Amara Mining plc

AIM : AMA
TSX : AMZ


Amara Mining plc

November 14, 2012 07:00 ET

Amara Mining plc: Q3 2012 Results

LONDON, UNITED KINGDOM--(Marketwire - Nov. 14, 2012) - Amara Mining plc (formerly Cluff Gold plc) ("Amara" or "the Company") (AIM:AMA)(TSX:AMZ), the dual AIM and TSX-listed West African focused gold mining company, is pleased to announce its results for the quarter ended 30 September 2012.

HIGHLIGHTS FOR Q3 2012

Operational

  • Results of the Preliminary Economic Assessment for Sega gold project confirm potential viability of the project, with robust metrics including 48% IRRi
  • Gold production from Kalsaka of 14,369 ounces despite unusually heavy rains in Burkina Faso
  • 8% decrease in cash cost per ounce produced to US$883/oz compared to Q2 2012 (US$961/oz)
  • 2012 production is expected to be 53,000-57,000 ounces at a cash cost of under US$1,000/oz - higher grade ore is now anticipated to be recovered in H1 2013
  • Work continues on the resource update for the Baomahun gold project in Sierra Leone
  • Exploration at Yaoure gold project in Côte d'Ivoire continues to yield encouraging results - resource update on track for Q1 2013 with all holes drilled to date intersecting the targeted mineralised zone

Financial

  • 22% increase in Group EBITDA to US$7.6 million compared to Q2 2012 (US$6.2 million) driven by lower cash costs
  • Cash and liquid assets of US$28.4 million at 30 September 2012
  • Balance sheet further boosted by US$20 million cash drawn down under the Samsung facility in Q4

Corporate

  • Strategic partnership formed with Samsung C&T Corporation to provide potential framework for the long-term funding of Amara's growth projects, plus other development opportunities
  • Change of name to symbolise the start of a new era for the Company's leadership under John McGloin
Q3 2012 Q2 2012 Q1 2012
Kalsaka
Total Gold Production (oz) 14,369 15,191 12,504
Cash Costs excl. Royalties (US$/oz produced) 883 961 1,016
Average Realised Gold Price (US$/oz sold) 1,660 1,612 1,701
Group
Revenue (US$'000) 24,145 23,924 23,605
EBITDA (US$'000) 7,569 6,192 5,310
Basic EPS (cents) 1.79 1.19 (0.89 )

Peter Spivey, Chief Executive Officer of Amara, commented:

"During Q3 2012 Amara has been transformed: financially, operationally and corporately. Financially, with the commencement of the partnership with Samsung, we have made significant progress towards funding the development of Baomahun. Operationally, we have demonstrated that Kalsaka's mine life will be extended through integration with Sega through the Preliminary Economic Assessment which offers robust metrics. Corporately, our rebranding to Amara comes at a time when we are focused on demonstrating our ability to move to a larger production platform, through the long term development of our growth portfolio at both Baomahun and Yaoure. With a strengthened team and diversified portfolio of assets, we are well positioned for the future."

The Company will host an analyst conference call at 10:00am UK with a simultaneous webcast. Dial in details are as follows:

Telephone number: +44(0)20 3427 1919
Passcode: 7590274

To log into the webcast, which will be aired simultaneously, please go to the homepage of the Company's website: www.amaramining.com. The webcast will subsequently be available for playback on this link.

A second conference call will be hosted at 9:30am EDT/2:30pm UK time for North American analysts. Dial-in details are as follows:

Canada +1-866-270-8076
USA +1-866-793-4279
Other parts of the world +44 20 8609 0205
Participant PIN Code: 754198#

Operational Review

Overview

Q3 2012 has been a transformational period for Amara at all levels, as the Company has taken significant steps towards achieving its goal of becoming a mid-tier producer. Amara is more than just the sum of its assets. It is the Company's strong management team, non-executive directors and operational staff who will ensure that maximum value is delivered to shareholders from the Company's portfolio of assets.

During Q3 Amara has successfully moved to a more solid financial footing. The innovative funding deal with Samsung C&T Corporation ("Samsung"), which does not require recourse to expensive hedging or royalty financing, will allow the Company to deliver its growth plans while maximising returns to equity investors. It also ensures Amara's shareholders are exposed to the upside of an appreciating gold price. This partnership provides a framework for the long term funding of the Baomahun gold project ("Baomahun") in Sierra Leone and other development opportunities. Amara's management remains committed to expansion while minimising dilution to investors and the delivery of this new form of financing is testament to its ability to think innovatively to benefit shareholders.

Of equal importance, the results of the Preliminary Economic Assessment ("PEA") for the Sega gold project ("Sega") in Burkina Faso have confirmed the potential viability of mining oxide and transitional material at Sega. This will extend the mine life of the Kalsaka gold mine ("Kalsaka") and ensure that Amara maintains its status as a producer. The PEA demonstrates that Sega's metrics are robust, with a post-tax net present value ("NPV") of US$49.5 million. Including the initial acquisition costs, this delivers a strong internal rate of return ("IRR") of 48%. As the material will be processed at Kalsaka, Sega requires limited upfront capital expenditure (US$9.5 million) and mining is expected to commence in H1 2013, before Kalsaka's remaining reserves are exhausted. The results of the PEA were announced alongside an update on the promising exploration results received from Sega. Amara firmly believes that through the on-going exploration programme the mine life of the Kalsaka-Sega complex will be further extended, ensuring that it continues to deliver cashflow to underpin the development of the Company's growth projects.

