28 December 2023

Bens Creek Group Plc

("Bens Creek" or the "Group")

Unaudited interim results for the six month period from 1 April 2023 to 30 September 2023

Bens Creek Group plc (AIM:BEN), the owner of a metallurgical coal mine in North America supplying the steel industry, is pleased to announce its interim results for the six month period.

Interim results highlights

·      The Group produced 204,998 (six months to 30 September 2022: 99,928) tons of clean metallurgical coal during the period, a 105% increase.

·      The Group delivered 18 (2022: 8) trains during the period, a 125% increase, all of which were sold via Integrity Coal Inc sales and included amongst them was an order that was shipped to Arcelor Mittal, one of the largest steel producers in the world.

·      42,728 (six months to 30 September 2022: 19,230) clean tons of coal were held in inventory at 30 September 2023, a 122% increase.

·      From September 2023 both highwall miners were fully activated and operational.

·      EBITDA loss of $6.5m for the period (six months to 30 September 2022: loss $6.4m).

Post period highlights

·      On 30 November 2023, Bens Creek announced that its subsidiary company, BC Operations, had executed its first agreement with Avani for the delivery of 3-unit trains comprising a total of 33,000 short tons of coal with delivery of coal anticipated to be made no later than end of January 2024.

Adam Wilson, CEO of Bens Creek, said,

"We have now successfully completed the transition of the business and are moving towards full production. During the period we have unfortunately suffered from weakness in pricing putting our cash flow under pressure. We were delighted to enjoy the support of both Avani and JCAM (ACAM) who assisted us by providing debt facilities during difficult months and Integrity with whom we have continued our strong relationship. A few of our competitors did not have the same level of support, issuing WARN notices ahead of making substantial redundancies. We are pleased that we were able to avoid taking any such action.

"Sales for the period were ahead of last year, reflecting our improved productivity.  However inflationary pressures on costs and a deteriorating price led to an increase in losses when compared to the same period last year. Our average sales price in the period being only $118/ton against $166/ton for the comparable period in 2022, a difference of $50/ton which, if we had achieved it in the period upon which we are reporting, would have been expected to result in a small profit for the half.

"This period saw a 125% increase in trains despatched, however there is a reliance on Norfolk Southern ("NS") to provide trains in a timely manner, which is completely out of our control.

"The early part of the 2^nd half of our financial year has seen a significant rise in the High Vol B met coal prices, from a low of $191/ton to a current price of $250/ton. This will bring our sales prices to levels seen in the comparable period in 2022. This has resulted in an improved order book and it has allowed us to commit to sales through to the end of the third quarter which, if trains booked run to schedule, could see the Group produce its first monthly profit. We are also delighted to announce that a number of those confirmed trains have been negotiated with Avani to be shipped to India. This will help the Company enter the Indian market, which is a key target for the future.

"We have repeatedly highlighted the correlation between the index price of the coal and its inter relationship with the share price and the net sales price achieved.

"The graph below shows clearly how intertwined the components are and clearly evidences that both profitability and capital value lies in the hands of the commodity market. With a predominantly fixed overhead any index price movement results in an upward or downward swing of both. We have of course been very aware of this and have concentrated, among other things, on reducing the fixed cost per ton produced.

"Overall, the outlook has improved for us, and we look forward with growing confidence to the coming months. With both Avani and Integrity in place, the Company will continue to establish its branded coal in markets worldwide. As ever I thank all of our staff for their continued commitment and support to the business and we are hopeful that we will be able soon to deliver positive returns to our shareholders."

Note: First train delivery of coal was in June 2022

Chairman's review of period

I am pleased to present the half-year chairman's review for the period ended 30 September 2023 and to share with you the progress the Company has experienced during the first half of this fiscal year and the challenges it faces.

Operational highlights:

·      Safety First: Our commitment to safety remains unwavering. I am pleased to report that our accident experience continues to be excellent, with no reported accidents in the period. This is thanks to our dedication to safety protocols and training. The well-being of our employees always remains our top priority.

