TIDMGCM
RNS Number : 0581T
GCM Resources PLC
22 March 2021
22 March 2021
GCM Resources plc
("GCM" or the "Company")
Interim Results for the 6 months ended 31 December 2020
GCM Resources plc (LON: GCM), an AIM quoted mining and energy
company , is pleased to report its interim results for the six
months ended 31 December 2020. The Chairman's Statement and the
full unaudited interim report are presented below and will shortly
be available at the Company's website www.gcmplc.com .
Chairman's Statement
I'm pleased to report to our shareholders on the Company's
performance for the six months ended 31 December 2020. It has been
a relatively productive period for the Company and, despite the
global effects of the Covid-19 pandemic, I am pleased with the
progress made under these difficult circumstances. We have
continued to pursue our strategy of presenting a comprehensive
power solution to the Bangladesh Government, packaged as the
Phulbari coal and Power Project ("the Project") and based on a 15
million tonne per annum "captive" coal mine in the Phulbari Coal
Basin, feeding "high efficiency, low emission" (HELE) coal-fired
power plants with a combined capacity of 6,000MW. The Project also
has an ability to supply high quality coal to other IPP's and
industries in Bangladesh, to suit Bangladesh Government
requirements.
A significant step in the reporting period was the signing of a
Framework Agreement ("the Agreement") with China Nonferrous Metal
Industry's Foreign Engineering and Construction Co., Ltd. ("NFC")
on 12 October 2020. This occurred after a lengthy period of Due
Diligence undertaken by NFC on the Phulbari coal mine's mine plan
and feasibility study. We are very pleased to have NPC as our mine
development partner and we are working with them to finalise
arrangements as set out in the Agreement:
-- A joint venture entity being established and that NFC will
acquire 5% in that entity from GCM;
-- NFC shall facilitate the arrangement financing for the
Project on acceptable, market-equivalent terms;
-- NFC will in principle be appointed as the exclusive
engineering, procurement, construction and commissioning contractor
("EPC") for the mine and a separate EPC framework agreement will be
negotiated in due course; and
-- A Joint Development Agreement to be agreed in due course
regarding the next steps for developing the Project.
The Agreement with NFC was reached under the tripartite MOU
signed with NFC and PowerChina that was set up back in July 2019.
We are also pleased that in December 2020, PowerChina sought an
extension of that MOU (but now excluding NFC) so that it could
assess taking a higher participation in the Project, as part of its
involvement in the mine mouth integrated power plants. This MOU
extension will run until 6 June 2021 with the intention of
determining how to accommodate that interest within the
Agreement.
Just outside the reporting period, on 19 January 2021 we
announced further extensions of the joint venture agreements with
PowerChina for development of the initial 4,000MW of the planned
6,000MW total capacity to be installed in stages to suit the
Project's coal mine ramp-up to full coal production. Specifically,
the first JV Agreement (2,000MW) was due to expire on 17 January
2021 and the second JV Agreement (2,000MW) on 15 March 2021. Both
have now been extended to 15 March 2022.
Other steps taken outside the reporting period include:
-- Appointment of WH Ireland Ltd as the Company's Nominated
Advisor and Broker, and strengthening the Board with the
appointment of Gary Lye as an Executive Director and James Hobson
as a Non-Executive Director; and
-- A Capital Reorganisation which would ensure the Company could
issue shares comparable to the market price for services and/or for
equity placings in the future. This was deemed necessary as the
Company's Shares are trading on AIM at or around the present
nominal value and English company law prohibits a company from
issuing shares at a discount to the nominal or par value of its
Ordinary Shares.
-- Our Development Partners, in communications over the past
week, have reaffirmed their commitment to progressing the Project
and have acknowledged that the global COVID-19 pandemic had
impacted their ability to meet timelines over the past year;
o China Nonferrous Metal Industry's Foreign Engineering and
Construction Co. Ltd ("NFC"), one of our Key Development Partners,
have confirmed they are moving to resume a normal working status
and that they are gearing-up to make progress on commitments for
coal mine development as set out in the Framework Agreement signed
between the parties on 15 October 2020, and
o Power Construction Corporation of China, Ltd ("PowerChina"),
have additionally confirmed and re-iterated their strong commitment
to the Project and to making progress under the extended JV
Agreements, as announced on the 19 January 2021. PowerChina are
focused on working with the Company to develop the Project using
the most advanced mining and power generating technology, while
adhering to the strictest compliance of health, safety and
environmental standards. Their stated aim is to produce clean and
sustainable energy and power for Bangladesh.
