Altyn Plc
("Altyn" or the "Company")
Results for the year ended 31 December 2016
Altyn Plc (LSE:ALTN) an exploration and development company, is pleased to announce its results for the year ended 31 December 2016.
Highlights
Underground development
· During the year the first transport decline was taken from 250masl (metres above sea level) to 200masl. The decline will now stop at this level.
· Second transport decline was taken from the 250masl and is currently being developed to 225masl.
· Completion of works on the second decline from 250masl to the bottom of the open pit at 320masl.
· Access portal, for the second transport decline was completed during H2 2016.
· Ventilation shafts and ancillary services for the mine works were completed.
· Tailings dam 4 was completed in January 2017. It covers an area of 190,000sqm and has the capacity to absorb 1m tonnes of tailings, and will have an operational capacity of 2-3 years on the basis of the planned production increases.
· Capital investment of US$5.6m (2015: US$9.6m) which includes 30 tonne haulage trucks and new load-haul-dumper (LHD), used to fill the underground trucks with ore. The principal operational fleet is to be further enhanced with an additional 30 tonne haulage truck in 2017 and an additional LHD, to be purchased in 2017.
Financial Highlights
· Debt raising of US$12m through the issue of convertible bonds, (2015: US$5.1m equity raising) and US$1.66m through unsecured loans.
· Turnover decreased in the year to US$15.9m (2016: US$24.1m).
· 12,602oz of gold sold (2015: 20,890oz), a reduction of 8,288oz.
· Average gold price achieved (including silver as a by-product), US$1,259oz, (2015: US$1,173oz).
· Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation excluding impairment) of US$260,000 (2015: negative US$2.3m).
Operational Highlights
· Gold poured 10,970oz, (2015: 15,534oz) a 29.4% decrease year-on-year, due to the continuing development of the second transport decline that resulted in a lower production in the year.
· Underground gold grade 2.70g/t, (2015: 2.55g/t).
· Operating cash cost US$846/oz, (2015: US$837/oz).
· Gold recovery rate 80.20% (2015:76.04%) the improvement is in line with expectations as the higher grade ore is processed.
Neil Herbert, Director of Altyn Plc commented:
"The 2016 annual results are in line with expectations, production declined as resources were switched to develop the second decline and infrastructure in order to access the high grade underground ore. With the solid platform developed in 2016, we look forward to progressing the underground mine in 2017, with rising production and profitability."
For further information please contact:
Altyn Plc
Rajinder Basra, CFO +44 (0) 207 932 2456
VSA Capital (Corporate Broker)
Andrew Monk / Andrew Raca +44 (0) 203 005 5000
Blytheweigh (Financial PR)
Tim Blythe/Camilla Horsfall +44 (0) 207 138 3204
Chairman's Statement
Dear shareholders,
The focus in 2016 as in the prior year has been on moving the underground project forward as efficiently as possible but aiming to maintain our working capital requirements, and ensure our loan commitments are met.
In relation to the latter the Company currently has a bank loan with EBRD, the capital amount outstanding as at the date of this report is US$1.79m. During the year the Company raised US$12m through the issue of convertible bonds with a coupon rate of 10%. The proceeds include US$2m from institutional investors and US$10m from its major shareholder. Additionally, a total of US$1.7m was raised in the form of 13% unsecured loans from the major shareholder. The funds raised were used to finance working capital commitments, repay the loan commitments as noted above, in addition to acquiring the capital assets in the year.
In order to continue with the underground development plans and move towards the targeted production levels the Company needs to raise further funds for capital investment in the underground development. As part of the process of engaging with potential investors the Company has instructed brokers and external consultants to actively market the company. We will keep shareholders updated as the financing progresses.
The Company has made significant progress utilising the funding so far, and the transition to the underground mine is progressing well, albeit with a delay from the original anticipated schedule of approximately 9 months. The underground ore mined in H1 2016 was 28,824mt and in H2 71,939mt. The Company has now moved to a monthly run rate of 29,000t in 2017, with the anticipation to increasing this toward the target of 40-45,000t during 2017.
The gold price is still favourable and stable and has been trading in the range of US$1,200/oz -US$1,300oz. As interest rates rise it is expected that the current price may be put under downward pressure. However, based on the Company's revenue and cost assumptions the profits going forward are still very favourable.
