Final Results
African Consolidated Resources Plc ('African Consolidated' or the
'Company')
Final Results
African Consolidated is pleased to announce its final results for the
13 month period ended 31 March 2009.
The Company's Annual Report is also available for download from the
Company's website www.acrplc.com. Copies will be distributed to
shareholders shortly.
Enquiries:
African Consolidated Resources plc +44 7920 189010
Andrew Cranswick +44 1622 816918 / +44 7920 189012
Roy Tucker
Ambrian Partners Limited
Richard Brown +44 20 7634 4700
Richard Greenfield
Chief Executive Officer's report
Introduction
I doubt that many resource companies exist in an environment where
the market considers geology and economics of projects barely
relevant, overshadowed by an overriding focus on national politics.
Of course there is a positive side to such a market obsession, being
the ability to quietly progress ambitious scales of exploration in a
bountiful geological terrain, at low costs and with little
competition to speak of. Such has been the nature of our operations
and the nature of global abstinence from the Zimbabwean mineral
exploration opportunity that we are continually amazed by the
untouched and unstudied deposits that we stumble across. This report
must therefore accept this unavoidable political scenery as its
backdrop, observe what it has meant and reflect on where Zimbabwe is
headed as a nation and therefore we as a company, while paying due
attention to alarming global economics.
Strategy and Politics
Before I review our many and varied projects, a reminder of our past
strategy is in order to place the current state of affairs and the
future vision into perspective. This will be especially useful for
new entrants to our share register which has changed somewhat in the
past year. Most junior explorers get their teeth into one or two
projects and advance them as far as possible for as small an outlay
as possible. Blue-sky prospects are set aside and ignored with a
faint hope of one day returning to develop them further. Given the
level of inherent actual risk, with due recognition of the market's
perception of higher risk associated with investment in Zimbabwe, our
strategy was necessarily different to the traditional one.
ACR has used its Zimbabwean management structure and in-country
know-how to assess large areas of the highly prospective region for
economic mineral deposits. Like any modern exploration company a
standard methodology is followed. Targeting includes the latest
techniques in broad geochemistry, geophysics and satellite imaging.
Identified targets are narrowed down to the next level with more
detailed work in all the spheres as well as on-ground truthing and
mapping. Third stage targets attract more detailed mapping to
qualify as definite assets. Development work on each asset is
thorough and includes detailed geochemistry, detailed mapping, and
low-level airborne magnetic + radiometrics and in some cases IP and
electromagnetic work. Exploratory drilling will follow dependent
upon results. In a few cases further drilling will be undertaken to
partly define JORC compliant resources.
Up to this point all is familiar, but from here, in the high-risk
domain of the recent past, our strategy diverged from the standard.
Progressing deposits to a pre-feasibility is a costly affair. The
next step to feasibility more so. To expend shareholder funds to
that stage requires a lower risk factor than that in play in the
recent past. Consequently, in this high-risk, low-cost, environment
with limited competition, we concentrated more on spreading the net
wide and developing more and varied projects. This might in other
environments have been a questionable game plan, but it was part of
our stated intent from the outset. Our successes to date speak for
themselves and the diversity in our mineral portfolio has provided a
much-needed resilience to our underlying asset value in this
recessionary vortex.
My Board and I believe that the Zimbabwe political landscape is now
changing and the forthcoming evolution of our strategy will reflect
new realities. This is tempered with the new realities of the world
in recession, and that factor too is a part of the equation as
described below.
Zimbabwe has seen turbulent times, especially in the past eighteen
months. In the past six months extraordinary progress has been made
to stabilise the national politics and the economy of the country.
Inflation has been dealt the fatal blow that came with dollarization
- ranging from immeasurable figures loosely estimated in the billions
of percentiles to what is now registered at approximately 1 to 4 %
depending on criteria. Scarcely a week goes by without a
Zimbabwe-focused investment conference in South Africa, Harare or
London. It is increasingly difficult to find a seat on the 7 daily
airline flights from Johannesburg to Harare. It is the world's
newest hard-currency economy. We have been inundated with approaches
from international companies looking for an entrance to the Zimbabwe
mineral opportunity. Taxes on mining companies have been slashed,
royalties rationalised and gold sales deregulated. We have switched
from the world's fastest shrinking economy to one of the few with a
projected GDP growth. These are extraordinary times. Bitter party
rivals joke over tea and coffee in Parliament before resuming lively
and productive debates. Bi-partisan parliamentary committees have
reinvented themselves and appear to have a common purpose of national
success. The IMF and World Bank have engaged and are mapping ways to
normalise Zimbabwe's status. Although the country is by no means yet
out of the woods I am cautiously optimistic that we may be
approaching a prosperous and peaceful future.
In this transition that we find ourselves, I reiterate that our
thinking is evolving to keep pace with these exciting developments.
As such we have begun to advance plans towards profitable gold
production to fund resource definition and feasibility studies on
further gold projects. We have opened up discussions on strategic
partnerships as described below and hope to bring news in this regard
to the market during 2009.
Global Economics and Impact on ACR
Following the global economic downturn and after the market bottomed,
we went to the market for an additional capital raising and the issue
was oversubscribed. We resisted the temptation to accept too great a
dilution and this judgement proved correct as the share price has
recovered along with the overarching indices.
More importantly, the dawn of the new reality of a global cash crunch
is that the market will down-value exploration properties and that
new capital comes at a heavy price to existing shareholders.
Clearly, companies such as ours need a revenue stream to fund
exploration. Couple our measured tailings resource and the recent
deregulation of gold sales in Zimbabwe, and we did not have far to
look for a solution.
Project Synopses
Gold
As mentioned above, the Zimbabwe Government has deregulated gold
sales and recently fixed gold royalties at 3% and corporate tax for
miners at 15%. This is a good environment for gold production.
Note that ACR's metal mining strategy remains the definition of large
ore bodies, progress to pre-feasibility study or bankable feasibility
study (BFS), and then seal a partnership with mid-tier or major
mining companies leading to subsequent large scale production. In
the first such cycle this would normally require continuous capital
raisings to achieve BFS. However, depressed share prices due to the
world market and local political climate would, in this traditional
model, imply significant dilution to existing ACR shareholders.
Fortunately there is an alternative and that is to advance to
modest-volume, low-cost, high-return production to fund the remainder
of the first of these cycles.
Discussions with an operator to produce gold from the Pickstone
sulphide concentrate dump are at an advanced stage and await
finalisation of metallurgical testing. The operator is expected to
furnish the plant, guarantee performance on percentage extraction and
charge a toll-fee per tonne. ACR is hopeful of finalising an
agreement in Q3 2009 and entering production and profitable cash flow
in the first half of 2010. In addition, scoping studies are underway
on the Peerless trend for a medium size open cast operation on the
Peerless oxides. Use will be made of existing infrastructure
including CIP tanks capable of processing 62,000 tonnes of ore per
month. Further progress reports on this facet will be made public in
due course.
Proceeds from the above production will be used to advance the
Concession Hill, Giant Mine, One-Step and Blue Rock gold deposits
towards a pre-feasibility stage whereupon partners will be sought to
complete BFS and capitalise large-scale plants to production.
Exploration on the Chakari-North greenstone belt has yielded several
exciting geo-chemical anomalies that will be followed up with a view
to defining potential drill targets. This is a previously unexplored
stretch of greenstone belt, which lies on the well mineralised Lily
Shear zone.
Diamonds
The Marange diamond field has been topical in the world news of late
and operations on the ground there by the Army and others have led to
a recent visit by the Kimberley Process review team. It would appear
that this has resulted in dissatisfaction with the status-quo. ACR
has stressed to the Kimberley Process team that tenure needs to be
resolved for formal mining and thereby Kimberley Process compliance
can be achieved. ACR management and staff are attempting to work
with all elements of the Zimbabwean Government to resolve the current
title impasse and thereby avoid an outright ban on Zimbabwean
diamonds. ACR is ready and willing to enter production on its mining
claims in the area as soon as control of these is returned to the
company. ACR has offered the Zimbabwean Government equity
partnership in this venture and awaits a response. The Board remains
hopeful that good sense will prevail and the deposit can be exploited
for the good of all Zimbabweans.
Exploration on diamonds elsewhere in Zimbabwe continues following up
information derived from the extensive diamond database acquired in
September 2008.
Platinum
ACR intends to complete limited drilling on the newly discovered
Northern facies of the Snakes Head PGM deposit within the Great
Dyke. Early mapping results indicate that this may be a high-grade
platinum zone. Discussions have commenced with a possible partner to
earn in on exploration spending to complete further drilling.
Phosphate
While industrial metals are subject to the vagaries of world economic
cycles, earth's rapidly growing population still needs to eat.
