the endorsement of the
Avocet Board.
Assuming shareholder approval is granted, the Elliott loan will be repayable in full on 31 December
2013, and the Company intends to put in place further financing by this time. Throughout the
remainder of 2013, we intend to remain focussed on evaluating lower capital cost options for the
development of Souma and Tri-K, and entrenching operational improvements at Inata. We believe
that the completion of the feasibility study at Tri-K in Guinea, as well as the advancement of Inata
and Souma, should demonstrate the potential value to be realised from the Group's portfolio of
assets during the rest of 2013, which ought to assist the Group in raising additional longer-term
financing by 31 December 2013..
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OPERATIONAL REVIEW
Gold production and cash costs
2012 2013
Q1 Q2 Q3 Q4 FY 2012 Q1
Ore mined (k tonnes) 578 610 559 906 2,653 817
Waste mined (k tonnes) 7,240 6,689 7,565 8,980 30,474 9,127
Total mined (k tonnes) 7,818 7,299 8,124 9,886 33,127 9,944
Ore processed (k tonnes) 608 651 643 654 2,556 616
Average head grade (g/t) 2.36 1.82 1.62 2.03 1.95 1.65
Process recovery rate 87% 86% 91% 83% 87% 82%
Gold Produced (oz) 38,296 32,917 33,067 30,909 135,189 30,481
Cash costs (US$/oz) Q1 Q2 Q3 Q4 FY 2012 Q1
Mining 332 402 374 562 412 542
Processing 283 332 279 350 309 360
Administration 122 145 167 219 161 163
Royalties 113 127 117 115 118 104
850 1,006 937 1,246 1,000 1,169
Gold production in the first quarter of 2013 of 30,481 ounces was in line with the life of mine plan
announced in March 2013. Grades were nearly 20% lower than in Q4 2012, and tonnes milled
were also lower, but these were largely offset by favourable inventory movements, with 1,977
ounces drawn out of gold in circuit inventory in Q1, whereas in Q4 3,708 ounces had been added to
gold in circuit inventory. Mining of higher grade ore from Minfo has commenced and quarterly
production is scheduled to increase as a result. Guidance for the full year remains at 135,000
ounces.
Mining volumes exceeded 9.9 million tonnes in the quarter, not only an improvement on Q4 2012,
but also the highest quarterly tonnage since mining began at Inata in 2008. This improvement is in
part due to the performance initiatives put in place over the latter half of 2012, and is the
aggregate effect of a number of individual improvements, including training programmes,
supervision monitoring, and revised schedules and timetables. Improved mining performance has in
turn increased availability of ore stockpiles, and therefore enables greater flexibility in processing
ore going forward.
Plant throughput levels (616,000 tonnes) were 6% lower than Q4 2012 but remain in line with the
life of mine plan. Head grades fell from 2.03 g/t in Q4 to 1.65 g/t in this quarter, as ores fed to the
mill were from slightly lower grade areas (chiefly the Sayouba pit). Recoveries were also slightly
lower than the previous quarter, at 82%, as ores treated in January and February in particular were
lower grade and included carbonaceous material.
Total cash costs (including royalties) in the quarter were US$1,169 per ounce, a decrease of six per
cent compared with Q4 2012.
Total mining costs were US$16.5 million, lower than the previous quarter. Mining costs on a unit
basis were US$1.66 per tonne, a reduction of 6% compared to the previous quarter, reflecting cost
improvement initiatives being implemented at site.
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The total processing cost for the quarter was US$11.0 million, which is in line with the previous
quarter. On a unit basis, the processing cost was US$17.81 per tonne, 8% higher than Q4 2012 as
a result of fewer tonnes milled and increased usage of consumables such as lime and cyanide. Cost
improvement initiatives are underway to optimise reagent usage, particularly with respect to lime
consumption.
Unit costs for both mining and processing are in line with the full year guidance given in March of
US$1,100 per ounce.
Souma exploration project, Burkina Faso
In January and February, a diamond drill rig collected geotechnical data and metallurgical samples
in support of planned feasibility work on the Souma project and new resources at Inata (Minfo East
and Filio). In March, a reverse circulation rig conducted scout drilling on geochemical and
geophysical anomalies at Souma with a view to identifying and prioritising resource candidates for
infill drilling in 2014.
During the quarter, an updated Mineral Resource estimate of 0.8 million ounces (16.3 million
tonnes grading 1.48 g/t Au) was announced, representing an increase of 38% on the previous
estimate. Souma’s geological setting is distinct from that at Inata, and preliminary testwork has
indicated gold recoveries of +90% for all nine samples that were submitted.
Testwork results from drilling undertaken in 2012, which were received during the quarter,
emphasise the high grade core at Souma, which will be the focus of any operation involving the
trucking of ore to the Inata processing plant. Results received during Q1 include:
- 16m @ 6.3 g/t Au from 35m;
- 11m @ 7.3 g/t Au from 61m;
- 21m @ 2.8 g/t Au from 6m;
- 6m @ 7.8 g/t Au from 72m; and
- 10m @ 3.9 g/t Au from 33m.
Tri-K development project, Guinea
The feasibility study for the phase 1 development of the Tri-K project is underway, targeting a heap
leach project exploiting oxide ore from two deposits at Tri-K – Koulékoun and Kodiéran. National,
regional and local authorities are supportive of the project, and discussions with regards to securing
a Mining Convention have commenced. The feasibility study is expected to be completed in H2
2013, and a mining licence application submitted shortly thereafter.
Exploration in Guinea has focused on supporting the Tri-K feasibility study by conducting infill
drilling on the upper oxide portion of the Kodiéran Mineral Resource. Geologists are undertaking a
geochemical survey of termite mound samples in an effort to generate new exploration targets for
2014 and help illustrate the upside potential of the Tri-K District.
As part of the feasibility study process, infill drilling is ongoing in order to establish a maiden
reserve estimate for Tri-K. Results received during the quarter for Kodieran include:
- 22m @ 5.5 g/t Au from 1m;
- 21m @ 5.7 g/t Au from 30m; and
- 14m @ 2.2 g/t Au from 45m.
