Interim results for the six months ended 31 December 2020
Goldplat plc / Ticker: GDP / Index: AIM / Sector: Mining & Exploration
5 March 2021
Goldplat plc ('Goldplat' or 'the Company')
Interim results for the six months ended 31 December 2020
Goldplat plc, the AIM listed gold producer, with international gold recovery operations located in South Africa and Ghana, announces its unaudited interim results for the six months ended 31 December 2020.
· Goldplat achieved an operating profit for the six months ended 31 December 2020 of £2,600,000 (31 December 2019: £2,566,000). Within this, the South African operation achieved an operating profit of £2,108,000(31 December 2019: £2,659,000) and the Ghana operation increased operating profitability by more than 5-fold to £849,000(31 December 2019: £151,000);
· The fully diluted earnings per share for the period from continuing operations increased to 1.45 pence (31 December 2019: 0.63 pence) as a result of increased performance in Ghana, increasing net profit from continuing operations attributable to owners of the company to £1,256,000(31 December 2019: £536,000).
· Revenues in South Africa decreased by 13% to £8,243,000 (six months ended 31 December 2019: £9,486,000);
· In pursuance of the objective to ensure profitability of our production lines, from material available in the market, on a sustainable basis, we have invested substantial time and resources on gathering data to optimise the production lines and investigating the best processing routes to obtain maximum recovery during re-processing of the gold contained in our tailings storage facility ("TSF"). This expenditure contributed to higher operating cost but this research should inform our future decision making;
· The total capital expenditure during the period in South Africa amounted to £394,000 focussed on the optimisation of the largest milling and Carbon-in Leach Circuit by adding additional equipment, and the installation of a pilot plant to bulk test material from the TSF, as described above, and the further extension of the deposition area on the current TSF;
· Normal operating costs increased, specifically as a result of electricity price increases, more water used from the Rand Water Board and rental of yellow machinery for material handling purposes in addition to higher security and engineering costs. Further electricity increases are expected but measures have been taken to mitigate and reduce other cost.
· We experienced a good supply from our regular clients during the period which was supported with supply from a new client in South America, driving the 92% increase in revenue year on year to £4,359,000 (six months ended 31 December 2019: £2,273,000).
· Our marketing efforts in Mali, Burkina Faso and Ivory Coast to secure additional sources of supply continue, with engagements at mine and Government level. We have received a low-grade trial batch from another mine in Mali for evaluation purposes and initial results are encouraging. By achieving a larger geographical spread with more clients, our objective is to have a steady supply to our plant in Tema from current production rather than ad hoc supplies from stockpiles.
· We are still engaging with relevant authorities in Ghana on re-entering the processing and tolling of tailings material.
· We are encouraged with the progress made during the last month on the sale of Kilimapesa to Mayflower. The formal legal documentation has been signed and transaction has been approved by a majority of Papillon shareholders, Papillon creditors deeds have been executed and we are in a position to complete the transaction by 31 March.
I am pleased to report good progress in delivering sustainable and strong results from our gold recovery operations, with profit for the half year from continuing operations of £1,500,000 (2019: £1,000,000) and an all-in, fully diluted EPS for the half year of 1.45 pence (Restated 31 December 2019: 0.63 pence). As recently announced, progress also includes simplifying the group structure to reduce group costs and ensure more of the strong operational performance may flow to our shareholders.
Our portfolio of core assets consists of two gold recovery operations, in South Africa and Ghana, which recover gold from by-products of the mining process, thereby providing mines with an environmentally-friendly and cost-efficient way of removing waste material.
We are also in the process of selling our Kilimapesa gold exploration and mining operation in Kenya and this is progressing well.
The Revenues for continuing operations for the six months ended 31 December 2020 increased by 7% to £12,602,000 (restated six months ended 31 December 2019: £11,759,000), with the growth achieved in Ghana, where revenues increased by 92%, from £2,273,000 for the six months ended 31 December 2019 to £4,359,000. The growth in Ghana was set-off by lower gold production in South Africa resulting in a decrease in Revenues in South Africa by 13% to £8,243,000 (six months ended 31 December 2019: £9,486,000).
The Group achieved an operating profit from continuing operations for the six months ended 31 December 2020 of £2,600,000 (restated for the six months ended 31 December 2019: £2,566,000). The overall increase was impacted by lower gold production in South Africa where material processed during this period was lower in grade and the volume of fine carbon was less than in previous periods. The measures being taken by the Company and the continuous research of better processing methods should ameliorate this effect as mines become more efficient and during the consolidation process of the industry.