Current economic phosphate Reserves of 15 billion tonnes are
estimated to last about 90 years at current use rates (Scientific
American, June 2009). However consumption is likely to increase as
population increases, and new demand from bio-fuel agriculture is
likely to add substantial further demand pressure on phosphate
supply. There is no replacement for phosphate in crop growth.
Eighty three percent of the world's reserves are concentrated in just
four countries; Morocco (40%), US, China and South Africa. The USA,
the largest consumer by far, is a net importer as its production does
not meet its agricultural requirements.
Rock phosphate is used in the manufacture of fertiliser and so is
directly linked to the production of food and bio-fuels. Although
now well below their peak, prices have risen sharply in the past 18
months.
ACR recently started a resource estimation process over part of the
Chishanya carbonatite complex under licence to ACR in south-eastern
Zimbabwe. As recently announced a detailed soil geochemistry
programme was followed by a surface outcrop sampling programme that
has to date defined an arc of apatite mineralisation some 10 hectares
in surface expression. In-house X-ray Fluorescence (XRF) analysis
grades the apatite between 5% and 19% phosphate (expressed in the
form P2O5 - Phosphorous Pentoxide) with an average grade of 11%. The
body appears to rise vertically through a steep hill of 85 metres in
height and it is expected that it would continue to depth well below
the hill. Should the width and grades prove consistent, a
significant tonnage of ore would be inferred. The Company intends to
have independent assays conducted as check samples and, subject to
results, will plan a drilling programme in order to arrive at an
estimate of economically mineable tonnage. Thereafter the Company
may opt to define a JORC-compliant resource on the deposit. The site
is close to main road (25km), water (1km) and electricity (10km).
Should economic volumes and grade achieve a critical mass, ACR intend
to advance the project to production as a priority. This will
involve scoping the economics of building a flotation plant on site
to produce a > 35% rock phosphate concentrate.
Nickel & Copper
ACR holds two important nickel projects - the Horseshoe laterite
project and the Perseverance sulphide project.
Preliminary metallurgical test trials have indicated that the
laterite deposit is amenable to atmospheric leaching with nickel
extractions of >90% achieved in less than 40 days. Head grades
averaged 0.88% Ni with no beneficiation. Based on initial pit
sampling results ACR estimates this resource to contain over 20
million tonnes of saprolitic laterite grading from 0.5 to 5%,
averaging 1% Ni. The site is within 120 kilometres of Harare, is
20kms from wide, good condition bitumen road, 5kms from electricity
supply and has nearby water sources. The ore is at surface and
consists mostly of a two-metre deep layer over a range of hills,
reducing the complexity and cost of mining, with the possibility of
gravity assisted delivery of ore to plant at the foot of the hills.
Several local sources of sulphuric acid are potentially available
including a large pyrite deposit held by ACR in Zimbabwe as well as a
more proximal resource of pyrite in friendly hands. Preliminary
discussions have commenced in this regard.
While several drill targets have already been defined along 30% of
the strike of the Perseverance ultramafic sill near Chakari in the
northern midlands of Zimbabwe, there remains a likelihood that
further targets will be identified along the remaining strike using
geochemistry and electro-magnetic survey techniques. Due to the
dramatic drop in nickel prices over the past 12 to 18 months, ACR has
postponed drilling and any large expenditure here with work confined
to mapping and some trench sampling. The Board remains highly
optimistic on this prospect and intends to advance it more
aggressively once the nickel prices have recovered and stabilised
sufficiently.
A further prospect (Ni, Cu & PGM's) was defined in 2008 and claims
have been pegged along what is thought to be the northern extent of
the Tati Nickel belt which extends into Zimbabwe from Botswana.
Mapping and geochemistry will be undertaken on this prospect during
the course of 2009.
A hill containing wide surface expressions of copper oxides has been
identified and acquired north of Harare in a proterozoic basin
(Makonde) that is similar in geology to the Zambian and Congolese
copper belts. Major historical copper mines occur along strike to
the north. Surface samples indicate grades of 1% to 9% Cu.
Interpretation by suitable experts is encouraging and ACR intends to
complete several exploration holes to define grade, width and likely
extent of the deposit.
Zambia & Mozambique
Three large scale prospecting licenses have been granted to ACR in
Zambia - variously prospective for copper, gold, diamond and
phosphate mineralisation. First pass evaluation will provide
indications of prospectivity, and thereafter partnership offers will
be invited and evaluated. In Mozambique, an MOU has been finalised
with local partners and first pass targeting is complete. Should
sufficient time and funding become available, this exercise will
progress to the next phase.
I must stress however that, given the climate of change and progress
in Zimbabwe coupled with the desire not to dilute our capital base
unnecessarily, the Board has logically decided that for at least the
short to medium term future, most of our effort and cash should be
focused on maximising our established advantage on the ground in
Zimbabwe.
Conclusion
ACR was incorporated for the primary purpose of gaining first-mover
advantage in Zimbabwe. This we have achieved. With the ambition and
breadth of scope in exploration undertaken during troubled times in
both this extraordinary country and this extraordinary decade, we
never pretended the road would be one easily travelled. Indeed we
have been through some trying and painful times. Yet all the while
we have never lost focus on the target, never been distracted from
our goal by any one crisis, regardless of its magnitude, and most
importantly of all we have never become disheartened and
disillusioned by seemingly insurmountable obstacles to progress. I
believe the Board, management team and staff have shown courage under
fire and outstanding skill in managing the assets of, and the risks
to, this Company. I therefore use this opportunity to congratulate
them and ask them to see us through these final miles with the same
professionalism and determination.
Finally, as a corporate and personal citizen, I would also like to
congratulate the diametrically opposed political parties of Zimbabwe
for achieving the Government of National Unity. Regardless of wrongs
and rights, acts of compromise from strongly defended positions of
ideology and power should be respected and admired. Evolution of
political change is always preferable to revolution, but somehow is
actually more difficult. The protagonists have come together for the
national good and, however imperfect it may appear, I hope that this
becomes increasingly supported, guided and rewarded by the
international community.
Andrew N Cranswick
CEO
The technical information contained in this report has been reviewed
by Mr. Michael Kellow (the Company's Technical Director). Michael
Kellow (BSc) is a member of the Australian Institute of Geoscientists
(AIG) and a full-time employee of African Consolidated Resources Plc.
Mr Kellow has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the 'Australian Code for Reporting of
Exploration Results, Mineral Resource and Ore Reserves' (JORC Code)
and the AIM Guidance Note for Mining, Oil and Gas Companies. Michael
Kellow consents to the publication of this report.
Report of the directors
for the 13 month period ended 31 March 2009
The directors present their report together with the audited
financial statements for the 13 month period ended 31 March 2009.
Results and dividends
The group income statement is set out on page 10 and shows the loss
for the period.
The directors do not recommend the payment of a dividend.
Principal activities, review of business and future developments
The Group is engaged in the exploration for and development of
mineral projects in Sub- Saharan Africa. Since incorporation the
Group has built an interesting portfolio of projects in Zimbabwe.
The directors consider the Group's key performance indicators to be
the rate of utilization of the Group's cash resources and the
on-going evaluation of its exploration assets. These are detailed
below.
Cash Resources
As can be seen from the balance sheet, cash resources for the group
at 31 March 2009 were approximately £1.5 million (2008: £4.1
million). During the period the cash outflows from operations were
£1,018,726 (2008: £831,354) and from investing activities was
£2,231,850 (2008: £928,028). There was expenditure of some
£2.2million on capital assets the major part of which consisted of
deferred exploration costs. The net monthly cash expenditure in the
year to March 2009 was approximately £226,000. This figure reflects
some reduction achieved in overheads and the fact that recent
exploration emphasis has been on relatively low cost geochemical and
geophysical work.
On the basis of a monthly cash overhead cost of £130,000, the cash
balance of the Group at the beginning of June 2009, following the
post balance sheet fundraising event (refer below), allows
significant head room for discretionary expenditure on exploration in
the coming year.
Evaluation of Exploration Areas
The Group has licences or claims over a significant number of
discrete areas of exploration. It is the Group's policy for the
Board to review progress every quarter on each area in order to
approve the timing and amount of further expenditure or to decide
that no further expenditure is warranted. If no further expenditure
is warranted for any area then the related costs will be written off.
The board measures progression in each of its claim areas based on a
number of factors including specific technical results, international
commodity markets, claim holding costs and economic considerations
Risks
The principal risks and uncertainties facing the Group are the normal
ones inherent in carrying out exploration. Exploration for natural
resources is speculative and involves significant risk. Drilling and
operating risks include geological, geotechnical, seismic factors,
industrial and mechanical incidents, technical failures, labour
disputes and environmental hazards. In addition the Group faces
particular country risks due to the fact that almost all of its
operations are currently in Zimbabwe where there is political and
economic uncertainty. These country risks are further addressed in
Note 1 to the Financial Statements.
