TIDMPERE
RNS Number : 1082Y
Pembridge Resources plc
07 September 2020
THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS DEEMED BY THE
COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE EU
MARKET ABUSE REGULATION (596/2014). UPON PUBLICATION OF THE
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION
IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
7 September 2020
Interim results for the period from 1 January 2020 to 30 June
2020
London, United Kingdom - Pembridge Resources plc (LSE: PERE)
("Pembridge" or the "Company") is pleased to present the condensed
interim financial statements for Pembridge Resources plc
("Pembridge" or the "Company", and together with its subsidiaries,
the "Group") results for the half year ended 30 June 2020.
Recent developments:
-- In March 2020, the COVID-19 pandemic broke out. Canadian and
Yukon government measures have had significant impacts on the Minto
mine, including mandatory quarantines of employees and contractors
entering the Yukon. Such quarantines have disrupted operations and
caused above normal operating expenses but have enabled operations
to continue while ensuring the safety of the mine's employees.
There are significant uncertainties with respect to future
developments and impact to Minto related to the COVID-19 pandemic,
including the duration, severity and scope of the outbreak and
measures taken by government and businesses to contain the
pandemic.
-- In December 2019, the other investors, Copper Holdings and
Cedro Holdings, called for USD 3 million of new equity capital
investment into Minto from Pembridge Resources plc in accordance
with the Minto Shareholders' Agreement. Having funded C$4 million
of Minto's total obligation to fund C$10 million over ten quarters
into the control account, as required by Zurich in association with
the Surety Bond associated with Minto's asset retirement obligation
and in accordance with the original Shareholders' Agreement,
Pembridge believed that it had fulfilled this obligation. However,
in view of the cash position of Minto under the circumstances of
the COVID-19 pandemic, the shareholders agreed that a further USD 3
million was needed and that it be funded by Copper Holdings and
Cedro Holdings purchasing an additional 484,240,064 of Minto's
Class B shares for USD $3 million. This purchase increased the
combined economic ownership of Copper Holdings and Cedro Holdings
in Minto from 66.66 percent to 89 percent, and reduced the economic
ownership of Pembridge from 33.33 percent to 11 percent. Minto's
USD $10 million 8 percent Notes held by Copper Holdings and Cedro
Holdings remain outstanding. Concurrent with the USD $3 million to
be invested by Copper Holdings and Cedro Holdings; Copper Holdings,
Cedro Holdings and Pembridge amended the existing Shareholder
Agreement reflecting the above matters and other details. Such
revisions were executed by the parties at the time of the purchase
of the new Class B shares by Copper Holdings and Cedro Holdings, in
June 2020. Under the original Shareholders' Agreement, Pembridge
was committed to funding up to a further C$2 million for the
control account, in addition to the C$4m funded already on behalf
of Minto. As part of the revised Shareholders' Agreement described
above, Pembridge will be relieved of this obligation and such
further funding will be made by Minto to complete the C$10 million
required. Minto continues to owe to Pembridge the existing funding
of C$4 million, on which interest is payable, and repayment will
commence in quarterly stages when Minto fully funds the control
account to C$10 million. In addition, the revised Shareholders'
Agreement provides that Minto may fund the deferred consideration
payments due from Pembridge to Capstone.
-- On 16 April 2020 the Board of Directors approved the issuance
and allotment of 11,175,499 new ordinary shares at a price of 3.3p
each, raising proceeds of GBP368,000. In order to enable this share
issue within the rules of the London Stock Exchange the directors
agreed to surrender their share options and the following changes
were made to the Convertible Loan Agreement with Pembridge's
Chairman and Chief Executive Officer, Gati Al-Jebouri:
o removing the right of Mr. Al-Jebouri to convert any of the
loans to shares in the Company;
o the maturity date of the loans was extended from 25 October
2021 to 31 December 2022. The extension in maturity corresponds
with the Company's expectations with regard to inflow of funds from
Minto Explorations Ltd to the Company; and
o In consideration for these changes, the Company agreed to
increase the interest rate on the loan from 8% to 10% with effect
from 1st May 2020, with the accumulated interest to be paid only at
the maturity date of the loan with no interim payments.
Interim results:
-- The interim financial statements of the Group, as set out in
full below, show a loss for the period of US$8,972,000 and equity
of US$6,517,000. As at 30 June 2020 the Group had US$5,551,000 in
cash reserves. The Board consider it appropriate to maintain the
going concern basis in the preparation of these financial
statements as the Directors have a reasonable expectation that the
Group and Company will be able to raise sufficient funds and
therefore continue in operational existence for the foreseeable
future.
