TIDMHMB
PRESS INFORMATION28 May 2012
HAMBLEDON MINING PLC
(AIM:HMB)
Final results
(All references to "$" are to the United States dollar, "c" to
the United States cent and "ounces" are to troy ounces)
Hambledon Mining plc ("Hambledon" or the "Group" or the
"Company"), the gold mining, exploration and development company
based in Kazakhstan, today announces its final audited results for
the year ended 31 December 2011. A copy of this announcement will
be available on the Company's website -
www.hambledon-mining.com.
FINANCIAL
-- Group reports its results in United States dollars for the first time.
-- Loss after taxation from continuing operations and before charge for
tailings dam 3 incident of $1.6 million (2010: profit of $3.0
million).
-- Charge for tailings dam 3 incident of $7.8 million resulting in loss
after taxation from continuing operations for 2011 of $9.4
million.
-- Capital expenditure of $14.4 million (2010: $4.9 million).
-- Cash of $1.8 million (2010: $0.9 million) at year end with loan
facility of $2.0 million still available for use (of which
$1.0
million was drawn down at 31 December 2011) and European Bank
of
Reconstruction and Development ("EBRD") loan of $15.0 million
being
completed.
-- Raised $11.5 million (net of expenses) in early 2012 through placing
of shares and $3.0 million investment from EBRD.
OPERATIONS AND DEVELOPMENT
-- 20,851 oz gold poured (2010: 22,802 oz).
-- Mined ore up 2.5 per cent., milled ore up by 4.5 per cent but ore
grade declined by 7.7 per cent.
-- Open pit stripping ratio 6.5 to 1 (2010: 5.3:1) due to remnant waste
stripping.
-- Underground mining commenced in November 2011.
-- Acquisition of Akmola Gold remains conditional upon certain approvals
from the Government of Kazakhstan.
Tim Daffern, Chief Executive of Hambledon Mining plc
commented:
"The difficulties of the tailings dam 3 incident overshadowed
the Company's business activities in 2011, despite not causing any
long term pollution. A higher than normal amount of waste was
removed to catch up on stripping, substantial refurbishment of the
mineral process plant was completed and underground mining
commenced ahead of schedule and under budget. The works in 2011
followed a disciplined approach to provide a solid platform from
which the Company can further develop a sustainable underground
operation. The proposed acquisition of Akmola Gold LLP would add
substantially to the future growth in gold production"
The annual general meeting of the Company will be held at the
offices of Fairfax I.S. PLC at 46 Berkeley Square, London, W1J 5AT,
United Kingdom on Friday 29 June, 2012 at 09.30 a.m. The annual
report of the Company for the year ended 31 December 2011 will be
posted to shareholders on or before 6 June 2012 and will then be
available on the Company's website.
For further information please contact:
Hambledon Mining plc
Charles Zorab Telephone: +44 (0) 207 233 1462
Fairfax I.S. PLC (Nomad and broker)
Ewan Leggat/Katy Birkin Telephone: +44 (0) 207 598 5368
Tavistock Communications
Ed Portman/Jos Simson Telephone: +44 (0) 207 920 3150
Chairman's statement
I am pleased to announce our financial results for the twelve
months to 31 December 2011.
Review of 2011 and 2012 to date
In the twelve months to 31 December 2011, the Group recorded a
loss after taxation from continuing operations of $9.4m (2010
profit of $3.0m) with revenue of $33.3m (2010 revenue $29.0m).
Although our production was slightly down on 2010 (20,851 oz gold
poured versus 2010 gold poured of 22,410 oz), the gold price
averaged $1,587 versus $1,295.
We started the year on a positive note with a much better
performance in the first quarter thanks to improved winterisation
of external infrastructure - improvements which were again
demonstrated in the first quarter of 2012. Although by no means
weather-proof, we believe we can achieve better results in this
very cold quarter in future until such time as the underground mine
is providing all the ore when there should be little weather
effect. In March 2011, we raised $13.9m net from a combined
institutional placing and open offer to all shareholders. We were
pleased by the response to both this and the placing in February
2012 where we raised $11.5m net of expenses.
Unfortunately, the year will be remembered not for positive
developments, of which there were many, but for the leak from
tailings dam 3. This occurred in October, at a time when everything
else was performing well. It caused a setback in our relations with
Sekisovskoye village and the wider community, and to our cash
resources and production. Since then we have worked hard to restore
our position amongst all stakeholders. One side effect was a delay
to the European Bank of Reconstruction and Development ("EBRD")
loan which should ideally have been in place by the end of the
year. It was this which caused us to have recourse to the
institutional placing in February 2012.
The involvement of the EBRD is a significant achievement for
Hambledon. We are pleased to have met the EBRD's exacting standards
for transparency and operating standards which is unusual in our
sector. EBRD have agreed, subject to finalisation of security
arrangements, to lend Hambledon $10.0m as a first tranche, with the
second tranche of $5.0m available when we have achieved certain
production targets by the first quarter of 2013. As I write, we are
in the process of completing the final steps necessary to satisfy
the conditions for the first tranche of their loan. In the
meantime, we welcome them as shareholders in the Company under the
subscription agreement announced on 5 April 2012 and look forward
to enjoying a fruitful relationship with them in the years
ahead.
Operations
Underground mining commenced at Sekisovskoye during 2011. This
has always been the main thrust for the development of the Company,
given that the great majority of the resources are underground and
the higher grade of ore to be found there. We are currently
drilling underground to further delineate and define the ore
bodies. The open pit, as the Chief executive's review will amplify,
has finally begun to benefit from the removal of the backlog of
waste stripping left over from the previous year. The process plant
has worked almost faultlessly, albeit the recovery of gold has been
lower than we would have expected due to the presence of carbonates
and harder ore than previously expected.
We were pleased that the process of liquidation of Ognevka has
finally been completed. Proceeds amounted to $1.5 million which has
been credited to earnings in 2011 as the investment had already
been fully written down.
Outlook
This year we expect to be producing more ounces as the output
from the underground mine is increasing and we are drilling further
to increase our knowledge of the ore body.
We regard the fines paid by your Company in respect of the
tailings dam 3 leak as excessive and are challenging them in the
courts. The issue is unlikely to be resolved before the end of the
year.
We are also endeavouring to complete the acquisition of Akmola
Gold. Although the Kazakhstan wealth fund has indicated that it has
a preliminary intention to pre-empt the transaction, we continue to
work towards completion.
Finally, as detailed in the circular dated 1 February 2012, we
are faced with the issue of the desire of the Kazakh government to
have all gold refined in-country and sold to Kazakhstan's National
Bank. The Kazakh government has deferred the implementation of
these rules over concerns that there is insufficient refining
capacity in Kazakhstan. We will of course keep shareholders
informed of developments.
Corporate
During the year we accepted the resignation of Chris Thomas from
the Board but welcomed Jeff O'Leary in his place. With the now
impending appointment of a director from EBRD, Jeff resigned to
make way for their nominated director. We are grateful to both of
them for their unstinting efforts on behalf of the Company.
I would also like to pay tribute to the hard work of all the
staff and my Board colleagues in what has certainly been a most
challenging year.
George Eccles
25 May 2012
Chief executive's review
The Company has continued to concentrate on the development of
its Sekisovskoye operations from a modest open pit operation to a
growing joint open pit and underground operation. Despite the
setback with tailings dam 3, the Company has made progress in the
refurbishment of existing infrastructure, resolving waste and land
management issues, improving engineering systems and controls and
solving the challenges of changes to the mineral processing
characteristics of the deeper gold and silver bearing ores.
