TIDMZIOC
RNS Number : 4869R
Zanaga Iron Ore Company Ltd
22 September 2017
22 September 2017
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2017
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM:
ZIOC) is pleased to announce its unaudited interim results for the
six months ended 30 June 2017.
Highlights
-- As reported in the Company's annual report dated 28 June
2017, investigations commenced into assessing the opportunity for a
small scale early production start-up project
-- Additional cost reductions implemented at the Zanaga Project,
as well as across ZIOC's corporate costs, to align the cost base
with current market conditions
-- Cash balance of US$4.4m as at 30 June 2017 and US$4.2m at 31 August 2017
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"The global iron ore market continues to demonstrate better than
expected fundamentals from a demand perspective, particularly in
relation to pricing for higher quality products. However, we remain
concerned by the continuing build up in Chinese iron ore port
stocks which may have a negative effect on iron ore pricing through
the end of the year if Chinese steel mill consumption slows.
The Project team is actively investigating the potential for the
early development of a small-scale, low capex, low opex project
utilising road and potentially rail transportation solutions as
well as existing port infrastructure. We intend to be in a position
to provide more detail on the outcomes of this study work by the
end of this year."
Copies of the unaudited interim results for the six months ended
30 June 2016 are available on the Company's website at
www.zanagairon.com.
For further information, please contact:
Zanaga Iron Ore
Corporate Development and Andrew Trahar
Investor Relations Manager +44 20 7399 1105
Liberum Capital Limited
Nominated Adviser, Financial Richard Crawley
Adviser and Corporate Broker and Neil Elliot
+44 20 3100 2000
About us:
Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is the owner
of 50% less one share in the Zanaga Iron Ore Project based in the
Republic of Congo (Congo Brazzaville) through its investment in
associate. The Zanaga Iron Ore Project is one of the largest iron
ore deposits in Africa and has the potential to become a
world-class iron ore producer.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Business Review - Operations
Cash Reserves and Project Funding
Similar to the Funding Agreement for 2016 project expenditure,
Glencore and ZIOC agreed a 2017 Project Work Programme and Budget
for the Project of US$1.4m plus US$0.3m of discretionary spend
dependent on certain workstreams requiring capital. ZIOC agreed to
contribute towards the work programme and budget an amount
comprising US$0.7m plus 49.99% of all discretionary items approved
jointly with Glencore. Ignoring any entitlement to savings, ZIOC's
potential contribution to the Project in 2017 is US$0.9m in
total.
We are pleased to report that the Project's activities are
currently running in line with the 2017 budget forecast.
As at 30 June 2017, we had cash reserves of US$4.4m and continue
to take a very prudent approach to the management of the
business.
Permitting
The application for the Environmental Permit for the Project's
first phase of development has been lodged with the Republic of
Congo ("RoC") Ministry of Environment and the Project team believes
that this is likely to be received during the second half of the
2017 fiscal year.
Early stage Pellet Project opportunity
As reported in the Company's annual results published on 28 June
2017, the Project team commenced the process of actively
investigating the potential for the early development of a
small-scale, low capex, low opex project utilising road and
potentially rail transportation solutions as well as existing port
infrastructure. The objective of the Project team is to determine
the feasibility of a project that demonstrates attractive economics
even in a low iron ore price environment. We intend to be in a
position to provide more detail on the outcomes of this study work
by the end of this year.
Iron Ore Market
Iron ore prices continue to trade at a higher range than the
market expected to see in this period of 2017. We remain
particularly encouraged by current record price premiums being paid
for higher quality products and maintain our view that this is a
structural shift for the industry, rather than a cyclical
occurrence.
