Operations and Trading Update
/ Ticker: GDP / Index: AIM / Sector: Mining & Exploration17 February 2014
('' or 'the Company')
, the AIM listed gold producer in , announces an operations and trading update for its two market leading gold recovery businesses in and and its in .
GPL recovery plant in Benoni, , continues to generate revenues for the Company by recovering gold from by-products of the mining process. During the six months to ('H1 2014'), GPL has however had a difficult trading period due to a lower gold price environment and a combination of temporary factors that have affected parts of the Company's operations. Nonetheless, has implemented a number of initiatives, which it believes will result in a stronger trading period in the second half of the year and beyond.
During the first half of the year the gold grade content of by-products that were delivered from the mines/suppliers were lower than historic grades, and at the same time had been procured at higher gold prices. This, combined with the fall and volatility of the gold price during 2013, led to a reduction in GPL's profitability for the period. However, to help mitigate the decrease in the gold price and boost operating margins, has focussed on revising by-product procurement contracts and cancelling low grade contracts with existing suppliers. In line with this, smaller sections of the plant, previously run on a single shift system for security reasons, will be run on 24 hour shifts with additional security measures being taken.
Furthermore, as previously announced on , agreed to purchase cyanide direct from local suppliers in liquid form rather than through intermediaries in order to help reduce costs. The Company achieved major cost savings in its cyanide consumption from and will increase these savings further by converting the plant to liquid cyanide supply during the second half of the 2014 financial year. These actions should improve margins and result in an increased overall yield going forward.
is also looking to increase its stockpiled by-product reserves to add production flexibility going forward. A number of new contracts have been, or are, close to finalisation and the Company is striving to conclude contracts on a corporate level rather than with individual plants. The Board believes that this strategy will enable not only to obtain by-products on a more economical basis, but also provide the supplier with an all-inclusive service, adding to leading service offering.
In the Company was pleased to announce that it was certified as a Responsible Gold producer in line with international guidelines. This certification is a major achievement for , which is the first secondary gold producer in to obtain this status. The process of accreditation took a number of months resulting in a period where was not in a position to accept by-products from suppliers nor could concentrates be sent for further processing, which further impacted GPL's profitability. By-products and concentrates are now being delivered and the Company expects revenues from by-product sources to return to its usual levels in the near term. In line with this, is confident that its accreditation will have a significant and positive impact on future contracts, profits and cash flows for GPL.
The depreciation in the South African Rand versus the US Dollar has also helped to mitigate some of the lower gold prices experienced during the period, but is unlikely to offset the deterioration in the margin in the first half of FY 2014. Nonetheless, with more favourable exchange rates, renegotiated and more cost-effective contracts, and more streamlined operations, is confident that the operational and trading outlook for the second half of the year to looks much stronger.
As a result of the Company's niche gold recovery experience, is also working closely with the in relation to in-country illegal mining activities on surface and believes that it can assist in reducing the impact of this problem to the benefit of the Company. As a result, is in the process of licensing a potential final deposit site for its re-processed tailings stockpiles on a previously disturbed area without increasing GPLs footprint.
GRG's gold recovery operation, which enjoys a tax free status until 2016, is located in the free port of in . In light of operational similarities to mature South African operation, the GRG recovery plant is sensitive to gold price fluctuations. Nonetheless, during the period under review, GRG has benefitted from a substantial deterioration in the Ghana Cedi, which has helped offset the recent lower gold price environment.
GRG has three profit centres. The first of these is GRG's tolling agreement with Endeavour Resources. As previously announced on , the Company had experienced margin pressures due to difficulties in procuring tailings at a commercial rate from artisanal and small scale miners to be processed at the GRG operation. While challenges remain, procurement prices have been substantially improved and tonnage production has increased, which should help to significantly enhance trading in the second half of the financial year ('H2 2014').
GRG's second profit centre is the carbon-in-leach section ('CIL') at . After the initial decision to close the CIL section in FY 2013, due to margin pressures sustained from procurement of sustainable by-products, GRG has begun to re-treat the stockpiles on site through the CIL circuit and is currently running at a profit.
third profit centre at GRG is its incinerator section, which recovers high-grade gold from fine carbon and rubber mill liners from blue-chip mining clients. It is intention to significantly grow this profit centre. During the first half of FY 2014 ('H1 2014), several new clients were successfully contracted to procure fine-carbon and rubber mill liner by-products, and existing contracts were renewed on more favourable terms. As a result GRG has managed to increase its fine carbon business substantially and expects to maximise production, and indeed profitability when an additional incinerator plant is commissioned in .
The Company is confident that it can expand its business benefiting from the tax free status substantially into the rest of and even further afield, and will work to achieve this during the remainder of 2014.
The Kilimapesa gold project is located in the historically productive Migori Archaean Greenstone Belt in western . Kilimapesa has a mineral resource of 8,715,291 tonnes at 2.40 g/t Au for 671,446 oz Au at a cut-off of 1 g/t.
The Kilimapesa mine remains on care and maintenance, however the plant continues to process small quantities of stockpiled ore to defray costs. Nevertheless Kilimapesa continues to suffer losses, albeit at a smaller rate, notwithstanding the gold price. The Board is currently evaluating its options for the future of Kilimapesa, and will update the market accordingly in due course.
The Company's interim results for the six months to are expected to be announced to the market on . As stated in the last Annual Report, this period has been a difficult one, and the results have been negatively impacted by a number of factors, as outlined above. Nonetheless action has been taken by management to reverse this trend on a number of fronts, including increasing the gold recovery and operational efficiency at both the South African and Ghanaian gold recovery sites, and with this in mind looks forward to H2 2014 with renewed confidence. However, the Board expects operating profit for FY 2014 to be materially below operating profit for FY 2013.
For further information visit or contact:www.goldplat.com
, is an AIM-listed profitable, debt free gold recovery services company with two market leading operations in and which produced 35,099 ounces of gold in FY 2013 generating a gross profit of £5,308,892. The Company's strategy is focussed on utilising its robust cash flow generated from flagship gold recovery operations in to self-fund sustainable growth and expansion of niche gold recovery business model. The Company also has a small gold mining and exploration portfolio in , and and is evaluating various opportunities to create value or monetise these assets.
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