Interim Results
Eurasia Mining PLC
27 September 2007
Eurasia Mining Plc.
Condensed consolidated interim financial statements
for the six months ending 30 June 2007
Contents
Chairman's Statement
Highlights:
Condensed consolidated interim income statement
Condensed consolidated balance sheet
Condensed consolidated interim statement of changes in equity
Condensed consolidated interim cash flow statement
Notes to the condensed consolidated financial statements
1. General information
2. Basis of preparation
3. Significant accounting policies
4. Business and geographical segments
5. Additions and disposals of property, plant and equipment
6. Additions and disposals of intangible assets
7. Investments in equity accounted investees
8. Reserves
9. Borrowings
Company information
Chairman's Statement
Highlights:
Losses trimmed as company advances with:
• Two new platinum discoveries on Kola Peninsula;
• Full exploration funding from Anglo Platinum;
• Urals drilling prepares way for bankable feasibility study;
• New drill rig started work to trace discoveries at Volchetundra.
The first six months of 2007 have seen the company announce two new discoveries
of platinum and Palladium in Kola. In parallel, the company is advancing to
platinum production in the Urals.
On the Kola Peninsula in northwest Russia Eurasia has been exploring in joint
venture with Anglo Platinum, who are earning an initial 40% interest in three
platinum group metals (PGM) exploration licences in the area. This year the
joint venture expects to spend over $3 million in Kola, funded in full by Anglo
Platinum, as part of a $10 million earn-in. The two discoveries announced in
early 2007 are based on the drilling undertaken during the 2006 season for which
assays were received this year. Drilling on these areas has continued and we
anticipate making further announcements as assays are received from this new
work.
At the Monchetundra discovery, drilling has continued tracing the mineralization
both along strike and at greater depth. The latest results show very encouraging
platinum plus palladium values between 1 and 2.9 gram per tonne (g/t) over
substantial widths. These results were obtained from a zone where detailed
drilling is underway.
The intersections represent at least two separate PGM bearing horizons that have
been traced so far for several hundred metres and remain open both at depth and
along strike. In view of the broad widths, apparent continuity and low sulphide
content Eurasia is targeting an open pit scenario with concentration by
flotation to produce a marketable high grade concentrate.
On a second Kola licence area at Volchetundra, first drill results from a new
target area discovered PGM mineralization in three zones in one drillhole: 44.6
metres at 1.7 g/t of platinum and palladium; and 18.5 metres at 1.9 g/t of
platinum and palladium; and 1 metre at 11 g/t of platinum and palladium.
Palladium/platinum ratios vary from 0.3 to 3.1 to 1. At the time of writing we
have just secured a new drill rig which has started work to trace these
discoveries.
On the third licence area at West Imandra, drilling of a new target area is
planned for later in 2007.
In the Urals at West Kytlim, drilling was completed in one of the planned
production areas. Eurasia expects to complete a reserve report in October which
can be lodged with the relevant authorities, a necessary step once the
conversion of the exploration licence into a mining permit is required. The
objective is to complete all the permitting required by the authorities to allow
mining to commence in mid 2008.
Feasibility work continues and upon the completion of a bankable study the joint
venture will examine how best to implement the project. Issues currently under
consideration include the use of mining plant owned by a local partner,
Production Artel Yuzhno-Zaozersky Priisk, investment in a new washing plant and
project finance options. Bulk sampling is underway and will be completed shortly
as part of this assessment work.
Work continues on the Company's planned gold projects but there is as yet no
substantive information to report.
We are very pleased with the progress we are making at present. The discovery of
new mineralization in two areas in Kola is a remarkably fast and unusually high
success rate from our exploration efforts. In parallel, the development work at
West Kytlim holds out the prospect of the company's first platinum production
being achieved in 2008. We look forward to reporting our plans for this
important milestone in the coming months.