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FINANCIAL REVIEW
Revenue in the quarter was US$40.9 million, reflecting sales of 28,751 ounces of gold at an
average realised price of US$1,422 per ounce, (including 8,250 ounces delivered into forward
contracts at US$950 per ounce), compared with revenue of US$44.5 million in Q4 2012,
representing 30,276 ounces at an average realised price of US$1,468 per ounce.
EBITDA for the quarter totalled US$6.7 million, compared with US$5.3 million in Q4 2012.
Favourable inventory movements totalled US$4.1 million in the quarter, with increases in stockpile
(due to additional tonnes and higher average cost) and gold in transit, partly offset by a reduction
in gold in circuit.
A number of exceptional items arose in the quarter as a result of the restructure of the hedge book
with Macquarie Bank Limited. These include a charge of US$20.2 million representing the cost of
closing out 29,020 ounces of forward gold sales. In addition, a non-cash expense of US$96.6
million was recognised as a result of bringing onto the balance sheet the mark-to-market liability of
the remaining 144,230 ounces of forward sales at US$937.50 per ounce. The recognition of the
mark-to-market liability is in accordance with IAS 39 (see note 13 for more information), and
reflects the fact that the recent buy back demonstrates a practice of cash-settling forward
contracts. Under IAS 39, this means that the own-use exemption previously applied is no longer
appropriate.
The inclusion of the hedge liability resulted in a partial reversal of the impairment recognised in
December 2012. The original impairment reflected the shortfall between the net present value of
Inata’s cash flows, including the effect of hedge sales, and its net assets, which excluded the hedge
liability. Following the recognition of the mark-to-market liability at 31 March 2013 the net present
value of Inata’s cash flows is now significantly greater than Inata’s net assets, resulting in an
impairment reversal in Q1 2013 of US$81.7 million.
Profit from operations in the quarter was US$73.6 million, which included the effect of the
impairment reversal, compared with an operating loss of US$139.7 million in Q4 2012, which
included the original impairment. Excluding the impairment and impairment reversal, operating
profit in Q1 2013 would have been US$1.4 million compared with an operating loss of US$4.4
million in Q4 2012.
The loss before tax for the quarter, including exceptional items, was US$44.8 million, compared
with a loss of US$140.0 million in Q4 2012. Excluding exceptional items, the pre-tax profit was
US$0.2 million compared with a loss of US$4.7 million in Q4 2012. Net cash consumed by
operating activities in the period was US$15.4 million, including the impact of the US$20.2 million
hedge buy-back which is reported as an operating cash flow item. Excluding this, Net cash flow
from operating activities in Q1 2013 was US$4.8 million.
Other cash flow items in the quarter include capex of US$5.4 million (principally US$2.4 million
work on the second tailings facility at Inata and US$2.6 million on mining equipment and engine
rebuilds), US$5.7 million of capitalised exploration expenses (US$3.1 million in Burkina Faso and
US$2.5 million in Guinea), as well as US$5.0 million drawn down on the Elliott Loan.
Net cash decreased in the quarter by US$22.0 million, with closing cash standing at US$32.9
million, and US$10.0 million of external debt (US$5.0 million each with Macquarie Bank Limited and
Elliott).
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OUTLOOK
Over the remainder of 2013, Avocet will be focussed on optimising cash flow at Inata, while
meeting its production guidance of 135,000 ounces at a total cash cost of US$1,100 per ounce.
Subject to shareholder approval, the Company expects to draw down a further US$10.0 million
under the Elliott Loan, to finance the completion of the feasibility study at Tri-K in Guinea, and to
meet corporate costs. Further low capital cost improvements at Inata are being investigated in
order to demonstrate the upside potential compared with the March life of mine plan, with work at
Souma geared to add longer term value to Inata.
Further financing is expected before the end of 2013 to provide funds for repayment of the US$15.0
million Elliott loan and for working capital for 2014. The Board is confident that undertaking the
value-generative initiatives outlined above should assist the Group in its discussions regarding
future financing.
DAVID CATHER
Chief Executive Officer
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CONDENSED CONSOLIDATED INCOME STATEMENT
For the three months ended 31 March 2013
Three months ended
Note 31 March 2013 Unaudited
31 March 2012 Unaudited
US$000 US$000
Continuing operations
Revenue 2 40,885 60,256
Cost of sales 2 (36,749) (36,007)
Gross profit/(loss) 4,136 24,249
Administrative expenses (2,135) (2,154)
Share based payments (329) (559)
Partial reversal of impairment of mining assets 3,7 72,200 -
Impairment of exploration intangible assets 3 (316) -
Profit from operations 73,556 21,536
Loss on recognition of forward contracts 3 (96,632) -
Restructure of forward contracts 3 (20,225) -
Finance items
Exchange (losses)/gains (114) 145
Finance expense (1,379) (858)
Finance income 2 16
(Loss)/profit before taxation from continuing operations (44,792) 20,839
Analysed as:
Profit before taxation and exceptional items 181 20,839
Exceptional items 3 (44,973) -
(Loss)/profit before taxation from continuing operations (44,792) 20,839
Taxation 37 (6,884)
(Loss)/profit for the period from continuing operations (44,755) 13,955
Discontinued operations
Loss on disposal on subsidiaries(1) 3 - (105)
(Loss) / profit for the period (44,755) 13,850
Attributable to:
Equity shareholders of the parent company (40,416) 12,492
Non-controlling interest (4,339) 1,358
(44,755) 13,850
Earnings per share
- basic (cents per share) 5 (20.30) 6.28
- diluted (cents per share) 5 (20.30) 6.20
EBITDA (2) 6,748 28,101
(1) During 2011, the Group disposed of all of its trading subsidiaries which were classified as discontinued operations. All operations for 2012 are continuing. Refer to note 3 for further information.
(2) EBITDA represents earnings before finance items, taxation, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.
