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Avesoro Resources Inc. - Financial Highlights for the Three and Six Months Ended June 30, 2018

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Avesoro Resources Inc. - Financial Highlights for the Three and Six Months Ended June 30, 2018

Canada NewsWire

TSX: ASO
AIM: ASO

TORONTO, Aug. 13, 2018 /CNW/ - Avesoro Resources Inc., ("Avesoro" or the "Company"), the TSX and AIM listed West African gold producer, is pleased to announce the release of its unaudited financial results for the quarter (the "Quarter" or "Q2") and six months ("H1") ended June 30, 2018.

Financial Highlights:
H1 2018

  • Gold production of 128,319 ounces, in line with full year 2018 guidance of 220,000 – 240,000 ounces and a 318% increase versus H1 2017 ("HoH");
  • Revenues of US$165.9 million from gold sales of 125,838 ounces at an average realised gold price of US$1,318 per ounce, versus revenues of US$39 million and gold sales of 30,375 ounces in H1 2017;
  • Operating cash costs US$658 per ounce sold in H1 2018, an improvement of 37% HoH;
  • All in sustaining cash costs ("AISC") of US$932 per ounce sold in H1 2018, a 40% HoH improvement;
  • Company EBITDA margin of 39%, with EBITDA of US$64.6 million versus EBITDA of US$1.1 million in H1 2017;
  • Operating cash flows of US$47.9 million, compared to an outflow of US$7.4 million in H1 2017; and
  • Cash of US$12.7 million and debt of US$134.5 million at June 30, 2018.

Q2 2018

  • Gold production of 60,231 ounces in the Quarter, a decrease of 12% on the previous quarter, as a result of planned lower grades at the Youga mine;
  • Revenues of US$74.5 million from gold sales of 57,285 ounces in Q2 2018 at an average realised gold price of US$1,302 per ounce;
  • Operating cash costs of US$698 per ounce sold in Q2 2018;
  • AISC of US$985 per ounce sold in Q2 2018;
  • Company EBITDA margin of 33%, with EBITDA of US$24.4 million in the Quarter; and
  • Operating cash flows of US$8.5 million in the Quarter.

Serhan Umurhan, Chief Executive Officer of Avesoro, commented: "We delivered a strong operational and financial performance during the first half of 2018 producing over 128,000 ounces of gold across our two mines at an operating cash cost of US$658 and all-in-sustaining cost of US$932 per ounce sold. Both New Liberty and Youga are performing in line with expectations helping the Company to generate US$47.9 million in cash flow so far this year. Following a particularly strong Q1 2018 performance, the Youga mine is now performing at a normalised production rate. New Liberty's performance continues to improve with a further seven percent increase in gold production during the Quarter and unit cost reductions in all key areas of operations.

We continue to make good progress with our substantial exploration drilling programme across both Liberia and Burkina Faso, with 89,900 metres of diamond drilling having been completed across our portfolio so far this year, representing 52% of the full year budget. We expect these activities to provide further increases in shareholder value in addition to the 29% increase in mineral reserves at Youga already announced earlier in the Quarter.

We now look forward to delivering another strong performance in the second half of 2018 and we maintain our full year production guidance of 220,000 – 240,000 ounces of gold at an all-in-sustaining cost of between US$960 and US$1,000 per ounce sold."

Table 1: Consolidated Financial Highlights

Metric

Q2 2018

Q1 2018

Q2 2018
vs
Q1 2018

H1 2018

H1 2017

H1 2018
vs
H1 2017

Gold production, oz

60,231

68,088

-12%

128,319

30,735

318%

Gold sold, oz

57,285

68,553

-16%

125,838

31,390

301%

Operating cash costs,
US$/oz sold

698

624

12%

658

1,043

-37%

All in Sustaining Costs,
US$/oz sold

985

889

11%

932

1,543

-40%

Average Realised Gold
Price, US$/oz

1,302

1,333

-2%

1,315

1,243

6%

Revenues, US$m

74.5

91.4

-18%

165.9

39.0

325%

EBITDA**, US$m

24.4

40.2

-39%

64.6

1.1

5,773%

EBITDA margin, %

33

44

-26%

39

3

1,281%

Cash flow from operations,
US$m

8.5

39.4

-78%

47.9

-7.4

747%

Capital spend, US$m

13.2

13.6

-3%

26.8

12.0

123%

Cash, US$m

12.7

23.0

-45%

12.7

2.8

354%

Debt, US$m

134.5

137.3

-2%

134.5

119.6

12%


Operating cash costs, AISC and EBITDA, are non-GAAP measures and are defined in the notes section of this announcement.

 

Table 2: Key Operational Financial Highlights

Metric

Q2 2018

Q1 2018

Q2 2018
vs
Q1 2018

H1 2018

H1 2017

H1 2018
vs
H1 2017

New Liberty

Gold production, oz

29,808

27,870

7%

57,678

30,735

88%

Mining cost, US$/t

2.42

2.51

-4%

2.47

2.38

4%

Processing cost, US$/t

24.53

24.52

0%

24.53

27.34

-10%

Operating cash costs,
US$/oz sold

781

846

-8%

813

1,043

-22%

All in Sustaining Costs,
US$/oz sold

1,038

1,095

-5%

1,066

1,543

-31%

Youga

Gold production, oz

30,423

40,218

-24%

70,641

48,922

44%

Mining cost, US$/t

1.90

2.40

-21%

2.11

1.57

34%

Processing cost, US$/t

18.64

19.63

-5%

19.14

18.76

2%

Operating cash costs,
US$/oz sold

616

470

31%

530

537

-1%

All in Sustaining Costs,
US$/oz sold

852

707

21%

767

821

-7%

 

Outlook

During the second half of 2018, the Company expects to see further improvements in unit cost performance as mining volumes increase following the commissioning of additional heavy mining equipment at both New Liberty and Youga and also the increased plant throughputs that have been enabled through process plant optimisation activities undertaken during H1 2018.

