Final Results
Metals Exploration PLC
30 March 2006
METALS EXPLORATION PLC
Group Report and Accounts for the period ended 30 September 2005
30 March 2006
LONDON - 30 March 2006 - The Directors of Metals Exploration plc ('Metals Ex'),
the UK based gold exploration company with a focus on the Philippines, are
pleased to announce its first audited final results for the period to 30
September 2005.
Highlights - up to 30 September 2005
• 22 October 2004 - Admission of the Company's Ordinary Shares to trading on
AIM.
• 23 December 2004 - Acquisition of a 70% interest in the Masapelid Project,
Philippines.
• 2 February 2005 - Acquisition of a 70% interest in the Runruno Project,
Philippines.
• 18 February 2005 - Acquisition of a 100% interest in the Jaclupan Project's
Exploration Permit Application, Philippines.
• 28 June 2005 - Acquisition of a 100% interest in the Puray Project's
Exploration Permit Application, Philippines.
• At Runruno, revaluation of historical data and recent mapping and sampling
of the surface and high grade miners' tunnels have produced
results which indicate mineralization over 2.5 km at the surface, 100m wide
and 400m deep.
• 14 September 2005 - Raised £1.25m pre expenses through a placing: at the
same time appointing WH Ireland Limited as broker and nomad.
Highlights - post 30 September 2005
• 23 November 2005 - Acquisition of an option to acquire a further 15%
interest in the Runruno Project.
• 25 January 2006 - JV with Medusa Group on the Masapelid Project with Metals
Ex retaining a 16% interest or conversion to a 10% net profit share at its
sole discretion.
• 7 March 2006 - Acquisition of 100% in a copper project's exploration permit
application, situated near Baguio, Philippines.
• Runruno has and continues to produce exciting drilling results.
Commenting on the results, Steven Smith, Chairman of Metals Exploration plc
said:
' It has been an exciting time for Metals Ex since coming to the AIM list in
October 2004. We have secured a significant interest in five exploration
projects and in one of them, Runruno, our initial drilling and sampling have
produced extremely encouraging results. We look forward to the second phase
drilling tests on this project with considerable optimism, and await our initial
results from the other projects. Since listing on AIM the Company has
demonstrated its ability to acquire quality projects and it is envisaged that
shareholder value will continue to grow accordingly.'
Enquiries:
Steven Smith - Chairman + 44 (0) 7797 721 858
Jonathan Anderson - Investor Relations + 44 (0) 7950 410 680
Philip Haydn-Slater - WH Ireland Limited + 44 (0) 2072 201 666
Activities
The principal activity of Metals Exploration plc ('Metals Ex' or 'the Company')
is to identify and acquire mining companies, businesses or projects with
particular emphasis on precious and base metal mining opportunities
predominantly in the Western Pacific Rim region.
Review of business
Following the Company's admission to AIM in October 2004 Metals Ex has focused
its efforts on the acquisition of a significant interest in five mineral
exploration projects, namely the Masapelid, Runruno, Jaclupan, Puray, and Baguio
projects, which are all located in the Philippines and are considered by the
Company to have substantial exploration potential.
RUNRUNO PROJECT
On 2 February 2005 the Board announced that Metals Ex had signed an option
agreement over the Runruno Project. The agreement allows Metals Ex to earn up to
a 70% economic interest in the project by paying the two shareholders of FCF
Mining Corporation ('FCF'), the owner of the project, US$ 210,000 and 1,600,000
ordinary shares in Metals Ex between them over a three year period.
On 23rd November 2005, MetalsEx entered into an agreement with one of the two
shareholders of FCF, Christian Mining Inc ('CMI'), obtaining an option over a
further 15% of FCF, thus allowing Metals Ex to earn up to 85% of FCF.
A summary of the key terms of the Option are:
1 MetalsEx shall pay to CMI an annual Option fee of US$65,000 until the Option
is either exercised or withdrawn by MetalsEx. MetalsEx has sole discretion to
terminate the Option;
2 MetalsEx can exercise the Option, at any time, by acquiring CMI's remaining
shareholding of FCF anywhere from 1% to 15%. The exercise price is the amount of
US$400,000 for every 1% of CMI's shareholding of FCF, up to a maximum of US$6
million for all of CMI's remaining 15% shareholding of FCF; and
3 In the event that MetalsEx decides to exercise the Option but only for a part
of and not the entirety of CMI's 15% shareholding in FCF, MetalsEx has the right
to continue to have the Option to acquire the balance, by maintaining the terms
and conditions of the Option. The exercise period of the Option is unlimited.
Runruno is located approximately 200 km north of Manila in Nueva Viscaya
Province. Geologically, the area is underlain by prominent alkaline syenite and
monzonite intrusives and alkaline volcanic flows and tuffs. Gold mineralization
has been know to exist in Runruno since the early 1960's and the property has a
long history of exploration.
From 1969 1972 a local company (Fil-Am) completed a total of 69 diamond drill
holes for a total of 7,300 metres. Using the results from this program they
calculated a 13.4 million tonne resource at an average grade of 1.41 g/t gold,
and 0.8 g/t gold cutoff, for a total contained 607,500 ounces gold.