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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the three months ended 31 March 2013
Three months ended
31 March 2013 31 March 2012
Note Unaudited Unaudited
US$000 US$000
(Loss)/profit for the period (44,755) 13,850
Revaluation of other financial assets 9 (206) 80
Total comprehensive income for the period (44,961) 13,930
Attributable to:
Equity holders of the parent company (40,622) 12,572
Non-controlling interest (4,339) 1,358
Total comprehensive income for the period (44,961) 13,930
Total comprehensive income for the period attributable to owners of the parent arising from:
Continuing operations (40,622) 12,677
Discontinued operations - (105)
(40,622) 12,572
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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2013
Note
31 March 2013 Unaudited
31 December 2012 Audited
US$000 US$000
Non-current assets
Intangible assets 6 55,081 49,442
Property, plant and equipment 8 217,910 145,653
Other financial assets 9 393 599
273,384 195,694
Current assets
Inventories 10 62,904 56,949
Trade and other receivables 11 28,387 25,124
Cash and cash equivalents 12 32,933 54,888
124,224 136,961
Current liabilities
Trade and other payables 50,408 42,023
Other financial liabilities 13 46,159 6,105
96,567 48,128
Non-current liabilities
Other financial liabilities 13 63,551 2,434
Deferred tax liabilities - 37
Other liabilities 6,317 6,251
69,868 8,722
Net assets 231,173 275,805
Equity
Issued share capital 16,247 16,247
Share premium 146,040 146,040
Other reserves 15,911 16,117
Retained earnings 66,134 106,221
Total equity attributable to the parent 244,332 284,625
Non-controlling interest (13,159) (8,820)
Total equity 231,173 275,805
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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Three months ended 31 March 2012
Share
capital Share
premium Other
reserves Retained earnings
Total attributable
to the parent
Non-controlling
interest Total
equity
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December 2011 (Audited)
16,247 149,915 15,273 208,129 389,564 991 390,555
Profit for the period - - - 12,492 12,492 1,358 13,850
Revaluation of other financial assets - - 80 - 80 - 80
Total comprehensive income for the period - - 80 12,492 12,572 1,358 13,930
Share based payments - - - 510 510 - 510
Release of treasury and own shares - - 230 (39) 191 - 191
At 31 March 2012 (Unaudited)
16,247 149,915 15,583 221,092 402,837 2,349 405,186
Three months ended 31 March 2013
Share capital
Share premium
Other reserves
Retained earnings
Total attributable
to the parent
Non-controlling
interest Total
equity
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December 2012 (Audited)
16,247 146,040 16,117 106,221 284,625 (8,820) 275,805
Loss for the period
- - - (40,416) (40,416) (4,339) (44,755)
Revaluation of other financial assets - - (206) - (206) - (206)
Total comprehensive income for the period - - (206) (40,416) (40,622) (4,339) (44,961)
Share based payments - - - 329 329 - 329
At 31 March 2013 (Unaudited) 16,247 146,040 15,911 66,134 244,332 (13,159) 231,173
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CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the three months ended 31 March 2013
Three months ended
31 March 2013 31 March 2012
Note Unaudited
US$000 US$000
Cash flows from operating activities
(Loss)/profit for the period (44,755) 13,850
Adjusted for:
Depreciation of non-current assets 2,8 5,076 6,565
Partial reversal of impairment of mining assets (72,200) -
Impairment of exploration intangible assets 316 -
Share based payments 329 559
Taxation in the income statement (37) 6,884
Loss on recognition of forward contracts 96,632 -
Non-operating items in the income statement 491 914
Discontinued operations 3 - 105
(14,148) 28,877
Movements in working capital
Increase in inventory (5,955) (9,870)
Increase in trade and other receivables (3,264) (2,312)
Increase /(decrease) in trade and other payables 8,058 (2,500)
Net cash (used in)/generated by operations (15,309) 14,195
Interest received 2 66
Interest paid (67) (409)
Net cash (used in) generated by operating activities (15,374) 13,852
Cash flows from investing activities
Payments for property, plant and equipment 8 (5,403) (6,649)
Exploration and evaluation expenses 6 (5,671) (8,056)
Disposal of discontinued operation, net of cash disposed of 3 - 1,980
Net cash (used in)/generated by investing activities (11,074) (12,725)
Cash flows from financing activities
Proceeds from debt 5,000 -
Financing costs (150) -
Payments in respect of finance lease (243) -
Loans repaid 13 - (6,000)
Net cash generated by/(used in) financing activities 4,607 (6,000)
Net cash movement (21,841) (4,873)
Exchange (losses)/gains (114) 145
Total decrease in cash and cash equivalents (21,955) (4,728)
Cash and cash equivalents at start of the period 54,888 105,236
Cash and cash equivalents at end of period 32,933 100,508
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated interim financial statements, which are unaudited, have been prepared
in accordance with the requirements of International Accounting Standard 34 as adopted for use in
the European Union. This condensed interim report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this condensed report is to be read in
conjunction with the Annual Report for the year ended 31 December 2012, which has been
prepared in accordance with IFRS as adopted by the European Union, and any public
announcements made by the Group during the interim reporting period.
The financial information set out in this interim report does not constitute statutory accounts as
defined in Section 435 of the Companies Act 2006. The unaudited condensed financial statements
for the three months ended 31 March 2013 have been drawn up using accounting policies and
presentation expected to be adopted in the Group’s full financial statements for the year ending 31
December 2013. The accounting policies are not different to those set out in note 1 to the Group’s
audited financial statements for the year ended 31 December 2012, with the exception of certain
amendments to accounting standards or new interpretations issued by the International Accounting
Standards Board, which were applicable from 1 January 2013. These have not had a material
impact on the Group.
The Company’s statutory financial statements for the year ended 31 December 2012 are available
on the Company’s website www.avocetmining.com. The auditor’s report on those financial
statements was unqualified and did not contain a statement under sections 498(2) or (3) of the
Companies Act 2006.
Going Concern
On 25 March 2013, the Company announced it had completed discussions regarding financing with
Macquarie Bank Limited ("Macquarie") and an affiliate of its largest shareholder, Elliott Management
("Elliott"), which is the beneficial owner of 27% of the Company's shares. The Company has
executed financing agreements with both parties.