On the supply side, we expect substantial production expansions
to enter the market in the second half of the year, with only a
small number of these acting as replacement projects for mines
entering the final phases of their lives. It is difficult to
forecast the net new tonnage expected to enter the seaborne market
in the next few months, but guidance from the major iron ore mining
companies indicates that these tonnages will continue to provide
net overall increases in global seaborne supply. This should result
in a reduction in benchmark iron ore prices, but Zanaga does not
expect a significant contraction of the attractive price premiums
being achieved by high quality products - the product market on
which we are focused.
From a demand perspective, we are pleased to see robust
consumption of high quality iron ore products, but are concerned by
the continuing build up in Chinese iron ore port stocks which may
have a negative effect on iron ore pricing through the end of the
year if Chinese steel mill consumption slows.
Outlook and next steps
The global iron ore market continues to demonstrate better than
expected fundamentals from a demand perspective, particularly in
relation to pricing for higher quality products.
The project team remains encouraged by improving iron ore market
conditions for premium products. Port and power arrangements remain
under constant review and progress is being made on securing the
environmental permit.
We look forward to providing further information to shareholders
towards the end of the year.
Financial review
Results from operations
The financial statements contain the results for ZIOC for the
first half of 2017. ZIOC made a loss in the half-year of US$0.6m
compared to a loss of US$3.1m in the year to 31 December 2016. The
loss for the 2016 half-year period comprised:
1 January to 1 January to 1 January to
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
US$000 US$000 US$000
-------------------------------------------------------------------- ------------ ------------ --------------
General expenses (357) (776) (1,257)
Net foreign exchange (loss)/gain 242 (655) (1,083)
Share-based payments (2) (2)
Share of loss of associate (382) (883) (619)
Interest income 3 11 16
(Loss)/Gain before tax (494) (2,305) (2,945)
Tax - (6) (15)
Currency translation - (23) 9(103)
Share of other comprehensive income of associate - foreign exchange (84) 731 7
-------------------------------------------------------------------- ------------ ------------ --------------
Total Comprehensive income (578) (1,603) (3,056)
-------------------------------------------------------------------- ------------ ------------ --------------
General expenses of US$0.4m (2016: US$0.8m), Directors' fees of
US$0.1m (2016: US$0.1m), professional fees of US$0.2m (2016:
US$0.1m) and US$0.1m (2016: US$0.2m) of other general operating
expenses.
The share-based payment charges reflect the expense associated
with share options granted in previous years.
The share of loss of associate of US$0.4m (2016: US$0.9m)
relates to ZIOC's investment in Jumelles Limited ("Jumelles"), the
joint venture company in respect of the Zanaga Project. From May
2014, as a result of the completion of the Feasibility Study and
thus consideration to complete the Glencore share option, only 50%
(less one share) of the Jumelles results are now included
above.
During the half year period, Jumelles' project expenditure was
US$0.9 including the effects of currency translation of $0.1m loss.
Capitalised exploration assets however, remain at US$80.0m.
Financial position
ZIOC's net asset value ("NAV") of US$42.1m is comprised of a
US$37.6m investment in Jumelles and US$4.4m of cash balances.
30 June 2017 30 June 2016 31 December 2016
Unaudited Unaudited Audited
US$m US$m US$m
--------------------------------------- ------------ ------------ ----------------
Investment in associate 37.6 38.1 37.9
Fixed assets - - -
Cash 4.4 6.0 4.9
Other net current assets/(liabilities) 0.1 - (0.1)
--------------------------------------- ------------ ------------ ----------------
Net assets 42.1 44.1 42.7
--------------------------------------- ------------ ------------ ----------------
Cost of investment
The investment in associate relates to the carrying value of the
investment in Jumelles, which as at 30 June 2017 owned 50% less one
share of the Project. The carrying value of this investment is
unchanged in 2017 due to:
-- Company funding per the Supplemental Agreements of US$0.2m; and
-- The Company's US$0.5m share of the comprehensive loss US$
0.98m made by Jumelles during the half-year.
