Final Results
Brancote Holdings PLC
30 April 2002
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2002
On 4 April 2002 Meridian Gold Inc. ('Meridian') announced an offer for the
Company comprising 0.1886 Meridian common shares for each Brancote Holdings PLC
ordinary share. This offer has been recommended by the Board of Directors of
Brancote Holdings PLC.
Meridian filed a Registration Statement with the Securities and Exchange
Commission in the United States of America on 19 April 2002 and will post an
Offer Document to shareholders when the Registration Statement becomes
effective.
The audited annual report and financial statements for the year ended 31 January
2002 are set out below. A notice of Annual General Meeting will only be sent in
the event of the offer by Meridian lapsing or should this otherwise be legally
required.
REPORT OF THE DIRECTORS
The Directors submit their report and the Group accounts for the year ended 31
January 2002.
PRINCIPAL ACTIVITIES
The Company is the parent undertaking of a Group which is involved in the
identification, acquisition and development of technically and economically
sound mineral projects, either alone or with joint-venture partners. The
principal area of activity is Argentina and the principal minerals are gold and
silver. During the year the Company increased the interest held in its
Argentinean subsidiary, Minera El Desquite S.A., from 60 per cent. to 76.44 per
cent.
FINANCIAL RESULTS
The financial results are as anticipated and reflect the ongoing costs of
developing the gold and silver project at Esquel in Argentina.
DIVIDENDS
The Directors do not recommend the payment of a dividend (2001: £nil).
SUBSTANTIAL SHAREHOLDINGS
The Company had been notified on 18 April 2002, the last practical date prior to
the publication of this report, of the following interests of 3 per cent. or
more in its issued share capital:
ORDINARY SHARES OF 5P Number Percentage
Consolidated Press International 15,310,617 17.46
Limited
Chase Nominees Limited 9,266,000 10.57
Willbro Nominees Limited 7,061,401 8.05
Vidacos Nominees Limited 3,093,053 3.53
Nutraco Nominees Limited 2,901,894 3.31
DONATIONS
Donations by the Group to charitable organisations in the year amounted to £250
(2001: £501). No political donations were made (2001: £nil).
CREDITOR PAYMENT POLICY
Although the Company does not follow a specific code when settling its payment
obligations with creditors, it is the policy of the Company to ensure that all
suppliers of goods and services are paid promptly and in accordance with
contractual and legal obligations.
GOING CONCERN
The financial statements have been prepared on the going concern basis, which
assumes that the Group will continue in operational existence for the
foreseeable future. The Directors have assumed the acquisition of the Group by
Meridian Gold Inc. (see Note 23), and the injection of funds into the Group by
that company. Should the acquisition not take place, the Group intends to raise
further funding for the completion of the feasibility study for the Esquel
Project. In this regard, the Group has a contractual commitment from a holder
of 17.5% of the issued share capital to take up a proportional number of shares
of any equity fund raising. Whilst there can be no certainty in relation to
these matters, the Directors believe that they will be successful in securing
the funding required and therefore have prepared the financial statements on a
going concern basis.
REPORT OF THE DIRECTORS (CONTINUED)
DIRECTORS AND THEIR INTERESTS
The Directors' interests in the share capital of the Company are shown in the
table below.
31-Jan 31-Jan
ORDINARY SHARES OF 5P 2002 2001
Mr D.W. Dare 179,680 179,680
Mr W.H. Humphries 750,000 750,000
Mr. R.O. Prickett 449,400 449,400
The following ordinary shares are under option to the
Directors:
ORDINARY SHARES OF 5P Number of Exercise Option
shares price expiry dates
Mr D.W. Dare 100,000 18.25p 19-Jan-05
51,778 61.70p 09-Jun-03
151,778
Mr W.H. Humphries 250,000 56.00p 27-Oct-06
750,000 10.00p 19-Jan-05
1,000,000
Mr. R.O. Prickett 250,000 18.25p 19-Jan-03
250,000 56.00p 27-Oct-06
125,000 43.00p (1) 31-Oct-03
51,778 61.70p 09-Jun-03
676,778
(1) Mr Prickett was granted on option over 125,000 ordinary shares of 5p each in
the Company's capital on 17 October 1995 with an expiry date of 31 October 2001.
On 2 August 2001 the option expiry date was extended to 31 October 2003.
No Director's options were exercised or lapsed during the year and at the year
end all options are exercisable. There have been no changes in Directors'
interests between 31 January 2002 and the date of this report.
The price range of the Company's ordinary shares during the year was as follows:
Highest price as at 2 February 2001 227p
Lowest price as at 27 September 2001 111.5p
Price as at 31 January 2002 124.5p
AUDITOR
In accordance with s384 of the Companies Act 1985, a resolution for the
re-appointment of KPMG Audit Plc as auditor of the company is to be proposed at
the forthcoming Annual General Meeting.