In Sierra Leone, Amara has completed a structural analysis of the Baomahun deposit and the remodelling of the orebody is close to its conclusion. Whilst this work has taken longer than originally anticipated, the improved understanding of the mineralisation at Baomahun is absolutely necessary for both the near term development and the longer term exploration of the area. Amara expects to complete the resource update imminently and the full feasibility study in H1 2013. The Company's objective remains to see first gold poured at Baomahun in 2015. Importantly, the structural analysis has identified a number of additional exploration targets. These lie within the anticipated open pit shell and are the subject of Amara's current Baomahun drilling programme.

Most excitingly, the Company has had continued exploration success at the Yaoure gold project ("Yaoure") in Côte d'Ivoire, with all holes drilled to date having intersected the targeted mineralised zones. The final holes of the current phase were drilled in early November and the Company is currently compiling and analysing the data with the intention of announcing a significant increase in the resource base early in 2013. Amara has now drilled out an area covering a strike length of 1km across the historic open pits, targeting a shallow dipping (25 to 35°) package of mineralised material varying in thickness from 10m to 25m on drill fence lines with an average spacing of 100m by 100m.

Kalsaka has continued to perform well in Q3, generating US$16.3 million in net cash inflows from operating activities and ensuring that that the Company's business model remains sustainable. While gold production fell by 5% during the period, cash costs decreased by 12% and the gold price strengthened, improving margins and lifting EBITDA by 20%. These improvements were seen despite Q3 being a challenging quarter, with unusually heavy rains in Burkina Faso forcing Kalsaka's mining team to alter its plans and move to areas of lower grade and higher waste stripping. Due to the working capital cycle of a heap leach operation, the full effect of these challenges will not be seen until Q4.

Looking ahead to Q4, Amara expects to return to higher grade zones in the K-zone 1 pit. However, due to the leach cycle the Company expects to fall marginally short of the lower end of previous guidance, producing 53,000-57,000 ounces as opposed to the 60,000 ounces originally anticipated. The ultimate impact will be that some of the higher grade ore will now be recovered in H1 2013, giving Amara further comfort on the smooth transition between Kalsaka and Sega ore sources in 2013.

The Company finished the quarter with US$28.4 million in cash and liquid assets. With the additional US$20 million from the Samsung facility, Amara is in a very healthy position to deliver on its near term growth and exploration plans. The management believes that there is better clarity than ever before on the future growth potential of the Company. A strong balance sheet, ongoing production and the long term partnership with Samsung ensure that Amara is well placed to deliver on its aspiration of becoming a mid-tier producer. As the Company move towards the feasibility study at Baomahun, an updated mineral resource estimate at Yaoure, and further extensions of the Kalsaka-Sega mine life, Amara is confident that it can continue to demonstrate the latent value in the Company for the benefit of all shareholders.

Kalsaka Gold Mine, Burkina Faso
Production statistics
Q3 2012 Q2 2012 Q3 2011 9M 2012 9M 2011
Ore mined (kt) 270 434 550 1,223 1,401
Waste mined (kt) 2,015 1,646 3,209 6,548 9,735
Total tonnage mined (kt) 2,285 2,079 3,759 7,771 11,136
Strip ratio (w:o) 7.45 3.80 5.84 5.35 6.95
Ore processed (kt) 359 408 451 1,174 1,230
Average ore head grade (g/t) 1.29 1.42 1.63 1.27 1.50
Gold production (oz) 14,369 15,191 23,611 42,064 55,129
Cash costs excl. royalties (US$/oz prod) 883 961 756 951 842
Cash costs excl. royalties (US$/oz sold) 886 1,008 848 952 890
Average realised gold price (US$/oz sold) 1,660 1,612 1,746 1,656 1,568
Pre-tax cash margin (US$/oz sold) 774 603 898 705 677
EBITDA (US$m) 10.9 9.1 23.6 27.9 39.4

Kalsaka delivered robust EBITDA in Q3 despite challenging conditions, with production decreasing by 5% on the previous quarter. However, due to the lower cash costs achieved in Q3 and the strengthening gold price, Kalsaka's EBITDA increased by 20%.

Burkina Faso suffered unusually heavy rains this year, which had a negative impact on both head grade and strip ratio. The original Kalsaka mine plan for H2 2012 focused on the K-zone 1 pit, which contains higher than average resource grade material. However, the heavy rainfall caused pit-wall failures, restricting access to higher grade ore and increasing waste stripping. Consequently, Kalsaka's operational team focused on opening lower grade pits, originally scheduled for mining in H1 2013, in order for production to continue. The gold produced from this material will not come out of the heap until Q4 as the leach cycle time is approximately 4 months. Now that the wet season is complete, Kalsaka's mining team is re-accessing K-zone 1's higher grade material, which is expected to have a positive impact on head grade and production in H1 2013.