-- Operating loss of US$7,349,000 is as a result of achieved
average prices of $2.32/lb, $972.55/oz and $4.47/oz for copper,
gold and silver respectively.
Operations update:
The following is an overview of recent developments at the Minto
Mine:
Production output and cash generation
-- 13,795 wet metric tonnes of concentrate produced
-- First shipment since re-starting Minto mine sent to Japan
-- US$ 28.4m received from Sumitomo (of which US$ 5.4m related
to 2019)
COVID-19 impact
-- No cases identified in Minto staff.
-- Yukon border closed and 14 day quarantine periods required.
Effective July 1(st) , BC residents are no longer required to
quarantine.
-- During Q2 and beginning of Q3 2020, underground rotations
were extended to 5 weeks to avoid repeated quarantines.
-- Covid-19 has had a limited impact on ore mining operations,
resulting in approximately 2 months delay in mining program.
-- Additional hotel costs, arising as a result of the need to
quarantine staff coming in from outside the Yukon, and Covid 19
testing were approximately C$600K through July 2020. This does not
include wages paid to staff in quarantine, which are included in
normal staff costs.
-- Canadian Employment Wage Subsidy (CEWS) of approximately
C$1MM received.
Health and safety
-- Health and safety management system (HSMS) development in
progress to support a strong culture of safety.
-- 3 near miss events without injury and 4 first aid reported
since completion of the acquisition and restart of the mine, with
no long-term injuries. Learnings and enhanced training followed to
reduce potential for future incidents.
-- 181 days free of lost time due to injury.
-- Mine Rescue Certifications completed for 10 new members in
June.
Environmental
-- As all mining operations are underground, there are no new
land reclamation issues arising during the period.
-- Progressive reclamation planning underway.
Underground operations
-- Minto East ore production sustained after discovery of
additional ore, which maintained ore output for milling during
Copper Keel final development.
-- Copper Keel 550m ventilation and secondary egress tunnel
completed after 74 days.
-- Copper Keel ore production commenced late July, ramping up to
expected full production by year end.
-- June 2020 had the highest monthly development meters to
date.
-- Longhole drilling commenced in Copper Keel.
-- Started Copper Keel West drilling.
Milling operations
-- The mill continues to operate on a 2-week on, 2-week off
schedule based on current ore production.
Exploration
-- Minto owns total claims of 50,000 km(2) over a 40 km belt,
which in time will be explored for minerals.
-- Exploration and in-fill drilling of 12,500m, costing C$1.9MM
was incurred in H1 2020. An additional C$1.1 approved for H2 2020
for a total of C$3.0MM.
-- Resource and Reserves report is being updated based on the
results of the drilling program and is expected to be published in
Q4 2020
Gati Al-Jebouri, Chief Executive Officer and Chairman of the
Board of Pembridge said:
"These interim financial statements set out the position of our
Company at a time when all economic sectors are impacted by the
Corona Virus pandemic. It is very encouraging to report that the
Minto operations did not stop during this difficult time and
development has continued. Development was delayed by a few months
due to the pandemic, however as of late July 2020 we are mining
from a new ore body - Copper Keel. Copper Keel is a previously
identified but not developed ore body. With the price of copper
having recovered from the lows reached earlier this year, Minto is
now concentrating on achieving profitable operations at EBITDA and
Retained Profit levels."
S
NOTES TO EDITORS
About Pembridge Resources plc
Pembridge is a mining company that is listed on the standard
segment of the Official List of the FCA and trading on the main
market for listed securities of London Stock Exchange plc.
Pembridge has an investment in Minto Explorations Ltd, a British
Columbia incorporated business operating the Minto mine in Yukon,
Canada.
About Minto Explorations Limited
Minto operates the underground copper-gold-silver mine located
in central Yukon, approximately 240 kilometres north of the capital
Whitehorse along the Klondike Highway. In excess of US$350 million
of capital expenditure has been invested into Minto operations
since site construction began in 2006. The Minto mine was in
continuous production between 2007 and 2018, when the mine was
placed onto temporary care and maintenance. Pembridge acquired
Minto from Capstone Mining Corporation in June 2019 and restarted
operations in October 2019.