Due to Inata's reduction in Ore Reserves and revised life of mine plan Macquarie placed restrictions
on the use of cash within Société des Mines de Bélahouro SA (“SMB”), the Company's trading
subsidiary that holds Inata, pending agreement on restructuring Inata's hedge. Following the hedge
restructure announced on 25 March, the minimum cash balance required by Macquarie to be held in
SMB fell from US$37 million to US$12 million.
The hedge restructure agreed with Macquarie, including the US$20.2 million hedge buy back,
meant that funds previously held in SMB were no longer available to fund the Tri-K project in
Guinea and general corporate activities. The Company therefore entered into a loan agreement
with Manchester Securities Corp. ("the Elliott Lender"), which, as an affiliate of its largest
shareholder Elliott, made the Elliott Lender a related party under the UK Listing Rules. The Elliott
loan facility will ensure that sufficient funds are available to complete the feasibility study at Tri-K
as well as for general corporate purposes in 2013.
One of the covenants related to the MBL loan and hedge facility relates to the ratio between the
hedge liability and the future cash flows at the Inata mine over the term of the hedge. For the
purposes of calculating this ratio, the hedge liability is reduced by cash in SMB and the prevailing
spot price is applied to all sales, including hedge deliveries, in calculating future cash flow. The
directors have a reasonable expectation that SMB’s cash flow and hedge commitments can be
managed so that this and other covenants will not be breached.
The funding arrangements between the Elliott Lender and the Company consist of two facilities: an
initial facility of US$5 million, drawn down at the end of March 2013; and a second secured facility
of US$15 million, which is subject to shareholder approval. US$5 million of this second secured
facility will be used to repay the initial unsecured facility.
The Directors have concluded that the shareholder approval of this facility represents a material
uncertainty that may cast significant doubt upon the Company’s ability to continue as a going
concern and that, therefore, the possibility exists that the Company could be unable to continue to
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 14
fund its corporate and exploration activities as currently envisaged. However, the directors have a
reasonable expectation that shareholders will approve the Elliott funding.
Assuming shareholder approval is obtained, the Elliott loan facility of US$15m will be due for
repayment 31 December 2013. Further finance will be required in order to repay the Elliott Lender
at that date and provide working capital for 2014. The directors have concluded that obtaining the
required finance represents a material uncertainty that may cast significant doubt upon the
Company’s ability to continue as a going concern and that, therefore, the possibility exists that the
Company could be unable to repay amounts owed to the Elliott Lender and to fund its corporate
activities in 2014. Nevertheless, the directors have a reasonable expectation that the Company will
obtain sufficient funding prior to 31 December 2013 and for these reasons, they continue to adopt
the going concern basis of accounting in preparing the annual financial statements.
Estimates
Certain amounts included in the condensed consolidated interim financial statements involve the
use of judgement and/or estimation. These are based on management’s best knowledge of the
relevant facts and circumstances, having regard to prior experience. However, judgements and
estimations regarding the future are a key source of uncertainty and actual results may differ from
the amounts included in the financial statements.
In preparing these condensed interim financial statements, the significant judgements made by
management in applying the Group’s accounting policies and the key sources of estimation
uncertainty were the same as those applied to the consolidated financial statements for the year
ended 31 December 2012, with the exception of those highlighted in the exceptional items in notes
of these statements.
2. Segmental reporting
IFRS 8 requires the disclosure of certain information in respect of reportable operating segments.
One of the criteria for determining reportable operating segments is the level at which information
is regularly reviewed by the Chief Operating Decision Maker (CODM) for the purposes of making
economic decisions. In this report, operating segments for continuing operations are determined as
the UK, West Africa mining operations (which includes exploration activity within the Inata mine
licence area), and West Africa exploration (which includes exploration projects in Burkina Faso,
Guinea and Mali). Discontinued operations for 2012 represent the disposal of one of the remaining
assets in South East Asia that was subject to the agreement with J&Partners L.P. (note 3).
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 15
2. Segmental Reporting
(a) Other cost of sales represents costs not directly attributable to production, including exploration expenditure expensed; (b) Includes amounts in respect of the amortisation of mine closure provision at Inata; (c) EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not
defined by IFRS but is commonly used as an indication of underlying cash generation.
For the three months ended 31 March 2013 UK
West Africa mining
operations West Africa exploration Total
US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 40,885 - 40,885
Cost of Sales 733 (36,262) (1,220) (36,749)
Cash production costs:
- mining - (16,495) - (16,495)
- processing - (10,970) - (10,970)
- overheads - (4,983) - (4,983)
- royalties - (3,171) - (3,171)
- (35,619) - (35,619)
Changes in inventory - 4,074 - 4,074
Expensed exploration and other cost of sales (a) 746 346 (1,220) (128)
Depreciation and amortisation (b) (13) (5,063) - (5,076)
Gross profit/(loss) 733 4,623 (1,220) 4,136
Administrative expenses and share based payments (2,464) - - (2,464)
Partial reversal of impairment of mining assets - 72,200 - 72,200
Impairment of exploration intangible - - (316) (316)
(Loss)/profit from operations (1,731) 76,823 (1,536) 73,556
Loss on recognition of forward contracts - (96,632) - (96,632)
Restructure of forward contracts - (20,225) - (20,225)
Net finance items (729) (744) (18) (1,491)
Loss before taxation (2,460) (40,778) (1,554) (44,792)
Taxation
- 37 - 37
Loss for the period
(2,460) (40,741) (1,554) (44,755)
Attributable to:
Equity shareholders of parent company (2,460) (36,402) (1,554) (40,416)
Non-controlling interest - (4,339) - (4,339)
(Loss)/profit for the period (2,460) (40,741) (1,554) (44,755)
EBITDA (c) (1,718) 9,686 (1,220) 6,748
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2. Segmental Reporting (continued)
At 31 March 2013 UK
West Africa mining
operations West Africa exploration Total
US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL POSITION
Non-current assets 931 213,818 58,635 273,384
Inventories - 62,386 518 62,904
Trade and other receivables 347 24,079 3,961 28,387
Cash and cash equivalents 6,183 25,888 862 32,933
Total assets 7,461 326,171 63,976 397,608
Current liabilities (9,129) (82,664) (4,774) (96,567)
Non-current liabilities (430) (69,438) - (69,868)
Total liabilities (9,559) (152,102) (4,774) (166,435)
Net assets (2,098) 174,069 59,202 231,173
For the three months ended 31 March 2013
UK
West Africa mining
operations West Africa exploration Total
US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
Loss for the period (2,460) (40,741) (1,554) (44,755)
Adjustments for non-cash and non-operating items (d) 1,071 28,982 554 30,607
Movements in working capital (127) (2,155) 1,121 (1,161)
Net cash (used in)/ generated by operations (1,516) (13,914) 121 (15,309)
Net interest paid 2 (67) - (65)
Purchase of property, plant and equipment (1) (5,303) (99) (5,403)
Deferred exploration expenditure - - (5,671) (5,671)
Proceeds from debt 5,000 - - 5,000
Financing costs (150) - - (150)
Other cash movements (e) (4,545) (1,754) 5,942 (357)
Total (decrease)/ increase in cash and cash equivalents (1,210) (21,038) 293 (21,955)
(d) Includes depreciation and amortisation, share based payments, taxation in the income statement, and other non-operating
items in the income statement; (e) Other cash movements include cash flows from financing activities, intragroup transfers, and exchange gains or losses.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 17
2. Segmental Reporting (continued)
(a) Other cost of sales represents costs not directly attributable to production, including exploration expenditure expensed; (b) Includes amounts in respect of the amortisation of mine closure provision at Inata; (c) EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not
defined by IFRS but is commonly used as an indication of underlying cash generation.