Financial instruments
Details of the use of financial instruments by the Company and its
subsidiary undertakings are contained in note 19 of the financial
statements.
Charitable and political contributions
During the year the Group made charitable contributions of £22,230
(2008 - £23,497).
The Group made no political contributions during the current period
or prior year.
Policy and practice on the payment of creditors
The Group's policy is to settle terms of payment with suppliers when
agreeing terms of business, to ensure that suppliers are aware of the
terms of payment and to abide by them. It is usual for suppliers to
be paid within 30 days of receipt of invoice.
The number of average days purchases of the Company represented by
trade creditors at
31 March 2009 was 19 days (2008 - 57 days).
Directors
The directors who served during the year and up to the date
hereof were as follows:-
Date of Appointment Date of Resignation
Stuart Bottomley 27.05.05 -
Andrew Cranswick 12.04.05 -
Michael Kellow 22.03.06 -
Roy Tucker 05.04.05 -
Ian Fisher 12.04.05 31.03.08
Directors' interests
The interests in the shares of the Company of the Directors who
served during the year were as follows:-
Ordinary Share Ordinary Share
Shares Options Shares Options
held at 31 held at 31 held at 29 held at 29
March March February February
2009 2009 2008 2008
of 1p each of 1p each
Stuart Bottomley 1,376,000 4,650,000 1,376,480 3,650,000
Andrew Cranswick 7,450,000 9,115,000 5,400,000 7,115,000
Michael Kellow - 5,150,000 - 4,150,000
Roy Tucker 1,122,223 6,695,000 1,122,223 4,695,000
Subsequent to period end on 29 April 2009 the following directors
aquired ordinary shares in the company.
Ordinary
Shares
Andrew Cranswick 1,470,727
Michael Kellow 200,000
Roy Tucker 363,636
All the interests were beneficial and no director has any interest in
the shares of any of the subsidiary companies.
Auditors
All of the current directors have taken all the steps that they ought
to have taken to make themselves aware of any information needed by
the Company's auditors for the purposes of their audit and to
establish that the auditors are aware of that information. The
directors are not aware of any relevant audit information of which
the auditors are unaware.
BDO Stoy Hayward LLP have expressed their willingness to continue in
office and a resolution to re-appoint them will be proposed at the
annual general meeting.
Post balance sheet events
The Company raised £2,311,212 before expenses through an equity
placement in April 2009.
There were no other material post balance sheet events.
By order of the Board
Roy Tucker
Secretary
30 July 2009
Statement of directors' responsibilities
The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the company, for safeguarding the assets of the company,
for taking reasonable steps for the prevention and detection of fraud
and other irregularities and for the preparation of a Directors'
Report which complies with the requirements of the Companies Act 1985
and 2006.
The directors are responsible for preparing the annual report and the
financial statements in accordance with the Companies Act 1985. The
directors are also required to prepare financial statements for the
group in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs) and the rules of the London
Stock Exchange for companies trading securities on the Alternative
Investment Market. The directors have chosen to prepare financial
statements for the company in accordance with IFRSs.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set
out in the International Accounting Standards Board's 'Framework for
the preparation and presentation of financial statements'. In
virtually all circumstances, a fair presentation will be achieved by
compliance with all applicable IFRSs. A fair presentation also
requires the Directors to:
* consistently select and apply appropriate accounting policies;
* present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; and
* provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity's financial position and financial
performance.
Financial statements are published on the group's website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance and
integrity of the group's website is the responsibility of the
directors. The directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Report of the independent auditors
______________________________________________________________________________
To the shareholders of African Consolidated Resources plc
We have audited the group and parent company financial statements
(the ''financial statements'') of African Consolidated Resources plc
for the 13 month period ended 31 March 2009 which comprise the group
income statement, the group and parent company balance sheets, the
group and parent company cash flow statements, the group and parent
company statements of change in equity and the related notes. These
financial statements have been prepared under the accounting policies
set out therein.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and
the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the
European Union are set out in the statement of directors'
responsibilities.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and have been properly prepared in
accordance with the Companies Act 1985 and whether the information
given in the directors' report is consistent with those financial
statements. We also report to you if, in our opinion, 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
information specified by law regarding directors' remuneration and
other transactions is not disclosed.
We read other information contained in the annual report and consider
whether it is consistent with the audited financial statements. The
other information comprises only the Directors' Report, the Chief
Executive Officer's Report and the Statement of Directors'
Responsibilities. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Our report has been prepared pursuant to the requirements of the
Companies Act 1985 and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of the
Companies Act 1985 or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgments
made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the group's
and 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 financial statements 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 financial statements.
Opinion
In our opinion:
* the group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the group's affairs as at 31 March 2009 and of its loss
for the period then ended;
* the parent company financial statements give a true and fair
view, in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act
1985, of the state of the parent company's affairs as at 31 March
2009;
* the financial statements have been properly prepared in
accordance with the Companies Act 1985; and
* the information given in the directors' report is consistent with
the financial statements.
Emphasis of Matter - political and economic instability in Zimbabwe
In forming our opinion, which is not qualified, we have considered
the directors' assessment of the political and economic instability
in Zimbabwe and the impact on the Group and Company (see basis of
preparation in note 1). Current political and economic uncertainty
gives rise to a significant uncertainty over the ability of the Group
and Company to realise the value of the Group's assets and the
Company's investment in Zimbabwe for the benefit of the Company's
shareholders. The financial statements do not include the adjustments
that would result if the current political and economic position in
Zimbabwe changed for the worse and the Group was unable to realise
the aforementioned assets.
BDO STOY HAYWARD LLP
Chartered Accountants
and Registered Auditors
London
30 July 2009
Group income statement
for the 13 month period ended 31 March 2009
2009 2008
Group Group
£ £
Notes
Revenue - -
Share options expenses 22 (585,258) (244,458)
Other administrative expenses (831,093) (908,403)
Administrative expenses (1,416,351) (1,152,861)
Operating loss 3 (1,416,351) (1,152,861)
Finance income 5 113,635 160,813
Loss before and after taxation (1,302,716) (992,048)
Loss attributable to the equity (1,302,716) (992,048)
holders of the
parent company
Loss per share - basic and diluted 9 (0.58) pence (0.48) pence
All amounts above relate to continuing operations.
The accompanying accounting policies and notes on pages 18 - 38 form
an integral part of these financial statements.
Group Statement of Changes in Equity
for the 13 month period ended 31 March 2009
Share Share Share Available Retained
capital premium option for sale earnings/ Total
Group account account reserve reserve (losses)
£ £ £ £ £ £
At 28 1,899,941 6,434,653 487,194 (10,866) (2,047,976) 6,762,946
February
2007
Available - - - 16,157 - 16,157
for sale
investments
-
valuation
gains
Net income - - - 16,157 - 16,157
recognised
directly in
equity
Loss for - - - - (992,048) (992,048)
the year
Total - - - 16,157 (992,048) (975,891)
recognised
income and
expense for
the year
Share - - 244,458 - - 244,458
options
expenses
Issue of
share
capital 310,345 4,054,655 - - - 4,365,000
(net of
issue costs
of
£135,000)
At 29 2,210,286 10,489,308 731,652 5,291 (3,040,024) 10,396,513
February
2008
Available - - - (25,908) - (25,908)
for sale
investments
-
valuation
losses
Net income - - - (25,908) - (25,908)
recognised
directly in
equity
Loss for - - - - (1,302,716) (1,302,716)
the period
Total - - - (25,908) (1,302,716) (1,328,624)
recognised
income and
expense for
the period
Share - - 585,258 - - 585,258
options
expenses
Share - - (11,778) - 11,778 -
options
exercised
Issue of 29,745 276,713 - - - 306,458
share
capital
At 31 March 2,240,031 10,766,021 1,305,132 (20,617) (4,330,962) 9,959,605
2009
The accompanying accounting policies and notes on pages 18 to 38 form
an integral part of these financial statements.
Company Statement of Changes in Equity
for the 13 month period ended 31 March 2009
Share Share Share Retained
capital premium option earnings/ Total
Company account account reserve (losses)
£ £ £ £ £
At 28 February 1,899,941 6,434,653 487,194 (1,881,743) 6,940,045
2007
Loss for the - - - (534,321) (534,321)
year
Total - - - (534,321) (534,321)
recognised
income and
expense for the
year
Share options - - 244,458 - 244,458
expenses
Issue of share
capital
(net of issue 310,345 4,054,655 - - 4,365,000
costs of
£135,000)
At 29 February 2,210,286 10,489,308 731,652 (2,416,064) 11,015,182
2008
Loss for the - - - (868,646) (868,646)
period
Total - - - (868,646)
recognised
income and
expense for the
period
Share options - - 585,258 - 585,258
expenses
Share options - - (11,778) 11,778 -
exercised
Issue of share 29,745 276,713 - - 306,458
capital
At 31 March 2,240,031 10,766,021 1,305,132 (3,272,932) 11,038,252
2009
The accompanying accounting policies and notes on pages 18-38 form an
integral part of these financial statements.
