Half Yearly Report

RNS Number : 1704S

Vane Minerals PLC

06 September 2010

 



6^th September 2010   

VANE Minerals Plc (AIM:VML)

('VANE' or the 'Company')

Interim Report for the Six Months to 30 June 2010 

VANE Minerals Plc (AIM:VML), today announces its interim report for the six months to 30 June 2010. 

Highlights for Period

·      Appointment of Chief Operating Officer

·      Mexico JV adds four more projects, La Colorada mine already producing high grade gold and silver

·      La Colorada JV gold Mine initial ore test run through SDA mill produces better than expected grades

·      Full NI 43-101 Resource Report, Wate Uranium Breccia Pipe, Arizona, USA

·      Application for minerals lease (mining license) on Wate pipe commenced

·      126 State land pipe targets projects actively being explored, two drill rig operating at present

·      155 Federal land pipe projects on care and maintenance due to moratorium decision expected July 2011

·      Copper exploration drilling commences, Lordsburg, New Mexico

-    Porphyry Copper program identifies +24 porphyry targets in a region containing the   highest known density of porphyry copper deposits in the world and produces 60% of the US's annual copper production

·      Granite Gap copper project and McGhee peak copper project claimed

Highlights post period

·      Additional High-grade Uranium Drilling Results, Wate Breccia Pipe Arizona

·      Fundraising to raise approximately £2 million

o  VANE is announcing today that it has entered into a placing agreement for the conditional placing of new ordinary shares to raise approximately £2 million (net) from new and current shareholders and certain directors.  The placing is conditional upon Admission becoming effective and upon the passing of the resolutions at the general meeting of the Company scheduled for Wednesday 6 October 2010.  One of the conditions is the completion of a Capital Reorganisation, further details of which can be found in today's placing announcement.

·      Fundraising being undertaken to fund:

o  Expansion of SDA mill, doubling capacity

o  Extension of milling process to include leaching and Merrill Crowe plant to produce precipitate

o  Exploration of Company's uranium and porphyry copper assets

·      Expansion plans expected to generate significant revenues by June 2012

For further information, please contact:

VANE Minerals Plc	[phone]
Matthew Idiens
Arbuthnot Securities	[phone]
Antonio Bossi / Ben Wells / Richard Johnson
Allenby Capital	[phone]
Alex Price
Threadneedle Communications	[phone]
Laurence Read/ Beth Harris

CHAIRMAN'S STATEMENT

Your Company is at a turning point on a number of fronts and the next twelve months will be an important transitional period for VANE. In Mexico, VANE has signed a binding memorandum of understanding to form a joint venture to enable us to grow the existing operations at the Diablito gold and silver mine, particularly the milling operations. The joint venture has four new additional projects, one of which, the La Colorada Mine, is already in production. The maiden run of La Colorada ore through the SDA Mill (which is wholly owned by VANE) has encouragingly produced head grades which have exceeded the Directors' expectations.   

This additional higher grade ore will enable VANE to reduce the requirement for blending of low-grade ore from Diablito by substituting La Colorada ore with effect from this month. Your Board believes that this will reverse the decline in Diablito`s revenues, which have also been adversely affected by the closure of one of Mexico`s two smelters. The Board believe that this closure is likely to result in an increase to its operating cost base, and the Company has therefore commenced construction of a cyanide leaching and Merrill Crowe processing plant at the SDA Mill site. When added to the existing crushing and flotation capabilities, VANE will be able to produce high-grade silver/gold precipitate which, your Board believes, will be widely marketable and therefore eliminate the need for a smelter and reduce operating costs. We believe that these improvements will make VANE`s Mexican milling and leaching capabilities highly attractive to the other local miners.

On the back of this potential investment, we are reviewing additional prospects in the region and we would hope to be able to add further projects in due course.

