Preliminary Results 2007
Aurum Mining PLC
27 September 2007
For immediate release 27 September 2007
A meeting for analysts will be held at 10am on the morning of the results, 27
September 2007, at the offices of Buchanan Communications, 45 Moorfields, London
EC2Y 9AE. The investor presentation, which will be used at the analyst meeting,
is available on Aurum's website, www.aurummining.net.
AURUM MINING PLC
('Aurum' or 'the Company')
Preliminary Results for the year ended 31 March 2007
Aurum Mining plc (AIM: AUR), the gold-mining company focussed on the Former
Soviet Union (FSU) and whose principal asset is the Andash Project in the Kyrgyz
Republic, is pleased to announce its preliminary results for the year ended 31
March 2007.
Highlights
•Aurum is on track for initial gold production at Andash in 2008
•Strong balance sheet following £30 million share issue in February 2007
•Identified capex savings at the Zone 1 mine, along with the continuing
strength of metal prices, have considerably enhanced the economics of the
Andash Project
•On-going exploration work will increase Aurum's reserves and offers
significant potential upside
Sean Finlay, Aurum's Chairman, commented: 'The current year promises to be
transformational for the Group. We are advanced with the execution of our plans
for the start of construction of the open-cast mine at Andash Zone 1 and look
forward to initial production from the mine in 2008. In addition to becoming a
near-term gold producer, Aurum has significant exploration potential from other
opportunities within the Andash licence area, which should increase the value of
our Company significantly. Metal prices are currently strong and the outlook
remains positive. We look forward to the future with confidence.'
For further information:
Aurum Mining plc Tel: 020 7478 9050
Mark Jones, Chief Executive Officer
Chris Eadie, Chief Financial Officer
Arbuthnot Securities Tel: 020 7012 2000
John Prior
John Toll
Buchanan Communications Tel: 020 7466 5000
Mark Court / Rebecca Skye Dietrich
Notes to editors
Aurum Mining, which joined the AIM market of the London Stock Exchange in May
2004, is a mining company focussed on gold opportunities in the Former Soviet
Union. Its principal asset is an exploration licence over the Andash gold and
copper project in the Kyrgyz Republic. A mining licence for Andash Zone 1 was
awarded by the Kyrgyz authorities in 2006. The feasibility study compiled by
Wardell Armstrong International, also in 2006, confirmed a measured and
indicated resource base of 19.2 million tonnes at 1.1 grams per tonne of gold
and 0.4% copper, which equates to 1.1 million ozs of gold and gold equivalent.
Initial production at Andash Zone 1 is expected in the second half of 2008. The
Andash project also includes Zone 2 and Zone 3 along with Tokhtonysay, Nakhodka
and three other additional exploration areas.
Aurum Mining plc
CHAIRMAN'S STATEMENT
In my Chairman's statement last year I described the year to 31 March 2006 as a
year in which the foundations were firmly laid for the delivery in 2008 of
Aurum's primary objective of becoming a gold producer. I am delighted to say
that, in the year to 31 March 2007, we have built extensively on those
foundations and have full confidence that Aurum is set to become a revenue
generating gold producer next year.
During the year, we made major progress with the Andash Project in the Kyrgyz
Republic culminating in February 2007 with a highly successful fundraising in
which we raised £30 million gross through a share issue to fully fund
construction of the open-cast mine at Zone 1 of the Andash licence area. This
fundraising was a very significant achievement, marking one of the largest
fundraisings this year in the AIM market's mining sector. The success of the
fundraising is a reflection of the commitment of the Aurum management team, the
quality of our Andash asset and the capability of our Nominated Adviser and
Broker, Arbuthnot Securities. This fundraising, which will allow the Zone 1 mine
to be built without the need for debt, followed a substantial amount of
preparatory work during the year including upgrades to the resource estimate,
the award of a mining licence from the Kyrgyz authorities and completion of a
western feasibility study.
The Andash Project is Aurum's principal asset which comprises a licence area of
53 sq km in northern Kyrgyzstan. Andash forms part of the Tien Shan gold belt,
one of the world's largest gold belts, and which stretches across central Asia.
Our strategy is to begin production at Zone 1 of the licence area at the
earliest opportunity, thereby creating the cash flow to exploit the significant
opportunities in other exploration areas. We have previously completed some
exploration drilling at Zones 2 and 3 and, during the period, we discovered a
new and very exciting target close to Zone 1, which we named Nakhodka. We also
identified a substantial prospect at Tokhtonysay, which is adjacent to the
Korgontash licence area held by Lero Gold Corporation, a subsidiary of Oriel
Resources plc.
These additional opportunities throughout the licence area have the potential to
increase substantially the Andash Project's resource base and thereby to create
significant value for the Company following the start of production at Zone 1.
Zone 1 itself has an extensive resource: our western feasibility study, the
preparation of which was led by Wardell Armstrong International (WAI),
identified a JORC compliant proven and probable resource of 16 million tonnes of
ore at a grade of 1.05 grammes per tonne (g/t) and 0.4% copper, giving contained
gold and gold equivalent of more than 1.1 million ounces. The feasibility study
also confirmed that Aurum will be a low-cost producer with cash costs for gold
and gold equivalent of just US$223 per ounce. The pit design will allow us to
mine at a rate of 2 million tonnes per annum with a very low stripping ratio of
0.8 of a tonne of waste to 1 tonne of ore.
We believe that responsible mining is fundamental to Aurum's success at Andash
and therefore we have continued our proactive interaction with the local
community with initiatives including our social fund for health and education.
As mentioned in our pre-close update, the Kyrgyz Republic is a demanding
environment in which to operate but we believe our initiatives on the ground,
including regular dialogue with senior government officials and with the local
community, mean that we will deliver our plans on schedule. It is our intention
to meet all of the social and environmental conditions made in our western
feasibility study, which has been ratified by the Kyrgyz authorities and to
which we are fully committed.
Post year end, we have made significant progress in the preparatory work for the
construction of the Zone 1 mine. Detailed design work, to meet the requirements
of the Company's mining licence and to enable the physical construction of the
mine, is progressing well.