In summary we have now developed the platform to move forward. The forthcoming years, will see the fortunes of the Company change as production increases and we move towards our target of 100,000oz of gold a year.
Finally, may I once again thank all our employees and our Management team for their hard work and also thank our shareholders for their continued support, as we look forward to a challenging and exciting year ahead for Altyn.
Kanat Assaubayev
Chairman
Chief Executive Officer's Report
Overview
The management team have had a successful year in advancing the development of the underground mine. The exercise was time consuming and technically difficult in a number of areas leading to a delay from the planned time table, essentially pushing the development back by approximately 9 months from that initially envisaged.
MAP OF UNDERGROUND MINE SOWING DECLINES
Current developments
To summarise the following progress was achieved in the development of the underground mine in the year, building a solid platform for production growth going forward:
· Development of the first decline which was taken from the 250masl down to 200masl, this gave access to ore body 11. The first decline will now be terminated at this level and the second decline will be used in the future to access the ore bodies. Development of the second decline has significantly reduced the haulage distance to the underground tracks. The decline was taken from the 250masl up to the 320masl to give access to the bottom of the open pit, and a transport portal was constructed. It is also currently in the process of being further developed to 225masl giving access to a number of ore bodies at this level.
· Ore bodies were prepared for production including ore body 10 and also ore body 5, the latter was originally expected to be producing ore in H2 2016, however the delay pushed this back to Q1 2017.
· The current production in Q1 2017 is being taken from ore body 5 that typically has ore grades on average of 3.5g/t. Although the actual grade achieved in the Q1 was 2.56 g/t this is mainly a dilution issue that is expected to be settled in the 2nd half of the year achieving the targeted average gold grade for the year.
· The extraction from the sides of the open pit has revealed veins of ore with very high grades of gold in excess of 6g/t, as well as free gold.
· Completion of tailings dam 4 allows for approximately 1 million tonnes of tailings to be absorbed. Tailings dam 4 will have a life of approximately 2-3 years, taking into account our plan to raise production. It is expected that after this period the paste plant will be constructed, thereafter allowing the tailings to be backfilled into the underground mine.
· Sourcing, purchasing and commissioning of plant and equipment during the year. Key items were the load-haul dumper CAT R1300 and the 3 Sandvik UG trucks TH430 which can carry 30 tonnes each. These are replacing the existing 15 tonne trucks which have been retained for possible deployment in Karasuyskoye. Another 30 tonne UG truck is to be ordered in the near term. Also in addition to the above a low haul dumper was delivered in late March 2017 and is now being used in the operations.
Looking forward
· The second decline is to be developed to 225masl as noted above, and this is expected to be completed by June 2017, giving access to the ore bodies at this level which will then be prepared for production. Ore body 11 contains on average higher grade ore up to 4.5g/t, and will be mined in H2 2017.
· Further drilling and preparatory works will be undertaken at ore bodies 2-10 at the 250masl in order to prepare them for ore production.
· The extraction of the very high grade ore that is being mined from the sides of the open pit is being further refined by applying higher concentrations of cyanide, in three smaller intensive leaching tanks which have been set up. The recovery rates will be further enhanced in the future by the purchase of gravitational circuits, as cash flow permits.
Capital requirements
An update to the current projected development capital requirements is given in the table below.
|
Total |
2017 |
2018 |
2019 |
2020 |
|
US$m |
US$m |
US$m |
US$m |
US$m |
|
|
|
|
|
|
Prospect drilling |
4.0 |
0.9 |
0.1 |
1.5 |
1.5 |
Underground development |
3.5 |
1.4 |
0.4 |
0.8 |
0.9 |
Infrastructure |
1.2 |
1.2 |
- |
- |
- |
Ore handling facilities |
16.8 |
10.2 |
4.6 |
2.0 |
- |
Process plant & paste plant |
12.0 |
- |
12.0 |
- |
- |
Contingency |
3.3 |
0.6 |
2.3 |
0.3 |
0.1 |
Total |
40.8 |
14.3 |
19.4 |
4.6 |
2.5 |
Of the total amount shown above the external funding requirement is in the region of US$20m-US$30m. The Company is currently in discussion with a number of interested parties, in order to raise the necessary funding.