With regard to the uranium exploration programme in northern Arizona, VANE has added to the Uranium One joint venture properties through the addition of significant breccia pipe targets on state lands, which now total an impressive 126 pipe targets, with each having the potential for between 1 and 6 million lbs of U₃O₈. Operations on state land are not impacted by federal government interference. At present, we have two drill rigs operating. The results of the last hole at the Wate pipe, which were announced in early July, were very encouraging and we believe that these will result in an expansion of the NI43-101 inferred resource announced previously. The other rig is drilling at the Tank 4½ pipe, where VANE has historic drilling data showing a +1% eU₃0₈ intercept. With uranium production from pipes commencing in the area earlier in the year from Denison Mines' Arizona One Mine, VANE feels this is the start of the regeneration of this historical producing area of high-grade uranium supply to the US utilities and is confident that, going forward, VANE has the potential to significantly grow its production of uranium.

Within our copper portfolio, in addition to the Freeport-McMoRan database, we have recently gained access to a small number of additional key data sources, which include some proprietary and exclusive-use files. Amongst these data sets are the "CAP 1 and CAP 2 Programmes"   provided by a prominent copper explorer which Clark Arnold and Steve Van Nort worked with for a number of years.  The multi-layer Geographical Information System (GIS) that we have created has now identified more than 24 potential porphyry copper targets within the southwest USA porphyry copper region.  Of these, VANE has already secured three and the Company intends to prioritise the remainder.  Of the three targets currently held, Granite Gap will be the first to be tested using some of the funds deriving from the Placing.  VANE's geological team believes that all the indications derived from a combination of data and follow-up field work show a potentially large copper porphyry in the area.  The Board is therefore eager to commence a drilling programme as soon as possible.  

The next 12 months look particularly encouraging, as we endeavour to capitalise on the opportunity in Mexico with the development of the additional feed for the milling plant, as well as progressing the uranium breccia pipe portfolio and our copper porphyry exploration programme, both of which the Board believes have the potential to create additional value for shareholders.

Sir Richard Needham

6 September 2010

CHIEF EXECUTIVE OFFICER'S OPERATIONS STATEMENT

VANE management have instituted an expansion plan which will substantially increase revenues from our mining and processing subsidiary, Minerales VANE SA de CV. This expansion will allow the company to continue exploration for both uranium and copper which gives the opportunity for considerable value creation while cash flow from Mexican operations will help fund the exploration programme.

Silver/Gold Production and Milling - Minerales VANE SA de CV Operations - Mexico

VANE Minerals plc's wholly-owned subsidiary, Minerales VANE SA de CV (MV), operated at a slight loss during the first half of 2010 as a result of dilution of ore during the mining process and several extraordinary planned expenditures which will be discussed further below. Changes in operational procedures and expansion of our existing mill are being undertaken to restore profitability and increase revenue. An opportunity arose as a result of developments following the closure at the end of 2009, of the Grupo Mexico smelter in San Luis Potosi, east of our operations, due to its inability to comply with environmental standards.  Starting in January 2010, it became necessary to ship all of MV concentrates to the Peñoles smelter in Torreon, north of our operations and although both smelters were roughly the same distance with regards to transportation costs, the closure of competition is likely to lead to a change in smelter costs.

Your management viewed this situation as an opportunity because other mining operations within the region and especially to the south will incur further costs and have to look for an alternative.  VANE is able to offer that alternative by doubling the existing mill capacity from 100 tonnes per day (T/d) to 200 T/d by the addition of another 100 T/d ball mill and more importantly, by the construction of a cyanide leaching plant and Merrill-Crowe recovery circuit to be added onto the existing milling facility, all of which are now underway at our San Dieguito de Arriba Mill (SDA). This will enable the production of high-grade Au/Ag precipitate that is widely marketable and will reduce costs significantly by eliminating the need to transport and smelt concentrates. The new plant will be able to treat four times the amount of concentrate currently produced at SDA thereby giving us the options of expanding production and accepting concentrates from other sources to take advantage of optimum grades.

