Half Yearly Report

RNS Number : 1497P

Vane Minerals PLC

29 September 2011

 



29 September 2011

VANE Minerals plc

("VANE" or the "Company")

Interim Report for the Six Months to

30 June 2011 

VANE Minerals plc (AIM:VML) today announces its interim report for the six months to 30 June 2011.

Highlights for Period

·      £1,240,651 Revenue, increased 18.45% (H1 2010 £1,047,423)

·      £1,559,977 Loss, representing (0.48) pence per share

·      £1,525,014 Group-wide cash balance at period end

Silver/gold production and milling, Mexico

·      Increased revenues at operations as a result of processing ore from the Ruiz joint venture

·      17,008T (105% of target) total ore production

·      Average metal price received on sales of concentrates was $38.09/oz silver and $1,525.41/oz gold (up from the 2010 average prices of $1,204.09/oz gold and $19.43/oz silver)

·      Diablito Mine expected to close mid-2012, on time and on budget

·      Expansion of Rosario JV with higher grade ore

Copper portfolio 

·      Permitting finalised for McGhee Peak project. Railroad expected to have permitting finalised in near future

·      Property positions also established at Bouse, Peg Leg, Lone Hills and Cherry Creek

Uranium portfolio

·      Drilling phase successfully completed on Wate deposit

o  Grade increased from 0.70% eU₃O₈ to 0.79% eU₃O₈ and inferred resource delineated at 1.118m Ibs eU₃O₈

Highlights post Period

·      David Newton appointed as Chief Executive Officer

·      Completion of cyanide leach/Merrill Crowe plant.

·      Renewal agreement with Freeport-McMoRan Copper and Gold Inc.for access to the Freeport databank extended to 30 June 2013

·      JV and option agreement signed with Uranium One Americas Inc. in relation to Rose uranium breccia pipe project

o  Drilling commenced

o  620 feet of vertical extent of known mineralization; historic grade results in excess of +1% eU₃O₈

David Newton, CEO of VANE Minerals said; "I am extremely pleased to have joined the board of VANE at what I hope will prove to be an exciting time in VANE's history. This has been a productive period for VANE as we have significantly increased revenues at our Mexican gold and silver operations as a result of increasing processed ore via our new joint venture with the Ruiz Brothers, combined with higher gold and silver prices. Post period end we have successfully completed the construction of a cyanide leach/Merrill Crow facility in Mexico and start-up operations have commenced. Within the porphyry copper portfolio, two targets have been drilled with another 6 property positions established and are in the drill permitting process. We are encouraged by these prospects and intend to continue to identify and add further targets to this portfolio. With regards to our uranium portfolio in Arizona, we have reached the pre-development phase milestone at our most advanced target, Wate, and will now progress the application for the exploitation Mineral Lease. We look forward to updating shareholders on news across our portfolio of gold and silver, porphyry copper and uranium prospects over the coming months."

Contacts:

VANE Minerals plc	[phone]
David Newton/Matthew Idiens Allenby Capital Brian Stockbridge/Alex Price	[phone]
Threadneedle Communications	[phone]

Laurence Read/ Beth Harris

CHAIRMAN'S STATEMENT

I am pleased to report on the interim results for the six months ended 30 June 2011.

During the period, the Company has worked hard to improve the profitability of its Mexican-based gold and silver production facilities whilst continuing to implement its exploration programme on its copper and uranium assets.

The post period-end appointment of David Newton as the Company's new Chief Executive Officer enables us to enhance the running of our operations whilst also allowing us to better assess new prospects for inclusion within the Company's portfolio.

We have seen Minerales VANE SA de CV, increase its revenues (as compared with the period ended 30 June 2010), as a result of us now processing ore from our new joint venture and also the positive impact of higher gold and silver prices. This improvement has been partially offset at the gross profit level by ore grades and recovery rates that have been slightly lower than expected. The ore grades from the Diablito Mine have continued to disappoint so the Company intends to maximise the supply of ore from its joint venture with the Ruiz Brothers, which is being processed on a more profitable basis than the ore from the Diablito Mine whilst at the same time moving towards the closure of the Diablito Mine, which is expected to occur mid-2012.

