Final Results
Amur Minerals Corporation
23 June 2006
23 June 2006
Amur Minerals Corporation
('Amur' or 'the Company')
AMUR MINERALS CORPORATION (AIM: AMC)
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005
Highlights for the year ending 31 December 2005
• Completed second field season on the Kun-Manie nickel-copper licence,
including 39 drill holes (5,235 metres)
• Resource estimate increased to 209,000 tonnes Ni and 58,500 tonnes Cu
• New mineralized zone identified (not yet included in resource estimate)
• Environmental baseline study initiated
• Raised US$5.5 million capital privately
Post- period highlights
• Successful admission to trading on AIM on 15 March 2006
• Placing raised an additional US$7 million based upon 12.36 million New
Ordinary Shares at 33p per Ordinary Share
• Net Assets increased to US$10.3 million on a pro forma basis
• Commencement of exploration field season at Kun-Manie
Chairman Robert W. Schafer commented: 'During 2005, the Company had tremendous
success with Kun-Manie and laid the groundwork for our listing in March of this
year. The year ahead will be equally exciting - if not more so - as we commence
a scoping study at Kun-Manie and prepare to file for a discovery with the
Russian authorities.'
ENDS
Full Chairman's Statement and Financial Statements follow.
Enquiries:
Amur Minerals Corp. Nabarro Wells & Co. Limited Parkgreen Communications
Robin Young John Wilkes Justine Howarth
CEO Director Victoria Thomas
+44 (0) 7981 126 818 +44 (0) 20 7710 7400 +44 (0) 20 7493 3713
+7 917 520 3491
Chairman's Statement
I am pleased to present my Chairman's statement on AMC's first set of annual
accounts as a public company. During 2005, the Company had tremendous success
with Kun-Manie and laid the groundwork for our listing in March of this year.
The year ahead will be equally exciting - if not more so - as we commence a
scoping study at Kun-Manie and prepare to file for a discovery with the Russian
authorities. In addition, we continue to look at opportunities to grow AMC
beyond Kun-Manie, including both near-production and early stage exploration
projects.
2005 in Review
Amur Minerals Corporation's principal asset is the 100% owned Kun-Manie
exploration licence, a nickel-copper-PGM deposit located in the Amur Province in
the far east of the Russian Federation. The Kun-Manie licence area is
approximately 950 km(2) and is located 700 km northeast of the capital city of
Blagoveshchensk and is 750km north of the Chinese border.
Last year was AMC's second field season at Kun-Manie. With our local drilling
contractor, we completed 39 drill holes for a total of over 5,200 metres in our
primary areas of Vodorazdelny and Ikenskoe. This work increased the resource
estimate from 20.9 million tonnes - none of which was JORC compliant - to 46.1
million tonnes, all of which was JORC compliant. Of this tonnage, 28.4 million
tonnes were in the indicated category at the end of the season, as reported in
our Admission Document dated 10 March 2006. The contained metal increased from
125,500 tonnes of nickel to 209,000, and the value placed on the project by SRK
Consulting increased from US$25-35 million to US$60-80 million. The geometry of
the Kun-Manie mineralization is such that open cut mining at a low waste:ore
ratio can be expected.
Our accomplishments were not all at the project site. During the year, AMC
completed two rounds of private financing. The funds received enabled AMC to
complete the field season and left the Company with enough working capital to
complete the placing and admission to AIM in early 2006 without unduly straining
resources. In addition, prior to the AIM listing, AMC put a new board in place,
restructured the original partnership agreements to eliminate ongoing
obligations to the founding partners, and adopted a new Memorandum and Articles
of Association to strengthen corporate governance.
Robert W. Schafer
23 June 2006
Financial Review
During AMC's second year in operation, we reduced administrative expenses by
approximately 6% to US$869,475. We achieved this reduction in overhead expenses
even while we increased the overall scope of operations. In 2005, we
capitalised over US$2.3 million in exploration expenditures, more than a 50%
increase from 2004. We improved our ratio of current assets to current
liabilities from 0.03:1 to a healthy 1.3:1.
Subsequent to year end, we completed our admission to trading on AIM and raised
gross proceeds of approximately £4.1 million (approximately US$7.1 million) by
placing 12.36 million new Ordinary Shares at a price of 33p per Ordinary Share.
AMC's market capitalization immediately following the listing was £28.4m.