REPORT OF THE DIRECTORS (CONTINUED)
CORPORATE GOVERNANCE
The Company joined the Alternative Investment Market (AIM) of the London Stock
Exchange in 1995. Companies listed on AIM are not required to make an annual
statement to shareholders regarding compliance with the Combined Code -
Principles of Good Governance and Code of Best Practice ('The Combined Code').
However, the Board has decided to comply with The Combined Code to the extent it
considers appropriate for a company of the size of Brancote Holdings PLC.
BOARD OF DIRECTORS
The Board consists of:
Richard Prickett has been a Director of the Company since its inception and
Chairman since 1995. He is a chartered accountant and has experience in the
field of corporate and property finance. He is also a Non-Executive Director of
Probus Estates Plc and The Capital Pub Company Plc.
William Humphries has been Managing Director since January 1999 and has 30 years
experience in the mining and civil engineering industries of Western Australia.
From 1996 to 1998 he was General Manager of Sardinia Gold Mining S.p.A.
David Dare has been the Company Secretary and legal advisor to the Company since
its inception in 1989 and has been a Non-Executive Director since 1997. In
addition to being a solicitor in private practice Mr Dare is also Chairman and a
Director in a number of companies.
David Whitehead was appointed a Non-Executive Director of the Company on 29
November 2001. He is Vice-President Integration, Exploration and Innovation at
BHP Billiton and was previously Chief Executive Officer of Exploration and
Development at Billiton PLC.
David Barnett was appointed a Non-Executive Director of the Company on 11
December 2001. He also holds office with Consolidated Press International
Limited, the largest shareholder of the Company.
The Company is controlled and led by the Board of Directors. The function of
the Chairman is to supervise the Board and to ensure effective control of the
business, and that of the Managing Director is to manage the Company on the
Board's behalf.
To facilitate balanced decision taking, there are three Non-Executive Board
members.
All Board members have access, at all times, to sufficient information about the
business to enable them to fully discharge their duties. Also, procedures exist
covering the circumstances under which the Directors may need to obtain
independent professional advice.
The Board has several established Committees to fulfil specific functions:
The Executive Committee, chaired by Mr Prickett, consists of the Executive
Directors and the Secretary. It has responsibility, insofar as a decision of
the full Board is not required, for the day-to-day management of decisions of
the Group.
The Audit Committee monitors and reviews the Group's financial reporting and
internal control procedures. It is chaired by Mr Dare and comprises all three
Non-Executive Directors. Meetings are held at least twice a year. A separate
internal audit function cannot be justified, at present, in view of the size and
scope of the Group's activities. The external auditors are invited to attend at
least one meeting of the Audit Committee each year.
The Remuneration Committee, chaired by Mr Dare, also consists of all three
Non-Executive Directors. Meetings are convened during the year to monitor,
assess and report to the full Board on all aspects and policy relation to the
remuneration of Directors. All Directors are required, in turn, to stand for
re-election every three years.
The Board, as a whole, determines the remuneration of the Non-Executive
Directors.
REPORT OF THE DIRECTORS (CONTINUED)
INTERNAL CONTROL
The Directors are responsible for ensuring that the Group maintains adequate
internal control over the business and its assets which comprise, principally,
cash and mineral properties.
There is close day-to-day involvement by the Directors in the Group's
activities. This includes the comprehensive review of both management and
technical reports, the monitoring of foreign exchange and interest rate
fluctuations, environmental considerations, government and fiscal policy issues,
employment and information technology requirements and cash control procedures.
The
Managing Director regularly attends meetings with minority shareholders in
subsidiaries and makes frequent site visits. In this way the key risk areas can
be monitored effectively and specialist expertise applied in a timely and
productive manner.
DIRECTORS' REMUNERATION
Mr Prickett, Mr Humphries and Mr Dare have service arrangements which provide
two years' notice of termination. These terms are in recognition of the
long-term nature of projects in the mining industry and the need to maintain
continuity of management.
RELATIONS WITH SHAREHOLDERS
The Company maintains effective contact with principal shareholders and welcomes
communications from private investors. Shareholders are encouraged to attend
the Annual General Meeting, at which time there is an opportunity for discussion
with members of the Board. Press releases together with other information about
the Company are available on the web site (www.brancote.com).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Applicable United Kingdom company law requires the Directors to prepare
financial statements for each financial period which give a true and fair view
of the state of affairs of the Company and the Group and of the profit or loss
for that period. In preparing those financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently
• make judgements and estimates that are reasonable and
prudent
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
By Order of the Board
D W Dare, Secretary
30 April 2002
REPORT OF THE INDEPENDENT AUDITOR
TO THE MEMBERS OF BRANCOTE HOLDINGS PLC
We have audited the financial statements on pages 7 to 23.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors are responsible for preparing the Directors' report and, as
described on page 5, the financial statements in accordance with applicable
United Kingdom law and accounting standards. Our responsibilities, as
independent auditors, are established in the United Kingdom by statute, the
Auditing Practices Board and by our profession's ethical guidance.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the Directors' report is not
consistent with the financial statements, if the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
Directors' remuneration and transactions with the Group is not disclosed.
