The financial year results and balance sheet reflect the start-up of the Mineral Hill mine and the strengthening of the balance sheet to achieve that outcome.
KBL incurred a post-tax loss of $22.9 million for the year, due largely to an impairment charge. The impairment charge of $14.9 million, which is a non-cash item, is taken against the Mineral Hill mine. The charge, which arises from application of the relevant accounting standard and incorporates lower forecast A$ commodity prices, reflects only the existing underground operations at Mineral Hill and not the highly attractive Pearse project which is currently carried as an exploration asset at a nominal value ($0.2 million). The Mineral Hill underground mine is now carried on KBL's books at a value of $28.0 million.
At the EBITDA level, the Mineral Hill mine incurred a loss of $1.8 million on sales revenue of $18.3 million in its first seven months of operation. Performance improved during the period and post year end with operating surpluses achieved in June and July. C1 cash costs were $2.48/lb and A$2.68/lb payable copper (after by-product credits), respectively. Copper prices (and those of the by-product gold and silver produced at Mineral Hill) have improved since year end and currently stand at a little more than A$3.50/lb. KBL is fully exposed to these higher commodity prices and undertakes hedging only of copper sales revenue for the period between shipping of concentrates and final pricing/payment. This quotational period hedging protected KBL from a falling copper price late in the financial year, resulting in a gain of $0.2 million at balance date.
KBL's balance sheet both grew and was strengthened during the period. Financed by capital raisings of $27.5 million (from share placements and a convertible note issue), KBL has invested some $18.1 million at Mineral Hill and $2.4 million on exploration. Net assets at 30 June 2012 were $38.5 million (post-impairment) and the balance sheet is essentially debt free (excluding the convertible notes). The residual amount payable to the Toho Zinc group on the asset acuisition which founded KBL has been reduced to $1.9 million at balance date and to $1.5 million since. Cash at balance date was $11.9 million.
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