Financial Results for the Second Quarter ending 30 June 2017

24 Aug 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 30 June 2017.

Business Update

  • On 22 May 2017 the Company announced that the Tender Offer and Consent Solicitation launched by China Tian Yuan Manganese Limited (“CTYML”), a subsidiary of Ningxia Tianyuan Industry Co.,Ltd. (“TMI”) 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 2017 the Company announced that the acquisition of the Company by CTYML had successfully closed with CTYML becoming the 100% legal and beneficial owner of the Company.
  • On 15 August 2017 Mr Tianjiang Jia, the ultimate beneficial owner and the Chairman of ConsMin, has announced the plans for a full re-start of the mining operations at the Company’s Woodie Woodie manganese mine in Western Australia by October 2017.

 

Key Highlights

  • Total tonnes of manganese ore production for Q2 2017 increased 35% compared to Q2 2016. Australian manganese ore production increased 15% and Ghanaian manganese ore production increased 39% compared to Q2 2016.
  • Manganese C1 unit cash cost for Q2 2017 was $1.44/dmtu compared to $1.30/dmtu in Q2 2016, an increase of 11%.
  • Total manganese sales tonnes decreased 9% in Q2 2017 compared to Q2 2016. Australian manganese tonnes sold decreased 42% but Ghanaian manganese tonnes sold increased 10%.
  • Average manganese FOB sales price achieved increased 17% from $2.41 in Q2 2016 to $2.83 in Q2 2017. Overall, average manganese FOB sales price increased 30% from $1.99 in the first six months of 2016 to $2.59 in the first six months in 2017.
  • The quarterly average price for manganese lump (CRU, 44%Mn CIF China) in Q2 2017 was $5.58/dmtu, an increase of 84% compared to $3.03/dmtu in Q2 2016 but was down 3% from $5.78/dmtu in Q1 2017.
  • Adjusted EBITDA2 for Q2 2017 was a $5 million, an increase of $2 million from a $3 million in Q2 2016. This increase is principally due to higher revenues as a result of improved pricing. Cash EBITDA for Q2 2017 was a loss of $3 million, decreased $19 million from $16 million profit in Q2 2016.
  • The Group recorded a loss for the quarter of $7 million compared to a loss of $11 million in Q2 2016.
  • During the quarter the group had an operating cash inflow of $22 million compared to an inflow of $23 million in Q2 2016.
  • Cash and cash equivalents net of overdrafts increased in Q2 2017 by $3 million to $43 million on 30 June 2017.
  • Total capital expenditure for the group in Q2 2017 was $6 million, 26% higher than in Q2 2016.

Key Performance Indicators

  Quarter ended Six months ended
Unaudited 30 June
2017
30 June
2016
% change 30 June
2017
30 June
2016
% change
Manganese ore produced (dry kt) 756.3 560.7 34.9% 1,570.3 950.4 65.2%
Manganese ore sales (dry kt) 571.6 628.0 (9.0%) 1,440.5 1,118.2 28.8%
Average C1 manganese unit cash cost ($/dmtu)1 1.44 1.30 10.8% 1.34 1.52 (11.8%)
Average manganese FOB Sales price ($/dmtu) 2.83 2.41 17.4% 2.59 1.99 30.2%
Revenue ($ million) 46.7 47.5 (1.7%) 105.9 68.9 53.7%
Adjusted EBITDA ($ million)2 5.0 2.7 85.2% 23.0 (6.2) 471.0%
‘Cash’ EBITDA ($ million)2 (3.4) 15.6 (121.8%) 14.2 4.4 222.7%
Loss for the period (7.5) (11.3) (33.6%) (2.7) (44.5) (93.9%)
  At 30 June 2017 At 31 December 2016 % change
Cash and cash equivalents ($ million) 42.5 40.0 6.3%
Gross debt ($ million) (414.2) (414.9) (0.2%)
Gross debt excluding high yield bonds ($ million) (5.1) (7.1) (28.2%)
Net debt ($ million) (371.7) (374.9) (0.9%)

 

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.

“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, Oleg Sheyko (CEO 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 35% increase in Group production compared to the corresponding period in 2016.This was driven by a 39% 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 15% compared with production in the second 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 Q2 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 $1.44/dmtu, an increase of 11% from $1.30/dmtu for Q2 2016. The Group C1 cash unit cost for Q2 2017 and Q2 2016 relates only to C1 unit costs from Ghana as the Australian mine was on care and maintenance.

The company’s manganese ore shipments totalled 572k dry tonnes during Q2 2017, a decrease of 9% compared to Q2 2016. Sales of Ghanaian manganese ore increased by 10% to 442k dry tonnes, compared to 402k dry tonnes in Q2 2016. Shipments of Australian manganese were 130k dry tonnes in Q2 2017, a decrease of 42% compared to Q2 2016 as the Woodie Woodie mine remained on care and maintenance with sales during the Q2 2017 being from the processing of lower grade stockpiles.

The average price for manganese ore (CRU, 44%Mn CIF China) in Q2 2017 was $5.58/dmtu, an increase of 84% from $3.03/dmtu in Q2 2016, but down 4%% from an average of $5.78/dmtu in the previous quarter (Q1 2017). Prices have been more stable in the first half of 2017 as supply increases since early 2016 curtailments have supported by improved steel and alloy markets in China.

Port stocks in China remain a headwind, but are down 19% from the end of Q1 2017. Traders and suppliers have been reluctant to reduce prices substantially due to healthy demand from the alloy sector. However, should steel production and subsequent demand for alloys soften, any liquidation of port stocks by traders could negatively impact manganese ore prices. The company believes that manganese ore prices will be less volatile and trade in a tighter range than experienced in 2016, but there are likely to continue to be falls and rises throughout the remainder of 2017.

The Company ended 2016 with net cash and cash equivalents of $40 million and has maintained liquidity at similar levels during Q2 2017 with net cash and cash equivalents having increased to $43 million at 30 June 2017

On 15 August 2017 Mr Tianjiang Jia, the ultimate beneficial owner and the Chairman of ConsMin, has announced the plans for a full re-start of the mining operations at the Company’s Woodie Woodie manganese mine in Western Australia by October 2017.

Download the full Report for the Second Quarter ending 30 June 2017 (PDF) – Consmin Quarterly Report – Q2 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

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

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.