Sekisovskoye operations
The Sekisovskoye operation has benefited substantially from
refurbishment of the crushing infrastructure to cope with the harsh
Kazakhstan winter climate. This resulted in an increase in mineral
process plant production of some 70 per cent. in the first quarter
of 2011, and further increases in production in the first quarter
of 2012 by 10 per cent. As explained in my review last year, the
decision was taken to expand the mining fleet and this equipment
has been utilised to move ahead with waste stripping. This has been
to both catch up on last year's shortfall of remnant waste and to
ensure that good mining conditions can be maintained. This resulted
in a 30 per cent. increase in mining volumes and for more normal
mining operations to resume, with consequent increases in
efficiency and cost reductions. The consequence of the removal of
the remnant waste has been a reduction in the grade of ore (gold
content) fed to the process plant with commensurate reductions in
process plant gold recovery and gold output.
The operational statistics for 2011 and 2010 were as
follows:
Mining
2011 2010
Ore mined t 594,152 579,579
Gold grade g/t 1.19 1.19
Silver grade g/t 2.20 2.20
Contained gold oz 22,638 22,176
Contained silver oz 41,512 41,031
Waste mined t 3,921,715 3,082,000
Mineral processing
2011 2010
Crushing t 748,485 713,088
Milling t 744,416 712,112
Gold grade g/t 1.09 1.18
Silver grade g/t 1.86 2.39
Contained gold oz 26,084 27,129
Contained silver oz 44,634 54,713
Gold recovery per cent. 81.2 83.6
Silver recovery per cent. 83.7 84.7
Gold poured oz 20,851 22,802
Silver poured oz 36,946 46,321
Note:The difference between mined ore tonnage and the mineral
crushed tonnage was material taken from the low grade stockpile and
third party ore treatment.
Mining activity - open pit mine
The expansion of the mining fleet in 2011, together with a
programme of employee incentivisation and improved maintenance,
enabled a vigorous approach to removing the remnant waste in the
open pit, which was completed as scheduled. The removal of the
waste has allowed in-pit water control to be improved along with
commensurate improvements to drilling and blasting activities.
During the period when waste extraction was at its highest
level, the open pit produced little ore for processing and the
mineral processing plant was fed from the low grade stockpile. This
allowed a concentration of effort in transporting the waste rock to
the tailings dam 5 embankment, with rapid progress being made. All
construction works for tailings dam 5 were according to the designs
by Golders Associates UK who are supervising its construction.
As tailings dam 5 nears completion, the waste rock from the open
pit will be placed into the foundation for tailings dam 6 which is
the final dam for the operation. The design of tailings dam 6 will
allow effluent from the mineral process plant to be stored for up
to 17 years. The plan is to complete all tailings dams in 2014 so
that when the open pit mine ceases production all civil engineering
infrastructure tasks onsite will be complete.
The improved maintenance of the Company's fleet was augmented by
the installation of a fuel cleaning system. Diesel fuel in
Kazakhstan is below normal standards due to aged Soviet era
refining plants. All fuel delivered to site is now cleaned by this
filter system which has improved machinery operating performance
and reduced downtime.
Mineral processing plant
The mineral processing plant had to contend with being fed low
grade ores for a period of six months whilst remnant waste was
removed from the open pit. This affected gold and silver recovery
for the year. In addition, due to the tailings dam 3 incident, the
process plant was shut down for nine days in the fourth quarter
whilst investigations and remedial works were undertaken to ensure
no further leakage from the Company's operations. Despite the fact
that during the year record plant throughput production levels had
been achieved, demonstrating the effectiveness of the process plant
machinery and equipment refurbishment programme, the tailings dam
incident led to an overall reduction of gold produced.
The process plant improvement programme continued as set out in
last year's annual report, with substantial works undertaken in
2011 including replacement of the main jaw crusher, replacement of
the main secondary cone crusher, refurbishment of 50 per cent. of
the crushing circuit conveyors, purchase of a new electric boiler
for the elution circuit as well as a new doré furnace.
In 2012 and 2013, as the operation moves more fully into the
underground phase, the process plant will be further developed to
meet the specification of the underground ores. This will be
achieved by:
-- Addition of a seventh carbon-in-leach (CIL) tank.
-- Expansion of the mineral process plant instrumentation needed to
control the plant chemistry.
-- Replacement of the remaining cone crushers and associated screens to
allow finer crushing and grinding of the metalliferous ores.
Underground mine
The development of the underground mine to the point of
operation was completed successfully in the fourth quarter of 2011.
Mining and extraction of ores from five mining levels has been
carried out and deepening of the main transport decline has
continued as planned. The decline has connected with the existing
320mrl and the connection zone has been refurbished to allow for
effective through mine ventilation, dewatering and safe working
below the main 320mrl.
The underground mining works are carried out by a contractor and
this arrangement will continue in 2012 with diamond drilling
carried out by the Company's staff. The contractor has expanded the
mining equipment fleet so that a gradual increase in mined tonnes
can be achieved in line with the budget and safe working
arrangements.
The works associated with the underground are numerous and a
summary of what was completed in 2011 is as follows:
-- Installation of rope guides and associated safety equipment in the
'320' shaft so that man-riding can be carried out according
to
Kazakhstan and western good practice.
-- Completion of some 13,250 metre of the 25,000 metre diamond drill
programme from the 320 exploration drift.
-- Completion of approximately 1,900 metres of tunnels for the transport
decline, with attendant electrical infrastructure, explosive
magazines, ventilation raises, pump station and ventilation
machinery.
-- Mining and extraction of approximately 4,500 tonnes per month of ore
since November 2011.
Tailings dam 3 incident
In late October 2011, a minor leak from tailings dam 3 occurred.
The effluent leaked was not harmful to the environment and apart
from temporary discolouration and temporary elevated levels of
various natural minerals, such as calcium and sulphates, there was
no long term pollution to the local environment. Whilst the leak
was minor, its consequences were significant. The business
interruption, resultant clean-up and legal costs have been
extensive and are set out in the financial section of this review.
The Company has now changed the manner in which it manages the
engineering works associated with tailings impoundment
construction. Since the incident, we have co-operated fully with
all local and national Kazakhstan authorities and have recently
replaced, improved and expanded the Sekisovska village water
reticulation system.
The courts of Kazakhstan have applied high levels of penalties
based on certain Soviet era pollution calculation methodologies.
The Group has enacted legal proceedings with the aim of obtaining
at least partial repayment of the fines paid to the Kazakh
government by challenging the manner in which the pollution effect
is calculated. Whether this can be finally achieved is
uncertain.
The remediation of tailings dam 3 has commenced and works are
expected to be completed in the third quarter of 2012. The remedial
works have been designed by Golders Associates UK and are being
peer reviewed by SRK UK. All site construction works are closely
supervised by Golders Associates technicians who are onsite seven
days a week. All other dams have been inspected by Golders
Associates and found to be in a satisfactory condition with
on-going tailings dams being designed by Golders Associates.
Strategic planning
The open pit operation at Sekisovskoye is designed to operate
until the third quarter of 2014. The current mining fleet will then
be used to carry out certain mine rehabilitation tasks in line with
the open pit mine closure plan. The Group's business strategy is to
develop additional gold based mineral projects in Kazakhstan
utilising, where possible, the existing open pit mining machinery.