In 1974, Consolidated Goldfields of Australia optioned the property from Fil-Am
for one year and drilled 9 widely spaced diamond drill holes. Following this
work approximately 9,000 metres of drilling had been completed on Runruno. In
1978 Fil-Am commissioned a feasibility study from Kurimoto Ironworks and Nissho
Iwai and Co Ltd of Japan to be based on the available diamond hole data. The
study found that the property was economically viable with an estimated resource
of approximately 450,000 ounces of gold mineable by block-caving method.
Golden Arrow Mining took out an option over the property in 1980 and carried out
further drilling until they relinquished the option in 1998 due to financial and
internal management problems. Base Metal Mineral Resources signed an exclusive
agreement with Fil-Am in 1995 allowing them to explore, develop
and operate the property. In 1996 ACA Howe International Ltd was engaged to
calculate a resource estimate for the property. In their report ACA Howe
estimated an inferred resource containing 607,000 ounces of gold, and that the
resource might be understated by up to 30% due to poor core recovery.
In 2000 Greenwater Mining Corporation together with others carried out further
work on the resource. Unpublished reports suggested that with further work a 2
million ounce gold resource was achievable. Mr Powell was given access to core
samples drilled by Greenwater during his due diligence visit in November 2004
and his conclusion was that the quality of work carried out was of a high
standard and therefore their results can be regarded as not requiring any
substantial verification process.
Metals Ex has, since acquiring its option over Runruno in February 2005, carried
out a careful review of all previous works and reports, a basic structural
analysis of the deposit, field mapping and sampling and extensive sampling of
the small scale miner's tunnels. During the review and collation of data
process, it was noted that the sample recoveries experienced during the 1970's
drilling by Fil-Am was very poor. The Company then determined that if core
recovereies could be improved. In addition the higher grade zones observed in
the local miners tunnels did not appear to be recovered in the previous
drilling.
Results of sampling and mapping of the local miners' tunnels located at the
Balcony 1, Balcony 2, Main Runruno, Tayab and Malilibeg areas have confirmed the
existence of the high grade (41.4g/t Au) potential of gold mineralisation (and
molybdenum) in the hanging-wall and foot-wall zones of the main Runruno
mineralisation.
Five meter channel samples (315 samples) were taken continuously along the side
walls and backs of the local miners' tunnels. Results of the channel samples
represent the grades of the high-grade material that the local miners have been
leaving behind.
Table 1: Summary of average grades returned from sampling the local miners'
tunnels.
Tunnel Locations No. of Tunnels sampled No. of Samples Au Mo Ag
g/t g/t g/t
Balcony 1 7 50 5.7 754 3.7
Balcony 2 1 14 5.5 978 5.2
Main Runruno 5 42 3.1 420 2.3
Tayab 19 100 4.5 1060 4.5
Malilibeg 18 109 3.9 1642 6.6
Totals 50 315
Weighted Average Grades 4.3 1,125 4.8
The local miners' tunnels occur over a lateral distance of approximately 2
kilometres. The main Runruno mineralisation, which has been mapped at surface
over a strike distance of 2.5 kilometres.
Since November 2005, the Company has been drilling over a surface area of
approximately 1,000m x 700m. This area encompasses the southern most portion of
the area previously drilled area by Fil-Am upon which their resource calculation
was based.
Table 2: Summary of drillhole intercepts - Runruno Project
Drill-hole Intercept (metres) Au Mo Au eq*
Number From to Width g/t % g/t
MXD1 38 40 2 1.82 0.068 3.78
42 50 8 4.00 0.059 5.70
107 110 3 2.57 0.041 3.75
116 120 4 1.44 0.002 1.50
122 135 13 1.68 0.039 2.80
Total combined intercept 30 2.37 0.038 3.46
MXD2 72 80 8 1.86 0.079 4.13
MXD3 37 40 3 2.20 0.044 3.47
45 46 1 1.54 0.018 2.06
47 53 6 3.31 0.045 4.60
Total combined intercept 10 2.80 0.042 4.01
MXD4 39 40 1 1.30 0.105 4.32
88 90 2 2.32 0.024 3.01
92 98 6 1.98 0.012 2.33
Total combined intercept 9 1.98 0.025 2.70
MXD5 37 40 3 2.33 0.027 3.11
84 95 11 4.33 0.079 6.60
Total combined intercept 14 3.90 0.068 5.86
MXD6 114 116 2 2.07 0.012 2.42
120 125 5 1.39 0.026 2.14
156 166 10 2.05 0.026 2.80
Total combined intercept 17 1.86 0.024 2.55
MXD7 116 121 5 2.64 0.083 5.03
123 125 2 1.86 0.111 5.05
131 135 4 2.09 0.164 6.81
148 156 8 2.36 0.045 3.65
Total combined intercept 19 2.32 0.087 4.82
MXD8 83 88 5 2.93 0.029 3.76
112 119 7 6.62 0.044 7.89
138 148 10 2.29 0.098 5.11
Total combined intercept 22 3.81 0.065 5.68
Notes:
1. Au eq 'gold equivalent grade' represents an arithmetic calculation of the
value in US$ of the contained metal per tonne using the current metal prices (as
at 27 March 2006) of US$560/oz gold and US$23.5/lb molybdenum. Given the limited
nature of exploration activities to date, no assurance or implication is being
given, or should be assumed to be being given, by the inclusion of these values
in this report that the Runruno Project has been, or will in the future be,
deemed to be economic.
