28

Unaudited Interim Statement and Management Update for the Quarter Ended 30 June, 2015

28 August 2015

Beowulf Mining plc

(“Beowulf” or the “Company”)

Unaudited Interim Statement and Management Update for the Quarter Ended 30 June, 2015

Beowulf (AIM: BEM; Aktietorget: BEO), the mineral exploration and development company focused on the Kallak iron ore project in northern Sweden and its Swedish exploration portfolio, announces its unaudited interim statement for the six months ended 30 June 2015 and provides a management update.

The next quarterly statement for the nine months ending 30 September 2015 will be released on or around Monday 30 November 2015.

Highlights:

  • As announced in June 2015 metallurgical testwork carried out by GTK in Finland on Kallak North samples confirmed, that the project is capable of producing:
    • a ‘super’ high grade magnetite concentrate, with over 71 per cent. iron content and very low levels of deleterious elements; and
    • a ‘bonus’ high grade hematite concentrate with over 68 per cent. iron content providing additional upside.
  • The Company continues to work closely with key stakeholders in and around Jokkmokk, as well as with communities that could be affected by the development of the Kallak iron ore project.
  • The Company is in the process of completing a desktop review of the historical information on its other exploration projects, which will assist in the design of future exploration plans and capital allocation.
  • The Company has started to rationalise its exploration portfolio in 2015, reducing the total area held, while maintaining those licence areas which demonstrate the greatest potential.
  • Loss before and after taxation attributable to the owners of the parent of £330,276 (2014: loss of £1,317,313).
  • All of the resolutions put forward at the Annual General Meeting (‘AGM’), as set out in the Notice of AGM, were unanimously approved by shareholders, as well as receiving the full support of the Company’s largest shareholder.

Post Period Highlights:

  • An important step forward has been taken by the County Administrative Board (‘CAB’) for Norrbotten County when they published their response to the Swedish Government’s request for comments on the national economic assessment of the Kallak North iron ore project. The assessment concluded that:
    • mining was economically relevant to the area;
    • the project generates economic benefits at local, regional and national levels; and
    • the Concession area applied for by the Company creates no conflicts where national interests are considered and is designated as an Area of National Interest (“ANI”) for minerals.
  • £650,000 (gross) raised in July 2015 by the issue of approximately 52 million new ordinary shares.

Kurt Budge, Chief Executive Officer, commented:

“The Company is looking forward to a busy second half of the year and we are optimistic that momentum is in our favour for a positive decision on the Exploitation Concession for Kallak North. Once the Concession is in place, Kallak North will be significantly de-risked in the eyes of potential investors and strategic partners and well positioned to advance its development.

“The Board would like to thank Jan-Ola for his enthusiasm and commitment to Beowulf over the past 10 years. Since his retirement on June 12 2015, the Board and management team of Beowulf has changed completely from that of August 2014. With the change in leadership, Beowulf has re-established itself, strengthened its financial controls and governance procedures, re-focused the Company’s strategy and aligned its interests with those of its shareholders. This all means that the Company is now in a stronger position, both operationally and financially.

“The current management team has also demonstrated its commitment to sustaining the Company through a challenging period for junior explorer/developers, and adopted an approach in Sweden which is beginning to yield results.”

Operational

Exploitation Concession

An important step forward was taken on 7 July 2015 with the Company’s application for an Exploitation Concession for Kallak North, when the CAB for Norrbotten County published their response to the Swedish Government’s request for comments on the national economic assessment of Kallak North.

The CAB stated in their response that mining is economically relevant, and that the Kallak North project generates economic benefits at local, regional and national levels, including direct and indirect jobs, tax revenues, and more broadly across mining equipment and services sectors in Sweden. In addition, the CAB stated that the Concession area applied for by the Company creates no conflicts where national interests are considered and is designated as an ANI for minerals.

In the Company’s opinion, the announcement was a positive turnaround from the position taken by the CAB in October 2014 and it also looked to the future, directing the Company towards working with communities that could be affected by the development of a mining project, including reindeer herders and Sami villages. This is work that the Company has already begun, with regular interactions and meetings with key stakeholders in and around Jokkmokk over the last six months, including a first meeting between the new management team and representatives of the Sami villages in June 2015.