The first steps towards this expansion programme came with the signing of the Memorandum of Understanding with the Ruiz brothers covering a 1,500 km² area of interest that encompasses the Rosario and La Rastra Mineral Districts located some 120 km to the north of MV's mill at San Dieguito de Arriba. The Ruiz's currently control four mines developed on high-grade veins including La Colorada (which is currently shipping ore to the SDA Mill), Saltito, Valenzuela and Papayal. The Ruiz family has been exploring and mining in this region for several generations, consequently they are familiar with a number of other high-grade opportunities. These opportunities will be investigated and if sufficient resources can be identified, MV will construct a mill centrally located within the Rosario-La Rastra district that would double current production from the SDA Mill.

Over the past six months, production from the Diablito Mine at Las Lumbres has averaged 2,096 tonnes per month (T/m), slightly above our target of 2,000 T/m. Silver and gold grades however, were below target mainly due to the continuing effects of dilution by low-grade wall rock and the need for development drifting in lower grade material necessary to access drill indicated ore in the eastern part of the mine.

The SDA Mill, located 30 km north of the Diablito Mine and 5 km east of MV's office and laboratory complex in Acaponeta, Nayarit, operated smoothly at 94% availability. Tonnes milled during the first half of 2010 amounted to 15,581 tonnes averaging 2,596 T/m or 104% of target. The average grade of material processed was 205 g/T silver and 1.74 g/T gold (20% and 32%, respectively, below projections). These grades reflect the combination of the approximately 1,500 tonnes per month of Diablito mined ore, at significantly higher grades, plus 1,000 tonnes per month of lower grade material either mined and brought to the surface or retrieved from stockpiles at the mine, the cost of which had previously been written off and therefore carried at zero cost. This material was accumulated during the first 3 years of mine operation before we commissioned the mill at SDA in January 2008.

During the first half of 2010, SDA shipped to the Penoles Smelter 228 tonnes of concentrates (38.1 T/m) representing an ore-to-concentrate ratio of 69:1. The average metal prices for the six month period were $17.56 and $1,148.60 per ounce of silver and gold, respectively.

One time expenditures during the first half of 2010, not directly related to mining and milling, which impacted our cash flow situation included costs associated with the new leaching and Merrill Crowe plant construction, expansion of the tailings ponds in advance of the rainy season, advances in capital to the Rosario JV in order to sustain production at the La Colorada vein, construction of a batch sampling plant at SDA to facilitate custom milling opportunities and underground drilling at Diablito to delineate ore shoots.

Plans for the remainder of 2010 are to operate the mill at full capacity, 2,500 T/m, and to increase the grade of the mill feed by supplementing the Diablito mined ore with high-grade material sourced from our Rosario joint venture partners to the north.

With the closure of the Grupo Mexico smelter, several additional acquisition opportunities have materialized in the area south of our SDA mill. These are under investigation and could provide an excellent source of additional SDA mill feed. Progress in this area will be reported as agreements are finalized.

U.S.A. Uranium Exploration

Your Company made excellent progress with its uranium program during the year to date, announcing an NI 43-101 resource statement on the Wate pipe in March, followed by posting of the full report in May. Additionally, VANE successfully reorganized its breccia pipe exploration effort by extending the portfolio to include an extensive land position having excellent discovery potential located on State of Arizona lands. VANE's current breccia pipe operations are entirely focused on projects included in the 50:50 joint venture with partner Uranium One Exploration U.S.A. Inc. (U1).