The Ruiz joint venture continues to run smoothly, with production of ore from the Colorada Mine running ahead of schedule and exceeding expectations. In addition, the construction of the cyanide leach/Merrill Crowe facility has been successfully completed and start-up operations are running efficiently, albeit on a slightly slower timescale than was originally expected.

The USA porphyry copper exploration programme continues as planned and whilst two targets were drilled in the period with negative results, the Directors are encouraged by the prospects that remain in and are being added to the exploration programme. A further six target areas have been acquired on which the drill permitting process is underway. The Company intends to add further targets in the near future.

The uranium exploration programme in Arizona continues through the joint venture arrangements that are in place with Uranium One Exploration U.S.A. Inc. The Company has an NI 43-101 compliant confirmed resource of 1.118m lbs of eU₃O₈ contained in 71,000 tons with an average grade of 0.79% eU₃O₈. The project has moved to the pre-development phase and preparation of the documents necessary to obtain the Mineral Lease (for exploitation) from the State of Arizona has commenced. Drilling at additional projects is underway and the Company is optimistic of further positive results.

There are however some macro-political issues arising, both in the USA and globally, which continue to have an impact on both the Company and the spot price for uranium. The Fukushima disaster in Japan has helped trigger a global slump in the prospects for uranium producers and, whilst it appears that this will continue for the short-term, the Directors believe that uranium will continue to be the clean fuel of choice in the future. Whilst your Company is optimistic about its drilling prospects for the assets that it owns on state lands (and on which it continues to be able to drill), the Directors remain realistic and will review the viability of these operations on a continuing basis.

Trading update and outlook

On 4 July 2011 we announced increased Gold/Silver production results at the SDA mill in Mexico. Notwithstanding this increase, however, based to a large extent on the disappointing ore grades from the Diablito Mine, average grades to the end of August 2011 have not been as high as expected and, as such, the Board considers that the outcome for the current financial year is likely to be below the board's previous expectations. That said, in recent weeks we have experienced improved grades and should these be sustainable then we expect them to have a positive impact on VANE's revenue for the current financial year. It should also be noted that the Board have taken a strategic decision that since VANE is an exploration company any profits that are generated from our Mexican business will be reinvested in the development of our exploration activities, thus impacting the board's expectation of VANE's financial performance for the year ending 31 December 2011.

We shall continue to seek to improve the profitability of the Company's producing precious metals assets in Mexico and drive forward the U.S. porphyry copper exploration programme.  The appointment of David Newton ensures we have a CEO with extensive experience working with natural resources companies driving forward the work programme over the next twelve months. Moreover, I believe that the forecast fundamentals for the mining sector in the next few years remain very encouraging given the current strength of most commodity prices, which is underpinned by continued strong demand by the BRIC countries.

In addition, the Directors continue to examine additional projects to add to the VANE portfolio.

Sir Richard Needham

29 September 2011

CHIEF EXECUTIVE OFFICER'S OPERATIONS STATEMENT

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

The Company's joint venture agreement with the Ruiz brothers, members of a long-established mining family located in El Rosario, State of Sinaloa, continues to operate efficiently. The joint venture has an area of interest covering some 1,500 square kilometres in southern Sinaloa. It includes three separate mining districts; La Rastra, Escuinapa and Rosario. Within the area of interest, the Ruiz family either owns or controls four concessions. The Colorada Mine located on the Colorada Concession is in production providing feed ore for the SDA mill. Three additional concessions, Maria Fernanda, Valenzuela and Jorge Luis cover three partly developed high-grade vein structures and are expected to provide further ore to the SDA mill.