It is envisaged that after refurbishment the existing fleet will be
transferred to a new mining location in 2015. A number of projects
have been identified near to Sekisovskoye which would enable this
strategy to be executed.
Corporate social responsibility
We believe that we have an obligation to be sensitive to the
needs of all our direct and indirect stakeholders and should make
decisions based not just on financial results but also on the
social and environmental consequences of our activities.
The Company has set out in a recently published stakeholder
engagement plan an action plan to improve its environmental and
social compliance ("ESAP"). These plans are integral to the support
of the company by EBRD and lie at the heart of the manner in which
Hambledon views its corporate development.
In addition to the execution of the ESAP, the Company intends to
place a register on its company website of all payments made to the
Kazakhstan authorities, as per the Extractive Industries
Transparency Initiative.
Furthermore, the Company has commenced accreditation with the
International Cyanide Management Institute ("ICMI") and initial
assessment has been highly complementary of the Company's
arrangements. Hambledon will be the first company in Kazakhstan to
attain such accreditation.
We believe that our operations fully comply with the laws and
regulations of Kazakhstan, which include environmental, licensing,
employment, health and safety and social obligations. We regard
these standards as a minimum and recognise that higher standards
can be achieved as we seek to ensure that our business is
environmentally and socially sustainable in the long term. In 2011,
we carried out social and environmental impact assessments which
have led to a number of recommendations for the implementation of
remedial measures to minimise our overall impact.
As part of our commitment to improved and disciplined management
control of operations, health and safety, risk management, the
environment and community and social development a local
consultancy group has been engaged to implement with company staff
a suite of ISO standards including ISO 9001, ISO 14001, ISO 18001,
ISO 26000 and ISO 31000.
Our community
During the past year, we have continued to support our local
communities in a number of ways. We have continued to carry out
winter maintenance to the roads of Sekisovskoye under the terms of
our community agreements; supported a number of local organisations
with a donation for the improvement of the regional social
environment and infrastructure; supplied materials to local farmers
to refurbish access roadways, completed a local sports field and
stadium facility in a nearby village and installed refuse centres
in the local village in co-operation with the local
municipality.
Plans for 2012 include commissioning a new, improved and
expanded drinking water reticulation system to the village of
Sekisovskoye; a village clean-up programme; anti-fungicide
treatment of all local trees; provision of a small excavator for
surface drainage and sewage works and provision of a garbage truck
and bins.
We intend to mandate a detailed social impact assessment program
looking at housing, employment, health and changing work
arrangements as the open pit mine transitions to an underground
mine. A detailed ecological study is to be undertaken to complement
the ICMI audit and to provide reassurance to the local community of
the minimal impacts of the industrial operations at
Sekisovskoye.
Hambledon - growth strategy
The Hambledon plan is to develop multiple gold-based mineral
projects in Kazakhstan and the Group is currently reviewing a
number of opportunities in Kazakhstan consistent with this
strategy. The company has signed a conditional sale and purchase
agreement with the vendors of Akmola Gold LLP which holds title to
two mineral properties in the northern central part of Kazakhstan.
These properties contain metalliferous ores which the Company
intends to exploit in the coming years to increase gold and silver
production. A summary of the Akmola Gold LLP properties is set out
below:
Akmola Gold LLP holds the subsoil use licence for two
wholly-owned projects in central Kazakhstan, known as Tellur and
Stepok, together containing around 440,000 ounces of gold
resources, along with potentially significant amounts of copper,
lead, zinc, gallium and indium. The acquisition is subject to the
government's pre-emptive right to acquire on the same terms as
Hambledon are offering, and on certain other required consents.
Tellur
Tellur is a high grade underground mine containing approximately
260,000 tonnes ore at a grade of over 17 grammes per tonne of gold,
giving a resource of over 140,000 ounces of gold. The attraction of
Tellur to the Group is that it is well explored, partially
developed and can be brought into production as early as the second
quarter of 2013. The ore can be transported to Sekisovskoye for
treatment in the Company's existing plant, allowing low cost
treatment and, because of its high grade, providing a substantial
boost to the Company's gold production potential. Subject to
further study, the Company envisages producing around 50,000 tonnes
per year. This would potentially yield an additional 20,000 ounces
of gold per annum once the mine is at a steady state in mid-2014.
The operating cost is expected to be as low as $600 per ounce as a
result of the high grade and because only marginal additional
treatment costs will be incurred at the already operating
Sekisovskoye treatment plant.
Stepok
Stepok is an advanced exploration project which is located
within the prolific Aksu-Bestobe-Zholombet gold district, some
three kilometres north of Tellur. Stepok contains estimated
measured and indicated resources, equivalent to some 300,000 ounces
of gold. The mineralisation also contains significant quantities of
lead and zinc metal, as well as possibly economic levels of copper,
gallium and indium.
Development of Stepok will take longer than for Tellur as the
project is less advanced and the metallurgy more complex. Around
three to four years will be needed to carry out additional resource
delineation drilling and a bankable feasibility study. A drill
programme of some 65,000 metres is planned, as it is believed that
a significant increase in the resource can be discovered at depth
and along strike. Mining will be by open pit, for which the mining
fleet from Sekisovskoye will by then be available. A hybrid
processing plant, including flotation and specialised cyanidation,
will be required to produce gold doré and extract concentrates for
copper, lead, zinc, gallium and indium. The resource is currently
sufficient to justify annual production of approximately 1 million
tonnes per annum, potentially yielding 30,000 ounces of gold and
40,000 ounces of silver per annum.
It is anticipated that after further exploration, the resource
at Stepok could be expanded sufficiently to justify a doubling of
output to 2M tonnes per annum, thereby doubling the gold output to
60,000 ounces per annum.
Financial
Sekisovskoye poured 20,851 ounces of gold in 2011. Due to the
time lag in shipping and selling gold poured to the refiner, a
total of 20,855 ounces were sold in 2011 at an average price of
$1,587 per ounce. There were no other material items of
revenue.
The cost of production (including depreciation and royalty
payments) was $1,417 per ounce (2010: $896 per ounce).The increase
in the cost of production in 2011 compared to 2010 was due to the
increase in stripping costs, lower recoveries and cost inflation.
In 2010, the stripping ratio was 5.3:1 waste to ore. In 2011 the
ratio was 6.5:1 waste to ore due to catch up of the back log in
stripping. The gold recovery in 2010 was 83.6 per cent. and in 2011
was 81.2 per cent. The Group's accounting policy is to directly
expense stripping costs to cost of sales where the stripping ratio
exceeds the long term 5:1 waste to ore ratio included in the
Sekisovskoye mine plan. The amount of stripping costs directly
expensed in 2011 was $2.9 million. Cost of sales for 2011 also
contains a provision against ore stockpiles of $1.6 million (2010:
$nil) due to production costs being higher than the net realisable
value of the gold contained within the ore.
Sekisovskoye's administration costs in 2011 were $2.7 million
(2010: $1.9 million) and capital expenditure was $14.4 million in
2011 (2010: $4.9 million). The main item of capital expenditure in
both 2010 and 2011 was the development of the underground mine.
In October 2011, a leak of tailings dam 3 occurred at the
Sekisovskoye mine site. The total cost of the leak is now estimated
at $7.8 million. This amount has been treated as a charge against
operating profits in the year. The main components of the charge
are the repair of the tailings dam of $2.4 million, fines and
penalties of $3.9 million, repairs to the environment of $0.4
million and social obligations arising from the leak of $1.1
million. Of the total costs, $0.4 million was paid prior to 31
December 2011 and the balance has been established as provision in
the accounts.