Financials
GCM incurred a loss after tax of GBP1,091,000 for the six months
ended 31 December 2020 (31 December 2019: loss after tax of
GBP616,000). The most significant expenditure during the period was
pre-development expenditure, while administrative expenses for the
six months ended 31 December 2020 were GBP329,000 (31 December
2019: GBP198,000) and capitalised project expenditure for the
period was GBP234,000 (31 December 2019: GBP287,000).
During the period, GCM further drew down GBP350,000 from the
short-term loan facility with Polo, the Company's largest
shareholder. The Company has at the date of this report drawn down
GBP3.2 million of the total short-term loan facility of GBP3.5
million. The terms of the facility are detailed in Note 5 of the
interim report.
Over the next six months, the Company will seek to strengthen
GCM's financial position and provide future funding. Until such
time, there remains a material uncertainty which may cast doubt as
to the Group's ability to continue as a going concern. The
directors remain confident that sufficient funding will be obtained
as and when required. As such, the financial statements have been
prepared on a going concern basis. Please refer to the accounting
policy note on going concern (Note 1 to the Financial Statements)
for further information.
Outlook
Finally, I would like to thank our Shareholders for their
continued commitment and support for GCM during the last 9 months
through this unpredictable and difficult period for many companies.
We continue to work towards finally presenting the complete Project
Proposal to the Bangladesh Government and delivering much awaited
value-adding for our shareholders and other stakeholders. However,
it would be unrealistic to assume the Coronavirus pandemic hasn't
had an impact on our timelines, given that the Government of
Bangladesh and governments worldwide have been focused on dealing
with the pandemic in the last 12 months.
Mohd Najib Bin Abdul Aziz
Non-Executive Chairman
Interim Consolidated Income Statement
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2020
2020 2019 audited
unaudited unaudited GBP000
GBP000 GBP000
Operating expenses
Pre-development
expenditure (587) (198) (420)
Exploration and
evaluation costs (7) - (52)
Administrative expenses (329) (279) (916)
------------------------------- ----------- ----------- -----------
Operating loss (923) (477) (1,388)
Finance costs (168) (139) (127)
------------------------------- ----------- ----------- -----------
Loss before tax (1,091) (616) (1,515)
Taxation - - -
Loss and total comprehensive
income for the period (1,091) (616) (1,515)
------------------------------- ----------- ----------- -----------
Earnings per share
Basic loss per share (pence) (0.9p) (0.6p) (1.45p)
Diluted loss per share (pence) (0.9p) (0.6p) (1.33p)
Interim Consolidated Statement of Changes in Equity
Share Share Share Accumulated Total
capital premium based losses
account payments
not settled
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 July 2019 9,864 50,497 5,835 (27,564) 38,632
Total comprehensive
loss - - - (1,515) (1,515)
Share issuances 1,392 3,037 (4,348) - 81
Shares to be issued - - 420 - 420
Share based payments - - (201) - (201)
Balance at 30 June 2020 11,256 53,534 1,706 (29,079) 37,417
Total comprehensive
loss - - - (1,091) (1,091)
Share issuances 602 675 (1,277) - -
Shares to be issued - - 587 - 587
Share based payments - - 5 - 5
Balance at 31 December
2020 (unaudited) 11,858 54,209 1,021 (30,170) 36,918
------------------------- --------- --------- ------------- ------------ --------
Balance at 1 July 2019 9,864 50,497 5,835 (27,564) 38,632
Total comprehensive
loss - - - (616) (616)
Share issuances - - - - -
Shares to be issued - - 198 - 198
Share based payments - - 3 - -
Balance at 31 December
2019 (unaudited) 9,864 50,497 6,036 (28,180) 38,217
------------------------ ------ ------- ------ --------- -------
Interim Consolidated Balance Sheet
31 December 31 December 30 June
2020 2019 2020
Notes unaudited unaudited audited
GBP000 GBP000 GBP000
Current assets
Cash and cash equivalents 48 236 69
Receivables 35 14 16
--------------------------- -------- ------------- ------------ ---------
Total current assets 83 233 85
Non-current assets
Property, plant
and equipment 10 16 13
Right of use assets 19 - 33
Intangible assets 3 41,861 41,537 41,627
Receivables - - -
Total non-current
assets 41,890 41,553 41,673
Total assets 41,973 41,803 41,677
