Final Results

Brancote Holdings PLC 23 May 2001 Date 23 May 2001 Contacts Richard Prickett, Chairman Bill Humphries, Managing Director Brancote Holdings PLC 020 7493 1002 David Bick / Chris Steele Holborn Public Relations 020 7929 5599 david.bick@holbornpr.co.uk chris.steele@holbornpr.co.uk BRANCOTE HOLDINGS PLC ANNUAL REPORT PUBLISHED Highlights * Completion of the company's refocusing onto the Argentinian Gold Project * Resources of 4.2 million ounces after completion of Phase III * Indications from Phase IV are highly encouraging * Pre-feasibility study on production underway * New exploration targets identified Commenting, Richard Prickett, Chairman, said: 'This year has been an outstanding success for the company. The resource in Esquel has exceeded even optimistic expectations and could well be even larger. We are confident of the company's ability to fund the development of the extraction given the low production costs and we have additional exciting prospects on other parts of our property. We believe that there is much more for shareholders to look forward to.' CHAIRMAN'S STATEMENT This has been another exciting and very positive year for Brancote which has seen the completion of our strategy to refocus the company totally on our Argentinian Gold Project. In June 2000 part of the non-core assets were sold to Landore Resources Inc for shares. In December 2000 those shares and the remainder of the non-core assets were transferred to HPD Exploration Plc (HPD) whose shares were offered by way of rights to shareholders at 1.5 pence per share. This offer was substantially oversubscribed and HPD which is quoted on OFEX gives shareholders the opportunity to participate in the future growth of a portfolio of exploration projects. Thus Brancote is now able to concentrate all of its resources and energies on our 60 per cent. Argentinian subsidiary Minera El Desquite S.A. whose main asset is the Esquel Gold Project. This project has now grown in size and quality to be one of the most significant epithermal gold deposits in the world. Full details of the project are set out in the Managing Director's report and can be summarised as follows: * The four drilling programmes have now identified and confirmed the presence of at least three high-grade veins from Galadriel to Julia into one massive vein system with a strike length of approximately 2.4 kilometres * The resource report by our consultants, Pincock, Allen & Holt, confirmed total resources of 4.2 million ounces of gold at the end of our Phase III programme. Given the tremendous success rate of the Phase IV programme, this resource report is likely to be extended both in quantity and an increase in the average grade * The economics of the project based on in-house studies show extremely robust statistics. We estimate that production cash costs, including royalties etc. will be below $100 per ounce. The capital requirement, inclusive of all indirect capital expenditure, should be below $100 million with an estimated pay back from production of approximately 1 year * The surface rights over the total project area have been acquired ensuring a smooth transition from exploration to production * Mine Engineering Consultants, Pincock Allen & Holt have been engaged to prepare the pre-feasibility study on the project. Field exploration has continued on the other prospective properties. Numerous targets have been identified and in particular a number of outcropping epithermal veins in the Corden Leleque area, which show similarities to those in the Corden Esquel. We anticipate that our successful exploration team of geologists will be able to concentrate on these areas now that the Esquel Gold Project is moving to the feasibility and development stage. We estimate that the Esquel Gold project will proceed through feasibility, funding and permitting from now until late 2002 with construction during 2003 and start up production in late 2003/early 2004. Given the project economics we would not expect that shareholders would be required to subscribe significant further capital; we anticipate that project finance will be available for the capital expenditure and that further equity participation of approximately $10 million over the next year to eighteen months should be sufficient. During the year the directors, with our professional advisers, conducted a strategic review of the project/business opportunities as a result of the successes of the Esquel project. In November 2000, we announced to shareholders that we were in discussions that might lead to an offer for the Company. However, In February 2001 we withdrew from these discussions, being supported