We read the other information accompanying the financial statements and consider
whether it is consistent with those statements. We consider the implications for
our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the Group's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures made
in the accounting policies section of the financial statements concerning the
future funding of the Group. The Directors have assumed the acquisition of the
Group by Meridian Gold Inc., and the injection of funds into the Group by that
company, but the acquisition is dependent, inter alia, on acceptance by Brancote
Holdings PLC's shareholders. Should that acquisition not proceed, a further
fund raising will be required. In view of the significance of these
uncertainties we consider that it should be drawn to your attention but our
opinion is not qualified in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and the Group as at 31 January 2002 and of the loss of
the Group for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
30 April 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 JANUARY 2002
2002 2001
Note £ £
TURNOVER 1 - 34,987
Cost of sales - (8,305)
GROSS PROFIT - 26,682
Administrative expenses (1,298,295) (913,712)
Amortisation of goodwill (123,888) (123,888)
Other operating income 525,125 -
OPERATING LOSS (897,058) (1,010,918)
Net profit/(loss) on disposal of investments 61,011 (135,312)
Strategic review costs (136,616) (195,545)
LOSS ON ORDINARY ACTIVITIES BEFORE
INTEREST AND TAXATION (972,663) (1,341,775)
Interest receivable 2 95,274 107,973
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 3 (877,389) (1,233,802)
TAX ON LOSS ON ORDINARY ACTIVITIES 4 - -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (877,389) (1,233,802)
Minority interest 24 (3,395) 87,634
RETAINED LOSS FOR THE YEAR 16 (880,784) (1,146,168)
LOSS PER SHARE 5 (1.3p) (1.9p)
DILUTED LOSS PER SHARE 5 (1.3p) (1.9p)
There is no difference between the results stated and the results on a
historical cost basis.
All activities are continuing.
CONSOLIDATED BALANCE SHEET
AT 31 JANUARY 2002
2002 2001
Note £ £
FIXED ASSETS
Intangible fixed assets
- deferred exploration costs 6 36,234,318 7,300,916
- goodwill 7 2,229,978 2,353,866
38,464,296 9,654,782
Tangible fixed assets 8 3,518,355 63,086
41,982,651 9,717,868
CURRENT ASSETS
Debtors: amounts falling due in less than one year 10 133,351 44,916
amounts falling due after one year 10 495,667 517,012
629,018 561,928
Cash at bank and in hand 244,534 2,851,077
873,552 3,413,005
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 11 (1,633,584) (383,570)
NET CURRENT (LIABILITIES)/ASSETS (760,032) 3,029,435
TOTAL ASSETS LESS CURRENT LIABILITIES 41,222,619 12,747,303
PROVISIONS FOR LIABILITIES AND CHARGES 12 - (101,810)
NET ASSETS 41,222,619 12,645,493
CAPITAL AND RESERVES
Called up share capital 13 4,247,657 3,144,250
Share premium account 14 41,642,188 13,982,799
Special reserve 15 720,000 720,000
Profit and loss account 16 (8,329,019) (8,627,764)
EQUITY SHAREHOLDERS' FUNDS 17 38,280,826 9,219,285
MINORITY INTEREST 24 2,941,793 3,426,208
41,222,619 12,645,493
The financial statements were approved by the Board of Directors on 30 April
2002 and signed on its behalf by:
R O Prickett - Chairman
COMPANY BALANCE SHEET
AT 31 JANUARY 2002
2002 2001
Note £ £
FIXED ASSETS
Tangible assets 8 15,512 3,954
Investments 9 34,002,844 8,342,916
34,018,356 8,346,870
CURRENT ASSETS
Debtors 10 4,053,541 33,343
Cash at bank and in hand 34,477 1,976,028
4,088,018 2,009,371
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 11 (146,833) (183,666)
NET CURRENT ASSETS 3,941,185 1,825,705
TOTAL ASSETS LESS CURRENT LIABILITIES 37,959,541 10,172,575
PROVISIONS FOR LIABILITIES AND CHARGES 12 - (101,810)
NET ASSETS 37,959,541 10,070,765
CAPITAL AND RESERVES
Called up share capital 13 4,247,657 3,144,250
Share premium account 14 41,642,188 13,982,799
Special reserve 15 720,000 720,000
Profit and loss account 16 (8,650,304) (7,776,284)
EQUITY SHAREHOLDERS' FUNDS 37,959,541 10,070,765
The financial statements were approved by the Board of Directors on 30 April
2002 and signed on its behalf by:
R O Prickett - Chairman
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 JANUARY 2002
2002 2001
£ £
Loss attributable to shareholders of Brancote Holdings PLC (880,784) (1,146,168)
Unrealised exchange rate movements 1,179,529 388,248
TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR 298,745 (757,920)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JANUARY 2002
2002 2001
Note £ £
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 18 (791,852) (891,553)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 19 95,274 107,973
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTS 19 (8,062,971) (4,548,518)
ACQUISITIONS AND DISPOSALS 20 (48,265) 641,786
NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (8,807,814) (4,690,312)
MANAGEMENT OF LIQUID RESOURCES 19 1,287,449 (287,449)
FINANCING:
Issue of shares 19 3,611,722 3,478,982
Net investment by minority interests 2,477,415 2,394,463
NET CASH INFLOW FROM FINANCING 6,089,137 5,873,445
(DECREASE)/INCREASE IN CASH IN THE YEAR 21 (1,431,228) 895,684
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE YEAR ENDED 31 JANUARY 2002
2002 2001
£ £
(Decrease)/increase in cash during the year (1,431,228) 895,684
Cash (outflow)/inflow from changes in liquid resources (1,287,449) 287,449
Exchange differences 112,134 193,032
Movement in net debt (2,606,543) 1,376,165
Net funds brought forward 2,851,077 1,474,912
Net funds carried forward 244,534 2,851,077
PRINCIPAL ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with applicable UK
Accounting Standards and the Companies Act 1985, and under the historical cost
convention. The following principal accounting policies have been applied
consistently in dealing with items which are considered material in relation to
the Group's financial statements. The Group adopted FRS19 Deferred tax during
the year (see Note 4).
