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