Financial Results for the 3 months to 31 March 2017

26 May 2017
All figures in accordance with IFRS and in United States Dollars, unless otherwise stated

Consmin, a leading manganese ore producer with mining operations in Australia and Ghana, announces its quarterly results for the period ended 31 March 2017.

Acquisition Update

  • On 15 November 2016 the Company announced that its ultimate beneficial and legal owners (“Sellers”) had entered into a share purchase agreement (“SPA”) with China Tian Yuan Manganese Limited (“CTYML”), a subsidiary of Ningxia Tianyuan Manganese Industry Co., Ltd. (“TMI”) pursuant to which the Sellers agreed to sell and transfer to CTYML all of their respective right and title to both the entire issued share capital of the Company and the shareholders funding given by them to the Company (the “Transaction”). The Transaction is conditional upon a number of conditions which are set out in the SPA, including, but not limited to, certain government consents and certain consents from the holders of the then outstanding US$400,000,000 Senior Secured Notes due 2020 (the “Notes”).
  • On 4 April 2017, the Company announced that holders of 89.84% of the Notes (the “Consenting Noteholders”) had locked up to tender their notes to and provide certain consents in relation to the Transaction, pursuant to the terms of a lock-up agreement between, amongst others, CTYML, the Company and the Consenting Noteholders (the “Lock-up Deed”). Pursuant to the Lock-up Deed, CTYML launched a tender offer and consent solicitation in respect of the Notes (the “Tender Offer and Consent Solicitation”) the terms of which were set out in an offer to purchase and consent solicitation statement dated 4 April 2017 (the “Statement”). The Tender Offer and Consent Solicitation is open to acceptance by all holders of the Notes. In order to become effective, the holders of at least 90% of the aggregate principal amount of the Notes must tender into the Tender Offer and provide their consent to certain amendments to the terms of the Notes.
  • On 21 April 2017, the Company announced that CTYML was extending the expiration date set out in the Statement to 11:59pm (EST) on May 31, 2017 pending the approval of the Ghanaian government (the “Ghana Consent Condition”).
  • On 8 May 2017, the Company announced that the Ghana Consent Condition had been satisfied and that CTYML was exercising its right to bring forward the Expiration Date of the Tender Offer and Consent Solicitation. CTYML gave notice that the Expiration Date should be brought forward to 11:59 pm EST on May 19, 2017 with the payment date expected to occur on or before May 24, 2017. It was further noted that in connection with the payment of interest on the Notes due on May 15, 2017 and in compliance with the terms of the Notes, the Company had elected to pay interest on the Notes for the May 2017 Interest Period entirely in cash at a rate equal to 8.000% per annum.
  • On 22 May 2017 the Company announced that the Tender Offer and Consent Solicitation launched by CTYML had successfully concluded with holders of 99.94% of the Notes having tendered their Notes and provided their consent to certain amendments to the terms of the Notes. On 25 May the Company announced that the Transaction had successfully closed with CTYML becoming the 100% legal and beneficial owner of the Company.

 

Key highlights

  • Total tonnes of manganese ore production for Q1 2017 increased 109% compared to Q1 2016. Australian manganese ore production increased 74% and Ghanaian manganese ore production increased 117% compared to Q1 2016.
  • Manganese C1 cash cost1 for Q1 2017 was $1.25/dmtu compared to $1.74/dmtu in Q1 2016, a decrease of 28%.
  • Total manganese sales tonnes increased 77% in Q1 2017 compared to Q1 2016. Australian manganese tonnes sold decreased 37% but Ghanaian manganese tonnes sold increased 97%.
  • Average manganese FOB sales price achieved increase 70% from $1.44 in Q1 2016 to $2.45 in Q1 2017.
  • The quarterly average price for manganese lump (CRU, 44%Mn CIF China) in Q1 2017 was $5.78/dmtu, an increase of 180% compared to $2.07/dmtu in Q1 2016 but was down 26% from $7.76/dmtu in Q4 2016.
  • Adjusted EBITDA2 for Q1 2017 was a $18 million profit, an increase of $27 million from $9 million loss in Q1 2016. This increase is principally due to higher revenues as a result of higher pricing and increased volumes sold. Cash EBITDA for Q1 2017 was a profit of $18 million, increased from $11 million loss in Q1 2016.
  • The Group recorded a profit for the period of $5 million compared to a loss of $33 million in Q1 2016.
  • During the quarter the group had an operating cash inflow of $13 million compared to an outflow of $33 million in Q1 2016.
  • Cash and cash equivalents net of overdrafts increased in Q1 2017 by $3 million to $43 million on 31 March 2017.
  • Total capital expenditure for the group in Q1 2017 was $7 million, 393% higher than in Q1 2016. Total capital expenditure included payments for major components ordered and delivered in 2016 but settled in 2017.