Cash costs per ounce produced in Q3 were lower than in H1 as expected, due to the working capital cycle of a heap leach operation. The high grade, low strip ore stacked in Q2, which was leached in Q3, had a beneficial effect on this quarter's cash costs, allowing a pre-tax margin of US$774/oz to be generated. However, cash costs in Q4 will be higher than previously anticipated as the lower grade ore processed in Q3 is recovered. Despite this, cash costs per ounce produced for the full year are expected to remain below US$1,000 per ounce, delivering a healthy pre-tax cash margin.

As production was budgeted to be weighted towards H2 and the operational results achieved in Q3 were weaker than anticipated, full year production is now expected to be 53,000-57,000 ounces. Despite the weaker production, Kalsaka continues to deliver strong EBITDA, which differentiates Amara from its exploration-only peers and self-funds it exploration programme. Amara's production is expected to increase in 2013 as the higher grade Sega material begins to be processed together with the delayed K-zone 1 material at Kalsaka. This, combined with the Company's larger ownership of Sega (90% compared to 78% at Kalsaka), is expected to ensure that Amara continues to generate robust cashflow.

Sega

Maintaining cashflow in Burkina Faso until production is scheduled to commence at Baomahun in 2015 is a key priority for Amara. The Company is committed to upholding its producer status, which lends flexibility to its development plans as it continues to grow its portfolio of assets. The results of the PEA for Sega, which were announced on 16 October 2012, confirm the potential viability of mining oxide and transitional material at Sega, located 20km north of Kalsaka, and transporting it to Amara's existing heap leach operation at Kalsaka for processing.

The PEA demonstrates that Sega has solid metrics, with a post-tax NPV of US$49.5 million, using a gold price of US$1,500 per ounce and a discount rate of 10%. Including the initial acquisition costs, this delivers a strong internal rate of return ("IRR") of 48%. The upfront capital expenditure required for the project is limited at US$9.5 million, as the material from Sega will be trucked to Kalsaka and processed in the existing plant. Combined with the good existing infrastructure in place, this reduces the permitting hurdle and diminishes the timeline to production.

Based on the mineral resources delineated at Sega to date, the mine plan delivers contained gold of 162,825 ounces over the 21 month initial mine life and a cash cost per ounce produced, excluding royalties, of US$821/oz. Amara's management is optimistic that production will continue from Kalsaka's reserves until the trucking of material begins from Sega, ensuring that production continues uninterrupted. The NI 43-101 technical report is on track to be filed on SEDAR before the deadline of 30 November 2012 and the environmental permit is expected to be received from the Burkina Faso government in Q1 2013. The mining licence is anticipated to be received shortly thereafter, with mining at Sega expected to commence in H1 2013.

Kalsaka/Sega exploration

Exploration at the Kalsaka-Sega complex is a primary focus for Amara. Drilling results received to date give confidence that there is further upside potential to Sega's current resources, with particularly encouraging intercepts logged at the Touli prospect. This upside potential adds further confidence that production will continue uninterrupted at the Kalsaka-Sega complex as the Company continues to develop its portfolio of growth assets.

As previously announced, 35,464 metres of RC and RAB drilling have been completed by the Company on the 313km2 Sega licence area. This followed up on the 10,000 metre drilling programme conducted by Orezone in Q1 2012 prior to the transfer to Amara. The recent drilling has focused on the Touli, Sampella, KNW and Bangassilla targets. Significant intercepts includeii:

  • 26m at 3.05g/t from 8m at Touli
  • 18m at 3.49g/t from 18m at Touli
  • 11m at 2.89 g/t from 25m at KNW
  • 5m at 3.48g/t from 96m at Sampella
  • 4m at 2.07g/t from 99m at Bangassilla

A significant intercept has a minimum width of 2m, a minimum grade of 0.4 g/t and a maximum internal dilution of 2m.

Further RC drilling commenced at KNW in late Q3 and will be completed, together with further drilling at Touli and initial drilling at a further target, Tiba3Sud, in Q4 after the harvest. Exploration work is also ongoing on the Kalsaka permit, focusing on areas east of the existing K-zone pits along the K-zone shear structure, where additional resources are expected to be defined.

Baomahun, Sierra Leone

In Sierra Leone, Amara has completed a fundamental re-analysis of the structural controls of the Baomahun resources. This work ensures that the Company not only has a robust geological model at the core of the Baomahun feasibility study, but it has also proved to be a valuable exploration tool, defining a number of new exploration targets that lie within the existing open pit shell that are currently classified as waste. Work on the Baomahun resource update is nearing its conclusion and it is anticipated that the final resource figures will be announced within the next few weeks.

The feasibility study for Baomahun remains at an advanced stage, based on a 2Mtpa CIL plant. The two outstanding technical aspects are the resource update, as detailed above, and geotechnical work for the final optimised open pit. Amara expects to announce the timing of the delivery of the feasibility study as part of the resource update, but it is currently anticipated that this should be completed in H1 2013. Importantly, with the financing options inherent in the recently announced strategic partnership with Samsung, and the work already completed on initial infrastructure at the Baomahun site, Amara anticipates that it can still meet its expectation of first gold in 2015 at Baomahun.

Exploration

Due to the onset of the wet season in Sierra Leone, exploration at Baomahun was minimal during Q3. Whilst drilling at Pujehun South halted in mid-July, work at the Makong South prospect continued with sampling and trenching in artisanal areas. Following the cessation of the rains, drilling has recommenced in November, focusing on the new targets within the resource area as well as the Pujehun South prospect.