Group and Company balance sheets
As at 31 March 2009
31 March 29 February 31 March 29 February
Note 2009 2008 2009 2008
Group Group Company Company
£ £ £ £
Assets
Non-current
assets
Intangible
assets 11 8,046,114 5,841,604 1,094,172 528,924
Property, plant
and equipment 12 454,383 403,419 43,972 33,382
Available for
sale investments 13 16,786 34,655 394 394
Investment in
subsidiaries 14 - - 653 653
Advance to group
companies 15 - - 8,669,075 6,403,447
8,517,283 6,279,678 9,808,266 6,966,800
Current assets
Inventory 16 15,387 25,499 - -
Receivables 17 82,944 162,945 55,881 142,050
Available for
sale investments 18 3,999 37,038 - -
Cash and cash
equivalents 20 1,511,177 4,142,105 1,286,897 4,133,774
Total current
assets 1,613,507 4,367,587 1,342,778 4,275,824
Total Assets 10,130,790 10,647,265 11,151,044 11,242,624
Equity and
Liabilities
Capital and
reserves
attributable to
equity holders
of the company
Called-up share
capital
21 2,240,031 2,210,286 2,240,031 2,210,286
Share premium
account
21 10,766,021 10,489,308 10,766,021 10,489,308
Available for
sale reserve
23 (20,617) 5,291 - -
Share option
reserve
23 1,305,132 731,652 1,305,132 731,652
Retained
earnings
23 (4,330,962) (3,040,024) (3,272,932) (2,416,064)
Total equity 9,959,605 10,396,513 11,038,252 11,015,182
Current
liabilities
Trade and other
payables 19 171,185 250,752 112,792 227,442
Total current
liabilities 171,185 250,752 112,792 227,442
Total Equity and
Liabilities 10,130,790 10,647,265 11,151,044 11,242,624
The accompanying accounting policies and notes on pages 18 to 38 form
an integral part of these financial statements.
The accounts on pages 13 to 38 were approved and authorised for issue
by the Board of Directors on 30 July 2009 and were signed on its
behalf by:
Roy C Tucker
Director
Group and Company cash flow statements
for the 13 month period ended 31 March 2009
2009 2008 2009 2008
Group Group Company Company
£ £ £ £
CASH FLOW FROM OPERATING
ACTIVITES
Loss for the period (1,302,716) (992,048) (868,646) (534,321)
Adjustments for:
Depreciation 178,513 116,861 21,634 15,755
Write-off of deferred
expenditure/intangible
assets - 31,984 - 30,254
Exchange gain on cash
and cash equivalents (313,190) (21,939) (261,301) (28,009)
Finance income (113,635) (160,813) (428,472) (160,797)
Profit on sale of
available for sale
investments (20,657) 2,186 - -
Profit on sale of
property, plant and
equipment (42,845) (353) (2,535) -
Share option charges 585,258 244,458 585,258 244,458
273,444 212,384 (85,416) 101,661
Changes in working
capital:
Increase in advance to
group companies - - (2,098,246) (1,127,870)
Decrease/(Increase) in
receivables 80,001 (78,313) 86,169 (67,602)
Decrease in
inventories 10,112 7,109 - -
(Decrease)/Increase in
payables (79,567) 19,514 (114,650) 60,256
10,546 (51,690) (2,126,727) (1,135,216)
Cash generated from
operations (1,018,726) (831,354) (3,080,789) (1,567,876)
Investing activities:
Payments to acquire
intangible assets (2,204,510) (911,438) (732,630) (342,820)
Payments to acquire
property, plant and
equipment (266,701) (152,248) (34,840) (11,918)
Payments to acquire
available for sale
investments - (59,432) - -
Payments to acquire
investment in
subsidiaries - - - (650)
Proceeds on disposal
of property, plant and
equipment 80,069 5,070 5,151 -
Proceeds on disposal
of available for sale
investments 45,657 29,207 - -
Interest received 113,635 160,813 428,472 160,797
(2,231,850) (928,028) (333,847) (194,591)
Financing Activities:
Proceeds from the
issue of ordinary
shares, net of issue
costs 306,458 4,365,000 306,458 4,365,000
(Decrease)/Increase in
cash and cash
equivalents (2,944,118) 2,605,618 (3,108,178) 2,602,533
Cash and cash
equivalents at beginning
of period 4,142,105 1,514,548 4,133,774 1,503,232
Exchange gain on cash
and cash equivalents 313,190 21,939 261,301 28,009
Cash and cash
equivalents at end of
period 1,511,177 4,142,105 1,286,897 4,133,774
The accompanying notes and accounting policies on pages 18 to 38 form
an integral part of these financial statements.
Statement of accounting policies
for the 13 month period ended 31 March 2009
1 Accounting Policies
Basis of preparation
The principal accounting policies adopted in the preparation of the
financial information are set out below. The policies have been
consistently applied throughout the current period and prior year
presented, unless otherwise stated. These financial statements have
been prepared in accordance with International Financial Reporting
Standards (IFRSs and IFRIC interpretations) issued by the
International Accounting Standards Board (IASB) as adopted by the
European Union and with those parts of the Companies Act 1985
applicable to companies preparing their accounts under IFRS.
The company changed its financial year end for administration
purposes from 28 February to 31 March giving rise to a 13 month
period. As a result comparatives for the income statement and cash
flow movements are not directly comparable.
In the preparation of the financial statements the directors have
considered the current political and economic uncertainty in Zimbabwe
and the impact on the Group and Company.
The presidential election run off in June 2008, followed by the
formation of a Government of National Unity, together with soaring
inflation in 2008 and early 2009, high unemployment and collapse of
the value of the Zimbabwean dollar, and the strong opposition to
change in the country has attracted global criticism. There has been
earlier press speculation that mining assets could be nationalised,
although this has been refuted more recently by the new Prime
Minister. There have been no such actions to date that the Directors
are aware of. The longer term policy of the government in this regard
remains under debate within parliamentary committees.
The foreign currency regulations as determined by the Government and
Reserve Bank of Zimbabwe, were materially amended in February 2009,
to allow for the legalisation of a multi-currency system. Certain
related legislation is still in the process of being fully amended.
The new minister of finance presented his mid year fiscal policy
review in July 2009, in which favourable investor policies were
mentioned. They await appropriate enactment.
The directors have further considered the quality of the assets held
by the Company through its investment in its subsidiary undertakings
in Zimbabwe. They have concluded that whilst the current political
and economic uncertainty gives rise to uncertainty over the ability
of the Group and Company to realise the value of the Group's assets
and the Company's investment in Zimbabwe for the benefit of the
Company's shareholders, the directors remain confident that in the
longer term, it will not materially impact the company's ability to
realise the value of its investments for its shareholders.
Change in Accounting Policy
New standards, amendments to published standards and interpretations
to existing standards effective on 1 March 2008 adopted by the Group.
New and revised standards Standard Effective for
effective for 31 March annual periods
2009
period-ends beginning on
or after
Interpretations IFRIC 11 - IFRS 2 Group and 1 March 2007
Treasury Share
Transactions
IFRIC 12 - Service 1 January 2008
Concession Arrangements
IFRIC 13 - Customer Loyalty 1 July 2008
Programmes
IFRIC 14 - IAS 19 The Limit 1 January 2008
on a Defined Benefit
Asset, Minimum Funding
Requirements and their
Interpretation
IFRIC 16 - Hedges of a Net 1 October
Investment in a Foreign
Operation 2008
New standards, amendments to published standards and interpretations
to existing standards in issue at 31 March 2009 but not yet
effective, that will be applicable to the Company in the future.
New and revised standards Standard Effective for
issued but not effective annual periods
for 31
March 2009 period-ends beginning on or
after
New Standard IFRS 8 - Operating Segments 1 January 2009
Amendment IFRS 1 - First time 1 January 2009
adoption of International
Financial Reporting
Standards*
IFRS 1 and IAS 27 - Cost of 1 January 2009
an Investment in a
subsidiary, jointly
controlled entity or
associate
IFRS 7 - Improving 1 January 2009
disclosures about financial
instruments*
Improvements to IFRSs 1 January 2009
(2009)
IAS 39 - Financial 1 July 2009
instruments : Recognition
and
Measurement : Eligible
Hedged Items*
Improvements to IFRSs 1 January 2010
(2010)*
IFRS 2 - Group cash settled 1 January 2010
share based payment
transactions*
IFRS 3 - Business 1 July 2009
Combinations
IFRS 2 - Share-based 1 January 2009
Payment - Vesting
Conditions
and Cancellations
IAS 1 - Presentation of 1 January 2009
Financial Statements - A
revised Approach
IAS 23 - Borrowing Costs 1 January 2009
IAS 27 - Consolidated and 1 July 2009
Separate Financial
Statements
IAS 32 and 1 - Puttable 1 January 2009
Financial Instruments and
Obligations Arising on
Liquidation
Interpretations IFRIC 15* - Agreements for 1 January 2009
the Construction of Real
Estate
IFRIC 17 - Distribution of 1 July 2009
non-cash assets to owners*
IFRIC 18 - Transfer of 1 July 2009
assets from customers*
Items marked* had not yet been endorsed by European Union at the date
that these financial statements were approved and authorised for
issue by the Board. The standards listed above are not yet effective
and are not expected to have a significant impact on the Group.