TOO Ognevka ("Ognevka") was placed into bankruptcy in 2010 and
has been treated in the financial statements as a discontinued
operation in 2010 and 2011. The net assets of the company had
previously been written down to nil value and therefore the placing
of Ognevka into bankruptcy in 2010 did not give rise to any profit
or loss. In 2012, the bankruptcy of Ognevka was completed and its
assets sold for approximately $1.8 million. The Group was a major
secured creditor of Ognevka and in April 2012 received $1.5 million
as an initial settlement of its debt due from Ognevka. The receipt
has been included in the consolidated income statement and as a
receivable in the financial statements for the year ended 31
December 2011.
Corporate administration costs in 2011 were $3.2 million (2010:
$2.6 million). These were director and other staff salaries,
professional fees and the cost of maintaining the Group's quote on
the AIM Market including investor relations. They also included
$0.9 million of consultancy for management support of the
Sekisovskoye operation.
The Group has loaned funds to Akmola Gold to finance its
operations whilst the Company completes the acquisition and, as at
31 December 2011, this loan stood at $1.5 million. This loan,
together with other acquisition-related costs of $1.5 million, has
been included within other receivables in the Group balance sheet
at 31 December 2011. Their recoverability is dependent upon the
completion of the acquisition of Akmola Gold.
The Group was financed by a secured $2 million working capital
facility from a local bank in Kazakhstan in 2011. Following the
year end, a $15 million secured facility was obtained from the
European Bank of Reconstruction and Development ("EBRD") subject to
certain conditions precedent. The local bank then agreed to renew
its facility on an unsecured basis. The EBRD facility and the local
unsecured facility were in the process of being completed at the
date of signing the accounts. The Group also raised $12.1m of
equity (before costs) in 2012 through a share placement and
subscription by the EBRD.
The Group has prepared its financial statements in United States
dollars for the first time and comparative figures have been
translated into United States dollars. The functional currency of
the companies in Kazakhstan is the Kazakhstan tenge ("KZT"). The
functional currencies of Hambledon Mining plc and Hambledon Mining
Company Limited is pounds sterling. The rates used to convert
pounds sterling and Kazakhstan tenge into United States dollars in
these financial statements are as follows:
2011 2010 2009
Closing Average Closing Average Closing Average
US$ = GBP 1.54 1.60 1.55 1.55 1.59 1.56
US$= KTG 145.58 146.65 144.52 145.08 146.82 148.92
GBP = KZT 224.96 235.22 223.54 224.45 233.44 235.08
The United States dollar did not appreciate or depreciate
against the Kazakh tenge by a material amount in 2011. As a result
there is an insignificant currency translation movement on the
Group's net investment in its subsidiaries in Kazakhstan which was
taken to reserves.
Principal risks, uncertainties and key performance
indicators
The principal risks and uncertainties facing the Sekisovskoye
operation include the following:
1 Failing to obtain the metallurgical recoveries predicted by
test-work.
2 Operating costs being significantly higher than those
predicted.
3 Operations being affected by events outside the control of the
Company such as major infrastructure failures or political
upheaval.
4 Uncertainty over the timing of receipt and terms of the
operating permits for the underground operation.
5 Production being affected by failure of vital equipment.
6 Tonnes and grades of ore mined differing from those predicted
from the geological model.
7 Plant breakdowns affecting the ability to extract the the
metalliferous material.
8 The risk that key staff may be absent from the operation for
prolonged periods for maternity or sickness.
9 Fluctuating gold and silver prices as their volatility affects
the Group's revenue.
Mitigation of risk and uncertainty
The Company's management has analysed the risks and
uncertainties and has in place control systems which monitor daily
the performance of the business via key performance indicators.
In addition, following a review of staff resources, we have
engaged supplementary staff to augment the chief financial officer
function, chief engineering role and financial administration.
The Group budget for 2012 includes provision for enhancements to
site loss control (security and site access control),
infrastructure enhancement and hence long term operating cost
reduction. Investments in machinery and process control
instrumentation are being made to improve the metallurgical plant
performance and there are work programmes to develop alternate
links to national infrastructure.
The board, as outlined in the corporate social responsibility
section, monitors the impact of the operation of the environment
and community in compliance with an agreed monitoring
programme.
The Group receives regular updates on all safety and welfare
matters related to its employees.
The key performance indicators used to monitor the performance
of the operations are:
-- Tonnes and grade of ore and waste mined.
-- Tonnes processed.
-- Metallurgical recovery.
-- Gold and silver produced.
-- Cost per unit of production.
-- Safety of the Group's employees.
Mineral resources
Resource statement
The mineral resource statement for the Sekisovskoye deposit has
been prepared under the Australasian JORC code. Open pit mining
operations commenced in mid-2006, ore mining commenced in 2007. The
open pit mine has a planned mine life extending until the third
quarter of 2014.
The basis of the resource statement is as set out in previous
annual reports, specifically that of 2010.
The resource model has been updated to reflect the sampling of
the drilling in the open pit by rotary air blast ("RAB") for
blasting activities. This grade control information is used daily
to control the extraction of ore for mineral processing, low grade
stockpiling or allocation to waste deposition. Depletion of the
open pit resource due to mining activities is reflected in the
mineral resource table 1 below.
The historic open pit activities have led to the creation of a
stockpile of some 0.5 million tonnes at a gold grade of 0.73
grammes per tonne. This is marginally below the cut-off grade that
is used to define the ore that is processed for doré
production.
An extensive underground drilling resource delineation programme
was undertaken in 2011 with some 13,250 metre of diamond drilling
undertaken. This programme is delineating the resources above and
below the 300mrl. The results from this drilling have confirmed and
added to the Soviet era drill results. They have been included in
the 2011 resource update.
Table 1
Geological resources remaining within the open pit mine only
Resource Tonnes Au (g/t) Contained Ag (g/t) Contained Au cut-off
category
(millions) metal (oz) metal (oz) (g/t)
Measured - - - - - 0.5
Indicated 1.5 1.55 74,750 2.37 114,295 0.5
Inferred 0.5 1.39 22,345 2.39 38,420 0.5
Total 2.0 1.52 97,095 2.38 152,715 0.5
Note: The resource estimation process has identified that due to
the erratic and nuggety nature of the mineralisation, the use of
the term 'measured' for JORC classification for resources cannot be
justified.
The decrease in open pit and underground resources is primarily
due to depletion of the mineral resources related to open pit
mining. There has been a reconciliation of the geological resource
model, grade control data and mineral processing results which have
together been used to determine the remaining mineral resource.
Table 2
Geological resources within the underground project area
Resource Tonnes Au (g/t) Contained Ag (g/t) Contained Au cut-off
category
(millions) metal (oz) metal (oz) (g/t)
Measured - - - - - 2.0
Indicated1 2.65 5.2 443,036 6.4 545,276 2.0
Inferred1 7.22 5.2 1,207,068 7.1 1,648,111 2.0
Indicated2 4.83 0.8 124,230 1.5 232,932 0.5
Inferred2 1.14 0.6 21,991 1.2 43,982 0.5
Total 15.84 3.53 1,796,325 4.86 2,470,301 0.5 + 2.0
Note 1:The resource estimation process has identified that due
to the erratic and nuggety nature of the mineralisation the use of
the measured classification for resources cannot be justified.