Dr. Michael Martineau
Chairman
Condensed consolidated interim income statement
For the six months ended 30 June 2007
Note 6 months to 6 months to
30 June 2007 30 June 2006
£ £
Revenue - -
Impairment of assets 6 - (29,129)
Gross loss - (29,129)
Finance costs 9 (38,683) (39,169)
Investment revenue 14,931 4,328
Other losses (25,860) (50,118)
Share of losses of equity accounted investees 7 (6,339) (83,530)
Administrative costs (438,878) (356,699)
Loss before tax (494,829) (554,317)
Income tax expense - -
Loss for the period (494,829) (554,317)
Attributable to:
Equity holders of the parent (486,058) (541,624)
Minority interest (8,771) (12,693)
Loss for the period (494,829) (554,317)
Loss per share:
Basic loss (pence per share) (0.40) (0.49)
Diluted loss (pence per share) (0.34) (0.44)
Condensed consolidated balance sheet
As at 30 June 2007
Note 30 June 31 December 2006
2007
£ £
ASSETS
Non-current assets
Property, plant and equipment 5 98,231 33,601
Intangible assets 6 847,702 859,613
Investments in equity accounted investees 7 1,208,326 1,220,054
Assets available for sale 127 127
Total non-current assets 2,156,386 2,113,395
Current assets
Trade and other receivables 250,189 217,685
Cash and bank balances 1,127,164 1,130,981
Total current assets 1,377,353 1,348,666
Total assets 3,531,739 3,462,061
EQUITY
Issued capital 7,042,805 7,042,805
Share premium 7,020,549 7,020,549
Reserves 8 3,724,188 3,644,802
Accumulated losses (15,733,643) (15,247,585)
Equity attributable to equity holders 2,053,899 2,460,571
of the parent
Minority interest (62,379) (54,934)
Total equity 1,991,520 2,405,637
LIABILITIES
Non-current liabilities
Long-term borrowings 9 80,077 499,998
Total non-current liabilities 80,077 499,998
Current liabilities
Trade and other payables 1,007,642 556,426
Short-term borrowings 9 452,500 -
Total current liabilities 1,460,142 556,426
Total liabilities 1,540,219 1,056,424
Total equity and liability 3,531,739 3,462,061
The financial statements were approved by the Board on 26 September 2007 and
signed on its behalf by:
C. Schaffalitzky
Director
Condensed consolidated interim statement of changes in equity
Note Share Share Capital Foreign Accumulated Attributable Minority Total
capital premium redemption currency losses to equity interest
and other translation holders of
reserves reserve the parent
£ £ £ £ £ £ £ £
Balance at 5,188,086 7,034,374 3,539,906 37,675 (14,152,462) 1,647,579 (33,700) 1,613,879
31 December 2005
Changes in equity
for the first half of 2006
Exchange differences on - - - (734) - (734) 2,386 1,652
translation of
foreign operations
Loss for the period - - - - (541,624) (541,624) (12,693) (554,317)
Total recognised income and
expense for the period - - - (734) (541,624) (542,358) (10,307) (552,665)
Issue of share capital 967,500 - - - - 967,500 - 967,500
Equity component 9 - - 49,167 - - 49,167 - 49,167
of convertible
loan notes
6,155,586 7,034,374 3,589,073 36,941 (14,694,086) 2,121,888 (44,007) 2,077,881
Balance at 30 June 2006
Condensed consolidated interim statement of changes in equity (continued)
Note Share Share Capital Foreign Accumulated Attributable Minority Total
capital premium redemption currency losses to equity interest
and other translation holders of
reserves reserve the parent
£ £ £ £ £ £ £ £
Balance at 31 7,042,805 7,020,549 3,589,073 55,729 (15,247,585) 2,460,571 (54,934) 2,405,637
December 2006
Changes in equity
for the first half of 2007
Exchange differences on - - - (838) - (838) 1,326 488
translation of
foreign operations
Loss for the period - - - - (486,058) (486,058) (8,771) (494,826)
Total recognised income and
expense for the period - - - (838) (486,058) (486,896) (7,445) (494,341)
Recognition of share-based - - 15,075 - - 15,075 - 15,075
payments
Gain on property 5 - - 65,149 - - 65,149 - 65,149
revaluation
Balance at 30 June 2007 7,042,805 7,020,549 3,669,297 54,891 (15,733,643) 2,053,899 (62,379) 1,991,520
Condensed consolidated interim cash flow statement
For the six months ended 30 June 2007
Note 6 months to 6 months to
30 June 2007 30 June 2006
£ £
Cash flows from operating activities
Loss for the period (494,829) (554,317)
Adjustments for:
Depreciation of non-current assets 5 1,353 3,008
Impairment of non-current assets 6 - 29,129
Share of loss of joint venture 7 4,054 83,530
Share of loss of associates 7 2,285 -
Net foreign exchange loss 25,860 50,118
Investment income (14,931) (4,328)
Finance costs 38,683 39,169
Share based payments 15,075 -
Increase in trade and other receivables (32,504) (25,053)
Increase in trade payables 471,991 100,006
Cash inflow/(outflow) from operations 17,037 (278,738)
Interest paid (13,751) -
Net cash from operating activities 3,286 (278,738)
Cash flows from investing activities
Contributed to joint venture - (1,543,328)
Purchase of property, plant and equipment 5 (2,148) (1,134)
Payments for intangible assets 6 (7,307) (17,761)
Interest received 14,931 4,328
Net cash generated/(used) in investing activities 5,476 (1,558,095)
Cash flows from financing activities
Proceeds from short term loan - 1,525,330
Proceeds from issue of share capital - 200,000
Net proceeds from issue of convertible loan notes 9 - 655,000
Net cash proceeds from financing activities - 2,380,330
Effects of exchange rate changes on the balance of cash (12,579) (2,188)
held in foreign currencies
Net increase in cash and cash equivalents 3,817 541,309
Cash and cash equivalents at beginning of period 1,130,981 198,201
1,127,164 739,510
Cash and cash equivalents at end of period
Notes to the condensed consolidated financial statements
For the six months ended 30 June 2007
1. General information
Eurasia Mining Plc (the 'Company') is a public limited company incorporated and
domiciled in Great Britain with its registered office and principal place of
business at Suite 139, Grosvenor Gardens House, 35-37 Grosvenor Gardens, London
SW1W 0BS. The Company's shares are listed on the Alternative Investment Market
of the London stock Exchange. The principal activities of the Company and its
subsidiaries (the 'Group') are related to the exploration for and development of
platinum group metals, gold and other minerals in Russia.
Eurasia Mining Plc's condensed consolidated interim financial statements are
presented in Pounds Sterling (£), which is also the functional currency of the
parent company.
The financial information set out in this condensed consolidated interim
financial statements does not constitute statutory accounts as defined in
Section 240 of the Companies Act 1985. The Group's statutory financial
statements for the year ended 31 December 2006, prepared under UK GAAP, have
been filed with the Registrar of Companies. The auditor's report on those
financial statements was unqualified and did not contain a statement under
Section 237(2) of the Companies Act 1985.
2. Basis of preparation
Prior to 2007, the Group prepared its audited financial statements and unaudited
interim financial statements under UK Generally Accepted Accounting principles
(UK GAAP). From 1 January 2007, the Group is required to prepare annual
consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU) and implemented
in the UK. As the 2007 annual financial statements will include comparatives for
2006, the Group's date of transition to IFRS is 1 January 2006 with the 2006
comparatives restated to IFRS. Thus these condensed consolidated interim
financial statements for the period ended 30 June 2007 have been prepared by
applying the recognition and measurement provisions of IFRS and the accounting
policies to be adopted for the annual accounts. These policies are summarised in
note 3 below.
An exercise to assess the full impact that the change to IFRS has had on the
Group's reported equity, reported losses and accounting policies, has been
completed. In preparing its opening IFRS balance sheet, the Group has adjusted
amounts reported previously in financial statements prepared in accordance with
its previous basis of accounting (UK GAAP). Adoption of IFRS resulted in no
changes in the reported numbers from UK GAAP.
These financial statements have been prepared under the historical cost
convention, except for revaluation of certain properties and financial
instruments.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these condensed consolidated interim financial
statements.