For the three months ended 31 March 2012 UK
West Africa mining
operations West Africa exploration
Continuing operations
total Discontinued
operations Total
US$000 US$000 US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 60,256 - 60,256 - 60,256
Cost of Sales 827 (35,637) (1,197) (36,007) - (36,007)
Cash production costs:
- mining - (12,707) - (12,707) - (12,707)
- processing - (10,827) - (10,827) - (10,827)
- overheads - (4,685) - (4,685) - (4,685)
- royalties - (4,339) - (4,339) - (4,339)
- (32,558) - (32,558) - (32,558)
Changes in inventory - 5,163 - 5,163 - 5,163
Expensed exploration and other cost of sales (a) 860 (1,710) (1,197) (2,047) - (2,047)
Depreciation and amortisation (b) (33) (6,532) - (6,565) - (6,565)
Gross profit/(loss) 827 24,619 (1,197) 24,249 - 24,249
Administrative expenses and share based payments (2,713) - - (2,713) - (2,713)
(Loss)/profit from operations (1,886) 24,619 (1,197) 21,536 - 21,536
(Loss)/profit on disposal of subsidiaries and investments
- - - - (105) (105)
Net finance items 3 (724) 24 (697) - (697)
(Loss)/profit before taxation (1,883) 23,895 (1,173) 20,839 (105) 20,734
Analysed as:
(Loss)/profit before tax & exceptional items
(1,883) 23,895 (1,173) 20,839 - 20,839
Exceptional items
- - - - (105) (105)
(Loss)/profit before taxation (1,883) 23,895 (1,173) 20,839 (105) 20,734
Taxation
- (6,884) - (6,884) - (6,884)
(Loss)/profit for the period
(1,883) 17,011 (1,173) 13,955 (105) 13,850
Attributable to:
Equity shareholders of parent company (1,883) 15,653 (1,173) 12,597 (105) 12,492
Non-controlling interest - 1,358 - 1,358 - 1,358
(Loss)/profit for the period (1,883) 17,011 (1,173) 13,955 (105) 13,850
EBITDA (c) (1,853) 31,151 (1,197) 28,101 - 28,101
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 18
2. Segmental Reporting (continued)
At 31 March 2012
UK
West Africa mining
operations West Africa exploration
Continuing operations
total Discontinued
operations Total
US$000 US$000 US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL POSITION
Non-current assets 2,486 264,232 33,674 300,392 - 300,392
Inventories - 49,936 449 50,385 - 50,385
Trade and other receivables 412 26,075 4,662 31,149 - 31,149
Cash and cash equivalents 64,786 34,400 1,322 100,508 - 100,508
Total assets 67,684 374,643 40,107 482,434 - 482,434
Current liabilities (3,384) (39,066) (4,904) (47,354) - (47,354)
Non-current liabilities (430) (29,464) - (29,894) - (29,894)
Total liabilities (3,814) (68,530) (4,904) (77,248) - (77,248)
Net assets 63,870 306,113 35,203 405,186 - 405,186
For the three months ended 31 March 2012
UK
West Africa mining
operations West Africa exploration
Continuing operations
total Discontinued
operations Total
US$000 US$000 US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
(Loss)/profit for the period (1,883) 17,011 (1,173) 13,955 (105) 13,850
Adjustments for non-cash and non-operating items (d) 589 14,609 (276) 14,922 105 15,027
Movements in working capital (4,579) (11,153) 1,050 (14,682) - (14,682)
Net cash (used in)/ generated by operations
(5,873) 20,467 (399) 14,195 - 14,195
Net interest (paid)/received 66 (409) - (343) - (343)
Purchase of property, plant and equipment
(117) (4,881) (1,651) (6,649) - (6,649)
Loans repaid - (6,000) - (6,000) - (6,000)
Deferred exploration expenditure
- (263) (7,793) (8,056) - (8,056)
Net proceeds from disposal of discontinued operations
1,980 - - 1,980 - 1,980
Other cash movements (e) (7,024) (3,229) 10,398 145 - 145
Total (decrease)/increase in cash and cash equivalents
(10,968) 5,685 555 (4,728) - (4,728)
(d) Includes depreciation and amortisation, share based payments, movement in provisions, taxation in the income
statement, and other non-operating items in the income statement; (e) Other cash movements include cash flows in respect of the sale of subsidiaries, deferred consideration paid, cash flows
from financing activities, and exchange gains or losses;
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 19
3. Exceptional items
31 March 2013 (three months)
Unaudited
31 March 2012 (three months)
Unaudited
US$000 US$000
Restructure of forward contracts (20,225) -
Loss on recognition of forward contracts (96,632) -
Partial reversal of impairment of mining assets 72,200 -
Impairment of Mali exploration asset (316) -
Loss on disposal of subsidiaries - (105)
Exceptional loss (44,973) (105)
Restructure and recognition of forward contracts
On 25 March 2013, Avocet announced the restructure of the Macquarie forward contracts for
delivery of gold bullion. The restructure consisted of eliminating 29,020 ounces under the forward
contracts at a cost of US$20.2 million and shortening the delivery profile of the remaining ounces
by 18 months so that all ounces are delivered by December 2016.