Drilling at Pujehun South, located 700m north of the Baomahun deposit, has discovered multiple zones of mineralisation within the hinge zones of isoclinal folds. The 2013 drilling campaign is expected to progress Pujehun South to the resource estimation stage.

Significant results have been received from sampling of the Makong South artisanal workings in quartz veined mylonites. An aggressive trenching programme is now underway to take the Makong South targets to the early drilling stage, with a drilling programme planned to commence in the current dry season.

Yaoure, Côte d'Ivoire

Exploration is the lifeblood of a mining company and through an extensive exploration programme, Yaoure forms Amara's medium term growth. The promising results received in Q2 warranted an aggressive approach and accordingly up to four diamond rigs were on site at Yaoure in Q3.

The drilling campaign continues to deliver encouraging results, underlining the potential for a large scale, moderate-grade, open pittable deposit. Drilling has covered a strike length of 1km across the historic open pits targeting a shallow dipping (25 to 35°) package of mineralised material varying in thickness from 10m to 25m where continuity is being established. However, it is expected that thinner, higher grade sub-vertical cross-cutting veins with frequent visible gold contained within the shallow dipping zones will enhance the overall grade of the ore body. Significant intercepts reported on 14 August 2012iii included:

  • 17.8m at 4.44 g/t from 111.9m in hole YDD0060
  • 9.4m at 4.88 g/t from 126.6m and 10.3m at 5.58 g/t from 542.8m in hole YDD0056
  • 6.2m at 9.06 g/t from 421. 7m in hole YDD0054

All of the 53 holes reported this year have encountered mineralisation, and the mineralisation remains open in all directions. The current drilling campaign concluded in early November and the Company expects to announce further drilling results in late November 2012, with a resource update targeted for Q1 2013.

The delineation of a sizeable resource at Yaoure would allow Amara to achieve greater flexibility in its portfolio of assets. Yaoure's location presents a number of advantages that will enhance the prospects for a CIL plant to be developed at site. These include excellent existing infrastructure including close proximity to the Kossou Barrage which offers the potential for lower operating and capital costs through the utilisation of hydro-electric power. In addition Yaoure benefits from an existing mining licence and environmental permits.

Corporate

Following John McGloin's appointment as Executive Chairman on 28 May 2012, a number of changes have taken place within Amara. Working alongside Peter Spivey and Pete Gardner, John has refocused Amara on a portfolio approach, ensuring that all of the Company's assets in West Africa are optimised and moved along the growth curve in a timely manner. However, the Company's assets are just one part of Amara's investment case - people are Amara's most valuable resource and it is the management team, non-executive directors and operational staff who will ensure that maximum value is delivered to shareholders.

John's background in geology has also driven the new approach towards the Baomahun resource. The focus on gaining a thorough understanding of the structural controls that underpin the resource estimate is expected to produce a more reliable geological model and consequently a better long term mine plan. Management's philosophy is that it is always best to make decisions with the maximum information available.

Amara is moving closer to its goal of becoming a mid-tier producer and to mark the beginning of this transitional period, the Company changed its name from Cluff Gold plc to Amara Mining plc on 1 October 2012. The rebranding coincided with the change of Amara's registered office to 29-30 Cornhill, London, EC3V 3NF.

As part of the Board's review of its structure following John's appointment, Bobby Danchin, Nicholas Berry and Ronald Winston resigned as directors on 30 September 2012. The Board now comprises three executive directors and three non-executive directors, which is appropriate for a company of Amara's size. Amara now has the right team to drive the Company's growth and achieve the next stage of its development into a sustainable mid-tier producer.

Financial Report
Group Financial Highlights
US$000 Q3 2012 Q2 2012 Q3 2011 9M 2012 9M 2011
Revenue 24,145 23,924 38,817 71,674 86,592
Gross profit 9,923 9,994 19,355 26,052 29,761
EBITDA 7,569 6,192 21,987 19,071 33,133
Profit before taxation 5,434 4,110 11,670 10,941 13,876
Basic EPS (cents per share) 1.79 1.19 4.82 2.41 4.38
Cash generated from operating activities 16,256 1,569 17,944 23,904 26,984
Net change in cash and cash equivalents 3,387 (32,708 ) 8,469 (4,790 ) 4,694
Total cash and cash equivalents 23,850 20,298 25,559 23,850 25,559
Total capital expenditure 10,919 41,379 6,552 63,294 19,076

Amara continued to deliver a robust financial performance in Q3 with Group EBITDA increasing by 22% to US$7.6 million, driven by the strong financial performance at Kalsaka. At Yaoure, the quarterly EBITDA represents a US$1.6 million loss as the remaining gold in process from the old Angovia heap leach was recovered. Amara's management is targeting reduced administrative costs at Yaoure in Q4 to reflect the project's status as an exploration property.

Sustaining capital expenditure fell in the quarter as the main annual cost, the addition of leach pads at Kalsaka, was incurred during H1. Other capital expenditure includes some of the initial costs of mechanical equipment for Sega; however, the majority of expenditure for Sega will be incurred during Q4 2012 and Q1 2013.

