Second quarter 2010
* Sales were 40,3 MSEK (25,3 MSEK)
* Result before depreciation was -2,4 MSEK (-8,2 MSEK)
* Net loss was -17,0 MSEK (-13,0 MSEK)
* Basic result per share was -0,20 (-0,18)
* Goldproduction was 155 kgs (170 kgs)
January - June 2010
* Sales were 97,7 MSEK (45,6 MSEK)
* Result before depreciation was 2,7 MSEK (-28,1 MSEK)
* Net loss was -17,8 MSEK (-38,0 MSEK)
* Basic result per share was -0,21 (-0,57)
* Goldproduction was 335 kgs (287 kgs)
Overview
Comments by CEO, Kjell Larsson
During the second quarter an updated mineral resource estimate was completed for
the Fäboliden project. The gold content in the measured and indicated mineral
resources at a cut-off of 0.4 grams per ton of gold are almost two million
ounces (1.95 Moz). We have revised the time table for the completion of the
feasibility study to the second quarter 2011 and we continue to be convinced
that Fäboliden will develop into a profitable gold mine for many years to come.
Pahtavaara did not achieve its production targets during the quarter which is
disappointing. Due to spring water and temporary rock mechanical problems we
were forced to mine lower grade ore. However, production has normalized after
the quarter ended and we reached production of 61 kgs in July.
Highlights during the second quarter 2010
* Production at Pahtavaara reached 155 kgs of gold during the second quarter
which was lower than plan. Production was affected negatively by spring
water and temporary rock mechanical problems.
* Lappland Goldminers concluded in April a 100% guaranteed convertible issue
with preferential rights for its shareholders. The convertible issue brought
MSEK 122.2 before issue costs and MSEK 118.2 after issue costs to the
company. The convertibles began trading on the Nasdaq OMX First North on 24
May, 2010. For complete information and terms regarding the issue please see
the news release issued on 19 February, 2010 and the prospectus dated 29
March, 2010.
* The Annual General Meeting of Lappland Goldminers was held on 19 May, 2010.
Ulf Ericsson, Pia Gideon and Lars-Olof Nilsson were reelected as directors
and Peter Edwall and Lars-Göran Ohlsson were elected as new directors. Ulf
Ericsson was reelected as chairman of the board. For further information of
the decisions during the meeting please see the news release dated 20 May,
2010.
Subsequent events
* On 5 July, 2010 Lappland Goldminers announced that Golder Associates has
concluded an updated resource estimate. The updated resource estimate shows
that the measured and indicated mineral resource at a cut-off grade of 0.4
grams of gold per tonne amounts to 57.8 million tonnes with 1.05 grams of
gold per tonne and 2.81 grams of silver per tonne. In addition there is an
inferred mineral resource of 32.4 million tonnes with 1.04 grams of gold per
tonne and with 3.37 grams of silver per tonne. The new estimate shows that
both tonnage and gold grades in the measured and indicated mineral resource
are lower than previously reported estimates from 2008. See also page 4 of
this report.
The gold grades in the updated mineral resource estimate requires a need to
consider alternative selective open pit and underground mining methods and
the need to define a new production optimum. As a result of these additional
studies, the feasibility study will take longer to complete and is expected
to be finalized in the second quarter of 2011 instead of the third quarter
2010 which previously has been communicated.
Production
Pahtavaara
Gold grades in the ore delivered to the mill (ROM) were during the later part of
the quarter lower than expected in the mine plan. The main reasons for the lower
gold grade are intense spring water in combination with rock mechanical problems
which temporarily disturbed production from two of the main access areas to the
richer ore. The planned production from these areas was replaced by lower grade
ore. Despite that the lower gold grade in the ore negatively affected the
recoveries in the mill the production in the mill has been working well.
The difficulties with mining the expected gold grades are due to that there are
currently few access points to the richer ore which makes the production
sensitive to disturbances as well as varied gold grades in the ore bodies. Local
management and the geologists of the mine are working towards optimizing the
mining process and increase the knowledge of the ore with the objective to
follow the set mining plans.
Underground core drilling has been carried out since April 2008 in order to
increase the ore reserves and the mineral resources and approximately 20,000
meters of drilling is planned for 2010, which is similar to 2009. The
surroundings of the present mine are considered unexplored by the company and
therefore systematic exploration around the open pits was initiated in June
2009. Totally 5 700 meters of surface drilling was done. The majority of the
drilling was concentrated on a mineralization called Länsi (West) located
north-west of and adjacent to the old open pits.