Set out below is a pro-forma statement of net assets for AMC, which has been
prepared on the basis of the audited accounts as at 31 December 2005, as
adjusted for the Placing as set out above. The pro-forma has been prepared for
illustrative purposes only and, because of its nature, will not represent the
Group's actual financial position or results.
31-Dec-05 Note (1) 31-Dec-05
NON-CURRENT ASSETS Audited Placing (US$ Pro-Forma
(US$ 000's) 000's) (US$ 000's)
Capitalised exploration costs 3,915 3,915
Property, plant and equipment, net 11 11
Total non-current assets 3,926 3,926
CURRENT ASSETS
Cash at bank 2,042 5,796 7,838
Other current assets 252 252
Total current assets 2,294 5,796 8,090
Total assets 6,220 5,796 12,016
CURRENT LIABILITIES
Trade and other payables 1,710 1,710
Total current liabilities 1,710 1,710
NET ASSETS 4,510 5,796 10,306
SHAREHOLDERS' EQUITY
Share capital (net of share issuance costs) 10,123 5,796 15,919
Accumulated losses (5,613) (5,613)
Total shareholders' equity 4,510 5,796 10,306
NOTES:
(1) The Placing proceeds are calculated after taking account of the listing
expenses.
With the additional capital, AMC's pro-forma net assets increased to
approximately US$10 million, the majority of which was represented by cash.
This healthy balance sheet will enable us to complete this year's exploration
works at Kun-Manie and devote resources toward completion of a scoping study in
the next 12 months.
Strategy Review
The principal aim of Amur Minerals Corporation is to locate, evaluate, acquire,
explore and develop mineral properties, primarily in the far east of Russia.
The growth in AMC will come from several sources:
• Continuing to expand the already identified resource at Kun-Manie;
• Identifying new targets at Kun-Manie and developing potentially
economic mineralization;
• Acquiring new exploration licences, primarily in the far east of
Russia; and
• Acquiring near-production stage projects.
With a portfolio of projects, AMC can realise value by:
• Taking an asset through bankable feasibility stage and into production;
• Entering into joint venture agreements or farm-in agreements on
specific assets where appropriate; and
• Maximizing the value of assets at an appropriate stage of their development
by producing them ourselves or selling them at a premium to book value.
Immediate plans
In 2006, we are continuing exploration activities within the Kun-Manie licence
area. This programme will include ground geophysics, approximately 4,000 metres
of drilling, 600 linear metres of trenching, geochemical sampling and geological
mapping within the main geological structure identified as the Krumkon Trend.
Completion of the Vodorazdelny and Ikenskoe programme will ultimately provide
the Company with a resource drilled at an appropriate spacing to allow for the
calculation of a resource estimate suitable for submission to the State
Committee of Reserves (GKZ). The timing of the submission is planned for Q4 06
or Q1 07. Once approved, AMC will have met its final obligation required under
the terms of its exploration licence. Though not required until December 2008,
the Company intends to complete this obligation as soon as possible to allow AMC
to apply for a discovery and subsequently convert the five year exploration
licence into a Mining / Production licence which will have a 20 year life.
While the majority of this work will be in-fill drilling to further define and
appraise the Vodorazdelny and Ikenskoe targets, we will also step out to the
target known as Maly Krumkon. Geologic mapping results, geochemical sampling
and trenching confirm the presence of anomalous nickel values in excess of
0.40%. The zone is mapped as having a length of more than one kilometre with a
thickness ranging from 3 to 70 metres. Diamond core drilling is scheduled for
this area during May and June at programme start up.
The Mineral Resource estimate prepared by SRK Consulting for the Kun-Manie
project is summarised in the table below. The estimate includes both Indicated
and Inferred Mineral Resources as defined by the Australasian Code for Reporting
of Mineral Resources and Ore Reserves ('JORC Code').