GOING CONCERN
The financial statements have been prepared on the going concern basis, which
assumes that the Group will continue in operational existence for the
foreseeable future. The Directors have assumed the acquisition of the Group by
Meridian Gold Inc. (see Note 23), and the injection of funds into the Group by
that company. Should the acquisition not take place, the Group intends to raise
further funding for the completion of the feasibility study for the Esquel
Project. In this regard, the Group has a contractual commitment from a holder
of 17.5% of the issued share capital to take up a proportional number of shares
of any equity fund raising. Whilst there can be no certainty in relation to
these matters, the Directors believe that they will be successful in securing
the funding required and therefore have prepared the financial statements on a
going concern basis.
BASIS OF CONSOLIDATION
The Group accounts include the accounts of the Company and subsidiary
undertakings made up to 31 January each year. Unless otherwise stated, the
acquisition method of accounting has been adopted. Under this method, the
results of subsidiary undertakings acquired or disposed of in the year are
included in the consolidated profit and loss account from the date of
acquisition or up to the date of disposal.
DEFERRED EXPLORATION COSTS
The Group uses the full cost method of accounting for mining operations.
Deferred exploration costs include costs of exploring for and developing mineral
reserves, which include acquisition costs, geological and geophysical costs,
costs of drilling, costs of mine production facilities, and an appropriate share
of overheads, and are treated as intangible assets. The capitalised cost of mine
and plant is accumulated in one or more full cost pools as determined from time
to time by the nature and scope of the Group's operations. On completion of a
mine development, all project costs are transferred to tangible assets.
Expenditure on abortive projects is written off to the profit and loss account.
The Directors constantly review each project under technical and commercial
considerations. In the event that it becomes evident that costs are unlikely to
be recovered from the future revenues they are written off immediately to the
profit and loss account.
GOODWILL
Purchased goodwill (both positive and negative) arising on consolidation in
respect of acquisitions before 1 January 1998, when FRS 10 goodwill and
intangible assets was adopted, was written off to reserves in the year of
acquisition. When a subsequent disposal occurs any related goodwill previously
written off to reserves is written back through the profit and loss account as
part of the profit or loss on disposal.
Purchased goodwill (representing the excess of the fair value of the
consideration given and any associated costs over the fair value of the
separable net assets acquired) arising on consolidation in respect of
acquisitions since 1 January 1998 is capitalised. Positive goodwill is amortised
to nil by equal annual instalments over its estimated useful life of 20 years.
On the subsequent disposal or termination of a business acquired since 1 January
1998, the profit or loss on disposal or termination is calculated after charging
(crediting) the unamortised amount of any related goodwill (negative goodwill).
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
TANGIBLE FIXED ASSETS
Each pool of mine development costs is amortised using a unit of production
basis once commercial production has commenced. The aggregate amount of the cost
of the mine and plant is carried forward in each pool and is stated at not more
than the assessed value of commercially recoverable reserves in that pool.
Depreciation is calculated to write down the cost less residual value of plant
and machinery and office equipment by equal annual instalments over a period of
five years. Depreciation is not provided in respect of freehold land until
commercial production has commenced.
INVESTMENTS
Investments are stated at cost less provisions for impairment in value.
TURNOVER
Turnover is the income arising on mining leases net of sales taxes. Income is
not recognised in the financial statements until the realisation of the income
in cash is reasonably assured.
TAXATION
The charge for taxation is based on profit for the period and takes into account
taxation deferred because of timing differences between the treatment of certain
items for taxation and accounting purposes. Provision is made for deferred tax
on a full provision basis following the adoption of FRS 19 during the year.
FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of transaction. Monetary assets and liabilities in foreign currencies
are translated at the rates of exchange ruling at the balance sheet date. The
financial statements of foreign subsidiaries are translated at the rate of
exchange ruling at the balance sheet date. The exchange differences arising from
the retranslation of the opening net investment in subsidiaries are taken
directly to reserves. Where exchange differences result from the translation of
foreign currency borrowings raised to acquire foreign assets (including equity
investments) they are taken to reserves and offset against the differences
arising from the translation of those assets. All other exchange differences are
dealt with through the profit and loss account.
During the year the Argentine Peso, which had previously been pegged to the US
Dollar on a one to one basis, was allowed to float freely. Since that time the
Argentine Peso has devalued considerably and the exchange rate at year end was
Peso 1.98 to US$1. In order to avoid distorting the results of the Group,
management have decided to prepare the accounts of its Argentine subsidiaries in
US dollars for the purposes of consolidation.
CASH AND LIQUID RESOURCES
Cash, for the purpose of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand.
Liquid resources are current asset investments which are disposable without
curtailing or disrupting the business and are either readily convertible into
known amounts of cash at or close to their carrying values or traded in an
active market. Liquid resources comprise term deposits of less than one year
(other than cash), government securities and investments in money market managed
funds.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2002
1. SEGMENTAL ANALYSIS Profit/(loss)
Turnover before taxation Net assets
2002 2001 2002 2001 2002 2001
£ £ £ £ £ £
Argentina - 34,987 245,070 (219,078) 35,035,943 8,565,511
UK - - (1,122,459) (1,014,724) 6,186,676 4,079,982
- 34,987 (877,389) (1,233,802) 41,222,619 12,645,493
2. INTEREST RECEIVABLE
2002 2001
£ £
Bank interest 95,274 107,973
receivable
3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
(a) The loss is stated after charging/ 2002 2001
(crediting):
Auditors remuneration £ £
- audit (Company: £10,000; 2001: 42,424 20,000
£10,000)
- other fees paid to the auditors and their 44,171 49,038
associates
Other operating income - gain on foreign (525,125) -
exchange
Operating lease charges: land and buildings 49,524 51,765
Depreciation 31,199 25,020
The foreign exchange gain in the year arises from the translation of US dollar denominated liabilities in
Argentina to Argentine pesos on a one basis following government legislation and the subsequent devaluation of the peso.
(b) Staff: 2002 2001
£ £
Wages and salaries, including amounts 609,147 302,187
capitalised
Social security costs, including amounts 30,254 4,261
capitalised
Other pension costs 37,500 -
676,901 306,448
2002 2001
The average number of employees by location Number Number
during the year:
Argentina - mining and 29 6
exploration
3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (CONTINUED)
(c) Directors'
emoluments:
Pension
Fee Bonus contributions Total
2002 2001 2002 2001 2002 2001 2002 2001
£ £ £ £ £ £ £ £
European Sales Company 100,000 77,742 40,000 - 15,000 - 155,000 77,742
Ltd.
MM-E 150,000 104,167 60,000 - 22,500 - 232,500 104,167
Dare & Co 32,000 27,000 - - - - 32,000 27,000
David Whitehead 3,333 - - - - - 3,333 -
285,333 208,909 100,000 - 37,500 - 422,833 208,909
Less: capitalised in connection with the development (75,000) (52,084)
of mining interests
347,833 156,825
Emoluments for the Chairman, R.O. Prickett, are paid to European Sales Company
Limited and emoluments for the Managing Director, W.H. Humphries, are paid to
MM-E for the provision of their services.
Directors and secretarial fees were paid to Dare & Co. for the services of D.W.
Dare, a firm in which he is principal. Dare & Co. was also paid legal expenses
of £4,800 during the year (2001: £4,800), this is excluded from the analysis of
remuneration above.
D. Whitehead was appointed on 29 November 2001 for an annual fee of £20,000.
D.J. Barnett was appointed on 11 December 2002 and receives no remuneration for
his services.
Details of Directors share options are disclosed on page 3.
4. TAX ON LOSS ON ORDINARY ACTIVITIES
The tax charge for the year was £nil (2001: £nil).
Factors affecting the tax charge for the year 2002 2001
£ £
Loss on ordinary activities before tax (877,389) (1,233,802)
Loss on ordinary activities before tax multiplied by standard rate of corporation tax in (263,217) (370,141)
the UK of 30%
Expenses not deductible for tax purposes 46,050 41,302
Other permanent differences 37,166 37,166
Higher tax rates on overseas earnings 12,253 -
Losses carried forward for which a deferred tax asset has not been recognised 167,748 291,673
Current tax charge for the year - -
4. TAX ON LOSS ON ORDINARY ACTIVITIES (CONTINUED)
The Group has potential net deferred tax assets as follows, none of which have
been recognised owing to the uncertainty as to whether they can be utilised.