Enquiries:
Pembridge Resources plc: +44 (0) 20 7917 2968
Gati Al-Jebouri, Chief Executive Officer and Chairman of the
Board
David James, Chief Financial Officer
Brandon Hill Capital - United Kingdom: +44 (0)20 3463 5016
Jonathan Evans
PEMBRIDGE RESOURCES PLC
Condensed Interim financial statements for the period from 1 January to 30 June 2020
Consolidated statement of comprehensive income for the period 1
January to 30 June 2020
6 months 6 months Year ended
ended ended
30 June 30 June 31 December
2020 2019 2019
Note US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Revenue 3 25.429 - 12,398
Production costs (27,475) - (14,739)
Royalties (363) - (204)
Depreciation and amortisation (4,271) - (3,459)
Administrative, legal and
professional expenses (1,262) (2,885) (3,110)
Gain / (loss) on fair valuation 341 - -
of concentrate receivable
Exceptional items - acquisition
and re-admission costs - - (2,347)
Foreign exchange gain / (loss) 252 - (357)
Operating loss (7,349) (2,885) (11,818)
Finance income 4 17 - -
Finance cost (1,435) - (1,295)
Loss before taxation (8,767) (2,885) (13,113)
Income tax 5 (205) - 26
Loss for the period (8,972) (2,885) (13,087)
Other comprehensive income
Items that may be reclassified
to profit or loss
Currency translation differences (978) (101) 936
Total comprehensive income
for the period (9,950) (2,986) (12,151)
Loss attributable to non-controlling
interest (7,191) (567) (5,024)
Loss attributable to equity
holders of the parent (1,781) (2,318) (8,063)
-------------------------------------- ----- ------------ ----------------- ------------
Total comprehensive income
attributable to non-controlling
interest (7,823) (567) (4,400)
Total comprehensive income
attributable to equity holders
of the company (2,127) (2,419) (7,751)
-------------------------------------- ----- ------------ ----------------- ------------
Earnings per share expressed
in cents
Basic and diluted earnings
per share attributable to
the equity holders of the
company 6 (5.3c) (10.4c) (33.5c)
Consolidated statement of financial position as at 30 June
2020
30 June 31 December
30 June 2020 2019 2019
Note US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Property, plant and equipment 51.086 36,378 50,207
Goodwill - 7,109 -
Intangible assets 378 - 394
Long term deposits 5,437 2,454 4,040
------------- ------------ ------------
Total non-current assets 56,901 45,941 54,641
Current assets
Trade and other receivables 3,640 598 8,610
Inventory 3,726 2,387 5,710
Cash and cash equivalents 5,551 9,787 964
------------- ------------ ------------
Total current assets 12,917 12,772 15,284
------------- ------------ ------------
Total assets 69,818 58,713 69,925
Non-current liabilities
Borrowings 10 (12,837) (103) (10,631)
Lease liabilities (3,440) - (2,734)
Reclamation and closure
cost provision (21,694 (24,774) (22,438)
Deferred revenue - (11,496) -
Deferred consideration
due to Capstone (4,305) (10,000) (4,305)
Deferred tax liability (465) (1,658) (270)
------------- ------------ ------------
Total non-current liabilities (42,741) (48,031) (40,378)
------------- ------------ ------------
Current liabilities
Trade and other payables (11,523) (5,445) (8,736)
Borrowings 10 - (8,312) -
Lease liabilities (4,140) - (2,899)
Deferred consideration
due to Capstone (4,897) - (4,897)
------------- ------------ ------------
Total current liabilities (20,560) (13,757) (16,532)
------------- ------------ ------------
Total liabilities (63,301) (61,788) (56,910)
Net assets/(liabilities) 6,517 (3,075) 13,015
============= ============ ============
Equity
Share capital 7 965 295 825
Share premium 7 9,222 2,902 8,900
Capital redemption reserve 7 1,011 1,011 1,011
Translation reserve (35) (101) 312
Other reserve - 66 369
Retained deficit (19,262) (8,251) (13,465)
------------- ------------ ------------
Equity attributable to
shareholders of the parent
company (8,099) (4,078) (2,048)
Non-controlling interests 12 14,616 1,003 15,063
------------- ------------ ------------
Total equity 6,517 (3,075) 13,015
============= ============ ============
Consolidated Statement of changes in equity for the period 1
January to 30 June 2020
Share Share Capital Translation Retained Total Non-controlling Total
capital premium Redemption / Other deficit interest Equity
Reserve reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January
2020 825 8,900 1,011 681 (13,465) (2,048) 15,063 13,015
Loss for the
period - - - - (1,781) (1,781) (7,191) (8,972)
Other
comprehensive
income -
exchange
difference on
translation - - - (346) - (346) (632) (978)
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Total
comprehensive
income for the
period - - - (346) (1,781) (2,127) (7,823) (9,950)
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Proceeds from
shares issued 140 322 - - - 462 - 462
Equity element
of convertible
loan - - - (53) - (53) - (53)
Investment by
non-controlling
interest in
Minto
share capital - - - - 317 317 2,568 2,885
Change in share
of economic
interest
in Minto - - - - (4,808) (4,808) 4,808 -
Share-based
payments - - - 158 - 158 - 158
Transfer to
retained
earnings after
surrender of
share
options - - - (475) 475 - - -
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Total
transactions
with owners
recognised
directly in
equity 140 322 - (370) (4,016) (3,924) 7,376 3,452
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
At 30 June 2020 965 9,222 1,011 (35) (19,262) (8,099) 14,616 6,517