--------------------------- -------- ------------- ------------ ---------
Current liabilities
Payables 4 (1,284) (806) (1,073)
Lease liabilities (26) - (27)
Borrowings 5 (3,737) (2,780) (3,220)
--------------------------- -------- ------------- ------------ ---------
Total current liabilities (5,047) (3,586) (4,320)
Non-current liabilities
Lease liabilities (8) - (21)
--------------------------- -------- ------------- ------------ ---------
Total non-current
liabilities (8) - (21)
--------------------------- -------- ------------- ------------ ---------
Total liabilities (5,055) (3,586) (4,341)
--------------------------- -------- ------------- ------------ ---------
Net assets 36,918 38,217 37,417
--------------------------- -------- ------------- ------------ ---------
Equity
Share capital 6 11,858 9,864 11,256
Share premium account 6 54,209 50,497 53,534
Other reserves 1,021 6,036 1,706
Accumulated losses (30,170) (28,180) (29,079)
----------------------- --------- --------- ---------
Total equity 36,918 38,217 37,417
----------------------- --------- --------- ---------
Interim Consolidated Statement of Cash Flows
6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2020
2020 2019 audited
unaudited unaudited GBP000
GBP000 GBP000
----------------------------------------- -----------
Cash flows used in operating
activities
Loss before tax (1,091) (616) (1,515)
Adjusted for:
Non-cash pre-development expenditure 587 198 420
Non-cash finance costs 168 139 127
Other non-cash expenses - - 18
------------------------------------------ ----------- ----------- -----------
(336) (279) (950)
Movements in working
capital:
(Increase)/decrease in operating
receivables (19) 9 7
Increase in operating payables 212 104 371
------------------------------------------ ----------- ----------- -----------
Cash used in operations (143) (166) (572)
Net cash used in operating activities (143) (166) (572)
Cash flows from investing activities
Payments for intangible
assets (228) (283) (366)
Payments for property, plant - - -
and equipment
------------------------------------------ ----------- ----------- -----------
Net cash generated from investing
activities (228) (283) (366)
Cash flows from financing activities
Issue of ordinary
share capital - - 22
Share issue costs - - -
Proceeds from borrowing 350 300 600
Interest paid - - -
Net cash from financing activities 350 300 622
Total (decrease) in cash and
cash equivalents (21) (149) (316)
Cash and cash equivalents at
the start of the period 69 385 385
------------------------------------------ ----------- ----------- -----------
Cash and cash equivalents at
the end of the period 48 236 69
------------------------------------------ ----------- ----------- -----------
Notes to the Interim Condensed Consolidated Financial
Statements
1. Accounting policies
GCM Resources plc (GCM) is domiciled in England and Wales, was
incorporated as a Public Limited Company on 26 September 2003 and
admitted to the London Stock Exchange Alternative Investment Market
(AIM) on 19 April 2004.
This unaudited interim report was authorised for issue by the
Board of Directors on 19 March 2021.
Basis of preparation
The annual consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union as they apply to the
financial statements of the Group for the year ended 30 June 2020
and applied in accordance with the Companies Act 2006.
The interim condensed consolidated financial statements for the
six months ended 31 December 2020 have been prepared using the same
policies and methods of computation as applied in the financial
statements for the year ended 30 June 2020. The financial
information contained herein does not constitute statutory accounts
within the meaning of Section 435 of the Companies Act 2006 and is
unaudited. The figures for the year ended 30 June 2020 have been
extracted from the statutory accounts for that year. Those accounts
have been delivered to the Registrar of Companies and contained an
unqualified auditors' report which included an emphasis of matter
concerning significant doubt over the ability for the Group to
continue as a going concern and did not include a statement under
section 498(2)(a) or (b), or section 498(3) of the Companies Act
2006.
Political and economic risks - carrying value of intangible
asset
The principal asset is in Bangladesh and accordingly subject to
the political, judicial, fiscal, social and economic risks
associated with operating in that country.
