APAC Resources Reports The Interim Results for The Six Months Ended 31 December 2012
2013-02-28 08:07:24 -
APAC Resources Limited (hereinafter "APAC" or the "Company")(Stock Code on the Hong Kong Stock Exchange: 1104), a natural resources investment and commodity business company with subsidiaries in Hong Kong and Shanghai, today reported its interim results for the six months ended 31 December 2012.
In a challenging economic environment, the Company, together with its subsidiaries (the "Group") reported a net profit
after tax of HK$81,567,000 for the six months ended 31 December 2012 (2011 Net Profit: HK$29,959,000), representing an increase of 172 % over the same period last year. The Company's Primary Strategic Investments reported an overall profit of HK$109,704,000 (2011 Profit: HK$228,668,000), and the Commodity Business achieved a profit of HK$5,119,000 (2011 Profit: HK$3,310,000). The Resource Investment portfolio posted a loss of HK$4,641,000 (2011 Loss: HK$148,080,000).
Mr. Andrew Ferguson, Chief Executive Officer and Executive Director of the Company, said, "During this period we witnessed a moderate turnaround in the global macro environment, intense price volatility, and mixed performance in resource equities and commodities. Valuation continues to be attractive and we believe the resource sector remains "underweight" even after the recent rally in equity markets. We remain cautiously optimistic that our investment and commodity businesses will perform well in 2013."
Primary Strategic Investment
The Company's two Primary Strategic Investments are a circa 27% interest in Mount Gibson Iron Limited ("Mount Gibson") and a circa 24% interest in Metals X Limited ("Metals X"), both with core assets and listings in Australia.
Mount Gibson is a leading West Australian "pure-play" Direct Shipping Ore (DSO) hematite iron ore producer listed on the Australian Stock Exchange ("ASX"). It has three mines in production with annual capacity of 10 million tonnes per annum of DSO.
For the latest December quarter, tonnage mined was up 11% year-on-year, and tonnage sold was up 121% year-on-year, as a result of the successful commissioning of rail and port facilities in the Mid West and the catch-up of the shipments from Koolan Island. As for the first half of financial year ending 30 June 2013, Mount Gibson reported production of 3.6 million tonnes and sales of 4.4 million tonnes, on track to meet FY2013 sales guidance of 8.0 to 8.5 million tonnes. It also declared an interim dividend of A$0.02 per share. The Company believes Mount Gibson is well positioned to maximise cash flow generation by continuing to draw down existing stockpiles throughout the rest of FY2013. As at 31 December 2012, Mount Gibson is strongly capitalised with A$279 million in cash and term deposits.
Mount Gibson has renewed and strengthened its management team after the appointment of Mr. Peter Kerr as the new CFO and Mr. Andrew Thomson as the new COO in September 2012. In addition, FIRB decreed in July 2012 that it is satisfied that the structure of Mount Gibson's Board is consistent with ASX Corporate Governance Principles.
Metals X is an Australian-based emerging diversified resource group with a primary focus on tin via its 50% interest in the producing Renison mine in Tasmania, nickel via its world-scale Wingellina nickel project, and gold via the Central Murchison gold project and the Rover gold and copper project after the recent merger with Westgold Resources Limited. Metals X also has indirect exposure to copper and bauxite through its portfolio of strategic investments, namely Reed Resources Limited, Mongolian Resource Corporation, and Aziana Limited.
During the first half, Renison produced 3,285 tonnes of tin in concentrate (all 100% basis), up 35% year-on-year as Metals X have now opened up the northern mining area, which contains higher grade ore. Significant progress continued at Wingellina. Metals X signed a Memorandum of Understanding ("MOU") with Samsung C&T in September 2012 to accelerate project development. Under the MOU, Samsung C&T will provide its technical expertise in engineering, feasibility studies and construction to assist Metals X in completing the Definitive Feasibility Study for the project. Samsung C&T will also use its financial reputation and capacity to assist Metals X with financing and development proposals.
Metals X completed the merger with Westgold by a scheme of arrangement in October 2012. As a result, Metals X has added two new gold projects, which have a total resource of 6.2 million ounces of gold. It is strongly capitalised with A$85 million in cash and working capital, and A$8.8 million in ASX-listed investments as of 31 December 2012.
