Final Results

Celtic Resources Holdings PLC 29 June 2005 29th June 2005 Celtic Resources Holdings Plc ("Celtic", "Celtic Resources",or "the Company") Full year results for the year ending 31 December 2004 - Pre-tax profits of US$5.7 Million for 2004 - Entry of Barrick Gold Corporation as largest shareholder (8.9%) and participant in IG Alrosa deal - Major progress towards completion of US$280 million deal with IG Alrosa and full ownership of Nezhdaninskoye mine and 5.9 M oz Kyuchus deposit - Successful startup of Suzdal Sulphide Project incorporating BIOX(R) Technology Financial Highlights - Like-for-like pre-tax profit up from US$2.7 million to US$4.7 million for the corresponding period - Pre tax profit for the year of US$5.7 million including US$1 million from the sale of hydrocarbon assets to Victoria Oil & Gas Plc - Dividend of 11.9 pence per share in Eureka Mining Plc shares paid in April 2004 - Shareholders' funds increased from US$66.5 million to US$94.8 million Russia - The entry of Barrick Gold Corporation into the Company as the largest shareholder and a strategic relationship with Barrick for the development of gold properties in Russia and Kazakhstan, thus providing a strong endorsement of the Company's work in the FSU to date and of our potential - Major progress achieved towards final completion of our negotiations with IG Alrosa to acquire full ownership of the Nezhdaninskoye gold mine and the 5.9 M oz Kyuchus gold deposit in Yakutia - Completion of the deal expected soon and EGM seeking shareholder approval to follow Kazakhstan - Suzdal sulphide treatment plant completed and first gold poured in May 2005 - Gold production in 2004 was 31,809 ounces from heap leaching oxide ores at Suzdal and Zherek Victoria Oil & Gas Plc - The successful sale of our hydrocarbon assets to Victoria Oil & Gas Plc in exchange for shares and repayment of debt was completed in July 2004 The Company's annual report and accounts are being sent to shareholders and will be available on our website shortly. For more information please contact: Kevin Foo / Kate Dexter Smith Leesa Peters / Laurence Read Celtic Resources Holdings Plc Conduit PR Tel: + 44 (0) 20 7921 8800 Tel: +44 (0)20 7618 8760 Investors@celticresources.com Tel: +44 (0) 781 215 9885 leesa@conduitpr.com www.celticresources.com CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2004 Dear Shareholders I am pleased to report a satisfactory year of progress for the Company. With the sale of our hydrocarbon assets to Victoria Oil & Gas Plc, we achieved our corporate objective of becoming a pure gold miner operating in the Former Soviet Union (FSU). Major Developments The major events of the period were: •Our fourth consecutive year of profits, with pre-tax profits of US$5.7m •Gold production from Kazakhstan operations of 31,809 ounces •The entry of Barrick Gold Corporation into the Company as our largest shareholder and a strategic relationship for the development of gold properties in Russia and Kazakhstan, thus providing a strong endorsement of the Company's work in the FSU to date and of our potential •Successful completion and commissioning of the Suzdal Sulphide Project incorporating BIOX(R) technology •Major progress achieved towards final completion of our negotiations with IG Alrosa to acquire full ownership of the Nezhdaninskoye gold mine and another important gold asset in Yakutia •Growth in the value of our investments in Eureka Mining Plc and Victoria Oil & Gas Plc Group Objective The Group objective set last year remains: "To be one of the largest gold miners in the FSU, with annual gold production of over 500,000 ounces, from a resource of over 30m ounces of gold, with production costs in the lowest world quartile." Increased Ownership of Nezhdaninskoye and Acquisition of Kyuchus Shareholders will be aware of the protracted negotiations with IG Alrosa concerning the acquisition of 100% of the Nezhdaninskoye gold mine and additional gold assets in Yakutia. These have been complex and have involved extensive technical, legal and financial due diligence. The entry of Barrick Gold Corporation into our Company late last year as our largest shareholder also meant that further dialogue with IG Alrosa was needed. All three parties have actively worked to develop a new deal. I can report that the parties have signed non-binding heads of agreement which, when carried to completion, will have the following key components: - Celtic acquiring full ownership of the Nezhdaninskoye mine - The Company will also acquire full ownership of the Kyuchus gold prospect in Northern Yakutia. This is a very attractive development project with over 5.9m ounces of gold in the Russian C1 and C2 categories - The parties are entering into certain agreements aimed at providing finance for