TIDMELX
RNS Number : 6828L
El Oro Ltd
04 October 2016
El Oro Ltd
Preliminary Announcement
Chairman's statement
The El Oro Group's loss before tax for the year-ended 30 June
2016 was GBP615,636 (loss before tax for the year-ended 30 June
2015 was GBP11,338,951). The Group's net assets at 30 June 2016
were GBP50,598,883 or 79.7 pence per share (30 June 2015:
GBP51,827,562 or 80.5 pence per share).
The Board has resolved to propose a final dividend of 2.405
pence per share for the year-ended
30 June 2016 (year ended 30 June 2015: 2.405 pence per share) on
28 November 2016 to Members registered on the books of the Company
at the close of business on 28 October 2016.
The ascent from the slough of despond seen around the start of
2016 has been especially dramatic in the mining sector, with the
FTSE 350 Mining Index appreciating 52% since 1 January and the AIM
Basic Resources Index up 48% since the January lows. Although this
puts us back more or less where we started in June 2015, the
expectation that the mining market, and gold, were yesterday's
ideas has been rebuffed, even if temporarily.
It is heartening to hear in recent weeks some of the sagest
investment minds saying that we are moving into uncharted waters,
and therefore increasing their exposure to gold. Whilst marking
time is not a seductive investment philosophy, we do believe that
the reduction in debt achieved over the last year, and a fall in
our exposure to Swaps, whilst increasing our exposure to
larger-capitalisation stocks, has provided a much more secure base
from which to approach the challenges ahead.
The fact that the entire political landscape has altered so
dramatically over the past few months emphasizes yet again that
assets providing security in a challenging and 'disruptive' world
are essential for a secure portfolio: we believe the mix of
old-economy stocks, in continuing demand, such as Young's and
Halstead, backed up by the gold exposure from our miners, does
answer some of those challenges, despite the shortcomings of the
metals during the mining-slump of the past few years.
Looking at a few of our individual stocks, Hurricane hit a low
around the 9p level in the spring, but has since bounced above the
30p mark, as two funds took advantage of its depressed level,
sensing the opportunity in its stranded oil West Shetlands deposit.
Its drilling result announced on the 9 September has validated the
optimism of its chief Geologist and seen a huge rise in its share
price, as good as the Pantheon Resources results were
disappointing. As always, fortune favours the brave, and we would
expect the oil reserve to grow in size in the months to come.
We were pleased to welcome Dominic Scriven OBE and his team's
Vietnam Enterprise Investment Fund to a London listing in early
July, and are grateful for his dedicated stewardship of a
significant holding for us, opening doors successfully to one of
the more populous and promising Asian markets.
Shanta Gold has also recently revealed greater reserves than
previously assessed, and continues its recovery, at its various
projects in Tanzania. Troy has recovered from its mid-winter lows,
but the volume of rain in Guyana has restricted its ability to meet
its production targets, and it has once again made recourse to
capital raising in recent weeks. Whilst the prospect of losing the
services of the ever-green Ken Nilsson, well into his seventh
decade, does not fill us with delight, we acknowledge his seminal
contribution to Troy's prosperity over the past 20 years and are
convinced that his legacy at Karouni, given a favourable gold
price, will eventually reward patient shareholders, despite further
fund raising.
The ride at Pantheon Resources has certainly been anything but
dull in recent months even if hopes for a further extension to its
Texan oil deposits were recently dashed, along with the share
price, by drilling complications. Whilst the shorts might have the
upper hand for now, we will wait for a recovery to emerge. That has
thus far been the case at Cadiz, the water project in the Mojave
Desert in California that has been the subject of a sustained
shorting attack. It now appears to have been exacerbated by
collusion with Government authorities, and the project, able to
bring water to upwards of 100,000 people in Southern California,
might at last see the light of day and save water that is at
present evaporating into the desert.
Whilst such projects, if finally greeted by fortune's smile, may
well enrich shareholders, we are mindful of the request by some
shareholders for larger cap stocks: we have been rewarded in this
respect by our investment in Newmont Mining one of the world's
major gold mining companies, and also Freeport McMoRan, one of the
foremost copper Miners in the world, producing a considerable
quantity of gold from its Grasberg concession in Indonesia, even if
a question mark does hang over its ability to renew it. Barring
another calamitous slump in the Chinese or American economy, the
world demand for copper should enhance the share prices of such
companies well beyond the low levels reached earlier in the
year.