in this decision by your company's professional advisers. In anticipation of an offer there was a speculative hike in our share price to a high of 235 pence with a subsequent markdown of 45 per cent. after we withdrew from the discussions. The share price has now stabilised to the level it was prior to the announcement. We did not believe that continuing the discussions was in shareholders' best interests given the confidence that we have in the project. This has been endorsed by the very positive results since then on our Phase IV drilling programme. Our priority is to add value for shareholders and advance this project towards production so that substantial earnings will flow for the benefit of shareholders. We will of course examine any other opportunities that arise and will, as always, keep shareholders fully informed. We look forward to the development of our project with immense enthusiasm and once again I would like to thank Bill Humphries and his first class team on their hard work and dedication over the past year. RICHARD O PRICKETT Chairman 23 May 2001 Operations Report EXECUTIVE SUMMARY During the year 2000, the Esquel Gold Project was progressed from an exciting discovery to a world class high-grade gold resource. Two well-orchestrated drilling programs increased the defined resource by over 3 million ounces of gold, in just one year. The average grade of the current resource at 2 g/t cutoff is 8 gpt gold, plus 13 gpt silver, with 63 per cent. defined in the measured and indicated categories. Project statistics on the first three drilling programs show: * Discovery rate per metre drilled 112 ounces gold * Discovery cost $2.40 per ounce gold The exceptionally low discovery cost, together with the resource being amenable to open pit mining, high extraction recoveries and excellent infrastructure, ensures that the total production costs will be among the lowest of current gold producers. Exploration continues to record important discoveries throughout our land holdings, perhaps the most outstanding of which was confirmation of the presence of high grade veins through the area known as the 'football field'', linking the established resources Galadriel, Galadriel Sur and Julia into one massive vein system with known strike length of approximately 2.4 kilometres. The Phase IV drilling program, commenced in January 2001, is targeted at upgrading the inferred resource in the 'football field' area. With drilling now 60 per cent. complete, results are very encouraging, ensuring that the target will be comfortably achieved. In April, Mine Engineering Consultants Pincock Allen & Holt of Denver, Colorado, were engaged to complete a pre-feasibility study and to prepare a report for release by October 2001. The Esquel Gold Project is now entering the development stage advancing towards eventual production. Bill Humphries Managing Director 23 May 2001 BRANCOTE HOLDINGS PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 JANUARY 2001 Year 13 months ended 31 ended January 2000 31 January 2001 Interests in joint Group Group ventures Total Note £ £ £ £ TURNOVER 34,987 36,745 2,070,704 2,107,449 Cost of (8,305) (39,963) (1,903,181) (1,943,144) sales GROSS PROFIT/ 26,682 (3,218) 167,523 164,305 (LOSS) Administrative (913,712) (517,077) - (517,077) expenses Amortisation of (123,888) - - - goodwill Exploration - (73,679) - (73,679) costs OPERATING (1,010,918) (593,974) 167,523 (426,451) LOSS Share of operating profit on - 167,523 joint venture TOTAL OPERATING LOSS: Group and share of (1,010,918) (426,451) joint venture Other - 24,428 income Net loss on disposal of (135,312) (1,671,363) investments Strategic review costs (195,545) - LOSS ON ORDINARY ACTIVITIES BEFORE INTEREST AND (1,341,775) (2,073,386) TAXATION Interest 107,973 34,113 receivable Interest payable and - (405) similar charges LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,233,802) (2,039,678) TAX ON LOSS ON ORDINARY - - ACTIVITIES LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (1,233,802) (2,039,678) Minority interest 87,634 40,698 RETAINED LOSS FOR THE (1,146,168) (1,998,980) YEAR LOSS PER SHARE 3 (1.86p) (4.23p) DILUTED LOSS PER SHARE 3 (1.76p) (3.90p) The interests in joint ventures are discontinued activities. All other activities are continuing. There is no difference between the results as stated and the results on a historical cost basis. BRANCOTE HOLDINGS PLC CONSOLIDATED BALANCE SHEET AT 31 JANUARY 2001 2001 2000 FIXED ASSETS £ £ Intangible assets - deferred exploration costs 7,300,916 3,306,337 - goodwill 2,353,866 2,477,754 9,654,782 5,784,091 Tangible assets 63,086 60,515 Investments - 703 9,717,868 5,845,309 