The Group's principal project relates to thermal coal and
semi-soft coking coal, the markets for which are subject to
international and regional supply and demand factors, and
consequently future performance will be subject to variations in
the prices for these products.
GCM, through its subsidiaries, is party to a Contract with the
Government of Bangladesh which gives it the right to explore,
develop and mine in respect of the licence areas. The Group holds a
mining lease and exploration licences in the Phulbari area covering
the prospective mine site. The mining lease has a 30-year term from
2004 and may be renewed for further periods of 10 years each, at
GCM's option.
In accordance with the terms of the Contract, GCM submitted a
combined Feasibility Study and Scheme of Development report on 2
October 2005 to the Government of Bangladesh. Approval of the
Scheme of Development from the Government of Bangladesh is
necessary to proceed with development of the mine. GCM continues to
await approval.
The Group has received no notification from the Government of
Bangladesh (Government) of any changes to the terms of the
Contract. GCM has received legal opinion that the Contract is
enforceable under Bangladesh and International law, and will
consequently continue to endeavour to receive approval for
development.
Accordingly, the Directors are confident that the Phulbari Coal
and Power Project (Project) will ultimately receive approval,
although the timing of approval remains in the hands of the
Government. To enhance the prospects of the Project, GCM has
engaged in a strategy to align the Project with the needs and
objectives of the Government. The Government seeks to rapidly
expand the country's power generation, including the increase in
coal fired power generation from the current 250MW to approximately
20,000MW. The Group's strategy is to combine the planned coal mine
with 6,000MW power plants in conjunction with large Chinese
State-owned engineering enterprises.
Until approval of the Scheme of Development from the Government
of Bangladesh is received there is continued uncertainty over the
recoverability of the intangible mining assets. The Directors
consider that it is appropriate to continue to record the
intangible mining assets at cost, however if for whatever reason
the Scheme of Development is not ultimately approved the Group
would impair all of its intangible mining assets, totalling
GBP41,861,000 as at 31 December 2020.
Going concern
As at 31 December 2020, the Group had GBP48,000 in cash and
GBP4,964,000 in net current liabilities. The directors and
management have prepared a cash flow forecast to March 2022, which
shows that the Group will require further funds to cover operating
costs to advance the Phulbari Coal and Power Project and meet its
liabilities as and when they fall due. Based on current forecasts,
additional funding will need to be either raised from third parties
or drawn down under the short-term loan facility with Polo
Resources Limited ("Polo Loan Facility") by the end of April 2021,
in order to meet current operating cost projections. The Directors
also note that, under the terms of the existing Polo Loan Facility,
repayment in cash can be requested upon 90 days' notice, or
alternatively converted to shares at 11 pence per share at the
lender's option. The Company does not currently have secured
funding arrangements in place to cover this loan or further
potential expenditure which may be needed to advance the Project
and, accordingly, should Polo request repayment of the Polo Loan
Facility, GCM will need to raise funds in a short amount of time,
which may not be available on terms acceptable to the Board or on a
workable timeframe.
The Company currently has GBP300,000 remaining to drawdown under
the Polo Loan Facility of GBP3.5million, which, at current run
rates, along with the Company's existing cash resources, is only
expected to provide sufficient capital for the next three months.
The Company is currently exploring alternative funding options,
with the aim to complete and secure the necessary third-party
funding by the end of April 2021.
In forming the conclusion that it is appropriate to prepare the
financial statements on a going concern basis the Directors have
made the following assumptions that are relevant to the next twelve
months:
- In the event that the short-term loan becomes payable,
sufficient funding can be obtained; and
- In the event that operating expenditure increases
significantly as a result of successful progress with regards to
the Phulbari Coal and Power Project, sufficient funding can be
obtained.
While the Directors remain confident that necessary funds will
be available as and when required, as at the date of this report
these funding arrangements are not secured, the above conditions
and events represent material uncertainties that may cast
significant doubt over the Group's ability to continue as a going
concern. The financial statements have been prepared on a going
concern basis. The financial statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
Upon achieving approval of the Phulbari Coal and Power Project,
significant additional financial resources will be required to
proceed to development.
2. Segment analysis
The Group operates in one segment being the exploration and
evaluation of energy related projects. The only significant project
within this segment is the Phulbari Coal and Power Project in
Bangladesh.