2. The drill holes were drilled towards the top of the hill at approximately
100m to 200m spacings. MXD-08 was drilled 100m downhill from, and intersected
the mineralised zone beneath MXD-04.
3. Reporting of the above composited intercepts was determined by applying an
upper and lower boundary defined by a low grade cut-off of 0.7g/t Au. Some
composited intercepts include single metre, internal intercept grades of less
than 0.7g/t Au. Isolated single metre intercepts are not reported unless
considered to be significant. No high grade cut-off has been applied to the
individual gold or molybdenum assays.
RUNRUNO - SAMPLING & ANALYSIS PROTOCOLS
Sample Preparation
The drill core is taken from the drill site to a secure compound at the
Company's field camp and is logged by the geologist. The drill core is then
split into two equal halves along its long axis, with one half being sampled at
predetermined intervals, bagged and sent for analysis. The remaining half-core
is retained in core boxes and stored on site for future reference.
The bagged half-core samples are being submitted to an independent 'ISO17025
accredited' laboratory for sample preparation and analyses for gold and
molybdenum. All of the half-core samples are crushed by the laboratory and a
900-1000 gram split is taken, pulverized and presented for analysis.
The remaining crushed sample is retained in bags and stored at the laboratory
for a period of three months before being returned to the Company for storage
These remaining crushed samples will be used in the future for additional
analyses for gold, molybdenum, silver, sulphur and other elements as deemed
necessary, for example, for resource estimation work.
Analytical Techniques
Gold: Gold analysis is by classical 'Screen Fire Assay' technique that involves
sieving a 900-1000 gram sample to 200 mesh (75microns). The entire oversize and
duplicate undersize fractions are fire assayed and the weighted average gold
grade calculated. This is one of the most appropriate methods for determining
gold content if there is a 'coarse gold' component to the mineralisation.
Molybdenum: The sample is dissolved in Aqua Regia (3:1 HCl:HNO3) and Molybdenum
analysis is carried out by Inductively Coupled Plasma-Optical Emission
Spectrometry (ICP-OES) method.
EXPLANATION OF TERMS
Au chemical symbol for gold
Mo chemical symbol for molybdenum
HCl chemical symbol for Hydrochloric Acid
HNO3 chemical symbol for Nitric Acid
g gram
t tonne
g/t grams per tonne, which is equivalent to parts per million (g/t Au = grams of gold per
tonne)
% percent (0.034% Mo = 340 parts per million of molybdenum)
lb avoirdupois pound (= 453.59237 grams)
oz troy ounce (= 31.103477 grams)
Micron A unit of length equal to one thousandth of a millimetre or one millionth of a metre
200 mesh the number of openings (200) in one linear inch of screen mesh (200 mesh approximately
equals 75 microns)
MASAPELID PROJECT
The Board announced the acquisition of a 70% interest in the Masapelid project
on 23 December 2004. The project was identified by Mr Gary Powell (Metals Ex
Director) as having potential for the definition of gold and copper resources.
Mr Powell carried out field investigations and due diligence at the project in
November 2004 to verify the existence of previous mining and exploration
activities. Metals Ex signed an agreement with the claim owner of the Masapelid
Project (San Manuel Mining Corporation) on 23 December 2004. The agreement
allowed Metals Ex to earn a 70% economic interest in the Project by paying San
Miguel Mining Corp US$ 105,000 and issuing 1,250,000 ordinary shares in Metals
Ex over a
three year period. Metals Ex is able to withdraw from the Agreement at any time,
without any encumbrances or liabilities, in return for relinquishing its
economic interest.
On January 25 2006 The Company signed a Joint Venture Agreement with Medusa
Mining Limited and Philsaga Mining Corporation over the Masapelid project.
In summary the principal terms of the JVA are:
• the Medusa Group has the right to earn an 84% share of the Interest, with
Metals Ex retaining a 16% share of the Interest or alternatively retaining a 10%
Net Profit Interest ('NPI') from Medusa in any mining operation;
• the Medusa Group is to expend the first US$1million on the Masapelid Project
and is to partly fund Metals Ex's remaining acquisition cost of the Interest;
• the Medusa Group is to operate the Masapelid Project;
• the remaining shares and cash consideration to acquire the Interest will be
shared 84% by Medusa and 16% by Metals Ex with the following payments to be
made:
(i) on or before 27 February 2006, proportionate payments to a total of
US$25,000 cash and the issue of 40,000 shares by Metals Ex and shares equivalent
in value to 210,000 Metals Ex shares by Medusa, such value to be determined with
reference to the average price of one ordinary share in Metals Ex during the 5
days of trading on AIM immediately preceding 24 January 2006;
(ii) on or before 27 January 2007, proportionate payments to a total of
US$25,000 cash and the issue of 40,000 shares by Metals Ex and shares equivalent
in value to 210,000 Metals Ex shares by Medusa; and
(iii) on or before 27 January 2008, proportionate payments to a total of
US$30,000 cash and the issue of 80,000 shares by Metals Ex and shares equivalent
in value to 420,000 Metals Ex shares by Medusa.
• on completion of the expenditure of US$1 million, Metals Ex has the exclusive
right to choose to contribute 16% of the on-going expenditure or to dilute to a
10% NPI (in which case Medusa would then own 100% of the Interest); and
• on commencement of any production, the present shareholders of SMMC will
receive a 1.5% Net Smelter Royalty ('NSR').