People
Aurum's management team, and Board, was strengthened in the period with the
appointment of Chris Eadie as Chief Financial Officer as announced on 17
November 2006. Chris is a Chartered Accountant whose broad financial experience,
particularly around financing and internal control, has already been of great
value to the Group.
In preparation for the construction and commissioning of the Andash Zone 1 mine,
we have expanded our management team at the Andash Mining Company (AMC), our
wholly owned Kyrgyz subsidiary, with some key appointments in general,
operational and project management and in financial control.
I would like to thank Aurum's dedicated team of staff in the UK and in the
Kyrgyz Republic and also thank the Company's consultants and other advisers for
their dedicated work throughout the year. I would also like to express my
gratitude for the valuable support from our investors.
Financials
For the year to 31 March 2007, the Group reported a loss of £1.96 million,
compared with a restated loss of £1.55 million in 2006. Cash at bank at the
balance sheet date was a healthy £28.4 million (31 March 2006: £0.3m),
reflecting February's £30 million gross fundraising. Careful cost control
remains a key priority at Aurum particularly as we begin to invest funds in the
Zone 1 mine's construction. As announced on 27 June 2007, we have successfully
identified significant savings in the forecast capital expenditure (capex) at
the mine, with the result that forecast capex is now expected to be in the
region of US$48.5 million, compared with the western feasibility study estimate
of US$55.5 million.
Future Opportunities
As we move closer to meeting our initial strategic target of bringing Zone 1 of
the Andash mine into production, the Board intends to review the potential to
diversify our asset base to grow the Group and to reduce country and political
risk.
To this end the Board will allocate time to looking at opportunities that are
complementary to Andash, whilst ensuring that operationally we maintain our
focus on delivering the Andash Zone 1 mine.
Outlook
The current year promises to be transformational for the Group. We are advanced
with the execution of our plans for the start of construction of the open cast
mine at Andash Zone 1 and look forward to initial production from the mine in
2008. In addition to becoming a near-term gold producer, Aurum has significant
exploration potential from other opportunities within the Andash licence area,
which should increase the value of our Company significantly. Metal prices are
currently strong and the outlook remains positive for the prolonged Bull Run to
continue. We look forward to the future with confidence.
Sean Finlay
Chairman
27 September 2007
CHIEF EXECUTIVE'S REVIEW
Our key objectives during the year to 31 March 2007 were the submission of the
local feasibility study for Andash Zone 1, the award of a mining licence and the
completion of a fully bankable feasibility study to enable the project financing
of the Zone 1 open-cast mine. Achieving these objectives was the focus of much
of our effort during the year, in line with our strategy of bringing Zone 1 into
production at the earliest possible date. We also made some important progress
during the year on new exploration opportunities. I am pleased to report that we
achieved our key objectives successfully and went on to raise £30 million gross
in equity to fully fund construction of the Zone 1 mine.
Post year end our effort has been focussed on preparing for the start of
construction work at the Zone 1 mine, where we have made considerable progress.
We announced in May the employment of technical and management staff at the
Andash Mining Company (AMC), and we have subsequently enlarged the AMC team in
line with our ongoing needs. The detailed design work, to meet the requirements
of the Company's mining licence, is progressing well. Construction equipment and
contractors are being sourced with key equipment already on order.
Deposits of precious and other metals tend to be located in challenging
environments as a result of weather, infrastructure, political, environmental or
technical issues. We are highly fortunate with the location of the Andash
licence area, in the Talas Valley in the North West of the Kyrgyz Republic, as
it is accessible year round. The technical and geological risks of the Andash
Project are low, in part because the Zone 1 ore body is fairly homogeneous,
close to the surface and with good geometry allowing an open-cast operation with
a low strip ratio, and high mining rates.
We have sought to minimise social or environmental problems by working closely
with the local population and have also maintained a regular dialogue with the
Kyrgyz government and authorities at local, regional and national levels.
The Talas Valley has received a lot of attention in the local media as it hosts
the Jerooy deposit, which was formerly held by Oxus Gold, as well as a number of
other exploration opportunities owned by both local and international companies.
Non-Governmental Organisations (NGOs) and other interested parties are rightly
concerned that any future mining operations minimise the impact on the local
environment and on the social structure in what is largely an agricultural area.
Media coverage, particularly around the use of cyanide, has caused concern
within the local population following the internationally reported cyanide spill
in 1998 at the Kumtor mine in western Kyrgyzstan. Although there have been
concerns within the local community about the use of cyanide, it should be noted
that it is not proposed to use cyanide for the Zone 1 mine.
Earlier this year, national government, in an initiative to reassure the local
population, requested all companies in the valley to show, through independent
assessment, that they were able to meet the highest environmental standards. As
part of our policy to work with the government we decided to rearrange our plans
and hold back on mobilising exploration and site work until July of this year.
An independent assessment by Oleg Pechenyuk from the Kyrgyz NGO, 'Independent
Ecological Experts', confirmed that our operation is designed to meet the
highest international standards. Although holding back has caused some delays,
it has not so far impacted our target of bringing Zone 1 into production in the
second half of next year. Current relationships with the Kyrgyz authorities are
good, at both national and regional level, and we do not foresee any further
disruptions to our timetable at this time.
Andash Zone 1
In June 2006, we completed the local feasibility study for Andash Zone 1 and it
was submitted for approval by the Kyrgyz authorities. This study, which covered
the economic, mining, metallurgical, legal, environmental and social issues of
the project, was prepared by Ken-Too Research and Design Centre, the leading
independent Kyrgyz mining consultancy. This study confirmed the resource
estimates previously included in the State Commission of Resources of the Kyrgyz
Republic, amounting to gold and gold equivalent of 1.5 million ounces.
This study was a key part of our application for a mining licence, which we
received from the Kyrgyz authorities in November 2006 and which underlined the
Company's good working relationship with the Kyrgyz Republic. This licence was
awarded by the State Agency for Geology and Mineral Resources of the Kyrgyz
Republic and is valid until 31 December 2017, but can be extended on the
identification of additional resources in other zones of the licence area.