The net financing cost can be split into intergroup foreign exchange movements, third party foreign exchange movements and net interest paid. This has been broken down in the below table:
Six Months Ended 31 December 2020
Restated Six Months Ended 31 December 2019
Intergroup foreign exchange movements
Third party foreign exchange movements
Net interest paid
The net interest paid includes £66,000 (31 December 2019: £41,000) paid on the Scipion loan. The remainder relates to lease interest of £36,000 (31 December 2019: £44,000) and pre-financing of proceeds of £36,000 (31 December 2019: £132,000).
The profit after taxation of £1,500,000 (restated 31 December 2019: £1,000,000) was negatively impacted by unrealised intragroup foreign exchange losses on intercompany loans balances for the six months ended of £357,000
(31 December 2019: £400,000). The group has intercompany loans denominated in USD which differ from its reporting currencies. The strengthening of the ZAR against the USD contributed the most to the unrealised intragroup foreign exchange loss for the six months.
The taxation expense decreased to £560,000 (31 December 2019: £918,000) as a result of more of the Group profits being attributable to Ghana which are subject to a favourable tax rate of 15%. Furthermore, the withholding tax expense year-on-year was lower due to less dividends declared by Goldplat Recovery (Pty) Ltd ('GPL')during the period, reducing dividend taxation paid for the six months ended 31 December 2020 to £80,000 (31 December 2019: £190,000). With Kilimapesa no longer requiring funding from the group we expect to maintain lower dividend declarations to fund working capital requirements. By restructuring GPL as a subsidiary of Goldplat Plc, as recently announced, there will not only be a saving of General and Administrative expenses but also a reduction in the withholding tax rate on dividends declared to Goldplat Plc
Cash and cash equivalents at the end of the period (net of bank overdrafts) decreased to £910,000 (31 December 2019: £1,981,000). This decrease in cash is attributable to increases in inventories and accounts receivable.
Precious metals on hand and in process doubled to £7,591,000 during the period, directly related to the larger batches of material received in Ghana and gold produced in South Africa not sold. Sales from this material will be accounted for during the third quarter.
We further increased our strategic raw material stockpiles by investing £1,400,000 in material. This is a defined strategy of the company to ensure sustainable production and afford the company the opportunities to blend and schedule production to maximise returns.
During the period trade and other receivable balances increased by £1,470,000.
The precious metals on hand and in process and trade receivable balance fluctuate based on when material is received and sold. The cash balance at date of the report increased to £1,990,000.
Goldplat Recovery (Pty) Ltd ('GPL')
Revenues in South Africa decreased by 13% to £8,243,000 (six months ended 31 December 2019: £9,486,000). Fluctuations of this nature are not uncommon and are dependent on the nature of material purchased, the grade of the material and the stage of processing. Margins on high value material are normally lower than lower value material received and changes in revenues do not necessarily result in lower margins. During the comparative period ending 31 December 2019, South Africa achieved record sales numbers as a result of good quality, high grade material available to be processed through all circuits. The production during the six months ended 31 December 2020, was in line with production during the six months ended 30 June 2020. In comparison with the six months ended 31 December 2019 the current period production was impacted by a milling circuit being offline for 3 months, whilst the pilot plant was constructed, and lower volumes of by-products received from clients.
The reduction in turnover and increased operating costs, did offset the benefit derived from increases in gold prices and resulted in the operating profit in South Africa for the period decreasing year-on-year from £2,659,000 for the six months ended 31 December 2019 to £2,108,000.
Increases in operating costs included £51,000 in water consumption from Rand Water Board due to poorer quality of other water sources we used in the past being contaminated by sewage from pipe failures in surrounding areas. The rental and repair of plant machinery during the period increased by £38,000, due to additional material handling requirements and breakdown of yellow machinery requiring lengthy repair. The additional plant infrastructure, together with increased electricity prices resulted in an increase in electricity cost compared to the previous period of £67,000. During the period we changed the security service provider in South Africa, resulting in an extra month of security cost being incurred. The additional cost amounted to £32,000 but in changing service providers will result in future saving of £11,000 per month.
Arrangements made to transport our staff in a hygienic and safe manner and other operating requirements under Covid-19 restrictions, cost the South African subsidiary an additional £75,000.
During the period we also evaluated an alternate PGM resource at some cost. We achieved mixed results but will continue our endeavours to penetrate and pursue this market.
The approval of our new TSF in South Africa remains critical to our ability to continue operating at current levels. The approval for the application is due in July 2021 but we will start pre-construction work during the June quarter to ensure we are in a position to move our deposition to the new facility when approval is received. The construction cost of the new TSF is estimated at £700,000.
The test work on re-processing the existing TSF has advanced to the point where we have established what we believe to be the optimal processing routes in terms of gold recovery, processing volumes and operating costs. These options will now be evaluated by accredited technical facilities to obtain the data on which the final processing plan can be designed.