PLANNED WORK PROGRAMME - MEDUSA
The Medusa Group is expected to immediately commence a confirmatory diamond
drilling programme which, dependent upon results, may be followed by underground
exploration and development.
ABOUT MEDUSA
The Medusa Group is currently conducting exploration in Eastern Mindanao.
Philsaga have just received a Special Mining Permit which enables them to
conduct commercial full scale underground mining operations at the Co-O gold
mine in Agusan del Sur, for a period of one year, renewable for like period.
Philsaga has been operating the narrow-vein Co-O mine for the last 5 years.
The Medusa Group has advised that it will immediately commence the development
required for full scale mining operations at the Co-O mine to provide the ore
feed to the Co-O treatment plant that is leased by Medusa and which is currently
undergoing its first upgrade to an initial nominal capacity of 400 tonnes of ore
per day (approximately 150,000 tonnes per annum).
As the Medusa Group has demonstrated the technical and financial ability to
develop and exploit narrow high gold-grade vein deposits in the eastern Mindanao
region, which encompasses the Masapelid Project area, the board of Metals Ex
regard the JVA as an excellent way of expediting the development of the
Masapelid Project and, at the same time, enabling Metals Ex to maintain its
focus on Runruno.
HISTORY
The Masapelid Project is located in the northeast corner of Mindanao in the
Province of Surigao, approximately 750 km south of Manila. The project covers
the entire Masapelid Island.
The Island is composed of tertiary andesite and basalt flows and sub-volcanics
with lesser amounts of pyroclastic. These volcanic rocks are uncomfortably
overlain by limestone of younger tertiary age. Pervasive silica-clay-pyrite
alteration is most pronounced in the andesitic units and is characteristic of
Masapelid. Quartz-gold-polymetallic veins have been mined historically on the
Island since Spanish colonial times, with records of production starting in the
1930's. This production was restricted to two northeasterly trending veins. A
total of approximately 21,000 tons of ore with a grade of 16 to 24g/t Au was
reportedly mined to a depth of approximately 90 metres. An assessment of the
developed parts of these veins in 1941 by H. Lindblom showed that there was
approximately 133,000 tons of ore blocked out ready for mining at that time. The
outbreak of World War II stopped all mining activities.
During the 1980's artisanal gold miners worked on the Island; however, the
discovery of the rich Diwalwal gold mining area located further to the South on
Mindanao Island eventually resulted in the decline of mining on Masapelid.
Western Mining Corporation carried out a regional soil sampling program and some
diamond drilling in the early 1990's. This generated a comprehensive database
covering the whole Island.
11 rock chip samples were collected during a reconnaissance survey in February
2005 of the historical Layong Vein mining area. The samples were submitted to an
independent, certified laboratory (Intertech Testing Laboratories) in Surigao
City, for multi-element analyses.
Table 1. Gold and Silver results Rock-chip sampling Masapelid Project,
Philippines
Sample Gold Silver Description of Rock Sample
Number (g/t) (g/t)
MSP001 0.12 0.1 altered diorite with minor quartz veinlets
MSP002 0.92 <0.1 altered andesite, slightly brecciated
MSP003 0.18 15.4 quartz vein
MSP004 0.04 0.1 altered andesitic volcanic
MSP005 1.37 3.7 altered andesitic volcanic with minor quartz veinlets
MSP006 0.45 40 quartz vein
MSP007 0.35 32 altered andesitic volcanic with minor quartz veinlets
MSP008 1.97 9.1 quartz vein
* MSP009 121 175 quartz vein
* MSP010 24 154 altered andesitic volcanic rock with quartz veinlets
MSP011 2.20 6.6 altered andesitic volcanic rock with quartz veinlets
*?Of particular interest are the 'bonanza' style gold grades attained from
samples MSP009 and MSP010, which also contain high silver grades. This style of
mineralisation is typical of a low-sulphidation quartz-gold-silver epithermal
system.
PURAY PROJECT
On 28 June 2005, the Company announced the signing of an option to purchase
agreement for the Puray copper-zinc-silver-gold project located in the
Philippines.
The Puray Project comprises one Exploration Permit Application covering some
6,075 hectares, and is located only 28 kilometres from the city of Manila. The
Puray property has been explored and partially mined since the 1930's. The
mineralisation is polymetallic, containing high-grade and disseminated
copper-zinc-silver-gold. The style of mineralisation is similar to the Kuroko
style of massive sulphide deposits, which have been major producers of copper,
zinc, silver, gold and lead in Canada (e.g. Kidd Creek, Ontario, Canada). The
high grade and commonly high precious metal content of Kuroko deposits continue
to make them attractive exploration targets.
During 1969 to 1981 mining of massive sulphide-copper ore was carried out by
Eastern Rizal Copper Corporation. Approximately 700 tonnes of bornite ore was
mined of which a 200 tonne parcel was shipped directly to Japan for smelting.
The grade of the shipment reportedly averaged 20% Cu, 5.75 g/t Au and 196g/t Ag.
The remaining 500 tonnes of the massive bornite ore stockpile was lost in a
hill-slide during a typhoon in 1972.