Note 2:The inferred resources contain resources which are
classified 'inferred' due to their complex geometry, erratic and
nuggety gold distribution and have limited sample data, which
complies with the descriptions as set out in the JORC code.However,
their nature or tenor is subject to the detailed geological
knowledge of the local geologist in 2003 who advised on their
inclusion as a basis for future delineation.These resources may be
subject to reclassification once additional resource delineation
drilling is completed and has been comprehensively assessed.
Note 3:Two sets of Indicated1+2 and Inferred1+2 have been
included showing the resource above 2.0 grammes per tonne Au and
between 0.5 grammes per tonne Au and 2.0 grammes per tonne Au.
Note 4:A component of the inferred underground resource that is
defined beyond the current limits of the 2006 block model (numerous
narrow zones at 2 grammes per tonne cut-off) was initially
considered to be equivalent to a JORC "inferred" category. This
inferred resource was based on the actual grade and ore thickness
of the zones which had been modelled (inferred/indicated). From
this, the two dimensional geological area was calculated when
projected onto a strike section, thus providing a volume or tonnage
factor per unit area. Beyond the limits of the modelled zones
numerous Soviet era drill holes intersected gold grades less than 2
grammes per tonne and the extent of the intersections along strike
and at depth provided a boundary within which gold has been found
and the area of this zone calculated accordingly, so that the
volume factor can be applied and therefore tonnage defined. The
grade will be the same as the global grade for the modelled zones.
This resource is not strictly an "extrapolation", as defined by
JORC - "where inferred resources have been defined beyond the
spatial limits of sample data". The historic drill data is being
comprehensively evaluated with the 2011 resource data to establish
tenor and thus determine levels of confidence in continuity.It is
noted that gold has been intersected at 930m from surface and this
intersection had a grade less than 5 grammes per tonne. Based on
the 2010 resource table, this resource totalled 5.78 million tonnes
at 5.2 grammes per tonne.
Mineable reserves
Table 3
Open pit mineable reserves at 31 December 2011.
Mineable Tonnes Au (g/t) Contained Ag (g/t) Contained Au cut-off
reserve
category (millions) metal metal (g/t)
(oz)a (oz)a
Probable 2.17 1.3 76,185 1.9 111,348 0.8
Note a:The open pit mineable reserve estimation process includes
mineral process plant recovery of an average of 84 per cent.
The open pit ore reserve estimate of Sekisovskoye deposit has
been prepared under the Australasian JORC code.
The open pit mineable reserves have been estimated by applying
project operating economics, a mining dilution tonnage factor of 25
percent; a mining dilution grade factor of 0.8 and mineral
processing plant recovery of 84 per cent. These factors allow a
realistic reconciliation between the geological resource model and
the actual 2011 mineral process plant feed tonnes and grade. The
high dilution reflects the numerous small ore zones and their
geometry. The open pit reserve is that portion of the indicated
resource falling entirely within the optimised open pit design. The
reduction in the open pit mineable reserves is primarily due to the
depletion of the ore mined in 2011 and a reassessment of the
economic worth of some of the marginal mineral resources due to
increases in operating costs from 2010 to 2011.
Within the JORC reporting guidelines, stockpiled materials can
also be treated similarly to the in-situ mineralised material for
the classification of a mineral resource or reserve. The stockpiled
material at Sekisovskoye is set out below.
Table 4
Open pit stockpile reserves at 31 December 2011.
Mineable Tonnes Au (g/t) Contained Ag (g/t) Contained Au
reserve cut-off
category (millions) metal metal (g/t)
(oz)a (oz)a
Probable 0.5 0.73 9,857 1.47 219,849 0.5 to
<0.8
Note a:The open pit stockpile mineable reserve estimation
process includes mineral process plant recovery of an average of 84
per cent.
The Sekisovskoye underground mineable reserve calculations are
based on consultancy work undertaken in 2007 and 2008 by AMC,
Australia and internally by the Hambledon underground project team,
comprising engineers, geologists and metallurgical staff
supplemented by additional consultancy work in 2011 by Golders
Associates. Mr.T Daffern has scrutinised these calculations and
considers the validity of the 2009 mineable reserves to be
legitimate. At this juncture no further update to the total
mineable reserves can be justified.
The mineable reserves have been derived in accordance with the
discipline of JORC to classify underground mineable reserves.
Table 5
Mineable reserves for the underground mine at 31 December
2011
Mineable Tonnes Au (g/t) Contained Ag (g/t) Contained Au cut-off
reserve
category (millions) metal metal (g/t)
(oz)A (oz)A
Probable 1.87 5.29 267,157 7.6 383,817 2.0
Note A:The underground mineable reserve estimation process
includes mineral process plant recovery of an average of 84 per
cent.
The derivation of the mineable reserves estimates includes
engineering calculations that have been undertaken in-house and
some by the use of external consultant over a period of four years.
Mining engineering calculations undertaken in 2011 added
substantially to the technical knowledge for the construction and
development of the Sekisovskoye underground mine. These studies
will be updated and expanded in 2012 in order to underpin knowledge
for the expansion of the mine from 100ktpa to 250ktpa. The studies
will also examine various development scenarios in order to
maximise the net present value of the underground resources. The
reduction in the 2009 mineable reserves has been due to depletion
of the reserves by virtue of the underground mining. There has been
a reassessment of the economic worth of some of the reserves due to
a complicated geometry of the precious metal mineralisation as well
as an increased level of confidence in expected operating costs and
extraction methodologies. This reassessment has resulted in a
modest reduction of the underground mineable reserves.
Mineral resource and mineable reserve and mineral process plant
feed reconciliation
Mining of the ore in the open pit is carried out by hydraulic
excavators following grade control drilling. The grade control
drilling is carried out by using Atlas Copco CR (RAB) drill rigs.
The laboratory analysis is carried out in the Sekisovskoye site
laboratory. The resulting assays are modelled using Datamine
software to produce a grade control model.
The grade control data is used to define the excavation
boundaries post blasting of the rock. The grade control model
results are based on vertical rotary drill hole sampling data,
versus the diamond drill core sampling (sub-vertical and
sub-orthogonal to the mineralised rock for the exploration (JORC)
resource model for the year ended 31 December 2011). A polygonal
approach was used for grade interpolation, in assigning gold grades
to the delineated ore zones prior to mining. For grade control the
Company does not assay silver.
The grade control geological model is reconciled back to the
original exploration-derived geological block model (JORC) prior to
mining to determine the accuracy of the original model. A
comparison of the grade control geological model and the original
exploration geological model indicated that there was a more
appropriate method of accounting for the complex geometry in
determining the mineable reserves or mineral processing plant
feed.
The exploration (JORC) geological resource model continues to
show a reasonably good spatial correlation with the grade control
resource model, which is consistent with the resource evaluations
undertaken.
Underground drilling undertaken from the 320mrl adit 2011 and so
far in 2012 has confirmed this geological understanding. Further
progress reports will be released during 2012.
The mining activities in 2011 involved the excavation of ore
from the 405mrl to the 390mrl.
Glossary of technical terms used
Grade The tenor or concentration by weight of
a metal in a mineral deposit or ore.
Indicated resource A category of mineral resource of higher
confidence than an Inferred
Resource, the estimation of
which is prescribed by the
JORC Code. This is the minimum level
of resource classification
required for ore reserve estimation
under the JORC Code.
Inferred resource A category of mineral resource the estimation
of which is prescribed by the JORC
Code. Inferred resources cannot be used as
a basis for ore reserve estimation.
JORC code Australasian Code for the Reporting of Exploration
Results, Mineral Resources
and Ore Reserves (Joint Ore Reserves Committee).
