Solway Group :: SOLWAY INVESTMENT GROUP ANNOUNCES FULL YEAR 2015 FINANCIAL RESULTS
7:18pm on Friday 24th June 2016
SOLWAY INVESTMENT GROUP ANNOUNCES FULL YEAR 2015 FINANCIAL RESULTS

The Solway Investment Group, GmbH, delivered strong financial results relative to 2014, despite challenging market conditions in 2015:

  • Sales revenue were comparable to 2014 numbers, stabilizing at USD 523 million with only a slight 1,7% decrease year-over-year.
  • Production costs increased to USD 418 million in 2015 from USD 362 million in 2014 due to the successful ramp-up ofFenix and Kurilgeo.
  • EBITDA increased 75% relative to the previous year to USD 210 million.
  • Due to the resulting low leverage (Net Debt/EBITDA 0,01x as of year end in 2015), Solway is well positioned to compete in the low-price environment.
  • The group’s total assets decreased to USD 1,314 billion as a result of the disposal of SASA, zinc and lead segment, as well as disposal of investment property segment.
  • In November 2015, Solway fully prepaid its USD 130,5 million syndicated PXF facility.

2015 was a year of further deterioration of the commodity markets, with prices for some of Solway’s products reaching multi-year lows. Solway benefits from a focus diversified commodity portfolio and low cash cost, capital investment discipline, and strong cost control, which enabled us to remain profitable in challenging commodity markets.

Highlights

Considerable management and shareholder effort was invested in the Group’s assets in 2015 resulting in a stabilized production, cost reductions and productivity gains. The Group also continues investing in effective use of natural resources and energy saving projects. It remains absolutely committed to the highest standards of health and safety, environmental protection, sustainability, and local community development.

Dan Bronstein, Chairman of the Board of Solway Investment Group: «In Solway Investment Group we believe that human capital, sustainable development, heritage, transparency are the main pillars of a successful business. With the goal to become one of the leaders in the industry, the Group utilises previously acquired knowledge and professional expertise in order to overcome the challenges it faces while transforming depressive projects into fully operational businesses. The latest technologies are embraced as is the heritage brought by the local communities. We aspire to carefully develop the regions we operate in into modern habitable areas while preserving their natural diversity.We always strive to use the best management practices in order to deliver the best possible results to the stakeholders and communities we serve.»

The Fenix Project, Guatemala

Solway plans to complete the ramp-up of Fenix in 2016 and is scheduled to reach its designated annual capacity of 20 000 tons of nickel by the end of 2017. The focus of the corporate strategy is on the introduction of modern mining and processing equipment, which minimizes impact on the environment and ensures the highest safety standards.

In 2015 a total amount of 2,569 million metric tons of wet ore was mined in Guatemala.

As for the ferronickel production, ProNiCo delivered 10,826 thousand dry metric tons of nickel in ferronickel in 2015.

Total capex amounted to USD 41,8 million. This included further technological development to help reduce losses, increase nickel recovery, and improve furnace performance.

Pobuzhsky Ferronickel Plant (PFP), Ukraine

Despite a less predictable economic environment in 2015, the facility performed according to plan while fully complying with local and regional environmental and safety standards and supporting the community in the neighboring town of Pobugskoe and fulfilling labor contracts to the letter. Due to its location the recent military conflict had no impact on the operations of PFP.

In 2015 PFP processed 1,449 million metric tons of wet ore into 17,952 thousand dry metric tons of nickel in ferronickel.

The installation of waste heat recovery and the introduction of pulverized coal injection were completed in 2015. Solway invested USD 19 million towards these projects. These energy-saving technologies will result in a reduction of annual gas consumption by more than 5 million cubic meters, thereby reducing associated energy costs for ferronickel production.

The next step in PFP’s environmental strategy is to finalize the design for the reconstruction of off-gas treatment at its roaster in 2015. Documentation for the reconstruction of gas treatment of the dryers is scheduled for completion in 2016. The objective of both projects is to reduce airborne emissions. Total capital cost of both initiatives is above USD 2 million.

Kurilgeo Project, Russia

The Kurilgeo Project successfully increased output at its gold production facility at Russia’s Urup Island in the Kuril Islands; the facility began operation in late 2014. In 2015 Kurilgeo produced 50 479 Oz of gold and 116 053 Oz of silver.

Low operating costs ensure a high operating margin, which is consistent with the approved business plan. After a successful ramp-up of the Kurilgeo Project in Russia in 2015, the operation has already contributed USD 65 million in sales with an EBITDA margin of 71%. In 2015, the company’s capex of USD 3,5 million was achieved with the ramp-up, and with the purchase of trucks, excavators, a hydrohammer, a crusher, and a nuclear absorption spectrometer.

Bucim Copper Mine, Macedonia

The steady improvement of this facility’s operational efficiency was the key driver for ensuring the sustainability of production and for improving financial results at Solway-owned DOO Bucim Radovish, which is Macedonia's largest copper mine.

In 2015 Buchim produced 42,690 thousand tons ofdry copper concentrate contained copper of 8,834 thousand tons; gold – 15 871 Oz; silver - 42 793 Oz; and produced cathode copper of the 99,99% quality (Cu) 2,268 thousand tons.

In 2015, Bucim invested USD 1,1 million into modernizing its production process; infrastructure development; and occupational health, safety, and environment protection measures. This included dust recovery at primary and secondary crushers; reconstruction of pump station at cathode production, construction of diversion channel at tailing facility, and a flow-line from the combine to leaching plant. Facility maintenance and repair expenses totaled EUR 5,35 million in 2015.