Along with Shell and British American Tobacco, there is
considerable comfort to be had from bolstering the portfolio with
these larger companies, even if growth will tend to come from the
successful selection of smaller companies.
Investors are increasingly seeking higher-yielding stocks, often
via the medium of ETFs and as a consequence their valuations are
rising to perhaps unsustainable levels, whilst those beneath the
radar of many brokers' lists continue to present compelling value.
Our positions in Young and Co and James Halstead, are examples of
small companies grown large by astute management in a favourable
area, and continue to impress with the consistency of their
performances and growth in dividends, even as we now welcome
Patrick Dardis at Young and Co., in succession to the admirable
Steven Goodyear, and unflappable Peter Whitehead.
PZ Cussons continues its recovery from what was deemed the
morass of Nigeria's economic and political woes, abetted by its
dominant position in distribution in that extensive market; Ocean
Wilsons is also thriving despite the vagaries of the Brazilian
economy.
MP Evans, having paid a special dividend with the proceeds of
the sale of its Australian cattle station, stands to benefit from
an increase in the palm oil price, as does REA, after enduring a
period of impairment from low yields and low prices. Select
Harvests is also beginning to see a recovery in the almond price,
and tiny Fulcrum, providing electricity services to several major
entities, has risen dramatically in the past year.
As some shareholders had expressed concern at the investment
performance of the Company, the widening discount to net asset
value and the lack of liquidity in the shares, the Board consulted
with some of the larger shareholders who reemphasised these
concerns. In the light of this the Board is proposing and will
support a special resolution at the forthcoming AGM to alter the
Articles of Incorporation to provide that the Company will be put
into voluntary liquidation at the AGM in November 2018 unless a
Special Resolution is passed to prevent such liquidation. The Board
considers that this action would give shareholders who wish to exit
the Company at closer to the net asset value the opportunity to do
so and will enable the Company to further reduce or eliminate its
debt and improve its investment performance in the intervening
period. Further details are given in the circular accompanying the
notice for the AGM.
Amidst tremendous global uncertainty, of the triumvirate that
ran the Britain's Economy, only one now survives, hopefully for not
much longer; the former Chancellor's predictions of penury bordered
on the treasonable, not to mention with hindsight, laughable. This
must be added to his deplorable record in making the tax system
fiendishly complex, primarily for political reasons, and putting
paid to the London property market, Buy to let and imposing the
egregious Living Wage.
His fellow conspirators included the execrable Geldof, pouring
obscene scorn on Britain's benighted fishermen, and joyless
Juncker, along with the effortlessly disloyal Obama and highly
questionable Lagarde: All these luminaries replete with their
diatribes of doom have been shown to be persistently and
fundamentally wrong: There is simply no sound reason why Janet
Yellen and the whole approach to quantitative easing, so
unsuccessful in Japan and Europe, will have any lasting beneficial
effect on any economy, other than the price of certain assets, and
the job security of various bankers, if carried on to Eternity.
What we do know is that the pension and savings systems of most
of the Western world have over the last 10 years been brought to
the borders of insolvency by the imposition of microscopic rates of
return. More of the same seems currently the only solution on
offer.
The recent collapse of the Hanjin Shipping Line, whilst
presaging a rise in freight rates, has highlighted the grotesque
overcapacity in the container market, and also that of port
capacity. The precipitous fall in the share price of Deutsche Bank,
once perceived as the giant of the German banking fraternity, can
but send a shiver down the spine of anyone insouciant enough to
believe in the supremacy of the German banking system: so soon
after imposing impossibly onerous terms on that of Greece. It is
ironic to see the magnanimous American regulators imposing a $14bn
fine on Deutsche Bank for infractions in the sale of mortgage
securities, a genre almost entirely the creation of the US
investment banks. These are not encouraging portents for world
trade, especially given a harsher political climate towards
treaties that seem to favour a tiny section of the electorate.
What a marvelous change to see Mrs. May confounding the
perceived wisdom of 50 years by allowing the creation of new
Grammar Schools. Sadly she has not scrapped the deeply dubious
Hinkley Point but perhaps may bite the bullet and dispose of HS2
and reverse the closure of our remaining Coal-fired Power stations
whilst accelerating the building of several more runways. Boris's
Cycle routes within London will remain an obstruction to the free
flow of traffic, and hardly enhances the well- being of the
cyclist. The apparent abandonment of their Vocational calling
amongst some junior doctors poses an existential threat to health
care and the NHS.