See www.jorc.org/main.php
Kriging A class of methods of estimating mathematically
the distribution of a metal in three
dimensions within the earth, together
with the confidence of the estimate
Mineral resource An estimated tonnage and grade
of mineralisation in the
ground determined as prescribed by the JORC Code
Mineable reserve That part of a mineral resource which can be
demonstrated to be exploited profitably
when all modifying factors are taken into
account, as prescribed by the JORC code.
Mineral inventory A term used to describe mineral resources
and mineable reserves which are
not static as additional resource delineation
is not yet complete,
and engineering calculations are
pending. As such what might be
a mineral resource today may be
a mineable reserve tomorrow.
Ore reserve That part of a mineral resource which
can be demonstrated to be worked
profitably when all modifying factors
are taken into account.
mrl Reduced Level. Measurement of elevation as measured
relative to Baltic Sea standard datum.
Tonne A metric tonne of 1000 kilograms
oz Troy ounce
g/t Grammes per tonne of mineralised rock
Qualified person
The Sekisovskoye mineral resource estimates have been prepared
by Mr.R Rhodes B.Sc., M.Sc., MIMMM, an independent geologist
consultant with Computer Resource Services. He has over 35 years of
relevant experience and is a qualified person for the purpose of
reporting resources under the JORC code and the London Stock
Exchange ("LSE") AIM Rules. The mineral resources have been checked
by Mr. T Daffern B. Eng. (Mining), MBA, C Eng., FAusIMM, MCIM,
FIMMM and found to be reasonable. Mr.R Rhodes has reviewed the
resource information given in this annual report and consents to
its inclusion in the form and context in which it appears.
The mineable reserve estimate has been prepared by Mr. T
Daffern, B. Eng. (Mining), MBA, C Eng., FAusIMM, MCIM, FIMMM. The
material which has been reviewed in preparation of the mineable
reserves estimates is that of Mr. R Rhodes, Golder Associates and
the in-house staff at Sekisovskoye. The underground project
mineable reserves are based on material from Mr. R Rhodes, Golder
Associates and AMC Australia and the in-house staff at
Sekisovskoye. Mr. T Daffern is a full time director of the Company
and has sufficient experience which is relevant to the operational
parameters used now and to the style of mining that is planned, and
is a qualified person for the purpose of reporting resources under
the JORC code and the AIM Rules.
This estimate of the mineral resources and reserves does not
comprise part of the audited financial statements, which have been
audited by Deloitte LLP.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out above. The major risks and uncertainties which could
impact on the Group's ability to generate cash in the next twelve
months are its level of production and gold prices.
Mining and processing operations at Sekisovskoye are the Group's
only source of revenue. The directors believe that production at or
above the levels achieved from the start of 2012 to the date of
this report are sustainable. The levels of production in 2012 are
currently running approximately ten per cent. above the levels of
production achieved in the same period of 2011 on an annualised
basis.
The Group's forecasts and projections based on the assumption
that the current level of production at Sekisovskoye can be
sustained and on the prevailing outlook for the gold price and
taking into account reasonably possible changes in the level of
production and gold prices show that the Group now expects to be
cash generative from operations for the foreseeable future. The
Group has various sources of finance available in addition to those
generated from operations to enable it to meet its capital
expenditure plans. The Group has a US$2 million working capital
borrowing facility contracted until December 2012. This facility is
currently being changed to an unsecured basis and will be available
for 3 years. The Group raised $11.5 million (net of expenses) in
early 2012 through placing of shares and $3 million share placement
investment from the European Bank of Reconstruction and Development
("EBRD"). The group is near to completing a debt facility with EBRD
totalling $15 million which will be used to develop the
Sekisovskoye underground project and attendant infrastructure. $10
million will be received as a first tranche, with a second tranche
of $5 million available on achieving certain production
targets.
The Group is committed to the purchase of Akmola Gold LLP once
all necessary permissions have been obtained from the government of
Kazakhstan in fulfilment of contractual conditions. The
acquisition, together with associated legal fees, will result in a
cash outflow of approximately $3 million. The directors believe
this can be financed either by raising additional finance at the
time of acquisition or from current cash flow by deferring certain
capital expenditure.
Accordingly, at the time of approving the Group financial
statements, the directors have a reasonable expectation that the
Group has adequate resources to continue to operate for the
foreseeable future. For this reason the directors continue to adopt
the going concern basis in preparing the financial statements.
Group income statement
year ended 31 December 2011
Notes 2011 2010
restated*
$000 $000
Continuing operations
Revenue 33,325 29,053
Cost of sales (29,892) (20,451)
Gross profit 3,433 8,602
Administrative expenses (5,886) (4,580)
Tailings dam leak 3 (7,757) -
Operating (loss) / profit (10,210) 4,022
Investment revenues 25 12
Other losses (77) (192)
Finance costs (317) (524)
(Loss) / profit before taxation (10,579) 3,318
Taxation benefit / (charge) 4 1,157 (280)
(Loss) / profit from continuing operations (9,422) 3,038
Discontinued operations
Profit / (loss) for the year 5 1,500 (73)
(Loss) / profit attributable (7,922) 2,965
to equity shareholders
(Loss) / profit per ordinary share
Continuing operations
Basic 7 (1.37)c 0.59c
Diluted 7 (1.37)c 0.59c
From continuing and discontinued operations
Basic 7 (1.15)c 0.57c
Diluted 7 (1.15)c 0.57c
* see note 2
Group statement of comprehensive income
year ended 31 December 2011
2011 2010
*restated
$000 $000
(Loss) / profit for the year (7,922) 2,965
Currency translation differences on foreign 98 (81)
currency net investments
Total comprehensive (loss) / profit for the year (7,824) 2,884
attributable to equity shareholders
* see note 2
Group balance sheet
31 December 2011
2011 2010 2009
restated* restated*
$000 $000 $000
Non-current assets
Property, plant and equipment 31,793 23,559 24,488
Inventories 4,177 5,841 -
Other receivables 399 - -
Deferred tax asset 978 - -
Restricted cash 239 161 65
37,586 29,561 24,553
Current assets
Inventories 11,061 5,821 7,931
Trade and other receivables 8,404 4,742 2,920
Cash and cash equivalents 1,763 959 2,328
21,228 11,522 13,179
Total assets 58,814 41,083 37,732
Current liabilities
Trade and other payables (5,994) (2,348) (2,269)
Other financial liabilities (282) (282) (280)
Provisions (7,640) (195) -
Borrowings (1,000) - -
(14,916) (2,825) (2,549)
Net current assets 6,312 8,697 10,630
Non-current liabilities
Trade and other payables - - (749)
Other financial liabilities (1,501) (1,712) (1,233)
Deferred taxation - (492) (218)
Provisions (1,400) (1,288) (1,308)
(2,901) (3,492) (3,508)
Total liabilities (17,817) (6,317) (6,057)
Net assets 40,997 34,766 31,675
Equity
Called - up share capital 1,310 946 946
Share premium 76,914 63,429 63,429
Merger reserve (282) (282) (282)
Other reserves 535 570 453
Currency translation reserve (6,821) (6,919) (6,838)
Accumulated losses (30,659) (22,978) (26,033)
Total equity 40,997 34,766 31,675
* see note 2
Group statement of changes in equity
Year ended 31 December 2011
Share based Currency
Share Share Merger payment translation Accumulated
capital premium Reserve reserve reserve losses Total
$000 $000 $000 $000 $000 $000 $000
1 872 59,180 (282) 323 (2,562) (26,282) 31,249
January
2009
-
restated*
Share - - - 208 - - 208
based
payment
Lapsed - - - (78) - 78 -
share
option
Other - - - - (97) 97 -
Currency
translation
differences
on
foreign
currency
net - - - - (4,179) - (4,179)
investments
Shares 74 4,389 - - - - 4,463
issued
Issue
costs
offset
against
share - (140) - - - - (140)
premium
Retained - - - - - 74 74
profit
for
the
year
1 946 63,429 (282) 453 (6,838) (26,033) 31,675
January
2010
-
restated*
Share - - - 207 - - 207
based
payment
Lapsed - - - (90) - 90 -
share
option
Currency
translation
differences
on
foreign
currency
net - - - - (81) - (81)
investments
Retained - - - - - 2,965 2,965
profit
for
the
year
1 946 63,429 (282) 570 (6,919) (22,978) 34,766
January
2011
-
restated*
Share - - - 206 - - 206
based
payment
Lapsed - - - (241) - 241 -
share
option
Currency
translation
differences
on
foreign
currency
net - - - - 98 - 98
investments
Shares 364 14,214 - - - - 14,578
issued
Issue
costs
offset
against
share - (729) - - - - (729)
premium
Retained - - - - - (7,922) (7,922)
loss
for
the
year
31 1,310 76,914 (282) 535 (6,821) (30,659) 40,997
December
2011
* see note 2.
