Final Results

RNS Number : 9580H

Pathfinder Minerals Plc

27 June 2013

 

Embargoed: 0700hrs 27 June 2013

Pathfinder Minerals Plc

("Pathfinder," the "Company" or the "Group")

Final results for the year ended 31 December 2012

Chairman's Statement

Introduction

Since I last wrote to you (in September 2012 with the publication of the half yearly results), Pathfinder has made significant progress towards the recovery of its expropriated assets. The legal proceedings which dominated 2012, the year under review, were those of the English High Court, which ruled that Pathfinder is the rightful owner of its shares in its Mozambique subsidiary; and the Court of Appeal has unequivocally rejected an application to appeal against that ruling. Pathfinder is now able to concentrate its efforts on action in Mozambique; and the legal rulings in England in the Company's favour have given the Company further credibility, not only with the Mozambican courts, but also in its dealings with politicians and diplomats in the UK and in the Republic of Mozambique.

Shareholders will have seen the announcements of activity that the Board has issued during the year, but let me recap on the events of 2012 and 2013 to date.

In February 2012, Pathfinder received confirmation from the Republic of Mozambique's Ministry of Mineral Resources that the mining registry of Mozambique no longer showed licences 4623C and 760C as being registered to Pathfinder's subsidiary, Companhia Mineira de Naburi S.A.R.L. ("CMDN"). The Company had been informed that a licence over the same areas covered by 4623C and 760C had been issued to a company called Pathfinder Moçambique S.A (an entity which is wholly unconnected with Pathfinder Minerals, but which is owned by General Jacinto Veloso, a retired government minister in Mozambique and a former director of Pathfinder Minerals Plc and of CMDN, together with his daughter and his business partner, Diogo Cavaco).

To date no satisfactory explanation has been provided as to the reasons for or basis of this register change, which the Company is advised was carried out through a process which was defective under the mining law of Mozambique. The Company had no involvement in the transfer and understands that the Ministry of Mineral Resources believed it was executing the transfer on the proper authority of General Veloso as the named representative on the face of the licences. The choice of name for the entity to which General Veloso applied to transfer the licences (i.e. Pathfinder Moçambique S.A.) strongly suggests it was his or Mr Cavaco's intention to mislead the Ministry of Mineral Resources into believing it to be an intra-group transfer within the Pathfinder Group.

In addition to the expropriation of the mining licences and as a means of restricting the action which Pathfinder can take to recover them, General Veloso, J.V. Consultores, Limitada (a company controlled by General Veloso) and Mr Cavaco (the "Defendants", as to which see further below) have asserted that the agreements (the "Acquisition Agreements") by which the shares in CMDN, as the licence holder, were acquired by IM Minerals Limited ("IM Minerals") (a wholly owned UK subsidiary of the Company) were null and void and, consequently, that IM Minerals had never been the owner of any shares in CMDN.

Steps towards recovery of the licences

The Company's sole focus, since the discovery of this outrageous conduct on the part of the Defendants, has been to restore ownership and control of CMDN and, thereafter, to recover the mining licences previously registered to it in order to resume project development.

English legal proceedings

As I note in my introduction, the period under review was dominated by the substantive legal proceedings commenced by the Company in the English High Court. The Company sought, among other things, declarations from the English court as to the validity and effect of the Acquisition Agreements, all of which are governed by English law (the "Contract Claims"). The Defendants accepted the jurisdiction of the English High Court to determine the Contract Claims but later, having already breached numerous orders of the English court, withdrew their participation in the proceedings.

Following a hearing on 18 September 2012 in the English High Court and full consideration of all the extensive evidence before the court, the judge ruled that Pathfinder (through IM Minerals) did validly acquire its 99.99% interest in CMDN. In so ruling, the judge expressly rejected any allegations of fraud which had been made by the Defendants against the Company, IM Minerals and their directors. The judge also granted a permanent injunction restraining General Veloso and his associates from taking any steps to interfere with IM Minerals' rights of ownership of shares in CMDN. The judge subsequently ruled that Pathfinder is entitled to recover 90% of its costs of the High Court proceedings from the Defendants.

In February 2013, the Company received notice of an order from the Court of Appeal in England that the Defendants had applied for permission to appeal the October 2012 judgment.  The Company believed the appeal to have no merits and therefore had no choice but to contest the grounds of appeal.  In April 2013 Pathfinder announced that the English Court of Appeal, through the unanimous judgments of Lady Justice Gloster, Lord Justice Leveson and Lord Justice Beatson, had duly dismissed the application of the Defendants for permission to appeal.