Faced with the prospect of a Fool or a Knave, as some have
described the choice facing the United States electorate, having
some protection against possible rises in interest rates, along
with gold, does seem to make a degree of sense. We could well be
entering another era of favourable prices for Precious metals,
where even the despised Platinum shares are making a comeback.
We are therefore continuing our search for well-financed
projects with substantial gold reserves, along with other metals
such as lithium as we move further into the era of electric
vehicles and the storage of electricity. We will back these up with
value positions where there is a significant discount to assets,
along with companies possessing an especial edge in technology or
licences, such as Renishaw. We have achieved a significant
reduction in debt since last November, even if with hindsight more
might have been made of the compelling prices on offer early in
January and again immediately after the 23 June - Independence Day.
We have also reduced management costs, albeit partly with the
departure to the Antipodes of Steven McKeane, doyen of Finance
chiefs, and a huge asset to the Company and support to myself for
the previous 9 years. He has left an impressive legacy for Una Ni
Dhonaill to follow, and we wish her well in that challenge.
Irrepressible Abbie celebrated her half-Century in style and
remains the beating heart of El Oro, along with recently arrived
Nancy and Nick continuing his scrutiny of the settlements. Chris
Copperwaite, unflustered by several changes of nomenclature,
controls the Guernsey side with huge competence and good grace.
The celebrations of Her Majesty's 90th Birthday, followed by the
warm glow of Rio, and the dominance of the British Eights, Four and
Women's Pair will take time to fade. Along with so many other
sporting successes this summer they are tributes to outstanding
individuals and dedicated and hugely competent management and
coaching teams. We are enormously reassured to see Britain achieve
such success, and believe that given goodwill and equivalent
perseverance, the new leadership of Britain under Mrs. May can
accomplish something similar. We are reminded of one recent gold
Medalist who after a previously undefeated career only won bronze
in London, yet overturned that a month ago in Rio.
We believe that despite the initial antagonism of many of the
young and bright of today, Britain's future as an independent
Nation, free of the shackles of a Socialist, dictatorial and
undemocratic union will be bright.
As we emerge from the slump in both mining and oil shares and
the tremendous pressures placed upon those trying to sustain their
business we are reminded of Psalm CXXIV v 7,8:
Blessed be the Lord, who hath not given us as a prey to their
teeth.
Our soul is escaped as a bird out of the snare of the fowlers;
the snare is broken and we are escaped.
Our help is in the name of the Lord, who made heaven and
earth.
It would be remiss not to acknowledge and mark the passing of
several friends and luminaries who have enriched my life and that
of others over many years: Geordie Kidston, who did do much to
emulate Teddy Butler-Henderson with his own observations and
eclectic search for information from hither and thither; Peter
Bennett, whose trenchant and nearly always correct views were
presented without malice or respect for convention, but always made
you stop and think (most recently in December recommending gold
shares); Hugh Mansel who was discrete and knowledgeable; and most
recently Colin Orr-Ewing, the brains behind Bacanora, the Lithium
project in Mexico which he planned to provide for his Pension. His
humour and infectious enthusiasm will be missed by many, so soon
after saying farewell to his wife Fleur. He enhanced the lives of
so many, and represented the very best of the English Gentleman
wherever he went.
It remains for me to thank my fellow directors for their
calmness and counsel in the face of conflicting opinions and
challenging conditions, and look forward to working together to
meet the opportunities at hand in a rapidly changing world.
