A UK mining company listed on the London Stock Exchange
100% of the Parys Mountain underground zinc-copper-lead-silver-gold deposit in North Wales, UK where an updated Scoping Study was completed in 2017. The results of this Study are positive and a further optimisation study is currently underway.
12% of Labrador Iron Mines Holdings Limited which holds direct shipping iron ore deposits in Labrador and Quebec.
A 8.7% interest in, and management rights to, the Grangesberg Iron project in Sweden, together with a right of first refusal to increase its interest to 58.8%.
To Anglesey Shareholders
Metal prices are a key factor in the outlook for the mining and mineral exploration industry as a whole and for Anglesey Mining in particular. Despite the current geopolitical uncertainty caused by fears of trade wars and tariffs, there is a general expectation of a continued positive outlook for base metals, particularly for zinc and copper, and more recently for iron ore.
The first half of 2018 saw a continued improvement in base metal prices which stalled mid-year as the optimism provided by shrinking metal inventories and generally declining mine production was overshadowed by the growing threat of a US-China trade war, tariffs, potential interest rate hikes in the US, uncertainty in Europe and a general slowdown in the global economy. These conditions caused most metal prices to retreat in the second half of 2018, before stabilizing towards year end
After having risen consistently for almost two years, the prices of zinc and copper began falling in mid-2018. Prices softened throughout the second half of 2018 and the first half of 2019 in response to the US/China trade conflict and concerns of slowing global economic growth. The zinc price improved through the first quarter of 2019, reaching a high of US$1.37 per pound (US$3,000/tonne) in mid-April, before weakening in the second quarter of 2019 as the opening of several large new zinc mines negatively impacted the price.
The expectations for supply and demand fundamentals are positive for 2019. According to the International Lead and Zinc Study Group global demand for refined zinc metal is expected to rise in the second half of 2019 and the expectation is that global demand for refined zinc will exceed global supply, drawing down stocks. Meanwhile, global demand for lead increased slightly year on year as demand for batteries for the new vehicle market increased.
Metal stocks on the LME remain below long-term average levels. With low or no copper mine production growth, the expansion of China’s smelting capacity and its demand for imported concentrates and the recent reduction in copper concentrate treatment charges, the outlook for the remainder of 2019 is for the copper price to trend upwards.
During the last year the substantial changes in the iron ore market favouring higher quality (+65% Fe) product has continued to result in very healthy premiums for higher grade product. Over the first half of 2019, the base price of 62% Fe jumped to a five year high of over US$120 per tonne, as a result of tailings dam failures affecting the Brazilian operations of Vale and a cyclone temporarily disrupting Australian production of both Rio and BHP.
Parys Mountain – Moving steadily forward
In 2017 a new Scoping Study on the Parys Mountain copper-lead-zinc project located on the island of Anglesey in North Wales, was prepared by Micon International Limited and Fairport Engineering Ltd. The Scoping Study envisages a mining rate of 1,000 tonnes per day, to produce an average annual output of 14,000 tonnes of zinc concentrate at 57% Zn, 7,200 tonnes of lead concentrate at 52% Pb and 4,000 tonnes of copper concentrate at 25% Cu, annually over an initial mine life of eight years.
The Scoping Study demonstrates a viable mine development and a healthy financial rate of return based on copper prices of $US2.50 per pound, zinc of $US1.25 per pound and lead of $US1.00 per pound, generating an overall net smelter return of $US270 million with an IRR of 28% and an NPV10 of $US43 million. Using assumptions of longer term metal price projections of $1.35 per pound for zinc and $3.00 per pound for copper, and using an 8% discount rate, to reflect the relatively low political risk in the UK, the NPV indicated would be $52 million, or £42 million, with an IRR of 30%.
Following completion of the positive 2017 Scoping Study, Anglesey has been working to progress the Parys Mountain project towards production. The Study recommended further work as interim steps towards undertaking a feasibility study, including more detailed mine planning and design, more engineering studies, additional metallurgical test work and a review of tailings management and environmental and planning permissions, all of which will require new and further financing.