As at 30 June 2017, Jumelles had aggregated assets of US$81.7m
(June 2016: US$82.9m) and aggregated liabilities of US$0.8m (June
2016: US$1.3m). Non-current assets consisted of US$80.0m (June
2016: US$80.0m) of capitalised exploration assets and US$1.7m (June
2016: US$2.0m) of other fixed assets including property, plant and
equipment. Cash balances totaled US$0.4m (June 2016: US$0.7m) and
other current assets were US$0.1m (June 2016: US$0.1m).
Cash flow
Cash balances have decreased by US$0.5m since 31 December 2016.
Additional investment in Jumelles required under Funding Agreements
(details set out in note 1 to the financial statements) utilised
US$0.2m, operating activities US$0.5m, and foreign exchange gains
were US$0.2m as the value of UK Sterling strengthened against the
US Dollar, thus increasing the US Dollar value of the UK Sterling
denominated cash balances.
30 June 2017 30 June 2016 31 December 2016
Unaudited Unaudited Audited
US$000 US$000 US$000
------------------------------ ------------ ------------ ----------------
GBP Balances 3.4 4.5 3.9
USD value of GBP balances 4.4 6.0 4.9
USD value of other currencies - - -
USD balances - - -
------------------------------ ------------ ------------ ----------------
Cash Total 4.4 6.0 4.9
------------------------------ ------------ ------------ ----------------
Consolidated Statement of Comprehensive Income for the six
months ended 30 June 2017
1 January 1 January 1 January
to to to
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Note US$000 US$000 US$000
------------------------------------------- ---- ---------- ---------- ------------
Administrative expenses (115) (1,433) (2,342)
Share of (loss)/profit associate (382) (883) (619)
------------------------------------------- ---- ---------- ---------- ------------
Operating loss (496) (2,316) (2,961)
Interest Income 3 11 16
(Loss) before tax (494) (2,305) (2,945)
Taxation 5 - (6) (15)
------------------------------------------- ---- ---------- ---------- ------------
(Loss) for the period (494) (2,311) (2,960)
Foreign exchange translation -
foreign operations - (23) (103)
Share of other comprehensive (loss)/income
of associate - foreign exchange
translation (84) 731 7
------------------------------------------- ---- ---------- ---------- ------------
Other comprehensive (loss)/gain (84) 708 (96)
------------------------------------------- ---- ---------- ---------- ------------
Total comprehensive (loss)/gain (578) (1,603) (3,056)
------------------------------------------- ---- ---------- ---------- ------------
(Loss)/Earnings per share (Cents)
Basic 7 (0.2) (0.5) (1.1)
Diluted 7 (0.2) (0.5) (1.1)
The loss for the period is attributable to the equity holders of
the parent company. All other comprehensive income may be
classified as profit and loss in the future.
Consolidated Statement of changes in equity
for the six months ended 30 June 2017
Foreign
currency
Share Retained translation Total
capital earnings reserve Equity
US$000 US$000 US$000 US$000
-------------------------------------------------------- ------------- --------------- ----------- -------------
Balance at 1 January 2016 267,010 (224,702) 3,418 45,726
-------------------------------------------------------- ------------- --------------- ----------- -------------
Consideration for share-based payments - other services 2 - - 2
Share buy backs - - - -
Loss for the period - (2,311) - (2,311)
Other comprehensive (loss)/ income - - 708 708
-------------------------------------------------------- ------------- --------------- ----------- -------------
Total comprehensive (loss)/income - (2,311) 708 (1,603)
-------------------------------------------------------- ------------- --------------- ----------- -------------
Balance at 30 June 2016 267,012 (227,013) 4,126 44,125
-------------------------------------------------------- ------------- --------------- ----------- -------------
Consideration for share-based payments - other services - -
Share buy backs - - - -
Loss for the period - (649) - (649)
Other comprehensive (loss)/income - - (804) (804)
-------------------------------------------------------- ------------- --------------- ----------- -------------
Total comprehensive (loss)/income - (649) (804) (1,453)
-------------------------------------------------------- ------------- --------------- ----------- -------------
