Interim Results
28th September 2005
COPPER RESOURCES CORPORATION
("Copper Resources" or the "Company")
INTERIM REPORT FOR SIX MONTHS
Ended June 30, 2005
Copper Resources Corporation (AIM: CRC), the minerals exploration and mining
company, today released its interim report for the 6 months ended June 30, 2005
Financial highlights
* Cash of $16.44 million
* Zero debt
Business highlights through September 30, 2005
* Acquisition of Haib Copper Project in the politically stable country of
Namibia to complement CRC's existing substantial interest in the Hinoba
copper project in the Philippines.
* Total copper resource base now at 3.2 billion pounds (7.2 billion pounds
after acquisition of Congolese company (see below).
* Admission onto London Stock Exchange (AIM section) 21st April 2005
* Appointment of Sir Sam Jonah as non-executive Chairman
* Granting of Mineral Production Sharing Agreement ("MPSA") which allows
commencement of opera-tions in the Philippines
* Entering into Memorandum of Understanding with the Forrest Group to acquire
75% of Minière Musoshi et Kinsenda, which enables the Company to become a
producer in the near term from high-grade 5.3% Kinsenda deposit along
Zambian border in Katanga Province, Democratic Republic of Congo.
Sir Sam Jonah, Chairman, commented,
"2005 promises to be an eventful year for CRC with significant developments on
a number of fronts, including:
* Advancing the Hinoba copper project toward completion of a bankable
feasibility study, after having been granted the MPSA in August 2005;
* Evaluating the optimal metallurgical process recovery route for the Haib
copper project to render a determination of its long-term economic
viability; and
* The planned acquisition of a 75% interest in MMK, will enhance the
Company's ability to become a copper producer earlier than originally
anticipated
For further information:
Mitchell Alland Executive Vice Chairman - CRC +44 (0)787 569 5563
John Robertson Nabarro Wells & Co. +44 (0)20 7710 7405
Bill Staple / Westhouse Securities +44 (0)20 7601 6100
Cailey Barker
Toby Hall/Jade gth media relations +44 (0)20 7153 8039/8035
Mamarbachi
Dear Shareholders,
The first six months of 2005 was a pivotal period for Copper Resources
Corporation ("CRC" or the "Company"), culminating in an April 2005 listing of
the Company's shares on the Alternative Investment Market ("AIM") of the London
Stock Exchange and a £4 million fund raising. The successful IPO, coupled with
the previous pre-IPO financing of US$11.1 million, has provided CRC the
financial strength to accelerate its Bankable Feasibility Study ("BFS") on the
Philippines-based Hinoba copper project; acquire an additional copper project
in Namibia which has increased CRC's total copper resource base to 3.2 billion
pounds; and in early September enter into an MOU to acquire a 75% interest in
MMK in Katanga Province of Congo whose assets include world class copper
deposits and infrastructure. The MMK acquisition enables CRC to become a
producer in the near term from the high-grade 5.3% Kinsenda deposit, bringing
the Company's resource base up to 7.2 billion pounds of copper.
LONDON AIM ADMISSION AND FINANCING
Favourable market conditions and the requirement for additional capital, led to
the decision in early 2005 to list CRC's shares on the London AIM market. This
marked a major milestone for the Company after the acquisition of Hinoba-an
which has had three years as a private company funded by its management and a
small group of private investors.
CRC successfully raised US$11.1 million in a pre-IPO financing followed by a £4
million (before issue costs) IPO placement to institutional investors at £1.00
per share. CRC's shares were admitted to trading on AIM on 21 April 2005. The
AIM listing has ex-panded the Company's institutional shareholder base and
raised its profile in the mining industry. With the funds raised from the IPO,
the Company is well positioned to accelerate its ongoing exploration and
feasibility study programs on the Hinoba-an copper project and the recent
acquisition in Namibia, as well as to proceed with the MMK acquisition in
Congo. As of June 30, 2005, the Company had cash on hand of US$16.44 million
and had no debt.
HINOBA COPPER PROJECT (PHILIPPINES)
Copper Resources is the ultimate holding company of a group of mineral
exploration, development and operating companies. The Group effectively has a
92.5 per cent economic interest in the Hinoba-an Porphyry Copper Project,
subject to a 3 per cent net benefits royalty payable to the original claim
owners. The Project is located on the island of Negros in the Philippines,
approximately 700 km south of Manila.