In late 2018, Anglesey entered into a Project Development and Cooperation Agreement with QME Mining Technical Services, a division of QME Ltd, to carry out an agreed programme of design, engineering and optimisation studies relating to the future development of Parys Mountain. The Agreement with QME will see the completion of a substantial part of the recommended further work on mine planning and design and project optimisation at no cost to Anglesey and at no dilution to Anglesey’s current shareholders.
The primary objective is to determine the optimum production plan for Parys Mountain, utilising all available and potential means of accessing both the indicated resources and inferred resources, at various “cut-off” grades.
As part of its work QME is developing a revised mine model with the objective of incorporating more of the indicated resources and some of the inferred resources, including part of the higher-grade Engine Zone inferred resources, into the earlier years of the mine plan with the intention of bringing forward cashflows and increasing the projected life of the Parys Mountain mine to at least 10 years, with potential positive outcomes on the project economics.
QME has undertaken a detailed review of various development and mining alternatives for Parys Mountain. In its preliminary work to date, QME has identified the potential for improvements in the development plans contained in the 2017 Scoping Study which was based on mining only the 2.1 million tonnes of indicated resources reported by Micon in 2012. Micon had reported a further 4.1 million tonnes of inferred resources which were not incorporated into the Scoping Study.
The QME studies have suggested that the project can be further improved if the potential mineable tonnage can be increased by using a lower cut-off grade and generating a revised mine development plan. This second stage of the process is ongoing with completion scheduled for the end of 2019. Subject to financing being available, this work would then form the basis for commissioning an updated scoping or preliminary feasibility study.
Following delivery of the optimisation studies, and the subsequent completion of a feasibility study, QME will have the option to undertake at QME’s investment, the mine development component of the Parys Mountain project, including decline and related underground development and shaft development, in consideration of which QME would earn a 30% undivided joint venture interest in the Parys Mountain project. If exercised this would significantly reduce the capital cost to the group for the development of the mine.
Anglesey continues to manage the Grangesberg iron ore project in Sweden, about 200 kilometres north-west of Stockholm. Until its closure in 1989 due to then prevailing market conditions, the Grangesberg mine had produced in excess of 150 million tonnes of iron ore. A Technical Report prepared by Roscoe Postle Associates Inc in 2014 estimated a resource of 115.2 million tonnes at 40.2% Fe in the indicated category and 33.1 million tonnes at 45.2% Fe in the inferred category and concluded that the Grangesberg deposit hosts a significant iron resource that has excellent potential for expansion at depth.
The high-quality product that Grangesberg will be expected to produce, which would attract premium prices in the current iron ore market, together with the potential for sales within the adjacent European markets, make Grangesberg more attractive than many other undeveloped iron ore projects.
The group holds a 12% interest in Labrador Iron Mines Holdings Limited (LIM) which owns extensive iron ore resources in its Schefferville Projects in Labrador and in Quebec, Canada. LIM has not undertaken mining operations since 2013 but maintains its iron ore assets on a stand-by care and maintenance basis. The Houston property, which is planned as LIM’s next direct shipping mine project, is situated in Labrador about 25 km southeast of the town of Schefferville, and is estimated to contain a resource of 40.6 million tonnes grading 57.6% iron. Subject to securing financing, LIM plans to pursue development of the Houston Project and resume mining operations when economic conditions warrant. When in full production, the Houston deposits are expected to produce consistent saleable product of about 2 million tonnes per year, with an initial mine-life of 10 years.
We remain confident that demand for metals will remain strong and the outlook for commodity prices will remain positive for the foreseeable future. The 2017 Scoping Study demonstrated a viable mine development at Parys Mountain with a healthy financial rate of return. The outlook for metal prices, particularly zinc, copper and lead, which form the basis of Parys Mountain revenue, remains very positive.
We will also continue to review the commercial and development opportunities for our iron ore projects as the medium-term outlook for iron ore is also positive.
Anglesey also plans to pursue new opportunities for mineral exploration and development projects, with a focus on advanced copper and other base metal exploration or development projects.
I would like to thank the current directors for their ongoing diligence and support in moving the Parys Mountain mine project forward and again thank all our shareholders for their continued confidence and support.