the rapid development of these assets and having certain rights of first refusal regarding future acquisitions in Russia and in Kazakhstan. Barrick will also have the option to take a 50% interest in and management control of Nezhdaninskoye and Kyuchus in exchange for the provision of capital to these projects - The consideration for the Nezhdaninskoye and Kyuchus transactions is to be a combination of the issue of Celtic ordinary shares and cash. The cash component will be provided by the issue to Barrick of Celtic shares using the US$75m pre-emptive financing right previously announced which is to be augmented by a further placing of shares at US$7.56 per share. The total consideration of the deal, including debt repayments from SVMC, is approximately US$280m - When the transaction is closed, IG Alrosa and Barrick will hold approximate interests of 26% and 22% respectively of Celtic's increased share capital. I should strongly emphasise that these arrangements are subject to contract, Regulatory Approval and Shareholder Agreement. It is not yet a closed deal. At present these detailed contracts are under final negotiation. All parties are actively working to bring the deal to a close at the earliest opportunity. Oil and Gas Assets Last year saw Celtic complete its corporate reorganisation to become a gold producer and developer focused on the FSU. In August, we sold our Kazakhstan and UK hydrocarbon assets to Victoria Oil & Gas Plc, a new AIM quoted company chaired by Celtic's Managing Director, Kevin Foo. The consideration was 6.483m Victoria Oil & Gas shares and the repayment of a £0.3m loan to Celtic. We retain most of these shares today and the holding of now 7.8% has risen in value from £2.18m to £2.82m since the transaction. Eureka Mining Plc Celtic, having distributed half of its interest to shareholders as a dividend, retains a 21% holding in Eureka Mining Plc which is expected soon to be producing molybdenum concentrates from its Shorskoye project in Kazakhstan. Eureka also recently acquired a portfolio of exciting copper projects in Southern Russia, containing a total resource of 609m tonnes of ore with an average grade of 0.55% copper and 0.18g/t gold. Financial Results We continue to generate profits. The pre-tax level reported US$5.7m for 2004, compared to US$14.4m in 2003, a figure which was boosted by US$11.7m from the sale of exploration assets to Eureka. At the end of the year, the Group held US$30.5m in cash which had been increased by Barrick Gold Corporation's subscription for new shares. Shareholders' funds rose from US$66.5m to US$94.8m at the year end. In the past, accounting principles have allowed us to treat SVMC as a subsidiary and to consolidate its individual assets and liabilities. This year it is treated as an associate and shown as a single amount in financial assets. This change is the primary reason for most of the significant differences in the individual assets and liabilities in the Consolidated Balance Sheet. Agreement with Barrick Gold Corporation In December, we were very pleased to announce that we have entered into a strategic relationship with Barrick Gold Corporation to develop Celtic's current and future gold assets in Yakutia and Kazakhstan. Canadian-based Barrick is one of the world's leading gold producers with unsurpassed experience in developing and managing very large gold mines. This relationship has progressed very positively and is expected to help Celtic reach its goal of becoming a major gold producer. Importantly, the decision by Barrick to invest in Celtic and to participate actively in discussions with us and IG Alrosa to expedite a conclusion to the Nezhdaninskoye negotiations is, I believe, an endorsement of Celtic. Celtic shareholders approved the issue of new shares and warrants to Barrick which raised US$28.9m in early January 2005. Barrick now holds 3.7m shares and is currently Celtic's largest shareholder with 8.9%. Celtic has also granted Barrick a pre-emptive right to subscribe for further new ordinary shares up to an aggregate total of US$75m in any placing or other equity fund raising Celtic undertakes. In addition, the exercise of warrants in Celtic that Barrick holds would bring in some US$20.9m. Litigation As we are now seeking to settle amicably the dispute over the ownership of 60% of our 50% of the shares of SVMC, the various cases we initiated have been postponed by mutual agreement. We are the respondent in an arbitration brought by Arduina Holdings BV in the London Court of International Arbitration. The claim arises from an unsuccessful association with Arduina in November 2002. The Directors have been advised that this claim has no merit. We are vigorously defending Celtic against Arduina's allegations and assert that we have no liability