The announcement of the Wate NI 43-101 compliant resource of 696,000 lbs eU₃O₈ at a grade of 0.80% eU₃O₈ was followed by the commencement of further drilling at Wate to increase the resource to 1,000,000 lbs eU₃O₈, at which point prefeasibility will commence. VANE issued a press release on 1 July with results from the first hole designed to expand the resource to 1 million lbs eU₃O₈. This hole, WT-37, encountered two zones of resource-grade mineralization (18.5 feet @ 0.35% eU₃O₈ from 1,299.5 - 1,318.0 feet, and 11.5 feet @ 1.25% eU₃O₈ from 1,362.5 - 1,374.0 feet) that expanded the known area of mineralization laterally 35 feet to the southwest into an untested area. VANE was subsequently able to obtain the drill intercept data for all historic Wate holes, which compare well to data VANE obtained from historic holes it had successfully washed out and logged as well as twinned holes.   For example:

Hole WT-5,             Depth        - Interval  - Grade    

RME (historic)        1491.0      - 33.5ft     -  1.17% eU₃O₈

VANE                   1483.5      - 33.5ft     -  1.46% eU₃O₈

Including:

RME (historic)        1491.0      - 25.0ft     -  1.85% eU₃O₈

VANE                   1488.5      - 25.0ft     -  1.81% eU₃O₈

This newly obtained historic drilling data is being evaluated by VANE's qualified consultant, SRK Consulting Inc., to determine if they, in conjunction with VANE's drilling results to date, are suitable for NI 43-101 reporting to enable an upgrade of the existing compliant resource.

The decision to shift operations to take advantage of the exploration potential on Arizona state lands was underpinned by strong support from Arizona Governor Jan Brewer and Arizona's two U.S. Senators who strongly opposed the Segregation Order issued by the US Secretary of Interior on federal lands. That order stymied, for at least two years, development of a source of clean energy in an area and by an industry with a proven successful environmental and economic record.

The acquisition program of state lands yielded over 100 exploration pipe targets including a number of "blind" targets identified by an airborne geophysical survey. Surveys of this type have been proven effective in identifying hidden mineralized pipes elsewhere in the district. The state land targets are presently being prioritized and permitted for drilling.

In addition to the current drilling at Wate, VANE is also actively drilling on the Tank 4½ pipe. Upon completion of drilling at Wate or Tank 4½, drilling will resume on the Miller project. VANE also has several untested targets on state lands permitted for drilling. A number of these targets and the new targets being permitted will be drilled by year end.

The U1-VANE joint venture operates with VANE conducting the exploration and U1 conducting development, mining and milling. With the Wate pipe nearing hand over to U1 for development, this is an important transition period for VANE.

For a number of reasons, our optimism and enthusiasm regarding the future of the nuclear industry within the US and particularly the breccia pipe district within the Colorado Plateau continues.

 Supply and Demand:

·      104 nuclear reactors provide 20% of the U.S.A.'s electrical energy and do so safely while producing no green house gases.

·      The U.S.A. currently imports 90% of the uranium required to fuel the 104 existing plants.

·      The U.S. Geological Survey estimates that the Arizona Strip (breccia pipe district) contains 2.2 billion lbs of U₃O₈. This is estimated to comprise 42% of the U.S.A.'s undiscovered uranium endowment.

·      Of the above estimated reserves, 350,000,000 lbs is within the area VANE is operating which would equate to 100 breccia pipe deposits believed to contain an average of 3.4 million pounds of U₃O₈ each.

·      Dozens more reactors are under construction throughout the world including the U.S.A. - all of which will require uranium fuel in the relatively near future.

Production:

·      Breccia pipe mining on the Colorado Plateau has an excellent record of safety and adherence to environmental concerns established over more than three decades.

·      The pipes have a small foot print - less than 20 acres. All mining is accomplished underground, above the water table, during a short 4 to 5 year mine life.

·      Reclamation following depletion of the deposits is highly effective as already demonstrated at a number of sites in the area.

Economics:

·      High-grade uranium production (circa. 1% U₃O₈).

·      Operating costs are low.

·      Capital expenditures are low.

·      Return of capital is rapid (short mine life).

The successful continuation of our uranium exploration and development project will propel the company into the upper ranks of US producers.