John F. Kearney
30 July 2019
Strategic report – operations
Principal activities and business review
Anglesey Mining is engaged primarily in the business of exploring and evaluating its wholly owned Parys Mountain zinc, lead, copper project in North Wales. In 2017 a new Scoping Study prepared by Micon International Limited and Fairport Engineering Ltd. demonstrated a viable mine development and a healthy financial rate of return.
In late 2018 QME, an Irish contracting and consulting group commenced an optimisation project of this Scoping Study. Site activities during the year have continued to be limited to care and maintenance.
In addition, under various agreements the group participates in the management of the Grangesberg iron ore property in Sweden in which it increased its holding to 9%, following a small investment in late 2018, and a right of first refusal to acquire a further 50% ownership interest. The group also has a 12% holding in the Labrador Iron Mines in eastern Canada, currently operating in care and maintenance.
During 2019 the company made a private placement of approximately 9.4 million new shares to raise a gross sum of £200,000.
The group’s objective remains to phase the development and financing of the Parys Mountain project by undertaking various studies, completing a prefeasibility or feasibility study and progressing the Parys Mountain Mine towards production.
The Parys Mountain property hosts a significant polymetallic zinc, copper, lead, silver and gold deposit. The site has a head frame, a 300m deep production shaft and planning permission for operations. The group has freehold ownership of the minerals and surface land. Infrastructure is good, political risk is low and the project enjoys the support of local people and government.
An independent JORC resource estimate completed in 2012 by Micon International Limited reported a resource of 2.1 million tonnes in the indicated category at 6.9% combined base metals and 4.1 million tonnes at 5.0% combined base metals in the inferred category, with substantial exploration potential.
In July 2017 a new Scoping Study using the 2012 resource estimate was prepared by Micon International Limited and Fairport Engineering Ltd. The Scoping Study demonstrates a viable mine development mining 1000 tpd to produce lead, zinc and copper concentrates and yielding a healthy financial rate of return.
Development Plan – 2017 Scoping Study
During the period 2006-2010 Anglesey Mining carried out a detailed drilling programme on the White Rock Zone which lies adjacent to the existing 300m Morris Shaft and largely overlies the deeper Engine Zone deposits, but which extends to surface. As a result of this drilling the 2012 resource estimate by Micon included both the White Rock Zone and the Engine Zone.
A new mining plan based on a surface decline to access the White Rock zone was prepared. It proposed that a decline would be developed by mining contractors and would be used as the initial means of access to the resource for development and mining. During the initial production phase from the White Rock zone the decline would continue to be driven to reach the current bottom of the Morris Shaft and beyond. The shaft would then be dewatered and deepened by approximately 150 metres and recommissioned as a hoisting shaft for the remnant White Rock ore and for the deeper and more valuable Engine Zone ore. Mining would be carried out initially from the main decline using rubber-tyred equipment including drill jumbos, load-haul-dump machines and trucks to remove development waste to surface and production ore to the planned adjacent processing plant. The existing hoist and headframe would be refurbished and used to bring ore to the surface for delivery to the processing plant through the deepened shaft.
The 2017 Scoping Study concluded that the preferred development option for Parys Mountain is a 1,000 tpd mine and plant with a Dense Media Separation (DMS) section and that after an initial ramp-up period, the higher production level can be maintained. This would result in a mine life of approximately eight years based only on the indicated resources.
The processing plant proposed in the 2017 Scoping Study will consist of crushing and grinding followed by conventional three stage flotation to produce copper, zinc and lead concentrates to be shipped to smelters in Europe. Metallurgical performance and recovery is based on the large volume of information available from test work on Parys Mountain ores over the years. Total base metal recovery to each of the three copper, zinc and lead concentrates is forecast to be 89.8% and taking into account the DMS losses overall recovery will be approximately 85.7%. Significant amounts of silver and gold will report to each of the concentrates. Some free gold will be recovered by gravity methods and will be sold as Welsh gold.