In 1981, Eastern Rizal Copper Corporation reported that there remained in the
underground workings several thousand tonnes of massive sulphide ore grading
10-50% Cu. They also reportedly calculated a proven and probable resource of 8
million tonnes at an average grade of >0.7% Cu and an additional 28 million
tonnes of possible resources at an unspecified grade for the remaining
disseminated sulphide mineralisation. The resources calculations were derived
from the results of sampling surface trenches and tunnels, although they are not
verifiable, and do not necessarily comply with the JORC guidelines for the
reporting of mineral resources.
ERCC did not consider other metals such as zinc, gold or silver as being
significant, therefore it appears that assaying for these metals were not always
carried out. The current metal prices for these other metals, however is
considered by the Company to be of some economic importance when reviewing the
potential for this project. Samples obtained from the surface during a recent
field visit by the Company returned assays ranging up to 8.9% Cu, 1.7% Zn and
1.3g/t Au.
The occurrence of 'direct shipping' bornite and chalcopyrite ore indicates the
potential for the delineation of high-grade Kuroko-style mineralisation of
significant size over a potential strike length of up to 6 kilometres.
Upon granting of the Exploration Permit Application, it is the intention of
Metals Exploration to exercise the option to purchase agreement and apply modern
exploration techniques to define the project's size and grade potential. The
Company considers the acquisition of the Puray polymetallic project an exciting
opportunity to enhance its projects portfolio and ultimately deliver increased
value to the shareholders.
BAGUIO EPA PROJECT
The Baguio regional office of the Mines & Geosciences Bureau ('MGB') has
recently accepted an Application for an Exploration Permit ('EPA') from the
Company. The application is for a property located in the district of Northern
Luzon, Philippines, and adjoins the Santo Nino property, previously a
copper-gold producer.
The EPA covers an area of approximately 5,845 hectares and is located about 10
kilometres to the northeast of Baguio City. The property is underlain by quartz
diorite and andesite rock types and was previously the object of extensive
exploration for copper+gold+molybdenum porphyry mineralisation during the 1970s.
Between 1974 and 1980, Worldwide Mineral and Industrial Corporation ('Worldwide
'), a Philippine corporation, completed 44 drill holes for an aggregate total of
12,989 metres. Worldwide also carried out a combined IP and Resistivity
geophysical survey in 1978.
The Company is in the process of obtaining and collating all available
historical data.
JACLUPAN PROJECT
The Jaclupan Project is located within 5 kilometres of the large open-cast and
underground copper-gold mines of Atlas Consolidated Mines & Development
Corporation (pre-mining reserve of 1 billion tonnes grading 0.46% Cu and 0.25 g/
t Au).
The Jaclupan Project is an Exploration Permit Application. Once the application
is granted exploration will commence with the aim of defining drill targets.
OUTLOOK
The Directors consider, as outlined in the above descriptions of Runruno,
Masapelid, Puray, Jaclupan and Baguio Copper that each of the projects have
considerable merit.
Metals Ex will keep its shareholders fully informed as these projects advance.
Results for the year and dividends
The loss for the period after taxation was £176,914. The directors do not
recommend the payment of a dividend.
Directors and their interests
The directors of the company at 30 September 2005, and their interests in the
share capital of the company, were:
Number of ordinary Number of
shares warrants
of 1p
2005 2005
S M Smith (appointed 13 July 2004) 1,500,000 1,000,000
P C Barnett (appointed 13 July 2004) NIL 1,000,000
K D Mahoney (appointed 29 September 2004) NIL 500,000
G R Powell (appointed 27 August 2004) NIL -
St James Square Secretaries (appointed 8 April 2004, resigned 13 July - -
Limited 2004)
Post balance sheet events
The company has issued a number of warrants to subscribe to 1p ordinary shares
since the balance sheet date, the details of which are set out in note 20 to the
accounts.
Policy and practice of payment of suppliers
The Group's policy on payment of suppliers is to settle the amounts due on a
timely basis taking into account the credit period given. At 30 September 2005,
the Group had an average of 60 days purchases outstanding.
Auditors
The auditors, Nexia Audit Limited, were appointed in the period. A resolution
for the reappointment of Nexia Audit Limited will be proposed at the Annual
General Meeting.
Approved by the board of directors
and signed on behalf of the board
S M Smith
Director
Statement of directors' responsibilities in respect of the Accounts
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period. In preparing those accounts,
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 departure disclosed and explained in the accounts;
• Prepare the accounts on the going concern basis unless it is inappropriate to
presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position for the
company and to enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Independent auditors' report
We have audited the accounts of Metals Exploration Plc for the period ended 30
September 2005 which comprises the consolidated Profit and Loss Account, the
consolidated Balance Sheet, the company Balance Sheet, the consolidated Cash
Flow Statement, and the related notes 1 to 21. These accounts have been prepared
under the historical cost convention and the accounting policies set out
therein.
This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the Statement of Directors' Responsibilities the company's
directors are responsible for the preparation of the accounts in accordance with
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Our responsibility is to audit the accounts in accordance with relevant legal
and regulatory requirements and UK Auditing Standards.
We report to you our opinion as to whether the accounts 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 accounts, 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 the information specified by law regarding directors' remuneration and
transactions with the company is not disclosed.
We read the Directors' Report and consider the implications for our report if we
become aware of any apparent misstatements within it.
Basis of audit opinion
We conducted our audit in accordance with UK 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 accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the company'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 accounts 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 accounts.