Competent Person's Independent Mineral Resource Estimate, as published in our
Admission Document dated 10 March 2006:
Mineralised Tonnage Ni Ni Cu Cu Pt Pt Pd Pd
Area (Mt) (%) (t) (%) (t) (g/t) (Kg) (g/t) (Kg)
Vodorazdelny
Indicated 7.1 0.60 42,900 0.17 12,000 0.2 1,100 0.1 1,000
Inferred 3.6 0.62 22,500 0.19 6,700 0.2 700 0.2 600
Sub-Total 10.7 0.61 65,400 0.17 18,700 0.2 1,800 0.2 1,600
Ikenskoe
Indicated 21.3 0.42 89,500 0.12 25,800 0.2 3,400 0.2 3,800
Inferred 14.1 0.39 54,200 0.10 14,000 0.1 1,200 0.1 1,800
Sub-total 35.4 0.41 143,600 0.11 39,800 0.1 4,600 0.2 5,600
Total Indicated 28.4 0.47 132,300 0.13 37,800 0.2 4,500 0.2 4,800
Total Inferred 17.7 0.43 76,700 0.12 20,700 0.1 1,900 0.1 2,400
Grand Total 46.1 0.45 209,000 0.13 58,500 0.1 6,400 0.2 7,200
Copies of audited accounts will be sent to shareholders by 27 June 2006. Copies
of the annual report and accounts will be made available from the offices of
Nabarro Wells & Co. Limited, Saddlers House, Gutter Lane, London EC2V 6HS
AMC had a General shareholders meeting on 10 February 2006. Because of the
recent date of this meeting, the Company intends to next hold it's next General
meeting on 19 September 2006. Notices for this Annual General Meeting are
expected to be posted to Shareholders in July.
Notes 31 December 2005 31 December 2004
(Restated)
NON-CURRENT ASSETS
Capitalised exploration costs 3 3,914,904 1,558,144
Property, plant and equipment 3 11,346 11,571
Total non-current assets 3,926,250 1,569,715
CURRENT ASSETS
Cash and cash equivalents 2,042,008 124,613
Other receivables 4 251,705 130
Total current assets 2,293,713 124,743
Total assets 6,219,963 1,694,458
CURRENT LIABILITIES
Trade and other payables 5 1,709,724 3,655,915
Total current liabilities 1,709,724 3,655,915
SHAREHOLDERS' EQUITY
Share capital 7 14,690 4,417
Share premium 7 10,107,939 2,089,085
Accumulated losses (5,612,390) (4,054,959)
Total shareholders' equity 4,510,239 (1,961,457)
Total liabilities and shareholders'
equity 6,219,963 1,694,458
Approved on behalf of the Board on 22 June 2006.
David Wood
The accompanying notes form an integral part of these financial statements.
Note Year ended 31 11 month period
December 2005 from
incorporation to
31 December 2004
(Restated)
Administrative expenses 9 (863,372) (922,570)
Partnership agreement termination 5 (666,875) (50,625)
Operating loss (1,530,247) (973,195)
Grant of carried equity shares 8 - (3,051,500)
Foreign currency exchange loss (36,662) (30,942)
Bank interest received 9,478 678
Loss before tax (1,557,431) (4,054,959)
Taxation 6 - -
Loss for the period 10 (1,557,431) (4,054,959)
Loss per share: basic & diluted 11 201 1,615
Adjusted loss per share: basic & diluted 11 0.05 0.40
The accompanying notes form an integral part of these financial statements.
11 month period
Year from
ended incorporation to
Note 31 December 31 December 2004
2005 (Restated)
Cash flow from operating activities:
Net Loss before Taxation (1,557,431) (4,054,959)
Adjustments to reconcile loss before tax to net cash used
in operating activities:
Depreciation 3 8,434 2,905
Share based payment 67,000 -
Grant of carried equity shares - 3,051,500
Investment income (9,478) (678)
Decrease/(increase) in accounts receivable 52 (128)
Increase in accounts payable 321,983 364,161
Net cash used in operating activities (1,169,440) (637,199)
Cash flow from investing activities:
Exploration expenditure (2,342,670) (1,350,890)
Purchase of property, plant and equipment (8,209) (14,476)
Interest received 9,478 678
Net cash used in investing activities (2,341,401) (1,364,688)
Cash flow from financing activities:
Proceeds from issue of share capital 7 5,086,200 2,207,500
Proceeds form prepaid share capital 459,500 -
Financing costs associated with share issues * 7 (117,464) (81,000)
Net cash from financing activities 5,428,238 2,126,500
Net change in cash and cash equivalents 1,917,395 124,613
Cash and cash equivalents brought forward 124,613 -
Cash and cash equivalents carried forward 2,042,008 124,613
Material non-cash transactions
Financing costs satisfied by the issue of shares 125,300 -
* Includes commissions paid on financing raised and prepayment of costs
associated with listing.