On average 14,000 tonnes of zinc concentrate at 57% Zn, 7,200 tonnes of lead concentrate at 52% Pb and 4,000 tonnes of copper concentrate at 25% Cu, will be produced annually. These figures will vary somewhat during the life of the mine as mine feed varies depending upon the particular ore bodies being mined at any time. Life of mine average annual metal production into concentrates is forecast at 17.6 million pounds of zinc, 8.3 million pounds of lead and 2.2 million pounds of copper.
Using estimated shipping costs, smelter terms and penalties, the overall NSR for the three concentrates, including the precious metals, was projected to total in excess of $270 million at the metal prices used for the base case. This would represent net smelter revenue of approximately 72% of the metal value in concentrates delivered to the smelters.
Project Financial Results
The pre-production capital cost of the base case including mining, DMS, concentrator and infrastructure is estimated at $56 million, including a $4 million contingency. The initial capital cost for mine development is estimated to be $16 million, the concentrator $29.5 million including $3 million for the DMS plant, and infrastructure $10 million. Operating costs were developed by Micon and Fairport based on current knowledge and experience which at the higher levels of production are forecast at around $47 per tonne of ore treated.
The base case yields a pre-tax net present value of $33 million, or £26 million, at a conservative 10% discount rate, using metal prices of $1.25 per pound for zinc, $1.00 per pound for lead, $2.50/pound for copper, $17.50 per ounce for silver and $1,275 per ounce for gold and at an exchange rate of £1.00 = $US1.25. With an estimated pre-production capital cost of $56 million, or £45 million, this results in an indicated internal rate of return (IRR) of 26%.
At an 8% discount rate, used to reflect the relatively low risks of the project given its advanced level of development and low political risk in the UK, the NPV8 would be enhanced to $40 million, or £32 million, for the base case metal price scenario. The Parys Mountain project is sensitive to metal prices and exchange rates. Using metal price projections of $1.35 per pound for zinc and $3.00 per pound for copper the NPV10% would be $43.2 million, or £34.6 million and the NPV8% $52 million, or £42 million, with an IRR of 30%.
The pre-tax net present values, at 10% and 8% discount rates, and internal rates of return, are illustrated in the table below, all at a sterling:US dollar exchange rate of £1.00 = $US1.25.
|Metal Prices||Pre-Tax Cash Flows|
QME Optimization Studies
The 2017 Scoping Study recommended further work as interim steps towards undertaking a feasibility study, including more detailed mine planning and design, more detailed engineering studies, additional metallurgical test work and review of tailings management and environmental and planning permissions, all of which would normally require new and further financing.
In late 2018 Anglesey announced that it had entered into a Project Development and Cooperation Agreement with QME Mining Technical Services, a division of QME Ltd, to carry out an agreed programme of engineering and optimisation studies relating to the future development of Parys Mountain.
Summary of QME Work to-date.
QME has made significant progress including detailed reviews of mine development capital and mine operating costs of the basic mine plan using their extensive experience in mine development throughout Europe.
In its preliminary work to date, QME has identified the potential for improvements in the development plans contained in the 2017 Scoping Study. The QME preliminary work has indicated that, based on the projected life-of-mine operating cost, the NSR cut-off for both the 2012 Mineral Resource Estimate and the 2017 Scoping Study was too high and that the optimum case can be improved if the potential mineable tonnage can be increased using a lower NSR cut-off.
QME developed a model to estimate the capital cost of contract mine development and also to estimate the mine operating costs for the life of mine during operations using either a contractor or direct hire labour with contractor management, as two separate cases. The purpose and benefit of using a contractor for initial mine development is to defer capital expenditure on mining equipment and also to ensure an efficient project start-up and mine ramp-up with trained and experienced mine development management and personnel.
The QME review work completed to date has generated revised mine development capital and operating costs for a number of cases that now enables support for a lower cut-off. The Micon 2012 Mineral Resource Estimate generated an indicated resource of 2.1 million tonnes using 2012 metal prices and a cut-off of $60/t. This was the resource used in the 2017 Scoping Study.
By using a lower cut off and updated prices QME identified mineable material of approximately 5M tonnes at $48/t cut-off, with an indicated NSR of $93/t. This will then give an opportunity to develop a new mining plan by re-defining the mining shapes and the stoping plan, to be followed by a new development plan and schedule, which is expected to demonstrate a longer mine life.