 

Key Performance Indicators

  Quarter ended  
Unaudited 31 March 2017 31 March 2016 % change
Manganese ore produced (dry kt) 814.0 389.7 108.9%
Manganese ore sales (dry kt) 868.9 490.2 77.3%
Average C1 manganese unit cash cost ($/dmtu)1 1.25 1.74 (28.2%)
Average manganese FOB Sales price ($/dmtu) 2.45 1.44 70.1%
Revenue ($ million) 59.2 21.4 176.6%
Adjusted EBITDA ($ million)2 18.0 (8.9) (302.2%)
‘Cash’ EBITDA ($ million)2 17.6 (11.2) (257.1%)
Profit / (loss) for the period from continuing operations 4.8 (33.2) (114.5%)
       
       
  At 31 March 2017 At 31 December 2016 % change
Cash and cash equivalents ($ million) 43.3 40.0 8.2%
Gross debt ($ million) (414.5) (414.9) 0.1%
Gross debt excluding high yield bonds ($ million) (6.0) (7.1) 15.5%
Net debt ($ million) (371.2) (374.9) 1.0%

1
Average C1 manganese unit cash cost represents the cash cost incurred at each processing stage from mining through to shiploading, divided by the total manganese dmtus produced.  Included within the C1 manganese cash costs are an allocation of offsite, non-corporate and support services. Depreciation, government royalty payments, deferred stripping adjustments and stockpile movements are not included in the calculation.
2 “Adjusted EBITDA” is defined as operating profit before depreciation and amortisation, impairment write-back/expense, net foreign exchange gain/loss and exceptional items3. ‘Cash’ EBITDA is defined as Adjusted EBITDA after removing the impact of the non-cash items of deferred stripping and net movement in inventories.  Adjusted EBITDA and Cash EBITDA are the key profitability measures used across the business and reflect performance in a consistent manner and in line with how the business is managed and measured on a day to day basis.  Adjusted EBITDA and Cash EBITDA are not uniformly or legally defined measures and are not recognised under IFRS or any other generally accepted accounting principles. Other companies in the mining industry may calculate these measures differently and consequently, our presentation of Adjusted EBITDA and Cash EBITDA items may not be readily comparable to other companies’ figures.
3 Exceptional items are material or non-recurring items excluded from management’s assessment of profits because by their nature they could distort the Group’s underlying quality of earnings. These are excluded to reflect performance in a consistent manner and in line with how the business is managed and measured on a day to day basis.

 

Commenting on the results, David Slater (CFO of Consmin) said:

The acquisition of Consmin by TMI represents the start of an exciting new chapter in the history of the Company. TMI and Consmin are jointly building a strong multinational conglomerate with the ability to develop and grow its production and processing capabilities. Management expect to continue operating Consmin in the interests of all stakeholders and look forward to implementing TMI’s growth plans for the Company.

During the quarter Consmin’s operational performance improved with a 109% increase in Group production compared to the corresponding period in 2016.This was driven by a 117% increase in Ghanaian ore production following a ramp-up of output to meet the strong demand for this product. Australian ore production also increased by 74% compared with production in the first quarter of 2016 following the decision in November 2016 to process selective stockpiles of low grade ore which commenced in January 2017. Australian production in Q1 2016 was limited as a result of the Company’s decision to suspend operations at the Woodie Woodie mine with effect from 2nd February 2016 and commence the transition into care and maintenance.

The manganese C1 unit cash cost for the quarter was $1.25/dmtu, an improvement of 20% from $1.74/dmtu for Q1 2016.