‘Super’ High Grade Concentrate

On 4 June 2015 the Company announced outstanding testwork results on iron ore samples from Kallak North. The Board had decided that with the funds raised in March 2015 it would commission further investigation of Kallak North ore, to demonstrate the quality of the orebody, despite the delay in being granted an Exploitation Concession, and in the knowledge that its technical consultants believed it could produce a ‘super’ high grade concentrate. As expected by the Company, the final report showed, a ‘super’ high grade magnetite concentrate, with over 71 per cent. iron content and very low levels of deleterious elements (silica, alumina, phosphorous and sulphur) and a ‘bonus’ high grade hematite concentrate with over 68 per cent. iron content providing additional upside.

Beowulf’s understanding of the quality of the orebody and the high grade products it can produce are critical to identifying appropriate investors and partners, who understand the fundamental value of Kallak North, the future value of Kallak South, together with the full exploration potential of both projects. In addition, Kallak significantly benefits from its location, with proximate access to power and transport infrastructure, and positioning in a low sovereign risk jurisdiction, Sweden, a country with a long mining history, developed knowledge, skills and innovation capability.

Exploration Portfolio

The Company has rationalised its exploration portfolio in 2015, reducing the total area held, while maintaining those licence areas which demonstrate the greatest potential. This has cut running costs, focused our efforts on ground that we believe demands investment and that we can add value to.

Exploration has for the most part taken a backseat, while limited cash resources have been directed at advancing Kallak North. However, we are in the process of completing a desktop review of the historical information on our exploration projects, which will assist in the design of future exploration plans and capital allocation. We continue to seek a replacement Chief Operating Officer, with interim support being provided by technical consultants, and look beyond our existing exploration portfolio for acquisition opportunities.

Financials

  • Loss before and after taxation attributable to the owners of the parent of £330,276 (2014: loss of £1,317,313) and basic/diluted loss per share of 0.09p (2014: loss of 0.47p). The main reasons for the lower loss in the period were lower corporate overheads especially directors’ remuneration and professional fees, and nil losses on derivative financial assets following the accelerated settlement of equity swap arrangements in January 2015.
  • £172,955 in cash held at the period end.
  • £650,000 (gross) raised in July 2015 by the issue of approximately 52 million new ordinary shares.

Corporate

  • The Board’s Salary Sacrifice ended 31 May 2015 and ordinary shares were issued on 9 June 2015 in respect of the cash amount sacrificed between 1 October 2014 and 31 May 2015, totaling £45,798.
  • Dr. Jan-Ola Larsson retired 12 June 2015.
  • Beaufort Securities Limited were appointed as the Company’s Joint Broker alongside Cantor Fitzgerald Europe on 18 June 2015.
  • The Company’s AGM was held on 29 June 2015. All of the resolutions put forward at the meeting, as set out in the Notice of AGM, were unanimously approved by shareholders. The Board received the full support of the Company’s largest shareholder.
  • On 17 July 2015 the Company granted options over a total of 17 million ordinary shares to Mr. Budge and Mr. Metcalf.
  • The total number of ordinary shares in circulation at the date of this announcement is 429,079,256 ordinary shares of £0.01 each, with each share carrying the right to one vote. The Company does not hold any ordinary shares in treasury.

Enquiries:

Beowulf Mining plc

 

Kurt Budge, Chief Executive Officer

Tel: +44 (0) 20 3771 6993

Cantor Fitzgerald Europe

(Nominated Advisor & Joint Broker)

 

Stewart Dickson / Jeremy Stephenson / Phil Davies / Carrie Drummond

Tel: +44 (0) 20 7894 7000

Beaufort Securities Limited

(Joint Broker)

 

Jon Belliss

Tel: +44 (0) 20 7382 8300

Blytheweigh

 