The 2017 Scoping Study was based on the initial development and production from the White Rock zone using a newly developed decline eventually leading to development of the deeper Engine Zone and then the rehabilitation and use of the Morris Shaft as a hoisting facility. The QME review examined whether different approaches to accessing the orebodies, particularly by early dewatering, rehabilitation and recommissioning of the Morris Shaft, could provide early access to the higher-grade Engine zone resources.
QME estimated the cost of the shaft pump out and refurbishment in order to access the 280m level for exploration purposes. A similar exercise was carried out to estimate the cost of deepening the shaft from the current 300m level down to 450m to permit in-shaft hoisting of ore after initial production via the decline. It was confirmed that the shaft will need to be refurbished for ore hoisting purposes, but the potential utilisation of the shaft for early production would require additional tonnage above that contemplated in the original plan in the scoping study.
It was originally envisaged that the QME Optimisation Study would be completed by the end of June 2019. The preliminary phase of the exercise has been completed. The QME studies have suggested that the project can be further improved if the mineable tonnage can be increased. QME has suggested that additional studies are carried out and this second stage of the process remains ongoing.
These additional studies will look at utilising some of the inferred resources into the mining plan, continuing review of cut-off grades and use of updated metal prices and it is expected that this will generate a significant increase of tonnage in the mineable tonnage in any future 2019 mining model. While the inclusion of inferred resources does not meet the strict criteria for feasibility studies used by banks for loan evaluation, given the detailed geological knowledge of Parys Mountain now available it is useful to include some of this inferred resource for comparative financial modelling.
It is now expected that these additional studies will be completed by the end of 2019 and, subject to financing being available, would then form the basis for commissioning of an updated scoping study or preliminary feasibility study.
Agreement with QME
QME Limited is based in Navan, County Meath, Ireland from which it operates several divisions and provides a wide range of services in the fields of both mine development and mine operations to the local and international mining community.
QME Mining Technical Services division undertakes contract mining projects and employs an ‘in-house’ team of highly experienced operations managers, underground supervisors, miners, fitters and electricians. QME has carried out both large- and small-scale underground mine development contracts, providing all technical evaluation and budgeting services, personnel, management, equipment and maintenance.
Under the Development Co-Operation Agreement with QME, the Company has agreed to grant QME various rights and options relating to the future development of Parys Mountain. On completion of the optimisation study and delivery to Anglesey of the results thereof:
(i) the Company will award QME, on an exclusive basis, contracts for the development of the decline and underground mine development, including rehabilitation of the shaft. This will be done on terms to be agreed following a decision by Anglesey to proceed with the development of Parys Mountain;
(ii) In the event Anglesey and QME are not able to agree terms the Company may offer such contracts to third parties, subject to a right of first refusal in favour of QME, and subject to a payment by the Company to QME, upon the award of such contracts to a third-party, of a break-fee; and
(iii) In addition, the Company will grant to QME the right and option, upon completion of a Prefeasibility Study (“PFS”), to undertake at QME’s cost and investment, the mine development component of the Parys Mountain project, including decline and related underground development and shaft development, with a scope to be agreed, to the point of commencement of production, in consideration of which QME would earn a 30% undivided joint venture interest in the Parys Mountain project.
Mineral Exploration Potential at Parys Mountain
In addition to the indicated and inferred resources reported by Micon, the Parys Mountain area, over which the group holds the mineral rights, contains numerous indications of mineralisation across several kilometres many of which have been disclosed in earlier reports and releases.
Grangesberg Iron AB
The Grangesberg iron ore project is situated in the mineral-rich Bergslagen district of central Sweden about 200 kilometres north-west of Stockholm. Until its closure in 1989 due to prevailing market conditions, the Grangesberg mine had produced in excess of 150 million tonnes of iron ore.
The group now holds a direct 8.7% interest in Grangesberg Iron AB (GIAB) and a right of first refusal over 50.1% of the share capital of GIAB. This right has been granted in exchange for the group continuing to co-manage GIAB on a cost recovery basis. The group also has shareholder and cooperation agreements such that it holds operatorship of GIAB subject to certain conditions and appoints three out of five directors to the board of GIAB.