============ ========== ================ =============== =========== =========== ================= =============
At 1 January
2019 295 2,902 1,011 66 (5,933) (1,659) - (1,659)
Loss for the
period - - - - (8,063) (8,063) (5,024) (13,087)
Other
comprehensive
income -
exchange
difference on
translation - - - 312 - 312 624 936
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Total
comprehensive
income for the
period - - - 312 (8,063) (7,751) (4,400) (12,151)
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Proceeds from
shares issued 530 6,109 - - - 6,639 - 6,639
Direct cost of
shares issued (111) (111) - (111)
Equity element
of convertible
loan - - - 53 - 53 - 53
Investment by
non-controlling
interest in
Minto
share capital - - - - 531 531 1,059 1,590
Non-controlling
interest on
acquisition
of subsidiary - - - - - - 18,404 18,404
Share-based
payments - - - 250 - 250 - 250
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
Total
transactions
with owners
recognised
directly in
equity 530 5,998 - 303 531 7,362 19,463 26,825
------------ ---------- ---------------- --------------- ----------- ----------- ----------------- -------------
At 31 December
2019 825 8,900 1,011 681 (13,465) (2,048) 15,063 13,015
============ ========== ================ =============== =========== =========== ================= =============
Consolidated Statement of changes in equity for the period 1
January to 30 June 2020 (continued)
Share capital Share Capital Other Retained Total Non-controlling Total
premium Redemption reserve deficit interest Equity
Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January
2019 295 2,902 1,011 66 (5,933) (1,659) - (1,659)
Loss for the
period - - - - (2,318) (2,318) (567) (2,885)
Other
comprehensive
income - - - (101) - (101) - (101)
-------------------- ------------------ ------------------ ----------------------- ------------------- ------------------- --------------------------- --------------------
Total
comprehensive
income for
the
period - - - (101) (2,318) (2,419) (567) (2,986)
Issue of
shares - - - - - - 1,570 1,570
At 30 June
2019 295 2,902 1,011 (35) (8,251) (4,078) 1,003 (3,075)
==================== ================== ================== ======================= =================== =================== =========================== ====================
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital Nominal value of shares issued.
Share premium Amount subscribed for share capital in excess
of nominal value, less share issue costs.
Capital redemption Reserve created on cancellation of deferred shares.
reserve
Other reserve Cumulative fair value of warrants and share options
granted, together with the equity element of the
convertible loan.
Translation reserve Cumulative translation adjustment from retranslation
of group undertakings with functional currencies
other than USD - included with other reserve in
the table above.
Retained deficit Cumulative net gains and losses recognised in
the statement of comprehensive income.
Non-controlling Non-controlling interests represent the portion
interest of the equity of a subsidiary not attributable
either directly or indirectly to the parent company
and are presented separately in the Consolidated
Statement of comprehensive income and within equity
in the Consolidated statement of financial position,
distinguished from parent company shareholders'
equity.
Consolidated Cash flow statement for the period 1 January to 30
June 2020
6 months 6 months Year ended
ended ended 31
December
30 June 2020 30 June 2019 2019
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Cash flows from operating activities
Loss for the period (8,972) (2,885) (13,087)
Adjusted for:
Net finance costs 1,418 - 1,295
Unrealised FX on debt included
in administrative expenses 140 - (169)
Depreciation 4,271 3 3,459
Tax charge / (credit) 205 - (26)
Share based payments 158 - 250
------------- ------------- -----------
(2,780) (2,882) (8,278)
Movements in working capital
Increase)/ decrease in inventories 1,735 - (3,248)
(Increase)/ decrease in trade
and other receivables 4,634 (358) (8,252)
Increase/ (decrease) in trade
and other payables 2,891 3,348 6,752
Net cash generated from / (used
in) operating activities 6,480 108 (13,026)
Cash flows used in investing
activities
Payments into long-term deposits (1,503) 1 (1,582)
Purchase of property, plant
and equipment (2,837) - (490)
Purchase of mining claims - - (237)
------------- ------------- -----------
Net cash used in investing
activities (4,340) 1 (2,309)
Cash flows used in financing
activities
Interest payments (401) - (497)
Repayment of borrowings - - (647)
Proceeds from borrowings 2,042 7,957 10,754
Lease payments (2,544) - (1,621)
Proceeds from issuance of shares 3,346 1,570 8,149
Net cash generated from financing
activities 2,443 9,527 16,138
------------- ------------- -----------
Net increase/(decrease) in
cash and cash equivalents 4,583 9,636 803
Cash and cash equivalents at
the beginning of the period 964 151 151
Impact of exchange rates on
cash balances 4 - 10
------------- ------------- -----------
Cash and cash equivalents at
the end of the period 5,551 9,787 964
============= ============= ===========
Notes to the condensed consolidated financial statements
for the period 1 January to 30 June 2020
1. NATURE OF OPERATIONS AND GENERAL INFORMATION
The principal activity of Pembridge Resources plc is that of a
mining company. The Company has an investment in and operates the
Minto copper-gold-silver mine in Yukon, Canada.
