The year to date has been dominated by the global economic slowdown, particularly its effects on Chinese production and demand and the ensuing downturn in worldwide commodity prices. This downturn has affected the share price of most mineral companies. Fortunately with Labrador Iron funded, the group is in a position to weather the current economic difficulties.
Development at the group’s 50% owned Labrador Iron project in Canada advanced to a high level. During the summer over 4,500 metres of reverse-circulation drilling were completed together with a further 1,000 metres of hydro-geological drilling. Work is now in progress on compiling updated resource estimates and a detailed engineering and design study.
Some 6,500 tonnes of bulk sample were extracted from the first four deposits. This material has been crushed and screened and is being shipped to the port of Sept-Îles for onward delivery to potential end-users. Detailed engineering and design work for the infrastructure and beneficiation systems has progressed well. Arrangements for the rail transport and port facilities have also advanced and the first ten ore transport cars have arrived on site.
Labrador Iron Mines had initiated environmental baseline studies in the region at the start of exploration in 2005/2006. Since that time, seasonal environmental studies, including work with elders of the various aboriginal nearby communities, has been conducted to document the existing environment and to include the collection of traditional knowledge in the environmental assessment. In 2008 these programs were ramped up to meet the scope of the proposed development. In April 2008, a Project Registration Application was submitted for the first phase of development of the project to the Department of Environment and Conservation in the Province of Newfoundland and Labrador and to the Canadian Environmental Assessment Agency (CEAA). The Project Registration Documentation addresses production from the first phase of the project, being the James North, James South and Redmond properties. These properties have been the subject of prior activity carried out by the Iron Ore Company of Canada and are already partially developed.
On August 13, 2008 the Minister of Environment and Conservation requested an Environmental Impact Statement (EIS) as part of the application process. On October 29, 2008 the Minister published the draft guidelines for the preparation of the EIS for public comment. The Minister is expected to publish the final guidelines, which will include public consultation meetings, in early December. The work necessary to complete this EIS is now being progressed and it is expected that the EIS will be submitted prior to the calendar year end. On submission the Minister will have a period of 70 days to review the EIS, following which it should be submitted to the Cabinet for project approval. Upon release of project approval, applications for the necessary operating permits will be made. Assuming the operating permits are issued in the first or second quarter of the year, it is planned to commence mining operations during the summer of 2009. If the permits are not issued in time to enable summer operations, the start of initial production may be delayed to 2010.
Discussions continue with a number of potential purchasers of iron ore product. There has been a major decline in spot iron ore prices in recent months but the company expects to sell most of its product based on the annual benchmark prices agreed between the major suppliers and steel mills. It is likely that these benchmark prices will weaken somewhat from the highs of 2008. At the end of September, Labrador Iron held $C43.5 million (£23.0 million) in cash, which is considered sufficient to take the project through to first production.
During the period extensive discussions took place with the Australian company Western Metals Limited regarding a major investment in the Parys Mountain project. As previously announced, these discussions were terminated in mid-October with no agreement being reached.
Prices for base metals and in particular zinc and lead have fallen significantly during the last three months. Nevertheless the board believes that the Parys Mountain project, with its asset base still intact and its planning permissions still valid, is well placed to take advantage of the upturn that is likely to follow these price falls. In the meantime development work on Parys Mountain will be maintained at low levels until there are signs of a recovery.
The loss for the six month period was £444,330 (2007 - £196,435) of which share based remuneration amounted to £206,156 (2007- nil). Development expenses capitalised amounted to £76,824 in respect of Parys Mountain (2007 £84,829) and nil in respect of Labrador (2007 - £168,007); this year the Labrador development is through an equity accounted associated company in which the group has a 50% interest. The group has no revenues from the operation of its properties.
In common with all other resource companies we are in a very uncertain economic climate. However Parys Mountain can be maintained on a minimum expenditure basis with no further significant demands on capital until markets improve. Juno Limited, the group’s major shareholder, has indicated that it intends to continue its financial support, including making available further cash advances. Labrador Iron continues to benefit from its strong cash position and its ability to progress to development. The directors believe that the group is in a relatively healthy position to ride out the current economic difficulties.
John F Kearney
27 November 2008
Consolidated income statement - unaudited
for the six months ended 30 September 2008
Consolidated balance sheets – unaudited
Consolidated cashflow statement - unaudited
for the six months ended 30 September 2008
Capital and reserves reconciliation – unaudited
Statement of directors' responsibilities
The directors are responsible for preparing the half yearly financial report in accordance with applicable laws and regulations.