The recognition of the liability is in accordance with IAS 39 (see note 13 for more information), and
reflects that the recent buy back demonstrates a practice of cash-settling forward contracts. Under
IAS 39, this means that the own-use exemption previously applied is no longer appropriate. The
fair value of the forward contracts has been recognised at $96.6m. Further details are provided in
note 13.
Partial reversal of impairment on mining assets
In March 2013 Avocet recognised a partial reversal of impairment of non–current mining assets in
respect of the Inata Gold Mine. Further details are provided in note 7.
Impairment of Mali exploration asset
During Q1 the company decided to discontinue operations at the N'tjila permit located in the
Republic of Mali. As a result the $0.3m capitalised in relation to the permit has been impaired and
recognised as an exceptional item.
Loss on disposal of subsidiaries
Completion of one of the last two exploration assets occurred on 16 February 2012 for proceeds of
US$2.0 million, resulting in a loss of US$0.1 million. There are no remaining assets or liabilities
recognised in the Group statement of financial position in respect of the last remaining South East
Asian exploration company, which the Company no longer expects to sell.
4. EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA) represents profit before
depreciation/amortisation, interest and taxes, as well as excluding any exceptional items and profit
or loss from discontinued operations.
31 March 2013
(three months) Unaudited
31 March 2012 (three months)
Unaudited
US$000 US$000)
(Loss)/profit before taxation (44,792) 20,734
Exceptional Items 44,973 105
Depreciation 5,076 6,565
Exchange (gain)/losses 114 (145)
Net finance income (2) (16)
Net finance expense 1,379 858
EBITDA 6,748 28,101
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 20
5. Earnings per Share Earnings per share are analysed in the table below, presenting earnings per share for continuing and discontinued operations.
31 March 2013 (three months)
Unaudited
31 March 2012 (three months)
Unaudited
Shares Shares
Weighted average number of shares in issue for the period
- number of shares with voting rights 199,104,701 198,905,882
- effect of share options in issue1 1,018,785 2,647,551
- total used in calculation of diluted earnings per share 200,123,486 201,553,433
US$000 US$000
Earnings per share from continuing operations
(Loss)/profit for the period from continuing operations (44,755) 13,955
Less non-controlling interest 4,339 (1,358)
(Loss)/profit for the period attributable to equity shareholders of the parent (40,416) 12,597
(Loss)/earnings per share
- basic (cents per share) (20.30) 6.33
- diluted (cents per share) 1 (20.30) 6.25
Earnings per share from discontinued operations
Profit/(loss) for the period - (105)
Less non-controlling interest - -
Profit/(loss) for the period attributable to equity shareholders of the parent - (105)
Earnings/(loss) per share
- basic (cents per share) - (0.05)
- diluted (cents per share) - (0.05)
Total (loss)/earnings per share
- basic (cents per share) (20.30) 6.28
- diluted (cents per share) 1 (20.30) 6.20
1 As a result of the loss for the period, in calculating the diluted earnings per share the effect of share options in issue has been ignored for the 3 months ending 31 March 2013.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 21
6. Intangible assets
Intangible assets represent deferred exploration expenditure. The movement in the period is analysed below:
31 March 2013
US$000
At 1 January (audited) 49,442
Additions 5,671
Capitalised depreciation1 284
Impairment of Mali exploration assets (316)
At 31 March (unaudited) 55,081
31 March
2013 (Unaudited)
31 December
2012 (Audited)
US$000 US$000
Burkina Faso 29,897 26,577
Guinea 25,184 22,574
Mali - 291
Total 55,081 49,442
1 Capitalised depreciation represents the depreciation of items of property, plant, and equipment which are used exclusively in the Group’s exploration activities. The consumption of these assets is capitalised as an intangible asset, in accordance with accounting standards and industry practice.
7. Partial reversal of impairment on mining assets
At 31 December 2012, the Group recognised an impairment of $135.3m in respect of mining assets
at Inata. In accordance with IAS 36 Impairment of Assets, an entity is required to assess at the
end of each reporting period whether there is any indication that a previous impairment loss may
no longer exist or may have decreased. If such an indication exists, the entity should estimate the
recoverable amount of that asset.
The forward contract liability at fair value in March 2013 has been excluded from both the carrying
amount of the cash generating unit (‘CGU’) and the cash flows of the value in use (‘VIU’)
calculation. This avoids double counting of the liability’s cash flow and provides a more stable basis
to assess the CGU’s fair value. The Company has concluded that the requirements of an indication
of a reversal of impairment were identified in relation to the Inata mining assets. An assessment
was therefore carried out of the fair value of Inata’s assets, using the discounted cash flows of
Inata’s latest estimated life of mine plan to calculate the VIU. As a result of the review, a pre-tax
partial reversal of impairment losses of $72.2m has been recorded in Q1 2013 and allocated to
mine development costs.
When calculating the VIU, certain assumptions and estimates were made. Changes in these
assumptions can have a significant effect on the recoverable amount and therefore the value of the
impairment recognised. The key assumptions are outlined below:
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Assumption Judgements Sensitivity2
Timing of
cash flows
Cash flows are forecast over the expected life
of the mine. The current life of mine plan
forecasts mining activities to continue until
2017, with a further 3 years during which
stockpiles will be processed and rehabilitation
costs will be incurred.