The Group's interest in the project is held under an Integrated Mining and
Operating Agreement with Colet Mining and Development Corporation ("Colet"),
which holds mining leases over 90 hectares and approximately 2,900 hectares of
mineral claims (collectively, the "Colet Claims"). The Colet Claims cover two
known porphyry copper deposits, the Don Jose deposit and the A1 deposit, which
comprise the Hinoba-an property.
Over the years, a significant amount of exploration and metallurgical testwork
has been performed on the Hinoba-an property with its previous owners having
spent approximately C$14.7 million. The Hinoba-an property has been subject to
approximately 48,000 metres of diamond drilling and 11,000 metres of reverse
circulation drilling, totalling 59,000 metres of drilling.
A scoping study undertaken in 1998 envisioned a 15-year mine life for the Colet
Claims based on a geological resource of 254 million tonnes at 0.46% Cu at a
0.30% Cu cut-off. The study showed that the deposits could be profitably mined
by open pit method with the ore processed in a conventional flotation milling
operation to produce approximately 2 billion pounds of recoverable copper and
other by-products. Annual production was estimated at 56,000 tonnes of
recoverable copper with an average cash cost (including smelting, refining and
by-product credits) of US$0.48/lb of copper.
CRC will complete additional infill core drilling on the property and a
feasibility study within the next 18 months. Upon completion of the feasibility
study, and assuming favourable economics, the Group plans to develop a
potential 15 million tonnes per annum open pit copper mine on the Hinoba-an
property. The development of the project will be dependent on obtaining future
financing.
In August 2005 the MPSA application was granted and registered to Colet by the
Sec-retary of Environment and Mines of the Philippines, and, in line with
existing agreements between CRC and Colet, is in the process of being assigned
to CRC. This is a significant milestone as CRC can now proceed with its
Bankable Feasibility Study, which includes an infill drilling program and
metallurgical testwork.
HAIB COPPER PROJECT (NAMIBIA)
In May 2005, the Company acquired an option on the Haib Project a substantial
low grade sulphide copper porphyry deposit, located in southern Namibia 8 km
from the Orange River and the South African border. The property is held by
Deep South Mining Company (Pty) Ltd. under Exclusive Prospecting License (EPL)
3140. The licence area is 74,563 hectares and incorporates all of the
mineralization within the Haib deposit and a substantial area around the
deposit. The EPL renewal date is 21 April 2007. Renewal of the licence is
assured under the Minerals Act of 1992 providing all conditions of the EPL have
been satisfied and a reasonable work program is submitted in support of the
renewal application.
Under the terms of the Option Agreement, CRC can earn a 60% interest in the
Haib Project by incurring initial expenditures of US$1.2 million and through
the issuance of 120,000 CRC shares. With further expenditures of US$1.0 million
and the issuance of a further 150,000 CRC shares, CRC can earn up to a 90%
interest in the Haib Project.
With 52,000 meters of drilling, the Haib Project is a well-defined deposit that
was placed on care and maintenance in the late 1990s owing to low copper
prices. Previous work has been carried out by Falconbridge (Pty) Ltd.
(1963-1964), King Resources of South Africa (1968-1969), Rio Tinto Zinc
Corporation (1972-1975), Rand Merchant Bank Ltd. (1992-1993), and most recently
by Great Fitzroy Mines NL (GFM) of Australia (1995-1998). The most recent
feasibility study work, undertaken in 1995-1997, focused on producing cathode
copper utilizing a roast-leach-electro-winning process plant. In 1996, Behre
Dolbear estimated the Haib Project resource at 244 million tonnes, grading
0.37% Cu, using a cut-off grade of 0.3% Cu. This equates to 2 billion pounds of
contained copper (net 1.2 billion pounds Cu to CRC based on 60% ownership).
Namibia is a politically stable country in which mining is the major
contributor to GDP. The Namibian Government has indicated its strong support to
advance the Haib Project to a point where a production decision can be made.