The shallow parts of the Länsi mineralisation, located immediately adjacent to
the existing mine, has been drilled and investigated with 31 core drill holes
and 13 reverse circulation holes (totally 4 700 meter). Measured and indicated
mineral resources, at a cut-off of 2.0 grams per ton, are estimated to 60.0
thousand tonnes with 2.97 grams of gold per tonne, see table below. The estimate
is carried out by T. Lindholm (GeoVista AB) who is an independent consultant and
qualified person (QP), according to the Svemin, the FinnMin and the JORC codes
for reporting.
The Länsi mineral resource at cut-off of 2.0 grams per ton. For further
information see the news release dated 5 July, 2010.
Analyses are made by Labtium Oy that is accredited by FINAS (T025). The samples
are analysed with Fire Assay, Labtium code 705A and with Aqua Regia ICP, Labtium
code 511P.
The Länsi mineralisation is still open towards northwest and towards depth. A
drilling program comprising 6 000 meter, where the majority will be drilled in
the Länsi area, was started in June.
Ersmarksberget
During the fourth quarter of 2009, a drilling program was resumed to investigate
the previously identified Central and South One gold mineralization´s at depth.
Within the current mining concession, fourteen core drill holes were drilled
(3 400 meter). The analyses from eight holes aimed at Central and from two aimed
at South One, were finalized during the second quarter. The results indicated
that further drilling was required towards depth in the Central mineralization
to define a mineral resource. South One mineralization has been extended and is
still open to the south. For additional detailed information of the drilling
results see the news release dated 5 July, 2010.
The objective of the ongoing activities at Ersmarksberget is to define and
verify enough mineral reserves to allow for profitable mining. Preliminary
assessments during the later part of July, of the current drilling program, give
reason to consider further drillings to ensure the gold grades and extension of
the mineralizations. If the outcome of the drilling is positive a mineral
resource estimate will be finalized. The current drilling program is expected to
be finalized in August and a mineral resource estimate, based on the current
drilling program, is expected to be finalized before the end of the fourth
quarter 2010.
Fäboliden
Golder Associates, a renowned international consulting company, has finalised
their review of the mineral resource estimate which will, together with capital
investment and operating costs, form the basis of a new ore reserve calculation
which will be reported on in the feasibility study.
The updated resource estimate shows that the measured and indicated mineral
resource at a cut-off grade of 0.4 grams of gold per tonne amounts to 57.8
million tonnes with 1.05 grams of gold per tonne and 2.81 grams of silver per
tonne. In addition there is an inferred mineral resource of 32.4 million tonnes
with 1.04 grams of gold per tonne and with 3.37 grams of silver per tonne. As
shown in the table below both tonnages and gold grades in the measured and
indicated mineral resource are lower than the previously reported estimates from
2008.
Mineral resources in Fäboliden calculated with a cut-off of 0.4 grams of gold
per tonne.
Analysis are made by ALS Chemex with Fire Assay, ALS Chemex code AA-Au26 or
AA-Au15 and with Aqua Regia, ALS Chemex code ME-ICP41. Older holes are analysed
by SGS laboratory with Fire Assay, SGS code FA30 and FA50 and Agua Regia, SGS
code ICP70. The earliest drilled holes were analysed by Boliden Mineral
laboratory.The mineral resource estimate has been carried out by Mr. J. Alvarez,
Ms. A. Harrison and Ms. F. Jones (Golder Associates (UK) Ltd) and examined by
Dr. B. Shaw and Mr. A. Miller (Golder Associates Pty Ltd). Mr. J. Alvarez is a
Competent person (CP) in accordance with the JORC-code.
The updated mineral resource estimate requires a need to consider alternative
selective open pit and underground mining methods and the need to define a new
production optimum. As a result of these additional studies, the feasibility
study will take longer to complete and is expected to be finalized in the second
quarter of 2011. For further information please see the news release dated 5
July, 2010.
There has lately been discussions whether the European Commission will issue a
ban on the usage of sodium cyanide within mining processing after a decision by
the European Parliament. On 23 June, 2010, the European Commissioner for the
Environment published a statement on behalf of the Commission stating a ban on
sodium cyanide is not justified as it would prohibit the use of cyanide in safe
environments. We therefore come to the conclusion there is presently no risk
there will be a ban on cyanide which would affect the Fäboliden project
negatively.