Group exploration expenditure was maintained in line with budget, with US$9.3 million incurred during the quarter compared to US$10.6 million in the previous period. At Yaoure, four diamond drills worked throughout the quarter with the aim of delivering a resource update in Q1 2013. Expenditure at Baomahun represents the ongoing costs of the feasibility study, together with maintenance of the camp and minor exploration work. Kalsaka expenditure relates entirely to work commencing on the new Sega licences, targeting the upside potential around the existing resource. Other segment expenditure relates to the completion of the initial drill programme in Mali.

Amara ended the quarter with cash and liquid assets totalling US$28.4 million, comprising US$23.9 million in cash and US$4.5 million in bullion sold after the quarter end. This healthy financial position has been strengthened further in October by the drawdown of the US$20 million facility provided by Samsung. This form of financing is revolutionary for both Amara and the wider mining sector as, unlike many traditional forms of debt, it does not require any hedging. The price paid by Samsung for gold is not fixed in any way, so Amara's shareholders will still see the majority of the upside of a rising gold price. It also avoids the disadvantages of other financing options, such as royalties, as it has a limited life and the obligations to deliver gold to Samsung cease after the debt is repaid. The longer term relationship with Samsung set out in the agreement delivers a solution with the potential to fund a significant proportion of Baomahun's financing requirements, alleviating a significant amount of risk from the Company's long term financing plans.

AMARA MINING PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the three and nine months ended 30 September 2012 and 2011
3 months
ended
30 September
2012
3 months
ended
30 September
2011
9 months
ended
30 September
2012
9 months
ended
30 September
2011
Notes US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Continuing operations
Revenue 24,145 38,817 71,674 86,592
Cost of sales (14,222 ) (19,462 ) (45,622 ) (56,831 )
Gross profit
9,923 19,355 26,052 29,761
General and administrative expenses (2,005 ) (3,288 ) (6,830 ) (6,374 )
Other operating costs (2,712 ) (3,777 ) (8,173 ) (9,543 )
Operating profit 5,206 12,290 11,049 13,844
Investment income 228 29 157 97
Finance costs - (649 ) (265 ) (65 )
Profit before taxation 5,434 11,670 10,941 13,876
Income tax (1,184 ) (3,188 ) (4,559 ) (5,016 )
Profit for the period 4,250 8,482 6,382 8,860
Attributable to:
Equity holders of the parent company 3,001 6,351 3,727 5,769
Non-controlling interests 1,249 2,131 2,655 3,091
Profit for the period 4,250 8,482 6,382 8,860
Total comprehensive income for the period 4,250 8,482 6,382 8,860
Earnings per share
Basic (cents per share) 3 1.79 4.82 2.41 4.38
Diluted (cents per share) 3 1.78 4.74 2.39 4.30
AMARA MINING PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2012
As at
30 September
2012
As at
30 September
2011
As at
31 December
2011
Notes US$'000 US$'000 US$'000
Unaudited Unaudited Audited
ASSETS
NON-CURRENT ASSETS
Intangible assets 4 120,812 62,441 68,027
Property, plant and equipment 5 21,540 19,939 17,453
Other receivables - 2,192 1,452
Deferred tax asset - 943 -
Total non-current assets 142,352 85,515 86,932
CURRENT ASSETS
Inventories 6 15,635 16,707 18,275
Other receivables 6,611 4,834 6,586
Cash and cash equivalents 23,850 25,559 28,905
Total current assets 46,096 47,100 53,766
TOTAL ASSETS 188,448 132,615 140,698
CAPITAL AND RESERVES
Share capital 7 2,950 2,374 2,375
Share premium 163,185 117,774 117,823
Merger reserve 15,107 15,107 15,107
Share option reserve 3,748 3,118 3,316
Currency translation reserve 987 987 987
Accumulated losses (27,016 ) (37,507 ) (30,886 )
TOTAL EQUITY ATTRIBUTABLE TO THE PARENT 158,961 101,853 108,722
Non-controlling interests 2,026 4,723 3,441
TOTAL EQUITY 160,987 106,576 112,163
NON-CURRENT LIABILITIES
Provisions 9,445 7,397 8,578
Deferred tax liability 168 - 305
Total non-current liabilities 9,613 7,397 8,883
CURRENT LIABILITIES
Trade and other payables 15,575 14,177 14,705
Corporation tax 2,273 4,465 4,947
Total current liabilities 17,848 18,642 19,652
TOTAL LIABILITIES 27,461 26,039 28,535
TOTAL EQUITY AND LIABILITIES 188,448 132,615 140,698
AMARA MINING PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the three and nine months ended 30 September 2012 and 2011
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share
capital
Share
premium
Merger
reserve
Share option
reserve
Currency translation reserve Accumulated
losses
Sub-total Non-controlling interests Total
equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2011 2,365 117,410 15,107 2,556 987 (43,431 ) 94,994 2,012 97,006
Profit for the period - - - - - 5,769 5,769 3,091 8,860
Total comprehensive income for the period - - - - - 5,769 5,769 3,091 8,860
Issue of ordinary share capital 9 364 - - - - 373 - 373
Share option charge - - - 717 - - 717 - 717
Reserve transfer - - - (155 ) - 155 - - -
Dividend - - - - - - - (380 ) (380 )
As at 30 September 2011 2,374 117,774 15,107 3,118 987 (37,507 ) 101,853 4,723 106,576
Profit for the period - - - - - 6,620 6,620 1,732 8,352
Total comprehensive income for the period - - - - - 6,620 6,620 1,732 8,352
Issue of ordinary share capital 1 49 - - - - 50 - 50
Share option charge - - - 199 - - 199 - 199
Reserve transfer - - - (1 ) - 1 - - -
Dividend - - - - - - - (3,014 ) (3,014 )
As at 31 December 2011 2,375 117,823 15,107 3,316 987 (30,886 ) 108,722 3,441 112,163
Profit for the period - - - - - 3,727 3,727 2,655 6,382
Total comprehensive income for the period - - - - - 3,727 3,727 2,655 6,382
Issue of ordinary share capital 575 47,712 - - - - 48,287 - 48,287
Share issue costs - (2,350 ) - - - - (2,350 ) - (2,350 )
Share option charge - - - 575 - - 575 - 575
Reserve transfer - - - (143 ) - 143 - - -
Dividend - - - - - - - (4,070 ) (4,070 )
As at 30 September 2012 2,950 163,185 15,107 3,748 987 (27,016 ) 158,961 2,026 160,987
AMARA MINING PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three and nine months ended 30 September 2012 and 2011
3 months ended
30 September
2012
3 months ended
30 September
2011
9 months ended
30 September
2012
9 months ended
30 September
2011
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Cash flow from operating activities
Operating profit for the period 5,206 12,290 11,049 13,844
Depreciation/amortisation 1,600 4,393 7,069 11,610
Increase in trade and other payables 1,301 2,544 1,615 4,236
Decrease/(increase) in trade and other receivables 5,785 (38 ) 1,169 (2,002 )
Decrease/(increase) in inventories 1,913 (1,433 ) 1,560 (2,759 )
Increase in provisions 253 4 867 1,338
Share option charge 198 184 575 717
Net cash flows from operating activities 16,256 17,944 23,904 26,984
Income taxes paid (1,521 ) (815 ) (7,370 ) (3,818 )
Cash flows used in investing activities
Interest receivable 63 29 157 97
Interest payable - (5 ) - (23 )
Purchase of property, plant and equipment (1,415 ) (1,147 ) (9,360 ) (3,392 )
Purchase of intangible assets - deferred exploration (9,996 ) (7,165 ) (27,643 ) (15,147 )
Purchase of intangible assets - mining rights - (14,959 )
Net cash flows used in investing activities (11,348 ) (8,288 ) (51,805 ) (18,465 )
Cash flows (used in)/from financing activities
Proceeds from the issue of share capital - 8 34,551 373
Dividends paid - (380 ) (4,070 ) (380 )
Net cash flows (used in)/from financing activities - (372 ) 30,481 (7 )
Net increase/(decrease) in cash and cash equivalents 3,387 8,469 (4,790 ) 4,694
Cash and cash equivalents at start of period 20,298 17,734 28,905 20,907
Exchange gains/(losses) on cash 165 (644 ) (265 ) (42 )
Cash and cash equivalents at end of period 23,850 25,559 23,850 25,559
AMARA MINING PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
For the three and nine months ended 30 September 2012 and 2011