Giving the leading judgment, Lady Justice Gloster said that "there is no doubt that the [Application] should be dismissed". She referred to the Defendants' failure to comply with the order for security for costs and their deliberate breaches of previous orders of the English court, finding that the Defendants' conduct amounted to "a cynical abuse of [the] court's process". Amongst other reasons given for dismissing the application, Lady Justice Gloster also referred to the matter being "a clear case where the relevant agreements relating to the sale of shares [in CMDN] are governed by English law and are subject to an English jurisdiction clause or clauses" and noted that the Defendants "have persistently disregarded their contractual obligations in this regard."

Lady Justice Gloster added that she had "seen nothing in the Defendants' grounds of appeal, or in the written arguments, that provide[d] any basis whatsoever for disturbing the conclusions reached by [the High Court in October 2012]" and considered the Defendants' grounds of appeal to be "wholly devoid of merit".

At the hearing itself, Lord Justice Leveson had also expressed concern "that [the Defendants' Application had] all been a game."

As a consequence of their failed application, the Defendants cannot further appeal against the English court judgment as to the validity and effect of the Acquisition Agreements, through which IM Minerals acquired 99.99% of the licence-holding company, CMDN.

Mozambique legal proceedings

With the dismissal of the application to appeal marking the conclusion of the English proceedings in the Company's favour, the Company is now able to focus wholly on the enforcement of its rights and costs orders in Mozambique. The Company has been advised that English court judgments and costs orders are recognisable and enforceable in Mozambique. Accordingly, the Company is taking the necessary steps to have the various judgments and orders it has obtained from the English court formally recognised by the Mozambique Supreme Court; and will seek enforcement of the costs orders in its favour (none of which have been paid), totalling £1,106,000, against the Defendants' assets, including in Mozambique. The Company is advised that the process for recognition and enforcement of judgments in Mozambique is a lengthy one, during which the Defendants will have an opportunity to object.

There remain several legal proceedings under way in Mozambique. These include a number of actions in which the same key issue of the ownership of CMDN, on which the English court has already ruled in relation to the Acquisition Agreements, arises. As previously announced, these actions include:

- challenges by IM Minerals to resolutions purportedly passed by the Defendants at shareholder meetings of CMDN in May 2009 (the "May 2009 Resolution") and December 2011 (the "December Resolutions");

- a rival challenge by the Defendants to the resolutions passed by IM Minerals at a shareholder meeting of CMDN in January 2012; and

- a claim made by the Defendants against Pathfinder and IM Minerals (as announced on 21 December 2012).

In each of these proceedings the Defendants allege, amongst other things, that IM Minerals was/is not a shareholder in CMDN on the basis, broadly, that (contrary to the findings of the English courts) the underlying agreements between the parties by which the shares in CMDN were acquired are not valid or binding and/or did not confer a right to acquire the shares in CMDN.

In October 2012 Pathfinder learned that it had been successful in an application for an interdict suspending the effect of the December Resolutions. The Maputo Court's judgment included a provisional finding that the share certificate issued to IM Minerals by CMDN (and signed by General Veloso and Mr Cavaco), showing IM Minerals as the holder of 399,998 of the 400,000 issued shares in CMDN, is valid and permissible under the constitution of CMDN, confirming therefore that, as a matter of Mozambique law, IM Minerals is the holder of 99.99% of CMDN. The issue of IM Minerals' status as a shareholder of CMDN was further considered at hearings in Maputo on 6 December 2012 and 15 May 2013. Decisions following each of those hearings are still awaited.

Financial results and current financial position

The financial statements of the Pathfinder Group for the year ended 31 December 2012 follow later in this report.  The Income Statement shows a loss of £4.3 million (2011 - £37.6 million). Since the Company has been prevented from conducting any activity relating to mining, the whole of this loss can be attributed to the Company's attempts to recover its expropriated licences.

The Group's Statement of Financial Position shows net assets of £3.9 million. The assets are held largely in the form of cash deposits (totalling £3.8 million at the year-end).

Since the end of the year the Board has continued its attempts to recover the Group's assets expropriated by General Veloso and Mr Cavaco. The conclusion of legal action in London brings a material reduction in the rate of expenditure and the Company estimates that it has sufficient resources to see through its strategy for the recovery of its assets.

Outlook

The Company originally acquired assets in Mozambique with a view to the responsible development of a mineral sands mine in Zambezia Province. In so doing the Company would create value both for its shareholders and for the Republic of Mozambique and, in particular the people of Zambezia Province, not only through the provision of employment on the construction of the mine, but also by virtue of the associated economic benefits which would flow from the major infrastructural improvements that accompany the development of the mine. That Pathfinder's shareholders and the people of Mozambique should have had, since November 2011, to endure such loss of opportunity because of the actions of General Veloso and Mr Cavaco is unconscionable.