Group cash flow statement
year ended 31 December 2011
2011 2010
restated*
$000 $000
Net cash inflow from operating activities 2,729 3,690
Investing activities
Interest received 25 12
Proceeds on disposal of property, 18 3
plant and equipment
Purchase of property, plant and equipment (13,426) (4,916)
Prepayment for non-current assets (399) -
Akmola Gold advances (1,462) -
Akmola Gold prepayment of fees (1,452) -
Restricted cash (78) (96)
Net cash used in investing activities (16,774) (4,997)
Financing activities
Proceeds on issue of shares 13,849 -
Drawdown of bank loans 1,000 -
Net cash inflow from financing activities 14,849 -
Increase / (decrease) in cash 804 (1,307)
and cash equivalents
Cash and cash equivalents 959 2,328
at beginning of the year
Effect of foreign exchange rates changes - (62)
Cash and cash equivalents at end of the year 1,763 959
* see note 2
Notes
1General information
Hambledon Mining plc (the "Company") is a company incorporated
in England and Wales. The address of the registered office is Daws
House, 33-35 Daws Lane, London, NW7 4SD. The principal activities
and place of business of the Company and its subsidiaries ("the
Group") are set out in the Chairman's statement and the Chief
executive's review above.
2Basis of preparation of financial information
The financial information set out above, which was approved by
the Board on 25 May 2012, has been compiled in accordance with
International Financial Reporting Standards ("IFRS"), but does not
contain sufficient information to comply with IFRS. The Company
expects to distribute its full financial statements that comply
with IFRS in June 2012.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 December 2011
but is extracted from those accounts. The Company's statutory
accounts for the year ended 31 December 2011 will be filed with the
Registrar of Companies following the Company's annual general
meeting. The independent auditors' report on those accounts was
unqualified, did not draw attention to any matters by way of
emphasis without qualifying those accounts and did not contain any
statement under section 498(2) or (3) of the Companies Act 2006.
The Company's statutory accounts for the year ended 31 December
2010 have been filed with the Registrar of Companies. The
independent auditors' report on those accounts was unqualified, did
not draw attention to any matters by way of emphasis without
qualifying those accounts and did not contain any statement under
Section 498(2) or (3) of the Companies Act 2006.
The Group has prepared its financial statements for the year
ended 31 December 2011 using United States dollars as the
presentational currency instead of United Kingdom pounds as in
previous years. The directors believe it is more appropriate to
prepare the Group financial statements in United Stated dollars as
follows:
1 Gold and silver is priced on world markets in United States
dollars and the Group receives its revenue in United States
dollars.
2 The United States dollar is more stable against the Kazakh
Tenge (the functional currency of the Group's operating
subsidiaries in Kazakhstan) than the United Kingdom pound. It will
therefore reduce the effect of translation foreign exchange gains
and losses in the financial statements.
3 It is the reporting currency of many peers in the gold mining
industry and therefore should aid comparison with other similar
companies.
4 Many financial performance metrics of the gold mining industry
are commonly quoted in United States dollars.
The change of presentational currency is a change of accounting
policy and has been accounted for in accordance with IAS 21 - "The
effects of changes in foreign currency exchange rates". In
accordance with IAS 1 - "Presentation of financial statements" an
additional balance sheet at 31 December 2009 in United States
dollars has been disclosed. The comparative information for the
years ended 31 December 2010 and 31 December 2009 has been restated
into United States dollars.
The impact of this change in the presentational currency on the
result for the year ended 31 December 2010 and the balance sheets
at 31 December 2009 and 2010 has been computed as follows:
1 The assets and liabilities of the Group have been translated
into United States dollars using the closing exchange rate at each
balance sheet date.
2 The consolidated income statement and cash flow statement for
the year ended 31 December 2010 have been translated into United
States dollars using the average rate for the year on the basis
that this average rate approximates to the exchange rates on the
actual dates of the transactions.
3 Equity items have been translated into United States dollars
at historical exchange rates.
The relevant exchange rates used for the years ended 31 December
2009 and 2010 were as follows:
2010 2009
GBP1=$ GBP1=$
Average rate 1.55 1.56
Closing rate 1.55 1.59
The financial statements have been prepared under the historical
cost convention. The accounting policies are consistent with those
adopted and disclosed in the Group's annual financial statements
for the year ended 31 December 2010.
3Tailings dam leak
On 29 October 2011, a leak of tailings dam 3 occurred at the
Sekisovskoye mine site. The mineral process plant waste water
contained in the dam escaped through the drainage network into an
emergency pond and the nearby Volchevka river. The tailings dam
leak was a violation of both the Water and Environmental codes of
Kazakhstan. Operations of the mineral process plant at the
Sekisovskoye mine site were temporarily suspended whilst the
tailings dam leak was repaired and recommenced on 7 November
2011.
The directors estimate that the total cost of the repair to the
tailings dam, payment of fines and penalties, repair to damage
caused to the environment and social obligations agreed with local
authorities as a result of the leak total $7,757,000 as
follows:
Paid in 2011 Payable in 2012 Total cost
$000 $000 $000
Repair of tailings dam 48 2,337 2,385
Fines and penalties - 3,892 3,892
Damage to environment 327 101 428
Social obligations - 1,052 1,052
375 7,382 7,757
A short term provision has been established for those amounts
payable in 2012. As a result of the tailings dam leak, the Group
has also contracted with the Government of Kazakhstan to spend an
additional $4.1 million on the construction of a paste plant.
4Taxation
An analysis of the taxation (benefit) / charge is as
follows:
2011 2010
$000 $000
Current taxation 313 -
Deferred taxation (1,470) 280
Total taxation (benefit)/ charge (1,157) 280
5Discontinued operations
During the year ended 31 December 2008, TOO Ognevka ("Ognevka")
ceased production of copper and other metal concentrates at its
plant in North Eastern Kazakhstan. Due to the closure of the plant,
the government rehabilitation process was deemed to have failed and
on 7 December 2010, Ognevka was placed into bankruptcy.