1. Basis of preparation

The condensed interim financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and implemented in the UK. The accounting policies, methods of computation and presentation used in the preparation of the interim financial information are the same as those used in the Group's audited financial statements for the year ended 31 December 2011, which this interim consolidated financial information should be read in conjunction with. The financial information has been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting.

The financial information in this statement does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information for the nine months ended 30 September 2012 and 30 September 2011 is unaudited, and has not been reviewed by the auditors.

The financial information for the year ended 31 December 2011 has been derived from the Group's audited financial statements for the period as filed with the Registrar of Companies. It does not constitute the financial statements for that period. The auditor's report on the statutory financial statements for the year ended 31 December 2011 was unqualified and did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006.

After review of the Group's operations, financial position and forecasts, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the unaudited interim financial information.

2. Segmental reporting

An analysis of the consolidated income statement by operating segment, presented on the same basis as that set out in the 2011 annual report, is set out below:

Kalsaka Yaoure Baomahun All other segments Total
US$'000 US$'000 US$'000 US$'000 US$'000
Three months ended 30 September 2012
External revenue 24,297 382 - - 24,679
Direct costs of production (11,603 ) (1,239 ) - - (12,842 )
Other operating and administrative costs (1,808 ) (711 ) - (1,749 ) (4,268 )
Segmental result - EBITDA 10,886 (1,568 ) - (1,749 ) 7,569
Exploration expenditure 1,986 3,908 2,510 927 9,330
Other capital expenditure 736 39 612 202 1,589
Mining rights - - - - -
Three months ended 30 September 2011
External revenue 42,746 2,083 - - 44,829
Direct costs of production (17,091 ) (229 ) - - (17,320 )
Other operating and administrative costs (2,051 ) (1,174 ) - (2,297 ) (5,522 )
Segmental result - EBITDA 23,604 680 - (2,297 ) 21,987
Exploration expenditure 2,191 - 3,038 95 5,324
Other capital expenditure 464 559 161 44 1,228
Mining rights - - - - -
Nine months ended 30 September 2012
External revenue 69,995 2,089 - - 72,084
Direct costs of production (36,506 ) (2,687 ) - - (39,193 )
Other operating and administrative costs (5,583 ) (2,514 ) - (5,723 ) (13,820 )
Segmental result - EBITDA 27,906 (3,112 ) - (5,723 ) 19,071
Exploration expenditure 5,442 9,989 10,266 1,478 27,174
Other capital expenditure 3,759 279 5,521 235 9,794
Mining rights 26,326 - - - 26,326
Nine months ended 30 September 2011
External revenue 86,508 8,346 - - 94,854
Direct costs of production (41,486 ) (7,355 ) - - (48,841 )
Other operating and administrative costs (5,604 ) (2,387 ) - (4,889 ) (12,880 )
Segmental result - EBITDA 39,418 (1,396 ) - (4,889 ) 33,133
Exploration expenditure 3,444 - 11,905 192 15,541
Other capital expenditure 2,248 793 393 101 3,535
Mining rights - - - - -