Southwest U.S.A. Porphyry Copper Exploration

VANE's copper programme is focused on porphyry copper systems and based on the application of a few basic concepts, many of which were developed and employed successfully during the time that two of the directors were associated with an unnamed, well-known copper expert during the 1970s and 1980s. These techniques involve acquisition and drill testing of a number of prospects in favourable areas as rapidly as possible and at low cost.

These concepts were employed by VANE early in its history in conjunction with the Freeport-McMoRan data base and have recently been advanced and refined to incorporate current technology including published and proprietary geophysical gravity data as well as water well geochemistry both of which are referenced to a Geographical Information System (GIS). This work has highlighted 24 untested targets in a region containing the highest known density of porphyry copper deposits in the world that produces 60% of the US's annual copper production.

The recently completed Lordsburg West project, based on information from the Freeport data base, was drilled during 2010, and although some 0.1% Cu was encountered beneath thin post-mineral gravels, the overall results were insufficient. This project has been fully impaired at June 2010.

Work at Yuma King has advanced the project to the drilling stage. Historic data from the Yuma King copper target has undergone considerable re-interpretation based on a review of the published mapping and sampling in the area as well as in-house surface and underground mapping and re-logging and re-sampling of the 5 core holes previously drilled by Big Bar Resources. We find that several of the Big Bar holes intersected highly anomalous copper and molybdenum values in the lower parts of the holes. VANE's plan is to offset these holes in an attempt to vector our way toward a centre of higher grade mineralization of the porphyry copper type.

Two other target areas have been claimed at Granite Gap and McGhee Peak, in southwestern New Mexico indentified during the porphyry copper programme. Both areas display classic peripheral fringe type effects of mineralization and alteration typically associated with porphyry copper systems in outcrops along the edge of gravel cover. In addition, water well data held within the GIS program show anomalous copper and molybdenum in wells located several miles down slope from a target area, making the project a priority for VANE to drill as it shows excellent potential.

In summary, the VANE operations have seen a substantial amount of important work conducted within the period, commencing the expansion of existing production and milling capacity and progressing our copper and uranium exploration projects. The primary strategic objective is to now build up the production side of the business within Mexico to secure internally the financing of the exploration programmes within the group going forward. Such revenues would underpin an exploration portfolio at a crucial stage, taking the company from building a portfolio to advancing the existing portfolio.  VANE has drill ready targets within one of the world's most prospective areas for copper and is ready to progress the Wate uranium pipe towards development. Our operations are also primed to progress more of our breccia pipe projects toward the resource stage so we can identify these assets for development within the Uranium One partnership. We look forward to announcing further news from across all our projects over the course of the next twelve months.

Steven D Van Nort

6 September 2010

Condensed consolidated income statement

For the six months ended 30 June 2010

		Unaudited 6 months ended 30 June		Audited year ended 31 December
	Notes	2010	2009	2009
		£	£	£
Revenue	4	1,047,423	1,083,404	2,350,866
Cost of sales		(1,454,486)	(821,435)	(1,230,727)
Gross (loss)/profit		(407,063)	261,969	1,120,139
Operating and administrative expenses		(858,342)	(856,103)	(1,692,627)
Impairment of exploration costs		(115,657)	-	(831,248)
Operating loss	4	(1,381,062)	(594,134)	(1,403,736)
Investment income		3,256	17,752	26,698
Finance costs		(72,001)	(73,810)	(144,341)
Loss before taxation		(1,449,807)	(650,192)	(1,521,379)
Taxation		54,448	55,400	(342,647)
Loss for the period from continuing operations attributable to owners of the parent company		(1,395,359)	(594,792)	(1,864,026)
Loss per share
Basic  & diluted	3	(0.73p)	(0.31p)	(0.98p)