The Company maintains its full year production guidance of 220,000 – 240,000 ounces of gold at an operating cash cost of US$620 to US$660 per ounce sold and all-in-sustaining cost of between US$960 and US$1,000 per ounce sold.

Following the Mineral Resource and Reserve upgrade for Youga published during Q2 2018, the Company's extensive drilling campaigns continue to progress at pace in both Liberia and Burkina Faso with 89,900 metres of diamond drilling completed during H1 2018. The Company now looks forward to further updating the market on the results of its Mineral Resource upgrade work at New Liberty during Q3 2018 and its infill drilling campaign at the Ndablama deposit during Q4 2018.

Analyst and Investor Call

The company will be hosting a conference call and webcast for investors and analysts on August 13, 2018 at 08:00 EST / 13:00 BST.

The access details for the conference call are as follows:

Location

Phone Type

Phone Number

United Kingdom

Freephone

0800 358 9473

United Kingdom, Local

Local

+44 333 300 0804

United States

Freephone

+1 855 857 0686

United States, Local

Local

+1 631 913 1422

Canada

Freephone

+1 416 216 4189

Canada, Local

Local

+1 844 747 9618

 

Password: 33464313#

Webcast URL:

http://arkadinemea-events.adobeconnect.com/e2w8a53msk4o/event/registration.html

Financial Statements and MD&A

The Financial Statements are appended to this announcement. Both the Financial Statements and the accompanying Management Discussion and Analysis are available for review at the Company's website, www.avesoro.com and on www.sedar.com.

In preparing the Company's interim financial statements for the period ended June 30, 2018, Management noted an error in the calculation of the fair valuation of related party loans with Mapa Insaat ve Ticaret A.S.  that requires the restatement of the audited consolidated statement of financial position as at December 31, 2017 and unaudited interim consolidated statement of financial position as at March 31, 2018.  The impact of the restatement of the audited consolidated statement of financial position as at December 31, 2017 is to increase the current portion of borrowings by US$2.0 million, increase the non-current portion of borrowings by US$3.2 million and reduce the capital contribution in equity by US$5.2 million.  The impact of the restatement of the unaudited interim consolidated statement of financial position as at March 31, 2018 is to increase the current portion of borrowings by US$2.8 million, increase the non-current portion of borrowings by US$4.9 million and reduce the capital contribution in equity by US$7.7 million.  The adjustments have no impact on profit nor cash flows for the year ended December 31, 2017 nor for the three months ended March 31, 2018.  The repayment terms, rates and amounts payable pursuant to the loan agreements are unchanged.

The Company will re-file on SEDAR the restated audited consolidated financial statements as of and for the year ended December 31, 2017 and the restated unaudited interim consolidated financial statements as of and for the three months ended March 31, 2018.

Notes

Non-GAAP Financial Measures: The Company has included certain non-GAAP financial measures in this press release, including operating cash costs and all-in sustaining costs ("AISC") per ounce of gold sold and EBITDA. These non-GAAP financial measures do not have any standardised meaning. Accordingly, these financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards ("IFRS").

Operating cash costs and AISC are a common financial performance measure in the mining industry but have no standard definition under IFRS. Operating cash costs are reflective of the cost of production. AISC include operating cash costs, net-smelter royalty, corporate costs, sustaining capital expenditure, sustaining exploration expenditure and capitalised stripping costs. The Company reports cash costs on an ounces of gold sold basis.

The Company calculates EBITDA as net profit or loss for the period excluding finance costs, income tax expense and depreciation. EBITDA does not have a standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes and the effects of changes in working capital balances and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.

Other companies may calculate these measures differently and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

About Avesoro Resources Inc.

Avesoro Resources is a West Africa focused gold producer and development company that operates two gold mines across West Africa and is listed on the Toronto Stock Exchange ("TSX") and the AIM market operated by the London Stock Exchange ("AIM"). The Company's assets include the New Liberty Gold Mine in Liberia ("New Liberty") and the Youga Gold Mine in Burkina Faso ("Youga").

New Liberty has an estimated Proven and Probable Mineral Reserve of 7.4Mt with 717,000 ounces of gold grading 3.03g/t and an estimated Measured and Indicated Mineral Resource of 9.6Mt with 985,000 ounces of gold grading 3.2g/t and an estimated Inferred Mineral Resource of 6.4Mt with 620,000 ounces of gold grading 3.0g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated November 1, 2017 and entitled "New Liberty Gold Mine, Bea Mountain Mining Licence Southern Block, Liberia, West Africa" and is available on SEDAR at www.sedar.com.

Youga has an estimated Proven and Probable Mineral Reserve of 11.2Mt with 660,100 ounces of gold grading 1.84g/t and a combined estimated Measured and Indicated Mineral Resource of 16.64Mt with 924,200 ounces of gold grading 1.73g/t and an Inferred Mineral Resource of 13Mt with 685,000 ounces of gold grading 1.70g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated July 31, 2018 and entitled "Mineral Resource and Mineral Reserve Update for the Youga Gold Mine, Burkina Faso" and is available on SEDAR at www.sedar.com.

For more information, please visit www.avesoro.com.

Qualified Persons

The Company's Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr. Sci.Nat) of the South African Council for Natural Scientific Professions. Mark Pryor is an independent technical consultant with over 25 years of global experience in exploration, mining and mine development and is a "Qualified Person" as defined in National Instrument 43 -101 "Standards of Disclosure for Mineral Projects" of the Canadian Securities Administrators and has reviewed and approved this press release. Mr. Pryor has verified the underlying technical data disclosed in this press release.

Forward Looking Statements

Certain information contained in this press release constitutes forward looking information or forward looking statements within the meaning of applicable securities laws. This information or statements may relate to future events, facts, or circumstances or the Company's future financial or operating performance or other future events or circumstances. All information other than historical fact is forward looking information and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results, performance, events or circumstances expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "would", "project", "should", "believe", "target", "predict" and "potential".  No assurance can be given that this information will prove to be correct and such forward looking information included in this press release should not be unduly relied upon.  Forward looking information and statements speak only as of the date of this press release. 