A reconciliation of segmental revenue to that reported in the interim financial statements is as follows:

3 months ended
30 September
2012
3 months ended
30 September
2011
9 months ended
30 September
2012
9 months ended
30 September
2011
US$'000 US$'000 US$'000 US$'000
Revenue for reportable segments 24,679 44,829 72,084 94,854
Change in accrued revenue for gold bullion in stock (534 ) (6,012 ) (410 ) (8,262 )
Revenue for interim financial statements 24,145 38,817 71,674 86,592

A reconciliation of segmental EBITDA to the profit before tax reported in the interim financial statements is as follows:

3 months ended
30 September
2012
3 months ended
30 September
2011
9 months ended
30 September
2012
9 months ended
30 September
2011
US$'000 US$'000 US$'000 US$'000
EBITDA for reportable segments 7,569 21,987 19,071 33,133
Depreciation and amortisation (1,459 ) (4,387 ) (6,928 ) (11,610 )
Share based payments (198 ) (184 ) (575 ) (717 )
Net interest received 59 24 153 74
Change in accrued profit for gold bullion in stock (679 ) (4,002 ) (521 ) (5,240 )
Exploration costs written-off - - - -
Exchange rate variance 336 (1,201 ) (150 ) (199 )
VAT provided in period (194 ) (567 ) (109 ) (1,565 )
Profit before taxation 5,434 11,670 10,941 13,876

3. Earnings per share

The calculation of basic and diluted earnings per ordinary share is based on the following data:

3 months ended
30 September
2012
3 months ended
30 September
2011
9 months ended
30 September
2012
9 months ended
30 September
2011
Shares Shares Shares Shares
Weighted average number of ordinary shares in issue for the period
- Number of shares with voting rights 168,047,937 131,848,222 154,707,791 131,733,492
- Effect of share options in issue 579,772 2,112,481 1,277,411 2,317,956
- Total used in calculation of diluted earnings per share 168,627,709 133,960,702 155,985,202 134,051,448
Profit for the period attributable to owners of the parent (US$'000) 3,000,749 6,351,458 3,727,120 5,769,623
Earnings per share
- Basic (cents per share) 1.79 4.82 2.41 4.38
- Diluted (cents per share) 1.78 4.74 2.39 4.30

4. Intangible assets

Deferred exploration
Costs
Exploration and mining
rights
Total
US$'000 US$'000 US$'000
Cost
At 1 January 2011 22,242 30,223 52,465
Additions 15,541 - 15,541
At 30 September 2011 37,783 30,223 68,006
Additions 6,155 - 6,155
At 31 December 2011 43,937 30,223 74,160
Additions 27,175 26,326 53,501
At 30 September 2012 71,112 56,549 127,661
Depreciation
At 1 January 2011 - 4,114 4,114
Charge for the period - 1,451 1,451
At 30 September 2011 - 5,565 5,565
Charge for the period - 568 568
At 31 December 2011 - 6,133 6,133
Charge for the period - 716 716
At 30 September 2012 - 6,849 6,849
Net book value
At 30 September 2012 71,112 49,700 120,812
At 31 December 2011 43,937 24,090 68,027
At 30 September 2011 37,783 24,658 62,441

5. Property, plant and equipment

Assets in the course of construction Mine development
and associated
property, plant and equipment costs
Motor vehicles, office equipment, fixtures and computers Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2011 - 70,604 4,698 75,302
Additions - 2,526 1,009 3,535
Transfer - 161 (161 ) -
At 30 September 2011 - 73,291 5,546 78,837
Additions - - 372 372
Disposals - (24 ) - (24 )
At 31 December 2011 - 73,267 5,918 79,185
Additions 4,466 3,981 1,347 9,794
Disposals - (27 ) - (27 )
At 30 September 2012 4,466 77,221 7,265 88,952
Depreciation
At 1 January 2011 - 44,439 2,978 47,417
Charge for the period - 10,825 656 11,481
Transfer - 133 (133 ) -
At 30 September 2011 - 55,397 3,501 58,898
Charge for the period - 2,249 590 2,839
Disposals - (5 ) - (5 )
At 31 December 2011 - 57,641 4,091 61,732
Charge for the period - 4,865 842 5,707
Disposals - (27 ) - (27 )
At 30 September 2012 - 62,479 4,933 67,412
Net book value
At 30 September 2012 4,466 14,742 2,332 21,540
At 31 December 2011 - 15,626 1,827 17,453
At 30 September 2011 - 17,894 2,045 19,939