Pembridge Resources plc is incorporated and domiciled in
England. The address of Pembridge Resources plc's registered office
is 200 Strand, London, WC2R 1DJ. Pembridge Resources plc's shares
are admitted to the Standard Segment on the Official List of the
London Stock Exchange.
Pembridge Resources plc's financial statements are presented in
United States dollars (US$), which is
also the functional currency of the Company.
These condensed interim unaudited consolidated financial
statements for the six-month period ended 30 June 2020 comprise the
Company and its subsidiaries (together referred to as the
"Group").
These condensed interim financial statements were approved for
issue by the Board of Directors on 4 September 2020.
These condensed interim financial statements for the six months
ended 30 June 2020 do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006.
2. Basis of preparation
The unaudited condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 Interim
Financial Statements as adopted by the European Union and the
Disclosure and Transparency Rules of the UK Financial Conduct
Authority. The condensed interim financial statements should be
read in conjunction with the annual financial statements for the
period ended 31 December 2019, which have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. The principal accounting policies
used in preparing the condensed interim financial statements are
unchanged from those disclosed in the Company's Annual Report for
the year ended 31 December 2019.
The condensed interim financial statements for the six months
ended 30 June 2020 and 30 June 2019 are un-reviewed and unaudited.
Statutory financial statements for the year ended 31 December 2019
were approved by the Board of Directors on 26 June 2020 and
delivered to the Registrar of Companies.
Changes in accounting policy and disclosures
(a) New and amended standards mandatory for the first time for
the financial year beginning 1 January 2020
The following new IFRS standards and/or amendments to IFRS
standards are mandatory for the first time for the Company and
Group:
Standard Effective date
-------------------------- --------------------------------------------------------- ---------------
IFRS 3 (Amendments) Business Combinations - revised definition of a business 1 January 2020
IAS 1 (Amendments) Presentation of Financial Statements 1 January 2020
IAS 8 (Amendments) Accounting policies, Changes in Accounting Estimates 1 January 2020
IFRS 9, IAS 39 and IFRS 7 Interest rate benchmark reform 1 January 2020
(Amendments)
The Directors believe that the adoption of these standards has
not had a material impact on the financial statements other than
changes to disclosures.
(b) New standards, amendments and Interpretations in issue but
not yet effective or not yet endorsed and not early adopted
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the condensed interim
financial statements are listed below. The Company intends to adopt
these standards, if applicable when they become effective.
Standard Effective date
------------------- -------------------------------------------------------- ----------------
IFRS 17 Insurance Contracts 1 January 2021*
IAS 1 (Amendments) Classification of liabilities as current or non-current 1 January 2022*
*Not yet endorsed by the EU.
The Company and Group are evaluating the impact of the new and
amended standards above. The Directors believe that these new and
amended standards are not expected to have a material impact on the
Company's and Group's results or shareholders' funds.
Going concern
The condensed interim financial statements have been prepared on
a going concern basis. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account
all relevant available information about the current and future
position of the Group and Company, including the current and future
level of resources. As part of their assessment, the Directors have
also taken into account the need for the Company to raise
additional funding during the going concern period.
The Company has no income stream of its own and is reliant,
until it is able to receive an income from its investment in Minto,
on further funding through equity raisings or other financial
arrangements. This additional funding is not guaranteed, however,
to date the Company has been successful in securing funding when
required and its management are confident that it can meet its
contracted and committed expenditure for at least the next 12
months. Minto has received commitments from its other investors,
Cedro Holdings and Copper Holdings, that they will support its
operations and they have contributed US$ 3 million of equity to
Minto in the period. The need for the Company to raise additional
funds during the going concern period indicates that a material
uncertainty exists which may cast significant doubt on the
Company's ability to continue as a going concern, and therefore its
ability to settle its debts and realise its assets in the normal
course of business.
At present the Group believes that there should be no material
disruption to its mining operations from COVID-19, but the Board
continues to monitor these risks and Minto's business continuity
plans.