The Commodity Business is dominated by two offtake agreements with Mount Gibson and the shipments are sold on the spot market to steel mills and traders in China. The business environment for the period has been unusually difficult due to the severe iron ore price volatility. The Company believes additional policy stimulus and a pickup in construction after winter in China will improve end-user demand and lend support to iron ore prices in the medium term.
The investments in this division comprise mostly holdings in various emerging natural resource companies listed on major stock exchanges including Australia, Canada, United Kingdom, United States, and Hong Kong. Despite many of the junior companies in the Company's portfolio reporting positive newsflow in advancing projects, lack of investor appetite and concerns with the global economy have weighed on share prices. During the half, the major resource sector benchmarks underperformed the major exchange indices. The Company recognises the cyclical nature of the resources industry and remains confident in the underlying fundamentals and the long-term prospects of the Company's investments.
ABM Resources NL ("ABM"), in which the Company holds a 19.7% interest, is a gold exploration company listed on the ASX with assets located in Northern Territory. It has a large acreage footprint in the Tanami-Arunta region, and is currently focused on the Old Pirate and Buccaneer projects, both of which sit inside the Twin Bonanza Gold Camp.
ABM has a total resource of 3.5 million ounces of gold, including a high grade resource of 723,800 ounces of gold at 11.96g/t at Old Pirate, one of Australia's highest grade open-pittable gold projects. The Buccaneer deposit contains 2.67 million ounces of gold resource at 0.65g/t. During the period, ABM continued to make substantial progress on exploration at Old Pirate. The latest metallurgical test-work on samples from Old Pirate indicates high gravity recovery of gold and ABM is planning a trial mining and processing exercise in 2013, which will further de-risk the Old Pirate project.
Although the half-year result has shown a marked improvement compared to the previous full-year result, the Company has not declared an interim dividend. Current asset valuations remain attractive amid a gradual recovery in global economic growth. Therefore, the Company has decided to preserve the flexibility for investments with the intention to deliver superior medium to long term returns to shareholders. The Company will reassess a potential dividend at year end if the business environment and its financial performance continue to improve.
The last six months have been dominated by political change with major elections being held in China, United States, and Japan. With increased political clarity, renewed momentum for additional economic stimulus and greater risk appetite, the Company believes the macro backdrop provides a strong medium term outlook for commodities and resource equities. Valuations remain attractive and the Company thinks certain areas of the resource sector, such as mid-cap producers, are particularly "under-owned".
For the Company's Primary Strategic Investments, Mount Gibson and Metals X, we expect higher iron ore and tin prices will result in better financial performance over the next few quarters. Operationally, Mount Gibson will benefit from the full ramp-up at Geraldton, the drawdown of existing stockpiles and various cost-cutting measures. Metals X should continue to ramp up its mining and processing throughput at Renison, which is expected to drive production growth and a reduction in unit cash costs, as well as progressing Wingellina and Central Murchison. For Resource Investment, the Company remains confident that the existing positions, in a more "risk-on" environment, will deliver solid performance given attractive valuations and sound fundamentals.
About APAC Resources
APAC Resources Limited is an established natural resources investment and commodity business listed on the Hong Kong Stock Exchange (Stock Code: 1104). APAC's business comprises three divisions: Primary Strategic Investment, Resource Investment and Commodity Business. Its investment business is run from Hong Kong, whereas the commodity business operates in Hong Kong and Shanghai. APAC's primary strategic investments include Australian mining companies, Mount Gibson Iron Limited (ASX:MGX) and Metals X Limited (ASX:MLX), with a focus on iron ore, tin, gold and nickel respectively. APAC's another significant resource investment is the 19.7% interest in ABM Resources NL (ASX:ABU) which is a gold exploration company. Its deposits contain circa 3 million ounces of gold resources. Please see www.apacresources.com.
Source: APAC Resources
Contact: APAC Resources Limited Frederick Wong, Chief Financial Officer Annabelle Wong, Assistant Manager - Corporate Development Tel: (852) 2541 0338 Email: email@example.com
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