Opinion
In our opinion the accounts give a true and fair view of the state of the
company and the group's affairs as at 30 September 2005 and of the loss of the
group for the period then ended and have been properly prepared in accordance
with the Companies Act 1985.
Nexia Audit Limited 25 Moorgate
Chartered Accountants London
Registered Auditors EC2R 6AY
Date
Consolidated profit and loss account
Notes 2005
£
Turnover 1 -
Administrative expenses (187,378 )
Operating loss (187,378 )
Interest receivable 10,819
Interest payable 4 (355 )
Loss on ordinary activities before taxation 5 (176,914 )
Tax on profit on ordinary activities 6 -
Loss for the financial period 13 (176,914 )
Basic loss per share 7 (0.67p )
Diluted loss per share 7 (0.56p )
All of the group's operations are classed as continuing. There were no gains or
losses in the period other than those included in the above profit and loss
account.
The company has taken advantage of Section 230 of the Companies Act 1985 not to
publish its own profit and loss account.
Consolidated balance sheet
Notes 2005
£
Fixed assets
Intangible assets 8 1,587,992
Current assets
Debtors 10 11,204
Cash at bank 1,178,687
1,189,891
Creditors: amounts falling due within one year 11 193,021
Net current assets 996,870
Net assets 2,584,862
Shareholders' equity
Called up share capital 12 471,683
Share premium amount 13 1,694,271
Shares to be issued 14 288,000
Profit and loss account 13 (176,914 )
2,277,040
Minority interests equity 307,822
2,584,862
The accounts were approved by the Board of Directors on 29 March 2006 and were
signed on its behalf by:
S M Smith
Company balance sheet
Notes 2005
£
Fixed assets
Intangible assets 8 561,919
Investments 9 718,251
1,280,170
Current assets
Debtors 10 11,204
Cash at bank 1,178,687
1,189,891
Creditors: amounts falling due within one year 11 193,021
Net current assets 996,870
Net assets 2,277,040
Shareholders' equity
Called up share capital 12 471,683
Share premium amount 13 1,694,271
Shares to be issued 14 288,000
Profit and loss account 13 (176,914 )
2,277,040
The accounts were approved by the Board of Directors on 29 March 2006 and were
signed on its behalf by:
S M Smith
Director
Consolidated cash flow statement
Notes 2005
£
Net cash outflow from operating activities 16 (35,131 )
Returns on investments and servicing of finance
Interest received 10,819
Interest paid (355 )
Net cash inflow from returns on investments and servicing of finance 10,464
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (858,956 )
Acquisitions
Payments to acquire subsidiary undertakings (53,763 )
Financing
Issue of ordinary share capital (net of expenses) 2,116,073
Increase in cash in the year 17 1,178,687
Notes to the accounts
1. Accounting policies
The accounts have been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice. A summary of the more important accounting
policies adopted are described below.
Basis of accounting
The accounts have been prepared under the historical cost convention.
Basis of consolidation
The group accounts consolidate those of the company and its subsidiary
undertakings using the acquisition method of accounting.
Exploration and development costs
Costs relating to the acquisition, exploration and development of mineral
properties are capitalised until such time as an economic reserve is defined and
mining commences or the mining property is abandoned.
Once mining commences the asset is amortised on a depletion percentage basis.
Provision is made for impairments to the extent that the asset's carrying value
exceeds its net recoverable amount.
Investments
Investments held as fixed assets are stated at cost less provision for any
impairment.
Deferred taxation
Deferred tax is provided for on a full provision basis on all timing differences
which have arisen but not reversed at the balance sheet date. No timing
differences are recognised in respect of (i) property revaluation surpluses
where there is no commitment to sell the asset; (ii) gains on sale of assets
where those assets have been rolled over into replacement assets; and (iii)
additional tax which would arise if profits of overseas subsidiaries are
distributed except where otherwise required by accounting standards. A deferred
tax asset is not recognised to the extent that the transfer of economic benefit
in future is uncertain. Any assets and liabilities recognised have not been
discounted.
Foreign currencies
Transactions denominated in a foreign currency are translated into sterling at
the rate of exchange ruling at the date of the transaction. At the balance sheet
date, monetary assets and liabilities denominated in foreign currency are
translated at the rate ruling at that date. All exchange differences are dealt
with in the profit and loss account. Exchange differences arising from the
translation of the net investment in a subsidiary company at the rate of
exchange ruling at the balance sheet date and that subsidiary's profit and loss
account at an average rate for the year, are recorded as movements on reserves.
Turnover
Turnover, excluding value added tax, represents net invoiced sales of the
Company's share of revenues in the period. Turnover is recognised as sales as
invoiced throughout the period.
Segmental reporting
The group's operating loss is derived from the company's principal activity, all
based in the UK. Of the group's net assets, £1,375,919 relates to assets held in
the Philippines, the remainder relates to net assets held in the UK.
2. Directors' fees
2005
£
S M Smith 16,000
P C Barrett * 12,000
K D Mahoney * 12,000
G Powell 13,228
53,228
*?Non-executive directors
Other than the directors' fees disclosed above, the company paid S M Smith
£13,000 in the period for accountancy services and £10,000 for general
consultancy. Additionally, the Group paid £13,304 in consultancy fees to
Boonjarding Limited, a company controlled by G Powell and paid £17,000 in
consultancy fees to P Barrett.
