Anglesey Mining plc              

 

15 December 2006                                                                                             LSE: AYM

Interim Report 2006

A period of major developments

Poised for production

 

Chairman’s Statement

The last six months have been a period of major developments and significant progress for the company. This has been coupled with a period during which the prices of our major commodities, zinc, copper and iron ore have soared to record heights.

Under the direction of our strengthened management team, we carried out a detailed review of the development options for the Parys Mountain project in North Wales. As a consequence of that review we have directed exploration efforts to locating sources of ore that will allow for early mining and development of the property. We believe we have been particularly successful in these endeavours and, subject to financing, this should now lead to mine development commencing in 2007 with the first production and commercial sale of concentrate minerals occurring in 2008.

At the same time we have completed a detailed initial feasibility study on our Labrador Iron Project in Canada. The results from that study have been very positive and have encouraged us to target initial production in 2008.

In the last few weeks prices of the metals of importance to the company have soared to new heights. Zinc is now selling at a price around $US2.00 per pound, copper at over $US3.00 per pound and lump hematite iron ore at $US65-70 per tonne. These prices are driven by surging Chinese demand and appear to be supported by growing needs elsewhere, including India and Brazil. Whilst there are always risks associated with the economies of developing nations, the outlook for metal prices remains excellent.  The following tables show how the major base metal prices have increased over the last 12 months.

 

Regrettably it appears that our progress has been largely unnoticed by the investment community and has not been reflected in the company’s share price. We believe that once investors and shareholders understand the achievements that we have made this year, and recognise that the company is poised to become a producer on two continents, a significant re-rating in the share price should take place.

Parys Mountain and the White Rock Mine

Our new management team spent some time examining options for the development of Parys Mountain. The original plan had been to develop the mine through the existing Morris Shaft and at an early stage to deepen that shaft to access the major resource blocks located around and below the bottom level of the shaft. It had always been considered that a minimum production rate of 1,000 tonnes per day would be required to sustain the capital expenditure for this plan. The new plan developed by the team will be based on developing a mining operation from a decline tunnel using underground trucks to haul ore to the mill.

Exploration efforts were concentrated on the White Rock zone located 200 metres east of the Morris Shaft which appeared to offer the most promise to locate shallow resources.  This area is shown in the following plan.

Plan showing the White Rock Area and the Morris Shaft

A programme of closely spaced drilling on the upper portions of this zone during the summer of 2006 has been very successful in this respect.   The following table shows the results from all the current year drill holes that intersected economic mineralisation.

DRILL HOLE

From

(m)

To

(m)

Width

(m)

Cu

(%)

Pb

(%)

Zn

(%)

Ag

(ppm)

Main Lens

WD1

40.1

47.5

7.4

0.45

3.30

6.06

36

WD2

44.0

49.0

5.0

0.15

1.08

2.10

25

WD3

25.1

49.5

24.4

0.16

1.02

2.18

39

WD4

21.6

50.4

28.8

0.47

3.71

6.05

46

WD5

26.9

32.7

5.8

0.16

1.17

1.13

9

WD7

72.8

84.1

11.3

0.27

2.58

4.98

40

WD8

59.6

82.0

22.4

0.53

3.97

7.07

101

Upper Lens

WD3

12.8

17.6

4.8

0.16

1.02

2.18

39

WD5

13.5

16.2

2.7

0.88

3.22

7.56

50

WD7

16.8

23.9

7.1

0.34

1.71

2.99

20

WD7

39.5

58.2

18.7

0.27

2.05

3.37

18

White Rock drilling results - 2006

A continuous block of ore at economic grades with a strike length of around 60 to 70 metres, and a core width of around 20 metres has been identified from surface down to at least the lowest level of the shaft.  The following section shows this block of ore in relation to the surface elevation.

White Rock main zone – long section

A revised resource estimate is currently being prepared on this White Rock zone and will be published in due course.

We have designated this new development as the White Rock Mine. This will be accessed through a decline tunnel to be driven from the currently permitted decline portal site. Subject to funding we would expect to commence this decline in the first half of 2007 and to be in a position to bring ore to surface within a few weeks of commencement.

