Final results for the period 31 December 2018

 

NQ Minerals PLC

(the “Company” or “NQ Minerals”;
NEX: NQMI, OTCQB: NQMLF)

Final results for the period 31 December 2018

May 31, 2019


   

NQ Minerals Plc (NEX: NQMI) (OTCQB: NQMLF), a mineral processing, exploration and mining company is pleased to announce its final results for the period ended 31 December 2018.

Chairman’s statement

Undoubtedly 2018 has been a transformational year for the Company.  Following the acquisition in 2017 of all the issued and outstanding shares of Keen Pacific Limited, along with its wholly owned subsidiaries Ivy Resources and Hellyer Gold Mines Pty Ltd (“Hellyer”), the Company embarked on an aggressive schedule to refurbish the processing plant at Hellyer.  The refurbishment commenced in February 2018, and our dedicated and experienced team of professionals completed the refurbishment on time and on budget, allowing the Company to commence floatation in September 2018.

In November 2018, the Company announced it had successfully produced its first lead, gold and silver concentrate lot and delivered it to Traxys Europe SA under a standing offtake agreement signed in August 2018.  Subsequent to the year end, we announced commercial production at Hellyer, and realized our objective of becoming an emerging producer in Australia.

Projects

NQ Minerals is focused on three main projects being Hellyer in Tasmania which now offers significant ongoing cash flow, and its two exploration projects, Ukalunda and Square Post in North Queensland, Australia.  These two exploration projects are both located in highly prospective mining districts that form part of the well-known and prolific Charters Towers Gold Province, where more than 20 million ounces of gold have been mined.

With ongoing cash flow before financing costs from Hellyer, the Company expects utilise cashflows to service debt obligations, to meet its minimum expenditure requirements under is exploration licenses and if cash flows allow, will allocate additional resources to its exploration prospects through 2019/202 with a view to defining the potential in Tasmania as well as North Queensland.

Hellyer

Hellyer represent the flagship project for the Company.  With life of mine revenues projected to exceed £560M and an expected 10 year mine life, 2018 was a transformational year as we changed status from a developer to a producer.  The capital expenditure incurred in 2018 was £11,939,000, allowing us to complete the refurbishment process and realise sales in late 2018.

The Company will continue to process the tailings which are within four separate areas representing 11.24mt, and which compromise a JORC compliant resource estimated at 9.5mt hosting 2.61 grams per tonne gold, 104 grams per tonne silver, 3.03% lead and 2.5% zinc for 790,000 ounces of gold, 32 million ounces of silver, 287,800 tonnes of lead and 237,900 tonnes of zinc.

Ukalunda

The Ukalunda tenement lies midway between the Lake Dalyrymple/Burdekin Dam and the historic Wirralie gold mine, which previously produced 1.1 million ounces of gold.  The Ukalunda project are contains multiple shows of mineralisation of similar characteristics to major deposits in the region.  Historic, wide-ranging exploration has been carried out on the Ukalunda permit area, having discovered potential areas of rich mineralisation of gold, silver, and a number of associated base metals.  In April, 2018, the Company announced further to the receipt of the required Queensland Environmental Authority, it has now been granted a Mining Lease for its wholly-owned Sunbeam Silver Mine (“Sunbeam”).

The Sunbeam mining lease allows the Company to conduct large-scale mining operations starting with the processing of approximately 48,000 tonnes of surface mineral stockpiles at Sunbeam.  The Company undertook a comprehensive program of rock chip sampling, mapping of the ore stockpiles, mineralogy and metallurgy.  The work has indicated the ore stockpiles contain minerals including gold, silver, copper, lead, zinc and antimony which all may have commercial value.

Square Post                                           

The Square Post tenement lies close to the Flinder Highway, 10 kilometres east of Mingela and 50 kilometres south of Townsville.  The area is considered underexplored, principally due to its rugged terrain.  The permit consists of 46 sub-blocks covering an area of approximately 168km2.  The Company has received prospective rock chip samples from the Square Post tenement, with further exploration work continuing through 2019 and 2020.