An extension or shortening of the
mine life would result in a
corresponding increase or decrease
in reversal of impairment, the
extent of which it is not possible to
quantify.
Production
costs
Production costs are forecast based on
detailed assumptions, including staff costs,
consumption of fuel and reagents,
maintenance, and administration and support
costs.
A change in production costs of
10% would increase or decrease the
pre-tax reversal of impairment
attributable by US$37.4 million1.
Gold price Analyst consensus prices were used for the
forecast of revenue from gold sales, based on
an average consensus at March 2013 for the
period 2013–2020. Prices range
from US$1,775 per ounce in 2013 to
US$1,293 per ounce from 2017.
A change of 10% in the gold price
assumption would increase or
decrease the pre-tax reversal of
impairment recognised in the year
by US$79.1 million1.
Discount
rate
A discount rate of 10% (pre-tax) has been
used in the VIU estimation.
A change in the discount rate of one
percentage point would increase or
decrease the pre-tax reversal of
impairment recognised in the year
by US$6.0 million1.
Ore
Reserves
and gold
production
The life of mine plan is based on Ore
Reserves of 0.92 million for the Inata Mine as
at 31 December 2012, less the Q1 2013
production. The Ore Reserve is estimated in
accordance with the principles the JORC Code
and was reviewed and approved by Clayton
Reeves (refer to page 22 of the 31 December
2012 Annual Report).
A 10% increase or decrease in
ounces produced, compared with
the current Ore Reserve, would
increase or decrease the pre-tax
reversal of impairment recognised
in the year by US$79.1 million1.
1Sensitivities provided are on a 100% basis, pre-tax. 10% of the post-tax impairment would be attributed to the non-controlling interest. 2The impairment reversal on the Inata mining assets would be limited to US$130.1 million, being the previous impaired value less the impact on depreciation as a result of the impairment.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 23
8. Property, plant and equipment
Mining property and plant
Mine development
costs Plant and
Machinery
Vehicles,
fixtures, and
equipment
Exploration property
and plant Office
equipment
Three months ended 31 March 2013 Note West Africa West Africa West Africa West Africa UK Total
US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 January 2013 (audited)
96,789 87,589 55,568 5,242 1,121 246,309
Additions 2,917 2,243 157 99 1 5,417
Partial reversal of impairment on mining assets
7 72,200 - - - - 72,200
At 31 March 2013 (unaudited)
171,906 89,832 55,725 5,341 1,122 323,926
Depreciation
At 1 January 2013 (audited)
56,958 23,624 18,677 822 575 100,656
Charge for the period 2,670 1,537 860 - 9 5,076
Charge for the period – capitalised1
- - - 284 - 284
At 31 March 2013 (unaudited)
59,628 25,161 19,537 1,106 584 106,016
Net Book Value
At 31 March 2013 (unaudited)
112,278 64,671 36,188 4,235 538 217,910
At 1 January 2013 (audited)
39,831 63,965 36,891 4,420 546 145,653
1 Capitalised depreciation represents the depreciation of items of property, plant, and equipment which are used exclusively in the Group’s exploration activities. The consumption of these assets is capitalised as an intangible asset, in accordance with accounting standards and industry practice.
9. Other financial assets
31 March 2013
Unaudited
31 December 2012
Audited
US$000 US$000
At 1 January 599 1,828
Fair value adjustment (206) (1,229)
At 31 March/December 393 599
Other financial assets represent available for sale financial assets which are measured at fair value.
The fair value adjustment is the periodic re-measurement to fair value, with gains or losses on re-
measurement recognised in equity.
Other financial assets relate to shares in Golden Peaks Resources Limited. The shares were
acquired as consideration for the disposal of two of the Group’s assets in South East Asia in 2011.
In January 2012 Golden Peaks announced that it had changed its name to Reliance Resources.
Reliance Resources is listed on the Toronto Stock Exchange.
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10. Inventories
31 March
2013 Unaudited
31 December 2012
Audited
US$000 US$000
Consumables 35,727 33,844
Work in progress 21,502 20,001
Finished goods 5,675 3,104
62,904 56,949
Work in progress includes ore in stockpiles and gold in circuit. Finished goods represents gold in
transit or undergoing refinement, prior to sale.
11. Trade and other receivables
31 March
2013 Unaudited
31 December 2012
Audited
US$000 US$000
Payments in advance to suppliers 7,887 9,524
VAT 18,667 14,766
Prepayments 1,833 834
28,387 25,124
12. Cash and cash equivalents
Included in US$32.9 million cash and cash equivalents at 31 March 2013 is US$13.4 million of
restricted cash (31 December 2012: US$38.4 million), representing a minimum account balance
held in Macquarie Bank Limited of US$12.0 million, a condition of the Inata project finance facility,
and US$1.4 million (31 December 2012: US$1.4 million) relating to amounts held on restricted
deposit in Burkina Faso for the purposes of environmental rehabilitation work, as required by the
terms of the Inata mining licence.
In relation to the minimum account balance held in Macquarie Bank Limited of US$12.0 million,
there are no restrictions on the use of funds above the minimum amount by SMB. Restrictions
apply to the other companies in the Group regarding access to the surplus funds above the $12.0m,
as set out per the press release on 25 March 2013.
13. Other financial liabilities
31 March
2013 Unaudited
31 December 2012
Audited
US$000 US$000
Current liabilities
Interest bearing debt 10,000 5,000
Finance lease liabilities 882 1,105
Forward contracts – held for trading 35,277 -
Total current other financial liabilities 46,159 6,105
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31 March
2013 Unaudited
31 December 2012
Audited
US$000 US$000
Non-current liabilities
Finance lease liabilities 2,196 2,434
Forward contracts – held for trading 61,355 -
Total non-current other financial liabilities 63,551 2,434
Interest bearing debt
Interest bearing debt includes the remaining balance under the Macquarie Bank Limited Inata
project finance facility of US$5.0 million (31 December 2012: US$5.0 million) and the Elliott Lender
loan of US$5.0 million (31 December 2012: US$nil).