The extensive drilling and metallurgical database available for the Haib
Project is already almost at the standard necessary for a bankable feasibility
study. The acquisition of the Haib Project represents a low cost entry
opportunity for CRC into a second major copper project. CRC intends to use the
extensive geological and metallurgical database available on the Haib Project
to evaluate the optimal process recovery method for project development.
ACQUISITION OF 75% OF MINIERE MUSOSHI ET KINSENDA ("MMK")
On the 7th September 2004 CRC entered into a Memorandum of Understanding to
acquire 75% of MMK which holds three deposits in the south of Katanga Province
of the DRC, located near the Zambian border as follows:
The Kinsenda and Musoshi properties were mined in 1972-1983 by a Japanese
mining consortium and by Canadian management on behalf of the Zairian
government from 1983 - 1987 and subsequently by Gecamines, a Congolese state
mining company; and are now owned by MMK, which is held 20% by SODIMICO, a
Government company, and 80% by the Forrest Group, the largest private business
in Katanga and one of the largest in Congo, with extensive diversified
operations including mining, engineering, construction, cement. Having operated
successfully in Congo since 1922, the Forrest Group has extensive operational
and management experience in the country that will support and facilitate CRC's
effort in successfully developing the properties.
The area has extensive infrastructure including roads, water, staff
accommodation and power. The power infrastructure includes a 220/110Kva line to
both Kinsenda and Musoshi. There is also a substation at Musoshi with
generators for back up if required. At Musoshi there is a 2,500 tpd ore
dressing plant which will need to be refurbished prior to commencing operations
The programme would be to start production at Kinsenda within 6-9 months after
the de-watering of the mine, which should take 6 months. Initial indications
are that it will cost in the order of US$5 million to complete the de-watering
of the mine and US$30 million to refurbish and regenerate the underground mine
and Musoshi concentrator.
EXPANSION OF THE BOARD
In May, the Board was pleased to welcome Sir Sam Jonah as non-executive
Chairman. Sir Sam Jonah is president of AngloGold Ashanti Limited, a NYSE
listed company, which is one of the world's largest gold producers with a
market capitalization of more than US$8.5 billion. Previously, he was chief
executive officer of Ashanti Goldfields Company Limited since 1986, and oversaw
its growth and listing as the first Sub-Saharan African company on the NYSE. He
became president of AngloGold Ashanti in May 2004, when Ashanti was acquired by
AngloGold Limited. He is a member of numerous advisory committees including
President Thabo Mbeki's International Investment Advisory Council of South
Africa, President Kufuor's Ghana Investors' Advisory Council, and the United
Nations Secretary General's Global Compact Advisory Council. His skills,
knowledge and contacts complement the Board's existing operational and
financial expertise.
STRATEGY AND OUTLOOK
2005 promises to be an eventful year for CRC with significant developments on a
number of fronts, including:
* Advancing the Hinoba copper project toward completion of a feasibility
study;
* Evaluating the optimal metallurgical process recovery route for the Haib
copper project to render a determination of its long-term economic
viability;
* Refurbishing the Kinsenda Mine and reconditioning the existing Musoshi
plant and infrastructure, to start production in the near term, producing
40,000t of copper per annum.
By focusing on the development of CRC's assets in the Philippines, Namibia and
Congo, CRC hopes to enhance shareholder value.
We would like to express our appreciation to the management and our
shareholders for their continued support.