The accompanying notes form an integral part of these financial statements.
Share capital Share Accumulated
Notes premium account losses Total
Incorporation - - - -
Net loss for the period as
previously stated - - (1,003,459) (1,003,459)
Grant of carried equity shares 8 - - (3,051,500) (3,051,500)
Net loss after restatement - - (4,054,959) (4,054,959)
Shares issued 7 4,417 - - 4,417
Premium on shares issued 7 - 2,203,085 - 2,203,085
Costs associated with issue of
share capital - (114,000) - (114,000)
Balance at 31 December 2004 4,417 2, 089,085 (4,054,959) (1,961,457)
Net loss for the year - - (1,557,431) (1,557,431)
Shares issued 7 10,273 - - 10,273
Premium on shares issued 7 - 5,274,330 - 5,274,330
Premium on share options - 3,045,397 - 3,045,397
Issue of warrants - - - 3,079,280
Costs associated with issue of
share capital - (300,873) - (300,873)
Balance at 31 December 2005 14,690 10,107,939 (5,612,390) 4,501,239
The future of the Group's retained earnings for distribution will be determined
by the individual companies' constitutions and legislation in their respective
countries, being the British Virgin Islands, Cyprus and the Russian Federation
and will not necessarily correspond to the amounts shown in the Company's
financial statements. Note 10 details the losses incurred by each Group
company.
The accompanying notes form an integral part of these financial statements.
1. General
a) Company
Amur Minerals Corporation ('Company') was incorporated as a holding company in
the British Virgin Islands on 28 January 2004 as Croesus Resources Group
Limited. It changed its name to Amur Minerals Corporation on 31 January 2006.
On 2 February 2006 the Company was re-registered as a business company under the
British Virgin Islands Business Companies Act 2004. On 28th January 2004 all
the Group companies referred to below came under common control from which time
they have been consolidated. Although, the Company officially acquired the
share capital of its subsidiaries on the dates mentioned below, the management
of the Company had full control over the operating and financial policies of all
Group companies since their incorporation. The Company and its subsidiaries ('
Group') locates, evaluates, acquires, explores and develops mineral properties
and projects primarily in the Russian Far East.
The Company's registered office is located at Kingston Chambers, P.O. Box 173,
Road Town, Tortola, British Virgin Islands. The average number of employees for
the Group for the period to 31 December 2005 was 11 (2004: 6 employees).
There is no single ultimate beneficial owner of the Company.
The Company is the 100% owner of a Cypriot company called Irosta Trading Limited
('Irosta'). The whole issued share capital was transferred to the Company on 14
July 2004. Irosta was incorporated in the Republic of Cyprus on 9 October 2003.
Irosta holds 100% of the shares in ZAO Kun-Manie (Kun-Manie), which holds a 5
year exclusive exploration license valid until 31 December 2008. The license is
for an area located north of the Amur Province of Russia, where Kun-Manie is
involved in the exploration of metals. Kun-Manie was incorporated in Russia on
14 April 2003 and was acquired by Irosta on 25 March 2004.
The Group includes the following companies as at 31 December 2005 and 31
December 2004:
Country of Percentage Principal
Incorporation Holding Activities
Amur Minerals Corporation British Virgin Islands Parent Company Investment Holding Company
Irosta Trading Limited Cyprus 100% Investment Holding Company
ZAO Kun - Manie Russia 100% Exploration & mining Company
The Group's principal place of business is in the Russian Federation.
In December 2005 SRK Consulting completed an independent mineral resource
estimate based on the analytical results from the exploration data set for all
holes and trenches that had been completed over the exploration life of the
project, inclusive of the work undertaken and results obtained during the 2005
exploration field season. SRK Consulting is a global entity specializing in the
assessment of mining resources. SRK reports an Indicated Mineral Resource for
Kun-Manie of 28.4 Mt with a mean grade of 0.47% Ni, 0.13% Cu, 0.2 g/t Pt and 0.2
g/t Pd and an Inferred Mineral Resource of some 17.7 Mt with a mean grade of
0.43% Ni, 0.12% Cu, 0.1 g/t Pt and 0.1 g/t Pd. SRK reports the resource estimate
as defined by the JORC Code. SRK considers that the resource estimate represents
only a portion of that likely to be demonstrated to be present.
b) Russian Business Environment
Whilst there have been improvements in the economic situation in the Russian
Federation in recent years, the country continues to display some
characteristics of an emerging market. These characteristics include, but are
not limited to, the existence of a currency that is not freely convertible in
most countries outside the Russian Federation, restrictive currency controls and
relatively high inflation.
