Annual financial report 2012

Anglesey Mining plc is pleased to release its annual financial report which is available on the company’s website here. The Chairman’s Statement is shown below.

Chairman’s Statement

I am very pleased to be able to report another successful year for the company highlighted by the establishment of Labrador Iron Mines as a fully-fledged iron ore miner and the only independent mining company operating in the Labrador Trough. We have also made significant progress at Parys Mountain and we are increasing our efforts at this property in the current year. This year’s net income of £19.1 million was chiefly the result of a book gain on our holding in LIM.

Shareholders will be only too well aware that junior and intermediate mining stocks have generally performed poorly in share price terms during 2012. This has been due to a combination of factors including doubts over financial stability in Europe, less than satisfactory growth in the US economy and concerns regarding the sustainability of economic growth and development in China. This rapid decline in mining stocks has occurred whilst commodity prices have largely been unaffected. The share prices of both Labrador Iron Mines and Anglesey Mining have been badly impacted by this phenomenon despite the real progress made by both companies in the period.

We believe that these significant shifts in investment sentiment have affected us disproportionately, caused in part by the decision of a large institutional shareholder to dispose of its shareholdings in both LIM and Anglesey. We are adequately financed for current activities, cashflows into LIM are projected to be significant and Anglesey is in a strong position to weather any short term storms and to take advantage of new growth opportunities as well as proceeding with the development of Parys Mountain.

Labrador Iron

Labrador Iron is Canada’s newest iron ore producer, engaged in the mining of iron ore and in the exploration and development of direct shipping iron ore projects in the central part of the prolific Labrador Trough region, one of the major iron ore producing regions in the world, situated in the Province of Newfoundland and Labrador and in the Province of Québec, centred near the town of Schefferville, Québec.

This has been an excellent year of progress for LIM. Initial production commenced at the James Mine in June 2011 and achieved sales of 400,000 tonnes of iron ore in its start-up 2011 season. Full scale production re-commenced in April, 2012 and by the end of June 2012 over 650,000 tonnes of iron ore had been mined and sold.

In April 2011 and March 2012 secondary fund-raisings for a total of almost C$200 million were completed. At 31 March 2012, LIM had current assets of C$103 million (£64 million) including C$71 million (£44 million) in unrestricted cash.

The Phase 3 expansion program of the Silver Yards processing plant, which includes the installation of a second washing and screening plant and a new magnetic separator to enhance the recovery of fines material, is expected to be completed in mid-summer. This expansion is expected to increase plant throughput to 12,000 tonnes per day, or an annual throughput of 2.0 million tonnes per year, and is also expected to improve weight recoveries to between 75% and 80%.

Available railway capacity has been expanded from two operating trains in April to four operating trains in June. An average of two shipments of iron ore are anticipated each month during the operating year.

LIM now has measured and indicated resources of 44.6 million tonnes at 56.5% iron in five DSO deposits and an additional 121 million tonnes of historical resources in about 15 other deposits.

Production and sale of two million tonnes of iron ore is targeted for calendar 2012, leading on to the development of the Houston deposits, with the objective of ramping up production towards five million tonnes of iron ore per year by 2015.

Iron ore prices strengthened from a low of approximately USD$115 per dry metric tonne, (62% Fe CFR China basis), in October 2011 to USD$150 in the first quarter of 2012. Moving into the second quarter of 2012, prices have softened to approximately USD$135 by mid-June. Port inventories in China remain high, while Chinese steelmakers are experiencing a squeezing of operating margins. The spot market remains very volatile. General market concerns over the level of debt in Europe continue to overhang perceptions for global growth in steel demand.

Parys Mountain

In December 2011 geophysical and deep overburden sampling work began near the Morris shaft where the target was shallower extensions of the Engine zones already identified from the 280 metre level underground development. In January 2012 a drilling rig commenced work in the same area and by March 2012 had completed 860 metres of core drilling in seven holes with several ore grade intersections.

Following this Engine Zone programme and starting in April the rig drilled 558 metres in two holes from the edge of the Great Open Cast pit about 800 metres east of the Morris shaft. These confirmed our geological interpretations and whilst not returning significant intersections did provide the basis for continuing exploration in that area.

In mid-May the rig moved to a location about 1.2 kilometres east of the Morris Shaft and 600 metres east of the Garth Daniel area identified in 2005 and has so far drilled three angled holes from the same drill site. These holes are the furthest east of any drilling by Anglesey Mining.

Micon International has been retained to work on a scoping study for a small scale stand-alone mining operation. This study which will incorporate both the entire White Rock zone and the now compliant Engine Zone, will update their 2007 study which was based solely on the shallow portion of the White Rock resources close to the Morris shaft. This concept has several advantages:

  • Phased development means initial capital expenditures are significantly reduced – ore from the shallower zones being mined will be trucked to surface
  • Time to first mine production and cashflows will be reduced
  • Plant feed of around 500 tonnes per day will be relatively easy to sustain
  • Exploration and definition drilling of further deeper targets can be achieved at much lower cost from underground
  • Cash from early operations will partially fund possible expansion to full scale production at 1000 tonnes per day.

In July 2012 an agreement was reached with Intermine Limited whereby the net profits royalty formerly due to Intermine has been bought out and  all amounts due have been discharged.

Financial

The LIM equity financings, which were completed at a price per share which exceeds the group’s carrying value per share, resulted in a profit on this ‘deemed disposal’ of almost £23 million and a corresponding increase in Anglesey’s carrying value of the investment in LIM. Anglesey’s interest in LIM is now 26% compared to 40% last year. The group’s share of the LIM operating loss, together with its own administrative expenses, which were reduced slightly this year, resulted in reported net income of £19.1 million. At 31 March 2012 Anglesey had total net assets of £55.7 million including a healthy cash balance of £3 million.

Outlook

The board believes that Anglesey Mining is now very well placed to generate significant shareholder value over the next few years from both Parys Mountain and Labrador Iron. The scoping study on the Parys Mountain project is scheduled for completion in the autumn and in the meantime exploration drilling is continuing. In Canada LIM’s iron ore production is targeted to grow to 5 million tonnes per year by 2015. We remain convinced that any improvement in the world economies and the return of investor confidence in the mining sector will be reflected in the share prices of both Labrador Iron and Anglesey Mining.

John F. Kearney

Chairman

24 July 2012

Click here to view a pdf of the annual financial report on the Anglesey Mining website.

For further information, please contact:

Bill Hooley, Chief Executive +44 (0)1492 541981;

Ian Cuthbertson, Finance Director +44 (0)1248 361333;

Samantha Harrison / Klara Kaczmarek:  RFC Ambrian +44 (0)2076 344700;

Emily Fenton / Jos Simson:  Tavistock Communications +44 (0)20 7920 3155

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