Sincerely,
Sir Sam Jonah Mitchell Alland
Chairman Executive Vice Chairman
CONSOLIDATED FINANCIAL STATEMENTS
OF
COPPER RESOURCES CORPORATION
PERIOD ENDED JUNE 30, 2005
(Expressed in U.S. Dollars)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
As at As at Year ended
June 30, June 30, December 31,
2005 2004 2004
$ $ $
[unaudited] [unaudited] [audited]
Non - current assets
Plant and equipment 5,980 1,293 1,688
Intangible assets - mineral exploration 2,543,851 209,009 212,573
costs
Investment in associate [note 4] - 78,009 78,009
Investment in other companies [note 4] 200,000 - -
2,749,831 288,311 292,270
Current assets
Trade and other receivables 196,105 7,954 8,500
Advances to associate - 449,851 448,476
Cash and Cash equivalents 16,440,513 117,420 1,348,286
16,636,618 575,225 1,805,262
Current liabilities
Trade and other payables (96,387) (31,708) (70,054)
Deferred purchase consideration (75,000) - -
Net current assets 16,465,231 543,517 1,735,208
Total assets less current liabilities 19,215,062 831,828 2,027,478
Non-current liabilities
Deferred purchase consideration (625,000) - -
Deferred income tax liabilities (492,988) - -
18,097,074 831,828 2,027,478
Shareholders' equity
Capital stock [note 5] 16,503,895 5,000 10,000
Contributed surplus [note 5] 2,817,400 1,252,400 2,817,400
Other reserves [note 5] 1,628,728 33,000 107,250
Deficit (2,866,571) (458,572) (907,172)
18,083,452 831,828 2,027,478
Minority interest 13,622 - -
Total equity 18,097,074 831,828 2,027,478
Consolidated income Statements
(Expressed in U.S. Dollars)
6-months 6-months 12-months
ended ended ended
June 30, 2005 June 30, 2004 December 31,
2004
$ $ $
[unaudited] [unaudited] [audited]
Revenue
Interest and other income 137,186 379 1,603
Expenses
General and administrative expenses (543,153) (365,283) (743,055)
Share option expenses (1,169,402) - (74,250)
Amortization (327) - (506)
Foreign exchange losses (383,703) (3,700) (996)
(2,096,585) (368,983) (818,807)
Net loss for the period before (1,959,399) (368,604) (817,204)
taxation
Income tax expense - - -
Net loss for the period (1,959,399) (368,604) (817,204)
Basic and diluted loss per share (0.10) (0.07) (0.10)
`
Consolidated Statements of cash flows
(Expressed in U.S. Dollars)
6-months 6-months 12-months
ended ended ended
June 30, 2005 June 30, December 31,
2004 2004
$ $ $
[unaudited] [unaudited] [audited]
Cash flows from operating activities
Net loss for the period (1,959,399) (368,604) (817,204)
Add items not affecting cash
Amortization 327 - 506
Foreign exchange (3,770) 3,507 4,883
Stock-based compensation expense 1,169,402 - 452,250
(793,440) (365,097) (359,565)
Net changes in non-cash working
capital
Trade and other receivables (169,039) (7,210) (7,756)
Trade and other payables 93,960 (7,243) 31,103
(75,079) (14,453) 23,347
Net cash from operating activities (868,519) (379,550) (336,218)
Cash flows from investing activities
Investment in associate - (60,000) (60,000)
Acquisition of tangible assets (4,619) - (901)
Investment in subsidiary company - (6,000) (6,000)
Investment in mineral exploration (599,407) - (3,565)
costs
Investment in Afric-Can Marine (200,000) - -
Minerals Corporation
Cash acquired in acquisition of 101 888 888
subsidiary companies
Net cash used in investing (803,925) (65,112) (69,578)
activities
Cash flows from financing activities
Net proceeds from issuance of common 16,764,671 - -
shares
Contributions by a shareholder - 400,000 1,592,000
Net cash generated from financing 16,764,671 400,000 1,592,000
activities
Net change in cash and cash 15,092,227 (44,662) 1,186,204
equivalents during the period
Cash and cash equivalents at 1,348,286 162,082 162,082
beginning of period
Cash and cash equivalents at end of 16,440,513 117,420 1,348,286
period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Expressed in U.S. Dollars)
Capital Contributed Other Retained Shareholders'
Stock surplus reserves deficit equity
$ $ $ $ $
Balance at December 5,000 814,900 - (89,968) 729,932
31, 2003
Additional - 437,500 33,000 - 470,500
contributions of
capital
Net loss for the - - - (368,604) (368,604)
period
Balance at June 30, 5,000 1,252,400 33,000 (458,572) 831,828
2004
Additional 5,000 1,565,000 74,250 - 1,644,250
contributions of
capital
Net loss for the - - - (448,600) (448,600)
period
Balance at December 10,000 2,817,400 107,250 (907,172) 2,027,478
31, 2004
Additional 16,427,895 - - - 16,427,895
contributions of
capital
Share option charge - - 1,587,478 - 1,587,478
Share options 66,000 - (66,000) - -
exercised
Net loss for the (1,959,399) (1,959,399)
period
Balance at June 30, 16,503,895 2,817,400 1,628,728 (2,866,571) 18,083,452
2005
Notes to Consolidated Financial Statements
[All amounts and information as at June 30, 2005 and for the six-month periods
ended June 30, 2005 and 2004 are unaudited]
1. Nature of operation
Copper Resources Corporation ["the Company or CRC"] was incorporated on
November 25, 2004, in the British Virgin Islands under the International
Business Companies Act 2000. On January 11, 2005, the Company entered into
an agreement to acquire the entire issued share capital of Hinoba Holdings
Limited ["HHL"] by way of a share for share exchange. The acquisition of
HHL was accounted for as a reverse take over (see note 3). Under reverse
take over accounting, HHL was identified as the acquirer and for accounting
purposes the consolidated entity is considered to be a continuation of HHL
with CRC consolidated from the date of acquisition. The pre-transaction
financial position, results of operations and cash flows of the
consolidated entity presented are those of HHL.