Tim Blythe / Megan Ray

Tel: +44 (0) 20 7138 3204

Cautionary Statement

Statements and assumptions made in this document with respect to the Company’s current plans, estimates, strategies and beliefs, and other statements that are not historical facts, are forward-looking statements about the future performance of Beowulf. Forward-looking statements include, but are not limited to, those using words such as “may”, “might”, “seeks”, “expects”, “anticipates”, “estimates”, “believes”, “projects”, “plans”, strategy”, “forecast” and similar expressions. These statements reflect management’s expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including, but not limited to, (i) changes in the economic, regulatory and political environments in the countries where Beowulf operates; (ii) changes relating to the geological information available in respect of the various projects undertaken; (iii) Beowulf’s continued ability to secure enough financing to carry on its operations as a going concern; (iv) the success of its potential joint ventures and alliances, if any; (v) metal prices, particularly as regards iron ore. In the light of the many risks and uncertainties surrounding any mineral project at an early stage of its development, the actual results could differ materially from those presented and forecast in this document. Beowulf assumes no unconditional obligation to immediately update any such statements and/or forecasts.

About Us

The Kallak North iron ore project is located about 40km west of the Jokkmokk municipality centre in the Norrbotten County in Northern Sweden.

Local infrastructure is excellent with all-weather gravel roads passing through the project area and all parts are easily reached by well used forestry tracks. A major hydroelectric power station with associated electric power-lines is located only a few kilometres to the south east. The nearest railway (the ‘Inland Railway Line’) passes approximately 40km to the east. This railway line is connected at Gällivare with the ‘Ore Railway Line’, which is used by LKAB for delivery of their iron ore material to the Atlantic harbour at Narvik (Norway) or to the Botnian Sea harbour at Luleå (Sweden).

The total Kallak project area is approximately 80km2, and includes the Parkijaure licence granted in 2010 and the Ågåsjiegge nr2 licence granted in 2014.

The Kallak North and Kallak South orebodies are centrally located and cover an area approximately 3,700m in length and 350m in width, as defined by drilling. The mineral resource estimate for Kallak North and South is based on drilling conducted between 2010-2014, a total 27,895m drilled, including 131 drillholes.

The latest resource statement for the Kallak project was finalised on 28 November 2014, following the guidelines of the JORC Code 2012 edition, summary as follows:

 

Category

Tonnage

Mt

Fe

%

P

%

S

%

Kallak North

Indicated

105.9

27.9

0.035

0.001

 

Inferred

17.0

28.1

0.037

0.001

           

Kallak South

Indicated

12.5

24.3

0.041

0.003

 

Inferred

16.8

24.3

0.044

0.005

           

Global

Indicated

118.5

27.5

0.036

0.001

 

Inferred

33.8

26.2

0.040

0.003

The Ballek Joint Venture project comprises two exploration permits over a total area of approximately 8.7km2, located in the Norrbotten County in Northern Sweden. In September 2008 Beowulf reported a maiden JORC Code compliant Inferred Resource estimate for the Lulepotten copper-gold deposit of 5.4Mt, grading 0.8% Cu and 0.3g/t Au.

Other attractive portfolio assets include the Nautijaure licence with potential for IOCG, Grundträsk gold project and the Munka licence which hosts Sweden’s largest, drill confirmed deposit of molybdenum.

CONSOLIDATED INCOME STATEMENT

     

For the 6 months ended 30 June 2015

     
 

(Unaudited)
6 months to
30-Jun-15

(Unaudited)
6 months to
30-Jun-14
as restated

(Audited)
Year ended
30-Dec-14

 

£

£

£

Continuing operations

     

Administrative expenses

(331,370)

(551,103)

(1,032,355)

Operating loss

(331,370)

(551,103)

(1,032,355)

       

Finance costs

(1,114)

Fair value loss on derivative

     

financial assets

(777,033)

(2,032,835)

Share of post-tax losses of equity

     

accounted joint venture

(2,928)

(2,552)

Finance income

638

14,865

6,397

Loss before tax

(330,732)

(1,317,313)

(3,061,345)

       

Tax

Loss for the period

(330,732)

(1,317,313)