Balance at 31 December 2016 267,012 (227,662) 3,322 42,672
-------------------------------------------------------- ------------- --------------- ----------- -------------
Consideration for share-based payments - other services - - - -
Share buy backs - - - -
Loss for the period - (494) - (494)
Other comprehensive (loss)/income - - (84) (84)
-------------------------------------------------------- ------------- --------------- ----------- -------------
Total comprehensive loss - (494) (84) (578)
-------------------------------------------------------- ------------- --------------- ----------- -------------
Balance at 30 June 2017 267,012 (228,156) 3,238 42,094
-------------------------------------------------------- ------------- --------------- ----------- -------------
Consolidated Balance sheet
as at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Note US$000 US$000 US$000
------------------------------------- ---- ---------- ---------- -----------
Non-current asset
Property, plant and equipment - 1 -
Investment in associate 6 37,636 38,146 37,873
------------------------------------- ---- ---------- ---------- -----------
37,636 38,147 37,873
------------------------------------- ---- ---------- ---------- -----------
Current assets
Other receivables 65 95 60
Cash and cash equivalents 4,435 6,025 4,852
------------------------------------- ---- ---------- ---------- -----------
4,500 6,120 4,912
------------------------------------- ---- ---------- ---------- -----------
Total Assets 42,136 44,267 42,785
------------------------------------- ---- ---------- ---------- -----------
Current liabilities
Trade and other payables (42) (142) (113)
------------------------------------- ---- ---------- ---------- -----------
Net assets 42,094 44,125 42,672
------------------------------------- ---- ---------- ---------- -----------
Equity attributable to equity
holders of the parent
Share capital 267,012 267,012 267,012
Retained earnings (228,156) (227,013) (227,662)
Foreign currency translation reserve 3,238 4,126 3,322
------------------------------------- ---- ---------- ---------- -----------
Total equity 42,094 44,125 42,672
------------------------------------- ---- ---------- ---------- -----------
These financial statements were approved by the Board of
Directors on 21 September 2017.
Consolidated Cash flow statement
for the six months ended 30 June 2017
1 January 1 January 1 January
to to To
30 June 30 June 31 Dec
2017 2016 2016
Unaudited Unaudited Audited
US$000 US$000 US$000
------------------------------------------------- ---------- ---------- ---------
Cash flows from operating activities
Loss for the year (494) (2,311) (2,960)
Adjustments for:
Depreciation - 1 3
Interest received (3) (11) (16)
Taxation expense - 6 15
Decrease in other receivables (6) 363 398
Decrease in trade and other payables (71) (4) (21)
Net exchange (profit)/loss (242) 1,363 895
Gain on part sale of associate - - -
Share of Total Comprehensive income of associate 382 152 619
Impairment to share of investment in associate - - -
Share-based payments - 2 2
Tax paid - (6) (27)
-------------------------------------------------- ---------- ---------- ---------
Net cash from operating activities (434) (445) (1,092)
Cash flows from financing activities
Repurchase of own shares - - -
Net cash from financing activities - - -
------------------------------------------------- ---------- ---------- ---------
Cash flows from investing activities
Interest received 3 11 16
Acquisition of property, plant and equipment - - -
Investment in associate (229) (488) (676)
Net cash from investing activities (226) (477) (660)
Net decrease in cash and cash equivalents (660) (922) (1,752)
Cash and cash equivalents at beginning of period 4,852 7,602 7,602
Effect of exchange rate difference 242 (655) (998)
-------------------------------------------------- ---------- ---------- ---------
Cash and cash equivalents at end of period 4,434 6,025 4,852
-------------------------------------------------- ---------- ---------- ---------
Notes to the financial statements
1. Business information and going concern basis of
preparation
In common with many exploration and development companies in the
mining sector, the Company raises funding in phases as its projects
develop.