Forward looking statements or information in this press release include, among other things, statements regarding full year 2018 production guidance of 220,000 to 240,000 ounces of gold at an operating cash cost of between US$620 to US$660 per ounce sold and an all-in sustaining cost of between US$960 and US$1,000 per ounce sold, statements regarding improvements in its unit cost base, increased mining rates, increased plant throughputs, publishing of an updated Mineral Resource and Mineral Reserve for New Liberty during Q3 2018 and the Ndablama deposit during Q4 2018.

In making the forward looking information or statements contained in this press release, assumptions have been made regarding, among other things: general business, economic and mining industry conditions; interest rates and foreign exchange rates; the continuing accuracy of Mineral Resource and Reserve estimates; geological and metallurgical conditions (including with respect to the size, grade and recoverability of Mineral Resources and Reserves) and cost estimates on which the Mineral Resource and Reserve estimates are based; the supply and demand for commodities and precious and base metals and the level and volatility of the prices of gold; market competition; the ability of the Company to raise sufficient funds from capital markets and/or debt to meet its future obligations and planned activities and that unforeseen events do not impact the ability of the Company to use existing funds to fund future plans and projects as currently contemplated; the stability and predictability of the political environments and legal and regulatory frameworks including with respect to, among other things, the ability of the Company to obtain, maintain, renew and/or extend required permits, licences, authorizations and/or approvals from the appropriate regulatory authorities; that contractual counterparties perform as agreed; and the ability of the Company to continue to obtain qualified staff and equipment in a timely and cost-efficient manner to meet its demand.

Actual results could differ materially from those anticipated in the forward looking information or statements contained in this press release as a result of risks and uncertainties (both foreseen and unforeseen), and should not be read as guarantees of future performance or results, and will not necessarily be accurate indicators of whether or not such results will be achieved. These risks and uncertainties include the risks normally incidental to exploration and development of mineral projects and the conduct of mining operations (including exploration failure, cost overruns or increases, and operational difficulties resulting from plant or equipment failure, among others); the inability of the Company to obtain required financing when needed and/or on acceptable terms or at all; risks related to operating in West Africa, including potentially more limited infrastructure and/or less developed legal and regulatory regimes; health risks associated with the mining workforce in West Africa; risks related to the Company's title to its mineral properties; the risk of adverse changes in commodity prices; the risk that the Company's exploration for and development of mineral deposits may not be successful; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in jurisdictions where the Company operates, including adverse or arbitrary changes in applicable laws or regulations or in their enforcement; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company's operations; that Mineral Resource and Reserve estimates are only estimates and actual metal produced may be less than estimated in a Mineral Resource or Reserve estimate; the risk that the Company will be unable to delineate additional Mineral Resources; risks related to environmental regulations and cost of compliance, as well as costs associated with possible breaches of such regulations; uncertainties in the interpretation of results from drilling; risks related to the tax residency of the Company; the possibility that future exploration, development or mining results will not be consistent with expectations; the risk of delays in construction resulting from, among others, the failure to obtain materials in a timely manner or on a delayed schedule; inflation pressures which may increase the cost of production or of consumables beyond what is estimated in studies and forecasts; changes in exchange and interest rates; risks related to the activities of artisanal miners, whose activities could delay or hinder exploration or mining operations; the risk that third parties to contracts may not perform as contracted or may breach their agreements; the risk that plant, equipment or labour may not be available at a reasonable cost or at all, or cease to be available, or in the case of labour, may undertake strike or other labour actions; the inability to attract and retain key management and personnel; and the risk of political uncertainty, terrorism, civil strife, or war in the jurisdictions in which the Company operates, or in neighbouring jurisdictions which could impact on the Company's exploration, development and operating activities.

Although the forward-looking statements contained in this press release are based upon what management believes are reasonable assumptions, the Company cannot provide assurance that actual results or performance will be consistent with these forward-looking statements. The forward looking information and statements included in this press release are expressly qualified by this cautionary statement and are made only as of the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.

Condensed Interim Consolidated Financial Statements (Unaudited)

Avesoro Resources Inc.

For the Three and Six Months Ended June 30, 2018 and 2017
(stated in thousands of US dollars)

Registered office:

199 Bay Street


Suite 5300


Commerce West Street


Toronto


Ontario, M5L 1B9


Canada



Company registration number:

776831-1  



Company incorporated on:

1 February 2011

 

Avesoro Resources Inc.
Interim Consolidated Statements of Income and Comprehensive Income
(stated in thousands of US dollars)
Unaudited


Three months
ended

June 30,
2018

Three months
ended

June 30,
2017

Six months
ended

June 30,
2018

Six months
ended

June 30,
2017

$'000

$'000

$'000

$'000






Gold sales (Note 2)

74,530

19,313

165,900

39,012






Cost of sales





- Production costs (Note 2)

(43,195)

(16,567)

(92,181)

(34,062)

- Depreciation (Note 2)

(20,390)

(7,428)

(37,000)

(14,179)






Gross profit/(loss)

10,945

(4,682)

36,719

(9,229)






Expenses





Administrative and other expenses (Note 3)

(2,405)

(1,395)

(4,009)

(2,980)

Exploration and evaluation costs

(4,513)

(371)

(6,524)

(867)

Loss on lease termination

-

-

(566)

-






Profit/(Loss) from operations

4,027

(6,448)

25,620

(13,076)






Derivative liability (loss)/gain

-

(13)

105

(175)

Foreign exchange loss

(817)

(167)

(1,912)

(164)

Finance costs

(2,832)

(2,853)

(7,173)

(5,623)

Finance income     

-

3

174

6






Profit/(Loss) before tax

378

(9,478)

16,814

(19,032)






Tax for the period (Note 4)

(3,267)

-

(9,856)