Tax
losses
£
At the beginning of the year 734,735
Losses for the year 167,748
At the end of year 902,483
5. LOSS PER SHARE
The calculation of basic and diluted loss per share is based on losses for the
year of £880,784 (2001: £1,146,168) and on the weighted average number of
69,107,221 shares (2001: 61,788,925 shares) ranking for dividend in respect of
the year.
6. DEFERRED EXPLORATION COSTS Group
£
At 1 February 2001 7,300,916
Additions 5,573,590
Fair value adjustment on 23,037,676
acquisitions
Exchange differences 322,136
At 31 January 2002 36,234,318
The deferred exploration costs together with the freehold land in Note 8
represent the aggregate of the Group's undeveloped mining interests.
7. GOODWILL Group
£
COST At 1 February 2001 2,477,754
At 31 January 2002 2,477,754
AMORTISATION At 1 February 2001 123,888
Charge for the year 123,888
At 31 January 2002 247,776
NET BOOK VALUE At 31 January 2002 2,229,978
At 31 January 2001 2,353,866
8. TANGIBLE FIXED ASSETS Freehold Motor Mine and Office Group
GROUP land vehicles plant equipment Total
COST £ £ £ £ £
At 1 February 2001 - 45,056 50,039 13,889 108,984
Exchange differences - 2,063 2,291 302 4,656
Additions 3,446,144 - 13,451 24,165 3,483,760
At 31 January 2002 3,446,144 47,119 65,781 38,356 3,597,400
DEPRECIATION
At 1 February 2001 - 22,243 19,031 4,624 45,898
Exchange differences - 1,019 871 58 1,948
Depreciation capitalised during - 10,209 15,220 1,076 26,505
the year
Depreciation charged to the profit and loss account - - 1,642 3,052 4,694
during the year
At 31 January 2002 - 33,471 36,764 8,810 79,045
NET BOOK VALUE
At 31 January 2002 3,446,144 13,648 29,017 29,546 3,518,355
At 31 January 2001 - 22,813 31,008 9,265 63,086
Office
COMPANY Equipment
COST £
At 1 February 2001 7,294
Additions 14,301
At 31 January 2002 21,595
DEPRECIATION
At 1 February 2001 3,340
Charge for the year 2,743
At 31 January 2002 6,083
NET BOOK VALUE
At 31 January 2002 15,512
At 31 January 2001 3,954
9. INVESTMENTS Percentage Percentage
The principal operating subsidiaries of Interest Interest
the Group are:
at at
Nature of Country of 31-Jan 31-Jan
business incorporation 2002 2001
Minera El Desquite Mining Argentina 76.44 60.00
S.A.
Minera Huemules S.A. Exploration Argentina 60.00 60.00
Leleque Exploration Exploration Argentina 60.00 60.00
S.A.
Minera Nahuel Pan Exploration Argentina 60.00 60.00
S.A.
Percentage
Country of Direct Nature of Group
COST incorporation shareholding business companies
At 1 February 2001: £
Minera El Desquite Argentina 50.00 Mining 4,302,738
S.A.
Scarabee Investment BVI 100.00 Holding Co. 4,040,178
Limited
8,342,916
Acquisitions in
November 2001:
Emerald Limited Bahamas 100.00 Holding Co. 21,509,161
Villagarden S.A. Uruguay 100.00 Holding Co. 3,690,179
Minera Huemules S.A. Argentina 60.00 Exploration 309,976
Leleque Exploration Argentina 60.00 Exploration 105,935
S.A.
Minera Nahuel Pan Argentina 60.00 Exploration 44,677
S.A.
At 31 January 2002 34,002,844
At 31 January 2002 the Company owns Emerald Limited, Scarabee Investment Limited
and Villagarden S.A. each of which are holding companies with direct interests
in Minera El Desquite S.A. of 14.0363%, 10% and 2.4% respectively. Emerald
Limited and Villagarden S.A. were acquired in November 2001. Further details of
the assets and liabilities acquired are given in Note 20.
On 1 February 2001 the Company had 60% indirect interests in three other
companies incorporated in Argentina; Leleque Exploration S.A., Minera Huemules
S.A. and Minera Nahuel Pan S.A.; each of which was 100% directly owned by Minera
El Desquite S.A. As a result of a strategic review process the Group
reorganised the holding structure for its interest in these subsidiaries in
November 2001. Minera El Desquite S.A. sold 60% interests in each of the three
subsidiaries to the Company for £460,588 and the remaining 40% interests to the
minority shareholders of Minera El Desquite S.A. for £307,028, realising a
profit of £152,528 on the sale of which £61,011 is realised outside the Group.
The three companies have been treated as subsidiaries throughout the year.