The results of the discontinued operations, which have been
included in the consolidated income statement are as follows:
2011 2010
$000 $000
External revenue - -
Expense - (73)
Loss before and after taxation - (73)
Liquidation proceeds 1,500 -
Profit / (loss) attributable to discontinued
operation 1,500 (73)
The Group was a major secured creditor of Ognevka and was
therefore entitled to any balance of proceeds arising from its
liquidation after settlement of certain preferred creditors and
payment of liquidation costs. In February 2012, the liquidation of
Ognevka was completed and its assets were sold to a third party for
approximately Kazakh tenge 265 million. In April 2012, the Group
was repaid $1.5 million being an initial settlement of its debt due
from Ognevka after payment of certain creditors and payment of
liquidation costs. It is considered that any further receipts in
respect of the Ognevka liquidation will not be of a material
amount. The receipt of $1.5 million has been included in the
consolidated income statement and as a receivable in the financial
statements for the year ended 31 December 2011.
6Dividends
The directors do not recommend the payment of a dividend (2010:
nil).
7Loss / (profit) per ordinary share
The calculation of basic and diluted earnings per share from
continuing and discontinued operations is based upon the retained
loss from continuing operations for the financial year of
$9,422,000 (2010: profit of $3,038,000) and the retained profit
from discontinued operations of $1,500,000 (2010: loss of
$73,000).
The weighted average number of ordinary shares for calculating
the basic loss (2010: profit) per share and diluted loss (2010:
profit) per share after adjusting for the effects of all dilutive
potential ordinary shares relating to share options are as
follows:
2011 2010
Basic and diluted 687,365,165 516,089,233
As the Group was loss making in 2011, the impact of Share
options was anti-dilutive.
8Post balance sheet events
8.1Issue of new ordinary shares
On 1 February 2012, the Company announced that it was proposing
to raise up to $9.1 million through the issue of 177,507,699 new
ordinary shares by way of a firm placing. The issue price was 3.25
pence (5 cents) per ordinary share. The Company announced that the
funds raised from the share placing together with the $3 million
from the share subscription by the European Bank for Reconstruction
and Development (see below "Investment by European Bank for
Reconstruction and Development") would be used as follows: (a) $3.0
million for payment to the vendors of Akmola Gold LLP and
associated costs; (b) $2.5 million for payment of a fine and
associated costs resulting from the tailings dam leak and (c) $6.0
million for working capital including repayment of a working
capital loan from Alfa bank. The directors subscribed for a total
of 142,308 new ordinary shares.
The firm placing was approved at a general meeting of the
Company held on 17 February 2012. Further to the placing
177,507,699 new ordinary shares in the Company were allotted
raising gross proceeds of $9.1 million and $8.5 million net of
expenses of $0.6 million. The shares were admitted for trading on
20 February 2012. Following the firm placing, the Company had a
total of 920,926,805 ordinary shares in issue.
8.2Investment by European Bank for Reconstruction and
Development
On 1 February 2012, the Company announced that it had agreed
heads of agreement with the European Bank for Reconstruction and
Development ("EBRD") for EBRD to make an investment in the Company.
The proposed investment was approximately 58.8m new ordinary Shares
of 3.25 pence ($5 cents) each. It was also proposed that EBRD would
be issued with warrants over up to 30 million ordinary shares.
On 23 February 2012, a subscription and warrant instrument was
entered into with the EBRD. The principle terms of the agreements
are as follows.
Subscription agreement
-- 58,794,708 new ordinary shares would be issued to EBRD at 3.25 pence
($5 cents) per ordinary share for a total consideration of $3
million.
-- The funds shall only be applied to developing the Sekisovkoye project
in accordance with the business plan agreed between the Company
and
EBRD
Warrant instrument
-- EBRD will be issued with non-transferrable warrants over 30 million
ordinary shares.
-- The warrants are exercisable at any time before the earlier of (i) 21
February 2014 and (ii) if the closing price per ordinary share
exceeds
6.5325 pence (10.3 cents) for a period of 20 consecutive trading
days
during that two year period, 45 days from the date on which
the
Company notifies EBRD that this condition has been met. In
either
case, any warrants not exercised within the relevant period will
lapse.
-- The warrants are exercisable in whole or in tranches of no less than
5,000,000 warrants (or, if less, the amount of warrants
unexercised as
at the relevant date).
-- The exercise price of the warrants is 4.875 pence (7.70 cents) per
Ordinary share (representing a 50 per cent. premium to the
shares to
be issued to EBRD under the subscription agreement above).
The agreements were conditional upon the Company satisfying
certain conditions. On 11 April 2012, the Company announced that
the conditions had been satisfied and that the $3 million
consideration for the share subscription had been received. The
shares were admitted to trading AIMb on 20 April, 2012. Following
the issue of the new ordinary shares to EBRD, the Company had a
total of 979,721,513 ordinary shares in issue.
8.3European Bank for Reconstruction and Development loan
On 21 February 2012, two of the Company's subsidiaries, Altai
Ken-Bayitu LLP ("AKB") and Sekisovskoye LLP ("Seki") entered into a
loan agreement with EBRD. The agreement is conditional upon certain
conditions being satisfied. The principal terms of the loan once in
operation will be as follows:
-- Total amount of the loan is $15 million in two tranches to AKB and
Seki, on a joint and several basis, repayable in quarterly
installments between 10 January 2015 and 10 October 2017.
-- The first tranche of the loan is $10 million. The second tranche of $5
million will only be available provided a certain
performance
condition for the underground mining operation at Sekisovskoye
is met.
-- The loan is available for drawdown following registration of the
security until 21 February 2014.
-- Interest on drawn amounts will be charged at a rate of three months
LIBOR plus seven per cent. per annum.
At the date of signing the financial statements, the only
condition outstanding was the registration of the security.
8.4Acquisition of Akmola Gold LLP
At the date of signing the financial statements, the acquisition
of Akmola Gold LLP had not been completed. The completion of the
transaction was awaiting certain approvals from the Government of
Kazakhstan as a condition of completion. Included in trade and
other receivables are advances to Akmola Gold LLP of $1.5 million
and legal fees incurred of $1.5 million. If the acquisition of
Akmola Gold LLP does not complete, these other receivables and
prepayments totalling $3.0 million will be expensed.
9Annual general meeting
The annual general meeting of the Company will be held at the
offices of Fairfax I.S. PLC at 46 Berkeley Square, Mayfair, London
W1J 5AT, United Kingdom on Friday 29 June, 2012 at 09.30 a.m.
Company Information
Directors George Eccles
Non-executive chairman
Timothy Daffern
Chief executive
Nicholas John Bridgen
Non-executive director
Baurzhan Yerkeyev
Executive director
Secretary William Roy Morgan B. Sc. ACA
Registered Office Daws House
33-35 Daws Lane
London NW7 4SD
Telephone +44 (0) 870 111 8778
Web www.hambledon-mining.com
Kazakhstan Office 10 Novostroyevskaya
SekisovskoyeVillage
Kazakhstan
Telephone: +7 (0) 72331 27927
Fax: +7 (0) 72331 27933
Nominated Advisor and Fairfax I.S. PLC
Broker 46 Berkeley Square
Mayfair
London W1J 5AT
Telephone: +44 (0) 207 598 5368
Investor relations Charles Zorab
Telephone: +44 (0) 207 233 1462
Registrars Neville Registrars
18 Laurel Lane
Halesowen
West Midlands B63 3DA
Telephone: +44 (0) 121 585 1131
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