and its controlled entities
ABN 52 077 221 722
INTERIM FINANCIAL REPORT
For the half-year ended 31 December 2018
Directors' Report............................................................................................................ 4
3
Events Subsequent to the end of the Reporting Period .............................................. 6
4
Rounding ......................................................................................................................... 6
5
Auditor's Independence Declaration ............................................................................. 6
6
Financial Statements ...................................................................................................... 8
7
Notes to the Condensed Consolidated Financial Statements ................................... 12
8
Directors' Declaration ................................................................................................... 22
9
Independent Auditor's Review Report ........................................................................ 23
2
CORPORATE DIRECTORY
1 1.1
Corporate Directory Board of Directors
Rodney Baxter | Independent Non-Executive Chairman |
Chi To (Nathan) Wong | Non-Independent Non-Executive Director |
Maree Arnason | Independent Non-Executive Director |
Ronald Beevor | Non-Independent Non-Executive Director |
Yuzi (Albert) Zhou | Non-Independent Non-Executive Director |
1.2 Company Secretary | |
John Traicos | |
1.3 Registered Office | |
Level 2, 100 Royal Street |
East Perth, Western Australia 6004
Postal Address PO Box 3011
East Perth, Western Australia 6892
Telephone: | +61 8 9328 9800 |
Facsimile: | +61 8 9328 9911 |
Email: | admin@mzi.com.au |
Website: | www.mzi.com.au |
1.4 Share Registry
Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace
Perth, Western Australia 6000
Telephone: +61 8 9323 2000
Website:www.computershare.com.au
1.5 Auditors
PricewaterhouseCoopers
1.6 Securities Exchange Listings
Shares in MZI Resources Ltd are quoted on the Australian Securities Exchange under trading code MZI. MZI Resources is also listed on the Frankfurt Stock Exchange under trading code AU000000MZI8.
3
DIRECTORS' REPORT
2
Directors' Report
The Directors present their report on the Consolidated Entity comprising MZI Resources Ltd (the "Company" or "MZI") and its controlled entities ("the Group") for the half-year ended 31 December 2018.
2.1
Directors
The following individuals were Directors of MZI Resources Ltd during the whole of the half-year up to the date of this report except as noted below:
| Rodney Baxter | Independent Non-Executive Chairman |
| Chi To (Nathan) Wong | Non-Independent Non-Executive Director |
| Maree Arnason | Independent Non-Executive Director |
| Ronnie Beevor | Non-Independent Non-Executive Director |
| Yuzi (Albert) Zhou | Non-Independent Non-Executive Director |
| Martin Purvis 1 | Managing Director |
1 Mr Purvis resigned as Managing Director on 29 January 2019
2.2 2.2.1
Operating and Financial Review Operating Result
The consolidated net loss for the half-year ended 31 December 2018 applicable to owners of the Company after income tax was $32,251,000 (2017: $11,339,000).
2.2.2 Review of Operations
The following significant events occurred during the half year:
Half year HMC output rose by 21% to 64,531t while saleable production for the half year to December increased 14% from the prior half year to 44,555t;
Sales volumes increased by 56% to 46,352t compared to the prior corresponding half with sales proceeds received of $34.239m;
Per unit cash costs reduced 35% over the closing quarter of 2018 compared to prior quarter;
Keysbrook Mine Feed Unit successfully relocated on time, safely and within budget;
Process initiated to explore a sale or alternative transaction to realise value from the Keysbrook assets, with the support of Resource Capital Fund VI LLC ("RCF") and RMB Holdings Australia Limited ("RMB").
2.2.3 Keysbrook
The Group recorded 1 Lost Time Injury during the half year ending 31 December 2018.
The primary focus during the half year to December was improvement in operational throughput and reduction in operating costs. HMC production over the period totalled 64,531t, resulting from an increased focus on feed control, improved plant availability and the commissioning of an on-site laboratory at the Wet Concentrator Plant ("WCP"). During November the Group relocated the Mine Feed Unit to a new location approximately 1km east of the Keysbrook WCP. The relocation was part of the mining plan and represented a key step in the ongoing operational improvement program at Keysbrook. The relocation was completed safely, on time, within budget and significantly, the move to a centralised location is expected to reduce average haulage distances and associated costs for the forthcoming year of operations.