As announced on in the press release on 25 March 2013, the remaining balance of US$5.0 million
under the Macquarie Bank Limited Inata project finance facility, previously due on 31 March 2013,
was re-negotiated as part of the hedge restructure and is now due by 30 September 2013.
The initial facility of US$5.0 million, under the loan agreement with the Elliott Lender was drawn
down on 25 March 2013 and is payable on 24 September 2013. Subject to shareholder approval,
the Company intends to repay this loan facility earlier then the due date using the second Elliott
Lender facility.
Forward contracts
On 25 March 2013, Avocet announced a restructure of the Macquarie forward contracts for delivery
of gold bullion. The partial settlement of the contract means that the remaining forward contracts
no longer qualifying for the ‘own use exemption’ and are therefore now within the scope of IAS 39
financial instruments. Under IAS 39 the forward contracts are classified as a financial liability
designated at fair value through profit or loss (FVTPL) as they meet the requirements to be
classified as held-for-trading.
The fair value of the forward contracts were assessed to be US$96.6 million based on a closing spot
rate of US$1,598.25/oz, analysed between current (US$35.2 million) and non-current (US$61.4
million) in accordance with the schedule delivery of forward sold ounces.
Finance lease liabilities
Also included within other financial liabilities are liabilities in respect of assets held under finance
lease, US$0.9 million of which is included within current financial liabilities, and US$2.2 million is
included within non-current financial liabilities.
14. Related party transactions
The table below sets out charges in the three month period and balances at 31 March 2013 between
the Company (Avocet Mining PLC) and Group companies that were not wholly owned, in respect of
management fees and interest on loans. There were no other related party transactions in the
period requiring disclosure.
Avocet Mining PLC Wega Mining AS
Charged in
three months to 31 March
2013
Balance at
31 March 2013
Charged in
three months to 31 March
2013
Balance at
31 March 2013
US$000 US$000 US$000 US$000
Société des Mines de Bélahouro SA (90%)
703 139,488 1,257 109,993
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 26
Compensation paid to key management of the Group during the quarter was US$0.8 million,
including pension contributions of US$0.04 million. A share based payment expense of US$0.3
million was recognised in the quarter in respect of awards made under the Performance Share Plan,
the details of which were reported in the announcement made on 13 March 2012. No dividends
were received by Directors during the period in respect of shares held in the Company.
During the quarter the Company entered into a US$15.0 million loan agreement with Manchester
Securities Corp. (“the Elliott Lender”), an affiliate of Avocet’s largest shareholder, Elliott
Management. Under the UK listing rules, the Elliott Lender and Elliott Management are related
parties to the Company. US$5.0m was drawn down in March 2013 under the initial facility in
accordance with the loan agreement. The terms of the initial facility, which is unsecured are
considered to be normal commercial terms. The availability of the second facility under the
agreement, which is secured, is subject to shareholder approval at a GM to be held on 28 May
2013.
15. Contingent liabilities
There were no contingent liabilities at 31 March 2013 or 31 December 2012.
Note 32 to the financial statements for the year ended 31 December 2012 contains a description of
the Indonesian civil cases being brought by PT Lebong Tandai against Avocet and other parties, and
the reader is therefore referred to the Company’s Annual Report for 2012 for further details. The
Company is not aware of any change in circumstances and as any financial settlement is considered
to be remote, this matter does not constitute a contingent liability.
Registered Office 3rd Floor 30 Haymarket London SW1Y 4EX England Registered in England No 3036214 27
16. Unaudited quarterly income statement for continuing operations
1EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.
Quarter ended 31 March
2013 (Unaudited)
Quarter ended 31 December
2012 (Unaudited)
Quarter ended 30 September
2012 (Unaudited)
Quarter ended 30 June
2012 (Unaudited)
Quarter ended 31 March
2012 (Unaudited)
US$000 US$000 US$000 US$000 US$000
Revenue 40,885 44,453 50,146 49,255 60,256
Cost of sales (36,749) (44,264) (45,689) (42,734) (36,007)
Cash production costs:
- mining (16,495) (17,372) (12,355) (13,225) (12,707)
- processing (10,970) (10,812) (9,219) (10,914) (10,827)
- overheads (4,983) (6,767) (5,521) (4,789) (4,685)
- royalties (3,171) (3,547) (3,877) (4,182) (4,339)
(35,619) (38,498) (30,972) (33,110) (32,558)
Changes in inventory 4,074 10,798 (5,662) (97) 5,163
Expensed exploration and other cost of sales
(128) (6,899) (3,084) (3,732) (2,047)
Depreciation and amortisation (5,076) (9,665) (5,971) (5,795) (6,565)
Gross profit 4,136 189 4,457 6,521 24,249
Administrative expenses (2,135) (4,052) (3,630) (3,166) (2,154)
Share based payments (329) (520) (517) (471) (559)
Impairment of mining assets - (135,300) - - -
Reversal of impairment of mining assets 72,200 - - - - Impairment of exploration intangible assets (316) - - - - Profit/(loss) from operations 73,556 (139,683) 310 2,884 21,536
Loss on recognition of forward contracts
(96,632) - - - -
Restructure of forward contracts (20,225) - - - - Net finance costs (1,491) (316) (633) (426) (697)
(Loss)/profit before taxation (44,792) (139,999) (323) 2,458 20,839
Analysed as:
Profit/(loss) before taxation and exceptional items 181 (4,699) (323) 2,458 20,839
Exceptional items (44,973) (135,300) - - -
(Loss)/profit before taxation (44,792) (139,999) (323) 2,458 20,839
Taxation 37 22,488 (486) (589) (6,884)
Profit/(loss) for the period (44,755) (117,511) (809) 1,869 13,955
Attributable to: Equity shareholders of the parent company (40,416) (105,975) (918) 1,611 12,597
Non-controlling interest (4,339) (11,536) 109 258 1,358
(44,755) (117,511) (809) 1,869 13,955
EBITDA 1 6,748 5,282 6,281 8,679 28,101