Environmental

The Company is determined and committed to making a positive impact in the communities we operate in.  The Company continues to operate at the highest standards as it relates to Environmental, Community, Sustainability and Human Resource policies and procedures.

With the announcement in 2017 of our approval for an Environmental Management Plan at Hellyer, followed by the successful receipt of our Mining Lease for Sunbeam, the Company is now positioned to further realise commercial value for its mineral assets.  The success of our permitting is a critical success factor, and Management and the Board have met expectations for world class standards.

Financing

A summary of the Group financing position includes:

  • A net debt position as at 31 December 2018 of £38,997,000.
  • A net debt position as at the date of this report of £ 41,692,000.

There is a requirement for the Group to refinance its current debt obligations to be able to meet its near-term financing payments and ensure compliance of covenant obligations. The Company has secured additional funding via its bond offering memorandum to fund ongoing working capital requirements and since 1 January 2019, the Company has raised £5,526,140. The Directors anticipate being able to continue to raise funds under this bond at a similar level going forward. The Directors are also in advanced discussions with an existing lender and has entered into non-binding heads of terms, to restructure its existing debt obligations and anticipates finalising those agreements in the first half of 2019. The proposed amendments would refinance the current repayment and interest rate profiles. Further details are disclosed in Note 2.

Outlook

2018 has been a transformational and exciting year for the Company, having realized our short term objective of becoming a producer.  With the refurbishment of the processing plant in 2018 and subsequent commercialization of the mineral assets, Hellyer is generating operational cash flow before financing costs.  The Board believes Hellyer is a world-class project which compliments our exploration assets in North Queensland.  The exciting portfolio of assets and a view to acquiring additional assets in the region will allow us to achieve our long term goal of becoming a significant gold and base metal producer in Australia.

The Executive and Senior Management have performed exceptionally well during a challenging refurbishment and start up, and should be commended for bringing Hellyer to commercial production in 2019.  The current environment poses ongoing challenges with respect to fundraising for Junior Mining companies, however I am optimistic about the Company’s prospects going forward, and look forward to achieving our long term goals.  We wish to thank all of our fellow shareholders for their continued support.

On behalf of the Board
Mr. Brian Stockbridge
Director
Dated: 30 May 2019

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

Year Ended  Year Ended
31 December  31 December
2018 2017
£’000s £’000s
Revenue from contracts with customers                     3,247
Cost of sales                    (5,214)
Gross loss                    (1,967) 
Other income                        135                          –
Selling and distribution expenses                       (381)                          –
Administrative expenses                 (11,196)                (13,453)
Operating loss                   (13,409)                    (13,453)
Finance costs                  (12,223)                  (3,869)
Finance income                          31                       136
Loss on ordinary activities before taxation                  (25,601)                 (17,186)
Taxation15393
Loss for the year(25,448) (17,093)
Other comprehensive income
Foreign exchange losses(400)(103)
Total comprehensive loss for the year attributable to the owners of the Parent(25,848) (17,196)
Loss per share (pence) (basic and diluted)(8.25p)(7.34p)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

Year Ended  Year Ended
31 December  31 December
2018 2017
£’000s £’000s
Assets
Non-current assets
Intangibles 1,218                        988
Inventory 19,344                    22,359
Property, plant and equipment 19,492                     8,204
Financial assets 1,068                     1,112
Deferred tax assets 986                     1,032
Other financial assets –                     1,072
Total non-current assets 42,108                    34,767
Current assets
Inventory                     3,467                            –
Trade and other receivables                     1,736                        755
Cash and cash equivalents                        513                     3,310
Total current assets                     5,716                     4,065
Total assets                    47,824                      38,832
Equity and liabilities
Equity attributable to owners of the Parent
Ordinary shares                        322                        283
Share premium                    15,487                    11,565
Unissued capital reserve                     3,879                     5,512
Share option reserve                     7,124                     5,391
Other reserve                        105                        201
Group reorganisation reserve                    (6,983)                    (6,983)
Translation reserve                       (412)                         (12)
Merger relief reserve                     7,171                     7,171
Accumulated losses                   (45,581)                   (20,133)
Total equity attributable to owners of the Parent                   (18,888)                     2,995
Non-current liabilities
Financial liabilities                    35,928                    17,289
Provision for rehabilitation                     4,100                     4,298
Deferred tax liabilities                     6,955                     7,402
Total non-current liabilities                    46,983                    28,989
Current liabilities
Trade and other payables                     6,338                     3,299
Financial liabilities                    11,934                     2,330
Convertible notes                     1,457                     1,219
Total current liabilities                    19,729                     6,848
Total liabilities                    66,712                    35,837
Total equity and liabilities                    47,824                      38,832
  