The preparation of the group financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current events
and actions, actual results may ultimately differ from those
estimates. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities in the next financial year are discussed below:
a) Useful lives of property, plant & equipment
Property, plant and equipment are depreciated over their useful
economic lives. Useful economic lives are based on management's
estimates of the period that the assets will be in operational use,
which are periodically reviewed for continued appropriateness. Due to
the long life of certain assets, changes to estimates used can result
in significant variations in the carrying value. More details,
including carrying values, are included in note 12 to the financial
statements.
b) Impairment of intangibles
The Group is required to test, on an annual basis, whether deferred
exploration costs, mining options and licence acquisition costs have
suffered any impairment. The recoverable amounts are determined based
on an assessment of the economically recoverable mineral reserves,
the ability of the group to obtain the necessary financing to
complete the development of the reserves and future profitable
production or proceeds from the disposition of recoverable reserves.
Actual outcomes may vary. More details, including carrying values,
are included in note 11 to the financial statements.
c) Share based payments
The Group operates an equity settled share based remuneration scheme
for key employees. Employee services received, and the corresponding
increase in equity, are measured by reference to the fair value of
equity instruments at the date of grant. The fair value of the share
options is estimated by using the Black Scholes model on the date of
grant based on certain assumptions. Those assumptions are described
in note 22 and include, among others, the expected volatility and
expected life of the options.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to
govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The financial information presents the
results of the Company and its subsidiaries (the "Group") as if they
formed a single entity. Inter-company transactions and balances
between Group companies are therefore eliminated in full.
Business combinations
The financial information incorporate the results of business
combinations using the purchase method. In the consolidated balance
sheet, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in
the group income statement from the date on which control is
obtained. The licences acquired have been valued at their fair value
using appropriate valuation techniques and posted to intangible
assets.
Revenue
The Group and Company had no turnover during the period.
Foreign currency
The functional currency of the Company and all of its subsidiaries,
is Pounds Sterling, which is the currency of the primary economic
environment in which the Company and all of its subsidiaries operate.
The Zimbabwean subsidiaries retain ledgers in the functional currency
and where transactions are denominated in Zimbabwe Dollars, United
States Dollars or South African Rands they are translated at the best
rate achievable given all relevant circumstances at the time.
Transactions entered into by the Group entities in a currency other
than the currency of the primary economic environment in which it
operates (the "functional currency") are recorded at the rates ruling
when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet
date. Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are similarly recognised immediately
in the income statement,
except for foreign currency borrowings qualifying as a hedge of a net
investment in a foreign operation.
Provision for abandonment costs
Provision for abandonment costs are recognised at the commencement of
mining. The amount recognised is the present value of the estimated
future expenditure determined in accordance with local conditions and
requirements. The present value is calculated by discounting the
future cash flows at a pre tax rate that reflects current market
assessments of the time value of money at that time. A corresponding
property, plant and equipment asset of an amount equivalent to the
provision is also created. This is subsequently depreciated as part
of the capital costs of production. Any change in the present value
of the estimated expenditure is reflected as an adjustment to the
provision and the property, plant and equipment assets.
Share-based payments
Where share options are awarded to employees, the fair value of the
options at the date of grant is charged to the income statement over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are factored
into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The cumulative
expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of options are modified before they
vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the
income statement over the remaining vesting period.
Where equity instruments are granted to persons other than employees,
the income statement is charged with the fair value of goods and
services received, except where it is in respect to costs associated
with the issue of shares, in which case, it is charged to the share
premium account.
Tax
The major components of income tax on the profit or loss include
current and deferred tax.
Current tax is based on the profit or loss adjusted for items that
are non-assessable or disallowed and is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet
date.
Income tax is charged or credited to the income statement, except
when the tax relates to items credited or charged directly to equity,
in which case the tax is also dealt with in equity.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying
amount of an asset or liability in the balance sheet differs to its
tax base, except for differences arising on:
* The initial recognition of goodwill;
* Goodwill for which amortisation is not tax deductible:
* The initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the
transaction affects neither accounting or taxable profit; and
* Investments in subsidiaries and jointly controlled entities where
the group is able to control the timing of the reversal of the
difference and it is probable that the differences will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances
where it is probable that taxable profit will be available against
which the difference can be utilised.
The amount of the asset or liability is determined using tax rates
that have been enacted or substantively enacted by the balance sheet
date and are expected to apply when deferred tax liabilities/(assets)
are settled/(recovered). Deferred tax balances are not discounted.
Deferred development and exploration costs
In accordance with the full cost method, all costs associated with
mining property development and investment are capitalized on a
project-by-project basis pending determination of the feasibility of
the project. Costs incurred include appropriate technical and
administrative expenses but not general overheads. If a mining
property development project is successful, the related expenditures
will be amortised over the estimated life of the commercial ore
reserves on a unit of production basis. Where a licence is
relinquished, a project is abandoned, or is considered to be of no
further commercial value to the Group, the related costs will be
written off.
Unevaluated mining properties are assessed at each year end and where
there are indications of impairment these costs are written off to
the income statement. The recoverability of deferred mining property
costs and interests is dependent upon the discovery of economically
recoverable reserves, the ability of the Group to obtain necessary
financing to complete the development of reserves and future
profitable production or proceeds from the disposition of recoverable
reserves.
If commercial reserves are developed, the related deferred
development and exploration costs are then reclassified as
development and production assets within property, plant and
equipment.
Proved mining properties
Depletion and amortisation of the full-cost pools is computed using
the units-of-production method based on proved reserves as determined
annually by management.
Mineral rights
Mineral rights are recorded at cost less amortisation and provision
for diminution in value. Amortisation will be over the estimated life
of the commercial ore reserves on a unit of production basis.
Licences for the exploration of natural resources will be amortised
over the lower of the life of the licence and the estimated life of
the commercial ore reserves on a unit of production basis.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at
cost and are subsequently carried at depreciated cost. As well as the
purchase price, cost includes directly attributable costs and the
estimated present value of any future costs of dismantling and
removing items. The corresponding liability is recognised within
provisions.
Depreciation is provided on all other items of property and equipment
is to write off the carrying value of items over their expected
useful economic lives. It is applied at the following rates:
Plant and machinery - 25% per annum, straight line
Fixtures and fittings - 25% per annum, straight line
Computer equipment - 33% per annum, straight line
Motor vehicles - 20% per annum, straight line
The depreciation on assets utilised directly for exploration
activities is capitalised as deferred exploration costs. Depreciation
in respect of all other assets is charged to administrative expenses
in the income statement.
Financial assets
The Group's financial assets consist of cash and cash equivalents,
trade and other receivables and available for sale investments. The
Group's accounting policy for each category of financial asset is as
follows:
Loans and receivables: These assets are non-derivative financial
assets with fixed or determinable payments that are not quoted in an
active market. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition
or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence
(such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the
Group will be unable to collect all of the amounts due under the
terms receivable, the amount of such a provision being the difference
between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable. For
receivables, which are reported net, such provisions are recorded in
a separate allowance account with the loss being recognised within
administrative expenses in the income statement. On confirmation that
the receivable will not be collectable, the gross carrying value of
the asset is written off against the associated provision.
The Group's loans and receivables comprise other receivables and cash
and cash equivalents in the balance sheet.
There is no significant difference between the carrying value and
fair value of receivables.
Available for sale: Non-derivative financial assets not included in
the categories above are classified as available-for-sale and
comprise the Group's strategic investments in entities not qualifying
as subsidiaries, associates or jointly controlled entities. They are
carried at fair value with changes in fair value recognised directly
in equity. Where a decline in the fair value of an available-for-sale
financial asset constitutes evidence of impairment, for example if
the decline is significant or prolonged, the amount of the loss is
removed from equity and recognised in the income statement.
Financial liabilities
The Group's financial liabilities consist of trade and other
payables, which are initially recognised at fair value and
subsequently carried at amortised cost, using the effective interest
method.
Inventories
Inventories are initially recognised at cost, and subsequently at the
lower of cost and net realisable value. Cost comprises all costs of
purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition. Weighted
average cost is used to determine the cost of ordinarily
inter-changeable items.