(3,061,345)

Loss attributable to:

     

Owners of the parent

(330,276)

(1,317,313)

(3,060,482)

Non-controlling interests

(456)

(863)

 

(330,732)

(1,317,313)

(3,061,345)

Loss per share attributable to the
owners of the parent:

     

Basic and diluted (pence)

(0.09)

(0.47)

(1.00)

 

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

     

For the 6 months ended 30 June 2015

     
 

(Unaudited)
6 months to
30-Jun-15

(Unaudited)
6 months to
30-Jun-14
as restated

(Audited)
Year ended
30-Dec-14

 

£

£

£

       

Loss for the period

(330,732)

(1,317,313)

(3,061,345)

       

OTHER COMPREHENSIVE INCOME

     

Items that will not be reclassified
to profit or loss:

     

Revaluation of listed investments

(20,550)

3,656

986

       

Items that may be
reclassified subsequently

     

to profit or loss:

     

Exchange difference arising on
translation of foreign operations

(410,918)

(383,009)

(758,807)

Share of other comprehensive income of
equity accounted joint venture

(5,102)

(8,021)

 

(410,918)

(388,111)

(766,828)

       

Other comprehensive income for the
Period, net of income tax

(431,468)

(384,455)

(765,842)

Total comprehensive income for the period

(762,200)

(1,701,768)

(3,827,187)

Total comprehensive income attributable to:

     

Owners of the parent

(756,175)

(1,701,768)

(3,819,849)

Non-controlling interests

(6,025)

(7,338)

 

(762,200)

(1,701,768)

(3,827,187)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2015

 

(Unaudited)
As at
30 June 2015

(Unaudited)
As at
30 June 2014
as restated

(Audited)
As at
31 Dec 2014

 

£

£

£

ASSETS

     
       

Non-current assets

     

Intangible assets

6,253,448

5,785,708

6,538,752

Property, plant and equipment

34,913

50,970

42,394

Investment in equity accounted joint ventures

198,905

Investments

23,220

20,550

Derivative financial assets

569,969

Loans and other financial assets

49,822

564,994

53,262

 

6,338,183

7,193,766

6,654,958

Current assets

     

Trade and other receivables

50,603

238,958

42,445

Derivative financial assets

150,000

Cash and cash equivalents

172,955

554,436

186,889

 

223,558

793,394

379,334

TOTAL ASSETS

6,561,741

7,987,160

7,034,292

EQUITY

     

Shareholders’ equity

     

Share
capital

3,764,619

2,828,273

3,452,598

Share
premium

15,070,648

14,078,466

15,009,812

Revaluation
reserve

(30,000)

(6,780)

(9,450)

Capital
contribution
reserve

46,451

46,451

46,451

Share
option
reserve

72,675

67,760

69,318

Translation
reserve

(1,333,184)

(555,593)

(927,835)

Accumulated
losses

(11,356,110)

(9,283,430)

(11,025,834)

 

6,235,099

7,175,147

6,615,060

Non-controlling interest

123,109

129,134

Total equity

6,358,208

7,175,147

6,744,194

LIABILITIES

     

Current liabilities

     

Trade and other payables

203,533

812,013

290,098

Total liabilities

203,533

812,013

290,098

TOTAL EQUITY AND LIABILITIES

6,561,741

7,987,160

7,034,292

               

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY    
For the 6 months ended 30 June 2015      
           
  Share Capital Share Premium Revaluation reserve Capital contribution reserve Share option reserve
           
  £ £ £ £ £
Balance at 31 December 2013          
as restated 2,828,273 14,078,466 (10,436) 46,451 67,760
           
Total comprehensive income 3,656
           
Balance at 30 June 2014 2,828,273 14,078,466 (6,780) 46,451 67,760
           
Issue of share capital 624,325 1,248,650
Costs associated with the issue of new shares (317,304)
Equity-settled share-based payment transactions 1,558
Acquisition of subsidiary
Total comprehensive income (2,670)
           