San Jorge Project, Mendoza, Argentina

As part of its growth strategy, the Group is currently evaluating strategic options for project development. San Jorge is a mid-sized deposit with NI 43-101 M&I resources of copper 2,000 M lb. and gold 1,3 M ozs with a straightforward development strategy, low capital, and operating costs.

Aquila Project/Other Satellite Projects, Indonesia

Unlocking the potential of its Tier-1 nickel projects remain the primary objective of management efforts in Indonesia in 2015. The project’s long-term management priorities are to complete downstream facilities configuration, develop new state-of-the-art processing technologies, and complete the design and construction of a smelter as required by the Indonesian legislature in order to ensure export of value-added nickel products. Geological exploration was focused on further expansion of the mineral resource base for the Group in the region.

SASA DOO Makedonska Kamenica

This asset was divested from the Group’s portfolio in 2015. This is well in line with the Group’s strategy, which focuses on realizing full value from asset development and reinvesting money into new underdeveloped and undervalued projects.

Chromite Deposit at Philippines

The Group has reinvested a portion of the proceeds from the sale of SASA into a new chromium ore project in the Philippines. Having acquired 40% of the project capital, Solway becomes the managing partner and key financier. The new asset represents a unique opportunity due to sizeable reserves and resources, favorable mineralogy, easy mining, and straightforward processing. Reasonable prospects for steady chromium price recovery add confidence to the project. The Group is convinced that the true value of the asset will be successfully unlocked as a result of the combined efforts of the local, experienced team and the group of Solway mining and processing engineers and project managers who are currently deployed at the site. Ramp-up of commercial operations is expected as early as the second quarter of 2016, consistent with an aggressive business plan approved by Solway and its local partners.

Environment protection, occupational health and safety in 2015

Solway’s first and foremost responsibility is to promote and protect the health, safety, and well-being of all of its employees, contract personnel, and members of Solway’s host communities.

Fenix Project, Guatemala

Solway is a responsible employer and neighbor and takes pride in being a positive force in the development and support of local social structures. In 2015, its activities focused on repairing municipal roads and constructing a multipurpose community center. Social development projects included donations to local schools and pharmacies, supporting sports programs, and sponsoring training programs for local midwives and farmers. The Group’s primary focus is to minimize the environmental impact on the neighborhoods surrounding the Fenix production facilities.

Several environmental protection initiatives related to the Fenix project were implemented, including: seasonal terrestrial and aquatic biodiversity monitoring of endangered species in close proximity to the mining infrastructure and industrial areas by scientific contractor (during both dry and rainy seasons). Other programs, which were initiated before Solway purchased this project, were maintained by Solway and include: crocodile monitoring, orchid management, howler monkey monitoring, and tree nursery management, protection of natural habitats, maintenance and patrol to prevent damage of the “Setal” private wildlife reserve.

Other environmental protection initiatives at Fenix include the improvement of waste management, greenhouse gas monitoring, rehabilitation and reforestation of historical pits, and implementation of fire prevention strip areas.

Pobuzhsky Ferronickel Plant (PFP), Ukraine

Solway's investment in the social infrastructure of Pobugskoe, Ukraine has increased by 30% since 2014. Sponsorship of athletic and cultural activities has increased 173,5% relative to 2014. Solway continues investing in environmental protection technologies, including those mentioned above (reconstruction of off-gas treatment at the roaster and other facilities to reduce air emissions).

PFP pays considerable attention to reviving areas that were once engaged in the production process. The introduction of recultivation technologies is aimed at reducing the damage caused by the plant's production processes, including nature recovery and waste recycling. The introduction of a closed wastewater cycle excludes discharge from entering into neighboring rivers.

PFP continues investing in the professional education of its employees, and follows the Group's policy on environmental and labor health-and-security management by providing monthly reports on current labor safety and annual health and social plan implementation.

Kurilgeo Project, Russia

Solway continued investing in environmental and labor health-and-safety protections in 2015. These included the monitoring of surface and ground waters, air quality, and pollution levels; the health of the sea mammal population in the area affected by KurilGeo operations; the construction of an environmental monitoring laboratory on the island; the disposal of industrial waste; and environment, labor, health and safety protection trainings for the staff.

International industry standards in Cyanide-less Gold Extracting Technology (ISTC) was implemented this year. Work on certifying cyanide waste transporting is currently in progress.

Protection and improvement of labor safety and staff recreation conditions is a high priority for Kurilgeo management. The company invests in social infrastructure development, and offers 24/7 medical care and support for sports and recreational activities.

Bucim Copper Mine, Macedonia

Solway is expanding its investments at the Macedonian Bucim mine in occupational health-and-safety initiatives, environmental safeguards, and the development of a municipal infrastructure in the mine’s neighboring towns. In 2015, Solway invested in development projects that support sports and educational programs; financing a preschool, a school, and correctional educational programs; and creating local football, handball, and wrestling clubs. Supported by Bucim, the sports clubs continue to hold top positions in local sports leagues. By supporting amateur football clubs, Bucim also improves community relations with the Turkish ethnic minority residing in the neighboring villages.

The facility was recently recertified according to ISO 14001 standards, with continued reclamation of a tailings dam and continued monitoring of the quality of the air and water in the area.