GIAB is a private Swedish company founded in 2007 which in 2014 completed (with assistance from the group) a financial and capital restructuring of the mine. GIAB holds a 25-year exploitation permit covering the previously mined Grangesberg underground mining operations granted by the Swedish Mining Inspectorate in May 2013.
In September 2014 an NI 43-101 Technical Report was prepared by Roscoe Postle Associates Inc showing a resource estimate for the Grangesberg Mine of 115.2 million tonnes at 40.2% Fe in the indicated category and 33.1 million tonnes at 45.2% Fe in the inferred category. RPA concluded that the Grängesberg iron ore deposit hosts a significant iron resource that has excellent potential for expansion at depth.
During the last year the substantial changes in the iron ore market favouring higher grade quality (+65% Fe) product has continued to result in very healthy premiums for higher grade product. Additionally, during this first half of 2019, following production problems that have developed in Brazil as a result of a number of tailings dam failures, the base price of 62% Fe has increased significantly.
The +67% Fe high-quality product expected to be produced from Grangesberg, together with the recent announcement by LKAB, Sweden’s largest iron ore producer, that its flagship Kiruna project in northern Sweden will have a shorter life than originally planned, makes the interest in developing the Grangesberg project, albeit at significant capital cost much more likely and make Grangesberg more attractive than many other undeveloped iron ore projects.
The group has an investment holding of 12% (2018 -12%) in Labrador Iron Mines Holdings Limited. LIM owns extensive iron ore resources in its exploration properties in Labrador and in Quebec, Canada, one of the major iron ore producing regions in the world.
In the three-year period of 2011 to 2013 LIM produced a total of 3.6 million dry metric tonnes of iron ore, all of which was sold in 23 cape-size shipments into the China spot market. LIM has not undertaken mining operations since 2013, primarily due to the low iron ore price environment, but maintains its properties on a stand-by care and maintenance basis and, subject to securing financing, is positioned to resume mining operations as soon as economic conditions warrant.
The directors continue to seek out new properties suitable for development that would be complementary to or provide synergies with the group’s existing projects within the financing capability likely to be available to the group. The directors have identified copper and other VMS projects as the most potentially attractive and the group continues to evaluate a number of early stage opportunities.
The group holds shares in mineral companies and has interests in exploration and evaluation properties and, until economically recoverable reserves can be identified, there are no standardised performance indicators which can usefully be employed to gauge the performance of the group, other than the market price of the company’s shares.
The chief external factors affecting the ability of the group to move forward are primarily the demand for metals and minerals, levels of metal prices and exchange rates and the market sentiment for investment in mining and mineral exploration companies. These and other factors are dealt with in the risks and uncertainties section below.
Financial results and position
The group has no revenues from the operation of its properties. The loss for the year ended 31 March 2019 after tax was £234,621 compared to a loss of £278,189 in the 2018 fiscal year. The administrative and other costs excluding investment income and finance charges were £75,538 compared to £109,677 in the previous year.
During the year there were no additions to fixed assets (2018 – nil) and £54,747 (2018 – £100,319) was capitalised in respect of the Parys Mountain property as mineral property exploration and evaluation.
At 31 March 2019 the group held mineral property exploration and evaluation assets with a carrying value of £15.2 million. These carrying values are supported by the results of the 2017 Scoping Study and may not reflect the realizable value of the properties if they were offered for sale at this time.
The group’s cash balance at 31 March 2019 was £6,012 (2018 – £137,113) the reduction being due to ongoing operating and capital expenses. After year end a loan of £100,000 was received from Juno Limited and the group also made a placement for cash of new shares resulting in an inflow after fees of £180,000.
At 31 March 2019 the company had 177,608,051 ordinary shares in issue, unchanged from the previous year. At 18 July 2019 there were 186,975,732 ordinary shares in issue.
The group’s use of financial instruments is described in note 24.