·      Production: We continued on our journey from rehabilitating a dormant coal operation to gradually moving into full production. In the six months to September 2022, we produced 99,928 tons of clean metallurgical coal, in the following six months 172,390 tons and in this period 204,998 tons. Once the operation reaches full production it is expected that the mine will be able to produce in excess of 300,000 tons in a six month period.

Environmental Stewardship:

We continue to make progress in minimising our environmental footprint. Investments in cleaner technologies and sustainable mining practices have positioned us as a responsible player in the industry. One of our highwall miners is now using line power in place of a mobile generator. The Company is always looking for opportunities for improvement and we remain focussed on further changes that will contribute positively to environmental preservation.

Financial Performance:

·      Revenue: Despite the challenging market conditions in the period to which the CEO has referred, we are pleased to report a revenue increase of 35% compared to the first half of the previous financial year. This growth is attributable to the increased production referred to above.

·      Profitability: The loss for the period is a result of the challenging price environment during much of the period. As noted above, production in the period was no more than two-thirds of what we expect once the optimal level of production is reached. Achieving this will have a significant positive impact on the company's profit margins, especially if recent price levels for our product are maintained.

Community Engagement:

We continue to foster positive relationships with the communities in which we operate. Our commitment to social responsibility includes community development programs, job creation, and efforts to support the well-being of local residents.

Conclusion:

Our commitment to safety, financial discipline, and responsible environmental practices are cornerstones for the company to be successful. I want to express my gratitude to our dedicated employees and contractors, supportive shareholders, and loyal stakeholders who have contributed to our achievements during this half-year period.

On behalf of the board of directors and the entire management team, I thank you for your trust in Bens Creek Group and look forward to a prosperous future.

Robin Fryer

Chairman

Responsibility Statement

We confirm that to the best of our knowledge: 

·      the interim financial statements have been prepared in accordance with AIM Rules;

·      give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

·      the Interim report includes a fair review of important events that have occurred during the financial period and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year.

The interim report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:

Robin Fryer

Chairman

27 December 2023

For further information please contact:

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1.     General Information

The Company was incorporated on 11 August 2021 in England and Wales with company number 13559916 and is domiciled in the United Kingdom with its registered office being 15 Stratton St, London, W1J 8LQ, United Kingdom. The ordinary shares of Bens Creek Group Plc were admitted to trading on AIM on 19 October 2021.

Bens Creek Group Plc is a holding company which, through its subsidiaries, Ben's Creek Carbon LLC, Ben's Creek Operations WV LLC and Ben's Creek Land WV LLC (the "Subsidiaries") (together the "Group"), is a producer of high-quality metallurgical coal in the United States of America.

The Subsidiaries own and operate a metallurgical coal mine located on over 10,000 acres on the southern part of the state of West Virginia and the eastern edge of Kentucky, in the central Appalachian Basin of the eastern United States of America (the "Mine"). The Mine's operations are located primarily in Mingo County, West Virginia. The Mine includes a wash plant and rail loading facility located on the freehold land.

2.     Basis of Preparation

These unaudited consolidated interim financial statements of Bens Creek Group Plc have been prepared in accordance with the AIM Rules. The comparative Balance Sheet figures for the year ended 31 March 2023 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The interim financial information set out does not constitute statutory accounts within the meaning of the Companies Act 2006. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of IFRS. The functional currency of the Group is US Dollars.

The acquisition by the Company of its Subsidiaries has been reflected in the consolidated financial results of the Group using merger accounting. This method for accounting for business combinations has been made by virtue of both the Company and the Subsidiaries being under common control prior to and post the acquisition. Business combinations under common control are outside the scope of IFRS 3. However, IAS 8 allows the use of judgement when developing an accounting policy.

In the prior year, there was a reclassification in the disclosure of the Convertible Loan Notes. This reclassification was in relation to the disclosure of current and non-current liabilities and did not affect the net assets of the Group or its loss for the period. 