Concurrent with the local feasibility study and mining licence application,
Wardell Armstrong International, the leading UK mining consultant with
particular expertise in the Former Soviet Union, was compiling the western
feasibility study to enable the project financing of the Zone 1 mine. This
study, which was prepared in association with engineering consultants GBM and
ground engineering and environmental services group Golder Associates, was
completed in December 2006.
The western feasibility study, which confirmed a JORC proven and probable
reserve at Andash Zone 1 of more than 1.1 million ounces of gold and gold
equivalent, underlined the attractive economics of the Zone 1 mine. The mine
which will be open pit, will be a low cost operation, the forecasted cash
operating costs are US$223 per ounce, well under the forecast industry average
in 2007 of US$350. The orebody, which outcrops, gives a stripping ratio of just
0.8 to 1. The pit geometry allows high production rates; the planned ore mining
rate of 2 million tonnes per annum giving a pit life of approximately 9 years.
A summary of WAI's feasibility study is available on Aurum's website.
We had been considering a number of options for the financing of the Zone 1 mine
but, given the persuasiveness of the western feasibility study, we decided to
maximise the equity component of the financing to avoid the effect of the gold
hedging demands that debt providers would almost certainly have required. Along
with our Nominated Adviser and Broker, Arbuthnot Securities, we decided to
finance the mine entirely through equity via a share placing that successfully
raised £30 million before expenses via a placing of new shares at 100p a share.
On 26 February 2007, we announced the successful result of this fundraising, the
net proceeds from which are sufficient to wholly fund the construction and
commissioning of the Zone 1 mine and to support the Company's exploration
programme in other parts of the Andash licence area. This fundraising was a
major step in the development of the Company and an endorsement of Aurum's
acquisition, in January 2005, of the Andash licence area.
A further benefit of funding the mine exclusively through equity has been our
ability to manage the project internally. In April 2007, we announced the
employment of Jeff Geissmann as Operations Director of AMC and Norman
Livingstone as Project Manager of AMC. The team was further complemented by the
employment of Andrew Howson as Financial Controller in May 2007. Using the
considerable experience of the team, particularly in mine construction and
commissioning, we have been able to eliminate the need for an external
engineering procurement and construction management contract, which would have
been required by a debt provider. In addition we have enhanced flexibility in
the sourcing of plant and equipment, which we are able to do locally.
This approach, as previously announced, has allowed us to identify significant
savings in the forecast capital expenditure of the mine, which is now expected
to be in the region of US$48.5 million compared with the western feasibility
study estimate of US$55.5 million. These capex savings will assist the Company
to advance other prospects within the Andash licence area to feasibility and
provide us with the option to look at other growth opportunities.
In the current year, we are making good progress in preparation for the start of
construction of the Zone 1 mine, and we expect to begin production in the second
half of 2008.
A decision was made by the executive team in July of this year to manage parts
of the open pit mine on a selective mining basis. This will allow us to avoid
many of the non pay dykes that are a feature of the ore body, as well as allow
us to manage the low and high grade areas to maximise recovery in the process
plant. In August this year we decided to equip the mine with a mining fleet that
provides full flexibility, so that both mass and selective mining opportunities
can be addressed. The mining fleet and all auxiliary and support equipment was
placed on order in August, with delivery scheduled for February 2008.
Final design for the new access road to site has been completed and we are
currently waiting for permission for the road build programme to start. All the
necessary road building equipment was ordered in April this year, and arrived on
schedule in August.
The detailed design phase that needs to be completed by the end of November is
on schedule, and all long lead time equipment has been identified. The
manufacturer of the two 3.7 MW Ball Mills, which is the longest lead time
component, has committed to schedule and deliver the mills to site in advance of
any critical path time line, and we are currently finalising contracts for their
purchase.
Environment
A statement of environmental impacts required by the Kyrgyz government (Stage 1
of the local environmental standard (OVOS)) has been submitted and accepted by
the regulatory authorities. Comments of independent ecological experts were
sought and relayed to AMC in July for consideration in the Stage 2 OVOS
submission. A suitable response to these comments was made by AMC in a letter to
the State Agency for Geology and Mineral Resources in August, and this was
accepted and noted by the State Agency in November 2006.
The latest information on layout and design has been transmitted to the Kupero
Bazaar authorities. Whilst no official response is required by the authorities,
at this stage, we believe that we have had a generally positive reaction to the
final design layout given in the western feasibility study.
The Stage 2 OVOS (Impact Assessment and Mitigation) will be linked in to the
Technical Design due in November 2007 and allows for further minor changes to be
incorporated.
The Environmental and Social Impact Assessment (ESIA) process led by our
consultants WAI runs on a parallel timeline to the OVOS process. Environmental
and social issues were addressed in the western feasibility study. A working
draft of the ESIA report was made available to AMC for review and comment in
June of 2007. Further work is progressing towards completing a social impact
assessment, community development programme, environmental monitoring and
management plan, mine closure and rehabilitation plan.
A final version of the ESIA will be published after receipt of permission from
the authorities and consideration of attached conditions.
The Stage 2 OVOS will include the compilation and State approval of maximum
permissible discharges, emissions and solid wastes for the construction and
operational phases of the project. These will be incorporated into the
provisions of the initial ecological passport for the project.
All environmental assessment documents and project descriptions were provided to
the Kazakh authorities (Jambal Oblast and Ministry of Environment) as required
by the UN Espoo convention of the assessment of impacts in transborder context,
in March 2007. A public meeting was held in Tarac, Kazakhstan in March 2007.
Principal concluding remarks were supportive of the project and approved
progression to detailed design and the stage 2 OVOS.
Social Impact assessment
During the review period and into the new financial year we continued to
establish good working relationships with the local population of Kupero Bazaar,
NGO's and regional and local government.
A Community Development Officer has been appointed to provide continuity in the
public participation process and to provide the main communication link between
AMC and the stakeholders.