Minerales VANE SA de CV ("MV"), VANE's 100% owned subsidiary, continued to broaden its reach in west-central Mexico during the period. Operations at the Diablito Mine, the Colorada Mine and at our 100 tonne/day (Tpd) San Dieguito de Arriba flotation mill (SDA), located 30 km north of the Diablito Mine, continued to be directed from MV's headquarters located in Acaponeta, State of Nayarit, that includes offices, living quarters and analytical facilities.

The construction of the cyanide leach/Merrill Crowe recovery circuit to treat silver-gold sulphide concentrates has been completed. The Directors continue to believe that the Mexican programme will be best served by continuing to operate the SDA mill at 100 Tpd whilst seeking to construct a new 200 Tpd concentrator at a location central to future mining operations, once the relevant reserves/resources sufficient to provide five years of feed have been identified. A 200 Tpd ball mill, bought by the Company in late 2010, is the critical part of any new mill construction and is currently stored in El Rosario. The new concentrator is expected to be constructed at a location within the Rosario joint venture area of interest, although the exact timescale remains to be established.

Financially, MV generated a gross profit, excluding depreciation and amortisation, of MXN$5,735,140 (£298,703) for the first half of 2011, which was lower than forecast as a result of the dilution of ore during the mining process and lower than expected recovery rates, primarily from ore produced by the Diablito Mine. Changes are being undertaken to improve both profitability and increase revenue, which we expect to be reflected in the results for the year as a whole and the board has decided to move towards the closure of the Diablito Mine, which is expected to be completed in mid-2012,and replace the ore produced by the Diablito Mine with that from the Rosario JV, which the Directors forecast to produce grades of 4g/T gold and 100g/T silver.

Ore production from Diablito for the six months ended 30 June 2011 amounted to 9,432 tonnes whilst production from Colorada contributed 7,576 tonnes for a total of 17,008 tonnes (2,835 tonnes per month) or 105% of target. This was ahead of target production of 2,700 tonnes per month. During the period, the SDA mill treated 8,392 tonne of ore from Diablito and 7,250 tonnes from Colorada at an average of 2,607 tonnes per month or 102% of the target amount, 2,500 tonnes per month. Precious metal grades at Diablito continued to suffer as a result of mining-related dilution but mill concentrate grades improved as a result of being able to process Colorada ore through the SDA mill. For the period, SDA mill head grades averaged 134 g/T silver and 2.80 g/T gold, while recoveries for silver and gold averaged 67% and 69%, respectively. Mill recoveries suffered due to the oxidized nature of the Colorada ore. Concentrates produced amounted to 190.29 tonnes or 31.7 tonnes per month (giving a concentration ratio of 82:1, ore:concentrates) and averaged 191.6 oz per tonne silver and 4.34 oz per tonne gold. All concentrates produced were sold to Penoles via the NexxTrade metal trading company. The weighted average metal price received on sales of concentrates was $38.09/oz silver and $1,525.41/oz gold, up from the 2010 average prices of $19.43/oz silver and $1,204.09/oz gold. The Company's budgets for the second half of the year are based on a price of $27.00/oz for silver and $1,325.00/oz for gold as compared with current prices of approximately $40.00/oz and $1,850/oz, respectively.

With the Company's treatment facilities strategically situated along the major north-south highways and rail routes, the MV team continues to seek and evaluate acquisition opportunities, being both stand-alone mine/mill operations and mine/mill production and/or concentrates as potential feed to the SDA mill and cyanide leach/Merrill Crowe plant. We also continue to look both north and south of Acaponeta for opportunities similar to the Rosario joint venture. This broad area of interest contains both producing mines with significant historic production and represents what the Company believes are a number of opportunities to expand its business.

Southwest U.S.A. Porphyry Copper Exploration

VANE's copper programme is focused on porphyry copper systems and based on the application of a number of proven techniques, many of which were developed and employed successfully during the time that two of the Directors were associated with a 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 and the Directors were involved with a number of significant copper discoveries in this area.

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 U.S.'s annual copper production.