Going concern

The Directors have reviewed the cashflow forecast and the future requirements of the Group for the period to 31 December 2024. They have considered current and future offtake agreements, changes in the economic climate and other contracts, such as vendors in place.

Key assumptions in the cashflow were production rates, recovery rates and pricing. The forecast also assumes Norfolk Southern will provide reliable train service to ship coal produced. The Directors and executive team discussed these assumptions in detail in reviewing the cashflow forecasts are accurate. Assumptions are discussed in further detail below.

The Group is confident that it will be able to achieve its targeted increased production rates using two High Wall Miners on double shifts. Although there is a risk of not being able to achieve this due to repairs, maintenance and anomalies, the Group considers the risk of downtime is minimal. One of the biggest contributors to downtime was the risk of generators breaking down. The Group in September 2023 installed Line Power to one of the High Wall Miners, which will now result in far less downtime due to having two generators and Line Power to ensure both High Wall Miners are running. Looking forward a second Line Power will be installed to ensure both High Wall Miners are running at maximum efficiency.

There are an estimated 92m tons of reserve in situ, which was confirmed by Marshall Miller, an independent expert in the field. This indicates that there is significant coal both underground and overground in which the Group can explore and mine in the future. This gives management confidence that there are enough reserves to continue mining beyond 10 years.  

The price of metallurgical coal has fluctuated in the year and post year-end, with a sharp fall in the price to a low of $191/ metric ton, High Vol B. However, management is confident even at the current price ($250/ metric ton, High Vol B) that the Group will be able to generate positive cash flows in the future.

The Directors also recognise the importance of the reliability of Norfolk Southern ("NS") who provide the transport service to the port.

The Group undertook a cost-cutting exercise amid the fall in coal prices. Contractor costs have decreased significantly, as underground mining has been cut from $45/ton to $35/ton. In addition to the reduction in costs the recoverability of underground mining has significantly improved since August 2023. It was achieving lows of 32% to currently around 45%, which significantly improves the profitability.

High wall mining costs have been cut from $28/ton to $25/ton with a view to achieving further decreases at full production. These and other costs that have been reduced have significantly helped the cash flow during the low of the coal prices.

Several events occurred during the period which have given further reassurance that the Group is a going concern. The most immediate of which was the issuance of two loan notes to provide extra funding for both working capital and repayment of outstanding convertible loan notes. At 30 June 2023 the convertible loan note issued in February 2022 was due for repayment (following amendment of repayment date). To ensure the Group was able to meet this repayment, some of the funds were used to repay this loan. 

The Directors are also confident that the Group is able to raise funds elsewhere if required. This can be done through several methods including raising finance against property, plant and equipment currently on the balance sheet, re-negotiating with contractors and suppliers for lower rates or an equity raise with shareholder approval. 

The Directors are of the opinion that the Group has adequate resources to continue in operational existence for twelve months from signing of the Interim financial statements, while recognising there is a material uncertainty. Accordingly the Interim financial statements have been prepared on a going concern basis.

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Company's medium-term performance and the factors that mitigate those risks have not substantially changed from those set out in the Company's 2022 Annual Report and Financial Statements, a copy of which is available on the Company's website: www.benscreek.com. The key financial risks are liquidity risk, credit risk, interest rate risk and fair value estimation. 

Critical accounting estimates

The preparation of condensed interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in Note 2 of the Company's 2022 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.

3.     Accounting Policies

Information on the accounting policies applied can be found in the Group's latest annual audited financial statements. The Group and Company Financial Statements have also been prepared under the historical cost convention, subsequent to any fair value adjustments required upon acquisition via a business combination, with the exception of the preparation and wash plant which is held under the revaluation model. Additionally, convertible loan notes are held under the fair value through the profit or loss "FVTPL" model.

Basis of consolidation

The Group's results consolidate the financial information of the Company and its Subsidiaries for the periods presented.