The prospects for future economic stability in the Russian Federation are
largely dependant on the effectiveness of the economic measures undertaken by
the government, together with legal, regulatory and political developments.
2. Significant accounting policies
a) Basis of Preparation
These financial statements have been prepared in United States Dollars under the
historical cost convention and in accordance with applicable International
Financial Reporting Standards ('IFRS') for the purposes of shareholders.
b) Comparative figures
The comparative figures are from the date of incorporation (28 January 2004) of
the Company to 31 December 2004. As this period is not for 12 months, the
comparative figures are not directly comparable with those for the year ended 31
December 2005.
c) Principles of Consolidation
These consolidated financial statements include accounts of the Company and its
subsidiaries as set out in note 1. All significant inter-company balances and
transactions are eliminated.
d) Measurement and presentation currency
The measurement currency of the Group is considered to be the US Dollar, as the
majority of exploration financing is in US Dollars. Furthermore, any future
sales will be in US Dollars.
The financial statements have been presented in US Dollars in accordance with
the Company's accounting policy. For the purpose of these financial statements
other currencies have been translated into US Dollars on the following basis:
(I) Share capital, capitalized exploration costs and fixed assets at the rate
ruling on the date of the relevant transaction.
(II) Liabilities and current assets at the rate ruling at the end of the
accounting period.
(III) Income Statement items at the average rate for the period.
The rates of exchange used to translate from other currencies into US Dollars
were as follows (currency per US Dollar):
Closing rate at 31 Closing rate at
December 2005 31 December 2004
Russian Rouble
(RUR) 28.74 27.75
Average rate for 12 Average rate for 11
months to 31 December months from incorporation
2005 to 31 December 2004
Russian Rouble
(RUR) 28.29 28.81
Exchange differences arising on the application of the above policy to
individual transactions and accounts have been dealt with through the Statement
of Income and Expenditure. The RUR has limited convertibility outside the
Russian Federation and, accordingly, presentation of RUR amounts in US Dollars
should not be construed as a representation that RUR amounts have been, could
be, or will be in the future, convertible into US dollars at the exchange rate
shown, or at any other exchange rate.
e) Financial instruments
Where the fair value of the financial asset or liability is materially below the
carrying amount, the carrying amount is written down to fair value.
f) Accounting estimates and assumptions
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and operating costs during the reporting
period. Actual results could differ from these estimates.
The accompanying financial statements reflect management's assessment of the
impact of the Russian business environment on the operations and the financial
position of the Company. The future business environment may differ from
management's assessment. The impact of such differences on the operations and
the financial position of the Company may be significant.
g) Cash and cash equivalents
Cash consists of cash and bank balances only.
h) Other receivables
Other receivables are stated at estimated realisable values after providing
against debts where recoverability is bad and/or doubtful.
i) Fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided on all tangible fixed assets at rates calculated to
write off the cost or valuation of each asset on a straight-line basis over its
expected useful life as follows:
Useful life (years)
Motor vehicles 2
Office and computer equipment 3-8
The costs of maintenance, repairs and replacement of minor items of tangible
fixed assets are charged to current expenditure. Renewals and betterments are
capitalised.
j) Exploration and evaluation assets
The Group has taken advantage of an early adoption of IFRS 6, Exploration for
and Evaluation of Mineral Resources. It is the Group's policy to capitalise
costs with respect to agreements entered into with third parties to perform
geological works. Costs are recognised on a percentage of completion basis, and
no amortisation has yet been applied. If economically recoverable ore reserves
are developed, capitalised costs of the related property are reclassified as
mining assets and amortised using the unit-of-production method. When a property
is abandoned, all related costs are written off to operations. If, after
management review, it is determined that the carrying amount of a mineral
property is impaired, that property is written down to its estimated net
realisable value. A mineral property is reviewed for impairment whenever events
or changes in circumstances indicate that its carrying amount may not be
recoverable.