Cash and cash equivalents
Cash comprises cash in hand and balances with banks. Cash equivalents
are short term, highly liquid accounts that are readily converted to
known amounts of cash. They include short term bank deposits
originally purchased with maturities of less than three months.
Leased assets
Where assets are financed by leasing agreements that do not give
rights approximating ownership, these are treated as operating
leases. The annual rentals are charged to the income statement on a
straight line basis over the term of the lease.
Pension costs
Contributions to defined contribution pension schemes are charged to
the income statement in the year to which they relate.
Notes to financial statements
for the 13 month period ended 31 March 2009
2 Segmental analysis
The Group operates in one business segment, the exploration for
mineral assets. African Consolidated Resources plc has interests in
one geographical segment being Southern Africa, primarily Zimbabwe.
3 Group loss from operations
2009 2008
Group Group
£ £
Operating loss is stated after
charging/(crediting):
Auditors' remuneration - audit 41,030 32,208
(Company £33,500 (2008 - £28,000))
Depreciation 178,513 116,861
Office lease 43,679 15,185
Foreign exchange gains (354,630) (14,975)
Employee share option expense 576,751 244,458
Employee pension costs 8,438 7,650
Wages and salaries 216,629 206,342
Profit on disposal of property, plant and
equipment (42,845) (352)
(Profit)/Loss on disposal of financial assets (20,657) 2,186
4 Auditors' remuneration
For auditing of accounts of the Company pursuant
to
legislation. 33,500 28,000
For auditing of accounts of the subsidiaries
pursuant
to legislation. 7,530 4,208
41,030 32,208
5 Finance income
Interest received on bank deposits 113,635 160,813
6 Taxation 2009 2008
Group Group
£ £
There is no tax charge
arising for the Group for the
period.
The tax assessed for the
period is lower than the
standard rate of
corporation tax in the UK.
The differences are explained
Loss before taxation (1,302,716) (992,048)
Loss before taxation at the
standard rate of corporation
tax in the UK of
28% (2008 : 30%)
Expenses disallowed for tax (364,760) (297,614)
(principally depreciation,
share issue expenses
and share option expenses) 211,473 109,010
Loss carried forward 153,287 188,604
Tax charge for the period - -
Factors that may affect future tax charges:
At the 31 March 2009, the Company had UK tax losses of
approximately £1,320,000 (2008- £1,170,000) carried forward which
can be utilised against future profits. However these losses are
only recoverable against future profits, the timing of which is
uncertain and as a result no deferred tax asset is being recognised
in respect of these losses.
7 Employees
Staff costs (including directors) Group Group Company Company
consist of: 2009 2008 2009 2008
£ £ £ £
Wages and Salaries - management 187,399 186,636 177,188 178,440
Wages and Salaries - other 29,230 19,706 - -
216,629 206,342 177,188 178,440
Consultancy fees 366,448 452,416 359,379 345,716
Social Security costs 4,505 1,782 2,182 1,756
Healthcare costs 4,845 3,222 4,845 3,222
Pension costs 8,438 7,650 8,438 7,650
600,865 671,412 552,032 536,784
The average number of employees (including directors) during the
year was as follows:
Group Group Company Company
2009 2008 2009 2008
Number Number Number Number
Management 7 7 7 6
Other operations 48 44 - -
55 51 7 6
8 Directors' remuneration 2009 2008
£ £
Directors emoluments 177,188 178,440
Company contributions to pension schemes 8,438 7,650
Healthcare costs 4,845 3,222
Amounts paid to third parties in respect of 141,146 137,409
directors' services
Directors remuneration 331,617 326,721
Share based payment charges 439,299 168,407
Key management remuneration 770,916 495,128
The directors' remuneration represents the emoluments paid to key
management.
Out of the share based payment charge (see note 3) of £585,258 (2008
: £244,458) , £439,299
(2008 : £168,407) relates to directors.
Emoluments paid to the highest paid director, including amounts paid
to third parties in respect of directors services is £98,541 (2008 -
£89,292).
One director (2008 : one) accrued benefits under a defined
contribution scheme during the year.
One director (2008 : nil) exercised 1,000,000 share options during
the year (refer note 22). The gain on exercise of options amounted to
£25,000.
9 Loss per share 2009 2008
Group Group
Loss per Ordinary Share has been
calculated using the
weighted average number of Ordinary
Shares in issue during
the relevant financial period.
The weighted average number of
Ordinary Shares in issue
for the period is. 222,816,217 208,614,788
Losses for the Group for the period
are (£) (1,302,716) (992,048)
Loss per share basic and diluted (0.58p) (0.48p)
The effect of all potentially dilutive
share options is anti-
dilutive. Details of the share options
which may dilute the
loss per share are disclosed in note
22 in the financial
statements
10 Loss for the financial period
The Company has taken advantage of the exemption allowed under
Section 230 of the Companies Act 1985 and has not presented its
own income statement in these financial statements. The Group loss
for the period includes a loss after taxation of £868,646 (2008 -
£534,321), which is dealt with in the financial statements of the
parent company.
11 Intangible assets Deferred Mining Licence Total
Group exploration options acquisition
costs costs
£ £ £ £
Cost at 29 February 3,771,763 17,550 2,052,291 5,841,604
2008
Additions during the 1,936,663 - 267,847 2,204,510
period
Reclassification during - (17,550) 17,550 -
the period
Disposals during the - - - -
period
Cost at 31 March 2009 5,708,426 - 2,337,688 8,046,114
Group
Cost at 28 February 2,882,595 47,661 2,031,894 4,962,150
2007
Additions during the 891,041 - 20,397 911,438
year
Disposals during the (1,873) (30,111) - (31,984)
year
Cost at 29 February 3,771,763 17,550 2,052,291 5,841,604
2008
Company
Cost at 29 February 453,275 17,550 58,099 528,924
2008
Additions during the 548,118 - 184,512 732,630
period
Reclassification during - (17,550) 17,550 -
the period
Disposals during the (167,382) - - (167,382)
period
Cost at 31 March 2009 834,011 - 260,161 1,094,172
Company
Cost at 28 February 110,598 47,661 58,099 216,358
2007
Additions during the 342,820 - - 342,820
year
Disposals during the (143) (30,111) - (30,254)
year
Cost at 29 February 453,275 17,550 58,099 528,924
2008
12 Property, plant and equipment Group
Plant and Fixtures, Computer Motor Total
machinery fittings assets vehicles
and
equipment
£ £ £ £ £
Cost at 29 246,276 32,968 42,325 267,964 589,533
February 2008
Additions during 108,655 10,554 19,154 128,338 266,701
the period
Disposals during (25,877) - - (41,962) (67,839)
the period
Cost at 31 March 329,054 43,522 61,479 354,340 788,395
2009
Depreciation at 29 66,658 9,880 23,419 86,157 186,114
February 2008
Charge for the 78,337 11,016 16,722 72,438 178,513
period
Disposals during (7,547) - - (23,068) (30,615)
the period
Depreciation at 31 137,448 20,896 40,141 135,527 334,012
March 2009
Net book amount at 191,606 22,626 21,338 218,813 454,383
31 March 2009
Group
Net book amount 168,699 14,893 20,597 168,560 372,749
at 28 February
2007
Additions during 64,890 14,227 10,844 62,287 152,248
the year
Disposals during (2,176) - - (3,441) (5,617)
the year
Charge for the (51,795) (6,032) (12,535) (45,599) (115,961)
year
Net book amount at 179,618 23,088 18,906 181,807 403,419
29 February 2008
Company
Cost at 29 12,902 8,107 30,182 15,070 66,261
February 2008
Additions during 25,446 1,690 4,704 3,000 34,840
the period
Disposals during - - - (5,233) (5,233)
the period
Cost at 31 March 38,348 9,797 34,886 12,837 95,868
2009
Depreciation at 29 6,713 2,309 19,286 4,571 32,879
February 2008
Charge for the 7,503 2,419 8,931 2,781 21,634
period
Disposals during - - - (2,617) (2,617)
the period
Depreciation at 31 14,216 4,728 28,217 4,735 51,896
March 2009
Net book amount at 24,132 5,069 6,669 8,102 43,972
31 March 2009
Company
Net book amount at 7,723 2,719 16,369 10,408 37,219
28 February 2007
Additions during 1,419 4,154 3,608 2,737 11,918
the year
Charge for the (2,953) (1,075) (9,081) (2,646) (15,755)
year
Net book amount at 6,189 5,798 10,896 10,499 33,382
29 February 2008
13 Available for sale investments 2009 2008 2009 2008
(Non current) Group Group Company Company
£ £ £ £
Fair value at the beginning of the 34,655 6,606 394 394
period
Movement in fair value (17,869) 28,049 - -
Fair value at the end of the 16,786 34,655 394 394
period
The available for sale investments represents investments in quoted
companies. The fair value of available for sale investments is
based on the quoted market price of those investments. The face
value of the Company's available for sale investments is not
materially different to the market value at either the current or
previous year end.