Robin Woodbine Parish
30 September 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
30 June 30 June
2016 2015
GBP GBP
Revenue 1,536,987 1,594,264
Net gains / (losses) on investments 467,584 (10,106,417)
------------ -------------
Total investment income /(loss) 2,004,571 (8,512,153)
Expenses (1,436,220) (1,558,728)
------------ -------------
Profit / (loss) before finance
costs and taxation 568,351 (10,070,881)
Finance costs (1,183,987) (1,268,070)
------------ -------------
Loss before taxation (615,636) (11,338,951)
Taxation 886,813 537,826
Profit / (loss) for the financial
year and total comprehensive
income 271,177 (10,801,125)
------------ -------------
Earnings / (losses) per share (basic) 0.4p (16.8p)
------------ -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
30 June
2016 30 June 2015
GBP GBP
Opening capital and reserves
attributable to equity holders 51,827,562 65,017,817
Total comprehensive income
and profit / (loss) for the
financial year 271,177 (10,801,125)
Decrease of share capital
on cancellation of shares (9,413) -
Increase of capital redemption
reserves on cancellation of
shares 9,413 -
Decrease of retained earnings
on cancellation of shares (151,342) -
Decrease of share capital
to Treasury account - (41,141)
Dividends paid (net) (1,348,514) (2,347,989)
Closing capital and reserves
attributable to equity holders 50,598,883 51,827,562
------------ -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June
30 June 30 June
2016 2015
GBP GBP
Non-current assets
Property, plant and equipment 609,216 1,110,747
Investment in artwork 500,000 -
Intangible asset 91,666 -
1,200,882 1,110,747
----------- -----------
Current assets
Trade and other receivables 364,710 1,806,755
Investments held at fair value
through profit or loss 66,612,318 70,453,855
Cash and cash equivalents 693,943 6,350,739
----------- -----------
Total current assets 67,670,971 78,611,349
Current liabilities
Borrowings - 5,107,691
Trade and other payables 496,886 559,872
Financial liabilities at fair
value through profit or loss 4,242,531 3,409,627
Current tax liability 148,603 305,642
Total current liabilities 4,888,020 9,382,832
----------- -----------
Net current assets 62,782,951 69,228,517
----------- -----------
Non-current liabilities
Borrowings 11,000,000 15,000,000
Deferred tax liabilities 2,384,950 3,511,702
----------- -----------
Total non-current liabilities 13,384,950 18,511,702
----------- -----------
Net assets 50,598,883 51,827,562
----------- -----------
Capital and reserves attributable
to equity holders
Share capital 437,732 447,145
Reserves
Share premium 6,017 6,017
Capital redemption reserve 356,815 347,402
Merger reserve 3,564 3,564
Retained earnings 49,794,755 51,023,434
----------- -----------
Total equity 50,598,883 51,827,562
----------- -----------
Net asset value per share 79.7 p 80.5 p
------- -------
The Board of Directors approved and authorised the Group's
financial statements for issue on 30 September 2016.
Signed on behalf of the Board by: CRW Parish (Director) and RAR
Evans (Director).
The Annual Report is available at www.eloro.com
CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended 30 June
30 June 30 June
2016 2015
GBP GBP
Operating activities
Net loss before tax (615,636) (11,338,951)
Adjustments for:
Depreciation 1,531 35,437
Foreign exchange losses 175,981 1,081,690
Net unrealised losses on
fair value investments through
the profit or loss 794,922 5,225,469
Finance costs 1,183,987 1,268,070
------------- -------------
Cash flow from operations
before changes in working
capital 1,540,785 (3,728,285)
Movement in financial assets
at fair value through the
profit or loss 4,870,655 16,087,375
Decrease / (increase) in
trade and other receivables 1,442,045 (460,166)
Decrease in trade and other
payables (7,673) (487,825)
------------- -------------
Cash flow from operations 7,845,812 11,411,099
Income taxes paid (386,106) (251,674)
------------- -------------
Cash flow from operating
activities 7,459,706 11,159,425
Investing activities
Purchase of property, plant
and equipment - (9,049)
Cash flow used in investing
activities - (9,049)
------------- -------------
Financing activities
Interest paid (1,239,300) (1,278,843)
Net dividends paid to Shareholders (1,348,514) (2,347,989)
Repayment of borrowing (9,000,000) -
Repayment of interest rate (1,170,000) -
swap
Purchase of own shares subsequently (151,341) -
cancelled
Loan note fee paid (150,000) -
Cash flow used in financing
activities (13,059,155) (3,626,832)
------------- -------------
Net increase in cash and cash equivalents (5,599,449) 7,523,544
Cash and cash equivalents - opening 6,243,048 (1,205,408)
Effect of foreign exchange rate changes 50,344 (75,088)
Cash and cash equivalents at 30 June 693,943 6,243,048
------------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFESITLSIIR
(END) Dow Jones Newswires
October 04, 2016 11:10 ET (15:10 GMT)
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