I am so grateful for the support which our shareholders continue to show for the Company as we seek to recover our assets. As the Company's largest shareholder I share your desire to return to the development of the Moebase and Naburi mineral sands deposits as soon as possible. There is no doubt that these assets are extremely valuable and indeed worth our efforts to recover them.  In 2011 the Moebase and Naburi deposits were independently estimated to be worth $529 million and the prices of the products have, since that study, risen significantly - driven by demand from developing economies.

The successful English legal proceedings were costly but central to the Company's ability to secure control of CMDN and to restore the licences to it. With the English litigation now concluded in the Company's favour, the Company's legal expenditure has been significantly reduced and we are confident of our strategic and financial ability to see the Mozambique proceedings through to a successful conclusion.

The Company, however, is not relying solely on the legal strategy to bring about a successful restoration of the Company's assets. During the process towards recovery it has become apparent, particularly in recent months, that there is a strong political will among senior political and diplomatic figures in the Republic of Mozambique and the UK to see this issue resolved. Indeed, they consider the matter demands a resolution in the interests of all stakeholders, particularly the Republic of Mozambique. The Board is in regular communication with such individuals with a view to bringing about an earlier resolution than that which we believe will be achieved through the courts.

On behalf of the board I should like to thank shareholders sincerely for their continued support. We are wholly focused on returning to the development of the Moebase and Naburi deposits; and we will continue to update you with material developments as they occur.

John McKeon

Chairman

26 June 2013

Statement of Consolidated Comprehensive Income

For the Year Ended 31 December 2012

Year ended 31 December	2012	2011
	£'000	£'000
CONTINUING OPERATIONS
Revenue	-	-
Administrative expenses	(4,424)	(2,533)
OPERATING LOSS BEFORE EXCEPTIONAL ITEMS	(4,424)	(2,533)
Exceptional items	-	(34,830)
	_______	_______
OPERATING LOSS	(4,424)	(37,363)
Finance income	106	19
	_______	_______
LOSS BEFORE INCOME TAX	(4,318)	(37,344)
Income tax	-	-
	_______	_______
LOSS FOR THE YEAR	(4,318)	(37,344)
OTHER COMPREHENSIVE INCOME	-	-
	_______	_______
TOTAL COMPREHENSIVE LOSS FOR THE YEAR	(4,318)	(37,344)
	=======	=======
Loss per share (expressed in pence per share)
Basic	(0.4)	(4.5)
Diluted	(0.4)	(4.5)
	=======	=======

Statement of Consolidated Financial Position

31 December 2012

	2012	2011
	£'000	£'000
ASSETS
CURRENT ASSETS
Trade and other receivables	163	34
Cash and cash equivalents	3,767	8,471
	_____	_____
	3,930	8,505
	_____	_____
TOTAL ASSETS	3,930	8,505
	=====	=====
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital	18,289	18,289
Share premium	11,022	11,022
Retained earnings	(25,661)	(21,343)
	_____	_____
TOTAL EQUITY	3,650	7,968
	_____	_____
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	280	537
	_____	_____
TOTAL LIABILITIES	280	537
	_____	_____
TOTAL EQUITY AND LIABILITIES	3,930	8,505
	=====	=====

Statement of Cash Flows - Group

For the Year Ended 31 December 2012

	2012	2011
	£'000	£'000
Cash flows from operating activities
Loss before income tax	(4,318)	(37,344)
Provision against diminution in value	-	34,830
Finance income	(106)	(19)
	______	______
	(4,424)	(2,533)
Increase in trade and other receivables	(129)	(34)
Decrease in trade and other payables	(257)	(444)
	_____	_____
Net cash from operating activities	(4,810)	(3,011)
	_____	_____
Cash flows from investing activities
Interest received	106	19
	_____	_____
Net cash from investing activities	106	19
	_____	_____
Cash flows from financing activities
Shares issued for cash	-	11,442
Net cash from financing activities	-	11,442
(Decrease) increase in cash and cash equivalents	(4,704)	8,450
Cash and cash equivalents at beginning of the year	8,471	21
	_____	_____
Cash and cash equivalents at end of the year	3,767	8,471
	=====	=====

Annual Report and Accounts

Copies of the Annual Report and Accounts, together with a notice of the annual general meeting, are being posted to shareholders today and are available within the Investor Relations section of the Company's website www.pathfinderminerals.com. 

Annual General Meeting

The annual general meeting of the Company will be held at the offices of Daniel Stewart & Company Plc at 36 Old Jewry, London EC2R 8DD on 23 July 2013 at 11 a.m.

Enquiries:

Pathfinder Minerals Plc

Nick Trew, Chief Executive

James Normand, Finance Director

Tel. [phone]

Daniel Stewart & Company Plc

David Hart or James Thomas

Tel: [phone]

M: Communications

Ben Simons

Tel: [phone]

 

END

 

 

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