Mineral explorer and producer Dominion Mining Ltd posted a first half profit after tax of $68,000 after the charging of $10.2 million in accounting adjustments and the bringing forward of an income tax benefit of $5.8 million.
Gold explorer and producer Dominion Mining Ltd posted a first half profit after tax of $68,000 after the charging of $10.2 million in accounting adjustments and the bringing forward of an income tax benefit of $5.8 million.
The charge of $10.2 million related to unrealised mark to market hedge book adjustments while the $5.8 million income tax benefit from retained losses was brought forward in accordance with AIFRS.
The company said the NPAT represented "a substantial turnaround from the $3.1 million loss attributable for the previous corresponding period."
Prior to adjustments the company's first half operating profit was $4.4 million and EBITDA of $12.2 million which were a result of increases in gold sales revenue of $32.6 million from $9.8 million in the pervious corresponding period.
At 1100 WST shares in Dominion were up 4 cents to 20 cents.
Below is the edited ASX announcement:
DOMINION ANNOUNCES INTERIM PROFIT; FURTHER EXPLORATION SUCCESS AND PRODUCTION UPDATE
KEY POINTS
- First half operating profit of $4.4 million and EBITDA of $12.2 million, reflecting strong production and cash generation from Challenger. This was before an unrealised negative mark to market hedge book adjustment of $10.2 million and income tax benefit of $5.8 million as required under AIFRS.
- Group cash and bullion increased to $16.5 million as at the end of February 2006.
- Continued strong production from Challenger Gold Mine with 19,371 ounces produced for January and February at an average cash operating cost of A$253/ounce.
- Successful replacement of reserves during the half, notwithstanding record production performance.
- Potential new gold zone identified at Challenger with a significant intersection of 3m @ 23g/t Au some 150 metres below the M1 shoot - potential to be another Challenger style shoot.
- Wide-spaced drilling at Wongan Hills identifies supergene copper mineralization over 2km strike length, up to 800 metres in width.
HALF YEAR FINANCIAL RESULTS
Dominion announced a profit after tax adjustments for the 6 months to 31 December 2005 of $68,000, representing a substantial turnaround from the $3.1 million loss attributable for the previous corresponding period. This result was after charging $10.2 million relating to the unrealised mark to market hedge book adjustments and bringing forward an income tax benefit of $5.8 million from retained tax losses in accordance with Australian International Financial Reporting Standards (AIFRS)
Before these adjustments, the Company reported a net profit of $4.4 million on strongly increased gold sales revenue of $32.6 million (2004: $9.8 million), generated from attributable sales of 53,884 ounces of gold.
Because of the impact of the unrealised AIFRS adjustments, the normal measures of underlying earnings in this instance provide a more realistic indication of the Company's financial performance for the period and its financial outlook for the second half of the financial year and in future periods.
Significantly, earnings before interest, tax and depreciation and amortisation (EBITDA) were $12.2 million for the December half (2004: negative $0.070 million), after expensing exploration expenditure of $1.8 million and royalties of $1.7 million. Depreciation and amortization charges totalled $7.6 million.
The Challenger Gold Mine generated a gross operating cash flow of $17.4 million for the half year (before capital expenditure and underground development of $4.4 million and the payment of royalties.).
This resulted in Dominion's cash position improving during the half, with the Company reporting group cash reserves ($11.5 million) and bullion on hand ($2.2 million) of $13.7 million as at 31 December 2005, an increase of 26% against the $10.9 million in group cash and gold bullion reported at 30 June 2005.
The cash balance was after repaying $3.5 million against the project debt facility, with the outstanding balance on this facility of $3.0 million, scheduled to be fully repaid by 30 June 2006.
Cash and bullion had risen to $16.5 million by the end of February 2006.
Dominion currently has 91,500 ounces forward sold at an average price of A$630/ounce. This represents approximately 35% of the Company's current gold reserves, sold on a flat forward basis for delivery from gold production between March 2006 and December 2007. This maintains significant exposure for the Company to upside from the spot gold price.
PRODUCTION UPDATE AND RESERVES
Dominion today reported continued strong gold production from the Challenger Gold Mine with production of 19,371 ounces for the months of January and February at an average cash operating cost of A$253/ounce. This compares favourably with the record production reported for the December 2005 Quarter of 29,860 ounces at a cash operating cost of A$258/ounce. Production for the 6 months to 31 December 2005 was 53,707 ounces at an average cash operating cost of A$282/ounce and for the 8 months ended 28 February 2006 73,078 ounces had been produced at a cash operating cost of A$253/ounce.
As previously reported, Dominion successfully replaced its reserves during the first half of the financial year, notwithstanding the record production performance. As at 31 December 2005, available gold reserves were 292,000 ounces, which compares favourably with the reserves reported at 30 June 2005 of 298,400 ounces.
CHALLENGER DRILLING IDENTIFIES NEW GOLD ZONE
The ongoing program of exploration drilling at Challenger returned significant results from initial testing of conceptual exploration targets below the M1 shoot (which currently hosts the majority of the Challenger reserves), in a position located only 150 metres (approximately) from the existing underground infrastructure.
A single diamond drill hole targeting this position returned an intercept of 3 metres @ 23g/t gold, which is regarded as a significant result. Further drilling to test the significance of this new discovery and confirm the continuity of the new ore position is scheduled to commence in April 2006.
WONGAN HILLS
Recent wide-spaced RAB and aircore drilling at the Wongan Hills Copper Project in Western Australia has returned encouraging results, delineating a zone of supergene copper mineralization over a continuous 2km strike length and up to 800m wide. The drilling targeted extensions of the mineralization identified in the discovery hole reported last year (44 metres @ 0.75% copper including 5 metres @ 3.79% copper and 1.87g/t gold).
Further drilling is scheduled during the June 2006 Quarter to in-fill and extend the currently identified mineralized zone, which remains open in all directions, together with deeper drilling to identify the primary sulphide source of this mineralization at Wongan Hills.
OUTLOOK AND COMMENTARY
With a continuing strong production profile at the Challenger Gold Mine, Dominion remains on track to achieve gold production in excess of 100,000 ounces for the 2005/06 financial year with cash operating costs anticipated to be less than A$280/ounce.
Commenting on the results, Dominion's Managing Director, Mr Peter Alexander, said: "The Challenger operations have continued to perform strongly during the March quarter to date, building on our excellent production during the first half, which was reflected in strong underlying earnings for the period."
"While the AIFRS adjustments for the first half impacted on our bottom line result, it was pleasing to see a return to profitability and a strong earnings performance from the Challenger Gold Mine, which we expect to continue through the second half of the financial year and beyond."
"By the financial year-end, Dominion should be debt free, with a strong group cash and gold bullion position underpinned by a robust production profile moving forward with production forecast to continue at the rate in excess of 100,000 ounces per annum at competitive cash operating costs," he added.
"Of even more importance is the fact that our exploration efforts are continuing to deliver promising results, which bode well for the prospect of further additions to the Challenger reserve inventory," Mr Alexander said. "The discovery of a new mineralized zone 150 metres below the current M1 shoot is, we believe, very significant and, if confirmed as a potential new M1-style ore shoot, will have very positive implications for the Company and its continued growth."
"In addition, our regional exploration is also delivering encouragement, with the Wongan Hills Copper Project in particular beginning to emerge as a significant exploration opportunity for the Company moving forward," he added. "Further drilling is scheduled both at Challenger and at Wongan Hills from next month, and we look forward to following on from these recent exploration successes."