During the period, two projects, Yuma King and Granite Gap, have been tested with negative results. The Company was fortunate, however, that in both areas it was able to conduct definitive tests, which is not always possible in areas having excessively thick post mineral cover, and property positions were terminated prior to the time when additional holding costs would have been incurred. In addition, permitting has been finalized for the McGhee Peak project and drilling can commence upon receipt of a routine well registration permit, which is expected by the Directors in the near future.

Property positions have been established in six areas, Railroad, where drilling will follow McGhee Peak and Bouse, Peg Leg, Lone Hills and Cherry Creek. Target development is also underway in additional areas and all of the areas mentioned are focused on copper and gold. Four are located in southwest New Mexico; one is situated in Pinal County, Arizona, which is also an area known to have a high concentration of porphyry copper deposits. Bouse is a bulk disseminated copper-gold target located in western Arizona in an area also known for the occurrence of such systems.

The time required for permitting of drilling projects once a property position has been established continues to be a bottleneck, particularly in New Mexico. In an effort to minimize delays, the Company has contracted that part of the exploration program to a local service group specializing in the provision of those services.

The Company continues to believe that its best chance of success in its copper exploration program lies in testing a large number of virgin targets situated beneath post mineral gravel or volcanic cover in areas well known for the type of deposits we are seeking. Targets are selected on the basis of fundamental geologic criteria and tested as quickly and inexpensively as possible.

U.S.A. Uranium Exploration

Northern Arizona Breccia Pipe District

The Company's uranium programme progressed strongly, led by the joint venture project with Uranium One Exploration U.S.A. (U1) in northern Arizona.  The surface drilling phase was successfully completed on the Wate deposit and exploration drilling was conducted on 12 other solution-collapse breccia pipe targets. The completion of final surface definition drilling in early 2011 at Wate confirmed a minimum of 1.118M lbs eU₃O₈ contained in 71,000 tons with an average grade of 0.79% eU₃O₈ (as reported in the Company's announcement of 18 May 2011). The project moved to the pre-development phase and preparation of the documents necessary to obtain the Mineral Lease (for exploitation) from the State of Arizona is underway. The Mineral Lease process also includes preliminary permitting efforts pertaining to mining development.

The 12 additional projects drilled included drilling on 11 new, previously undrilled targets and continued drilling on the Red Dike breccia pipe to offset the 0.26% eU₃O₈ mineralization discovered in earlier drilling.   Initial exploration drilling on the 11 new targets consisted of shallow drilling which identified subsurface depressions indicating the potential for a pipe on 8 of the 11 targets that will require follow-up deep drilling.  At one of these projects, Square Tank, the indication of a subsurface depression confirming at least 140 feet of collapse is noted in the drilling completed to date.  Drilling is continuing to locate the center of this depression where a deep hole will be placed.  At the V403 "covered target", which was identified by VTEM geophysics, shallow drilling completed at the location of the geophysical feature indicates a hidden circular depression under the surface alluvial gravels.   The centre of the depression appears to be located outside the area permitted for drilling and, upon expanding the permit area, additional shallow drilling can be completed to better define the center of the depression and to position a deep drill hole. Offset drilling of mineralization previously discovered in the Red Dike pipe did not expand that known mineralization. 

A positive, post period accomplishment is the agreement signed with U1 on the mineralized Rose breccia pipe project (see the announcement dated 27 July 2011).  Drilling on this project by the JV is underway to follow up the initial drilling completed by previous owners.   That drilling consisted of three deep holes, each of which cut +1% eU₃O₈ mineralization. Further information will be announced at the appropriate time.