The carrying amounts for mineral properties do not necessarily represent present
or future values. Their recoverability is dependent upon the discovery of
economically recoverable reserves, the ability of the Company to obtain the
necessary financing to complete the exploration and development of its mineral
properties, and attain future profitable production, or proceeds from the
disposition of its mineral properties.
k) Income taxes
Income tax expense represents the sum of the tax currently payable and deferred
tax. Taxable profit differs from net profit as reported due to income tax
effects of permanent and timing differences. Non-profit based taxes are included
within administrative expenses.
l) Costs associated with the issue of share capital
Costs associated with the issue of shares, net of any taxes, have been set off
against the share premium account.
m) Share-based payments
Goods or services received or acquired in a share-based payment transaction are
recognised when the goods are obtained or as the services are received.
Goods or services received and the corresponding increase in equity are measured
at the fair value of the goods or services received.
3. FIXED ASSETS
Vehicles, and office & Exploration and Total
computer equipment evaluation assets
Cost or valuation:
At 28 January 2004 - - -
Additions 14,476 1,558,144 1,572,620
At 31 December 2004 14,476 1,558,144 1,572,620
Additions 8,209 2,356,760 2,364,969
At 31 December 2005 22,685 3,914,904 3,937,589
Accumulated depreciation:
At 28 January 2004 - - -
Charge for the year 2,905 - 2,905
At 31 December 2004 2,905 - 2,905
Charge for the year 8,434 - 8,434
At 31 December 2005 11,339 - 11,339
Net book value:
At 31 December 2004 11,571 1,558144 1,569,715
At 31 December 2005 11.346 3,914,904 3,926,250
4. OTHER RECEIVABLES
31 December 2005 31 December 2004
Other debtors 76 128
Deferred listing costs 251,627 -
Unpaid share capital 2 2
251,705 130
5. TRADE AND OTHER PAYABLES
31 December 2005 31 December 2004
Exploration and evaluation creditors 221,344 207,254
Accrued listing costs 146,212 -
Partnership Termination Compensation 552,000 50,625
Subscription funds received 334,500 -
Warrant Premium to be returned 125,000 -
Share option provision - 3,051,500
Accruals and other creditors 330,668 346,536
1,709,724 3,655,915
Partnership Termination Agreement
Included above is US$552,000 payable as compensation under the termination of
the Partnership Agreement. On 8 December 2005 the Company entered into a
termination deed with Anturium Resources SA, Polar Star Capital and Resource
Investment Group Inc (collectively the 'Russian Partners'), under which the
Russian Partners will receive compensation in lieu of the fees not paid and
shares envisaged under the Partnership Agreement. As per the termination deed,
the Russian Partners received a one time payment of $165,500 within 5 days of
the signing of the agreement, followed by 24 payments of US$23,000 per month to
be paid monthly by the 30th day of each month for 24 months starting from
January 2006.
In March 2006, the Company settled this liability in full. Accordingly, the
liability at 31 December of US$552,000 has been shown as a current liability.
Subscription Funds Received
Subscription funds received consist of moneys received under subscription
agreements for new shares which were issued to the subscribers on 10 January
2006.
Warrant Premium to Be Returned
On 10 December 2005, the Company notified warrant holders of its intention to
list its shares on AIM. According to the terms of the Warrant Agreements,
Warrant Holders had the right to exercise the Warrant by giving notice to the
Company at any time during the period of 14 days starting on (and excluding) the
date when it receives notice of a listing, or at any other time during the
Warrant Period. One warrant holder submitted a notice of exercise and paid the
premium prior to a meeting of warrant holders on 10 January, at which the
Company agreed to allow the warrants to be redeemed in a cashless exercise (see
note 18). The premium was subsequently returned to this Warrant Holder as he
chose instead the cashless exercise.
6. TAXATION
Reconciliation of tax charge:
31 December 2005 31 December 2004
Loss per accounts (1,557,431) (4,054,959)
Tax at domestic income tax rate - 0% - -
Tax at domestic income tax rate - 10% (3,921) (3,013)
Tax at domestic income tax rate - 24% (39,453) (16,128)
Tax effect of expenses not allowable for tax 39,453 14,479
Loss available for carry forward for future relief 3,921 4,662
Tax charge - -
There is no material difference between the accounting and tax base.
The Group has significant exposure to the Russian business and fiscal
environment through its business and operations being largely based in Russia.
Russia currently has a number of laws related to various taxes imposed by both
federal and regional governmental authorities. Laws related to these taxes have
not been in force for significant periods, in contrast to more developed market
economies; therefore, implementing regulations are often unclear; and few
precedents with regard to tax related issues have been established.