We have held a number of public consultations: round table discussions and
public meetings, with representatives of the local communities, NGO's and local
government. Our objective of sharing information centred around the following:
•the beneficial impact for the local community from a well managed
producing mine;
•the social, economic and environmental impact the mine will have on the
local community; and
•the enhanced life style offered, by creating local job opportunities.
Key concerns shared:
•how the mining activity will affect the local environment;
•how it can be controlled;
•lack of information and understanding about the technical process of
mining.
AMC is continuing to work closely with the local community by providing
financial help for various projects. The new AMC information centre will be
opened in Kupero Bazaar in September 2007 to provide a venue for sharing
information. It will provide details of the proposed mining and processing
activity, the economic impact and the benefits it will provide to the local
community and will include a 'book of comments' that will allow individuals to
seek clarification or share concerns. This will complement the information packs
that were given to every household in the local villages in August this year.
AMC has carried out public relations activities designed to promote and
stimulate the development of the mining sector of the country, protection of the
environment, rendering assistance to vulnerable groups of the population, as
well as preserving and reviving Kyrgyz national values. AMC also participated in
the implementation of a number of projects and charity events to support
technical progress, health and education in the Talas region.
During the year AMC rendered financial support for the Council of Veterans, the
Council for Women, local government schools, kindergartens, hospitals as well as
assistance for farmers.
Exploration
Whilst our primary focus is to bring the Zone 1 deposit into production during
2008, we have also made significant progress during the year under review at the
other opportunities within the Andash licence area, which benefit from the
considerable exploration work carried out in the Soviet era.
We were particularly excited to discover a new mineralised zone, which we named
Nakhodka, which is in close proximity to Zone 1 and is a possible faulted
extension of the Zone 1 orebody. This new area shares with Zone 1 identical
bedding structures, the same host rocks and the same chemical elements both in
type and grade. Trenching results showed strong mineralisation running 9.9
metres (m) at 7.89g/t of gold and 9m at 5.04 g/t of gold, considerably higher
than results obtained in Zone 1 trenches.
Also during the period, we conducted further successful exploration work at
Tokhtonysay, which was originally discovered during the Soviet era and contains
seven outcropping mineralised zones. Four of these zones are situated within the
Andash licence area whilst the other three are within the adjacent Korgontash
licence area, which is held by Lero Gold Corporation, a subsidiary of Oriel
Resources plc.
Results from our geophysical study, announced in December 2006, were highly
encouraging. Trenching work revealed gold grades as high as 27.9g/t and copper
grades of 0.77 per cent.
The close proximity of Nakhodka and Tokhtonysay to the Zone 1 mine creates the
potential, following further drilling, to extend the mine life significantly.
Of the money raised in February, US$2 million has been allocated to the
exploration programme. At the end of August, exploration teams who will complete
a full geophysical survey of Nakhodka and start core drilling at Tokhtonysay,
were mobilised. We expect to report initial findings before the 2007 calendar
year end.
Summary
We made very considerable progress during the year under review and entered the
current year with the full funding in place to construct and commission the Zone
1 mine and to progress the other substantial opportunities within the Andash
licence area. Our immediate priority is the completion of the preparatory work
to allow the construction of the Zone 1 mine, which is on track to begin
production in the second half of 2008.
Mark Jones
Chief Executive
27 September 2007
Aurum Mining plc
Consolidated profit and loss account for the year ended 31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
Restated
Note £'000 £'000
Administrative expenses
Exceptional items 22 - (252)
Other (1,938) (1,305)
Total administration expenses and operating (1,938) (1,557)
loss
Interest receivable and similar income 4 154 21
Interest payable and similar expense 5 (175) (14)
Loss on ordinary activities before taxation (1,959) (1,550)
Tax on loss on ordinary activities 6 - -
Loss on ordinary activities after taxation (1,959) (1,550)
Retained loss for the financial year 16 (1,959) (1,550)
Loss per share - basic and diluted 18 (13.38p) (16.30p)
All amounts relate to continuing activities.
Aurum Mining plc
Consolidated statement of total recognised gains and losses for the year ended
31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
Restated
£'000 £'000
Loss for the financial year (1,959) (1,550)
Exchange translation differences (93) 14
Total recognised gains and losses for financial (2,052) (1,536)
year
Prior year adjustment- share based payments (299)
Total gains and losses recognised since last (2,351)
statements
Aurum Mining plc
Consolidated and Company balance sheets as at 31 March 2007
Group Group Company Company
Notes 2007 2006 2007 2006
Restated Restated
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 8 - 1,305 - -
Tangible fixed assets 9 5,123 263 6 8
Investments in 10 - - 3,213 665
subsidiary undertakings
----- ------- -------- --------
5,123 1,568 3,219 673
----- ------- -------- --------
Current assets
Stocks 11 184 11 - -
Debtors: amounts 12 94 85 59 26
falling due within one
year
Debtors: amounts 12 - - 2,802 1,211
falling due after one
year
----- ------- -------- --------
Total Debtors 94 85 2,861 1,237
Cash at bank and in 28,356 321 28,279 284
hand
----- ------- -------- --------
28,634 417 31,140 1,521
Creditors: amounts 13 (351) (339) (322) (257)
falling due within one
year
----- ------- -------- --------
Net current assets 28,283 78 30,818 1,264
----- ------- -------- --------
Total assets less 33,406 1,646 34,037 1,937
current liabilities
Convertible Loan Note 23 - (643) - (643)
----- ------- -------- --------
Net assets 33,406 1,003 34,037 1,294
----- ------- -------- --------
Capital and reserves
Called up share capital 14 455 95 455 95
Other reserve 16 250 304 250 304
Share premium 16 32,941 1,687 32,941 1,687
Merger Reserve 16 498 498 498 498
Shares to be issued 16 2,548 - 2,548 -
Profit and loss account 16 (3,286) (1,581) (2,655) (1,290)
----- ------- -------- --------
Shareholders' funds 17 33,406 1,003 34,037 1,294
----- -------- -------- --------
The financial statements were approved by the Board of Directors and authorised
for issue on 27 September 2007 and were signed on its behalf by:
Chris Eadie
Chief Financial Officer
Aurum Mining plc
Consolidated cash flow statement for the year ended 31 March 2007
Note Year ended Year ended
31 March 2007 31 March
2006
£'000 Restated
£'000
Net cash outflow from operating (a) (1,847) (967)
activities
------ -------
Returns on investments and servicing of
finance
Interest received and similar income 154 21
----- ------
Net cash inflow from returns on
investments and servicing of finance
154 21
------ -------
Capital expenditure
Purchase of tangible fixed assets (111) (138)
Deferred exploration expenditure (1,080) (486)
Sale of assets 2
------ -------
Net cash outflow from capital expenditure (1,189) (624)
------ -------
Cash outflow before management of liquid (2,882) (1,570)
resources & financing
------ -------
Financing
Issue of ordinary shares 32,624 -
Issue of convertible Loan Notes (net of - 947
issued costs)
Expenses paid in connection with share (1,707) -
issues
------ -------
Net cash inflow from financing 30,917 947
------ -------
Increase/(decrease) in cash (c) 28,035 (623)
------ -------
Significant non-cash transactions are as follows:
Capital expenditure:
Shares to be issued of £2,548,000 have been capitalised within mining
properties.