Northern Arizona Political Developments

VANE has remained optimistic regarding the outcome of the Environmental Impact Statement ("EIS").  The Draft EIS ("DEIS") was released in February 2011, which indicated no significant environmental impact from exploration and mining activities nor did it provide evidence that an environmental emergency existed which is the requirement for the issuance of the Segregation Order.  The demonstration of no significant impact is a testament to the uranium industry having successfully and quietly operated for 20 years under the tried-and-tested FLPMA and NEPA environmental policies.  Other investigations have revealed that the U.S. relies on foreign sources for 90% of its nuclear fuel needs and an economic impact of $29 billion over the life of this uranium project on the U.S. and northern Arizona, where skilled jobs are scarce.  Further to this, bipartisan legislation passed in 1984 specifically designates a portion of the lands being targeted for withdrawal must remain open for mining.  However on June 20, 2011, Secretary Salazar, issued an emergency 6-month extension to the Segregation and stated that he plans to recommend the full withdraw of these federal lands for 20 years. 

Given this development, the Company has elected to significantly reduce expenditures on its exploration programme while awaiting the outcome of Secretary Salazar's 6-month extension which is due to expire on 20 January 2012.  While VANE has remained optimistic toward a favourable outcome of this issue and carried on with activities on state lands during the study period, the Directors now consider that political preferences will decide this issue. 

The issue, however, has strong regional support from at least 23 governmental offices and professional organizations. These include the Governors of both Utah and Arizona as well as U.S. Congressman Jeff Flake of Arizona, who has introduced legislation to block Secretary Salazar from withdrawing the lands.  This legislation has passed in Committee and is now with the U.S. House of Representatives. VANE is also active with various organizations in an effort to bring the facts on uranium mining and exploration in northern Arizona, which the Directors believe have been misrepresented by various news sources, environmental groups and political officials, to the forefront and to prevent the withdrawal of these lands.

The Company will continue to update its shareholders as details become available.

Utah Uranium Projects

The Happy Jack, North La Sal, and North Wash projects remain on care and maintenance with an economic scoping study being organized for North Wash due to the presence of vanadium mineralization on that project.  The North Alice property was relinquished as of 31 August 2011 when the lease expired.  The Director's believe that the low average grade of uranium mineralization (0.13% eU3O8) encountered in drilling is too far below economic viability to justify renewing the lease.  

In summary, the VANE operations have seen a substantial amount of important work conducted within the period. The primary strategic objective is to continue to build up the production side of the business within Mexico with the aim of providing increased internal finance for the exploration programmes within the group going forward. We look forward to announcing further news from across all our projects over the course of the next twelve months.

Steven D Van Nort & David Newton

29 September 2011

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2011

		Unaudited six months ended 30 June		Audited year ended 31 December
	Notes	2011	2010	2010
		£	£	£
Continuing operations
Revenue	4	1,240,651	1,047,423	2,560,413
Cost of sales		(1,350,917)	(1,454,486)	(3,015,319)
Gross loss		(110,266)	(407,063)	(454,906)
Operating and administrative expenses		(861,322)	(858,342)	(1,496,022)
Impairment of intangible exploration and evaluation assets		(526,996)	(115,657)	(417,587)
Impairment of available for sale investment		-	-	(213,571)
Operating loss		(1,498,584)	(1,381,062)	(2,582,086)
Investment income		389	3,256	3,613
Finance costs		(73,058)	(72,001)	(145,515)
Loss before taxation		(1,571,253)	(1,449,807)	(2,723,988)
Taxation		11,276	54,448	272,349
Loss for the period attributable to owners of the parent company	4	(1,559,977)	(1,395,359)	(2,451,639)
Loss per ordinary share
Basic  & diluted	3	(0.48p)	(0.73p)	(1.12p)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2011

		Unaudited six months ended 30 June		Audited year ended 31 December
		2011	2010	2010
		£	£	£
Loss for the period attributable to owners of the parent company		(1,559,977)	(1,395,359)	(2,451,639)
Other comprehensive income
Exchange differences arising on translation of foreign operations		(83,462)	263,341	161,280
Income tax relating to components of other comprehensive income		90,330	(151,953)	(86,598)
		6,868	111,388	74,682
Total comprehensive income for the period attributable to owners of the parent company		(1,553,109)	(1,283,971)	(2,376,957)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2011