Sekisovskoye operational update
In the year to December 2016, the mine has been operating at a very low capacity and the current year low level of production has to be seen as a necessary step in order to achieve the Company's long term goal. During H1 2016 this dropped to 3,694oz of gold produced but since then production has been rising as the underground mine is developed.
The key performance statistics show that the underground grades are improving as direct access is gained to the ore bodies and recovery rates are now moving to the target goal of above 80%. Indeed, in Q1 2017 the recoveries have increased, albeit the grades have remained at the 2.5-2.6g. The grades are expected to improve as the higher grade ore bodies are accessed and there is less developmental ore delivered to the processing plant
The operational performance of the Company' Sekisovskoye gold mine during 2016 against the prior year is shown in the tables below.
Mining - open pit |
|
|
|
|
|
2016 |
2015 |
Ore mined |
T |
107,586 |
339,111 |
Gold grade |
g/t |
0.91 |
1.06 |
Silver grade |
g/t |
1.60 |
2.03 |
Contained gold |
oz |
3,065 |
11,595 |
Contained silver |
oz |
5,361 |
22,139 |
Mining - underground |
|
|
|
|
|
2016 |
2015 |
Ore mined |
T |
100,763 |
79,276 |
Gold grade |
g/t |
2.70 |
2.55 |
Silver grade |
g/t |
3.76 |
3.7 |
Contained gold |
oz |
8,757 |
6,492 |
Contained silver |
oz |
12,182 |
9,441 |
Mining processing |
|
|
|
|
|
2016 |
2015 |
Crushing |
T |
258,206 |
570,949 |
Milling |
T |
262,546 |
566,664 |
Gold grade |
g/t |
1.66 |
1.12 |
Silver grade |
g/t |
2.88 |
2.25 |
Gold recovery |
% |
80.20 |
76.04 |
Silver recovery |
% |
73.45 |
64.91 |
Contained gold |
oz |
13,679 |
20,428 |
Contained silver |
oz |
22,491 |
40,994 |
Gold poured |
oz |
10,970 |
15,534 |
Silver poured |
oz |
16,519 |
26,608 |
Total gold production for 2016 was only 10,970oz, and was lower than that initially budgeted. The result reflects the winding down and closure of the open pit mine at Sekisovskoye, as the Company's efforts were focused on increasing its underground development. Of this amount 3,694oz were produced in H1 and 7,276oz in H2, the increase in production is encouraging. The production is expected to build in 2017 such that it is expected to achieve a run rate of 40,000oz of gold per annum in the latter part of the year.
As expected the gold recoveries have increased and are now in excess of 80% as production is switched to the higher grade ore. The increase is expected to continue as the composition of the ore processed is not expected to be so variable in grade. In addition to this the operational upgrades made in the prior year in the processing plant have also made a difference in uplifting the recoveries achieved. In the current year the processed ore was a mixture of lower grade ore from the open pit and the developmental ore from the higher grade underground ore bodies. The open pit ore grade was 0.91 at a very low level and was only used in order to keep the plant operational. In the current year the low grade stockpiles have been fully impaired as they are no longer considered to be economically viable to process.
Financial performance review 2016
In terms of production and revenue generation this is anticipated to be the low point of the Company's performance. The production performance was a direct result of the continuing underground mine development which led to delays and interruptions to production. In addition the use of low grade ore from that remaining in the open pit led to the low levels of grade and recovery rates, and was principally used to maintain the operation of the processing plant.
As anticipated the grades and recovery are improving and all the main elements are in place to increase production in the forthcoming year. The second decline is now moving towards 200masl and a number of ore bodies are accessible and are being prepared for production. As noted previously further investment will be required in order to advance the second decline to minus 50masl which is the current development plan, and to conduct further exploratory drilling.
The current KPI's are to a large extent not a valid comparable to prior years, as production was being maintained at the processing plant to keep it operational during developmental works. In particular the production cash cost is very high given the low level of production and will decrease incrementally as the production rises with the targeted average cash cost of US$540.
The current cash position and anticipated trading is sufficient for the budgeted capex (with no expansion), and budgeted production for the next year, but to further develop the mine additional investment is required. In the prior year one of the principal factors affecting the results for the year was the devaluation of the Kazakh Tenge against the US Dollar The US Dollar has stabilised against the Kazakh Tenge and is in the range of KZT300-320, and gold is trading in the range of US$1,200-1,300. Both are expected to be in similar ranges in the forthcoming year.