No directors accrued retirement benefits under a money purchase pension scheme.
3. Employee information
The company had no employees under a contract for service in the period.
4. Interest payable
2005
£
Bank loans and overdrafts 355
5. Loss on ordinary activities before taxation is stated after charging:
2005
£
Auditors' remuneration
-audit (group and company) 8,000
6. Tax on profit on ordinary activities
2005
£
(a)UK corporation tax at 30% -
(b)Factors affecting tax charge for period £
Loss on ordinary activities before tax (176,914 )
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK 30% (53,074 )
Effects of:
Expenses not deductible for tax purposes 120
Tax losses carried forward 52,954
Current tax charge for period -
A deferred tax asset of £52,954 due to on-going tax losses has not been
recognised due to uncertainty over its future reversal.
7. Loss per share
Basic loss per share has been calculated on the basis of loss after taxation of
£176,914 divided by the weighted average number of shares in issue since the AIM
admission of 26,313,414.
The diluted loss per share includes 5,455,993 of warrants exercisable at prices
between 3.25p and 20p. The share price on 30 September 2005 was 10p per share.
The weighted number of shares for the diluted earnings per share is therefore
31,769,407.
8. Intangible fixed assets - Group
Costs of
Exploration
£
Cost
On incorporation -
Additions 1,587,992
At 30 September 2005 1,587,992
Intangible fixed assets - Company
Costs of
Exploration
£
Cost
On incorporation -
Additions 561,919
At 30 September 2005 561,919
9. (a) Investments
Subsidiary
Undertakings
£
Cost
On incorporation -
Additions 718,251
At 30 September 2005 718,251
The above investments are unlisted.
The subsidiary companies are as follows:
Company Country of registration % holding Nature of
business
San Manuel Mining Corporation Philippines 70% Holder of mining rights
FCF Mining Corporation Philippines 70% Holder of mining rights
(b) Analysis of acquisitions
On 23 December 2004, the company concluded an agreement which resulted in the
purchase of 70% of the subscribed share capital in SMMC. The agreement allows
Metals Ex to earn 70% of the economic interest in the project on completion of
the following payment schedule:
Cash (US$) Shares in the Company
On completion 25,000 250,000
One year after completion 25,000 250,000
Two years after completion 25,000 250,000
Three years after completion 35,000 500,000
The fair value of the assets acquired were:
Fair value (£)
Intangible assets mining rights 602,093
Metals Exploration plc - proportion of economic interest 421,465
Fair value of consideration 421,465
Goodwill -
On 2 February 2005, Metals Ex signed an agreement which resulted in the purchase
of 70% of the share capital in FCF Mining Corporation. The following payment
schedule has been agreed, with payments made to its two former shareholders;
Filminera Resources Corp and Christian Mining Inc.
Cash (US$) Shares in the Company
Shares in the Company
On completion 100,000 400,000
One year after completion 30,000 400,000
Two years after completion 40,000 400,000
Three years after completion 40,000 400,000
The fair value of the assets acquired were:
Fair value (£)
Intangible assets mining rights 424,146
Metals Exploration plc - proportion of economic interest 296,902
Fair value of consideration 296,902
Goodwill -
10. Debtors
2005
£
Other debtors 6,337
Prepayments 4,867
11,204
11. Creditors: amounts falling due within one year
£
Accruals 193,021
12. Called up share capital
£
Authorised
100,000,000 ordinary shares of 1p each 1,000,000
Allotted, called up and fully paid
47,168,332 ordinary shares of 1p each 471,683
On incorporation the Company's authorised share capital was 100,000,000 ordinary
shares of 1p each and the Company issued 2 1p ordinary shares at par. The
Company additionally made the following issues of 1p ordinary shares in the
period:
Date of issue Number of shares Price per share Overall consideration
30 September 2004 7,499,998 1p 75,000
22 October 2004 18,093,332 3p 542,800
23 December 2004 250,000 * -
31 January 2005 500,000 3.25p 16,250
17 March 2005 300,000 3.25p 9,750
10 August 2005 3,000,000 9.15p 274,500
16 August 2005 400,000 ** -
2 September 2005 1,500,000 9.875p 148,125
14 September 2005 15,625,000 8p 1,250,000
* The Company issued 250,000 1p ordinary shares in consideration for receipt of
10,000 ordinary shares in San Manuel Mining Corporation, which represents a 70%
stake in that company.
** The Company issued 400,000 1p ordinary shares in consideration for receipt of
500,000 ordinary shares in FCF Mining Corporation, which represents a 70% stake
in that company. All the authorised and allotted shares are of the same class
and rank pari passu.
Warrants
The company issued the following warrants to subscribe to 1p ordinary shares in
the period:
Date of issue Number of shares Warrant price Number exercised in period
30 September 2004 3,500,000 3.25p 200,000
15 October 2004 1,800,000 3.25p 800,000
10 August 2005 4,000,000 3.25p -
2 September 2005 2,000,000 3.25p -
15 September 2005 1,496,708 8p 500,000
15 September 2005 6,408,274 20p 2,116,651
13. Reserves
Shares to be issued Share Premium Profit & Loss Account Total
£ £ £ £
On incorporation - - - -
Loss for the year - - (176,914 ) (176,914 )
Premium on share issue - 1,943,933 - 1,943,933
Issue expenses - (249,662 ) - (249,662 )
Deferred consideration 288,000 - - 288,000
At 30 September 2005 288,000 1,694,271 (176,914 ) 1,805,357
14. Shares to be issued
Under the arrangements of the deferred consideration on the purchase of certain
mining rights set out in note 9, an additional 2,200,000 ordinary 1p shares are
to be issued to the vendors, to be issued at various
points in the next 3 years. For valuation purposes these shares have been valued
between 7.5p and 11.5p, the price on completion of the transactions.