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Investments in subsidiaries are accounted for at cost less impairment.

Where considered appropriate, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All intercompany transactions and balances between Group enterprises are eliminated on consolidation.

New and amended standards adopted by the Group

There have been no new or amended standards adopted by the Group for the first time during the interim period.

4.     Cost of sales

5.     Administrative Expenses

6.     Earnings (loss) per share

The calculation of the total basic loss per share of 3.532 cents is based on the loss attributable to equity holders of the Company of $13,108,138 and on the weighted average number of ordinary shares of 368,214,862 in issue during the period.

7.     Property, Plant and Equipment

Group

8.     Coal reserves and reclamation assets

 Other assets

Movement in the year relates to the depletion of coal reserves from coal mined underground during the year.

The reclamation bond is based on a number of mining permits which is held with the West Virginia Department of Environmental Protection and is interest bearing.

The group has provided certificates of deposit as collateral to secure mine reclamation obligations as required by the West Virginia Department of Environmental Protection. The certificates were released during the year through a Surety. This enabled the Company to realise the cash element of the Deposits.

9.      Trade and other receivables

10.    Trade and other payables

11.    Deferred consideration

12.    Borrowings

On 23 June 2023 Bens Creek Operations entered into an unsecured loan note agreement with Avani Resources Pte Ltd (the Company's largest shareholder) for a total subscription of $6,500,000 in Loan Notes. The Loan Notes have a term of 18 months and interest will roll up and be repaid as a bullet on the second anniversary of the Loan Note.

Bens Creek Operations will repay to the Lender $2 per tonne of clean coal sold within 7 business days of production. The principal outstanding under the Loan Notes, less coal payments or other prepayments, will be repayable on the repayment date. 

Simple interest shall be added to the principal amount of the outstanding Notes on each relevant repayment date. The interest shall be calculated at a rate of 15.1% per annum from and including the date of issue of each Note up to and including the date of the redemption or repurchase of the relevant Notes. The interest shall be payable in the same manner as in the case of the original principal amount of the Note and shall otherwise be treated as principal of the Note for all purposes. 

In the event Bens Creek Operations redeems or fully repays any Note prior to the repayment date it shall, together with the payment of the principal amount outstanding, pay for the account of the Avani a prepayment calculated at a rate of 15% per annum from and including the date of issue of each Note up to and including the date of the redemption or repurchase of the relevant Notes.

On 7 July 2023 Bens Creek entered into a second unsecured loan note agreement with the Avani Resources Pte Ltd for a total subscription of $6.5 million of Loan Notes. The Loan Notes have a term of 18 months and interest will roll up and be repaid as a bullet at the maturity of the Loan Note. The terms of the loan note are the same as the note issued on 23 June 2023.

Proceeds from the second Loan Note issuance with Avani were used to repay one of the Convertible Loan Notes held by ACAM LP which was due for repayment by the end of summer 2023. Total repayment amounted to $5.7m.

On 7 July 2023 Bens Creek also issued c.$7.57 million of unsecured loan notes to ACAM LP (the "2023 ACAM Loan Notes").

The 2023 ACAM Loan Notes have been issued to ACAM in replacement for the now cancelled $6m of convertible loan notes issued to ACAM on 14 December 2021, full details of which were included in the Company's announcement of 15 December 2021. The CLNs were due for repayment on 31 December 2023.

Following negotiations with ACAM it has been agreed that they would cancel the CLNs and accept the 2023 ACAM Loan Notes by way of replacement. The 2023 ACAM Loan Notes have a term of 18 months. The 2023 ACAM Loan Notes are not convertible into new ordinary shares in the Company.

The terms of the 2023 ACAM Loan Notes are the same as the loan notes issued to Avani Resources Pte Ltd.

The Company has also issued ACAM with a total of 21,082,257 warrants to subscribe for new ordinary shares in Bens Creek exercisable at 28 pence per ordinary share. The warrants have a life of five years from the date of issue and can be exercised at any time by ACAM during the period ending 10 July 2028.