There are major advantages to this plan for the White Rock Mine: in particular production can be achieved in a shorter time frame than through the shaft and the initial production rate can be set at a level allowing for a lower initial capital expenditure. We currently expect this initial rate to be around 500 tonnes per day.

We envisage that the White Rock Mine will have a life of five to seven years. The second phase of this plan will involve connecting the decline with the current shaft at a number of levels including the lowest level in the mine. This will enable the shaft to be refurbished and deepened from underground and will permit the current indicated resources, including both the deeper White Rock zone and the adjacent larger Engine zone, to be accessed using operating cash-flow thereby reducing capital expenditure requirements.  The plan will enable production to be built up to the original planned rate over a number of years.  This will extend the life of the mine by a further five to seven years. 

It is planned to drive development headings to the east to access the original inferred resources as well as the exciting new discoveries in the Garth Daniel area that were announced earlier this year.  The following table shows the resource as estimated in 1990.

 

Million Tonnes

Cu

(%)

Pb
(%)

Zn

(%)

Ag

(ppm)

Au

(ppm)

Indicated

2.251

1.43

3.43

6.72

78

0.7

Inferred

4.198

2.83

2.16

4.62

22

0.3

Total

6.449

2.34

2.60

5.35

41

0.4

Parys Mountain resource estimate (1990 Robertson Group plc)

It should be noted that these estimates do not include any resources in either the Garth Daniel zone or in the White Rock zone as a result of drilling carried out in 2005 and 2006.

The next steps in the development of the White Rock Mine will involve the revised resource estimate which is currently under way, a pre-feasibility study to be followed by a bankable study, establishment of a portal, driving a decline and acquisition or construction of a mill.

We believe that this new plan for the White Rock Mine, based on the recent success in White Rock exploration, has completely re-written the future for Parys Mountain, and will be viewed by the investment community as major step to production, and to re-rating of the company.

Labrador Iron Mines – Decision to proceed towards production

We have also been working very hard to increase our understanding of our iron ore properties in western Labrador and to develop a plan for their successful development through to production. In addition to a programme of field work and exploration drilling on six of the properties, we engaged several reputable consulting groups to assist in a number of specialist areas.

The major activities that have been undertaken include a detailed review of the upper section of the existing railroad which connects the properties at Schefferville to the port of Sept Iles; a resource modelling study on the first property likely to be developed; a programme of metallurgical test-work on material from a number of the properties to better understand the upgrading characteristics; a review of the likely capital and operating costs to develop and produce from the properties; an environmental base-line study brought forward to ensure that there will be no production delays due to environmental data gathering requirements; and discussions with various First Nations communities.

Additionally we engaged specialist geologists and drilling contractors on a targeted exploration programme during the summer. The drilling programme although limited in scope enabled us to gather substantial data and knowledge on these properties.

All of this work culminated in the production of an initial Feasibility Study at the end of September. This study indicated that there are no technical or physical areas of concern that would prevent the project moving to production as originally considered. Further the Study indicates that the economics of the project are viable.

On the basis of this work the company made an election to continue with the development of the properties by committing to put them into production. Following this election and as a result of meeting minimum expenditure levels, the company, through the Labrador joint venture, has now consolidated its prior option status on the properties into a direct ownership of the mineral rights. At the same time the company increased its holding in the joint venture to 80%.

These developments have been very important and place us in a prime position to create the first new iron ore mine in Canada for many years and to benefit from the current extremely strong market for iron ore products. We intend to pursue this objective as rapidly as possible during the coming year to meet our declared aim of initial production during 2008.

Financial results

The loss for the six month period was £230,918 (2005 - £151,102) the increase being due to resulting in higher levels of activity and management expense. The charge for share based remuneration in the period was £44,116 compared with £70,852 for the same period last year. Development expenses capitalised amounted to £721,344 of which £450,964 (2005 – nil) was in respect of Labrador and £270,380 (2005 - £144,142) was in respect of Parys Mountain.