10. DEBTORS 2002 2001
GROUP £ £
Other debtors - due in less than 133,351 44,916
one year
Other debtors - due in more than 495,667 517,012
one year
629,018 561,928
2002 2001
COMPANY £ £
Amounts owed by subsidiary 3,957,158 -
undertakings
Other debtors 96,383 33,343
4,053,541 33,343
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2002 2001
GROUP £ £
Trade creditors 381,057 269,591
Amounts payable in respect of the acquisition 1,104,490 -
of freehold land
Other creditors 1,205 11,733
Accruals and deferred 146,832 102,246
income
1,633,584 383,570
2002 2001
COMPANY £ £
Amounts due to subsidiary - 95,905
undertaking
Other creditors - 10,000
Accruals and deferred 146,833 77,761
income
146,833 183,666
12. PROVISIONS FOR LIABILITIES AND CHARGES
GROUP AND COMPANY £
At 1 February 2001: provision for National Insurance 101,810
Contributions on share options
Paid during the year (84,195)
Excess provision reversed in profit and (17,615)
loss account
At 31 January 2002 -
13. CALLED UP SHARE CAPITAL 2002 2001
Authorised £ £
90,000,000 ordinary shares of 5p 4,500,000 4,500,000
each
Allotted, called up and
fully paid
84,953,178 (2001: 62,885,037) ordinary 4,247,657 3,144,250
shares of 5p each
The following allotments of the issued share capital of the Company have
taken place during the year:
13. CALLED UP SHARE CAPITAL (CONTINUED)
Issued Issued
for for Total Total
cash acquisitions Number of Issue cash
Number of Number of shares price received
Date shares shares issued £ £
Exercise of options 08-Feb-01 400,000 - 400,000 1.0000 400,000
Exercise of options 23-Apr-01 100,000 - 100,000 0.5600 56,000
Exercise of options 18-May-01 730,500 - 730,500 0.2800 204,540
Placing of shares 12-Jun-01 1,000,000 - 1,000,000 1.6500 1,650,000
Placing of shares 19-Oct-01 1,000,000 - 1,000,000 1.2200 1,220,000
Acquisition of Emerald 01-Nov-01 - 15,233,020 15,233,020 - -
Limited
Acquisition of Villagarden 22-Nov-01 - 2,604,621 2,604,621 - -
S.A.
Exercise of warrants 25-Jan-02 1,000,000 - 1,000,000 0.1350 135,000
4,230,500 17,837,641 22,068,141 3,665,540
On 25 February 2002 the Company placed a further 2,169,240 shares at an issue price of
£1.20.
Share options at 31 January
2002:
Last
Number of exercise Price
shares date £
449,500 (1) 24-May-02 28p
103,556 10-Jun-03
61.7p
125,000 (2) 31-Oct-03 43p
350,000 19-Jan-05
18.25p
750,000 19-Jan-05 10p
600,000 (3) 27-Oct-06 56p
(1) Options were exercised on 11 April
2002.
(2) On 2 August 2001 the option expiry date was extended from 31 October 2001 to 31
October 2003.
(3) Options were exercised in respect of 100,000 shares on 16
April 2002.
At year end all options are exercisable.
14. SHARE PREMIUM ACCOUNT
GROUP AND COMPANY £
At February 2001 13,982,799
On issues in the year 27,659,389
At 31 January 2002 41,642,188
15. SPECIAL RESERVE
£
GROUP AND COMPANY
At 31 January 2001 and 31 January 720,000
2002
The special reserve will be treated as a non-distributable reserve of the
Company for the purposes of section 264 of the Companies Act 1985 until such
time as the liabilities of the Company at the date of creation of the reserve
(25 September 1996) have been fully discharged.
16. PROFIT AND LOSS ACCOUNT Group Company
£ £
At 1 February 2001 (8,627,764) (7,776,284)
Retained loss for the year (880,784) (874,020)
Exchange differences arising on 1,179,529 -
translation
(8,329,019) (8,650,304)
17. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
2002 2001
GROUP £ £
Loss attributable to shareholders of (880,784) (1,146,168)
Brancote Holdings PLC
Exchange differences arising on 1,179,529 388,248
translation
Issues of shares 28,762,796 3,478,982
Net increase in shareholders' 29,061,541 2,721,062
funds
Equity shareholders' funds at 9,219,285 6,498,223
beginning of year
Equity shareholders' funds at end 38,280,826 9,219,285
of year
18. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2002 2001
£ £
Operating loss (897,058) (1,010,918)
Depreciation and amortization 128,582 148,908
Increase in debtors (67,090) (339,301)
Increase in creditors and provisions 43,714 309,758
Net cash outflow from operating activities (791,852) (891,553)
19. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2002 2001
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE £ £
Interest received 95,274 107,973
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (2,379,270) (20,297)
Investment in undeveloped mining interests (5,547,085) (4,332,676)
Payments of strategic review costs (136,616) (195,545)
(8,062,971) (4,548,518)
MANAGEMENT OF LIQUID RESOURCES
Short term deposit 1,287,449 (287,449)
FINANCING
Issue of share capital 3,665,540 3,515,307
Expenses in connection with issue of shares (53,818) (36,325)
3,611,722 3,478,982
20. ACQUISITIONS AND DISPOSALS
In November 2001 the Group increased its interest in Minera El Desquite S.A.
from 60% to 76.44% by acquiring 100% interests in Emerald Limited and
Villagarden S.A., which respectively held 14.0363% and 2.4% interests in Minera
El Desquite S.A. The consideration paid for the companies was 17,837,641
ordinary shares in Brancote Holdings PLC with a mid price on the days of
transactions of £1.41 per ordinary share and the market valuation of the total
consideration paid was £25,151,074. The Group incurred legal and professional
costs of £48,266 in relation to these acquisitions.