13.    Convertible Loan Notes

During the period, the Group repaid one of the Convertible Loan Notes in full. In doing so the Group undertook a number of new Loan Notes which were non-convertible, detailed in note 12. Additionally, the second Convertible Loan Note was cancelled, and a new Loan Note for the same balance was issued for equal value. Attached to this were 21,082,257 warrants exercisable at 28p. The warrants are deemed a derivative, as there is no additional investment required, the value of the warrants will vary based on the issuer's share price and the warrants will be settled in the future. Black Scholes was used to value the derivative.

14.    Provisions

The Group's provision for reclamation costs has a carrying value at 30 September 2023: $4,369,100 (31 March 2023 of $4,147,212) and relates to the Group's reclamation obligations. The provision for reclamation costs is calculated by discounting the expected future cash outflows in respect of reclamation work based on the estimated future cost provided by independent experts (Heritage Technical Associates, Inc), being $7,816,773. The reclamation costs are expected to be incurred in 10 years (at the end of the mine life per the management's mine plan). The cash outflows have been discounted at 15% and inflation assumed to be 8.6%. The reclamation provision is a commitment to restore the site to a safe and secure environment. The provisions are reviewed annually.

The Group's provision for minimum lease payments amount to $1,930,775 relate to leases held with Pocahontas, MGC, Carbon Fuels and Star Ridge. In the agreements with each respectively there is a minimum monthly payment which has been calculated based on the life of the mine or if shorter the lease agreement. The lease payments have been discounted to present value and will be reviewed annually. The royalty agreements contain further clauses in which further royalties are payable when mining on the land. However, as there is no accurate method to estimate the level of production, no provision has been included.

15.    Share options

During the period 1,075,000 share options were granted to employees. The options are valued at the date of the grant using the Monte Carlo Model, totalling a charge of $16,498.

16.  Related party transactions

Avani Resources Pte Ltd, who are the major shareholder by owning 29.9% of the total shareholding entered into two Loan Notes during the period. Total subscription amounted to $13,000,000 in Loan Notes. The Loan Notes have a term of 18 months and interest will roll up and be repaid as a bullet at the end of the term of the Loan Note.

Bens Creek Operations will repay to the Lender $2 per tonne of clean coal sold within 7 business days of production. The principal outstanding under the Loan Notes, less coal payments or other prepayments, will be repayable on the repayment date. 

Simple interest shall be added to the principal amount of the outstanding Notes on each relevant repayment date. The interest shall be calculated at a rate of 15.1% per annum from and including the date of issue of each Note up to and including the date of the redemption or repurchase of the relevant Notes.

In the event Bens Creek Operations redeems or fully repays any Note prior to the repayment date it shall, together with the payment of the principal amount outstanding, pay for the account of the Avani a prepayment calculated at a rate of 15% per annum from and including the date of issue of each Note up to and including the date of the redemption or repurchase of the relevant Notes.

17.  Events after the Balance Sheet Date

On 30 November 2023, Bens Creek announced that Bens Creek Operations WV LLC ("BC Operations"), a wholly owned operating subsidiary of the Company executed an agreement with Avani Resources Pte Ltd ("Avani"), the Company's largest shareholder, for the delivery of 3-unit trains comprising a total of 33,000 short tons of Bens Creek High Vol B Metallurgical coal. The delivery of the coal is expected to be made, subject to train delays, no later than the end of January 2024. This sale is in addition to existing and ongoing business. The coal was purchased by Avani at a price which is in line with market rates at the time for the sale and purchase of High Vol B coal. The quality of the coal will be in keeping with standard production from the Bens Creek mine. This coal sale follows on from Avani entering into a non-exclusive sales and marketing agreement, details of which were announced by Bens Creek on 26 July 2023.

18.  Approval of interim financial statements

The interim financial statements were approved by the Board of Directors on 27 December 2023.