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Press Release: Avesoro Resources Inc. - Financial -7-

21 Mar 2018 11:00 am

The net cash outflow from the acquisition amounted to $4.3 million. Acquisition-related costs of $0.7 million have been charged to administrative and other expenses in the statement of comprehensive income for the year ended December 31, 2017.

The results of Youga and Balogo Gold Mines are included within the consolidated statement of income from the date of acquisition. Youga and Balogo Gold Mines contributed revenues of $2.5 million and a net income after tax of of $0.5 million to the Group's net loss for the period from December 18 to 31, 2017.

Had the acquisition completed on January 1, 2017, the Company would have reported revenues of $236.6 million and a net income after tax of $13.7 million for the year ended December 31, 2017.

5. 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 and Balogo Gold Mines; 
 
   -- Exploration; and 
 
   -- Corporate. 

Gold sales from New Liberty operations and Burkina operations are each sold to a single but different customer, both located in Switzerland.

Following is an analysis of the Company's results, assets and liabilities by reportable segment for the year ended December 31, 2017:
 
                  New Liberty  Burkina       Exploration  Corporate  Total 
                   operations   operations 
                  $'000        $'000        $'000         $'000      $'000 
Net 
 income/(loss) 
 for the year        (20,770)        1,319       (2,458)    (5,498)   (27,407) 
Gold sales             95,246        2,540             -          -     97,786 
Production costs 
- Mine operating 
 costs               (70,433)      (3,187)             -          -   (73,620) 
- Change in 
 inventories          (1,983)        2,109             -          -        126 
                     (72,416)      (1,078)             -          -   (73,494) 
Depreciation         (32,248)            -         (500)       (17)   (32,765) 
 
Segment assets        241,451       90,818         4,197        572    337,038 
Segment 
 liabilities        (152,409)     (49,388)       (4,196)      (777)  (206,770) 
Capital 
 additions and 
 acquisitions 
 -- property, 
 plant and 
 equipment             55,868       38,191             -          -     94,059 
 

Following is an analysis of the Company's results, assets and liabilities by reportable segment for the year ended December 31, 2016:
 
                   New Liberty  Burkina      Exploration  Corporate  Total 
                    operations   operations 
                   $'000        $'000        $'000        $'000      $'000 
Loss for the year    (103,015)            -      (3,105)    (6,870)  (112,990) 
Gold sales              63,612            -            -          -     63,612 
Production costs 
- Mine operating 
 costs                (80,209)            -            -          -   (80,209) 
- Change in 
 inventories           (1,875)            -            -          -    (1,875) 
- Impairment of 
 inventories           (4,933)            -            -          -    (4,933) 
                      (87,017)            -            -          -   (87,017) 
Depreciation          (15,948)            -        (389)       (22)   (16,359) 
Other costs 
- Termination fee 
 (Note 20)             (4,500)            -            -          -    (4,500) 
- Shutdown costs       (4,383)            -            -          -    (4,383) 
                       (8,883)            -            -          -    (8,883) 
Segment assets         216,567            -          575     10,101    227,243 
Segment 
 liabilities         (121,483)            -         (69)      (715)  (122,267) 
Capital additions 
 
 -- property, 
 plant and 
 equipment              27,714            -           30          -     27,744 
 

6. Administrative expenses
 
                                              Year ended         Year ended 
                                               December 31,2017   December 31, 
                                                                  2016 
                                              $'000              $'000 
Wages, salaries and contractual 
 termination/change 
 of control payments                                      1,693          4,046 
Legal and professional                                    1,548          5,412 
Depreciation of non-mining assets                            17            411 
Share based payments                                      1,070            768 
Foreign exchange                                             78            250 
Other expenses                                            1,260          1,162 
                                                          5,666         12,049 
 

7. Income taxes
 
                   Year endedDecember 31,2017  Year endedDecember 31,2016 
                   $'000                       $'000 
Current taxation                          143                           - 
 

The analysis of the Company's taxation charge for the year based on the company's statutory tax rate of 26.5% is as follows:
 
                           Year endedDecember        Year endedDecember 
                           31,2017                   31,2016 
                           $'000                     $'000 
Loss before tax                            (27,264)                  (112,990) 
 
Tax recovery at the 
 Canadian corporation tax 
 rate 
 of 26.5%                                   (7,225)                   (29,942) 
Effect of different tax 
 rates of subsidiaries 
 operating 
 in other jurisdictions                         345                      1,895 
Non-deductible expenses                       1,048                     10,822 
Non-taxable gains                             (997)                      (279) 
Tax losses not utilised 
 and carried forward                          7,219                     17,957 
Other                                         (247)                      (453) 
                                                143                          - 
 

Deferred tax balances in Burkina Faso for which there is a right of offset within the same tax jurisdiction are presented net on the face of the balance sheet as permitted by IAS 12. The closing deferred tax assets, after this offsetting of balances, are shown below:
 
                                    December 31,2017  December 31,2016 
                                    $'000             $'000 
Deferred tax assets arising from: 
Capital allowances                             3,203                 - 
Other temporary differences                    1,351                 - 
                                               4,554                 - 
 

Deferred tax balances in Liberia for which there is a right of offset within the same tax jurisdiction are presented net as permitted by IAS 12. A deferred tax asset of $4.8 million (2016: $2.9 million) in respect of losses has been recognised and off set against a deferred tax liability of $4.8 million (2016: $2.9 million) with respect to accelerated tax depreciation in Liberia. The Group has only recognised an asset up to the value of the deferred tax liability.

The Group has further carried forward losses and capital allowances in Liberia and Canada in which it does not recognise a deferred tax asset due to uncertainty over the utilisation of these assets. The unrecognised deferred taxation asset at December 31, 2017 is $107.9 million (2016: US$81.3 million) based on a carried forward tax losses asset of $51.1 million (2016: US$26.6 million) which expires between 2031 and 2037 and capital allowances of $56.8 million (2016: US$54.7 million) which have no expiry date.

8. Trade and other receivables
 
                                        December 31,2017  December 31,2016 
                                        $'000             $'000 
Trade receivable                                     416               760 
Other receivables                                 10,690             1,940 
Due from related parties (Note 20(e))              1,015               122 
Pre-payments                                      13,165             2,953 
                                                  25,286             5,775 
 

Other receivables include a VAT receivable from the Burkina Faso Government amounting to $8.9 million as at December 31, 2017 (2016: $nil).

9. Inventories
 
                  December 31,  December 31, 
                   2017          2016 
                  $'000         $'000 
Gold dore                3,986         1,720 
Gold in circuit          2,561         1,492 
Ore stockpiles           6,688         3,737 
Consumables             23,697         9,402 
                        36,932        16,351 
 

Consumables at New Liberty as at December 31, 2016 include inventories acquired from a related party (Note 20(d)).

Production costs for the year ended December 31, 2017 include a write-down of ore stockpiles at New Liberty of $2.9 million to net realisable value. Production costs for the year ended December 31, 2016 include an impairment of the low grade oxide stockpiles which was not planned to be fed through the processing plant at New Liberty as at December 31, 2016 of $4.9 million.

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