Condensed consolidated statement of comprehensive income

For the six months ended 30 June 2010

		Unaudited 6 months ended 30 June		Audited year ended 31 December
		2010	2009	2009
		£	£	£
Loss for the period		(1,395,359)	(594,792)	(1,864,026)
Other comprehensive income
Exchange differences arising on translation of foreign operations		263,341	(499,844)	(289,492)
Other comprehensive income before tax		(1,132,018)	(1,094,636)	(2,153,518)
Income tax relating to components of other comprehensive income		(151,953)	263,641	153,797
Total comprehensive income for the year attributable to owners of the parent company		(1,283,971)	(830,995)	(1,999,721)

Condensed consolidated statement of financial position

as at 30 June 2010

	Unaudited 30 June		Audited 31 December
	2010	2009	2009
	£	£	£
Non-current assets
Investments	213,571	213,571	213,571
Intangible assets	2,888,571	2,728,377	2,567,140
Property, plant and equipment	2,400,934	2,865,597	2,645,091
Deferred tax asset	-	121,947	-
	5,503,076	5,929,492	5,425,802
Current assets
Inventories	588,022	167,011	804,200
Trade and other receivables	401,088	353,642	374,251
Cash and cash equivalents	824,859	2,599,776	1,818,959
	1,813,969	3,120,429	2,997,410
Total assets	7,317,045	9,049,921	8,423,212
Current liabilities
Trade and other payables	(527,703)	(329,034)	(454,276)
Current taxation	(55,258)	(9,399)	(65,238)
	(582,961)	(338,433)	(519,514)
Non-current liabilities
Convertible loan notes	(1,442,154)	(1,417,992)	(1,429,985)
Deferred tax liabilities	(400,216)	-	(320,295)
Provisions	(41,250)	(37,500)	(41,250)
	(1,883,620)	(1,455,492)	(1,791,530)
Total liabilities	(2,466,581)	(1,793,925)	(2,311,044)
Net assets	4,850,464	7,255,996	6,112,168
Equity
Share capital	19,010,811	19,010,811	19,010,811
Share premium account	2,359,071	2,359,071	2,359,071
Share option reserve	302,428	255,263	280,161
Other reserves	261,220	261,220	261,220
Retained losses	(17,266,040)	(14,601,447)	(15,870,681)
Cumulative translation reserve	182,974	(28,922)	71,586
Equity attributable to owners of the parent company	4,850,464	7,255,996	6,112,168

 

Condensed consolidated statement of changes in equity (Unaudited)

	Share capital	Share premium	Share option reserve	Other reserves	Cumulative translation reserves	Retained losses	Total
	£	£	£	£	£	£	£
As at 1 January 2009	19,010,811	2,359,071	231,210	261,220	207,281	(14,006,655)	8,062,938
Loss for the period	-	-	-	-	-	(594,792)	(594,792)
Exchange translation differences on foreign operations	-	-	-	-	(499,844)	-	(499,844)
Deferred tax effect of exchange differences arising on translation of foreign operations	-	-	-	-	263,641	-	263,641
Total comprehensive income	-	-	-	-	(236,203)	(594,792)	(830,995)
Transactions with owners
Share based payment	-	-	24,053	-	-	-	24,053
As at 30 June 2009	19,010,811	2,359,071	255,263	261,220	(28,922)	(14,601,447)	7,255,996

Condensed consolidated statement of changes in equity (Audited)

	Share capital	Share premium	Share option reserve	Other reserves	Cumulative translation reserves	Retained losses	Total
	£	£	£	£	£	£	£
As at 1 January 2009	19,010,811	2,359,071	231,210	261,220	207,281	(14,006,655)	8,062,938
Loss for the year	-	-	-	-	-	(1,864,026)	(1,864,026)
Exchange translation differences on foreign operations	-	-	-	-	(289,492)	-	(289,492)
Deferred tax effect of exchange differences arising on translation of foreign operations	-	-	-		153,797	-	153,797
Total comprehensive income	-	-	-	-	(135,695)	(1,864,026)	(1,999,721)
Transactions with owners
Share based payment	-	-	48,951	-	-	-	48,951
As at 31 December 2009	19,010,811	2,359,071	280,161	261,220	71,586	(15,870,681)	6,112,168