in the proceedings because all agreements between the parties are null and void and of no legal effect. The hearing is scheduled to start on 11 July 2005. The Future Completing the arrangements with IG Alrosa and Barrick remains our highest priority. At Suzdal, the new BIOX(R) plant is fully commissioned and annual gold production should exceed 100,000 ounces in 2006 while Zherek could reach its full potential of 50,000oz/yr by 2007. The cash flow from these operations, the new developments at Nezhdaninskoye and Kyuchus, together with the support of its major shareholders will enable Celtic to apply its skills to acquiring other gold projects in the FSU. Our long term target is to become a top 10 world gold producer. I would like to thank sincerely all of our employees for their hard work and commitment over the year. Celtic will soon be in a very strong position to grow into a resource rich low cost gold miner, which will result in increased shareholder value. Peter Hannen Chairman 28 June 2005 MANAGING DIRECTOR'S REVIEW OF OPERATIONS FOR THE YEAR ENDED 31ST DECEMBER 2004 Celtic is now a gold miner focused on projects in the Former Soviet Union (FSU). The Group's major asset is its 50% ownership of SVMC, operator of the Nezhdaninskoye gold mine in Yakutia, Russia. Negotiations with IG Alrosa continued throughout 2004 and in past months to conclude the agreed acquisition of the balance of SVMC and another asset and progress is reported in the Chairman's letter. In Kazakhstan, the Suzdal mine produced 11,598 ounces of gold from oxide ores and we successfully built and commissioned the sulphide project expansion, which incorporates the BIOX(R) bacterial leaching process for refractory gold ores. This project was completed substantially with in-house and local Kazakhstan resources, a notable achievement. At the 75%-owned Zherek open pit, heap leach mine, gold production rose to 20,211 ounces. Kazakhstan Gold Mines We have successfully completed development of the Suzdal Sulphide Project Expansion and commenced underground mining operations at Suzdal. First gold from the sulphide plant was poured in May 2005. At the nearby Zherek mine gold production increased last year from 11,270 ounces to 20,211 ounces and is forecast to continue rising. The Company, in co-operation with its major shareholder Barrick, will review further attractive gold production opportunities in this country. Suzdal Gold Mine In 2004, oxide ore was mined from Pits 2-9, Pit 2 and from the transition zone in Pits 1&3. The leaching of stacked ore was suspended as planned during the winter months because of sub-zero temperatures, as leaching of low grade ore is not economical during harsh winter conditions. Total gold production at Suzdal for the year was 11,598 ounces at a cash cost of approximately US$216/oz - the reduced production and increased costs are due to the exhaustion of the oxide ores and the conversion of the mine to exploit the sulphide orebodies directly below the oxide zones. SULPHIDE PROJECT EXPANSION The sulphide ores are refractory and conventional cyanidation techniques yield low gold recoveries. Evaluation of alternative treatment methods and test work showed that the sulphide ore is amenable to conventional flotation techniques where the sulphide minerals containing the gold are concentrated. These concentrates can then be oxidised using bacterial oxidation and gold recovered through a CIL and elution plant. The decision to convert to the mining of the sulphide orebodies with gold extraction incorporating the BIOX(R) process was taken in late 2003. The construction of the project included two main sections both housed in the same building complex. The first part was the crushing, grinding, flotation and filtration sections which were built from existing equipment that was sourced locally in the FSU and then refurbished and installed. The second part was the construction of new "state of the art" BIOX(R), CIL and gold elution facilities, including two fully lined tailings management facilities, and a cyanide detoxification plant. The commissioning of the crushing circuit commenced in November 2004 with the grinding and flotation following in December 2004. A concentrate filter was sourced and installed in December 2004 to enable production and sale of concentrate to proceed, while construction of the BIOX(R) and CIL facilities were finalised, and the inoculum (bacteria) volume was built up to full-scale production volumes. The full commissioning of the production treatment facilities was completed in May 2005 and commercial production has begun. The total project cost including mine development, plant and equipment, infrastructure development, tailings facilities, working capital, owner's costs and camp expansions will be approximately