Financing:
From 14/11/2006 to 31/03/2007 convertible debt of £643,000 was converted into
ordinary shares.
Notes to the consolidated cash flow statement for the year ended 31 March 2007
(a) Reconciliation of operating loss to net cash outflow from operating
activities
2007 2006
Restated
£'000 £'000
Operating loss (1,938) (1,557)
Depreciation of tangible fixed assets 77 64
Loss on sale of tangible fixed assets 5 -
Share based payments 347 299
(Increase)/decrease in stocks (173) (11)
(Increase)/decrease in debtors (9) 180
Decrease/(increase) in creditors 12 58
Foreign exchange movements 7 14
Interest payable and similar expense (175) (14)
----- -----
Net cash outflow from operating (1,847) (967)
activities
----- -----
(b) Reconciliation of net cash flow to movement in the net cash
2007 2006
£'000 £'000
Increase/(decrease) in net cash in the 28,035 (623)
year
(Increase)/decrease in debt on (issue)/ 643 (643)
redemption of convertible Loan Notes
----- -----
Movement in net funds/(debt) 28,678 (1,266)
Opening net (debt)/funds (322) 944
----- -----
Closing net funds/(debt) 28,356 (322)
----- -----
(c) Analysis of net funds
At 1 April Cash flow Non cash At 31 March
2006 movement 2007
£'000 £'000 £'000 £'000
Cash at bank and in hand 321 28,035 - 28,356
Debt due after more than
one year
Convertible Loan Note (643) 643 -
-------- ------- -------- --------
(322) 28,035 643 28,356
-------- ------- -------- --------
Notes forming part of the financial statements
The financial information set out in this preliminary statement does not
comprise Aurum Mining's statutory accounts within the meaning of section 240(5)
of the Companies Act 1985. The statutory accounts of Aurum Mining for the year
ended 31 March 2007 will be delivered to the Registrar of Companies for England
and Wales following the Company's annual general meeting and have also been sent
to shareholders today. Copies will be available from the Company's registered
office at 26 Curzon Street, London, W1 7TQ, and will also be available at
Aurum's website, www.aurummining.net.
The auditors have reported on those accounts; their reports were unqualified and
did not contain statements under s237(2) or (3) Companies Act 1985.
1Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with currently
applicable Accounting Standards in the United Kingdom, which have been applied
consistently, and under the historical cost convention. In preparing these
financial statements the Group has adopted FRS20 'share-based payment' for the
first time.
Basis of consolidation
Aurum Mining Plc, together with its subsidiaries as listed in note 10, is a
mining and exploration group that is focused on opportunities in the territories
of the Former Soviet Union.
The consolidated financial statements incorporate the results of Aurum Mining
Plc and all of its subsidiaries as at 31 March 2007 using the acquisition method
of accounting. The acquisition method includes the results of subsidiary
undertakings from the date of acquisition.
The Company has taken advantage of Section 230 of the Companies Act 1985 in not
presenting its own profit and loss account. The Company's loss for the year was
£1,711,805 (2006: loss of £1,253,892 as restated).
Stocks
Stock is valued at lower of cost and net realisable value. Cost is based on the
cost of purchase on a first in, first out basis. Net realisable value is based
on estimated selling price less additional costs to disposal.
Fixed asset investments
Investments held as fixed assets are stated at cost less provision for any
impairment to their carrying value.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided to write off the cost, less estimated residual values, of all tangible
fixed assets, evenly over their expected useful lives. It is calculated on
straight line basis at the following rates:
Office and computer equipment: 20% to 33% per annum
Plant and Equipment: 20% to 33% per annum
Vehicles 33% per annum
Mining properties
Once a decision is made to proceed with the development of a mining project,
exploration and evaluation expenditure other than that on buildings, machinery
and equipment is capitalised under tangible fixed assets as mining properties,
together with any amount transferred from unevaluated mining properties. Mining
properties are amortised over the estimated life of the reserves on a 'unit of
production' basis.
Unevaluated mining properties
All costs associated with mining development and investment 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. When a decision is made to proceed to
development, the related expenditures will be transferred to mining properties.
Where a licence is relinquished, a project is abandoned, or is considered to be
of no further commercial value to the company, the related costs will be written
off.
The recoverability of deferred mining costs and mining interests is dependent
upon the discovery of economically recoverable reserves, the ability of the
company to obtain necessary financing to complete the development of reserves
and future profitable production or proceeds from the disposition of recoverable
reserves.
Costs on productive areas are amortised over the life of the area of interest to
which such costs relate on a unit of production output basis.
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount.
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.