The company’s manganese ore shipments totalled 869k dry tonnes during Q1 2017, an increase of 77% compared to Q1 2016. Sales of Ghanaian manganese ore rose 97% to 823k dry tonnes, a record for quarterly shipments from the Nsuta mine, compared to 418k dry tonnes in Q1 2016. During the quarter the Ghanaian customer base was reasonably well diversified, and included sales to our long-term customers TMI and Ukraine and also to buyers from the Chinese alloy and EMM/EMD sectors. Shipments of Australian manganese were only 46k dry tonnes in Q1 2017, a decrease of 37% compared to Q1 2016 with the Woodie Woodie mine remaining on care and maintenance with sales during the Q1 2017 being from the processing of lower grade stockpiles.

The benchmark quarterly average price for manganese ore (CRU, 44%Mn CIF China) in Q1 2017 was $5.78/dmtu, an increase of 180% year on year from $2.07/dmtu in Q1 2016, but down 26% from an average of $7.76/dmtu in the previous quarter (Q4 2016). By the end of March, however, manganese prices for high grade ores fell to circa $4.00/dmtu but rose again in April and May as traders in China decided to hold back port stockpile sales.

Although much improved from Q1 2016, the manganese ore market still remains fragile as China’s ore imports have averaged 2.0 million tonnes per month in the first quarter and port stocks have remained at over 3.0 million tonnes. Manganese ore supply has been abundant and should demand for ore begin to soften, ore prices are likely to come under renewed downward pressure, unless new shipments from global suppliers are cut significantly and port stocks are reduced. As a result of these uncertain factors, volatility in manganese ore pricing is expected to persist throughout the remainder of 2017, with much depending on the performance of China’s steel industry and supplier response to any negative changes in the Chinese steel market.

The Company ended 2016 with net cash and cash equivalents of $40 million and has maintained liquidity at similar levels during Q1 2017 with net cash and cash equivalents having increased to $43 million at 31 March 2017.”

Download the full Report for the 3 months to 31 March 2017 (PDF) – Consmin Quarterly Report – Q1 2017

About Consolidated Minerals Limited

Consmin is a leading manganese ore producer with mining operations in Australia and Ghana.  The principal activities of the Company and its subsidiaries (the “Group”) are the exploration, mining, processing and sale of manganese products. The Group’s operations are primarily conducted through four major operating/trading subsidiaries: Pilbara Manganese Pty Limited (Australia), Ghana Manganese Company Limited (Ghana), Manganese Trading Limited (Jersey) and Pilbara Trading Limited (Jersey).

Consolidated Minerals Limited is headquartered in Jersey and the address of its office is Commercial House, 3 Commercial Street, St Helier, Jersey, Channel Islands, JE2 3RU.

Company Information

 For further information, please visit our website www.consmin.com or contact:

Consmin:  +44(0)1534 513 300

Mark Camaj, General Manager, Marketing
Jurgen Eijgendaal, Managing Director, Ghana
David Slater, Executive Director and CFO

Conference Call

There will be a conference call for analysts and bondholders, the details of which are released through the Company website www.consmin.com.

Market, Economic and Industry Data

Market, economic and industry data used throughout this report has been derived from various industry and other independent sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed and such industry forecasts may not have been updated. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward looking statements contained in this report.

Forward looking statements

This report includes “forward-looking statements” that express or imply expectations of future events or results.  Forward-looking statements are statements that are not historical facts.  These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, products and services, and statements regarding future performance.  Forward-looking statements are generally identified by the words ‘plans,’ ‘expects,’ ‘anticipates,’ ‘believes,’ ‘intends,’ ‘estimates’ and other similar expressions.

All forward-looking statements involve a number of risks, uncertainties and other factors.  Although Consmin’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Consmin, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained in this report.  Factors that could cause or contribute to differences between the actual results, performance and achievements of Consmin include, but are not limited to, political, economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the Australian dollar and US dollar exchange rates), Consmin’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to process its mineral reserves successfully and on a timely basis. Consmin is also exposed to the risk of trespass, theft and vandalism, changes in its business strategy, as well as risks and hazards associated with the business of mineral exploration, development, mining and production.  Accordingly, investors should not place reliance on forward looking statements contained in this report.

The forward-looking statements in this report reflect information available at the time of preparing this report.  Subject to the requirements of the applicable law, Consmin explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this report that may occur due to any change in Consmin’s expectations or to reflect events or circumstances after the date of this report.  No statements made in this report regarding expectations of future profits are profit forecasts or estimates, and no statements made in this report should be interpreted to mean that Consmin’s profits for any future period will necessarily match or exceed the historical published profits of Consmin or any other level.