Goldplat : Trading and Operational Update

Goldplat plc, the AIM listed gold producer in Africa, announces a positive trading and operational update for its two market leading gold recovery businesses in South Africa and Ghana, and its Kilimapesa Gold Project in Kenya. 

Trading Update for the quarter ended 31 March 2014 (Q3 FY2014)

The Company is pleased to announce that the trading results for the quarter ended 31 March 2014 have been highly encouraging, with the Company's two gold recovery operations in South Africa and Ghana returning to profitability, and as a result Goldplat is reporting a profit after tax of £313,000 for Q3 FY2014.  Goldplat made an operational profit of £459,000 for Q3 FY2014 which reduced the half year operational loss (six months to 31 December 2013 or H1 FY2014) of £694,000 to a loss of £235,000 for the 9 months to 31 March 2014.

A positive operational performance from Goldplat Recovery (Pty) Ltd in South Africa has reversed the H1 FY2014 operational loss of £138,000, to a year to date profit as at 31 March 2014 of £260,000 for the 9 months to 31 March 2014, which equates to a profit from operations of £398,000 for the quarter.

In addition, Goldplat's Gold Recovery operation in Ghana further increased its profitability from an operating profit for the half year of £201,000 to an operational profit of £532,000 for the 9 months to 31 March 2014, which has resulted in an operational profit of £330,000 for Q3 FY2014.

The Company's Kilimapesa Gold mine in Kenya increased its operational loss to £448,000 for the 9 month period ending 31 March 2014.  The operational loss for Q3 FY2014 equates to £167,000.

The holding companies of the Group incurred administrative expenses of £95,000 for Q3 FY2014 bringing administrative expenses for the 9 month period ending 31 March 2014 to £570,000.  Finance cost increased from £218,000 for H1 2014 to £304,000 for the 9 month period ending 31 March 2014, an increase of £86,000. 

The cash position decreased marginally from £634,000 as at 31 December 2013 to £568,000 as at 31 March 2014, however the Company is confident that its cash position has and will continue to improve in Q4 FY2014 as the South African and Ghanaian operations profitability continues to strengthen in line with management's expectations.  

Group subsidiaries have collected proceeds from 2,005 troy ounces of gold amounting to approximately £1,540,000 from balances reflected as 'Accounts Receivable' and 'Gold Inventories' as at 31 March 2014.

Operations Update
Goldplat Recovery Pty Limited ('GPL') - South Africa

Goldplat's recovery plant in South Africa, had a strong performance during Q3 FY2014 following the successful implementation of various initiatives by the management team to improve the efficiency of the gold recovery operation.  An improved gold price combined with a weaker South African Rand versus US dollar exchange rate also contributed to the stronger performance. The growth outlook remains positive for the remainder of H2 2014.

Initiatives successfully implemented include:

• the introduction of a 24 hour shift for the by-product section where yield has improved and mitigated the risk related to treating lower grade, by-product material;

• the throughput of lower grade by-product material was increased resulting in a higher overall gold production without reducing the stockpile reserves as new contracts were signed with clients delivering more lower grade material;

• the Responsible Gold accreditation which has resulted in new business wins; and

• cost savings from the use of liquid cyanide remains on track. 

Other improvements and potential revenue generators include the reprocessing of existing tailings at GPL. Following positive results from initial in-house test work on the tailings, Goldplat has engaged a South African University to undertake a project to design a process for the retreatment of the tailings with the objective of recovering additional gold during the reprocessing phase.  This initiative would provide a new revenue stream at a very low cost.  GPL is in the process of licensing a final deposition site for the tailings.

Goldplat is also evaluating other business growth opportunities at GPL.  In line with this, Goldplat secured and successfully executed a two month toll treatment project during February and March 2014 for a local client.  The toll treatment strategy for local and international clients coupled with the continuous building of stockpiled reserves remains GPL's focus and has given Goldplat significant production flexibility.

The Company's project at Central Rand Gold's No.4 Shaft is progressing well and contributing towards GPL's profits.  The sustainability of this project is still subject to securing a safe second outlet and access for the work force and material handling.  Management remains optimistic that this objective can be achieved in the short term and the project will deliver sustainable revenues in future.

Goldplat is also working towards potential diversification into the Platinum Group Metals (PGM's) as part of its long term growth strategy to capitalise on a more stable platinum price.  The various by-products from the platinum mining industry are currently being evaluated with a trial project to start mid Q4 FY2014.