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

Year Ended  Year Ended
31 December  31 December
2018 2017
£’000s £’000s
Cash flows from operating activities                   (13,484)                   (9,547)
Cash flows from investing activities
Payment for exploration expenditure                       (271)                        (89)
Payment for property, plant and equipment                   (11,939)                          –
Payment for share purchase acquisition, net of cash acquired                          –                 (11,039)
Net cash flows from investing activities                   (12,210)                 (11,128)
Cash flows from financing activities
Interest income                          28                          –
Increase in borrowings:
New borrowings                    35,130                    24,267
Repayment of borrowings       (983)
Transaction costs                    (5,553)                   (2,366)
Interest paid                    (4,950)                   (2,407)
Proceeds on issue of shares:
New shares413                     2,655
Transaction costs                      (146)
Net cash flows from financing activities                    24,085                    22,004
Net increase in cash and cash equivalents                    (1,609)                     1,329
 

Net foreign exchange differences

                       (1,188)                       (103)
Cash and cash equivalents brought forward                     3,310                     2,084
Cash and cash equivalents carried forward                        513                      3,310

 

NOTES TO THE PRELIMINARY RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2018

Note 1

The financial information set out above does not constitute statutory accounts for the purpose of Section 434 of the Companies Act 2006. The financial information has been extracted from the statutory accounts of NQ Minerals Plc and is presented using the same accounting policies, which have not yet been filed with the Registrar of companies, but on which the auditors have an unqualified report on 30 May 2019.

Note 2 Going Concern

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The Consolidated Entity has incurred net losses after tax of £25.848M (31 Dec 2017: £17.196M), and experienced net cash outflows from operations of £13.484M (31 Dec 2017: £9.650M) and net cash outflows from investing activities of £12.210M (31 Dec 2017: £11.128M) for the year ended 31 December 2018. As at 31 December 2018, the Consolidated Entity had a deficiency of current assets to current liabilities of £14.013M (31 Dec 2017: £2.783M) and cash assets of £513K (31 Dec 17: £3.310M). These conditions indicate a material uncertainty that may cast significant doubt about the Consolidated Entity’s ability to continue as a going concern.

The Directors have considered the following in making their assessment of the Company’s ability to continue as a going concern:

  • The Company commenced operations at its 100% owned Hellyer Gold Mines in 2018, and in November, 2018 realised its first revenues from operations. For the year ended 31 December 2018, the Company realised £3.247M in revenues from contracts. The Company has been consistently producing concentrates of lead, zinc and pyrite since November 2018 as operations improve to a steady run rate. On a monthly basis, the Company invoices its selling agent through its offtake arrangements. The gross loss of £1.967M for the period to 31 December 2018 is a result of operational start-up costs.
  • Subsequent to the year end, the Company has secured additional funding via its bond offering memorandum to fund ongoing working capital requirements. Since 1 January 2019, the Company has raised £5,526,140 and the Directors anticipate being able to continue to raise funds under this bond at a similar level going forward.
  • The Company is also in advanced discussions with an existing lender and has entered into non-binding heads of terms, to restructure its existing debt obligations and anticipates finalising those agreements in the first half of 2019. The proposed amendments would refinance the current repayment and interest rate profiles.
  • The Company proposes to pursue a listing on AIM during the 2020 financial year and will explore further opportunities to raise equity for working capital and debt restructuring purposes.
  • Subsequent to the year end, the debt cap of the Group has been breached. The directors have advised all of the lenders of this breach. As a result of this breach the Company is also technically in default under the facility agreement with Audley, however, Audley have provided their written confirmation of their agreement to extend the debt cap. However, the increase in the debt cap is only effective upon receipt of agreement to it from all parties to that agreement.

