GCM Resources plc, an AIM quoted mining and energy company, is pleased to report its interim results for the six months ended 31 December 2019. The Chairman’s Statement and the full unaudited interim report are presented below, and will shortly be available at the Company’s website www.gcmplc.com.
Chairman’s Statement
I’m pleased to report to our shareholders on the Company’s performance for the six months ended 31 December 2019. It has been a busy period for the Company and, despite the macro-economic headwinds I am pleased with the progress made. We have continued to pursue our strategy of presenting a comprehensive power solution to the Bangladesh Government, based on a 15 million tonne per annum “captive” coal mine in the Phulbari Coal Basin, feeding power plants with a combined capacity of 6,000MW, utilising highly energy-efficient ultra-supercritical boiler technology, and we continue this progress into 2020.
As the world is confronting climate change and looking for ways to increase power generation, whilst simultaneously reducing greenhouse gas production, we have taken steps to incorporate “high efficiency, low emission” (HELE) coal-fired power plant technology into our project. Over the past decade, developments in HELE technology have moved coal-fired power plant energy efficiency from circa 35% to 43-44% using the ultra-supercritical technology and this trend is expected to continue over the next 5 years, with “advanced ultra-supercritical plants” expected to further increase energy efficiency towards 50%, with greatly reduced CO2 emissions. This technological advance is highly relevant to GCM, as it is expected to happen within the 10-year timeframe that is estimated for the installation of the 6,000MW Phulbari Coal and Power Project.
Our recent progress can be measured by the fact that:
1. Working under the joint-venture arrangements with internationally renowned PowerChina (Power Construction Corporation of China Ltd), we have completed the full Power Proposals covering an initial 4,000MW. These documents were prepared to the Bangladesh Power Development Board’s requirements and will be presented as two 2,000MW Phases, installed in succession, to suit the production ramp-up of the Phulbari coal mine.
2. Working under the MOU with NFC (China Non-ferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd) and PowerChina, NFC successfully completed their Due Diligence studies towards the end of 2019 and we are hopeful of moving to a formal joint venture arrangement as early as possible in 2020.
We have prepared the Phulbari Coal and Power Project Proposal and are working with our appointed local consultant to finalise ready for submission to the Bangladesh Government. This is a truly a “Mega Project” and is estimated to require some US$14.5 billion Foreign Direct Investment into Bangladesh to deliver the Project in its entirety. The Board would note that it’s not just about the mine and power plants, but also about bringing major local and regional development, with significant job creation, a new township, new villages, roads, rail, industrial development based on stable and expansive power supply, reticulated water supplies and free water for irrigation schemes, sanitation systems and many other improved community amenities.
Other steps taken in early 2020 include:
· Securing the continuing support of Polo Resources Ltd (AIM: POL) (“Polo”) by way of the extension of the loan agreement to ensure funding for a further 12 months.
· Agreeing extension of the memorandum of understanding with NFC and PowerChina for a further three months, through into April 2020, on the same terms as previously announced.
· Agreeing the extension of the Joint Venture Agreement (“JVA”) and definitive Engineering, Procurement and Construction Contract (“EPC Contract”) with PowerChina, for a further 12 months, to 17 January 2021, on the same terms as previously announced.
Financials
GCM incurred a loss after tax of £616,000 for the six months ended 31 December 2019 (31 December 2018: loss after tax of £1,844,000). The most significant expenditure during the period was pre-development expenditure, while administrative expenses for the six months ended 31 December 2019 were £198,000 (31 December 2018: £335,000) and capitalised project expenditure for the period was £287,000 (31 December 2018: £275,000).
During the period, GCM agreed an extension in the short-term loan facility with Polo, the Company’s second largest shareholder. The short-term loan facility was been increased by £1.2 million, in exchange for permitting the outstanding loan balance and accrued interest to be repaid by issuing new ordinary shares in the Company, at a conversion price of 11 pence per share. The loan facility continues to attract an interest rate of 12% per annum and may be repaid via the issue of new ordinary shares in GCM as mentioned, or in cash, with Polo being required to give 90 days’ notice to the Company.
Over the next six months, the Company will seek new investment to strengthen GCM’s financial position and provide future funding. Until such time, there remains a material uncertainty which may cast doubt as to the Group’s ability to continue as a going concern. The directors remain confident that sufficient funding will be obtained as and when required. As such, the financial statements have been prepared on a going concern basis. Please refer to the accounting policy note on going concern (Note 1 to the Financial Statements) for further information.
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