14 Investment in subsidiaries 2009 2008
Company Company
£ £
Cost at the beginning of the period 653 3
Additions during the period - 650
Cost at the end of the period 653 653
The principal subsidiaries of African Consolidated Resources plc,
all of which are included in these consolidated Annual Financial
Statements are as follows:
Company Country of Class Proportion Proportion Nature of
registration held by held by business
group group
2009 2008
Millwall BVI Ordinary 100% 100% Mining
International exploration
Investments and
Limited development
Mimic Mining United Ordinary 100% 100% Holding
UK Limited Kingdom company
African Zambia Ordinary 100% 100% Mining
Consolidated exploration
Resources and
(Zambia) development
Limited
** African BVI Ordinary 100% 100% Nominee
Consolidated company
Resources
(PTC) Limited
Moorestown BVI Ordinary 100% 100% Mining
Limited exploration
and
development
Canape Zimbabwe Ordinary 100% 100% Mining
Investments exploration
(Private) and
Limited development
* Breckridge Zimbabwe Ordinary 100% 100% Mining
Investments exploration
(Private) and
Limited development
* Lescaut Zimbabwe Ordinary 100% 100% Mining
Investments exploration
(Private) and
Limited development.
* Indirectly held
** Previously Touzel Holdings Limited
15 Advance to Group 2009 2008 2009 2008
Companies Group Group Company Company
£ £ £ £
Advance to Group - - 8,669,075 6,403,447
Companies
16 Inventory
Material and supplies 15,387 25,499 - -
There is no material difference between the replacement cost of
stocks and the amount stated above.
The amount of inventory recognized as an expense during the year
was £164,800
(2008 - £140,900)
17 Receivables
Other receivables 82,944 162,945 55,881 142,050
All amounts fall due for payment within one year.
Advances to Group companies are repayable on demand, subject to
relevant exchange control approvals being obtained.
18 Available for sale
investments
(Current)
Fair value at the 37,038 20,891 - -
beginning of the period
Additions during the - 59,432 - -
period
Disposals (25,000) (31,393) - -
Movement in fair value (8,039) (11,892) - -
Fair value at the end 3,999 37,038 - -
of the period
Available for sale investments comprise shares in quoted
companies. The face value of the Group's available for sale
investments was not materially different to the market value at
the previous year end.
19 Trade and other
payables
Trade payables 11,723 38,739 7,474 33,480
Other payables 11,861 110,124 - 92,172
Other taxes and social 11,921 2,090 4,083 1,991
security taxes
Accrued expenses 135,680 99,799 101,235 99,799
171,185 250,752 112,792 227,442
All amounts fall due for payment within one year.
20 Financial instruments - risk
management
Significant accounting policies
Details of the significant accounting policies in respect of
financial instruments are disclosed in Note 1 to the financial
statements. The Group's financial instruments, comprise available
for sale investments (notes 13 and 18), cash and items arising
directly from its operations such as trade receivables and trade
payables.
Financial risk management
The Board seeks to minimise its exposure to financial risk by
reviewing and agreeing policies for managing each financial risk
and monitoring them on a regular basis. No formal policies have
been put in place in order to hedge the Group and Company's
activities to the exposure to currency risk or interest risk,
however this will be considered periodically by the Board. No
derivatives or hedges were entered into during the period.
The Group and Company is exposed through its operations to the
following financial risks:
* Credit risk
* Cash flow interest rate risk
* Foreign currency risk
* Liquidity risk
The policy for each of the above risks is described in more detail
below.
The principal financial instruments used by the Group, from which
financial instruments risk arises are as follow:
* Trade and other receivables
* Cash and cash equivalents
* Trade and other payables
* Available for sale investments
The fair value of all financial assets and financial liabilities
is not materially different to the book value.
Credit risk
Financial assets which potentially subject the Group and the
Company to concentrations of credit risk consist principally of
cash, short term deposits and trade receivables. Cash balances are
all held at recognised financial institutions. Trade receivables
are presented net of allowances for doubtful receivables. Trade
receivables currently form an insignificant part of the Group's
and the Company's business and therefore the credit risk
associated with them is also insignificant to the Group and the
Company as a whole.
The Company has a credit risk in respect to inter-company loans to
subsidiaries. The recoverability of these balances in dependent on
the commercial viability of the exploration activities undertaken
by the respective subsidiary companies. The credit risk of these
loans is managed as the directors constantly monitor and assess
the viability and quality of the respective subsidiary's
investments in intangible mining assets.
Intercompany loan amounts between the holding company and its
Zimbabwean subsidiary Canape Investments, are subject to credit
risk in so far as the Zimbabwe's exchange control regulations,
which change from time to time, prevent timeous settlement.
Maximum exposure to credit risk
The Group's maximum exposure to credit risk by class of financial
instrument is shown in the table below:
2009 2009 2008 2008
Carrying Maximum Carrying Maximum
value exposure value exposure
£ £ £ £
Cash and cash 1,511,177 1,511,177 4,142,105 4,142,105
equivalents
Trade and other 82,944 82,944 162,945 162,945
receivables
The Company's maximum exposure to credit risk by class of financial
instrument is shown in the table below :
2009 2009 2008 2008
Carrying Maximum Carrying Maximum
value exposure value exposure
£ £ £ £
Cash and cash 1,286,897 1,286,897 4,133,774 4,133,774
equivalents
Trade and other 55,811 55,811 142,050 142,050
receivables
Advances to Group 8,669,075 8,669,075 6,403,447 6,403,447
Companies
Cash flow interest rate risk
The Group has adopted a non speculative policy on managing interest
rate risk. Only approved financial institutions with sound capital
bases are used to borrow funds and to invest surplus finds in. The
Group and the Company had no borrowing facilities at either the
current period end or previous year end.
The Group and the Company seeks to obtain a favourable interest rate
on its cash balances through the use of bank deposits. At the period
end the Group had a cash balance of £1,511,177 (2008: £4,142,105)
which was made up as follows:
2009 2008
Group Group
£ £
British pounds 773,028 2,964,011
United States dollars 727,680 1,172,601
Zimbabwean dollars 3,606 5,373
Zambian Kwacha 6,863 120
1,511,177 4,142,105
Included within the above are amounts of £101,553 and US$972,777
(2008 £144,625 and US$1,821,306) held within fixed and floating rate
deposit accounts. Interest rates are 2% to 5% based on bank interest
rates.
The Group received interest for the period on bank deposits of
£113,635 (2008: £160,813).
The effect of a 10% reduction in interest rates during the period
would, all other variables held constant have resulted in reduced
interest income of £11,363 (2008 - £16,081). Conversely the effect of
a 10% increase in interest rates during the period would, on the same
basis, have increased interest income by £11,363 (2008 - £16,081).
At the period end, the Company had a cash balance of £1,286,897
(2008 : £4,133,774) which was made up as follows:
2009 2008
Company Company
£ £
Pounds Sterling 773,028 2,964,011
United States dollars 513,869 1,169,763
1,286,897 4,133,774
The Group and the Company has no interest bearing debts at either
the current period end or previous year end.
Liquidity risk
Borrowing facilities are negotiated with approved financial
institutions at acceptable interest rates. All assets and
liabilities are at fixed and floating interest rate. The Group and
the Company seeks to manage its financial risk to ensure that
sufficient liquidity is available to meet the foreseeable needs
both in the short and long term.
Foreign currency risk
Foreign exchange risk is inherent in the Group's and the Company's
activities and is accepted as such. The majority of African
Consolidated Resources Plc's expenses are denominated in Pounds
Sterling.
At 31 March 2009 and 28 February 2008, the currency exposure of the
Group was as follows:
UK Sterling US Dollars Other Currencies
At 31 March 2009 £ £ £
Cash and cash equivalents 773,028 727,680 10,469
Trade and other 66,763 12,224 3,957
receivables
Trade and other payables (96,185) (75,000) -
Available for sale - 20,785 -
investments
Net assets 743,606 685,689 14,426
At 29 February 2008
Cash and cash equivalents 2,964,011 1,172,601 5,493
Trade and other 136,339 22,424 4,182
receivables
Trade and other payables (164,590) (64,727) (21,435)
Available for sale - - 71,693
investments
Net assets 2,935,760 1,130,298 59,933
The effect of a 10% strengthening of Sterling against the US dollar
at the balance sheet date, all other variables held constant, would
have resulted in increasing post tax losses by £68,582 (2008 :
£105,471). Conversely the effect of a 10% weakening of Sterling
against the US dollar at the balance sheet date, all other
variables held constant, would have resulted in decreasing post tax
losses by £68,582 (2008 : £128,191).