Following the acquisition of HHL, the Company has, through a subsidiary,
acquired the operating rights to the Hinoba-an Porphyry Copper Project on
Negros Island in the Republic of the Philippines.
On January 28, 2005, the Company became the registered holder of the entire
issued share capital of Copper Spur Mining Corporation ["Copper Spur"] that
was previously held by HHL.
On May 25, 2005, the Company acquired a wholly owned subsidiary, African
Millennium Corporation, through which it acquired option rights to the Haib
Copper project in southern Namibia.
The Principal activity of the Company is as a holding company for the
Group, to pursue exploration and development of minerals.
2. Significant accounting policies
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), including
International Accounting Standards ("IAS") and Interpretations issued by
the International Accounting Standards Board.
The principal accounting policies adopted in the preparation of the
consolidated financial information are set out below:
(a)Basis of Presentation
These consolidated interim financial statements have been prepared under
the historical cost convention.
The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group's
accounting policies.
(b)Basis of Consolidation
The consolidated financial statements include the accounts of CRC, Copper
Spur Mining, African Millennium Corporation ["AMC"] and Hinoba Holdings
Limited and its subsidiaries.
On acquisition and when control is achieved, the assets and liabilities and
contingent liabilities of a subsidiary are measured at their fair values at
the date of acquisition or at the date control is achieved. Any excess of
the cost of acquisition over the fair values of the identifiable net assets
acquired is recognized as goodwill.
The result of subsidiaries acquired or disposed of during the period are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries in order to bring the accounting policies in line with those
adopted by the Group.
All significant intra-group transactions and balances between the Group's
companies are eliminated on consolidation.
(c)Segment Reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are
different from those of other business segments. A geographical segment is
engaged in providing products or services within a particular economic
environment that are subject to risks and returns that are different from
those of segments operating in other economic environments.
(d)Mineral Exploration Costs
Expenditures for mineral exploration work prior to and subsequent to
drilling are deferred as incurred. These will be written off if the results
of the exploration work are unsuccessful. If the results are successful,
the deferred expenditures and the subsequent development cost will be
capitalized and amortized from the start of commercial operations.
(e)Foreign currency translation
Group companies
The consolidated financial information is presented in US Dollars, which is
considered by management to be the most appropriate presentation currency
for its consolidated financial information.
All assets and liabilities are translated at the closing rate existing at
the balance sheet date. Income and expense items are translated at an
average rate for the period. Equity items other than the net profit or loss
for the period that is included in the balance of accumulated profit or
loss are translated at the closing rate existing at the balance sheet date.
All translation differences are recognized as a separate component of
equity.
Fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and
liabilities of the foreign entity and translated at the closing rate
Transactions and balances
Transactions in currencies other than US Dollars are recorded at the rates
of exchange prevailing on the dates of the transactions or translated at
the average exchange rates for the period. Exchange differences resulting
from the settlement of transactions denominated in foreign currency are
included in the statement of income using the exchange rate ruling on that
date.
At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Foreign currency gains and losses arising from
the translation of assets and liabilities are reflected in the profit and
loss account as foreign exchange translation gains less losses.
(f)Equipment Costs
Equipment is carried at cost less accumulated amortization and any
impairment in value.
Amortization is computed using the straight- line method over the estimated
useful lives of the equipment ranging from three to five years.