The Company has reported a net loss of US$6.4m (2015: US$10.2m), with a gross profit of US$2.3m (2015: US$4.3m) and an operating loss of US$4.1m (2015: US$4.8m).
During 2016, Sekisovskoye poured 10,970oz of gold (2015:15,534oz). A total of 12,602oz (2015:20,890oz) were sold in 2016 at an average price of US$1,259oz (2015: US$1,151oz). Revenue totalled US$15.9m (2015: US$24.1m) and was lower than 2015 as the Company focused its efforts on developing the underground development. The principal purchaser of the gold dore was Kazakh state refinery as in the prior year.
The total cash cost of production, which includes administrative costs but excludes depreciation and provisions, amounted to US$1,238/oz, (2015: US$1,263oz). The operating cash cost amounts to US$832/oz (2014: US$837/oz). This is based on the cost of sales excluding depreciation and administrative expenses, and impairments. The earnings before interest, tax and depreciation, (Adjusted EBITDA), excluding exceptional items, amounted to a positive US$260,000, (2015: negative (US$2.3m)).
Depreciation of US$3.1m (2015: US$4.2m). The lower level of deprecation is a reflection of the decreased charge for mining properties, reflecting the lower production in the year. In 2016, the amortisation charge of US$553,000 (2015: US$852,000) relates to the geological data asset for Karasuyskoye ore field purchased in 2013. As the Company has been awarded a subsoil contract in May 2016 US$322,000 of the amortisation charge has been capitalised to the exploration and evaluation asset in line with the Group's accounting policy.
The Group has reported Net cash outflow from operating activities of US$2.9m (2015: net inflow of US$8.2m). The effect of lower production was partially offset by a higher average gold price.
Purchase of property plant and equipment of US$4.9m (2015: US$9.6m). The Company has been conserving cash where possible in order to preserve working capital until such point as the funding is in place to further develop the mine.
Cash at year-end was US$2.2m (2015: US$1.1m). During the year, the Company raised US$12m via convertible bonds and US$1.7m in the form of unsecured loans. The Company is currently in negotiations to raise further funds, and will update shareholders as matters progress, however available cash resources are sufficient to meet the current working capital requirements.
The Company's principal debts are that owed to The European Bank for Reconstruction (EBRD), and the convertible loan notes issued in the year. The EBRD loan is set to be paid over the remaining two equal quarterly instalments of US$833,000. In relation to the convertible bonds they are not expected to impact the cash flow, (other than the interest payments), until maturity in 2021, at which point they may be converted into shares. African Resources Limited have agreed to delay the payment of the outstanding interest payable on their loans in order to aid the cash flow of the Company.
The consolidated net assets of the Company are US$34.0m (2015: US$38.4m).
In summary the Company has progressed well on a developmental level on its limited funding, and managed to continue the mine development as well as maintain production albeit at low levels. 2017 is looking encouraging and mining and production is moving towards the targeted production levels set for the high grade underground mine.
Consolidated statement of profit or loss
Year ended 31 December 2016
|
Notes |
2016 US$000 |
2015 US$000 |
Revenue Costs of sales |
3 |
15,867 (13,554) |
24,054 (19,763) |
Gross profit Administrative expenses Impairment-other Impairment reversed |
|
2,313 (5,352) (1,107) - |
4,291 (9,762) - 674 |
Operation Loss Foreign exchange loss Finance expense |
|
(4,146) 283 (2,215) |
(4,797) (5,718) (1,235) |
Loss profit before taxation Taxation credit |
|
(6,078) (278) |
(11,750) 1,532 |
Loss attributable to equity holders of the parent |
|
(6,356) |
(10,218) |
Profit per ordinary share |
Basic & Diluted |
4 |
(0.3c) |
(0.4c) |
Consolidated statement of profit or loss and other comprehensive income
Year ended 31 December 2016
|
2016 US$000 |
2015 US$000 |
Loss for the year |
(6,356) |
(10,218) |
Currency translation differences arising on translations of foreign operations items that may be reclassified to profit or loss |
747 |
(34,577) |
Currency translation differences arising on translation of foreign operations relating to taxation |
866 |
4,574 |
Total comprehensive loss attributable to equity holders of the parent |
(4,743) |
(40,221) |