Following completion of the Feasibility Study in April 2014,
modified to a staged development basis under the terms of the
Supplemental Agreement announced on 13 September 2013, the
consideration for the Call Option whereby Glencore owns 50% plus
one share shareholding in the project, is now satisfied. The Mining
Licence was granted in August 2014 and a Mining Convention was
signed with the Government of the Republic of Congo. This has now
been ratified by the Republic of Congo and adopted as law. Under
the 2016 funding agreement entered into by the Company and
Glencore, the Company's funding obligations for the 2017 work
programme and budget are for a sum of US$0.59m, plus a percentage
share of discretionary costs. Such share for the Company would be
US$0.15m if all the discretionary costs were approved jointly by
the Company and Glencore. On current projections, it is estimated
that the cash amounts payable by the Company to Jumelles during
2017 will be between approximately US$0.59m and US$0.74m. As
regards ZIOC's corporate costs for the 2017 financial year, it is
estimated that such costs will be of the order of US$0.6m and
US$0.8m. The directors have a reasonable expectation that the
Company has adequate financial resources to continue in operational
existence for the foreseeable future. For these reasons, the
financial statements of the Company have been prepared on a going
concern basis.
2. Accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
3. Basis of preparation
The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
In accordance with the AIM Rules for Companies, the condensed
set of financial statements has been prepared in applying the
accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial
statements for the year ended 31 December 2016. The comparative
figures for the financial year ended 31 December 2016 are not the
Company's statutory accounts for that financial year. The 2016
accounts have been reported on by the Company's auditors. The
report of the auditors was (i) unqualified and (ii) did not include
a reference to any matter to which the auditors drew attention by
way of emphasis without qualifying their report.
Up until 30 April 2014, the company accounted for 100% of the
Jumelles group Comprehensive Income. From May 2014, as a result of
completion of the Feasibility Study (note 1 above) and thus
consideration to complete the Call Option, the Company has
accounted for 50% less one share shareholding portion of that
Comprehensive Income.
4. Segmental reporting
The Company has one operating segment, being its investment in
the Zanaga Project, held through Jumelles. Financial information
regarding this segment is provided in note 6.
5. Taxation
The Company is exempt from most forms of taxation in the British
Virgin Islands ("BVI"), provided the Company does not trade in the
BVI and does not have any employees working in the BVI. All
dividends, interest, rents, royalties and other expense amounts
paid by the Company, and capital gains realised with respect to any
shares, debt obligations or other securities of the Company, are
exempt from taxation in the BVI.
30 June 2017 30 June 2016 31 December 2016
Unaudited Unaudited Audited
US$000 US$000 US$000
--------------------------------------------------------------- ------------ ------------ ----------------
Recognised in profit and loss:
Current year - (6) (15)
Reconciliation of effective tax rate
Profit/(Loss) before tax (494) (2,305) (2,945)
Income tax using the BVI corporation tax rate of 0% (2015: 0%) - - -
Effect of tax rate in foreign jurisdictions - (6) (15)
--------------------------------------------------------------- ------------ ------------ ----------------
- (6) (15)
--------------------------------------------------------------- ------------ ------------ ----------------
The effective tax rate for the Group is 0.00% (December 2016:
0.26%).
6. Investment in associate
US$000
---------------------------- ------
Balance at 1 January 2016 37,809
Additions 488
Share of comprehensive loss (152)
---------------------------- ------
Balance at 30 June 2016 38,145
---------------------------- ------
Additions 188
Share of comprehensive loss (460)
Balance at 31 December 2016 37,873
---------------------------- ------
Additions 229
Share of comprehensive loss (466)
---------------------------- ------
Balance at 30 June 2017 37,636
---------------------------- ------
From 30 April 2014, the investment represents a 50% less one
share shareholding (previously 100%) in Jumelles for 2,000,000
shares of 4,000,001 total shares in issue.