(g)Income Taxes
The British Virgin Islands under the IBC imposes no corporate taxes or
capital gains. However, the Company as a group may be liable for taxes in
the jurisdictions where it is developing mining properties.
Deferred income tax is provided in full, using the liability method, on
taxable temporary differences arising between the tax bases of assets and
liabilities and their carrying amount in the financial statements.
(h)Stock based compensation
The Company follows the Black-Scholes option pricing model. Under this
model, share-based payments are measured at the fair market at the date of
grant. The fair value determined at the grant date is expensed to when
options vest. Options vest immediately.
(i)Cash and Cash Equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purposes of the cash flow statement, cash and cash equivalents comprise
cash on hand, deposits held at call with banks and other unrestricted
short-term deposits with original maturities of three months orless.
(j)Long -Term Investment
Investments in companies over which the Company has significant influence
are accounted for using the equity method.
(k)Financial Instruments
The carrying value of accounts receivable and accounts payable and accrued
liabilities approximates to their fair values at the date of the
transaction due to the relatively short term maturity of these instruments.
Fair value represents the amount that would be exchanged in an arm's length
transaction between willing parties and is best evidenced by a quoted
market price.
(l) Comparative information
The comparative information for the year ended 31 December 2004 relates to
HHL and has been extracted from the AIM Admission Document dated 14 April
2005. HHL prepared its financial information for that year under IFRS. The
accounting policies adopted in the six months to 30 June 2005 are the same,
in all material respects, as those adopted by HHL in the financial
information for the year ended 31 December 2004 as set out in the Aim
Admission Document.
3. Reverse Take Over
On January 11, 2005, HHL entered into a reverse take over agreement with
CRC. Under the terms of the agreement, CRC issued 10,756,600 common shares
for all the issued and outstanding shares of HHL. This resulted in the
former shareholders of HHL obtaining 99.99% of the outstanding shares of
CRC. The acquisition was accounted for as a reverse take over. For the
purposes of accounting for this transaction, HHL is treated as the acquirer
and CRC the acquiree. The net assets of CRC at the date of acquisition
consisted of share capital of $1 and a deficit of $4,872 relating to
administrative expenses which have been charged to the consolidated income
statement.
4. Acquisitions
Selenga Mining Corporation
The 40% investment in Selenga Mining Corporation ["SMC"] was recorded on an
equity basis during 2004. Hinoba Holdings (Philippines), Inc. ["HHPI"], a
subsidiary of HHL, paid $60,000 on January 13, 2004 and a further $15,000
on January 15, 2005 when it exercised the assignable option dated January
13, 2004 allowing it the option to acquire the remaining 59.6% of the
shares outstanding in SMC for a purchase price of $150,000. HHPI assigned
its interest in SMC to its subsidiary, Hinoba-an & Sipalay Holdings Inc
["HSHI"], on January 15, 2005. As a result of the above assignment HSHI
owns 92.5% of SMC.
This transaction has been accounted for by the purchase method with the
results of operations included in these financial statements from the date
of acquisition. Details of the acquisition are as follows:
Net assets acquired - at fair value
Advances from Colet Mining
$
18,566
Mineral exploration costs
622,682
Accounts payable and accrued liabilities
(7,371)
Payable to HHPI
(452,246)
Minority interest
(13,622)
$
168,009
Consideration given - at fair value
Cash
$
93,009
Deferred consideration
75,000
$
168,009
African Millennium Corporation
On May 25, 2005, CRC acquired 100 common shares of AMC, representing 100%
of the outstanding shares. This transaction has been accounted for by the
purchase method with the results of operations included in these financial
statements from the date of acquisition. Details of the acquisition are as
follows:
Net assets acquired - at fair value
Cash
$
100
Exploration option rights
1,408,538
Deferred income tax liabilities
(492,988)
$
915,650
Consideration given - at fair value
Cash
$
250,000
Common shares in the Company
40,650
Deferred consideration
625,000
$
915,650
$250,000 of the deferred consideration is contingent upon the successful
completion of a bankable feasibility study of the project and $375,000 is
contingent upon the commencement of commercial production at the Haib
project.