Furthermore, the Russian Tax Service is in the process of developing and
refining its methods of regulation. These facts create tax risks in Russia
substantially more significant than those typically found in countries with more
developed tax systems. Tax declarations, together with other legal compliance
areas (such as customs and currency control matters) are subject to review and
investigation by a number of authorities, who are enabled by law to impose
extremely severe fines, penalties and interest charges. As a result of these
factors, the Group is unable to determine whether or not the inspecting
authorities would challenge the taxation treatment of certain transactions
recorded by the Group.
7. SHARE CAPITAL
31 December 2005 31 December 2004
Number of Shares (par value USD 1 each):
Authorised 50,000 50,000
Issued and fully paid 14,688 4,415
Issued but not fully paid 2 2
Total issued 14,690 4,417
Share issues in the year have been as follows:
Number of
shares Issue price Capital Premium Total
Period from incorporation to 31
December 2004 2 1 2 - 2
Shares issued 3,215 500 3,215 1,604,285 1,607,500
Cost of share issue (81,000) (81,000)
Shares issued 1,200 500 1,200 598,800 600,000
Cost of share issue (33,000) (33,000)
As at 31 December 2004 4,417 4,417 2,089,085 2,093,502
Year ended 31 December 2005:
Shares issued 91 500 91 45,409 45,500
Carried equity shares 6,103 500 6,103 3,045,397 3,051,500
Shares issued 1,771 1,000 1,771 1,769,229 1,771,000
Cost of share issue (92,330) (92,330)
Shares issued 2,308 1,500 2,308 3,459,692 3,462,000
Cost of share issue (208,543) (208,543)
As at 31 December 2005 14,690 14,690 10,107,939 10,122,629
During 2005, 158.3 shares were issued to satisfy commissions totaling US$125,330
on fundraising. An additional 67 shares were issued in lieu of management fees
and expense reimbursements totaling US$67,000. All these shares were issued at
a fair value to the value of the services provided based on recent share issues
at the time of issue.
All ordinary shares carry equal voting rights and rights to dividends. On
incorporation 2 ordinary shares were issued at par to directors of the Company
as nominees, being Jonathan Charles Rowell Morley-Kirk and Michael John Kerrison
Nosworthy. Payment for these shares is outstanding at the end of each year.
The initial seed capital investors and Foxley Associates Limited ('Foxley'), a
company registered in the British Virgin Islands and trading under the name
Proteus International, entered into a Formation Agreement in November 2003.
Under the Formation Agreement, Foxley and its Russian Partners were to be issued
free shares in order to maintain an equity interest in the Company up to 50%.
The rights of the Russian Partners and Foxley to these carried equity shares was
limited to the lesser of the amount of the Work Program and Corporate Funding,
as defined in an initial budget, subject to a maximum of US$12.5 million ('the
Carried Equity Limit'). As the Company received only one of the originally
anticipated licenses, the Carried Equity Limit was reached at US$3.85 million.
To satisfy this sum the Directors of Amur Minerals Corporation issued 2,034
shares to Foxley and its designees on 27 May 2005, and issued an additional
4,069 shares to entities nominated by the Russian Partners on 8 December 2005.
In December 2005 a termination agreement was signed with the Russian Partners
whereby the Russian Partners would receive compensation in lieu of fees and
shares envisaged under the Partnership Agreement (See note 5)
The remaining shares are owned by other entities, with no single entity owning a
significant proportion.
Prior to the formation of the Group, the Company issued seed capital, being the
initial equity capital issued. This seed capital was issued between December
2003 and November 2004 with the Company issuing 4,415 shares at an initial
subscription price of US$ 500 for each share. In addition, each subscriber of
shares of the seed capital shares received one five year warrant for every two
shares subscribed which entitled the holder to subscribe for an additional share
at the initial subscription price. Furthermore, the founding partners were
entitled to 50% of the warrants as part of their carried interests. 2,253
warrants relating to initial shares issued were granted in 2004, the warrants
that related to the founding partners carried equity issue were issued in 2005
when the share were issued. These warrants have been valued at fair value by the
directors, and since the warrants were issued prorata the fair value of the
warrants was zero. There were 4,506.1 warrants shares outstanding as at 31
December 2005. The warrants have all now been converted into shares. Further
details are set out in note 18.
