Consmin, a leading manganese ore producer with mining operations in Australia and Ghana, announces its annual results for the year ended 31 December 2015.
|Unaudited||31 December 2015||31 December 2014||% change|
|Manganese ore produced (dry kt)||2,763.0||3,194.5||(13.5%)|
|Manganese ore sales (dry kt)||2,684.4||2,786.1||(3.7%)|
|Average C1 manganese unit cash cost ($/dmtu)¹||2.09||2.46||(15.0%)|
|Average manganese FOB Sales price ($/dmtu)||2.68||3.98||(32.7%)|
|Revenue ($ million)||256.7||420.8||(39.0%)|
|Adjusted EBITDA ($ million)2||39.8||127.1||(68.7%)|
|‘Cash’ EBITDA ($ million)2||21.3||80.3||(73.5%)|
|Loss for the year from continuing operations||(318.5)||(7.3)||(4263.0%)|
|At 31 December 2015||At 31 December 2014||% change|
|Cash and cash equivalents ($ million)||79.1||82.1||(3.7%)|
|Gross debt ($ million)||(390.3)||(428.6)||(8.9%)|
|Gross debt excluding high yield bonds ($ million)||(17.2)||(44.0)||(60.9%)|
|Net debt ($ million)||(311.2)||(346.5)||(10.2%)|
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.
“During the year Consmin’s operational performance was adversely impacted by 14% lower Group production of manganese ore compared to 2014. Australian ore production declined 24% as a result of the combination of the transition to Topvar and Cracker pits that required pre-stripping and the uncharacteristically fine nature of the ore encountered in Homestead and Paystar pits which negatively impacted processing yields and production.
The manganese C1 cash cost for the year was $2.09/dmtu, an improvement of 15% from $2.46/dmtu for 2014, with the reduction largely driven by the beneficial effect of the relative weakening of the Australian dollar as well as improvement in mine site, haulage and shiploading costs.
Total manganese sales tonnes for 2015 decreased 4% compared to 2014, with Australian manganese tonnes sold decreasing by 27% due to the lower production in the year, offset by a 28% increase in Ghanaian manganese tonnes sold which benefitted from the resumption of the trading relationship with TMI. Despite only a small decrease in sales volumes, revenue in 2015 fell by 39% as a result of the average FOB manganese price decreasing 33% and the lower average grade sold as a result of a larger proportion of sales from Ghana.
As a result of the continuing difficult pricing environment and weaker Australian production, financial performance for 2015 worsened substantially compared to 2014. Adjusted EBITDA for 2015 was $40 million, down from $127 million in 2014 with cash EBITDA declining from $80 million to $21 million over the same period.
In accordance with International Financial Reporting Standards goodwill and non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount may not be recoverable. For the year ended 31 December 2015 we recorded a $256 million impairment charge of which $155 million related to the impairment of Australian Manganese non-current assets, $36 million related to the impairment of Australian Iron Ore non-current assets and $65 million related to the Group’s investment in OM Holdings Limited, $55 million of which has been reclassified from reserves having being recognised in prior periods as revaluation losses in other comprehensive income. The impairments arose as a result of the significant decline in commodity pricing during the year.
Net cash generated from operations in 2015 at $89 million increased by $57 million compared to $32 million in 2014. This increase in operating cash flow was largely driven by the $50 million settlement received from TMI for access to Ghanaian manganese ore and working capital improvements offsetting the adverse financial performance as a result of the weaker pricing environment for manganese. During the year $11 million was spent on the repurchase on a portion of the 2020 senior secured notes. The net cash outflow from investing activities reduced from $43 million in 2014 to $19 million in 2015 as a result of reduced payments for capital expenditure in order to help maintain liquidity. As a result total cash and cash equivalents net of overdrafts increased in the year by $16 million to $76 million at 31 December 2015.
With recent manganese ore prices at record lows most major seaborne ore suppliers announced supply curtailments or cessation of new shipments primarily during the period from December 2015 to February 2016. As a result of the current depressed prices and the limited opportunity for a significant and sustainable recovery the company took the difficult decision to place its Australian Woodie Woodie mine on care and maintenance as selling ore is no longer economically viable and continuing production would likely destroy the future value of our ore reserves. We believe that suppliers’ reaction is a step in the right direction to balancing global supply and demand; spot prices in March rose by more than 50% month on month as supply cuts led to exuberant buying in China partially driven by the sharply reduced stockpiles in the Chinese The Chinese government continues to tackle a significant steel and manganese alloy over capacity in the country and to drive the transition of the Chinese economy from one led by fixed asset investment to a more balanced one driven by domestic consumption. These initiatives should continue to limit any major demand tailwind for manganese ore.
Although Consmin ended 2015 with a net cash and cash equivalents of $76 million, the continued weakness and uncertain outlook on pricing for manganese ore, as well as costs associated with placing the Woodie Woodie mine into care and maintenance have put further pressure on liquidity, with Consmin’s net cash and cash equivalents having reduced to US$41 million at 29 February 2016. Management has analysed its cash flow forecast with a view to assessing whether the financial statements should be prepared on a going concern basis. Analysis of the cash flow forecast has identified the potential need, if pricing remains at expected levels, to renegotiate existing funding arrangements or obtain additional funding in late 2016 in order for the Group to meet its on-going cash requirements. As a result Consmin announced on 8 March 2016 that it anticipated discussions with holders of the 8.000% Senior Secured Notes due May 15, 2020 regarding the notes.”
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.
For further information, please visit our website www.consmin.com or contact:
+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
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 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.
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.