15. Reconciliation of movements in Shareholders' funds Group
2005
£
Loss for the financial period (176,914 )
Issue of share capital 2,165,954
Shares to be issued 288,000
Opening shareholder's funds -
Closing shareholders' funds 2,277,040
16. Reconciliation of operating profit to net cash outflow from operating
activities
£
Operating loss (187,378 )
Increase in debtors (11,204 )
Increase in creditors 163,451
Net cash outflow from operating activities (35,131 )
17. Reconciliation of net cash flow to movement in net funds
2005
£
Increase in cash in the period 1,178,687
Movement in net funds in the year 1,178,687
Net funds on incorporation -
Net funds at 30 September 2005 1,178,687
18. Analysis of net debt
On At 30 September
incorporation Cash flow 2005
£ £ £
Cash in hand, at bank - 1,178,687 1,178,687
Total - 1,178,687 1,178,687
19. Related party transactions
Other than the directors' fees disclosed in note 3, the company paid SM Smith
£13,000 in the period for accountancy services and £10,000 for general
consultancy. Additionally the Group paid £13,304 in consultancy fees to
Boonjarding Limited, a company controlled by G Powell and paid £17,000 in
consultancy fees to P Barnett.
20. Post balance sheet events
On 3 November 2005, the company granted warrants to certain directors and third
parties to subscribe to up to 5,800,000 1p ordinary shares. The principal terms
of the warrants issued to the related parties were:
Warrant holder Exercise Exercise period (from date of Number of shares under Total warrants
price grant) warrant held
G Powell 12p Up to 7 years 1,000,000 1,500,000
40p Up to 7 years 500,000
Reef Securities Limited*20p Up to 7 years 1,000,000 2,500,000
40p Up to 7 years 500,000
P Bennett 20p Up to 7 years 500,000 2,000,000
40p Up to 7 years 500,000
* Reef Securities Limited is a company controlled by SM Smith
The additional warrants were issued at exercise prices ranging from 12 p to 40p,
with exercise periods from 2 to 7 years from the date of grant.
Between 14 November 2005 and 10 March 2006, the company issued 3,298,053 new 1p
ordinary shares at prices ranging between 3.25p per share and 20p per share,
pursuant to the exercise of existing warrants.
In November 2005, the company signed an option agreement with Christian Mining
Inc to acquire an additional 15% shareholding in FCF Mining Corp., the holder of
the Runruno permit, which if exercised would give the company an 85% interest.
The company shall pay a $65,000 per annum option fee until the option is either
exercised or withdrawn, although the company has sole discretion to terminate
the option. The exercise price of the option is $400,000 for each additional 1%
per shareholding, subject to a maximum fee of $6million. The exercise period of
the option is indefinite.
On 25 January 2005 the company signed a joint venture agreement (JVA) with
Medusa Mining Limited and Philsaga Mining Corporation in respect of the
Company's interest in San Manuel Mining Corporation. The principal terms of the
JVA are that the company will retain a 16% share of the interest or
alternatively retain a 10% net profit interest, in return for a reduced payment
schedule.
On 21 February 2006, the company issued 400,000 new 1p ordinary shares in
connection with the company's interest in the Runruno project. The shares were
issued together with cash payments of US$30,000 in respect of the company's
outstanding obligations under the terms of the existing agreement entered into
on 1 February 2005.
On 7 March 2006, the company issued 40,000 new 1p ordinary shares to satisfy a
payment obligation of the company pursuant to an agreement with Medusa Mining
Limited and Philsaga Mining Corporation.
In March 2006 the company obtained an exploration permit for the Baguio regional
office of the Mines and Geosciences Bureau for a 5,845 hectare property located
in Northern Luzou in the Philippines.
21. Financial Instruments
The Company's financial instruments comprise cash at bank and various items such
as other debtors and creditors that arise directly from its operations and are
therefore excluded from the disclosures. The main purpose of these instruments
is to provide finance for operations. The Company has not entered into
derivative transactions nor does it trade financial instruments as a matter of
policy.
Other than the immaterial, floating rate bank overdraft interest on the Group's
Sterling bank account, the Group does not pay interest on any of its other
financial liabilities; nor is it likely to in the future.
Interest rate risk profile on financial assets
The only financial assets (other than the costs of exploration and short term
debtors) are cash at bank, which comprise inter bank sterling deposits with
interest earned at a fixed average rate of 4.12%. The Directors believe the fair
value of the financial instruments is not materially different to the book
value.
Currency exposure
At the period end, the Company's currency exposure is predominantly to the US
dollar, with payments made for costs of exploration in this currency. The
Company does not have a formal policy in place to manage this currency risk, but
the directors believe the risk of material change in rates is minimal. The
remaining other assets and liabilities of Group are in Sterling.
This information is provided by RNS
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