3. Intangibles
During the period intangibles increased by GBP234,000. The
increase is due to capitalised mining exploration and evaluation
expenditure relating to the Phulbari Coal and Power Project in
Bangladesh.
4. Payables
31 December 31 December 30 June
2020 2019 2020
unaudited unaudited audited
GBP000 GBP000 GBP000
-----------------------
Trade payables 590 259 527
Related party accrued
payable 694 397 546
Transaction costs - 150 -
payable
1,284 806 1,073
----------------------- ------------- ------------ ---------
The related party accrued payable of GBP694,000 at 31 December
2020 relates to accrued fees owing to the management services
company of the Executive Chairman of the Company, Datuk Michael
Tang PJN.
5. Borrowings
31 December 31 December 30 June
2020 2019 2020
unaudited unaudited audited
GBP000 GBP000 GBP000
Short-term loan facility from
related party 3,737 2,780 3,220
3,737 2,780 3,220
------------------------------- ------------- ------------ ---------
GCM is party to a GBP3,500,000 short-term loan facility with its
largest shareholder, Polo Resources Limited ("Polo"). As at 31
December 2020, the Company owed GBP3,737,000, comprising
GBP2,950,000 loan balance and accrued finance costs on borrowings
of GBP787,000. The principal terms of the short-term loan are 12%
per annum interest rate on the loan balance and repayment within 90
days upon request. Alternatively, the lender may request repayment
by the issuance of new ordinary shares in the Company at 11 pence
per share. Any issue of GCM shares to the Polo is conditional upon
its interest, together with the interest of any parties with which
it is in concert, remaining below 30% of the Company's issued share
capital. The Company may elect to repay all or part of the
outstanding loan at any time giving 60 days' notice.
6. Share issues
There were 6,021,621 shares issued during the period for
non-cash consideration in respect of services provided by
consultants.
7. Post-balance sheet events
On 11 January 2021, the Company announced it had appointed WH
Ireland Ltd as its Nominated Advisor, following the resignation of
the previous Nominated Advisor. In addition, the Company appointed
James Hobson as a Non-Executive Director, and restructured the
Board with Mohd Najib Bin Abdul Aziz being appointed Non-Executive
Chairman. In addition, the Company drew down a further GBP250,000
from the Polo Loan facility, with a total of GBP3.2million drawn
down on the GBP3.5million facility.
On 19 January 2021, the Company announced that it has completed
the extension of the joint venture agreements announced on 17
January 2019 and 13 January 2020 ("First JV Agreement") and 15
March 2019 ("Second JV Agreement") with Power Construction
Corporation of China ("PowerChina"). The joint venture agreements
which were due to expire on 17 January 2021 and 15 March 2021
respectively have both been extend to 15 March 2022.
On 22 January 2021, the Company announced it had appointed Gary
Lye as an Executive Director of the Company.
On 25 February 2021, the Company announced following the
completion of the Annual General Meeting, and all resolutions
having been passed, the Capital Reorganisation to which each of the
issued ordinary shares of 10 pence each in the capital of the
Company ("Existing Ordinary Shares") was subdivided into one New
Ordinary Share of 1 pence and one deferred A share of 9 pence.
Application was made for 118,581,630 New Ordinary Shares of 1 pence
each to be admitted to trading on AIM ("Admission") in place of
118,581,630 Existing Ordinary Shares of 10 pence each effective on
26 February 2021.
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
For further information:
GCM Resources plc WH Ireland Ltd
Keith Fulton James Joyce
Finance Director James Sinclair-Ford
+44 (0) 20 7290 1630 +44 (0) 20 7220 1666
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com
About GCM Resources
GCM Resources plc (LON: GCM), an AIM listed mining and energy
company, has identified a high-quality coal resource of 572 million
tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project
(the "Project") in north-west Bangladesh.
Utilising the latest highly energy efficient power generating
technology, the Phulbari coal mine is capable of supporting power
plants of up to 6,000MW. GCM is awaiting approval from the
Government of Bangladesh to develop the Project. The Company has a
strategy of combining the Company's mine proposal with up to
6,000MW of power generation, together with credible,
internationally recognised strategic partners. GCM aims to deliver
a practical power solution to provide the cheapest coal-fired
electricity in the country, in a manner amenable to the Government
of Bangladesh.
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