Final Results -9-
March 25 2009 - 3:01AM
UK Regulatory
currency. The devaluation of the Peruvian sol (5%) had an impact of ($4.1)
million; the Argentinean peso (10%) had an impact of ($3.9) million; and the
Mexican peso (27%) had an impact of ($0.7) million. These losses were partially
offset by a foreign exchange gain of $1.6 million in the UK generated by
primarily as a result of the acquisition of shares in Lake Shore Gold which was
effected in Canadian dollars.
Income tax
The pre-exceptional effective income tax rate in 2008 is 48.4%, compared to
30.8% in 2007. The increase in the effective income tax rate has been driven
primarily by the following factors:
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| | |
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| i) | The reduction in profit following the lower grades and increased |
| | costs at the mines has resulted in less tax being paid to the |
| | authorities compared to the prior year. However, items for which |
| | no tax relief is created (such as the tax losses arising in |
| | exploration companies, for which no deferred tax asset can be |
| | recognised, and non-deductible expenditure) did not reduce by a |
| | similar amount, and as a result they are a larger percentage of |
| | prima facie tax expense (profit before tax multiplied by the |
| | weighted average statutory tax rate) than they were in the |
| | previous year. This has resulted in a 9% increase in the |
| | pre-exceptional effective tax rate. |
| | |
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| ii) | The significant decline in the Mexican and Argentinean pesos, and |
| | the Peruvian soles (being the currencies in which tax calculated |
| | and levied in the Group's operations), against the US dollar has |
| | resulted in the recognition of additional deferred tax |
| | liabilities, and tax being paid on taxable exchange gains which |
| | arose in the local operations. The effect of the devaluation of |
| | the local currencies was to increase the pre-exceptional effective |
| | tax rate by 7%. |
| | |
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| On a post-exceptional basis, the effective tax rate for the Group was 243.8%. |
| The significant increase over the post-exceptional effective tax rate for the |
| previous year was the result of: |
| |
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| i) | The factors discussed above, and |
| | |
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| ii) | The impairments of the San Felipe project, and the investments in |
| | EXMIN and Electrum Capital for which there was no deferred tax |
| | relief (refer to the "Exceptional items" discussion below). |
| | |
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| However, the actual amount of current tax expense in 2008 was $13.1 million |
| compared to $44.9 million in 2007. |
| |
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| Exceptional items |
| |
+--------------------------------------------------------------------------------+
| Exceptional items, after tax, totalled $45 million in 2008. This mainly |
| includes; |
| |
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| i) | Impairment of fixed assets: Selene, Moris and San Felipe were |
| | impaired by a total consideration of $29.6 million, after tax; |
| | |
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| ii) | Impairment of financial investments in: EXMIN $8.2 million and |
| | Electrum Capital $2.6 million; and |
| | |
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| iii) | Other exceptional items include: the loss from changes in the fair |
| | value of financial instruments of $4.7 million, after tax, |
| | termination benefits of $1.1 million and impairments on accounts |
| | receivable of $1.3 million. In addition, the Group recorded a |
| | credit of $3.9 million mainly as a result of gains on Gold |
| | Resources' options ($2.3 million) and on the sale of Fortuna |
| | silver shares ($1.3 million). |
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Impairments of fixed assets
The Group conducts an impairment review every time indicators of impairment
exist, as required by IFRS. Impairment indicators include: declines in metal
prices; increases in costs, royalties or taxes; falling grades; lower reserves;
production cut backs and significant project development over-runs. The presence
of one or more indicators does not necessarily mean that the asset would be
impaired but that it must be tested for impairment. Impairment testing should be
performed at an individual asset or cash-generating unit level.
Given the impact of lower precious metals prices in the second half of 2008 and
the production and cost profiles of some of our operations, we have recorded a
total impairment charge of $34.7 million in 2008 (before tax) and $29.6 million
after tax which has an impact of $0.09 on the EPS.
Selene has been written down by $13.7 million due to declining grades at the
mine and the high level of capital required to extract economic tonnage. Moris
has been written down by $5.7 million as a result of the small reserve and
resource base at the operation.
In addition, we have recorded an impairment charge of $15.4 million for the San
Felipe project, which was delayed as a result of declining zinc prices in the
second half of the year and our commitment to conserve cash holdings. We remain
confident about the long term value of San Felipe and will continue to review
the timing of the project.
Dividends
The directors recommend a final dividend of $0.02 per ordinary share which,
subject to shareholder approval at the 2009 AGM, will be paid on 28 May 2009 to
those shareholders appearing on the register on 1 May 2009. Dividends are
declared in US dollars. Unless a shareholder elects to receive dividends in US
dollars, they will be paid in pounds sterling with the US dollar dividend
converted into pound sterling at exchange rates prevailing at the time of
payment. Our dividend policy takes into account the profitability of the
business and the underlying growth in earnings of the Company, as well as its
capital requirements and cash flow.
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| Dividend | 2009 |
| dates | |
+-------------+--------+
| Ex-dividend | 29 |
| date | April |
+-------------+--------+
| Record | 1 May |
| date | |
+-------------+--------+
| Deadline | 5 May |
| for | |
| return | |
| of | |
| currency | |
| election | |
| forms | |
+-------------+--------+
| Payment | 28 May |
| date | |
+-------------+--------+
Balance sheet & cash flow review
Working capital:
+----------------------------------+--------------------+--------------------+
| US$(000) unless otherwise | As at | As at |
| indicated | 31 December 2008 | 31 December 2007 |
+----------------------------------+--------------------+--------------------+
| Current assets | | |
+----------------------------------+--------------------+--------------------+
| Inventories | 49,220 | 47,012 |
+----------------------------------+--------------------+--------------------+
| Trade and other receivables | 123,726 | 134,180 |
+----------------------------------+--------------------+--------------------+
| Current liabilities | | |
+----------------------------------+--------------------+--------------------+
| Trade and other payables | 82,291 | 52,176 |
+----------------------------------+--------------------+--------------------+
| Pre-shipment loans | 49,660 | 23,750 |
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