The Company continues to work closely with the Department of Mineral Resources to curb illegal mining activities on surface.  GPL expects to assist the Department of Mineral Resources by cleaning up surface areas that are currently threatening local communities and by processing the material removed from the illegal mining sites at GPL to benefit from the gold recovery.

With more favourable exchange rates, renegotiated cost-effective contracts, and more streamlined operations, Goldplat has shown during Q3 FY2014 that strong revenues can be realised from the various by-product processes at GPL and therefore remains confident that the operational and trading performance for H2 FY2014 will be stronger than that of H1 FY2014.

Gold Recovery Ghana Ltd ('GRG') - Ghana

At GRG, action plans to mitigate the risks to the gold price were implemented by management in H1 2014 and have been executed successfully. The positive results achieved during Q3 FY2014 have been a direct result of these interventions.

Profitability for GRG's tolling agreement with Endeavour Resources to process tailings from artisanal and small scale miners has improved over the quarter. This is largely due to the purchase prices of tailings reducing to normal levels on the back of support from the Ghanaian Government who continue to apply pressure to legalise all mining operations in Ghana, and the Small Scale Miners Association assisting the Company with its procurement efforts.

At GRG's Carbon-in-Leach (CIL) section in Tema, gold recovery has improved by milling the oversize material which has increased the profitability of the CIL section.  Adjustments to the flow sheet have decoupled the mill and the thickener allowing greater production flexibility during breakdowns.  Options for the disposal of the final residue are being investigated.  Reduced cyanide consumption impacted positively on costs however the recent increases of power and fuel costs have reversed the trend.

A second spiral circuit has been commissioned at the spiral and incinerator section which improves the capacity for the treatment of high grade carbon.  Importantly, the first batch of material procured outside of Ghana has been received and the volume of fine carbon received continues to increase in line with Goldplat's strategy to significantly grow this profit centre through new clients and more favourable contracts with existing clients.  

Existing lower grade material has also been exported to GPL to realise further profit and reduce the pressure on storage capacity at GRG while the plans for the kiln installation are progressed.

In addition, the Company remains confident that it can expand its business substantially into the rest of Africa and further afield and continues to review other opportunities to grow its recovery operations. The Company will continue to benefit from the free zone tax regime as the maximum tax rate will only be 8% as from 2016.

Kilimapesa Gold Mining - Kenya

During Q3 FY2014, Kilimapesa continued with ore production to keep the mill operational and reduce the overall costs of the operation.  Included in the operational loss for Kilimapesa are the costs for primary development of a new adit to access the reef at a lower elevation, and secondary development at the mining areas to ensure sufficient ore remains available for processing. 

Goldplat remains cost-conscious and mindful of Group objectives of focusing in the near-term on the success of its cash generative niche gold recovery business in Africa, and as a result Goldplat continues to progress discussions with joint venture partners to advance the development of Kilimapesa.  To date, the Company has signed two non-disclosure agreements and a third potential investor has been identified.  The market will be updated on developments in this regard in due course.

This process is helped by an important development in the publication of the Mining Bill in Kenya, which will replace the previous Mining Act of 1940. We expect the Bill to be enacted by Parliament during this year.  We believe that the Government of Kenya has the aspiration to develop the mining industry and that the uncertainties regarding tenure have been resolved.  The Mining Bill proposes a 10% free carried interest and it appears that royalty rates will remain unchanged.  Based on this encouraging development it is expected that Goldplat, together with a future joint venture partner, will continue to develop this mine.

Other Development Assets

The Group has now returned to profitability which enables Goldplat to evaluate its expansion into West Africa and as such, the Company will prioritise the Burkina Faso Midas gold recovery operation.  Licensing issues have not yet been finalised but are in progress and the market will be updated in due course.

Anumso Gold in Ghana and Nyieme Gold still remain de-prioritised at this stage, however Goldplat is continuing to evaluate opportunities to realise value or monetise these projects either through joint ventures or trade sales. 

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Notes:

Goldplat plc, is an AIM-listed cash generative, debt free gold recovery services company with two market leading operations in South Africa and Ghana.  The Company's strategy is focussed on utilising its robust cash flow generated from flagship gold recovery operations in Africa to self-fund sustainable growth and expansion of niche gold recovery business model. The Company also has a small gold mining and exploration portfolio in Kenya, Burkina Faso and Ghana and is evaluating various opportunities to create value or monetise these assets.

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