6. Inventories

As at
30 September
2012
As at
30 September
2011
As at
31 December
2011
US$'000 US$'000 US$'000
Consumable stores 1,702 1,971 2,358
Ore stockpiles 5,764 1,900 6,544
Gold in process 6,255 8,758 7,347
Gold bullion 1,914 4,078 2,026
15,635 16,707 18,275

7. Share capital

As at
30 September
2012
As at
30 September
2011
As at
31 December
2011
US$'000 US$'000 US$'000
Authorised:
200,000,000 Ordinary shares of 1p each 3,080 3,080 3,080
No. No. No.
Issued and Fully Paid:
Ordinary shares of 1p each 168,047,937 131,852,026 131,897,937
US$'000 US$'000 US$'000
Issued and Fully Paid:
Ordinary shares of 1p each 2,950 2,374 2,375

During the period 36,150,000 ordinary shares were issued as follows:

On 8 March 2012, 150,000 ordinary shares of 1p were issued at 74p in respect of the exercise of share options.

On 22 March 2012, by way of placing, 25,000,000 ordinary shares of 1p were issued at 92p.

On 24 March 2012, 11,000,000 ordinary shares of 1p were issued at 62.75p in respect of the acquisition of the Sega Gold project in Burkina Faso.

8. Contingent liabilities

As stated in note 21 of the Annual report and accounts for the year ended 31 December 2011, the Company received a proposal for additional costs sustained by the mining contractor at the Yaoure Mine totalling US$9.2m in February 2011.

An updated claim was made in June 2011 totalling a further US$5.4m. Whilst the situation remains unresolved the Company has received external advice that confirms that the current provision of US$1.0m is, in the opinion of the Directors, the maximum payable under the terms of the contract.

The terms of the contract clearly state that the rates set out therein shall apply regardless of the difficulty in performing the works under the contract, such that the majority of the additional costs claimed cannot be recovered under the contract.

9. Post balance sheet events

On 12 September the Company announced the signing of a strategic alliance with Samsung C&T Corporation which was due to commence with a US$20m unhedged debt facility. Following the completion of certain conditions precedent the US$20m was drawdown by the Company on 24 October 2012.

This report includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation.

All statements other than statements of historical fact included in this report, including, without limitation, the positioning of the Company for future success, anticipated production at Kalsaka and cash flow from Kalsaka, expected grade of material processed from Sega, the finalisation of a fiscal stability agreement with the Sierra Leone Government, commencement of production at Baomahun, statements regarding the exploration, drilling results, mineral resource update and potential future production at Yaoure, Kalsaka and Baomahun, the timing of the feasibility study for Baomahun, and future capital plans and objectives of Amara, are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Amara's expectations include, among others, the Company's ability to delineate sufficient sulphide resources for the development of a CIL/CIP operation, risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined as well as future price of gold. Although Amara has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Amara does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

Non IFRS Measures - EBITDA (Earnings Before Interest, Income Taxes, Depreciation and Amortization), cash cost per ounce, pre-tax cash margin and average realised gold price are financial measures used by many investors to compare mining companies on the basis of operating results, asset value and the ability to incur and service debt. EBITDA is used because Amara's net income alone does not give an accurate picture of its cash generating potential. Management believes that EBITDA is an important measure in evaluating the Company's financial performance, ability to fund future capital expenditures and repay any future project financing, and in determining whether to invest in Amara. Similarly, cash cost per ounce, pre-tax cash margin and average realised gold price are measures that are considered key measures by Amara in evaluating the Company's operating performance. However, EBITDA, cash cost per ounce and average realised gold price are not measures of financial performance, nor do they have a standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other companies.

Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of Amara's performance or to cash flows from operating, investing and financing activities of liquidity and cash flows. These measures have been described and presented in this document in order to provide shareholders and potential investors with additional information regarding the Company's operational performance, liquidity and its ability generate funds to finance its operations.

Peter Brown is a "Qualified Person" within the definition of National Instrument 43-101 and has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained herein, and reviewed and approved the information contained within this announcement. Mr Brown (MIMMM) is the Group Exploration Manager.

i See the Company's press release, "Results of the Preliminary Economic Assessment and Exploration Update for the Sega Gold Project", dated 16 October 2012

ii See the Company's press release, "Results of the Preliminary Economic Assessment and Exploration Update for the Sega Gold Project", dated 16 October 2012

iii See the Company's press release "Further drilling results from the Yaoure project", dated 14 August 2012

NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS PRESS RELEASE

Contact Information

  • Amara Mining plc
    John McGloin, Chairman
    Peter Spivey, Chief Executive Officer
    Pete Gardner, Finance Director
    Katharine Sutton, Head of Investor Relations
    +44 (0)20 7398 1420

    Canaccord Genuity Limited
    (Nominated Adviser & Broker, London)
    Rob Collins
    Sebastian Jones
    Joe Weaving
    +44 (0)20 7523 8350

    Pelham Bell Pottinger
    (Financial Public Relations)
    Charlie Vivian
    Daniel Thole
    Lorna Spears
    +44 (0)20 7861 3232