CRC through its acquisition of AMC holds option rights to certain mineral
properties located in southern Namibia close to the South Africa border,
referred to as the Haib Copper Project. ["Haib Project"]. On May 25, 2005,
the Company entered into an agreement with Afri-Can Marine Minerals
Corporation ["AFA"] and Deep-South Mining Company (Pty) Limited
["Deep-South"] to explore and develop the Haib Project. Under the terms of
the agreement, the Company has paid $162,000 to AFA, subscribed for
US$200,000 in AFA's shares and issued 60,000 common shares of the Company
to Deep-South and has a further commitment to fund US$1,200,000 in
expenditures on the project within 40 months. The Company shall be entitled
to a 60% interest in a new company which will be formed to hold the Haib
Project at the time the Company has fulfilled its funding obligations.
Hinoba Holdings (Australia) Pty Ltd.
On April 28, 2005, HHPI, a subsidiary of HHL incorporated a wholly owned
subsidiary, Hinoba Holdings (Australia) Pty Ltd. The results of operations
have been included in the financial statements from the date of
incorporation. As HHPI was the founding shareholders there was no
acquisition of net assets.
5. Capital stock
(a) Authorized
The Copper Resources Corporation ["the Company/CRC"] was incorporated with
an authorized share capital of 50,000 common shares of $ 1 each.
On April 1, 2005, the authorized share capital of the Company was amended
so that the Company was authorized to issue up to 500,000,000 shares of one
class and one series of no par value.
(b) Issued and outstanding common shares
Shares
Amount
#
$
Balance - January 1, 2005 and issued shares before reverse take over (i)
1
10,000
Shares issued on reverse take over [note3]
10,756,600
Balance after reverse over take over
10,756,601
10,000
Shares issued after reverse take over:
Founder shares (ii)
1,300,000
13,000
Exercise of stock options (ii)
600,000
216,000
Private placement (iiii)
11,100,000
10,516,081
Initial public offering (iv)
4,000,000
7,615,600
Initial public offering costs
(1,948,086)
Common shares issued to acquire 100% interest in African
Millennium Corporation (v)
60,000
40,650
Common shares issued for earn-in interest in Haib project (v)
60,000
40,650
Outstanding as at June 30, 2005
27,876,601
16,503,895
(i) Under reverse take over accounting, the share capital is presented as
if the consolidated financial statements are a continuation of the legal
subsidiary, HHL. Therefore, the opening balance of $10,000 represents the
book value of the share capital of HHL on 1 January 2005. The numbers of
shares in issue, however, reflect that of the legal parent company.
(ii) On April 1, 2005, the Company issued 1,300,000 common shares to
founders at a price of $0.01 each for cash and 600,000 common shares
pursuant to the exercise of share options at an exercise price of $0.25
each for cash consideration of $150,000.
(iii) Pursuant to a private placement carried out by the Company, the
Company issued 11,100,000 common shares at a price of $1.00 on April 1,
2005 for cash with financing costs of $583,919.
(iv) Following the Company's admission to AIM, the Company issued 4,000,000
shares at a price of 1 British pound (US$1.9039) on April 21, 2005 for
cash.
(v) On May25, 2005,in consideration for the acquisition of African
Millennium Corporation (note 4), the Company issued 60,000 shares to the
vendors and 60,000 shares to a joint venture partner for an earn-in
interest in the Haib project (note 4). The market price of these shares at
the time of issue was 37 British pence (US$0.68) per share. The value of
the shares, in the amount of $40,650 has been included as an investment in
a subsidiary and $40,650 as exploration option rights.
(c) Option Plan
The Company has established a share option scheme whereby the Directors may
from time to time at their discretion grant to the Directors, employees and
consultants of the Group Options to subscribe for Common Shares. Under the
plan, the exercise price of each option shall be the average of the middle
market quotation for the thirty dealing days preceding the grant and the
number of options that may be granted is limited to 10 per cent of the
total Common shares issued. An Option is exercisable on the date it is
granted and expires on the fifth anniversary of the grant date.