At 31 March 2009 and 28 February 2008, the currency exposure of the
Company was as follows :
At 31 March 2009 UK US
Sterling Dollars
£ £
Cash and cash equivalents 773,028 513,869
Trade and other receivables 55,175 706
Advances to Group companies 8,669,075 -
Trade and other payables (79,105) (33,687)
9,418,173 480,888
At 29 February 2008
Cash and cash equivalents 2,964,011 1,169,763
Trade and other receivables 142,050 -
Advances to Group companies 6,403,447 -
Trade and other payables (162,715) (64,727)
9,346,793 1,105,036
Capital
The objective of the directors is to maximise shareholder returns
and minimise risks by keeping a reasonable balance between debt and
equity. To date the Company and Group has minimised risk by being
purely equity financed. The capital employed by the Group and
Company is comprised of equity attributable to shareholders.
21 Share capital Number of Nominal Share
shares value premium
£ £
Authorised
Ordinary shares of £0.01 1,000,000,000 10,000,000 -
each
Issued
Called up, allotted and
fully paid
As at 28 February 189,994,098 1,899,941 6,434,653
2007
Issued during the year 31,034,482 310,345 4,054,655
As at 29 February 2008 221,028,580 2,210,286 10,489,308
Issued during the period 2,974,549 29,745 276,713
As at 31 March 2009 224,003,129 2,240,031 10,766,021
22 Share based payments
Share Outstanding Exercised Lapsed Granted Outstanding Final
options at during during during at exercise
Exercise 29 February last last last date
price 2008 13 months 13 months 13 months 31 March
2009
4.5p 2,500,000 - - - 2,500,000 Dec 2010
4.5p 1,111,111 - - - 1,111,111 June
2010
4.5p 11,000,000 (1,000,000) - - 10,000,000 June
2011
7.0p 1,500,000 - (1,500,000) - - March
2009
7.0p 37,500 - - - 37,500 June
2011
12.0p 666,667 - - - 666,667 June
2009
12.0p 5,500,000 - - - 5,500,000 June
2011
12.0p 1,965,000 - - - 1,965,000 Dec 2010
14.5p 1,945,000 - - - 1,945,000 June
2011
15.0p 5,500,002 - - - 5,500,002 June
2011
18.0p 5,499,998 - - - 5,499,998 June
2011
14.5p - - - 2,040,000 2,040,000 June
2011
18.0p - - - 8,000,000 8,000,000 June
2011
37,225,278 (1,000,000) (1,500,000) 10,040,000 44,765,278
No share options were exercised, lapsed or cancelled in the previous
year.
All share options have been valued using the Black Scholes method on
valuing options from the date of grant.
Of the 44,765,278 options outstanding at 31 March 2009. 10,040,000
are not yet exercisable at 31 March 2009.
The Company operates an unapproved share option plan for directors,
senior management and staff consultants. Details of the valuation
basis and the grant and vesting dates are contained below.
Fair value of options - Employees
Inputs to the valuation model
The fair values of awards granted under the Employee Share Option
Plan have been calculated using the Black Scholes pricing model
that takes into account factors specific to share incentive plans
such as the vesting periods of the Plan, the expected dividend
yield of ACR's shares and the estimated volatility of those shares.
Based on the above assumptions, the fair values of the options
granted are estimated to be:
12p options 14.5p 18p options 14.5p
options options
Grant date March 2007 Jan 2008 April 2008 July 2008
Vesting periods Dec 2007-Dec Dec 2008- April July 2009-
2010 June 2011 2009-June June 2011
2011
Share price at 7.7p 14.5p 19p 13p
date of grant
Exercise price 12p 14.5p 18p 14.5p
Volatility 50% 50% 41% 42%
Option life 3 years 2.5 years 2.25 years 2 years
Dividend yield Nil Nil Nil Nil
Risk free 4.86% 4.86% 3.8% 5.13%
investment rate
Fair value 1.3p 4.5p 5.92p 3.47p
Volatility has been based on the volatility of comparable listed
companies in the mining, oil and gas sector, based on historical
share price information.
Expense arising from share-based payments
Based on the above fair values and ACR's expectations of employee
turnover, the expense arising from equity-settled share options and
share awards made to employees was £585,258(2008 : £244,458).
The Company had also granted share options to Geoinformatics
Limited and Williams de Broe plc in respect of geological and
financial consultancy services provided to the company, these
options lapsed on 31 March 2009.
23 Reserves
Details of the nature and purpose of each reserve within owners'
equity are provided below:
The share premium account holds the balance of consideration
received net of fund raising costs in excess of the par value of
the shares.
The share options reserve represents the accumulated balance of
share benefit charges recognised in respect of share options
granted by the company.
The available for sale reserve holds the gains/(losses) arising on
recognising financial assets classified as available for sale at
fair value.
The retained earnings reserve represents the cumulative net gains
and losses recognised in the Group income statement.
24 Related party transactions
Group
There were no related party transactions during the period in the
Group other than directors and key management emoluments which are
disclosed in note 8 and the following :
* Andrew Cranswick holds a 50% (2008 : 25%) equity stake in FG
Investments (Private) Limited from which Canape Investments
(Private) Limited incurred £18,264 (2008 : £8,832) rental
expense in the current financial period.
* Canape Investments (Private) Limited purchased three
commercial vehicles for £29,789 (2008: £38,606) from Andrew
Cranswick.
* Andrew Cranswick and Michael Kellow each hold a 20% equity
stake in Aeromags.com from which African Consolidated
Resources plc incurred £35,793 (2008 : £Nil) aeromagnetic
survey expense in the current financial period.
Company
The Company emoluments to directors and key management are
disclosed in note 8 to the financial statements.
At the period end, the Company had an outstanding loan to Canape
Investments (Private) Limited (a wholly owned subsidiary) of
£4,322,211 (2008: £3,237,224). During the period, interest of
£154,992 (2008: £114,820) was accrued on this loan. This is
included in the balance payable by Canape Investments (Private)
Limited at the period end.
At the period end, the Company had an outstanding loan to Millwall
International Investments Limited (a wholly owned subsidiary) of
£3,438,113 (2008: £2,900,574). During the period, interest of
£130,370 (2008: £110,205) was accrued on this loan. This is
included in the balance payable by Millwall International
Investments Limited at the period end.
At the period end, the Company had an outstanding loan to Mimic
Mining (UK) Limited (a wholly owned subsidiary) of £347,307 (2008
: £252,742). During the period, interest of £13,619 (2008: £Nil)
was accrued on this loan. This is included in the balance payable
by Mimic Mining Limited at the period end.
At the period end, the Company had an outstanding loan to African
Consolidated Resources (Mauritius) Limited (a wholly owned
subsidiary) of £125,944 (2008 : £Nil). This is included in the
balance payable by African Consolidated Resources (Mauritius)
Limited at the period end.
At the period end, the Company had an outstanding loan to
Moorestown Limited (a wholly owned subsidiary) of £374,035 (2008 :
£Nil). During the period, interest of £8,090 (2008: £Nil) was
accrued on this loan. This is included in the balance payable by
Moorestown Limited at the period end.
At the period end, the Company had an outstanding loan to African
Consolidated Resources (Zambia) Limited (a wholly owned
subsidiary) of £61,463 (2008: £12,905).
At the period end, the Company had an outstanding loan to ACR
Nominees Limited (a wholly owned subsidiary) of £2 (2008: £2).
These receivables totalled £8,669,075 (2008: £6,403,447) at the
period end.
The Company also charged a management fee to Canape Investments
(Private) Limited of £10,833 (2008: £10,000) during the period.
25 Contingent liabilities and capital commitments
There is a contingent liability, which in the opinion of the
directors is not likely to exceed £63,650, in respect of the Giant
acquisition made in the period to 28 February 2006 relating to
resource ounces still in the process of being quantified.
26 Litigation
Amongst intangible assets for the Group is included £389,045
(2008: £256,314) representing costs of title acquisition and of
exploration over a diamond deposit near Marange. On 28 September
2006, the Group received notification from the Zimbabwe Minister
of Mines that he intended to challenge the group's legal title
with respect to Marange. The Group has initiated proceedings in
the Zimbabwe High Court in order to confirm this title. Counsel
has advised that in his opinion the Group's title is good and
therefore no provision against loss of this asset has been made.
Further to this pending High Court action, the Group has in
addition applied to the Zimbabwe High Court on an urgent basis to
stop the on-going mining activities of the ZMDC (Zimbabwe Mining
Development Company) a government parastatal, at Marange. The
initial application was dismissed. The Group is to appeal this
decision in the Supreme Court of Zimbabwe.
There is no other litigation involving any group company.
27 Post balance sheet event
The Company raised £2,311,212 before expenses through an equity
placement in April 2009.
There were no other material post balance sheet events.
---END OF MESSAGE---
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