-






Net profit/(loss) after tax

(2,889)

(9,478)

6,958

(19,032)

Attributable to:





- Owners of the Company

(4,172)

(9,478)

3,847

(19,032)

- Non-controlling interest (Note 13)

1,283

-

3,111

-






Other comprehensive income/(loss)

Items that may be reclassified subsequently
to profit or loss:





Fair value gains/(losses) on investments

(9)

14

22

(4)

Currency translation differences

(3)

(244)

(40)

(193)






Total comprehensive income/(loss)





Attributable to:





- Owners of the Company

(4,184)

(9,708)

3,829

(19,229)

- Non-controlling interest

1,283

-

3,111

-


(2,901)

(9,708)

6,940

(19,229)

Earnings/(Loss) per share, basic and
diluted (US$) (Note 5)

(0.051)

(0.178)

0.047

(0.357)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Interim Consolidated Statements of Financial Position
(stated in thousands of US dollars)
Unaudited


June 30,

2018

$'000

December 31,

2017

$'000

(as restated -
see Note 1)

Assets



Current assets



Cash and cash equivalents

12,686

17,787

Trade and other receivables (Note 6)

32,532

25,286

Inventories (Note 7)

40,030

36,932

Other assets

1,486

1,710


86,734

81,715

Non-current assets



Property, plant and equipment (Note 8)

243,403

249,552

Intangible assets - Exploration and evaluation assets (Note 9)

3,359

-

Investments

-

21

Deferred tax asset

2,602

4,554

Other assets

1,301

1,196


250,665

255,323

Total assets

337,399

337,038




Liabilities



Current liabilities



Borrowings (Note 10)

25,750

37,964

Trade and other payables

49,964

41,003

Income tax payable

9,392

12,358

Finance lease liability (Note 11)

254

1,913

Derivative liability

-

105

Provisions

3,143

523


88,503

93,866

Non-current liabilities



Borrowings (Note 10)

107,685

101,335

Trade and other payables

-

463

Finance lease liability (Note 11)

770

5,875

Provisions

9,738

10,439


118,193

118,112

Total liabilities

206,696

211,978




Equity



Share capital (Note 12)

353,686

353,653

Capital contribution

53,549

54,022

Share based payment reserve

8,407

7,840

Acquisition reserve

(33,060)

(33,060)

Fair value reserve

-

(487)

Cumulative translation reserve

(506)

(466)

Deficit

(256,774)

(260,156)

Equity attributable to owners

125,302

121,346

Non-controlling interest (Note 13)

5,401

3,714

Total equity

130,703

125,060

Total liabilities and equity

337,399

337,038

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.                                    

Avesoro Resources Inc.
Interim Consolidated Statements of Cash Flows
(stated in thousands of US dollars)
Unaudited


Six months
ended

June 30,

2018

Six months
ended

June 30,

2017


$'000

$'000

Operating activities



Net profit/(loss) after tax      

6,958

(19,032)

Tax for the period

9,856

-

Profit/(Loss) before tax 

16,814

(19,032)


Items not affecting cash:





Share-based payments (Note 3)

567

590



Depreciation (Note 8)

37,171

14,339



Unrealized foreign exchange loss/(gain)

1,125

(186)



Derivative liability loss/(gain)

(105)

175



Interest expense

7,173

5,623



Loss on lease termination

566

-

Changes in non-cash working capital




Increase in trade and other receivables

(7,246)

(8,732)


Increase/(decrease) in trade and other payables

6,008

(1,351)


(Increase)/decrease in inventories

(3,098)

1,209

Income taxes paid

(11,066)

-

Cash flows from/(used in) operating activities

47,909

(7,365)




Investing activities



Payments to acquire property, plant and equipment

(23,447)

(12,002)

Payments to acquire intangible assets

(3,359)

-

Decrease/(increase) in other assets

119

(603)

Proceeds from sale of available for sale investment

44

-

Cash flows used in investing activities

(26,643)

(12,605)




Financing activities



Proceeds from borrowings (Note 10b)

6,150

15,600

Payments to borrowings (Note 10)

(24,045)

-

Finance charges

(5,540)

(6,269)

Dividend payment to non-controlling interest

(1,424)

-

Payment of finance leases

(1,254)

-

Proceeds from exercise of stock options (Note 12)

33

-

Cash flows (used in)/from financing activities

(26,080)

9,331




Impact of foreign exchange on cash balance

(287)

21

Net decrease in cash and cash equivalents

(5,101)

(10,618)

Cash and cash equivalents at beginning of period

17,787

13,429

Cash and cash equivalents at end of period

12,686

2,811

 

Significant non-cash transactions during the six months ended June 30, 2018 includes the acquisition of new heavy mining equipment for $10.3 million in exchange for new related party loans (Note 10c) and the termination of the generators held as finance leases (Note 8).   

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Interim Consolidated Statements of Changes in Equity
(stated in thousands of US dollars)
Unaudited


Total Equity Attributable to Owners




Share
capital

 

$'000

Capital
contribution

(as restated -
see Note 1)

 

$'000

Share-
based
payment
reserve

 

$'000

Acquisition

reserve

 

$'000

Fair value

reserve

 

$'000

Cumulative
translation
reserve

 

$'000

Deficit


 

$'000

Total

 

 

$'000

Non-
controlling
Interest

 

$'000

Total Equity

 

$'000

Balance at January 1, 2017

283,506

48,235

6,770

-

(453)

(400)

(232,682)

104,976

-

104,976

Loss for the period

-

-

-

-

-

-

(19,032)

(19,032)

-

(19,032)

Other comprehensive loss for period

-

-

-

-

(4)

(193)

-

(197)

-

(197)

Total comprehensive loss for period

-

-

-

-

(4)

(193)

(19,032)

(19,229)

-

(19,229)

Share-based payments

-

-

590

-

-

-

-

590

-

590

Balance at June 30, 2017

283,506

48,235

7,360

-

(457)

(593)

(251,714)