The improved efficiencies aim to facilitate further reductions in cash costs at Keysbrook that have been demonstrated from the start of the current financial year, including a 35% reduction in unit cash costs in the December quarter. Monthly site operating costs, per tonne of HMC, have declined by approximately 50% since January 2018. Operational reliability has similarly improved with downtime hours declining by approximately 60% since January 2018.
Research into recovery of L88 product commenced during the half year with industry experts commissioned to assess the current recovery and potential options to improve performance. Initial research has indicated that L88 recovery is restricted due to overloading of the mids-spiral sections of the WCP, resulting in ineffective separation of the finer L88 particles in the ore from the surrounding mass of larger, but equally dense, quartz particles. A range of short-
4
DIRECTORS' REPORT
term modifications to the WCP were implemented during the latter half of 2018 and work continues with experts to ascertain options available for more substantial modifications to the WCP.
At the Picton Mineral Separation Plant ("MSP"), saleable production for the half year increased 14% to 44,555t compared to the prior half year. As noted previously, achieving targeted recovery of L88 product remains a challenge to the business and extensive work has been undertaken during the period to evaluate opportunities to improve recovery at the MSP. Detailed research undertaken by METS Engineering has confirmed the potential to recover not only the majority of L88 currently being lost to zircon concentrate but also the potential to produce a high quality zircon product. The evaluation work will continue into the next quarter involving a detailed engineering study and pilot scale test to be conducted at the Picton site, in agreement with plant owner, Doral Mineral Sands Pty Ltd.
Key operating statistics for the period ending 31 December 2018 are shown below.
Sales revenue for the half year ending 31 December 2018 totalled $34.239m (2017: $19.123m).
Production | Unit | 31 Dec 18 | 31 Dec 17 |
Ore Mined | dt | 2,491,053 | 1,841,500 |
Ore Processed | dt | 2,502,163 | 1,583,265 |
Mined Grade | % HM | 3.04 | 3.28 |
WCP Availability | % | 92.5 | 88.6 |
MSP Availability | % | 96.5 | 94.5 |
HMC Production (WCP) | dt | 64,531 | 53,239 |
HMC Processed (MSP) | dt | 64,267 | 51,394 |
L70 | dt | 16,807 | 16,449 |
L88 | dt | 16,225 | 12,516 |
Zircon Concentrate | dt | 11,523 | 10,286 |
Total Products | dt | 44,555 | 39,251 |
Sales | |||
L70 | dt | 17,309 | 9,406 |
L88 | dt | 17,164 | 11,126 |
Zircon Concentrate | dt | 11,879 | 9,218 |
Total | dt | 46,352 | 29,750 |
2.2.4
Geology & Exploration
In October 2018 the Company released an updated Keysbrook Mineral Resource of 138.9 Mt grading 2.0% Total Heavy Minerals (THM), and an updated Ore Reserve of 57.6 Mt grading 2.2% THM as at 30 June 2018.
The Keysbrook Ore Reserve Statement includes 53.0 Mt in the Proven Category and 4.6 Mt in the Probable Category, sufficient to support a mine life of approximately 10 years at current production rates.
A planned drilling programme is forecast to commence in April 2019. The exploration programme will focus on closed spaced drilling at Keysbrook for grade control purposes, and resource definition drilling within E70/2407.
2.2.5 Corporate
At the end of the half year, the Group held $6.697m in cash and undrawn credit facilities of $0.588m.
As announced subsequent to the half year end, the Company has initiated a process to explore a sale or alternative transaction to realise the value inherent in the Keysbrook mineral sands assets. This announcement is the culmination of lengthy discussions with both RMB and RCF regarding the restructuring of funding arrangements, to better align the Company's requirements with current operational capacity and to explore alternative ways to fund the value initiatives identified.
In support of this process, RCF has agreed in principle to key terms for a short-term funding package and other financial accommodation. This includes providing an additional US$1.5m to be utilised as working capital (subject to receipt of an ASX waiver and documentation) and an extension of the maturity date of the existing RCF Convertible Loan Facility to 1 July 2020. Royalty payments due to RCF will continue to accrue but payment will be deferred until 30 June 2019.
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MZI Resources Ltd. published this content on 12 March 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 12 March 2019 10:34:15 UTC