The directors confirm that to the best of their knowledge, these condensed financial statements which should be read in conjunction with the annual financial statements for the year ended 31 March 2008:
i) have been prepared in accordance with IAS 34 'Interim financial reporting' as adopted by the European Union; and
ii) include a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules 4.2.7R and 4.2.8R.
The directors of the company are listed in the annual report and accounts 2008 and there have been no changes to the board since its publication. A list of current directors is also maintained on the company's website to be found at www.angleseymining.co.uk.
These interim results were approved by the board on 27 November 2008. The half-yearly results for the current and comparative period are neither audited nor reviewed by the company's auditors.
By order of the board
Bill Hooley Ian Cuthbertson
Chief Executive Finance Director
Significant accounting policies and notes to accounts
1. BASIS OF ACCOUNTING: The unaudited interim condensed
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 31 March 2008 annual report. Any accounting assumptions and estimates made
in connection with these statements are consistent with those applied in that
report. They should be read in conjunction with that annual report which is
available on the company’s website at
2. RISKS AND UNCERTAINTIES: The risks and uncertainties applicable to these condensed financial statements are the same as those described in the annual report for the year ended 31 March 2008.
3. NEW IFRSs: There are no new IFRSs which affect these condensed financial statements.
4. The group is engaged in mineral property development and has no turnover. There are no minority interests or exceptional items.
5. EQUITY SETTLED EMPLOYEE BENEFITS: IFRS 2 “Share-based Payment” requires the recognition of equity settled share-based payments (which in the case of the group during the period are for share options only) at fair value at the date of grant. The fair value of the options expensed in these statements has been determined by a Black-Scholes option pricing model using a volatility factor of 66% and an option life of 3 years as the significant assumptions.
6. EARNINGS PER SHARE: The calculation and reporting of basic and diluted earnings per share are in accordance with IAS 33. These earnings per share are computed by dividing the loss attributable to ordinary shareholders of £444,330 (2007 - loss - £196,435) by 152,558,051 (2007 – 144,217,887) - the weighted average number of ordinary shares in issue during the period. Since there is loss for the period, diluted earnings per share are not reported.
7. ASSETS AND LIABILITIES HELD FOR SALE: In the audited financial statements at 31 March 2008, the group’s Parys Mountain assets, liabilities and operations were classified as held for sale, and a Parys properties fair value adjustment was made in respect of a potential impairment in the carrying value of those Parys assets and liabilities. Since that date and after the termination of specific negotiations for sale, this classification has been rescinded and the Parys project is not classified as being held for sale. Following a calculation of the net present value, discounted at 10%, of the Parys Mountain cashflows based on the directors’ estimates of future metal prices and capital and operating costs, the directors have decided to retain the Parys fair value adjustment made in the 31 March 2008 financial statements in these condensed financial statements and that no further impairment of the value of the Parys project assets is appropriate.
8. BUSINESS AND GEOGRAPHICAL SEGMENTS: All activities relate to the group’s principal activity which is the exploration and development of mining properties: hence only the geographical segments have been disclosed below. There are no revenues. From 3 December 2007 the Canadian activities have been accounted for on an equity basis and from that date are not included in this table. Previously the Canadian activities were consolidated on a line by line basis.
9. DEFERRED TAX: There is an unrecognised deferred tax asset of £1.4 million which in view of the group’s trading results, is not considered to be recoverable in the short term. 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 condensed financial statements.
10. CHANGES IN SHARE CAPITAL: None.
11. DEVELOPMENT EXPENDITURE: Mineral development expenditure incurred by the group is carried in the condensed financial statements at cost, less an impairment provision. The recovery of this expenditure is dependent upon the successful development and operation of the Parys Mountain project which is itself conditional on finance being available to fund such development.
12. COMPARATIVE INFORMATION: As described in note 7, the Parys Mountain project is no longer classified as held for sale. As required by IFRSs, the comparative information at 31 March 2008 in the income statement has been reclassified and the balance sheet comparative information has not been reclassified.
13. 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 2008 which were prepared under International Financial Reporting Standards, as approved by the European Union, 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, was not qualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis.
14. POST BALANCE SHEET AND OTHER EVENTS: None.
15. RELATED PARTY TRANSACTIONS: None.
For further information:
Bill Hooley, Chief Executive
+(44) 1492 541981
Ian Cuthbertson, Finance Director
+(44) 1248 361333
|Anglesey Mining plc
Parys Mountain, Amlwch,
Anglesey, LL68 9RE, UK
|Phone +44 1248 361333