3. Significant accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company. Control is achieved where
the Company has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of are included in the
consolidated income statement from the effective date of acquisition or up to
the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation.
Minority interests in the net assets of consolidated subsidiaries are identified
separately from the Group's equity therein. Minority interests consist of the
amount of those interests at the date of the original business combination and
the minority's share of changes in equity since the date of the combination.
Losses applicable to the minority in excess of the minority's interest in the
subsidiary's equity are allocated against the interests of the Group except to
the extent that the minority has a binding obligation and is able to make an
additional investment to cover the losses.
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties
undertake an economic activity that is subject to joint control that is when the
strategic financial and operating policy decisions relating to the activities of
the joint venture require the unanimous consent of the parties sharing control.
The Group reports its interests in jointly controlled entities using the equity
method of accounting, except when the investment is classified as held for sale,
in which case it is accounted for in accordance with IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations.
Under the equity method, investments in joint venture are carried in the
consolidated balance sheet at cost as adjusted for post-acquisition changes in
the Group's share of the net assets of the joint venture, less any impairment in
the value of individual investments. Losses of a joint venture in excess of the
Group's interest in that joint venture are not recognised, unless the Group has
incurred legal or constructive obligations or made payments on behalf of the
joint venture.
Any excess of the cost of acquisition over the Group's share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of the
joint venture recognised at the date of acquisition is recognised as goodwill.
The goodwill, if any is included within the carrying amount of the investment
and is assessed annually for impairment as part of the investment. Any excess of
the Group's share of the net fair value of the identifiable assets, liabilities
and contingent liabilities over the cost of acquisition, after reassessment, is
recognised immediately in profit or loss.
Unrealised gains on transactions between the Group and its joint venture are
eliminated to the extent of the Group's interest in the joint venture.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
Interests in associates
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those
policies.
The results and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting, except when the
investment is classified as held for sale, in which case it is accounted for in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. Under the equity method, investments in associates are carried in
the consolidated balance sheet at cost as adjusted for post-acquisition changes
in the Group's share of the net assets of the associate, less any impairment in
the value of individual investments. Losses of an associate in excess of the
Group's interest in that associate are not recognised, unless the Group has
incurred legal or constructive obligations or made payments on behalf of the
associate.
Any excess of the cost of acquisition over the Group's share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of the
associate recognised at the date of acquisition is recognised as goodwill.
The goodwill, if any, is included within the carrying amount of the investment
and is assessed annually for impairment as part of the investment. Any excess of
the Group's share of the net fair value of the identifiable assets, liabilities
and contingent liabilities over the cost of acquisition, after reassessment, is
recognised immediately in profit or loss.
Where a group entity transacts with an associate of the Group, profits and
losses are eliminated to the extent of the Group's interest in the relevant
associate.
Foreign currencies
Functional and presentation currency
The individual financial statements of each group entity are presented in the
currency of the primary economic environment in which the entity operates ('the
functional currency'). The consolidated financial statements are presented in
GBP, which is the functional and the presentation currency of the Company.
Transaction and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
Group companies
The results and financial position of all the group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
• assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet;
• income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions); and
• all resulting exchange differences are recognised as a separate component of
equity.
When a foreign operation is partially disposed of or sold, exchange differences
that were recorded in equity are recognised in the income statement as part of
the gain or loss on sale.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on
the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Share-based payments
Equity-settled share-based payments
Equity-settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instrument at the grant
date. Fair value is measured by use of Black Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions and behavioural
considerations.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest.
Equity-settled share-based payment transactions with other parties are measured
at the fair value of the goods and services received, except where the fair
value cannot be estimated reliably, in which case they are measured at the fair
value of the equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the service.
All equity-settled share-based payments are ultimately recognised as an expense
in the income statement with a corresponding credit to 'other reserve'.
Upon exercise of share options the proceeds received net of attributable
transaction costs are credited to share capital, and where appropriate share
premium. No adjustment is made to any expense recognised in prior periods if
share options ultimately exercised are different to that estimated on vesting or
if the share options vest but are not exercised.