Impairment losses of continuing operations are recognised in the profit and loss
account in those expense categories consistent with the function of the impaired
asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognised. If that is the case the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation or amortisation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the profit and loss
account. After such a reversal the depreciation or amortisation charge is
adjusted in future periods to allocate the asset's revised carrying amount, less
any residual value, on a systematic basis over its remaining useful life.
Environmental provisions
Appropriate and adequate provision is made for rehabilitation costs over the
estimated period of exploration activity. As at 31 March 2007 no environmental
damage had occurred and hence no provision has been made.
Operating leases
Amounts payable under operating leases are charged against income on a
straight-line basis over the lease term.
Foreign currency transactions
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at the rate of
exchange ruling at the date of the transaction. Exchange differences are taken
to the profit and loss account as they arise. Results of overseas subsidiaries
and their balance sheets are translated at year end rate. Exchange differences
which arise from the translation of the opening net assets of foreign
subsidiaries are taken to reserves.
Deferred Taxation
FRS 19 'Deferred tax' requires deferred taxation to be recognised in full in
respect of transactions or events that have taken place by the balance sheet
date and which could give rise to an obligation to pay more or less taxation in
the future. Deferred tax assets are only recognised to the extent they are
deemed recoverable. The Group has chosen not to discount deferred tax balances,
as permitted by FRS 19.
National Insurance on share options
To the extent that the share price as at balance sheet date is greater than the
exercise price of outstanding options, provision for any National Insurance
contributions has been made based on the prevailing rate. The provision is
accrued over the performance period attaching to the award.
Convertible Debt
In accordance with FRS4 and FRS25, the company has classified the convertible
debt in issue as a compound financial instrument. Accordingly, the Company
presents the liability and equity component separately on the balance sheet. The
classification of the liability and equity component is not reversed as a result
of a change in the likelihood that the conversion option will be exercised. No
gain or loss arises from initially recognising the components of the instrument
separately. Interest on the debt element of the loan is accreted over the term
of the loan. Costs associated with raising debt are set off against the gross
value of monies received.
Financial instruments
In relation to the disclosures made in note 19:
short term debtors and creditors are not treated as financial assets or
financial liabilities except for the currency disclosures; and
• the Group does not hold or issue derivative financial instruments for
trading purposes.
Liquid resources
For the purposes of the cash flow statement, liquid resources are defined as
short term deposits.
Share-based payments
The cost of equity-settled transactions with suppliers of goods and services is
measured by reference to the fair value of the good or service received, unless
that fair value cannot be estimated reliably. The fair value of the good or
service received is recognised as an expense as the Group receives the good or
service. The cost of equity-settled transactions with employees, and
transactions with suppliers where fair value cannot be estimated reliably, is
measured by reference to the fair value of the equity instrument. The fair value
of equity-settled transactions with employees is recognised as an expense over
the vesting period. The fair value of the equity instrument is determined at the
date of grant, taking into account market based vesting conditions. The fair
value is determined using an option pricing model.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions, the
number of equity instruments that will ultimately vest, or in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement, with a corresponding entry in equity.
Adoption of FRS 20 - Share- Based Payment
The Group has adopted Financial Reporting Standard (FRS) 20 'Share-based
Payment' during the year. The adoption of this standard constitutes a change in
accounting policy. Therefore, the impact has been reflected as a prior year
adjustment in accordance with FRS 3 'Reporting Financial Performance'.
The standard requires that where shares or rights to shares are granted to third
parties, including employees, a charge should be recognised in the profit and
loss account based on the fair value of the shares at the date the grant of
shares or right to shares is made.
The adoption of FRS 20 has resulted in a net increase in the loss for the year
of £347,312 and for the year ended 2006 the net increase in the loss was
£298,799.
There is no impact on the net assets of the Group.
The share-based payments expense has been included in the administrative
expenses line of the consolidated profit and loss account.
4 Net interest receivable and similar income
Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Bank interest receivable 154 10
Exchange gains - 11
------ ------
154 21
------ ------
5 Interest payable and similar expense
Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Interest payable on convertible Loan Notes 107 14
Exchange losses 68 -
------ ------
175 14
------ ------
6 Taxation
No current or deferred tax charge has arisen in the current year.
The Company and the Group have incurred tax losses for the year and a
corporation tax charge is not anticipated. The potential benefit of these
carried forward taxation losses calculated at the rates of tax prevailing in the
countries in which the losses were incurred amount to approximately £479,000.
This amount has not been recognised in the financial statements as the recovery
of this benefit is dependent on the future profitability of certain
subsidiaries, the timing of which cannot be reasonably foreseen.
The Directors believe that there have been no breaches of foreign tax
regulations and that all necessary provisions have been made in these accounts.
The tax assessed for the year is different than the standard rate of corporation
tax in the UK. The differences are explained below:
Year ended Year ended
1 March 31 March
2007 2006
Restated
£'000 £'000
Loss on ordinary activities before 1,959 1,550
taxation
------- ------
Loss on ordinary activities at the (465)
standard rate of corporation tax in the
UK of 30% (2006: 30%) (588)
Effects of:
Expenses not deductible for tax 109 95
purposes
Unutilised tax losses carried forward 479 370
------- ------
Current tax charge - -
------- ------
8 Intangible assets
Unevaluated
mining properties
Group
£'000
Cost
As at 1 April 2006 1,305
Foreign currency re-translation (70)
Additions during the year 3,628
Transfer to mining properties (4,863)
--------
At 31 March 2007 -
--------
Net book value -
At 31 March 2007
--------
At 31 March 2006 1,305
--------
The Company had no intangible assets at 31 March 2007 or at 31 March 2006.