The additional interests acquired in the net assets of Minera El Desquite S.A.,
which had a corresponding book value of £2,161,663, have been valued at
£25,199,339 which represents their fair value. A fair value adjustment of
£23,037,676 has been attributed to the mining interests of Minera El Desquite
S.A. since these are the principal assets being acquired. The 16.4363% acquired
in the underlying assets in Minera El Desquite S.A. and the fair value
adjustments thereto are as follows:
20. ACQUISITIONS AND DISPOSALS Minera El 16.4363 Cash
(CONTINUED)
Desquite Per cent Fair value Fair value flows
S.A. Acquired adjustment to Group 2002
£ £ £ £ £
Tangible fixed assets 119,684 19,672 - 19,672
Intangible fixed assets 14,350,628 2,358,712 23,037,676 25,396,388
Debtors 853,607 140,301 - 140,301
Cash at bank and in 1,023,510 168,227 - 168,227
hand
Creditors (3,195,665) (525,249) - (525,249)
Net assets 13,151,764 2,161,663 23,037,676 25,199,339
Market value of ordinary shares issued in 25,151,074
consideration
Legal expenses incurred 48,265 (48,265)
25,199,339 (48,265)
Brancote HPD Cash
Brancote Canada Exploration flows
Net assets disposed of in the year ended 31 US Inc Limited Total PLC 2001
January 2001
£ £ £ £ £
Deferred exploration costs 473,992 114,004 587,996 -
Current asset investment - - - 838,577
Debtors 90,817 - 90,817 100,000
Creditors (1,715) - (1,715) -
Cash 4,706 17,596 22,302 - (22,302)
567,800 131,600 699,400 938,577
Cost of disposal 97,379 140,010 (237,389)
Loss on disposal - (135,312)
796,779 943,275
Satisfied by
Shares in Landore 838,577 -
Resources Inc
Cash (payment)/receipt (41,798) 943,275 901,477
796,779 943,275 641,786
On 22 February 2000 Brancote Holdings PLC sold Brancote US Inc and Brancote
Canada Limited in exchange for 6,000,000 ordinary shares in Landore Resources
Inc, a company listed on the Canadian stock exchange. As part of the same
transaction on 22 February 2000, the Company purchased a further 2,125,680
shares at a cost of £41,798, giving the Company an overall stake of 35 per cent.
in Landore Resources Inc.
On 20 November 2000 the shareholding in Landore Resources Inc, and the Company's
100 per cent. shareholding in Brancote Mining Limited, were transferred into a
newly incorporated subsidiary, HPD Exploration PLC. On 22 November 2000, HPD
Exploration PLC was sold to the existing shareholders of Brancote Holdings PLC
for £943,275 in cash. This equates to 1.5p for every 1p share in HPD Exploration
PLC.
21. ANALYSIS OF NET FUNDS
Exchange
2001 Cash flow differences 2002
£ £ £ £
Cash 1,563,628 (1,431,228) 112,134 244,534
Deposits 1,287,449 (1,287,449) - -
Total 2,851,077 (2,718,677) 112,134 244,534
There is no material difference between the fair value and the book value of the
Group's financial assets and liabilities as at 31 January 2002.
22. CAPITAL COMMITMENTS
There were no capital commitments as at 31 January 2002 or 31 January 2001.
The group leases land and buildings under operating leases. The minimum annual
rentals under such leases at 31 January 2002 are as follows:
2002 2001
Commitments which expire: £ £
Within one year 46,452 51,286
Within two to five years 6,816 -
53,268 51,286
23. POST BALANCE SHEET EVENTS
On 25 February 2002 the Company issued 2,169,240 ordinary shares at an issue
price of £1.20 per share.
On 4 April 2002 the Company announced that it had received an offer from
Meridian Gold Inc. to purchase all of its share capital in return for shares.
As part of this transaction the Company has conditionally agreed to acquire the
remaining minority shares in Minera El Desquite S.A.
24. MINORITY INTERESTS
£
At 1 February 2001 3,426,208
Acquired by the Group (2,161,663)
Net investment by minority 2,477,415
during the year
Premium paid by minority interest on transfer of interest in (61,011)
exploration subsidiaries
Exchange differences (742,551)
Share of profit for the 3,395
year
At 31 January 2002 2,941,793
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