Condensed consolidated statement of changes in equity (Unaudited)

	Share capital	Share premium	Share option reserve	Other reserves	Cumulative translation reserves	Retained losses	Total
	£	£	£	£	£	£	£
As at 1 January 2010	19,010,811	2,359,071	280,161	261,220	71,586	(15,870,681)	6,112,168
Loss for the period	-	-	-	-	-	(1,395,359)	(1,395,359)
Exchange translation differences on foreign operations	-	-	-	-	263,341	-	263,341
Deferred tax effect of exchange differences arising on translation of foreign operations	-	-	-	-	(151,953)	-	(151,953)
Total comprehensive income	-	-	-	-	111,388	(1,395,359)	(1,283,971)
Transactions with owners
Share based payment	-	-	22,267	-	-	-	22,267
As at 30 June 2010	19,010,811	2,359,071	302,428	261,220	182,974	(17,266,040)	4,850,464

Condensed consolidated statement of cash flows

For the six months ended 30 June 2010

		Unaudited 6 months ended 30 June		Audited Year ended 31 December
		2010	2009	2009
		£	£	£
Net cash outflow from operating activities	A	(718,395)	(367,079)	(593,322)
Net cash outflow from investing activities	b	(293,784)	(277,500)	(869,156)
Net cash outflow from financing activities	c	(1,844)	(5,148)	(8,818)
Net decrease in cash and cash equivalents		(1,014,023)	(649,727)	(1,471,296)
Cash and cash equivalents at beginning of period		1,818,959	3,308,016	3,308,016
Effect of foreign exchange rate changes on cash and cash equivalents		19,923	(58,513)	(17,761)
Cash and cash equivalents at end of period		824,859	2,599,776	1,818,959

Appendices to the condensed consolidated statements of cash flows

For the six months ended 30 June 2010

		Unaudited 6 months ended 30 June		Audited Year ended 31 December
		2010	2009	2009
		£	£	£
a	Cash flow from operating activities
	Loss before taxation	(1,449,807)	(650,192)	(1,521,379)
	Income from investments	(3,256)	(17,752)	(26,698)
	Finance costs	72,001	73,810	144,341
	Depreciation and amortisation	306,241	298,813	595,918
	Impairment of intangible fixed assets	115,657	-	831,248
	Share based payments	22,267	24,053	48,951
	Effect of foreign exchange rate changes	75,321	11,925	26,303
	Operating cash (outflow)/inflow before movements in working capital	(861,576)	(259,343)	98,684
	Decrease/(increase) in inventories	216,178	(146,854)	(784,043)
	(Increase)/decrease in trade and other receivables	(26,837)	143,463	122,854
	(Decrease)/increase in trade and other payables	75,558	(30,170)	98,175
	Cash used in operations	(596,677)	(292,904)	(464,330)
	Taxes paid	(61,927)	(11,660)	(8,476)
	Interest paid	(59,791)	(62,515)	(120,516)
	Net cash outflow from operating activities	(718,395)	(367,079)	(593,322)
b	Cash flow from investing activities
	Interest received	3,256	17,752	26,698
	Purchase of property, plant and equipment	(4,441)	(24,146)	(60,106)
	Purchase of intangible assets	(292,599)	(271,106)	(835,748)
	Net cash outflow from investing activities	(293,784)	(277,500)	(869,156)
c	Cash flows from financing activities
	Repayment of obligations under finance leases	(1,844)	(5,148)	(8,818)
	Net cash outflow from financing activities	(1,844)	(5,148)	(8,818)

Notes to the condensed consolidated interim financial statements

1. Accounting Policies

Basis of preparation

This Report was approved by the directors on 2 September 2010

The financial statements have been prepared in accordance with the recognition and measurement principles of International Accounting and Financial Reporting Standards ("IFRS") as adopted in the EU.