	Unaudited 30 June		Audited 31 December
	2011	2010	2010
	£	£	£
Non-current assets
Investments	-	213,571	-
Intangible assets	2,954,987	2,888,571	3,019,789
Property, plant and equipment	1,728,114	2,400,934	1,961,254
	4,683,101	5,503,076	4,981,043
Current assets
Inventories	371,646	588,022	432,158
Trade and other receivables	466,146	401,088	504,622
Cash and cash equivalents	1,525,014	824,859	2,750,399
	2,362,806	1,813,969	3,687,179
Total assets	7,045,907	7,317,045	8,668,222
Current liabilities
Trade and other payables	(652,271)	(527,703)	(638,721)
Taxation	-	(55,258)	(2,646)
	(652,271)	(582,961)	(641,367)
Non-current liabilities
Convertible loan notes	(1,468,822)	(1,442,154)	(1,455,380)
Deferred tax	(11,916)	(400,216)	(113,741)
Provisions	(45,375)	(41,250)	(45,375)
	(1,526,113)	(1,883,620)	(1,614,496)
Total liabilities	(2,178,384)	(2,466,581)	(2,255,863)
Net assets	4,867,523	4,850,464	6,412,359
Equity
Share capital	19,147,627	19,010,811	19,147,627
Share premium account	4,868,863	2,359,071	4,868,863
Share option reserve	281,149	302,428	310,701
Other reserves	261,220	261,220	261,220
Cumulative translation reserves	153,136	182,974	146,268
Retained loss	(19,844,472)	(17,266,040)	(18,322,320)
Equity attributable to owners of the parent company	4,867,523	4,850,464	6,412,359

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

	Share capital	Share premium account	Share option reserve	Other reserves	Cumulative translation reserves	Retained loss	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)
Other comprehensive income for the period	-	-	-	-	111,388	-	111,388
Total comprehensive income for the period	-	-	-	-	111,388	(1,395,359)	(1,283,971)
Share-based payments	-	-	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 CHANGES IN EQUITY (AUDITED)

		Share capital	Share premium account	Share option reserve	Other reserves	Cumulative translation reserves	Retained loss	Total
		£	£	£	£	£	£	£
As at 1 January 2010		19,010,811	2,359,071	280,161	261,220	71,586	(15,870,681)	6,112,168
Transactions with owners in their capacity as owners
Issue of equity shares		136,816	2,673,385	-	-	-	-	2,810,201
Expense of issue of equity shares		-	(163,593)	-	-	-	-	(163,593)
Total transactions with owners in their capacity as owners		136,816	2,509,792	-	-	-	-	2,646,608
Loss for the year		-	-	-	-	-	(2,451,639)	(2,451,639)
Other comprehensive income for the year		-	-	-	-	74,682	-	74,682
Total comprehensive income for the year		-	-	-	-	74,682	(2,451,639)	(2,376,957)
Share-based payments		-	-	30,540	-	-	-	30,540
As at 31 December 2010		19,147,627	4,868,863	310,701	261,220	146,268	(18,322,320)	6,412,359

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

	Share capital	Share premium account	Share option reserve	Other reserves	Cumulative translation reserves	Retained loss	Total
	£	£	£	£	£	£	£
As at 1 January 2011	19,147,627	4,868,863	310,701	261,220	146,268	(18,322,320)	6,412,359
Loss for the period	-	-	-	-	-	(1,559,977)	(1,559,977)
Other comprehensive income for the period	-	-	-	-	6,868	-	6,868
Total comprehensive income for the period	-	-	-	-	6,868	(1,559,977)	(1,553,109)
Share-based payments	-	-	8,273	-	-	-	8,273
Transfer to retained earnings in respect of exercised share options	-	-	(37,825)	-	-	37,825	-
As at 30 June 2011	19,147,627	4,868,863	281,149	261,220	153,136	(19,844,472)	4,867,523