The details of the changes in the number of stock options outstanding as at
June 30, 2005 are as follows:
Options Amount
# $
Balance - January 1, 2005 (i) 975,000 107,250
Granted
February 14, 2005 (ii) 1,325,000 742,663
April 4, 2005 (iii) 320,000 337,343
April 21, 2005 (iv) 400,000 241,755
April 21, 2005 (v) 208,175 176,321
May 24, 2005 (vi) 150,000 89,396
Exercised (600,000) (66,000)
Outstanding, June 30, 2005 2,778,175 1,628,728
(i) Pursuant to the reverse take over agreement, the company granted
975,000 stock options to the existing option holders of HHL. at an exercise
price of $0.25 expiring on January 19, 2010, in substitution for their
existing options in HHL.
(ii) Options having an exercise price of $1 expiring February 13, 2010
(iii) Options having an exercise price of 1 British pound expiring April 4,
2010
(iv) Options having an exercise price of 1 British pound expiring October
21, 2006
(v) Options having an exercise price of 1 British pound expiring on April
21, 2008
(vi) Options having an exercise price of 58 British pence expiring on May
23, 2010
The following table summarizes information about stock options outstanding
as at June 30, 2005:
Weighted average
Exercise price Number outstanding Remaining contractual life
$ # Years
$0.25 375,000 4.56
$1.00 1,325,000 4.63
$1.06 150,000 4.90
$1.87 320,000 4.76
$1.91 608,175 2.06
2,778,175 4.18
The fair value of stock options granted during the period ended June 30,
2005 has been estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions: risk free
interest rate between 3.03% to 3.7%, expected dividend yield of nil,
expected volatility of 63%, expected option life between 1.5 to 5 years.
The cost of share options granted during the period amounted to $1,587,478
of which $1,169,402 has been included within administrative expenses in the
consolidated income statement and $418,076 has been charged to capital
stock as part of the costs of the initial public offering.
.
6. Segmented information
The Company operates principally in one reportable business segment, the
development and exploration of mineral properties. Information relating to
geographical segments is set out below:
a. Revenue
b.
June 30, June 30, December 31,
2005 2004 2004
British Virgin Islands 126,702 - -
Bahamas 10,484 379 1,603
137,186 379 1,603
.
b. Profit (loss) for the period
c.
June 30, June 30, December 31,
2005 2004 2004
British Virgin Islands (1,807,857) - -
Bahamas 4,811 (339,172) 731,542
United States (3,628) - (1,902)
Philippines (152,725) (29,432) (83,761)
(1,959,399) (368,604) (817,204)
The losses of CRC, SMC ,AMC and Copper Spur from their respective dates of
acquisition to the period ended June 30, 2005 were $1,804,445.
Assuming the date of acquisition for all business combinations effective during
the period had been the beginning of the period, the total revenue of the
combined entity would have been $137,186 and the combined losses would have
been $1,959,399.
c. Intangible assets -mineral exploration costs
June 30, June 30, December 31,
2005 2004 2004
United States 79,957 75,612 79,177
Philippines 842,460 133,397 133,397
Namibia 1,611,189 - -
2,533,606 209,009 212,573
7. Loss per share
The basic loss per common share has been calculated based on the
weighted average number of shares outstanding for the period ended June
30, 2005 of 18,886,103 (June 30, 2004 - 5,378,300, December 31, 2004 -
8,008,671) Under reverse take over accounting, the weighted average
number of shares is affected by the number of shares issued to complete
the reverse take over. In 2005 and 2004, all stock options were
excluded from the loss per share calculation as their effect was
anti-dilutive.
8. Subsequent events
Subsequent to the period ended June 30, 2005, the company has entered
into a Protocole d'Accord ("Memorandum of Understanding") with George
Forrest International Afrique SPRL ("Forrest Group") dated September 7,
2005. CRC made a Stock Exchange announcement on the September 8, 2005
outlining the terms of the agreement. In essence CRC will acquire 75%
of Minere Musoshi Kinsenda ("MMK") and will issue to the Forrest Group
40% of the post acquisition equity of CRC. CRC will immediately embark
on a US$5.0 million dewatering program of the Kinsenda Mine. The US$5.0
million funds to be provided by CRC will be recorded in the form of a
loan which will be capitalized upon closing of the transaction.
No other matters or circumstances have arisen since the end of the
period which significantly affected or may significantly affect the
operations of the economic entity, the results of those operations, or
the state of affairs of the economic entity in future financial years.
9. These interim accounts were approved by the Board of Directors on
September 27th 2005
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