86,337

-

86,337












Balance at January 1, 2018

353,653

59,230

7,840

(33,060)

(487)

(466)

(260,156)

126,554

3,714

130,268

Restatement of related party loans

-

(5,208)

-

-

-

-

-

(5,208)

-

(5,208)

Balance at January 1, 2018, as restated

353,653

54,022

7,840

(33,060)

(487)

(466)

(260,156)

121,346

3,714

125,060

Profit for the period

-

-

-

-

-

-

3,847

3,847

3,111

6,958

Other comprehensive income/(loss) for period

-

-

-

-

22

(40)

-

(18)

-

(18)

Total comprehensive income/(loss) for period

-

-

-

-

22

(40)

3,847

3,829

3,111

6,940

Exercise of stock options (Note 12)

33

-

-

-

-

-

-

33

-

33

Share-based payments

-

-

567

-

-

-

-

567

-

567

Dividends paid to non-controlling interest

-

-

-

-

-

-

-

-

(1,424)

(1,424)

Related party loans (Note 10)

-

1,698

-

-

-

-

-

1,698

-

1,698

Payment of related party loans (Note 10b)

-

(2,171)

-

-

-

-

-

(2,171)

-

(2,171)

Reserve transfer on sale of investment

-

-

-

-

465

-

(465)

-

-

-

Balance at June 30, 2018

353,686

53,549

8,407

(33,060)

-

(506)

(256,774)

125,302

5,401

130,703

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
For the three and six months ended June 30, 2018 and 2017
(in thousands of US dollars unless otherwise stated)

1  Nature of operations and basis of preparation

Avesoro Resources Inc. ("Avesoro" or the "Company"), was incorporated under the Canada Business Corporations Act on February 1, 2011. The focus of Avesoro's business is the exploration, development and operation of gold assets in West Africa, specifically the New Liberty Gold Mine in Liberia and the Youga gold mine in Burkina Faso. 

On December 18, 2017 the Company completed the acquisition of the Youga gold mine and the Balogo satellite deposit in Burkina Faso through the acquisition of the entire issued share capital of MNG Gold Burkina SARL, Cayman Burkina Mines Ltd., MNG Gold Exploration Ltd., AAA Exploration Burkina Ltd. and Jersey Netiana Mining Ltd. and their subsidiaries from Avesoro Jersey Limited ("AJL"), the Company's majority shareholder, for a total consideration of US$70.2 million comprised of the issuance of US$51.5 million of new common shares in the Company and a cash component of US$18.7 million.

These condensed interim consolidated financial statements ("interim financial statements") have been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting". They do not include all disclosures that would otherwise be required in a complete set of financial statements. They follow accounting policies and methods of their application consistent with the audited consolidated financial statements for the year ended December 31, 2017. Accordingly, they should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2017. 

These interim financial statements were authorised by the Board of Directors on August 10, 2018.

Restatement of Consolidated Statement of Financial Position as at December 31, 2017

In preparing the Company's interim financial statements for the period ended June 30, 2018, Management identified an error in the calculation of the fair valuation of related party loans with Mapa Insaat ve Ticaret A.S.  The error requires the restatement of the audited consolidated statement of financial position as at December 31, 2017.  The impact of the restatement of the audited consolidated statement of financial position is to increase the current portion of borrowings by $2.0 million, increase the non-current portion of borrowings by $3.2 million and reduce the capital contribution in equity by $5.2 million.  The adjustment has no impact on profit nor cash flows for the year ended December 31, 2017.  The repayment terms, rates and amounts payable pursuant to the loan agreements are unchanged.



As previously
stated at
December 31,
2017

Increase/
(Decrease)
Restatement

As restated at
December 31,
2017



$'000

$'000

$'000

Liabilities





Borrowings, current portion


35,999

1,965

37,964

Borrowings, non-current portion


98,092

3,243

101,335






Equity





Capital contribution


59,230

(5,208)

54,022

 

New accounting policies

The Company adopted the following revised or new IFRS standards that have been issued effective January 1, 2018. The impact of the standards on the Company's accounting policies and financial statements is discussed below:

IFRS 9, Financial Instruments introduces new requirements for the classification and measurement of financial assets and liabilities. IFRS 9 replaced the multiple classification and measurement models for financial assets that exist under IAS 39 Financial Instruments, and the basis on which financial assets are measured will determine their classification as either, at amortized cost, fair value through profit and loss, or fair value through other comprehensive income.

Although the investment in Stellar Diamonds plc remains measured at fair value with fair value gains or losses recognised in other comprehensive income, on disposal of the investment the cumulative change in fair value remains in other comprehensive income and is not recycled to the income statement. The adoption of IFRS has no other material impact on the consolidated financial statements.  

IFRS 15 Revenue from Contracts with Customers provides that an entity should recognize revenue to depict the transfer of goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. The Company has assessed the impact of this change on the amount of revenue recognised and determined it to be not significant.

Going concern

The condensed interim consolidated financial statements have been prepared on a going concern basis. As at June 30, 2018, the Company has net current liabilities of $1.8 million and has approximately $28.6 million of debt repayments due in the next twelve months. 

The free cash generation of the Company significantly improved following the acquisition of the Youga gold mine and the Balogo satellite deposit in December 2017 and the continuing improvement of operations at New Liberty. Accordingly, the Company expects to meet its current liabilities through its free cash generation capacity. In addition, the Company has an undrawn facility of $20 million with AJL as at June 30, 2018 which it can call upon for general working capital purposes. 

The Company's forecasts and projections show that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, it continues to adopt the going concern basis of accounting in preparing the consolidated financial statements.

2  Segment information

The Company is engaged in the exploration, development and operation of gold projects in the West African countries of Liberia, Burkina Faso and Cameroon. Information presented to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on the geographical location of mining operations. The reportable segments under IFRS 8 are as follows:

  • New Liberty operations;
  • Burkina operations which include the Youga gold mine and the Balogo satellite deposit;
  • Exploration; and
  • Corporate.