Outlook
At Pahtavaara the gold grades in the ore delivered to the mill (ROM) were,
during the first six months of 2010, lower than expected in the mine plan. The
temporary problems, described in the Pahtavaara section in this report, combined
with that the gold grades in the ore bodies, in the short term, are difficult to
estimate and are varied have led to that the forecasted gold production, at
Pahtavaara, for 2010 has been revised from at least 800 kgs of gold to at least
675 kgs of gold.
Income Statement
Sales increased during the second quarter 2010 compared to the second quarter
2009 and reached SEK 40.3 million compared to SEK 25.3 million. Compared to the
first quarter 2010 sales decreased by SEK 17.0 million. The reduction compared
to the first quarter 2010 is due to lower gold production and deliveries of gold
from Pahtavaara. A total of 131 kgs of gold were delivered from Pahtavaara
during the quarter at an average price of 1,265 USD per ounce. During the first
quarter 2010 219 kgs of gold were delivered from Pahtavaara at an average price
of 1,133 USD per ounce.
The Pahtavaara operations contributed with a profit before depreciation of SEK
9.3 million during the quarter. The lower production during the second quarter
resulted in a higher unit cost of production which impacted the profit compared
to the first quarter 2010. Cash cost increased from 840 USD per ounce to 981 USD
per ounce. Maintenance costs at Ersmarksberget of SEK 5.0 million, exploration
costs of SEK 1.7 million and corporate costs of SEK 4.9 million offset the
quarterly profit at Pahtavaara. The group recorded a loss before depreciation of
SEK 2.4 million during the second quarter 2010 which can be compared to a loss
of SEK 8.2 million for the corresponding quarter 2009.
The maintanence costs at Ersmarksberget are due to the mill running on standby
mode to prevent it from dilapidation and treatment of excess water from the old
mining site. The water levels were relatively high during the second quarter to
snow melting which increased costs by SEK 0.8 million compared to the first
quarter 2010.
Depreciation charges during the quarter of SEK 9.6 million are primarily due to
depreciation of capitalized ore development at Pahtavaara. Depreciation charges
are calculated using a unit of production method in relation to the remaining
ore reserves. Compared to the first quarter 2010 depreciation charges increased
by SEK 3.3 million and are due to higher ore production. Compared to the first
quarter ore produced increased by 25,244 tonnes.
The net loss for the group during the first quarter was SEK 17.0 million
compared to a net loss of MSEK 13.0 million for the corresponding quarter 2009.
During the second quarter 2010 Lappland Goldminers completed an issue of
convertibles. The majority of the issue costs, SEK 2.9 million, have, according
to IFRS, been recorded in the income statement as financial costs. The remaining
portion, SEK 1.2 million, has been recorded directly to shareholders' equity.
Cash flow
The net change in cash position was positive by SEK 50.6 million during the
quarter. Cash flow from operations, before working capital changes, was negative
during the quarter and reached SEK 4.2 million which can be compared to negative
SEK 10.7 million for the second quarter 2009. The Pahtavaara operations
generated positive cash flow and contributed SEK 9.3 million during the quarter,
before working capital changes.
Total capital expenditures during the quarter were SEK 20.4 million of which
Pahtavaara accounted for SEK 12.3 million and costs associated with the
feasibility study at Fäboliden were SEK 5.6 million. Capital expenditures at
Pahtavaara are primarily related to ore development when the operations are
moving into new areas within the existing mine.
A somewhat higher inventory at Pahtavaara and lower accounts payable contributed
to negative working capital changes. The net change of working capital was
negative SEK 11.4 million.
The convertible issue, which was completed during the second quarter, generated
SEK 118.2 million after guarantee provisions and other issue costs. During the
second quarter the company repaid financial debt of SEK 32.0 million.
Financial position
The financial position strengthened during the quarter when the convertible bond
issue was finalized but has been negatively affected by the loss of production
at Pahtavaara. The company has initiated a review of the structure and costs in
order to increase cash flow. A sale process of the Haveri deposit has been
initiated. However, further financing may be necessary to complete the expansion
strategy. Cash and bank balances were SEK 65.0 million as of 30 June, 2010.
Parent company
Sales, which are mainly internal, were SEK 0.2 million during the second quarter
2010. The operating costs are mainly group overhead costs for geology,
administration and group management and were SEK 7,0 million during the second
quarter 2010. Financial costs of SEK 8.7 million during the second quarter
relate mainly to external interest costs, costs related to the convertible debt
issue and exchange differences on intra-group loans.
Segmented Financial Information
(Excluding financial intercompany transactions)
Unit costs and realized gold prices.