US$43m. Of this, the plant and EPCM cost of US$35m is some US$6m above budget due to escalating stainless steel costs and delays in imported equipment and consequential project delays of some five months. Nevertheless, this cost reflects the major savings to be made by maximising the use of local Kazakhstan equipment, engineering institutes and people. To build a similar project using an "all western" approach has been estimated to cost more than US$90m. CURRENT AND FUTURE OPERATIONS The development of underground mining at Suzdal commenced in August 2004. To date this has included over 256m of horizontal ore development on three different mining levels as well as excavation of exploration crosscuts and raises on those levels. This work, albeit in a limited area, has been very encouraging in confirming the resource estimates with respect to ore widths and extents along the strike, and grades encountered. In fact, sampled grades intersected so far exceed the resources estimates with some in-situ values being well in excess of 50g/t Au. Nevertheless, the Company plans to complete additional underground drilling to confirm orebody dimensions and grades and to upgrade resources to reserves. The Sulphide Treatment Plant is designed to produce in excess of 100,000 ounces of gold per annum from 300,000 tonnes of sulphide ore at a nominal cash cost of US$170 per ounce. Table 1: Suzdal production figures for years 2000 - 2004 2000 2001 2002 2003 2004 Forecast 2005 -------- -------- -------- -------- ------- ----------- Oxide ore mined Tonnes 124,000 248,000 233,000 187,000 127,865 20,400 Grade g/t Au 6.0 6.2 5.7 3.5 2.7 0.8 Stacked on heap Tonnes 169,000 307,000 355,000 213,000 163,553 50,000 Grade g/t Au 6.14 5.46 4.22 3.39 2.62 1.04 Sulphide ore mined Tonnes - - - - 252,782 61,314 Grade g/t Au - - - - 6.2 16.65 Sulphide ore treated Tonnes - - - - - 157,351 Grade g/t Au - - - - - 13.93 Gold production Ounces 24,244 42,341 36,875 21,167 11,598 53,629 Total cash cost US$/oz sold 225 155 163 195 216 241 Zherek Gold Mine From the start of mining to the end of 2004 some 614,000 tonnes of oxide ore at an average grade of 2.69g/t were stacked on heap leach pads at Zherek and a total of 31,481 ounces of gold was produced at an approximate average cash cost of US$296/ounce. During 2004, total gold output at Zherek increased to 20,211 ounces of gold and was produced at an average cash cost of US$254/ounce. The increased production was due to leaching higher grade ores. CURRENT AND FUTURE OPERATIONS Gold production from Zherek should rise to 23,000 ounces this year and increase further in 2006. During this period we will review the feasibility of converting Zherek to a sulphide operation with a concentrate being trucked to the new Suzdal processing plant some 28km away. There is potential to increase the existing Russian category resources especially in the sulphide zone and we plan further drilling to delineate the orebodies. Table 2: Zherek production figures for years 2003 - 2004 Forecast 2003 2004 2005 -------- -------- --------- Ore mined Tonnes 293,411 320,957 360,000 Grade g/t Au 2.00 3.37 2.55 Stacked on heap Tonnes 352,891 339,684 360,000 Ore grade g/t Au 1.91 3.30 2.55 Gold production Ounces 11,270 20,211 23,000 Total cash cost US$/oz sold 370 254 276 Russian Gold Mines NEZHDANINSKOYE GOLD MINE SVMC continued to develop orebodies underground and carry out plant and metallurgical tests. Production continued from remnant low grade vein blocks in the upper part of the mine. During the year 82,993 tonnes of ore were processed at an average grade of 4.58g/t and a total of 9,154 ounces of gold were produced in dore and concentrates. To open up new reserves SVMC has deepened the mine below the 650m Level (AMSL) to the 600m Level via a ramp system in the footwall of the 7-15 veins; concurrently the 7-15 veins were developed as sub levels. The ramp targets the down dip reserves of a number of high grade narrow vein systems as well as providing access and haulage to Zone 1 reserves below the 700m Level. Development to the north of the ramp system on 650m Level gained access to the reserves on vein 8 below the 700m Level where stope preparation has begun. SVMC, supported by Celtic and Barrick specialists, is preparing a mine startup plan in anticipation of completion of the IG Alrosa - Celtic - Barrick deal. Kyuchus Gold Deposit Subject to completion of contracts between Celtic, IG Alrosa and Barrick, an additional asset that Celtic will acquire is the Kyuchus Gold Deposit. Kyuchus is an advanced gold project in northern Yakutia with substantial Russian Category reserves and resources. It is located some 200km from the mouth of the Yana River where it enters the Arctic Ocean and 40km from the settlement of Ust Kuyga. The Kyuchus deposit is