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended June 30, 2018:


 New Liberty
operations

Burkina
operation

Exploration

Corporate

Total


$'000

$'000

$'000

$'000

$'000

Profit/(Loss) for the period

(7,701)

12,476

(5,314)

(2,350)

(2,889)

Gold sales

37,194

37,336

-

-

74,530

Production costs






- Mine operating costs

(23,435)

(21,222)

-

-

(44,657)

- Change in inventories

(135)

1,597

-

-

1,462


(23,570)

(19,625)

-

-

(43,195)

Depreciation

(18,653)

(1,736)

(65)

(53)

(20,507)

Segment assets

232,806

94,472

4,356

5,765

337,399

Segment liabilities

(144,557)

(55,125)

(4,310)

(2,706)

(206,698)

Capital additions






- property, plant and equipment

7,273

3,822

-

-

11,095

- intangible assets

-

-

1,599

-

1,599

 

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the six months ended June 30, 2018:


 New Liberty
operations

Burkina
operations

Exploration

Corporate

Total


$'000

$'000

$'000

$'000

$'000

Profit/(Loss) for the period

(13,737)

30,756

(6,351)

(3,710)

6,958

Gold sales

74,517

91,383

-

-

165,900

Production costs






- Mine operating costs

(46,696)

(41,909)

-

-

(88,605)

- Change in inventories

(1,887)

(1,689)

-

-

(3,576)


(48,583)

(43,598)

-

-

(92,181)

Depreciation

(31,200)

(5,800)

(117)

(54)

(37,171)

Capital additions






- property, plant and equipment

23,721

12,734

40

-

36,495

- intangible assets

-

-

3,359

-

3,359

 

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended June 30, 2017:


 New Liberty
operations

Burkina
operations

Exploration

Corporate

Total


$'000

$'000

$'000

$'000

$'000

Loss for the period

(7,744)

-

(422)

(1,312)

(9,478)

Gold sales

19,313

-

-

-

19,313

Production costs






- Mine operating costs

(16,688)

-

-

-

(16,688)

- Change in inventories

121

-

-

-

121


(16,567)

-

-

-

(16,567)

Depreciation

(7,428)

-

(66)

(5)

(7,499)

Segment assets

219,718

-

255

2,985

222,958

Segment liabilities

(135,802)

-

(111)

(708)

(136,621)

Capital additions






- property, plant and equipment

5,372

-

-

-

5,372

 

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the six months ended June 30, 2017:


 New Liberty
operations

Burkina
operations

Exploration

Corporate

Total


$'000

$'000

$'000

$'000

$'000

Loss for the period

(15,375)

-

(1,001)

(2,656)

(19,032)

Gold sales

39,012

-

-

-

39,012

Production costs






- Mine operating costs

(32,833)

-

-

-

(32,833)

- Change in inventories

(1,229)

-

-

-

(1,229)


(34,062)

-

-

-

(34,062)

Depreciation

(14,180)

-

(150)

(10)

(14,340)

Capital additions






- property, plant and equipment

12,580

-

-

-

12,580

 

3  Administrative expenses


Three months ended

Six months ended


  June 30,
2018

  June 30,
2017

  June 30,
2018

  June 30,
2017


$'000

$'000

$'000

$'000

Wages and salaries

591

375

1,127

752

Legal and professional

657

134

959

676

Depreciation

117

72

171

161

Share based payments

270

314

567

590

Other expenses

770

500

1,185

801


2,405

1,395

4,009

2,980

 

Foreign exchange gains and losses have been reclassified as financing items rather than operational items.  The above table has been restated to exclude the foreign exchange gain of US$164 thousand for the six months ended June 30, 2017.   

4  Income taxes

Tax for the period comprises of:


Three months ended

Six months ended


  June 30,
2018

  June 30,
2017

  June 30,
2018

  June 30,
2017


$'000

$'000

$'000

$'000

Current tax

(3,554)

-

(7,884)

-

Deferred tax

287

-

(1,972)

-


(3,267)

-

(9,856)

-

 

5  Earnings per share ("EPS")


Three months ended

Six months ended


  June 30,

2018

  June 30,

2017

  June 30,

2018

  June 30,

2017


$'000

$'000

$'000

$'000

Net profit/(loss) after tax

attributable to Owners of the Company

 

(4,172)

 

(9,478)

 

3,847

 

(19,032)






Weighted average number of
outstanding shares for basic EPS

81,575,260

 

53,247,590

81,567,802

 

53,247,590

Dilutive share options

-

-

583,456

-

Weighted average number of
outstanding shares for diluted EPS

81,575,260

53,247,590

82,151,258

53,247,590






Basic EPS (US$)

(0.051)

(0.178)

0.047

(0.357)

Diluted EPS (US$)

(0.051)

(0.178)

0.047

(0.357)

 

6  Trade and other receivables


June 30,

2018

December 31,

2017


$'000

$'000

Trade receivable

316

416

Other receivable

14,676

10,690

Due from related parties (Note 14)

2,715

1,015

Pre-payments

14,825

13,165


32,532

25,286

 

Other receivables include a VAT receivable from the Burkina Faso Government amounting to $12.8 million as at June 30, 2018 (December 31, 2017: $8.9 million).

7  Inventories


June 30,

2018

December 31,

2017


$'000

$'000

Gold doré

1,253

3,986

Gold in circuit

5,038

2,561

Ore stockpiles

3,368

6,688

Consumables

30,371

23,697


40,030

36,932

 

Ore stockpiles as at June 30, 2018 are stated at their net realisable values after cumulative write-down at New Liberty of $2.1 million (December 31, 2017: US$2.9 million).