Having prepared forecasts based on current resources, assessing
methods of obtaining additional finance and assessing the possible
impact of COVID-19, the Directors believe the Group and Company
have sufficient resources to meet its obligations for a period of
12 months from the date of approval of these Financial Statements.
Taking these matters into consideration, the Directors continue to
adopt the going concern basis of accounting in preparing these
Financial Statements. The Financial Statements do not include the
adjustments that would be required should the going concern basis
of preparation no longer be appropriate.
Risks and uncertainties
As at 30 June 2020 the key risks that could affect the Company
in the medium term and the factors that mitigate those risks have
not substantially changed from those set out in the Annual Report
and Financial Statements for the year ended 31 December 2019.
Segment reporting
In the opinion of the directors the operations of the Company
currently represent one segment, and are treated as such, when
evaluating its performance. The chief operating decision maker is
the Board of Directors. The Board of Directors reviews management
accounts prepared for the Company when assessing performance.
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Six months Six months Year ended
ended ended
31 December
30 June 2020 30 June 2019 2019
US$'000 US$'000 US$'000
Copper 23,150 - 12,789
Gold 5,381 - 1,579
Silver 180 - 54
Total gross revenue 28,711 - 14,422
Less: treatment and selling
costs (3,282) - (2,024)
Revenue 25,429 - 12,398
All revenue comprises the sale of metal concentrate to one
customer.
When considering the recognition of revenue, IFRS 15 requires
preparers to go through five steps which will determine the timing
and quantum of the revenue recognised at a given time.
Identify contract with a customer
Since acquisition, and through 2020, Minto sells its concentrate
to its only end customer, which is Sumitomo, under an offtake
agreement. Sales of copper are made direct to Sumitomo and sale of
gold and silver are made to Sumitomo via Wheaton, hence the
valuation of the gold and silver revenues is determined by Minto's
contract with Wheaton but timing of revenue recognition for them is
the same as for copper.
Identify performance obligation
The performance obligation is the sale of copper, gold and
silver concentrate to Sumitomo, including its transportation to a
location specified by them in Japan. At the end of each month,
under the offtake agreement, Minto weighs and assays the
concentrate it has produced and Sumitomo takes title to it, paying
Minto a provisional payment of 90% of its value. Minto must keep
the concentrate separate from any other product in a location
approved by Sumitomo and may not sell it to any other party. From
this point, Minto has control over the concentrate and, if it is
still physically in Minto's care, Minto is acting as its custodian
for Sumitomo.
Determine the transaction price
The Company's metal concentrates are sold under a pricing
arrangement where final prices are determined by quoted market
prices in a period subsequent to the date of sale. Until prices are
final, revenues are recorded based on forward market prices for the
expected period of final settlement. Subsequent variations in the
final determination of the metal concentrate weight and assay are
recognised as revenue adjustments as they occur until finalised.
Subsequent variations in the final determination of the price are
treated as a remeasurement of a financial asset under IFRS 9 and
are recognised as revenue adjustments as they occur until
finalised.
Allocate price to each performance obligation
There is one overarching performance obligation, which is the
delivery of metal concentrates to Sumitomo. This includes the
production of the concentrates and their transportation to Japan.
Their transportation does not carry significant risks or rewards
and its cost can be estimated in advance, so the revenue is
recognised net of that cost until it is delivered.
Recognise revenue when the performance obligation is satisfied
by transferring good or service to customer (i.e. the customer
obtains control)
Because Sumitomo gains control over the concentrate at the end
of each month, even if it is on the Minto site, and its subsequent
transportation does not carry significant risks or rewards, the
main obligation is satisfied when Sumitomo takes title and the
revenue is booked at this time, net of costs such as transportation
and refining which will be incurred in completing the
transaction.
3. FINANCE COSTS
6 months 6 months Year ended
ended ended 31 December
30 June 30 June
2020 2019 2019
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Interest on loans 929 - 727
Discount unwind on provision 196 - 376
Interest from leases 310 - 192
1,435 - 1,295
4. INCOME TAX
The income tax charge of US$ 205,000 (period to 30 June 2019:
nil, year to 31 December 2019: credit US$ 26,000) is payable to the
Yukon government under the Quartz Mining Act.
5. EARNINGS per share
The calculation of the earning per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period. The basic and
diluted loss per share are the same as the effect of the exercise
of share warrants and options would be anti-dilutive.
6 months 6 months Year ended
ended ended 31 December
30 June 30 June
2020 2019 2019
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Basic and diluted loss per share
(US cents) (5.3c) (10.4c) (33.5c)
Loss for the period (1,781) (2,318) (8,063)
Weighted average number of shares
for basic and diluted loss per
share 33,427,432 22,384,926 24,063,552
The basic and diluted loss per share have been calculated using
the loss attributable to shareholders of the Company of as the
numerator, i.e. no adjustment to loss was necessary. The basic and
dilutive loss per share are the same as the effect of the exercise
of share options and warrants would be anti-dilutive.