April - June, 2010
January - June, 2010
The Gold Price
Other information
Major customers
The sales of the group presently come from the Pahtavaara mine. Pahtavaara
produces three types of gold concentrate - gravimetric concentrate, middling
concentrate and flotation concentrate. Currently, all concentrate is shipped to
three major customers in Europe and Asia.
Risks and uncertainties
A number of risk factors can have a negative impact on the operations of the
group and the parent company. External and internal factors can influence the
financial position and the growth of Lappland Goldminers. Factors, among others,
which can influence the company are the price of gold, currency risks, estimates
of mineral reserves and mineral resources, interest risks, liquidity- and
financing risks, electricity- and energy prices, key staff and employees,
permits, environmental factors and political risks. For further information
regarding risks and uncertainties see page 23 of the 2009 Annual Report of
Lappland Goldminers.
Environment
The operations of the company require, in many cases, permissions from
authorities. See page 23 of the 2009 Annual report of Lappland Goldminers for
further information regarding environmental impact.
Employees
The company and subsidiaries have 77 employees (2009 - 62). In addition to this,
the Company engages consultants and contractors for various projects on a
continuing basis. Altogether the company and subsidiaries engage the equivalent
of 130 (2009 - 100) full time employees.
Reporting dates
Interim report January-September 2010 October 28, 2010
Annual Report
The Annual Report is found on the Company's web site with possibility for
downloading and printing.
Accounting principles
This report has been prepared in compliance with IAS 34 - Interim Financial
Reporting and according to Swedish "Årsredovisningslagen". The company applies
IFRS 3r and IAS 27r but concludes they have no material impact on the financial
statements. The same accounting principles have been applied as in the last
issued Annual Report. For detailed information regarding accounting principles,
see the Annual Report 2009.
The Board of Directors declares that this six-month interim report provides a
true and fair overview of the Parent Company's and Group's operations, their
financial position and performance, and describes the material risks and
uncertainties facing the Parent Company and other companies in the Group.
Lycksele, 12 August, 2010
Ulf Ericsson Peter Edwall Pia Gideon
Chairman Board Member Board Member
Lars Olof Nilsson Lars-Göran Ohlsson
Board Member Board Member
Kjell Larsson
Chief Executive Officer
The interim report for the period January - June 2010 has been reviewed by the
company's auditors.
Conference call
The company plans to hold a conference call in connection with the interim
report on 19 August, 2010 at 15:00 CET. The telephone number will be available
on the web sitewww.lapplandgoldminers.se .
For further information please contact:
Kjell Larsson, CEO Tel: 0950-275 06, 070-385 03 57
E-mail:kjell.larsson@lgold.se
Anders Haker, CFO, Tel: 0708-108559, E-mail:anders.haker@lgold.se
TRANSLATION OF THE SWEDISH ORIGINAL
Auditor's Review Report on condensed interim financial statements prepared in
accordance with IAS 34 and Chapter 9 of the Swedish Annual Accounts Act (SFS
1995:1554
To the Board of Directors and Managing Director of Lappland Goldminers AB (publ)
Introduction
I have performed a review of the condensed interim financial statements for
Lappland Goldminers AB (publ) at 30 June 2010 and the six-month period then
ended. The Board of Directors and the Managing Director are responsible for the
preparation and presentation of these Interim financial statements in accordance
with IAS 34 and the Swedish Annual Accounts Act. My responsibility is to express
an opinion on the condensed interim financial statements based on my review.
Scope of Review
I have conducted my review in accordance with the Standard on Review
Engagements, SÖG 2410, "Review of Interim Financial Statements Performed by the
Independent Auditor of the Entity", issued by the Swedish Federation of
Authorized Public Accountants. A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review has a different purpose and a substantially less scope than an audit
conducted in accordance with the Standards on Auditing in Sweden (RS) and other
generally accepted auditing practices. The procedures performed in a review do
not enable us to obtain such a level of assurance that would make us aware of
all significant matters that might be identified in an audit. Accordingly, an
opinion based on a review does not constitute the same level of assurance as an
opinion based on an audit.
Opinion
Based on my review, nothing has come to my attention that causes me to believe
that the interim financial statements are not prepared, in all material aspects,
for the group in accordance with IAS 34 and the Swedish Annual Accounts Act and
for the parent company in accordance with the Swedish Annual Accounts Act.
Lycksele, 12 August, 2010
Bruno Holmkvist
Auktoriserad revisor
The full press release including tables and chart can be downloaded from the
following link.
[HUG#1437363]
Lappland Goldminers AB (publ): Interim report January - June 2010
| Source: Lappland Goldminers AB
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