8  Property, plant and equipment



Mining assets

Stripping asset

Mine closure
and
rehabilitation

Assets held
under finance
lease

Machinery and
equipment

Vehicles

Leasehold
improvement

Total



$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Cost










At January 1, 2017


175,290

-

2,223

13,629

16,392

1,884

83

209,501

Additions


8,322

16,229

544

2,025

27,752

996

-

55,868

Acquisitions


24,895

-

3,445

-

30,639

204

-

59,183

Impairment


-

-

-

(3,896)

-

-

-

(3,896)

Foreign exchange


-

-

-

-

10

8

3

21

At December 31, 2017


208,507

16,229

6,212

11,758

74,793

3,092

86

320,677

Additions


7,286

7,510

-

-

21,699

-

-

36,495

Disposals


-

-

-

(7,000)

-

-

-

(7,000)

At June 30, 2018


215,793

23,739

6,212

4,758

96,492

3,092

86

350,172











Accumulated depreciation










At January 1, 2017


14,909

-

116

651

1,622

1,020

66

18,384

Charge for the period


23,754

1,838

296

2,933

3,622

303

19

32,765

Acquisitions


13,442

-

1,878

-

5,633

39

-

20,992

Impairment


-

-

-

(1,020)

-

-

-

(1,020)

Foreign exchange


-

-

-

-

3

-

1

4

At December 31, 2017


52,105

1,838

2,290

2,564

10,880

1,362

86

71,125

Charge for the period


21,292

6,305

691

1,130

7,522

231

-

37,171

Disposals


-

-

-

(1,527)

-

-

-

(1,527)

At June 30, 2018


73,397

8,143

2,981

2,167

18,402

1,593

86

106,769











Net book value










At December 31, 2017


156,402

14,391

3,922

9,194

63,913

1,730

-

249,552

At June 30, 2018


142,396

15,596

3,231

2,591

78,090

1,499

-

243,403


 

9  Intangible assets - Exploration and evaluation assets


June 30, 2018

December 31,

2017


$'000

$'000

Gassore East

1,904

-

Ouaré

1,455

-


3,359

-

 

Gassore East is a new minable mineralisation located 2 kilometres from the Youga processing plant. 

Ouaré, located 36 kilometres north east of the Youga processing plant, is the subject of an infill drilling campaign to upgrade the confidence level and classification of the existing mineral resources.

Resource modelling and pit design from the National Instrument 43-101 – Standards of Disclosure of Mineral Projects published on June 19, 2018 shows these two satellite deposits will add further mine life to the Youga Gold Mine.

10  Borrowings


June 30,

2018

December 31,

2017


$'000

$'000

(as restated -
see Note 1)

Current



Bank loan - Senior Facility Tranche A

14,692

14,741

Bank loan - Senior Facility Tranche B

-

9,737

Shareholder loan – Other

-

8,106

Related party loan

11,058

5,380


25,750

37,964

Non-current



Bank loan - Senior Facility Tranche A

58,566

58,668

Bank loan - Subordinated Facility

11,049

10,846

Shareholder loan - Working Capital Facility

12,665

14,938

Shareholder loan - Other

4,026

-

Related party loan

21,379

16,883


107,685

101,335

 

(a)  Bank loans

On December 17, 2013 the Company entered into an agreement for an $88 million project finance loan facility with Nedbank Limited and FirstRand Bank Limited (collectively the "Lenders"), (the "Senior Facility"), and also entered into a subordinated loan facility agreement for $12 million with RMB Resources (the "Subordinated Facility"). On December 9, 2015 the Company entered into an agreement for an additional $10 million Tranche B Senior Facility ("Tranche B Facility", together with the Senior Facility and the Subordinated Facility the "Loan Facilities") provided by the Lenders.  These Loan Facilities, which have been fully drawn, financed the development of the Company's New Liberty Gold Mine. $22.4 million of the Senior Facility principal has been repaid to date including $10 million during the six months ended June 30, 2018.

(b)  Shareholder loan

Working Capital Facility

In 2017, the Group borrowed $18.8 million from AJL through a working capital facility to meet liabilities arising on the termination of legacy procurement contracts, make advanced payments to suppliers to secure lower unit cost pricing and to accelerate the acquisition of capital items that will increase process plant throughput at New Liberty. 

The loan payable to AJL is recognised at fair value calculated as its present value at a market rate of interest and subsequently measured at amortised cost. The difference between fair value and loan amount is credited to equity as a capital contribution as the loan is from its majority shareholder.

New loans of $6.2 million during the six months ended June 30, 2018 were allocated to an increase in loan payable of $4.9 million and additional capital contribution of $1.2 million. Principal repayments totalling $10 million were made during the six months ended June 30, 2018 of which $7.8 million was allocated as a reduction to the loan payable and $2.2 million as a reduction to capital contribution.

Interest expense on the non-current loan payable to AJL for the six months ended June 30, 2018 was $0.6 million (six months ended June 30, 2017: $nil).

Other

The other shareholder loan payable to AJL was assumed on acquisition of the Youga gold mine and Balogo satellite deposit of which $4.1 million was repaid during the six months ended June 30, 2018.

(c)  Related party loan

In 2017 the Company entered into equipment and finance facility agreements with Mapa İnşaat ve Ticaret A.Ş. ("Mapa"), a company controlled by Mehmet Nazif Gűnal, Non-Executive Chairman of the Company, to facilitate the purchase of heavy mining equipment. The loan principal of these agreements includes a mark-up of 2.5% over the cost incurred by Mapa in procuring the equipment. The equipment finance loans are unsecured, with interest charged at 6.5% per annum on the US$ denominated loan and 5.5% per annum on the Euro denominated loan amount. The loans are repayable in cash in eight equal semi-annual instalments, the first of which will fall due six months after utilisation of the loan.

As discussed in Note 1, Management noted an error in the calculation of the fair valuation of related party loans with Mapa Insaat ve Ticaret A.S. The impact of the adjustment to restate the consolidated statement of financial position as at December 31, 2017 is to increase the current portion of borrowings by $2.0 million, increase the non-current portion of borrowings by $3.2 million and reduce the capital contribution in equity by $5.2 million

During the six months ended June 30, 2018, the Company entered into further equipment and finance facility agreements with Mapa amounting to $10.3 million. Similar to the loans entered into in 2017, these loans were initially recognised at fair value calculated as its present value at a market rate of interest and subsequently measured at amortised cost. The difference of $0.5 million between the loan amount of $10.3 million and fair value of $9.8 million has been credited to equity as a capital contribution from a related party.