Employment, community and donations
The group is an equal opportunity employer in all respects and aims for high standards from and for its employees. At 31 March 2019 the company had five male directors; there were no female directors or employees. It also aims to be a valued and responsible member of the communities which it operates in or affects. There are no social, community or human rights issues which require the provision of further information in this report.
The group currently has no operations and consequently its effect on the environment is very slight, being limited to the usage of two small offices, where recycling and energy usage minimisation are encouraged. It is not practical or useful to quantify the effects of these measures.
Risks and uncertainties
The directors have carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity. In conducting its business the group faces a number of risks and uncertainties some of which have been described above in regard to particular projects. The board believes the principal risks facing the group are adequately disclosed in these financial statements and that there are no other risks of comparable magnitude which need to be disclosed. In reviewing the risks facing the group, the board considers it is sufficiently close to the group’s operations and aware of its activities to be able to adequately monitor risk without the establishment of any formal process. The group may become subject to risks against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons. However, there are also risks and uncertainties of a nature common to all mineral projects and these are summarised below.
General mining risks
Actual results relating to, amongst other things, mineral reserves, mineral resources, results of exploration, capital costs, mining production costs and reclamation and post closure costs, could differ materially from those currently anticipated by reason of factors such as changes in general economic conditions and conditions in the financial markets, changes in demand and prices for minerals that the group expects to produce, legislative, environmental and other judicial, regulatory, political and competitive developments in areas in which the group operates, technological and operational difficulties encountered in connection with the group’s activities, labour relations, costs and changing foreign exchange rates and other matters.
The mining industry is competitive in all of its phases. There is competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. The group faces competition from other mining companies in connection with the acquisition and retention of properties, mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel.
Development and liquidity risk
The group has relied on equity financing to fund its working capital requirements and will need to generate additional financial resources to fund future planned exploration programs.
On previous occasions and during the year the group has relied upon its largest shareholder, Juno Limited, for financial support and may be required to do so in the future to ensure the group will have adequate funds for its current activities. In the absence of support from Juno Limited the group would be dependent on the proceeds of share issues or other sources of funding. Developing the Parys project will be dependent on raising further funds from various sources.
There is no assurance that the group will continue to obtain additional financial resources and/or achieve positive cash flows or profitability.
Exploration and development
Exploration for minerals and development of mining operations involve risks, many of which are outside the group’s control. Exploration by its nature is subject to uncertainties and unforeseen or unwanted results are always possible. Mineral exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production.
Substantial expenditures are required to develop the mining and processing facilities and infrastructure at any mine site. No assurance can be given that a mineral deposit can be developed to justify commercial operations or that funds required for development can be obtained on a timely basis and at an acceptable cost. There can be no assurance that the group’s current development programs will result in profitable mining operations.. Current operations are in politically stable environments and hence unlikely to be subject to expropriation but exploration by its nature is subject to uncertainties and unforeseen or unwanted results are always possible.
The prices of metals fluctuate widely and are affected by many factors outside the group’s control. The relative prices of metals and future expectations for such prices have a significant impact on the market sentiment for investment in mining and mineral exploration companies. Metal price fluctuations may be either exacerbated or mitigated by currency fluctuations which affect the amount which might be received by the group in sterling.
LIM is a Canadian company; Angmag AB and GIAB are Swedish companies. Accordingly, the value of the group’s holdings in these companies is affected by exchange rate risks. Operations at Parys Mountain are in the UK and exchange rate risks are minor. Most of the cash balance at the year end was held in sterling – see notes 17 and 24.
Permitting, environment and social
The group holds planning permissions for the development of the Parys Mountain property but further environmental studies and assessments and various approvals and consents will be required to carry out proposed activities and these may be subject to various operational conditions and reclamation requirements.
Employee and personnel
The group is dependent on the services of a small number of key executives specifically the chairman, chief executive and finance director. The loss of these persons or the group’s inability to attract and retain additional highly skilled and experienced employees for any areas in which the group might engage may adversely affect its business or future operations.
In the event that the UK leaves the European Union, the directors believe that the effect on the specific operations of the group would not be material.
This report was approved by the board of directors on 30 July 2019 and signed on its behalf by:
Chief executive officer