Outlook

We truly believe that we are now at a most exciting stage in the company’s development. During this last year we have evolved from being a single property evaluation company to where we now have well developed plans to bring two properties into production in a very short time frame. Coupled with the continuing strength of our major metals this should enable the company to be significantly re-rated. Naturally it will be necessary for the company to finance these developments through equity and other sources; discussions on these matters with our financial advisors are underway.

We look forward to the coming months and years being particularly exciting and beneficial for all our shareholders

John F Kearney

Chairman

15 December 2006

 

 

Significant accounting policies and notes to accounts

1.  BASIS OF ACCOUNTING:  The unaudited interim financial statements have been prepared under the historical cost convention, on a going concern basis and in accordance with the accounting policies employed in the company’s accounts at 31 March 2006. There are no minority interests or extraordinary items.

2.  LOSS PER SHARE:  The calculation and reporting of basic and diluted loss per share (LPS) are in accordance with IAS 33. Basic loss per share is computed by dividing the loss of £230,918 attributable to ordinary shareholders by 137,915,722 - the weighted average number of ordinary shares in issue during the period. Since there is a loss for the year, basic and diluted LPS are the same.

3.  SHARE-BASED PAYMENTS:  IFRS 2 “Share-based Payment” requires the recognition of share-based payments (which in the case of the group during the period are share options only) at fair value at the date of grant. Prior to the adoption of IFRS 2 for the 30 September 2005 accounts, the group did not recognise the financial effect of share-based payments. The fair value of the options to be expensed has been determined by a Black-Scholes option pricing model using a volatility factor of 70% and an option life of 3 years as the significant assumptions.

4.  DEFERRED TAX:  The group has accumulated losses for taxation purposes of £3.7 million up to 30 September 2006. There are also capital allowances, including mineral extraction allowances, exceeding £9 million unclaimed and available. Because the recoverability of any taxation relative to these amounts from future operations is uncertain, no deferred tax asset is reflected in the financial statements.

5.  BUSINESS AND GEOGRAPHICAL SEGMENTS: All activities relate to the group’s principal activity which is the exploration and development of mining properties and hence only the geographical segments have been disclosed below:

6.  CHANGES IN SHARE CAPITAL:  During the period 600,000 shares were issued in respect of the discharge of a liability and 700,000 shares were issued in respect of the exercise of share options.

7.  DEVELOPMENT EXPENDITURE:  Mineral development expenditure incurred by the group is carried in the financial statements at cost less an impairment provision. The recovery of this expenditure is dependent upon the successful development of the Parys Mountain and Labrador projects which is itself conditional on finance being available to fund those developments.

8.  FINANCIAL INFORMATION:  This financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2006 which were prepared under International Financial Reporting Standards, have been delivered to the Registrar of Companies. The report of the auditors on those accounts did not contain a statement under Section 237 of the Companies Act 1985 and was not qualified, but did contain a reference to fundamental uncertainties.

9.  BOARD APPROVAL:  These interim results were approved by the board on 15 December 2006.

 

Drilling at Knob Lake, Labrador and at Parys Mountain, Wales
during summer 2006

 

 

Directors                                 John Kearney                            Chairman

                                                Bill Hooley                                  Executive Director

                                                Ian Cuthbertson                         Finance Director

                                                David Lean

                                                Howard Miller

                                                Roger Turner

                                                Danesh Varma

 

Registered office                 Parys Mountain, Amlwch

                                                Anglesey, LL68 9RE, Wales

Corporate office                  01248 361333

Parys Mountain Site             01407 831275

Labrador Iron Mines            +1 416 362 6686

 

Registrars                              Capita Registrars

                                                www.capitaregistrars.com

                                                0870 1623131

 

Web site                                www.angleseymining.co.uk

E-mail                                      mail@angleseymining.co.uk

Company registered number             1849957

Shares listed                         The London Stock Exchange – LSE:AYM

 

For further details:

Ian Cuthbertson, Finance Director        + (44) 1248 361333

Bill Hooley, Executive Director              + (44) 1492 541981

John F. Kearney, Chairman                  + (1) 416 362 6686

Cathy Malins / Annabel Leather,
Parkgreen Communications                  + (44) 20 7493 3713

 


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  Anglesey Mining plc
Parys Mountain, Amlwch,
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