9 Tangible fixed assets
Office and Plant, Mining Total
computer equipment Properties
equipment and vehicles
Group £'000 £'000 £'000 £'000
Cost
At 1 April 2006 30 299 - 329
Foreign currency (2) (34) - (36)
re-translation
Additions 7 104 - 111
Disposals - (10) - (10)
Transfer from - - 4,863 4,863
unevaluated mining
properties
---- ------ ----- ------
At 31 March 2007 35 359 4,863 5,257
---- ------ ----- ------
Depreciation
At 1 April 2006 9 57 - 66
Foreign currency - (6) - (6)
re-translation
Charge for the year 7 70 - 77
Disposals - (3) - (3)
---- ------ ----- ------
At 31 March 2007 16 118 - 134
---- ------ ----- ------
Net book value 19 4,863 5,123
At 31 March 2007 241
---- ----- ------
------
At 31 March 2006 21 242 - 263
---- ------ ----- ------
9 Tangible fixed assets (Continued)
Office and
computer
Company equipment
£'000
Cost
At 1 April 2006 13
Additions 1
--------
At 31 March 2007 14
--------
Depreciation
At 1 April 2006 5
Charge for the year 3
--------
At 31 March 2007 8
--------
Net book value 6
At 31 March 2007
--------
At 31 March 2006 8
--------
10 Fixed asset investments
Investments
in subsidiary
Company undertakings
£'000
Cost
At 1 April 2006 665
Additions 2,548
--------
At 31 March 2007 3,213
--------
The Company had the following subsidiary undertakings at the end of the year
which has been included in the consolidated financial statements:
Percentage Country Activity
interest of incorporation
Kaldora Company Limited 100 British Virgin Holding company
Islands
Andash Mining Company 100 Kyrgyz Republic Mining and exploration
11 Stocks
Group Group Company Company
Year Year Year Year
ended ended 31 March ended ended
31 March 2006 31 March 2007 31 March 2006
2007
£'000 £'000 £'000 £'000
Raw materials and 184 11 - -
consumables
------- ------ -------- --------
12 Debtors
Group Group Company Company
Year Year Year Year
ended ended 31 March ended ended
31 March 2006 31 March 2007 31 March 2006
2007
£'000 £'000 £'000 £'000
Amounts falling due
within one year:
Other debtors 32 38 - -
Prepayments and accrued 62 47 59 26
income
------- ------ -------- --------
94 85 59 26
------- ------ -------- --------
Amounts falling due
after more than one
year:
Amounts owed by - - 2,802 1,211
subsidiary undertakings
------- ------- -------- --------
Total debtors 94 85 2,861 1,237
------- ------ -------- --------
Amounts owed by subsidiaries are unsecured, interest free and fall due for
repayment in 2008.
13 Creditors: Amounts falling due within one year:
Group Group Company Company
Year Year Year Year
ended ended ended ended
31 March 31 March 31 March 31 March
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Trade creditors 11 170 7 143
Other creditor - 6 - -
Other taxation and 46 5 38 2
social security
Accruals and deferred 294 158 277 112
income
------ ------ -------- --------
351 339 322 257
------ ------ -------- --------
14 Share capital
Authorised
2007 2006 2007 2006
Number Number £'000 £'000
Ordinary shares 200,000,000 200,000,000 2,000 2,000
of 1p each
Allotted, issued and fully paid
2007 2006 2007 2006
Number Number £'000 £'000
Ordinary 45,467,005 9,505,775 455 95
shares of 1p
each
On 25 April 2006, 81,915 ordinary shares of 1p were allotted at 47 pence per
share to W H Ireland on the exercise of share options.
On 12 May 2006, 2,777,778 ordinary shares of 1p were issued at a premium of 89
pence for cash.
From 14 November 2006 to 31 March 2007, 2,857,135 ordinary shares of 1p were
allotted following the conversion of Loan Notes of £1,000,000 issued on 15
February 2006 at the previously agreed conversion price of 35 pence per share.
On 28 February 2007, 30,000,000 ordinary shares of 1p were issued at a premium
of 99 pence for cash.
On 31 March 2007, 244,402 ordinary shares of 1p were allotted following the
conversion of accrued interest on Loan Notes issued on 15 February 2006 at the
previously agreed conversion price of 35 pence per share.
16 Reserves
Group Merger Other Share Profit and Shares to
reserve reserve Premium loss account be issued
£'000 £'000 £'000 £'000 £'000
At 1 April 2006- as 498 304 1,687 (1,581) -
restated
Loss for the year - - - (1,959) -
Share based payments - - - 347
Equity proportion of
convertible Loan Notes
- (54) - - -
Exchange differences on - - - (93) -
retranslation
Issue of 81,915 shares
following exercise of
share options - - 38 - -
Issue of 2,777,778
shares at a premium of
89 pence - - 2,472 - -
Issue of 30,000,000
shares at a premium of
99 pence - - 29,700 - -
Share issue costs - - (1,707) - -
Issue of 3,101,537
shares following
conversion of Loan Notes
and accrued interest
- - 751 - -
Shares to be issued - - - - 2,548
------ ------ ------- ------- -------
At 31 March 2007 498 250 32,941 (3,286) 2,548
------ ------ ------- ------- -------
Shares to be issued represent the further consideration payable at year end for
the acquisition of Kaldora Company Limited. Per the acquisition agreement, the
further consideration of US $5 million was to be satisfied in shares. The issue
of shares was completed on 24 April 2007, refer to note 24 for more details.