Interest expense on the related party loan to Mapa for the six months ended June 30, 2018 was $1.2 million (six months ended June 30, 2017: $nil). Interest repayment was $0.8 million during the six months ended June 30, 2018 (six months ended June 30, 2017: $nil).

11  Finance lease liability

The finance lease liability as at June 30, 2018 relates to the fuel storage facility at New Liberty Gold Mine following termination of the lease arrangement on the generators at nil consideration. Such assets have been classified as finance leases as the rental period amounts to a major portion of the estimated useful economic life of the lease assets and the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased assets.


June 30,

2018

December 31,

2017


$'000

$'000

Gross finance lease liability



-       Within one year

362

2,820

-       Between two and five years

903

7,191


1,265

10,011

Future finance cost

(241)

(2,223)

Present value of lease liability

1,024

7,788




Current portion

254

1,913

Non-current portion

770

5,875

 

12  Equity

(a)  Authorised

Unlimited number of common shares without par value.          

(b)  Issued


 Shares

 $'000

Balance at January 1, 2017

53,247,590

283,506

Issued to AJL on acquisition of Youga gold mine (i)

20,334,928

51,459

Equity financing (i)

7,974,490

20,248

Share issuance costs (i)

-

(1,568)

Exercise of stock options (ii)

3,750

8

Share consolidation adjustment

(498)

-

Balance at December 31, 2017

81,560,260

353,653

Exercise of stock options (ii)

15,000

33

Balance at June 30, 2018

81,575,260

353,686

 

The Company's number of outstanding and issued shares, stock options and warrants are retrospectively presented to reflect a 100:1 share consolidation which became effective on January 16, 2018.

(i)      The Company acquired the Youga gold mine and the Balogo satellite deposit on December 18, 2017 for a total consideration of US$70.2 million which comprises of the issuance of 20,334,928 new common shares in the Company at a price of GBP£1.90 per share and a cash component of US$18.7 million. The cash component was funded through the issuance of 7,974,490 new common shares at a price of GBP£1.90 per share through a private placement. The directly attributable costs of issuance of these new common shares amounted to $1.6 million.

(ii)     During the three months ended June 30, 2016, the Company issued 15,000 new common shares on exercise of 15,000 stock options at a price of GBP£1.575 per stock option. In 2017, the Company issued 3,750 new common shares on exercise of 3,750 stock options at a price of GBP£1.575 per stock option.

(c)  Stock options

Information relating to stock options outstanding at June 30, 2018 is as follows:



Six months
ended

June 30, 2018


Year ended

December 31,

2017


Number of

options

Weighted
average

exercise price
per share

Number of
options

Weighted
average

exercise price
per share



         Cdn$


      Cdn$

Beginning of the period

2,829,428

4.96

1,242,695

9.12


Options granted

61,000

4.58

1,745,000

3.41


Options exercised

(15,000)

2.66

(3,750)

2.66


Options expired

(10,862)

72.00

(5,570)

105.00


Options forfeited

(127,508)

3.66

(148,947)

17.86


Share consolidation adjustment

(5)

-

-

-

End of the period

2,737,045

4.76

2,829,428

4.96

 

13  Non-controlling interest

Non-controlling interest represents the Government of Burkina Faso's 10% share of Burkina Mining Company and Netiana Mining Company, the subsidiaries which respectively holds the Youga gold mine and the Balogo satellite deposit.

14  Related party transactions

(a) Borrowings

Principal repayments of the shareholder loan to AJL, new and repayments of equipment finance loans with Mapa and interest repayments to Mapa in relation to the equipment finance loans during the six months ended June 30, 2018 are disclosed in Note 10.

(b) Acquisition of heavy mining equipment

In addition to the heavy mining equipment financed by Mapa, the Company also acquired five mining trucks from Mapa for US$0.4 million during the six months ended June 30, 2018 to supplement the hauling capacity at Balogo.

(c) Provision/(purchases) of goods and services

The Company also provided/(purchased) the following services from related parties:


Three months ended

Six months ended


  June 30,

2018

  June 30,

2017

  June 30,

2018

  June 30,

2017


$'000

$'000

$'000

$'000

Technical and managerial services provided by the
Company to:






Avesoro Services (Jersey) Limited, a
subsidiary of Company's parent company

-

109

-

214






Technical and support staff services provided by
the Company to:






MNG Gold Liberia Inc., a subsidiary of
Company's parent company

146

-

146







Sale of consumables by the Company to:






MNG Gold Liberia Inc., a subsidiary of
Company's parent company

538

-

538







Drilling services provided to the Company by:






Zwedru Mining Inc., a subsidiary of
Company's parent company

(967)

(234)

(1,854)

(377)






Drilling services provided to the Company by:






Faso Drilling Company SA., a subsidiary of
Company's parent company

(2,397)

-

(3,847)

-






Charter plane services provided to the
Company by:






MNG Gold Liberia Inc., a subsidiary of
Company's parent company

(90)

-

(180)

-






Travel services provided to the Company by:






MNG Turizm ve Ticaret A.S., an entity
controlled by the Company's Chairman

(6)

(7)

(6)

(15)






Management services provided by the
Company to:






Atmaca Services Liberia Inc., a subsidiary
of Company's parent company

-

2,000

-

2,000

 

Included in trade and other receivables is a receivable from related parties of $2.7 million as at June 30, 2018 (December 31, 2017: $1.0 million). 

Included in trade and other payables is $2.8 million payable to related parties as at June 30, 2018 (December 31, 2017: $0.5 million).

SOURCE Avesoro Resources Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/13/c7297.html

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