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 annual results for the year ended 31 December 2014.

Key highlights

• Total tonnes of manganese ore production for 2014 decreased 7% compared to 2013. Australian manganese ore production increased 4% offset by a 17% decrease in Ghanaian manganese ore production compared to 2013.
• Manganese C1 cash costs for 2014 were $2.46/dmtu compared to $2.52/dmtu in 2013, a decrease of 2% continuing the positive trend seen over the last three years.
• Total manganese sales tonnes decreased 23% in 2014 compared to 2013. Australian manganese tonnes sold were slightly ahead of the prior year but Ghanaian manganese tonnes sold were 41% lower than prior year as a result of the termination of the Tianyuan Manganese Industry Co. Ltd (TMI) contract.
• Average manganese FOB sales price achieved decreased 17% from $4.81 in 2013 to $3.98 in 2014.
• The annual average price for manganese lump (CRU, 44%Mn CIF China) in 2014 was $4.56/dmtu, a decrease of 16% from $5.43/dmtu in 2013. In 2014, prices started the year at $5.25 and ended at $4.35/dmtu.
• Based on the December 2014 resource and reserves statement total Ghanaian reserves have increased 20% and resources have remained the same compared to the June 2013 statement. The equivalent comparison for the Australian business at December 2014 shows a 29% increase in reserves and a 17% increase in resources compared to the December 2013 statement.
• Financial performance in 2014 has been negatively impacted by the combination of lower manganese pricing and the lower sales volumes in Ghana and reduced margin arising from the termination of the TMI contract during the year. As a consequence Adjusted EBITDA² for 2014 was $127 million, down from $291 million in 2013 and Cash EBITDA for 2014 was $80 million, down from $261 million in 2013.
• The Group recorded a profit for the year of $1 million compared to a profit of $145 million in 2013.
• During the year the group had an operating cash inflow from continuing activities of $32 million compared to an inflow of $254 million in 2013.
• Total capital expenditure for the group in 2014 was $57 million, inclusive of $14 million of assets acquired under hire purchase agreements, which was in line with the planned capital expenditure for the year.
• During the year the Company spent $246 million redeeming all of the outstanding senior secured notes due 2016.
• On 12 May 2014, the Company issued $400 million in principal amount of 8.0% senior secured notes due 2020. Of the net proceeds of the issue $118 million were used in part to repurchase the remaining senior secured notes due 2016. A further $250 million of the proceeds were used to partially repay the shareholder loans treated as equity in the statement of financial position.
• Cash and cash equivalents net of overdraft decreased by $160 million from $220 million at 31 December 2013 to $60 million at 31 December 2014 with net debt increasing by $324 million to $347 million over the same period.
• In July 2013 the Company ceased mining at its Coobina chromite mine and final sales of Chromite ore concluded in Q1 2014. On 2 April 2014 the company transferred the Coobina tenement assets to PMI in part settlement of the liability arising from the termination of the Super Fines agreement generating a non cash gain on disposal of $10 million. As a result Coobina has been reclassified as a discontinued operation in the statement of comprehensive income and statement of cashflows for 2014, 2013 and 2012.
• Following the termination of the TMI agreement in August 2014, as a result of TMI’s breaches and non-performance, the Company made a drawdown demand on the $50 million standby letter of credit and commenced arbitration proceedings in London in order to recover its losses. TMI commenced court proceedings in China and obtained a temporary injunction, alleging fraud in order to prevent payment under the standby letter of credit. The Company continues to contest this injunction in the Chinese courts with the intention of lifting it. The Company continues to pursue the arbitration proceedings in London.

Key Performance Indicators

1. ¹Average 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. ²“Adjusted EBITDA” is defined as operating profit before depreciation and amortisation, impairment write-back/expense, net foreign exchange gain/loss, non-cash inventory write-downs 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. ³Exceptional 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.
4. ⁴Refer to note 6 of the Audited Consolidated Financial Statements.

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

“During the year, Consmin delivered steady operational performance. Financial performance for the year, however, was substantially lower as a result of the combination of a difficult pricing environment, the termination of the TMI contract and its subsequent impact on the sales of Ghanaian ore.

Following the termination of the TMI agreement in August 2014, as a result of TMI’s breaches and non-performance, the Company made a drawdown demand on the $50 million standby letter of credit and commenced arbitration proceedings in London in order to recover its losses. TMI obtained a temporary injunction in China, alleging fraud in order to prevent payment under the standby letter of credit. The Company continues to contest this injunction in the Chinese Courts with the intention of lifting it. The Company continues to pursue the arbitration proceedings in London.

Manganese C1 cash costs for year were $2.46/dmtu, a decrease of 2% from $2.52/dmtu for 2013 and 25% lower than the $3.28/dmtu seen for 2012. The reduction in the 2014 C1 cash costs was a positive achievement, considering the change in the Ghanaian production profile following the termination of the TMI contract, which led to an increase in mine site costs per unit. C1 cash costs in 2014 benefited from foreign exchange due to the impact of the relative weakening of the Australian dollar.

In May 2014, the Company successfully completed the issuance of $400 million in principal amount of 8.0% senior secured notes due 2020, thereby extending the maturity profile of the Group. The net proceeds of the issue were used in part to repurchase the remaining senior secured notes due 2016 with a further $250 million used to partially repay the shareholder loans.

Consmin is cautious in its expectation for 2015 due to weakening Chinese market sentiment in the manufacturing and steel sectors putting downward pressure on manganese alloys demand. Consmin held its prices stable in January 2015; however, the market prices decreased in February, and have remained under pressure since. The price declines in manganese ore are due in part to the combination of the depreciation of currencies in Australia and South Africa against the US dollar, lower fuel and freight costs, which have lowered operating and transporting costs for miners.”

Download the full financial results for the year ending 31 December 2014 (PDF – 1.2MB)

About Consolidated Minerals Limited

Consmin is a leading manganese ore producer within 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
Paul Muller, Managing Director, Australia
David Slater, Executive Director and CFO

Conference Call

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

Market, Economic and Industry

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 timely and successfully process its mineral reserves which may or may not occur. 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.