On 11 February 2011, Xstrata Projects (now renamed Glencore
Projects) exercised the Xstrata Call Option and from that date owns
50% plus one share of Jumelles and Jumelles is controlled at both a
shareholder and director level by Glencore Projects. However, as
the shares issued on exercise of the option were not considered to
vest until provision of the services relating to the Preliminary
Feasibility Study and the Feasibility Study had been completed, the
Group continued to account for a 100% interest in Jumelles until
the Feasibility Study was completed in April 2014. From May 2014
the Group has accounted for the reduction of its interest in
Jumelles. The Group's interest remains accounted for as an
associate using the equity method of accounting.
The Group financial statements account for the Glencore Projects
transaction as an in-substance equity-settled share-based payment
for the provision of services by Glencore Projects to Jumelles in
relation to the Preliminary Feasibility Study and the Feasibility
Study. These services largely were provided through third party
contractors and were measured at the cost of the services
provided.
As at 30 June 2017, Jumelles had aggregated assets of US$82.1m
(June 2016: US$82.9m) and aggregated liabilities of US$0.8m (June
2016: US$1.6m). For the 6 months ended 30 June 2017, Jumelles
incurred no taxation charge (June 2016: US$nil). A summarised
consolidated balance sheet of Jumelles for the 6 months ended 30
June 2017, including adjustments made for equity accounting, is
included below:
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
US$000 US$000 US$000
---------------------------------------- ---------- ---------- ------------
Non-current assets
Property, plant and equipment 1,697 2,053 1,842
Exploration and other evaluation assets 80,000 80,000 80,000
Total non-current assets 81,697 82,053 81,842
---------------------------------------- ---------- ---------- ------------
Current assets 495 859 756
Current liabilities (838) (1,326) (846)
---------------------------------------- ---------- ---------- ------------
Net current liabilities (343) (467) (90)
---------------------------------------- ---------- ---------- ------------
Net assets 81,354 81,586 81,752
---------------------------------------- ---------- ---------- ------------
Share capital 337,627 336,011 337,096
Translation reserve (4,894) (3,280) (4,728)
Retained earnings (251,379) (251,145) (250,616)
---------------------------------------- ---------- ---------- ------------
81,354 81,586 81,752
---------------------------------------- ---------- ---------- ------------
30 June 30 June
2017 2016 31 December 2016
Unaudited Unaudited Audited
7. Earnings per share US$000 US$000 US$000
----------------------------------------------------------- ---------- ---------- ----------------
Profit/(Loss) (Basic and diluted) (US$000) (494) (1,603) (2,960)
Weighted average number of shares (thousands)
Basic and diluted
Issued shares at beginning of period 278,777 278,777 278,777
Effect of shares issued - - -
Effect of share repurchase - - -
Effect of own shares (3,842) (3,842) (3,842)
Effect of share split - - -
----------------------------------------------------------- ---------- ---------- ----------------
Weighted average number of shares at end of period - basic 274,935 274,935 274,935
----------------------------------------------------------- ---------- ---------- ----------------
(Loss)/Earnings per share (Cents)
Basic (0.2) (0.5) (1.1)
Diluted (0.2) (0.5) (1.1)
----------------------------------------------------------- ---------- ---------- ----------------
8. Related parties
The following transactions occurred with related parties during
the period:
Transactions for the period Closing balance
---------- ----------------------------- ----------- -----------------------
30 June 30 June 31 December 30 June 30 June 31 December
2017 2016 2016 2017 2016 2016
Unaudited Unaudited Audited Unaudited Unaudited Audited
US$000 US$000 US$000 US$000 US$000 US$000
--------------------- ---------- ------------- -------------- ----------- ---------- -----------
Funding:
To Jumelles Limited 229 135 357 35 41 35
--------------------- ---------- ------------- -------------- ----------- ---------- -----------
----------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UAUVRBSAKUAR
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