The number of shares and loss per share for the six months to 30
June 2019 have been restated to reflect the impact of the
consolidation in December 2019 of every 10 existing ordinary shares
of nominal value 0.1 pence each into one Ordinary Share of nominal
value 1p.
6. SHARE CAPITAL AND PREMIUM
Number Number Share Share Capital Total
of ordinary of deferred Capital- Premium redemption
Shares shares Ordinary reserve
US$'000 US$'000 US$'000 US$'000
At 1 January 2020 63,231,494 - 825 8,900 1,011 10,736
At 30 June 2020 74,406,993 - 965 9,222 1,011 11,198
Ordinary shares have attached to them full voting, dividend and
capital distribution rights (including on a winding up).
7. RELATED PARTY TRANSACTIONS
The Company has paid remuneration of US$ 181,500 to its
Directors for the six months ending June 30, 2020 (six months to 30
June 2019: US$154,000, year to 31 December 2019: US$
1,997,000).
As previously disclosed in the financial statements for the Year
Ended 31 December 2019, on 30 October 2019, the Company entered
into a convertible loan facility of with Gati Al-Jebouri, to be
repaid by 25 October 2021 and carrying interest at an annual rate
of 8%. The Company also pays an arrangement fee in the amount of 6%
of the amounts drawn down under the Convertible Loan. On 16 April
2020, the terms of this loan were changed as follows:
-- removing the right of Mr. Al-Jebouri to convert any of the loans to shares in the Company;
-- the maturity date of the loans was extended from 25 October
2021 to 31 December 2022. The extension in maturity corresponds
with the Company's expectations with regard to inflow of funds from
Minto Explorations Ltd to the Company; and
-- In consideration for these changes, the Company agreed to
increase the interest rate on the loan from 8% to 10% with effect
from 1st May 2020, with the accumulated interest to be paid only at
the maturity date of the loan with no interim payments.
Under this facility, GBP3.1 million had been borrowed at 30 June
2020.
8. BUSINESS ACQUISITION
Acquisition of Minto Explorations Ltd
On 3 June 2019 the company acquired all of the outstanding
common shares of Minto Explorations Ltd (Minto) from Capstone
Mining Corp (Capstone) ("Minto Acquisition").
The consideration for the Minto Acquisition, which is
unconditional, comprises up to US$20 million in total payments due
to Capstone payable out of future cash flows and realisations from
Minto and based on certain hurdles linked to production levels at
Minto as well as future copper prices as detailed below.
1. First payment to Capstone of US$5 million will be due once
production at Minto has reached a steady state 60% of mill
capacity.
2. Second payment to Capstone of US$5 million will be due once
production at Minto has reached 60% of mill capacity and the copper
price has averaged over US$3.00/lb (US$6,615/t) for two consecutive
quarters
3. Final payment to Capstone of US$10 million will be due upon
the copper price achieving an average of US$3.50/lb (US$7,717/t)
for two consecutive quarters.
On the same day, to fund the re-starting of mine operations,
Pembridge made an agreement with two other investors, Copper
Holdings and Lion Point, who each acquired non-voting B shares in
Minto which represent a one third economic interest each in
Minto.
Pembridge published an initial estimate of the fair value of
certain assets and liabilities acquired in its interim reporting in
2019, and has since fully determined the fair value of both the net
assets acquired and the consideration payable pursuant to the Minto
acquisition in accordance with IFRS 3, as shown below. This
process, known as a purchase price allocation exercise, resulted in
material changes to the amounts previously shown for assets,
liabilities and goodwill.
The Company calculated a fair value for the total consideration
due for the Minto Acquisition as US$9.2 million, and accordingly a
liability of $9.2 million is recorded in the consolidated statement
of financial position. The fair values of identifiable assets and
liabilities of Minto as at the date of acquisition were:
Provisional
fair value
US$'000
Cash and cash equivalents 1
Inventory 2,325
Long term deposits 2,371
-----------------------------
Current Assets 4,697
-----------------------------
Mineral properties 20,370
Plant Property and Equipment 22,986
Construction in progress 1,954
-----------------------------
Non-current assets 45,310
-----------------------------
Total assets 50,007
-----------------------------
Income and mining tax (317)
Reclamation and closure cost provision (22,084)
-----------------------------
Total liabilities (22,401)
-----------------------------
Net Assets acquired 27,606
-----------------------------
The Company's one third economic interest in Minto on
acquisition means that it had an interest in 33% of the above net
assets, which is US$9.2m. Consequently there is no goodwill on the
acquisition.