located within Mesozoic sediments and in a major anticline structure which forms part of an arcuate mobile belt which developed during continental collision towards the end of the Jurassic period. The mineralization occurs in a number of steep dipping "vein zones", each comprised of a series of individual quartz veins. These vein zones can reach thicknesses of up to 20m in places, although the average thickness is reported to be just over 4m. A significant amount of exploration work has been completed at Kyuchus and, as is typical for steep dipping tabular gold vein deposits in Russia, this has comprised both drilling and underground development and has enabled the production of C1 and C2 classified estimates of tonnes and grade and the development of a good understanding of the orebody geometry and mineralisation style. The above geological work has been supplemented by a certain amount of analysis in other technical areas, which, though not yet to feasibility study standard, has enabled the production of underground and open pit conceptual mining and processing scenarios and infrastructure requirements. Kyuchus has been independently considered by SRK to be a gold prospect with real potential. A pre-feasibility study, which is assessing both underground and open pit mining plus a combination of the two, is currently underway. Celtic envisages a medium sized open pit operation followed by an underground mine to extract up to 600,000 tonnes of ore per year. Group Gold Resources Inventory The Group resources inventory as of June 2005 is shown in Table 3. On a 100% ownership basis of Nezhdaninskoye and Zherek, Celtic holds over 17m ounces of gold in the Russian B, C1 and C2 categories. These are equivalent to JORC Measured, Indicated and Inferred categories respectively. The Australian Joint Ore Reserve Committee (JORC) is the most commonly used western standard for ore reserve definition. We have not included any estimates for Resources in the Russian "P" or Prognostic category, which is classified as mineral potential. For instance, at Nezhdaninskoye there are estimated to be over 12.5m ounces of P1 category ore which with further development should be upgraded to C2 and C1 classifications. In addition, many orebodies are known to extend laterally and at depth. At Kyuchus, the Russian State Committee for ore resources verify P1 category resources of 2.0m ounces. Table 3 Group Resources Inventory Category Tonnes Gold grade Gold ---------- -------- ------------ ------ (M) (g/t) (Moz) Russia -------- Nezhdaninskoye B+C1 45.7 4.8 7.1 C2 49.0 5.3 8.3 Total Nezhdaninskoye B+C1+C2 94.7 5.1 15.4 Kazakhstan ------------ Suzdal Oxide C1+C2 0.8 1.1 0.03 Suzdal Sulphides C1+C2 4.2 9.4 1.27 Total Suzdal C1+C2 5.0 8.5 1.3 Zherek Oxide C1+C2 1.4 2.5 0.1 Zherek Sulphides C2 2.8 5.5 0.5 Total Zherek C1+C2 4.2 4.6 0.6 Total Group 103.7 5.4 17.3 Total Attributable* 55.3 5.3 9.4 * Figures adjusted to 50% ownership of Nezhdaninskoye and 75% of Zherek SRK Consulting Russian Resource/Reserve Estimates During the extensive due diligence conducted for the proposed transaction with IG Alrosa, considerable technical reviews and audits of assets were conducted by SRK Consultants. SRK completed work to provide audited Mineral Resource Statements for both properties as classified using the terms and guidelines of the JORC Code, and this is summarised in Table 4. In terms of Russian classified resources, which in our experience are very close to JORC standards, the total C1+C2 resource figure for Nezhdaninskoye and Kyuchus is 120m tonnes at an average grade of 5.45 g/t containing 21.3m ounces of gold. At Nezhdaninskoye, the orebodies contain silver at an average of 4-6 times the gold grade. Table 4: SRK Audited Mineral Resource Statement to JORC Code Mine Resource Category Tonnes Gold Grade Gold (M) (g/t) (Moz) ------------ ------------ ---------- ---------- ---------- Kyuchus Indicated 6.6 10.1 2.1 Sub-Total 6.6 10.1 2.1 Inferred 7.3 9.6 2.2 Nezhdaninskoye Measured 3.1 6.7 0.7 Indicated 34.6 5.2 5.8 Sub-Total 37.7 5.3 6.5 Inferred 40.2 5.7 7.4 Combined Measured 3.1 6.7 0.7 Indicated 41.2 6.1 7.9 Sub-Total 44.3 6.0 8.6 Inferred 47.5 6.3 9.6 Grand Total 91.8 6.3 18.2 In Conclusion Finally, I should like to thank all employees for their extraordinary efforts this year under, at times, difficult conditions. The building and operation of the Suzdal Sulphide Plant, using substantially local resources, was a new benchmark for Celtic and the determination of our Russian based teams in achieving substantial progress despite many external constraints, was admirable. We look to the future with a determination to meet all challenges in achieving our objective. Kevin Foo Managing Director 28 June 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 $000 $000 Turnover 