Cash-settled share-based payments
For cash-settled share-based payments, a liability equal to the portion of the
goods or services received is recognised at the current fair value determined at
each balance sheet date.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax
The tax payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of goodwill, initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when
the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Property, plant and equipment
Freehold properties held for administrative purposes, are stated in the balance
sheet at their revalued amounts, being the fair value at the date of
revaluation, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations are performed with sufficient
regularity such that the carrying amounts do not differ materially from those
that would be determined using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation is credited in equity to the
properties revaluation reserve, except to the extent that it reverses a
revaluation decrease for the same asset previously recognised in profit or loss,
in which case the increase is credited to profit or loss to the extent of the
decrease previously charged. A decrease in the carrying amount arising on the
revaluation of such land and buildings is charged to profit or loss to the
extent that it exceeds the balance, if any, held in the properties revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued asset is charged to profit or loss. On the subsequent
sale or retirement of a revalued property, the attributable revaluation surplus
remaining in the properties revaluation reserve is transferred directly to
retained earnings. No transfer is made from the revaluation reserve to retained
earnings except when an asset is derecognised.
Fixtures and equipment are stated at cost less accumulated depreciation and any
accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives, using the straight-line method. The estimated
useful lives, residual values and depreciation method are reviewed at each year
end, with the effect of any changes in estimate accounted for on a prospective
basis.
The gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets represent the cost of acquisition by the Group of rights,
licences and know how. Such expenditure requires the immediate write-off of
exploration and development expenditure that the Directors do not consider to be
supported by the existence of commercial reserves.
Exploration, evaluation and development of mineral resources
All costs associated with mineral exploration and investments are capitalised on
a project-by-project basis, pending determination of the feasibility of the
project. Costs incurred include appropriate technical and administrative
expenses but not general overheads. If an exploration project is successful, the
related expenditures will be transferred to mining assets and amortised over the
estimated life of the commercial ore reserves on a unit of production basis.
Where a licence is relinquished or a project abandoned, the related costs are
written off. Where the Group maintains an interest in a project, but the value
of the project is considered to be impaired, a provision against the relevant
capitalised costs will be raised.
The recoverability of all exploration and development costs is dependent upon
the discovery of economically recoverable reserves, the ability of the Group to
obtain necessary financing to complete the development of reserves and future
profitable production or proceeds from the disposition thereof.
Impairment testing of goodwill, other intangible assets and property, plant and
equipment
At each balance sheet date, the Group reviews the carrying amounts of the assets
to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if
any). Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated
to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet
available for use are tested for impairment annually, and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease. Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the carrying value
of goodwill
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss of the assets other than goodwill is recognised immediately in profit or
loss, unless the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation increase.
Financial instruments
Financial assets and liabilities are recognised on the group's balance sheet
when the group has become a party to the contractual provisions of the
instrument.
Financial assets
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as 'loans and
receivables'. Loans and receivables are measured at amortised cost using the
effective interest method less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables where
the recognition of interest would be immaterial.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on deposit with banks.
Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that
are either designated as such or do not qualify for inclusion in any of the
other categories of financial assets. All financial assets within this category
are measured subsequently at fair value, with changes in value recognised in
equity, through the statement of changes in equity. Gains and losses arising
from investments classified as available-for-sale are recognised in the income
statement when they are sold or when the investment is impaired.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been
impacted. For financial assets carried at amortised cost, the amount of the
impairment is the difference between the asset's carrying amount and the present
value of estimated future cash flows, discounted at the original effective
interest rate.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables where
the carrying amount is reduced through the use of an allowance account.
When a trade receivable is uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
With the exception of available-for-sale financial assets, if, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the investment at the date the impairment
is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
In the case of impairment of available-for-sale assets, any loss previously
recognised in equity is transferred to the income statement. Impairment losses
recognised in the income statement on equity instruments are not reversed
through the income statement. Impairment losses recognised previously on debt
securities are reversed through the income statement when the increase can be
related objectively to an event occurring after the impairment loss was
recognised in the income statement.
Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the entity
after deducting all of its financial liabilities.
Where the contractual liabilities of financial instruments (including share
capital) are equivalent to a similar debt instrument, those financial
instruments are classed as financial liabilities, and are presented as such in
the balance sheet. Finance costs and gains or losses relating to financial
liabilities are included in the profit and loss account. Finance costs are
calculated so as to produce a constant rate of return on the outstanding
liability.
Where the contractual terms of share capital do not have any features meeting
the definition of a financial liability then such capital is classed as an
equity instrument. Dividends and distributions relating to equity instruments
are debited direct to equity.
Compound financial instruments
Compound financial instruments comprise both liability and equity components.
At issue date, the fair value of the liability component is estimated by
discounting its future cash flows at an interest rate that would have been
payable on a similar debt instrument without any equity conversion option. The
liability component is accounted for as a financial liability.
The difference between the net issue proceeds and the liability component, at
the time of issue, is the residual or equity component, which is accounted for
as an equity instrument.
Transaction costs that relate to the issue of a compound financial instrument
are allocated to the liability and equity components of the instrument in
proportion to the allocation of the proceeds.
The interest expense on the liability component is calculated by applying the
effective interest rate for the liability component of the instrument. The
difference between any repayments and the interest expense is deducted from the
carrying amount of the liability.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at
fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using
the effective interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the amortised cost of a
financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
4. Business and geographical segments
The entire Group's activities are related to the exploration for and development
of platinum group metals, gold and other minerals in Russia. The Directors
therefore believe that there is only that single class of business and
geographic segment.
5. Additions and disposals of property, plant and equipment
6 months to 12 months to 6 months to
30 June 31 December 30 June
2007 2006 2006
£ £ £
Net book value at the beginning of period 33,601 41,172 41,172
Additions 2,148 3,215 1,134
Revaluation increase 65,149 - -
Disposals (604) - -
Depreciation (1,353) (6,413) (3,009)
Exchange differences (710) (4,373) (2,208)
Net book value at the end of period 98,231 33,601 37,089
6. Additions and disposals of intangible assets
Exploration, evaluation and development of mineral recourses
6 months to 12 months to 6 months to
30 June 31 December 30 June
2007 2006 2006
£ £ £
Net book value at the beginning of period 859,613 1,280,810 1,280,810
Additions 7,307 49,116 17,761
Reallocation to investment in associates - (324,744) (324,744)
Impairment charge - (29,129) (29,129)
Exchange differences (19,218) (116,440) (57,025)
Net book value at the end of period 847,702 859,613 887,673
7. Investments in equity accounted investees
Equity accounted investees represent (a) 50% interests in a Urals Alluvial
Platinum Limited (the 'UAP') group and (b) 20% direct interest in certain
companies, which in turn 80% owned by the UAP. By arrangements with the UAP the
Company cannot exercise full control in proportion to its total holding in those
companies and therefore 20% interest is being accounted as interest in
associates.
6 months to 12 months to 6 months to
30 June 31 December 30 June
2007 2006 2006
£ £ £
Investments in joint venture
Net book value 1 January 895,310 197,410 197,410
Invested in the period - 2,657,735 2,081,029
Reimbursed by partner in joint venture (1,870,419) -
Group's share of losses in joint venture (4,054) (98,017) (83,530)
Exchange differences (5,389) 8,601 (22,052)
885,867 895,310 2,172,857
Investments in associates
Net book value 1 January 324,744 - -
Invested in the period - 324,744 324,744
Group's share of losses in associates (2,285) - -
322,459 324,744 324,744
Total at the end of period 1,208,326 1,220,054 2,497,601
Under UK GAAP investments in associates were included into 'other investments'
group. On transition from UK GAAP to IFRS other investments were split into two
categories and recognised: as investment in associates (as above) and the
balance of other investments of GBP 127 as non-current assets available for
sale.