Balance at 31 December 2014 3,452,598 15,009,812 (9,450) 46,451 69,318
           
Issue of share capital 312,021 83,776
Costs associated with the issue of new share (22,940)
Equity-settled share-based payment transactions 3,357
Total comprehensive income (20,550)
           
Balance at 30 June 2015 3,764,619 15,070,648 (30,000) 46,451 72,675

 

  Translation Reserve Accumulated Loses Total Non-controlling nterest Total Equity
  £ £ £ £ £
Balance at 31 December 2013          
as restated (167,482) (7,966,117) 8,876,915 8,876,915
           
Total comprehensive income (388,111) (1,317,313) (1,701,768) (1,701,768)
           
Balance at 30 June 2014 (555,593) (9,283,430) 7,175,147 7,175,147
           
Issue of share capital 1,872,975 1,872,975
Costs associated with the issue of new shares (317,304) (317,304)
Equity-settled share-based payment transactions 1,558 1,558
Acquisition of subsidiary 136,472 136,472
Total comprehensive income (372,242) (1,742,404) (2,117,316) (7,338) (2,124,654)
           
Balance at 31 December 2014 (927,835) (11,025,834) 6,615,060 129,134 6,744,194
           
Issue of share capital 395,797 395,797
Costs associated with the issue of new shares (22,940) (22,940)
Equity-settled share-based payment transactions 3,357 3,357
Total comprehensive income (405,349) (330,276) (756,175) (6,025) (762,200)
           
Balance at 30 June 2015 (1,333,184) (11,356,110) 6,235,099 123,109 6,358,208

 

CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months ended 30 June 2015

 

(Unaudited)
6 months to
30 June 2015

(Unaudited)
6 monhts to
30 June 2014
restated

(Audited)
Year ended
31 Dec 2014

 
 

£

£

£

 

Cash flows from operating activities

       

Loss before income tax

(330,732)

(1,317,313)

(3,061,345)

 

Depreciation charges

4,825

2,733

8,227

 

Equity-settled share-based transactions

3,357

1,558

 

Impaired exploration costs recovered

(36,804)

 

Impairment of exploration costs

3,187

 

Impairment of accrued interest receivable

9,725

 

Share of post-tax losses of equity accounted joint venture

2,928

2,552

 

Gain on asset acquisition arising on reclassifying

       

Joint venture as a subsidiary

(59,891)

 

Finance costs

777,033

2,032,835

 

Finance income

(638)

(14,878)

(6,397)

 
 

(323,188)

(576,576)

(1,079,274)

 

(Increase)/Decrease in trade and other receivables

(8,638)

326,891

200,747

 

(Decrease)/Increase in trade and other payables

(90,760)

348,384

(242,953)

 

Net cash (used in)/from operating activities

(422,586)

98,699

(1,121,480)

 

Cash flows from investing activities

       

Purchase of intangible fixed assets

(113,366)

(1,174,537)

(1,375,121)

 

Sale of intangible fixed assets

36,804

 

Purchase of property, plant and equipment

(51,713)

(48,631)

 

Sale/(purchase) of fixed asset investments

37

(101)

 

Sale of investments

49,205

 

Funding of joint venture

(624,373)

(294,639)

 

Acquisition of subsidiary cash

1,168

 

Interest received

638

5,153

6,397

 

Net cash used in investing activities

(112,691)

(1,808,767)

(1,661,621)

 

Cash flows from financing activities

       

Proceeds from issue of shares

395,797

887,975

 

Payment of share issue costs

(22,940)

(182,304)

 

Settlement of derivative financial asset

150,000

298,608

312,775

 

Net cash from financing activities

522,857

298,608

1,018,446

 

Decrease in cash and cash equivalents

(12,420)

(1,411,460)

(1,764,655)

 

Cash and cash equivalents at beginning of period

186,889

1,983,616

1,983,616

 

Effect of foreign exchange rate changes

(1,514)

(17,719)

(32,072)

 

Cash and cash equivalents at end of period

172,955

554,437

186,889

 

 

NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

     

For the 6 months ended 30 June 2015

     
       

1. Cash and cash equivalents

     