13,584 12,105 Cost of sales (7,145) (6,787) -------- -------- Gross profit 6,439 5,318 Administrative expenses (4,266) (2,909) Foreign currency exchange gains 2,809 586 -------- -------- Operating profit 4,982 2,995 Profit on disposal of investments, including shares of subsidiaries 962 11,659 Loan interest payable (374) (348) Interest receivable 102 110 -------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,672 14,416 Taxation (2,295) (1,458) -------- -------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,377 12,958 Minority interest (581) - -------- -------- GROUP PROFIT FOR THE YEAR 2,796 12,958 Dividend paid (7,626) - -------- -------- RETAINED (LOSS)/PROFIT CARRIED FORWARD (4,830) 12,958 ======== ======== All income and expenditure arises from continuing operations US Cents US Cents Earnings per share 7.66 41.86 Fully diluted earnings per share 7.38 38.69 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 2004 2003 $000 $000 FIXED ASSETS Intangible assets 20,039 55,387 Tangible assets 28,106 11,719 Financial assets 47,178 7,830 -------- ------- 95,323 74,936 ======== ------- CURRENT ASSETS Stock 7,071 3,248 Financial assets - 8,017 Debtors 5,465 6,871 Cash at bank and in hand 30,494 7,713 -------- ------- 43,030 25,849 Creditors: (amounts falling due within one year) (13,664) (10,479) -------- ------- Net current assets 29,366 15,370 Creditors: (amounts due after more than one year) (28,265) (20,251) Provision for liabilities and charges (1,120) (398) -------- ------- Net Assets 95,304 69,657 ======== ======= Financed by: CAPITAL AND RESERVES Called up share capital - equity 11,310 9,249 - non equity 3,184 3,184 Capital conversion reserve 61 61 Share premium - equity 86,376 55,982 Profit and loss account - equity 7,407 2,696 Employee Benefit Trust Reserve- equity (13,507) (4,623) -------- ------- Shareholders' funds 94,831 66,549 Minority interest - equity 473 3,108 -------- ------- 95,304 69,657 ======== ======= CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Notes 2004 2003 $000 $000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES (a) (11,059) (7,347) -------- ------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 102 110 Interest paid (2,336) (1,120) -------- ------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (2,234) (1,010) -------- ------- TAXATION PAID (1,573) (1,060) -------- ------- CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire intangible fixed assets (9,701) (17,723) Proceeds on disposal of tangible assets - 71 Payments to acquire tangible fixed assets (19,236) (6,952) Purchase of subsidiary undertakings - (274) Proceeds of sale of subsidiary undertakings - 300 -------- ------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL (28,937) (24,578) INVESTMENT -------- ------- NET CASH OUTFLOW BEFORE FINANCING (43,803) (33,995) -------- ------- FINANCING Issue of ordinary share capital 42,997 20,782 Costs associated with shares issued during the year - (501) -------- ------- 42,997 20,281 Net increase in loans 23,703 18,996 -------- ------- NET CASH INFLOW FROM FINANCING 66,700 39,277 -------- ------- INCREASE IN CASH (c) 22,897 5,282 ======== ======= NOTES TO CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 (a) Reconciliation of operating profit to net cash outflow 2004 2003 from operating activities $000 $000 Operating profit 4,982 2,995 Expenses satisfied with EBT shares 955 - Depreciation and fixed asset write down 1,617 1,447 Increase in stocks (5,171) (1,347) Increase in debtors (6,199) (2,742) Increase/(decrease) in creditors 4,855 (1,964) Settled on Employee Benefit Trust (10,933) (4,623) Exchange movements (1,165) (1,113) -------- ------- (11,059) (7,347) ======== ======= Disposal and (b) Analysis of net funds 31 December SVMC Cash 31 December At 2003 reclassification flow At 2004 $000 $000 $000 $000 Cash in hand and at 7,713 (116) 22,897 30,494 bank --------- ---------- ------- --------- Loans falling due (913) - (6,439) (7,352) within one year Loans falling due in (18,083) 11,049 (17,264) (24,298) more than one year --------- ---------- ------- --------- (18,996) 11,049 (23,703) (31,650) --------- ---------- ------- --------- (11,283) (10,933) (806) (1,156) ========= ========== ======= ========= (c) Reconciliation of net cash flow to movement in net 2004 2003 funds $000 $000 Increase in cash in the period 22,897 5,282 Cash inflow from increase in debt (23,703) (18,996) Cash outflow on sale of subsidiaries (116) (12) Inflow from SVMC debt elimination 11,049 Net (deficit)/surplus at start of year (11,283) 2,443 -------- ------- Net funds/(defecit) at end of year (1,156) (11,283) ======== ======= This information is provided by RNS The company news service from the London Stock Exchange

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