CURRENT ASSETS Debtors: amounts falling due in less than one 44,916 224,747 year amounts falling due In more 517,012 188,697 than one year 561,928 413,444 Cash at bank and in hand 2,851,077 1,474,912 3,413,005 1,888,356 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (383,570) (177,337) NET CURRENT ASSETS 3,029,435 1,711,019 TOTAL ASSETS LESS CURRENT LIABILITIES 12,747,303 7,556,328 PROVISIONS FOR LIABILITIES AND CHARGES (101,810) - NET ASSETS 12,645,493 7,556,328 CAPITAL AND RESERVES Called up share capital 3,144,250 2,974,740 Share premium account 13,982,799 10,673,327 Special reserve 720,000 720,000 Profit and loss account (8,627,764) (7,869,844) EQUITY SHAREHOLDERS' FUNDS 9,219,285 6,498,223 MINORITY INTEREST 3,426,208 1,058,105 12,645,493 7,556,328 BRANCOTE HOLDINGS PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 JANUARY 2001 Year ended 13 months 31 January to 31 January 2001 2000 £ £ Loss attributable to shareholders of Brancote (1,146,168) (1,998,980) Holdings PLC Unrealised exchange rate movements on foreign 388,248 314,184 currency net investments TOTAL RECOGNISED LOSSES RELATING TO THE YEAR (757,920) (1,684,796) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JANUARY 2001 Year ended 13 months 31 January to 31 January 2001 2000 Note £ £ NET CASH OUTFLOW FROM OPERATING ACTIVITIES 4 (891,553) (900,943) RETURNS ON INVESTMENTS AND SERVICING OF 107,973 32,208 FINANCE CAPITAL EXPENDITURE AND FINANCIAL (4,548,518) (1,556,250) INVESTMENTS ACQUISITIONS AND DISPOSALS 641,786 (3,095,938) NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (4,690,312) (5,520,923) MANAGEMENT OF LIQUID RESOURCES (287,449) (1,000,000) FINANCING Issue of shares 3,478,982 7,380,018 Net investment by minority interests 2,394,463 - Decrease in debt - (509,211) NET CASH INFLOW FROM FINANCING 5,873,445 6,870,807 INCREASE IN CASH IN THE YEAR 895,684 349,884 BRANCOTE HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. BASIS OF PREPARATION The preliminary announcement has been prepared in accordance with applicable UK Accounting Standards and the Companies Act 1985 and under the historical cost convention. 2. SEGMENTAL ANALYSIS Turnover Profit/(loss) before Net assets Year taxation ended 13 Year 13 31 months ended months January ended 31 January ended 2001 31 January 2001 13 January 2001 2000 2000 2000 £ £ £ £ £ £ Argentina 34,987 - (219,078) (101,744) 8,565,511 1,796,443 USA - 25,306 - (56,534) - 534,858 UK - - (1,014,724) (1,567,977) 4,079,982 5,093,427 Canada - 11,439 - 6,372 - 131,600 34,987 36,745 (1,233,802) (1,719,883)12,645,493 7,556,328 Joint venture Australia - - 2,070,704 - (319,795) - - discontinued 34,987 2,107,449 (1,233,802) (2,039,678)12,645,493 7,556,328 3. LOSS PER SHARE he calculation of basic loss per share is based on losses for the year of £ 1,146,168 (13 months ended 31 January 2000: £1,998,990) and on the weighted average number of 61,788,925 shares (2000: 47,187,290) ranking for dividend in respect of the year. The calculation of diluted loss per share is based on losses for the year of £ 1,146,168 (13 months ended 31 January 2000: £1,998,980) and on the weighted average number of 64,997,481 shares (2000: 51,279,290) ranking for dividend in respect of the year. 4. NET CASH OUTFLOW FROM OPERATING ACTIVITIES 13 months Year ended ended 31 January 31 January 2001 2000 £ £ Operating loss (1,010,918) (593,974) Share of profit of joint ventures - 167,523 Depreciation and amortisation 148,908 14,169 (Increase) in debtors (339,301) (242,153) Increase/(Decrease) in creditors 309,758 (246,508) Net cash outflow from operating activities (891,553) (900,943) BRANCOTE HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT (Continued) 5. ANALYSIS OF NET FUNDS At At 1 February Exchange 31 January 2000 Cash flow Differences 2001 £ £ £ £ Cash 474,912 895,684 193,032 1,563,628 Deposits 1,000,000 287,449 - 1,287,449 Total 1,474,912 1,183,133 193,032 2,851,077 6. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information act out in this preliminary announcement does not constitute the Company's statutory accounts as defined in section 240 of the Companies Act 1985. The summarised balance sheet at 31 January 2001 and the summarised profit and loss account, summarised cash flow statement and associated notes for the year then ended have been extracted from the Group's 2001 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237(2) or (3) of the Companies Act 1985. 7. The Annual General Meeting of the Company will be held on 19 June 2001 at 11.30am in The Waterloo Room at the Institute of Directors, 116 Pall Mall, London, SW1Y 5ED. - ENDS -

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