The comparative numbers for 30 June 2019 relating to the Minto
acquisition were initial estimates which were revised to the values
above for the year end financial statements as at 31 December
2019.
9. BORROWINGS
The Company and Copper Holdings, LLC, a New York based private
equity group and Cedro Holdings I, LLC, an entity managed by Lion
Point Capital, L.P. (together, the "Investor Consortium") entered
into the Investor Consortium Financing Agreement on 3 June 2019,
pursuant to which the Investor Consortium advanced $10 million to
Minto to finance the recommencement of operations. The Investor
Consortium shall be entitled to be repaid from all free cash-flows
and realisations arising from Minto until the holders of the loan
note (i.e., the Investment Consortium, their assignors and
successors) have received US$10,000,000 plus interest at a rate of
8% per annum. The Investor Consortium have been granted security
over the assets of Minto until such time as the holders of the loan
note have been repaid.
As described in note 8, the Company has entered into a
convertible loan facility of with Gati Al-Jebouri. Under this
facility, GBP3.1 million had been borrowed at 30 June 2020.
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
US$'000 US$'000 US$'000
(unaudited) (unaudited) (audited)
Loan notes 8,741 8,312 8,582
Loans from directors - non-current 4,096 - 2,049
Borrowings - non-current 12,837 8,312 10,631
Loans from directors - current - 103 -
Total borrowings 12,837 8,415 10,631
10. RECONCILIATION OF MOVEMENT IN NET DEBT
At 1 New borrowing Interest Debt Other Foreign At 30
January added repaid cash exchange June
to debt flows
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cash at bank
and in hand 964 2,042 - (2,544) 5,085 4 5,551
Borrowings -
by the Company (2,049) (2,042) (221) - - 216 (4,096)
by Minto (8,582) - (159) - - - (8,741)
(10,631) (2,042) (380) - - 216 (12,837)
Lease liabilities (5,633) (4,406) (310) 2,544 - 225 (7,580)
Net debt (15,300) (4,406) (690) - 5,085 445 (14,866)
11. NON-CONTROLLING INTEREST IN MINTO EXPLORATIONS LTD
In June 2020, the Company and its fellow investors agreed
changes to the terms of the Shareholders' Agreement. These changes
resulted in new investment into Minto by Copper Holdings and Cedro
Holdings of US$ 3 million and relieved the Company of some large
financial obligations. They also resulted in a change in relative
economic interests in Minto, increasing the combined economic
ownership of Copper Holdings and Cedro Holdings in Minto from 66.66
percent to 89 percent and reducing the economic ownership of
Pembridge from 33.33 percent to 11 percent. The Company considers
that, although it now has an economic interest of considerably less
than 50% in Minto's results and net assets, it has control over
Minto through holding 100% of voting rights and having control of
the Minto Board, which means that it is able to control the
day-to-day operations of the mine. On this basis it continues to
consolidate the results of Minto.
Movements in the non-controlling interest in the period are set
out below.
6 months Year ended
ended 30 31 December
June 2020 2019
$'000 $'000
Balance at start of period 15,063 -
On acquisition of 67% economic interest
of subsidiary - 18,404
Investment by non-controlling interest
in Minto share capital 2,568 1,059
Change in share of economic interest in
Minto 4,808 -
Share of loss for the period (7,191) (5,024)
Share of exchange difference on translation (632) 624
Balance at end of period 14,616 15,063
----------- -------------
Summarised financial information for Minto in the period is set
out below.
6 months Year ended
ended 30 31 December
June 2020 2019
Summarised income statement $'000 $'000
Revenue 25,429 12,398
Operating loss (6,524) (6,345)
Loss before income tax (7,874) (7,562)
Income tax (205) 26
Loss for the year (8,079) (7,536)
----------- -------------
Summarised statement of financial position
Non-current assets 53,526 52,726
Current assets 12,640 13,789
Non-current liabilities (34,339) (34,024)
Current liabilities (15,404) (9,896)
Net assets 16,423 22,595
----------- -------------
Cash flow statement
Cash flows from operating activities 7,878 (6,884)
Cash flows from investing activities (2,861) (559)
Cash flows from financing activities (60) 7,998
Net increase in cash and cash equivalents 4,957 555
Cash and cash equivalents at 1 January
2020 565 1
Impact of exchange rates on cash balances 4 9
Cash and cash equivalents at 30 June 2020 5,526 565
----------- -------------
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END
IR LZLFBBKLBBBZ
(END) Dow Jones Newswires
September 07, 2020 02:00 ET (06:00 GMT)
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