Dramatic drops in key commodity prices, and the effect of the economic downturn, have impacted heavily upon the bottom line of exploration and mining outift, Kagara.
Dramatic drops in key commodity prices, and the effects from the economic downturn, have impacted heavily upon the bottom line of West Perth-based mining and exploration outift, Kagara.
The company posted a full year post-tax loss of $94 million, including a $57.4 million pre-tax impairment charge and a $39.4 million provisional pricing adjustment.
Average copper and zinc spot prices fell by 36 per cent and 46 per cent respectively during the financial year compared to the previous financial year which contributed heavily to the full financial year loss after tax of $94 million.
Shares in Kagara were 2 cents lower, down 1.9 per cent, to $1.03 at AEST1336.
Full announcement below:
Preliminary Final Report & Full Year Results for the Year Ended 30 June 2009
2008/09 FINANCIAL SUMMARY
Capital raising of A$226 million commenced in June 2009 and completed in July 2009
Strategic Alliance with Guangdong Foreign Trade Group to earn up to a 19.9% stake in Kagara
Balance Sheet strengthened through a debt reduction strategy
41% increase in copper metal production for the year to 37,043 tonnes
Cash on hand plus receivables of A$98.7 million at year end
Cash flow from mining operations of A$49.9 million for the financial year
Net loss after tax of A$26.2 million prior to provisional pricing adjustments and asset impairments
Cash margin from the Mt Garnet and Thalanga Copper Plants of US$0.59 per pound of payable copper on an average price received of US$1.94 per pound of payable copper
Cash margin from the Mt Garnet Polymetallic Plant of US$0.11 per pound of payable zinc on an average price received of US$0.60 per pound of payable zinc
The 2008/09 financial year has been a challenging one for Kagara. The effects of the Global Financial Crisis, significant falls in base metal prices, a high level of debt and a record wet season had a major impact on profitability and cash flows during the year.
In light of this difficult operating environment, management embarked on a major capital raising in June 2009 which resulted in a comprehensive recapitalisation of the Company and the introduction of a new strategic major shareholder, the Guangdong Foreign Trade Group from China. Base metal prices began to recover in the June 2009 quarter and Kagara is now well placed to enter a new phase of growth.
The net loss after tax for the financial year ended 30 June 2009 was A$26.2 million prior to a pre-tax provisional pricing adjustment charge of A$39.4 million, largely relating to concentrates produced and invoiced during the previous financial year and a pre-tax impairment charge of A$57.4 million.
Zinc cash operating costs after by-product credits for the financial year from the Mt Garnet polymetallic plant in North Queensland was US$0.49 per pound of payable zinc (2008: US$0.55) produced against an average realised zinc price of US$0.60 per pound of payable zinc (2008: US$1.10). The cash margin from operations was US$0.11 per pound of payable zinc (2008: US$0.55).
Copper cash operating costs after by-product credits for the financial year from the Mt Garnet copper plant were US$1.32 per pound of payable copper produced (2008: US$1.37) against an average realised copper price of US$1.96 per pound of payable copper (2008: US$3.24). The cash margin from the Mt Garnet copper plant was US$0.64 per pound of payable copper (2008: US$1.87).
Copper cash operating costs after by-product credits for the financial year from the Thalanga plant were US$1.37 per pound of payable copper produced (2008: US$1.49) against an average realised copper price of US$1.93 per pound of payable copper (2008: US$3.23). The cash margin from the Thalanga plant was US$0.56 per pound of payable copper (2008: US$1.74).
Despite cash operating margins being impacted by falling base metal prices during the financial year, Kagara's base metal operations remained cash flow positive with A$49.9 million being generated from mining operations. In October 2008, Kagara commenced a strategic review of operations including a review of capital, development and exploration expenditures in light of the effects of the Global Financial Crisis taking place during that period. This review resulted in the optimisation of cash flows and increasing copper production, whilst deferring capital expenditures.
The A$226 million capital raising consisting of a placement, entitlement offer and strategic alliance provided funds to address the level of bank debt and improve working capital flexibility. Subsequent to the financial year end, the Company had zero net debt, excluding leasing liabilities which leaves the Company's balance sheet in a very strong position.
The 2009/2010 financial year will see zinc production increase from 26,938 tonnes of metal to approximately 46,000 tonnes of metal in concentrate and copper production reduce to approximately 23,000 tonnes of metal in concentrate as a result of the Thalanga plant being converted to tailings retreatment.
The debt reduction strategy embarked upon several months ago, together with several key initiatives, including the forthcoming Mungana Goldmines IPO which will bring forward gold production, completion of a Heads of Agreement with Western Areas NL which will result in rapid production from the Lounge Lizard nickel deposit in Western Australia and the commencement of a Pre-Feasibility Study on the world class Admiral Bay zinc-lead-silver-barite deposit, has enabled Kagara to return to its previously outlined growth strategy with a strengthened balance sheet.
The key results and further information for the financial year ended 30 June 2009 is provided in the attached Appendix 4E and Financial Report for the year ended 30 June 2009.