8. Reserves
30 June 31 December 30 June
2007 2006 2006
£ £ £
Capital redemption reserve 3,539,906 3,539,906 3,539,906
Property revaluation reserve 65,149 - -
Foreign currency translation reserve 54,891 55,729 36,941
Share-based payments reserve 15,075 - -
Equity component of convertible loan notes 49,167 49,167 49,167
3,724,188 3,644,802 3,626,014
The capital redemption reserve was created as result of share capital
restructure in early years. There is no policy of regular transactions affecting
capital redemption reserve.
The properties revaluation reserve arises on the revaluation of freehold
property.
The foreign currency translation reserve represents exchange differences
relating to the translation from the functional currencies of the Group's
foreign subsidiaries into GBP.
The equity-settled employee benefits reserve arises on the grant of share
options to employees under the employee share option plan.
The equity component on convertible loan notes represents the value of
conversion rights of the 8% convertible notes issued in 2006 (see note 9).
9. Borrowings
30 June 31 December 30 June
2007 2006 2006
£ £ £
Non-current:
Minority shareholder loan 80,077 81,908 87,697
Convertible loan notes - 427,568 415,002
80,077 509,476 502,699
Current:
Convertible loan notes 452,500 - -
Other loans - -- 1,495,879
452,500 - 1,495,879
All borrowings held by the Group are unsecured
The minority shareholder loan relates to long term funding advanced by the 20%
minority shareholder in Eurasia PGM Limited in connection with the Company's
Baronskoye PGM-gold project. The minority shareholder loan is interest free and
is repayable when the project reaches such an advanced stage of development that
it can be repaid out of the proceeds of either the project's cash flow or
through the direct or indirect disposal to a third party of an interest in the
project.
Convertible loan notes with a face value were issued on 31 March 2006, bearing
interest rate 8%, The notes are convertible at the holders' option at any time
before maturity on 31 March 2008, into ordinary shares at the rate of £0.05 per
share. Loan notes to the face value of £230,000 were converted to ordinary
shares during April 2006. Any unconverted stock is redeemable at maturity on 31
March 2008.
Movement in the convertible loan notes is analyzed as follows:
6 months to 12 months to 6 months to
30 June 31 December 30 June
2007 2006 2006
Liability component £ £ £
Proceeds of issue - 700,000 700,000
Issue cost - (45,000) (45,000)
Equity component - (74,539) (74,539)
Liability component at the date of issue - 580,461 580,461
Balance at 01 January 427,568 - -
Interest charged 38,683 77,233 39,170
Interest paid in cash (13,751) (19,646) -
Shares issued in lieu of interest payment - (5,852) -
Loan notes converted into shares - (204,628) (204,629)
Closing balance of liability component 452,500 427,568 415,002
Equity component
Balance at 01 January 49,167 - -
Equity component on the date of issue - 74,539 74,539
Loan notes converted into shares - (25,372) (25,372)
49,167 49,167 49,167
Company information
Directors
M. P. Martineau (Chairman)
C. Schaffalitzky (Managing Director)
G. C. FitzGerald (Non Executive)
Secretary
M. J. de Villiers
Head Office and Registered Office
Suite 139, Grosvenor Gardens House
35-37 Grosvenor Gardens
London, SW1W 0BS
Telephone: +44 (0) 20 7932 0418
Facsimile : +44 (0) 20 7976 6283
E-mail: info@eurasia-mining.plc.uk
www.eurasiamining.co.uk
Russian Office
194 Lunacharsky Street
Ekaterinburg
Russia
Telephone: +(7) 3432 615187
Facsimile: +(7) 3432 615924
Company Number 3010091
Advisers
Auditors
Grant Thornton UK LLP
Grant Thornton House
Melton Street
Euston Square
London, NW1 2EP
Registrars
Capita IRG Plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Bankers
National Westminster Bank plc
1 Princes Street
London
EC2R 8PH
Solicitors
Eversheds LLP
Senator House
85 Queen Victoria Street
London
EC4V 4JL
This information is provided by RNS
The company news service from the London Stock Exchange
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