8. PRIOR YEAR ADJUSTMENT
During the year the company issued 6,103 shares, in accordance with The
Formation Agreement (which is explained in more detail in note 7).
Under International Financial Reporting Standard (IFRS) No 2 entitled
Share-based Payment, these shares are recorded in the financial statements at
their fair value of the equity instruments granted at the measurement date.
However, ours is a new start up company with no prior history and the company
has not been able to establish a fair value of the carried equity shares when
they were granted. Therefore, the company has adopted paragraph 24 of IFRS2, and
is applying the intrinsic value of the carried equity shares on a time basis.
The intrinsic value has been estimated based on a private placement valuing
shares at US$500 shortly after formation.
IFRS 2 became effective for annual periods beginning on or after 1 January 2005,
which has given rise to a prior year adjustment in respect of the above. This
has had the effect of increasing the loss for 2004 by US$3,051,500 with a
corresponding effect on the total assets of the company. This particular grant
of carried equity shares will not have any effect on the results or assets of
any subsequent accounting periods.
9. ADMINISTRATIVE EXPENSES
Year ended Period from incorporation
31 December 2005 to 31 December 2004
Salaries & wages 308,948 141,386
Management fees 105,000 397,500
Travel and subsistence 159,162 208,681
Professional fees 134,738 81,983
Depreciation 8,434 2,905
Bank charges 6,793 3,165
Rent 28,044 19,556
Other expenses 112,253 67,394
863,372 922,570
The average number of employees of the group was 11 (2004:6)
10. GROUP LOSSES
The Group companies' losses are made up as follows:
Year ended Period from incorporation
31 December 2005 to 31 December 2004
Amur Minerals Corporation 1,353,836 3,957,631
Irosta Trading Limited 39,209 30,128
ZAO Kun-Manie 164,386 67,200
1,557,431 4,054,959
11. LOSS PER SHARE
Basic and fully diluted loss per share are calculated and set out below. The
effects of warrants outstanding at the respective year ends are anti-dilutive
and have therefore been excluded from the following calculations.
Year ended Period from incorporation
31 December 2005 to 31 December 2004
Net loss for the year (1,557,431) (4,054,959)
Average number of shares for the year/period 7,757 2,511
Basic and diluted loss per share (201) (1,615)
Adjusted average number of shares for the year/period 31,026,419 10,045,640
Adjusted basic and diluted loss per share (0.05) (0.40)
The adjusted figures presented above take account of the share split that was
effected in 2006 (note 18).
Subsequent to the year end, the Company has issued new shares. The number of
shares outstanding at the date of these financial statements is 86,203,938
shares of no par value.
12. CURRENCY ANALYSIS AND RISKS
31 December 2005
Denominated in
RUR GBP $
Cash and cash equivalents 15,038 - 2,026,970
Other receivables 76 245,753 5,877
Warrant premium to be returned - - (125,000)
Exploration and evaluation creditors (221,344) - -
Other payables (317) (202,003) (826,560)
Net Exposure (206,547) 43,750 746,787
31 December 2004
Denominated in
RUR $
Cash and cash equivalents 13,170 111,443
Other receivables 128 2
Exploration and evaluation creditors (207,254) -
Share option provision - (3,051,500)
Other payables (86,633) (310,528)
Net Exposure (280,589) (3,250,583)
The main financial risk faced by the Group relates to currency risk exposure due
to its Rouble based contract with Dalgeophysica. The Group's functional currency
and financing is the USD, and therefore if the Rouble strengthens its positions
against the USD, this has a negative impact on the Group. Given the
unpredictability in currency exchange rates movement, this exposure can give
rise to a material change (either favorable or unfavorable) in the future.
Management reviews its currency risk exposure periodically and since the year
end has started to hedge part of its exposure by buying and holding on deposit
Roubles in order to cover a proportion of the current year's anticipated Rouble
expenditures.
13. COMMITMENTS
Geological works
A contract for geological works was entered into with Dalgeophysica on 22
February 2005. This agreement relates to works to be performed from March 2005
until March 2006. The total value of this contract is approximately US$ 2.3
million. As at 31 December 2005, the Group had incurred approximately US$2.1
million in respect of this commitment.
A further contract for geological works was entered into with
Dalgeophysica on 16 January 2006 for geological works. This agreement commenced
in February 2006 and finishes in March 2007. The total value of the contract is
approximately US$ 1.95 million.
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