The financial statements are presented in British pounds as this is the currency in which funds from financing are generated and in which receipts are usually retained. The functional currency of the holding company is also British pounds.

The company is domiciled in the United Kingdom.  The company is listed on the Alternative Investment Market stock exchange.

The current and comparative periods to June have been prepared using the accounting policies and practices consistent with those adopted in the annual financial statements for the year ended 31 December 2009 and are also consistent with those which will be adopted in the 31 December 2010 financial statements. Comparative figures for the year ended 31 December 2009 have been extracted from the statutory financial statements for that period which carried an unqualified audit report with an emphasis of matter in regard to going concern, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.

The Financial Information contained in this report does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.  This report has not been audited or reviewed by the group's auditors.

During the first six months of the current financial year there have been no related party transactions that materially affect the financial position or performance of the group and there have been no changes in the related party transactions described in the last annual financial report.

The principal risks and uncertainties of the group have not changed since the publication of the last annual financial report where a detailed explanation of such risks and uncertainties can be found.

2. Dividends

The directors do not recommend the payment of a dividend for the period.

3. Loss per ordinary share

The calculation of basic and diluted loss per ordinary share is based on the loss after taxation and on the following weighted average number of shares in issue.

	Shares in Issue
	Unaudited		Audited
	30 June 2010	30 June 2009	31 December 2009
Weighted average number of shares	190,108,108	190,108,108	190,108,108

As a result of the loss incurred in the periods ended 30 June 2010, 30 June 2009 and 31 December 2009 there is no dilutive effect from the subsisting share options.

4.   Segmental analysis

The Group's primary segmental reporting is based on geographic segments as follows:

	Unaudited		Audited
Geographical Location	6 months to 30 June 2010 £	6 months to 30 June 2009 £	12 Months to 31 December 2009 £
Revenue
UK	162,824	183,692	353,260
USA	-	-	-
Mexico	1,047,423	1,083,404	2,350,866
Paraguay	-	-	-
	1,210,247	1,267,096	2,704,126
Less intersegment sales	(162,824)	(183,692)	(353,260)
	1,047,423	1,083,404	2,350,866
Segment results
UK	(270,959)	(375,400)	(661,708)
USA	(524,251)	(345,184)	(1,454,196)
Mexico	(585,852)	126,450	712,168
Paraguay	-	-	-
	(1,381,062)	(594,134)	(1,403,736)
Investment income	3,256	17,752	26,698
Finance costs	(72,001)	(73,810)	(144,341)
Current and deferred tax	54,448	55,400	(342,647)
	(1,395,359)	(594,792)	(1,864,026)
Net Assets
UK	(810,138)	1,049,080	213,797
USA	3,038,030	2,160,336	2,637,074
Mexico	2,622,572	3,405,534	3,261,297
Paraguay	-	641,046	-
	4,850,464	7,255,996	6,112,168

Activities in Mexico are currently concerned with gold and silver mining and exploration. Activities in the USA are split between other sources for further gold and silver properties, copper exploration and research and evaluation of potential uranium properties. Activities in the United Kingdom are concerned with administration and management of the Group.

5.  Capital and reserves

Share option reserve

The share option reserve includes an expense based on the fair value of share options issued since 7 November 2002.

Other reserve

The other reserve represents recognition of the equity component of the convertible loan notes.

Cumulative translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations that do not have a sterling functional currency. Exchange differences are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised in the income statement in the period in which the operation is disposed of.

Kristopher K. Hefton, Chief Operating Officer of VANE Minerals (US) LLC, BSc Geology, who meets the criteria of a qualified person under the AIM Rules - Guidance for Mining, Oil and Gas Companies, has reviewed and approved the technical information contained within this announcement.

 

END

 

 

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