Gold Recovery Ghana ('GRG')
We experienced a good supply from our regular clients during the period which was supported with supply from a new client in South America, driving the 92% increase in revenue year on year to £4,359,000 (six months ended 31 December 2019: £2,273,000). The increase in volume of material processed, together with the higher gold price resulted in operating profit margins increasing from 6.6% during the 6 months ended 31 December 2019 to 19.5% for the 6 months ended 31 December 2020. Operating profit of £849,000 for the 6 months ended 31 December 2020 represents a more than five-fold increase from Operating profit reported for the 6 months ended 31 December 2019 of £151,000.
Our efforts in Mali, Burkina Faso and Ivory Coast to secure additional sources of supply continue, with engagements at mine and Government level, has yielded positive outcomes and the company continues its marketing in the region. We have received a low-grade trial batch from another mine in Mali for evaluation purposes and initial results are encouraging. By achieving a larger geographical spread with more clients, our objective is to have a steady supply from the mines current production, rather than ad hoc supplies from stockpiles.
We are still engaging with relevant authorities in Ghana on re-entering the processing and tolling of tailings material.
Kilimapesa Gold ('KPG')
KPG is currently classified as an asset in disposal groups classified as held for sale and has been disclosed separately in the statement of financial position at fair value less the cost of sale. During the period the Group supported KPG with a balance of £243,000 which has been impaired and recognised under discontinued operations during the period.
The formal legal documentation relating to the acquisition of total issued share capital of Kilimapesa by Mayflower Gold Investments Limited ("Mayflower Gold") a wholly owned subsidiary of Mayflower Capital Investments Pty Limited (the "Transaction") has been signed by all parties. The formal documentation includes a Share Purchase Agreement ("SPA") entered into by Gold Mineral Resources Limited ("GMR") (a wholly owned subsidiary of Goldplat) with Mayflower Gold. The SPA sets out the terms of the Transaction under which Mayflower Gold will acquire 100% of the entire issued share capital of Kilimapesa which holds the licences and assets of producing Kilimapesa Gold Mine and processing operations located in Narok County, Kenya. The completion date for the Transaction has been changed from 28 February 2021 to 31 March 2021.
A deed of novation and royalty agreement has also been entered into by GMR and Mayflower Gold. The deed of novation relates to the transfer of all rights and obligation of GMR in the loan agreement between GMR and Kilimapesa to Mayflower Gold as described in the Company's announcement of 31 July 2020. Under the royalty agreement, GMR has the right to receive a 1% gross net smelter return royalty subject to a maximum of US$1,500,000 on future gold produced and sold by Kilimapesa.
Completion of the Transaction remains subject to a number of conditions being satisfied including, amongst other things:
o Receipt of various regulatory approvals in Kenya;
o Approval of Kilimapesa's prospecting license;
o The completion by Mayflower Gold of the Reverse takeover of Papillon Holdings plc including a fundraising of at least US$4 million; and
o initial consideration to be satisfied by the issue of shares to that value of US$1,750,000 in Papillon Holdings Plc or US$1,500,000 in cash payment to GMR;
As at 31 July 2020 GMR had lent US$10 784 765 to Kilimapesa which will be subject to the novation agreement and during the interim period a further US$150 000 was advanced to facilitate the conclusion of the transaction.
Progress can be reported subsequent to 31 December 2020 on the following:
· The installation of density separation unit at our largest milling circuit has been completed and we are currently in the process of commissioning the unit. The purpose of the unit is to increase gold recovery and margins achieved from the processing of lower grade material, containing significant amount of carbon. If successful material that previously was not commercially viable may become payable and add additional sources of material.
· Engagement with authorities is continuing on our water use license application required for future deposition of tailings;
We remain committed to our strategy of increasing long term visibility of earnings in the recovery businesses through key initiatives. These key initiatives include:
· improving our gold recoveries from lower grade contaminated material, effectively reducing the grade of the material we will be able to source economically. Reserves of lower grade materials are more readily available and help to alleviate the sourcing risk;
· Building strategic partnerships within the mining industry;
· Evaluating the investment into larger tailings storage facility and additional mill and leaching capacity to enable us to reprocess our current TSF; and
· Increased investment into sourcing initiatives and test work on a wider range of materials, including PGM discards.
The company's production has remained satisfactory, to date, during the second half. The profitability for remainder of the period will however remain dependent on sourcing of quality material and the gold price.
5 March 2021
|Werner Klingenberg||Goldplat plc (CEO)||Tel: +27 (82) 051 1071|
|Colin Aaronson / Richard Tonthat / Ben AO Roberts||Grant Thornton UK LLP (Nominated Adviser)||Tel: +44 (0) 20 7383 5100|
|James Joyce / Jessica Cave / Lydia Zychowska||WH Ireland Limited (Broker)||Tel: +44 (0) 207 220 1666|
|Tim Thompson / Mark Edwards / Fergus Mellon||Flagstaff Strategic and Investor Communications||Tel: +44 (0) 207 129 1474
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