16 Reserves (continued)
Company Merger Other Share Profit and Shares to
reserve reserve Premium loss account be issued
£'000 £'000 £'000 £'000 £'000
At 1 April 2006- as 498 304 1,687 (1,290) -
restated
Loss for the year - - - (1,712) -
Share based payments - - - 347
Equity proportion of
convertible Loan Note
- (54) - - -
Issue of 81,915 shares
following exercise of
share options - - 38 - -
Issue of 2,777,778
shares at a premium of
89 pence - - 2,472 - -
Issue of 30,000,000 -
shares at a premium of
99 pence - - 29,700 -
Share issue costs - - (1,707) - -
Issue of 3,101,537
shares following
conversion of Loan Notes
and accrued interest
- - 751 - -
Shares to be issued - - - - 2,548
------ ------ ------- ------- -------
At 31 March 2007 498 250 32,941 (2,655) (2,548)
------ ------ ------- ------ -------
17 Reconciliation of movement in equity shareholders' funds
Group Group Company Company
Year Year Year ended Year ended
ended ended 31 March 31 March
31 March 31 March Restated
Restated 2007 2006
2007 2006 £'000 £'000
£'000 £'000
Loss for the year (1,959) (1,550) (1,712) (1,254)
Issue of ordinary shares 32,678 - 32,678 -
Expense of share issue (1,707) - (1,707) -
Convertible Loan Note 643 - 643 -
conversion
Share based payments 347 299 347 299
Shares to be issued 2,548 - 2,548 -
Equity proportion of (54) 54 (54) 54
convertible Loan Note
Exchange differences on (93) 14 - -
retranslation
Issue of warrants - 250 - 250
-------- -------- -------- --------
Addition/(reduction) in 32,403 (933) 32,743 (651)
shareholders' funds
Opening shareholders' 1,003 1,936 1,294 1,945
funds
-------- -------- -------- --------
Closing shareholders' 33,406 1,003 34,037 1,294
funds
-------- -------- -------- --------
18 Loss per ordinary shares
The calculation of loss per share of 13.38 pence (2006: 16.30 pence as restated)
is based on the loss for the year of £1,959,000 (2006: £1,550,000 as restated)
and on the weighted average number of shares in issue during the year of
14,645,392 (2006: 9,505,775).
Due to the losses incurred during the year a diluted loss per share has not been
disclosed as this would serve to reduce the basic loss per share.
There are options and warrants outstanding at the end of the year that could
potentially dilute basic earnings per share in the future. These are detailed in
note 15.
22 Exceptional items
On 7 December 2004 the Company entered into an agreement with Geocentr whereby
the Company agreed to make available a facility of up to $170,000. The loan
carries an interest rate of 5% and was due for repayment not later than 31 March
2006. The amount lent to Geocentr was £89,366. The purpose of the Loan was to
enter into a strategic relationship with a view to acquire a substantial equity
stake in Geocentr. The acquisition of Geocentr could not be completed within the
conditional agreement's terms and therefore was terminated. As part of the
conditional agreement entered into with Loyal Wealthy, it was agreed that the
benefit of an outstanding loan of £89,366 to Geocentr would be assigned to Loyal
Wealthy.
On 3 August 2004 the Company entered into an agreement with Power Products
International ('PPI') under which the Company would make available to PPI an
interest free loan of up to £163,000 to assist in the refurbishment of a
drilling rig owned by PPI in consideration for the right to require PPI to carry
out drilling into the last quarter of 2005. The debt is to be repaid by the
provision of drilling services at the Andash mine in Krgyzstan to the Company at
cost price. Following repayment of the debt the Company will have the right to
require PPI to carry out drilling in Central Asia at any time of year for three
years on three months notice at a discounted rate of 120% of cost.
The Board made full provision in the 2006 accounts against the above loans due
to uncertainty regarding the eventual recovery of the balances outstanding.
23 Convertible Loan Notes
Group Group Company Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
------- ------ -------- --------
Convertible Loan Notes - 643 - 643
------- ------ -------- --------
During the prior year, Loan Notes with a par value of £1,000,000 were issued for
cash (being £1 per Loan Note) on 15 February 2006 (the 'Commencement Date'). The
Loan Notes were secured on the Group's interest in the Andash Project.
Interest was payable on the Loan Notes from the Commencement Date to the earlier
of the date of redemption or the date of conversion. Interest was accrued at 11%
until the first anniversary of the Commencement Date and thereafter at 10 per
cent per annum.
The Loan Notes were convertible at the lesser of 35p per ordinary share and the
price at which any fundraising took place. The ordinary shares so issued rank
pari passu in all respects with the existing ordinary shares in issue.
Each Loan Note holder received one warrant entitling him to subscribe for 1
ordinary share (each a 'Warrant') for each £1 of Loan Notes subscribed for. The
Warrants, which are transferable (in whole or in part) are exercisable at 45p
per share at any time prior to 15 February 2016. The ordinary shares to be so
issued will rank pari passu in all respects with the existing ordinary shares in
issue.
In accordance with the provisions of FRS4 and FRS25, the Company treated the
simultaneous issue of the convertible Loan Notes and warrants as a composite
financial instrument. The Company apportioned the proceeds of the loan based
upon the fair value of the loan and the fair value of the warrants issued and as
a result £53,850 of the proceeds from the loan was classified as equity. Costs
incurred on raising the loan amounts of £53,252 were set against the loan
amount.
From 14 November 2006 to 31 March 2007, all of the Loan Notes were converted as
was accrued interest of £86,000 into ordinary shares. This resulted in the issue
of 3,101,537 ordinary shares of 1p at the conversion price of 35 pence per
share.
24 Post balance sheet events
As part of the acquisition of Kaldora, the Company agreed to pay US$5 million in
deferred consideration to the vendors of Kaldora Company Limited. The
consideration was settled by the Company issuing 2,500,000 ordinary shares of 1p
at a fixed price of US$2 per share on 24 April 2007 as follows:
• 1,500,000 ordinary shares to Kantanna Company Ltd, a company controlled
by Oleg Kim, the former General Director of the AMC
• 500,000 ordinary shares to Jake Consultants Ltd, a company controlled by
David Bryans, a consultant to Aurum.
• 500,000 ordinary shares to John Webster, Non-Executive Director of the
Company.
Aurum Mining Kazakhstan LLP was incorporated on 26 April 2007. The Company has
been set up for the purpose of assisting the Group in reviewing potential
investment opportunities in Kazakhstan, which neighbours the Kyrgyz Republic.
John Webster, a Non-Executive Director of the Company has agreed to be
contracted directly to supply consulting and engineering services to the Company
and as such he is expected to play a key role in the construction of the Andash
mine. In order to allow Mr Webster to fulfil this role, he stepped down from the
Board of the Company on 1 May 2007.
In September 2007, AMC entered into a contract to acquire the entire mining
fleet for the Andash Zone 1 mine. The total value of the contract was US$7
million. The assets acquired include all the excavators, haul fleet, bulldozers,
graders and support vehicles required for the mine.
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