The amounts disclosed in the statement of
cash flows in respect of cash and cash equivalents are
in respect of these statements
of financial position amounts:

     

Period ended 30 June 2015

     
   

(Unaudited)
As at 30-Jun-15

(Audited)
As at 31-Dec-14

   

£

£

Cash and cash equivalents

 

172,955

186,889

Period ended 30 June 2014

     
   

(Unaudited)
As at 30-Jun-14
as restated

(Audited)
As at 31-Dec-13
as restated

   

£

£

Cash and cash equivalents

 

554,436

1,983,616

Period ended 31 December 2014

     
   

(Audited)
As at
31-Dec-14

(Audited)
As at
31-Dec-13
as restated

   

£

£

Cash and cash equivalents

 

186,889

1,983,616

Cash and cash equivalents consist of cash in
hand and balances with banks.

 

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the 6 months ended 30 June 2015

1. Basis of preparation

These interim financial statements for the six month period ended 30 June 2015 have been prepared using the historical cost convention, on a going concern basis and in accordance with applicable International Financial Reporting Standards as adopted by the European Union (“IFRS”) and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union. They have also been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 December 2015, and which are also consistent with the accounting policies applied for the year ended 31 December 2014 except for the adoption of any new standards and interpretations.

These interim results for the six months ended 30 June 2015 are unaudited and do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2014 have been delivered to the Registrar of Companies and filed at Companies House and the auditors’ report on those financial statements was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Companies Act 2006.

2. Prior year adjustments

Change in accounting policy

During the year ended 31 December 2014, the Group adopted IFRS 11 ‘Joint Arrangements’ which was effective for periods beginning on 1 January 2014. The Directors have considered the factors specified within IFRS 11 and classified the interest in the jointly controlled entity, Wayland Copper Limited as a joint venture. Under the requirements of IFRS 11, joint ventures are accounted for using the equity accounting method. Joint ventures are initially recognised at cost and subsequently adjusted for the Group’s share of the profit and losses and other comprehensive income in the joint venture.

The accounting policy adopted prior to the implementation of IFRS 11 followed the requirements of IAS 31 ‘Financial reporting of Interests in Joint Ventures’ under which the Group had accounted for the interest in the jointly controlled entity using the proportional consolidation method.

The Group has retrospectively restated the 2014 figures to reflect this change in accounting policy.

Re-classification of impairment of investment

In 2012 a full provision was made in the Revaluation Reserve in respect of a £95,000 investment in Agricola Resources Plc following its de-listing from the PLUS market. A prior year adjustment was made in the financial statements for the year ended 31 December 2014 to transfer this impairment in value of the investment from Revaluation Reserve to Accumulated Losses to reflect the permanent diminution of value following the de-listing.

3. Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary owners of the parent by the weighted average number of ordinary shares of 362,187,280 (30 June 2014: 282,827,365 and 31 December 2014: 304,755,824) outstanding during the period. There is no difference between the basic and diluted loss per share.

4. Called up share capital

     
       
 

(Unaudited)
30-June 2015

(Unaudited)
30 June 2014

(Audited)
31 Dec 2014

 

£

£

£

Allotted, issued and fully paid

     

376,461,972 ordinary shares of 1p each

3,764,619

2,828,273

3,452,598

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the 6 months ended 30 June 2015

The number of shares in issue was as follows:

   
 

Number of shares

 
     

Balance as 31 December 2013

282,827,365

 

Issued during the period

 
     

Balance at 30 June 2014

282,827,365

 

Issued during the period

62,432,484

 
     

Balance at 31 December 2014

345,259,849

 

Issued during the period

31,202,123

 
     

Balance at 30 June 2015

376,461,972

 

5. Availability of interim report

A copy of these results will be made available for inspection at the Company’s registered office during normal business hours on any weekday. The Company’s registered office is at 207 Temple Chambers, 3-7 Temple Avenue, London, EC4Y 0DT. A copy can also be downloaded from the Company’s website at www.beowulfmining.com. Beowulf Mining plc is registered in England and Wales with registered number 02330496.