The ability of the Consolidated Entity to continue as a going concern and pay its debts as and when they fall due, given the Consolidated Entity’s intended operational plans is dependent upon the Company’s ability to secure new debt and/or equity in order to meet the Group’s debt repayments as they fall due. The Group has debt repayments of £14,417,140 due in the next 12 months this includes a AUS$4,000,000 loan which according to the latest loan documentation is due for repayment in full on 5 June 2019. The Company has received, via an intermediary, confirmation that this repayment date has been extended by 1 month to 5 July 2019, however no formal documentation has been received to confirm this from the financiers themselves. The Group is reliant on securing new debt and/or equity in order to meet these repayments. The Group is also reliant on the continuing support of its current financiers.

The directors are of the opinion that the use of the going concern basis of accounting is appropriate as they are confident in the ability of the Consolidated Entity to be successful in securing additional funds through debt or equity issues. Notwithstanding this, as a junior producer with a dependency on continued support from current financiers and on securing additional funding, should the Consolidated Entity be unable to secure sufficient funding from the above or the continued support of current financiers, the Group would be unable to continue trading as a going concern. In which case the Consolidated Entity would be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due. Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that may be necessary should the Group be unable to continue as a going concern.

Note 3 Loss per Share

Year Ended  Year Ended
31 December  31 December
2018 2017
Basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year:
Loss after tax attributable to equity holders of the Company             25,448,000               17,093,000
Weighted average number of ordinary shares           308,410,022              232,873,534
Basic and diluted loss per share (8.25p) (7.34p)

 

Diluted loss per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Since the Group does not have any dilutive potential ordinary shares at the balance sheet date, the diluted loss per share is the same as the basic loss per share.

Potentially convertible shares

The Company has convertible ordinary shares on issue as at 31 December 2018 as follows:

  • 65,021,012 (2017: 65,021,012) contingent shares in the Company in connection with the purchase of Keen Pacific Limited which are only issuable on the exercise of underlying dilutive outstanding financing options and convertible notes which have conversion periods ranging to June 2022. Refer to Note 14 for further details;
  • 23,831,827 (2017: 23,831,827) convertible ordinary shares in connection with the convertible notes in issue at year end. These convertible notes have a maturity date within the next 12 months; and
  • 190,926,9200 (2017: 169,926,920) options in issue to various directors and financiers as disclosed in Note 30. These share options expire in the 2021 and 2022 financial year.

The above have not been factored into the loss per share calculation as they do not dilute current earnings per share.

-END-


About NQ Minerals

NQ Minerals is an Australia-based mining company which commenced production in Q4 2018 at its flagship Hellyer Gold Mine. The Company anticipates strong cash-flow and profitability from Hellyer and has a portfolio of exciting exploration prospects. The Company’s management team has decades of experience in the exploration and production of gold, silver and a variety of base metals. Please visit our website at www.nqminerals.com.


For further information, please contact:

NQ Minerals
Brian Stockbridge
Non – Executive Chairman
[email protected]
+ 44 (0) 787 688 8011 (UK)
NQ Minerals
Colin Sutherland
Chief Financial Officer
[email protected]
+ 1 (416) 452 2166 (North America)
Arden Partners Plc
Corporate Finance
Ruari McGirr, Ciaran Walsh
Dan Gee-Summons
+44 (0) 207 416 5900
IFC Advisory Ltd
Financial PR
Graham Herring,
Tim Metcalfe
+44 (0) 203 934 6630