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2011

		Unaudited six months ended        30 June		Audited year ended    31 December
	Appendices	2011	2010	2010
		£	£	£
Net cash used  in operating activities	a	(416,607)	(718,395)	(790,111)
Net cash used in investing activities	b	(811,298)	(293,784)	(971,930)
Net cash (used)/ from financing activities	c	-	(1,844)	2,644,750
Net (decrease)/increase in cash and cash equivalents		(1,227,905)	(1,014,023)	882,709
Cash and cash equivalents at beginning of period		2,750,399	1,818,959	1,818,959
Effect of foreign exchange rate changes		2,520	19,923	48,731
Cash and cash equivalents at end of period		1,525,014	824,859	2,750,399

APPENDICES TO THE CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2011

		Unaudited six months ended    30 June		Audited year ended     31 December
		2011	2010	2010
		£	£	£
a	Operating activities
	Loss before tax	(1,571,253)	(1,449,807)	(2,723,988)
	Investment income	(389)	(3,256)	(3,613)
	Finance costs	73,058	72,001	145,515
	Adjustments for:
	Depreciation of property, plant and equipment	484,843	306,241	929,939
	Impairment of intangible exploration and evaluation assets	526,996	115,657	417,587
	Impairment of available sale investment	-	-	213,571
	Share-based payments	8,273	22,267	30,540
	Effect of foreign exchange rate changes	11,589	75,321	(106,582)
	Operating cash outflow before movements in working capital	(466,883)	(861,576)	(1,097,031)
	Decrease in inventories	60,512	216,178	372,042
	Decrease/(Increase) in trade and other receivables	38,476	(26,837)	(130,371)
	Increase in trade and other payables	13,769	75,558	186,468
	Cash used in operations	(354,126)	(596,677)	(668,892)
	Income tax paid	(2,646)	(61,927)	(933)
	Interest paid	(59,835)	(59,791)	(120,286)
	Net cash used in operating activities	(416,607)	(718,395)	(790,111)
b	Investing activities
	Interest received	389	3,256	3,613
	Purchase of property, plant and equipment	(241,699)	(4,441)	(181,137)
	Purchase of intangible exploration and evaluation assets	(569,988)	(292,599)	(794,406)
	Net cash used in investing activities	(811,298)	(293,784)	(971,930)
c	Financing activities
	Proceeds from issue of shares	-		2,810,201
	Expenses of issue of shares	-		(163,593)
	Finance lease payments	-	(1,844)	(1,858)
	Net cash (used)/from financing activities	-	(1,844)	2,644,750

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2011

1.  ACCOUNTING POLICIES

Basis of preparation

This Report was approved by the directors on xxxxxxx

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 AIM.

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 2010 and are also consistent with those which will be adopted in the 31 December 2011 financial statements. Comparative figures for the year ended 31 December 2010 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

Basic loss per ordinary share is calculated by dividing the net loss for the period attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the year. The calculation of the basic and diluted loss per ordinary share is based on the following data:

	Unaudited six months ended        30 June		Audited year ended   31 December
	2011	2010	2010
	£	£	£
Losses
Loss for the purpose of basic loss per share being net loss attributable to owners of the parent company	(1,559,977)	(1,395,359)	(2,451,639)
	Number	Number	Number
Number of shares
Weighted average number of shares for the purposes of basic loss per share	326,923,658	190,108,108	218,376,369
Loss per ordinary share
Basic and diluted	(0.48p)	(0.73p)	(1.12p)

As a result of the losses incurred in the periods ended 30 June 2011, 30 June 2010 and 31 December 2010 there is no dilutive effect from the existing share options or convertible loan notes.

4.  SEGMENTAL INFORMATION

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

	Unaudited  six months ended 30 June		Audited Year ended 31 December
	2011	2010	2010
Geographical location	£	£	£
Revenue
UK	176,196	162,824	323,815
USA	-	-	-
Mexico	1,240,651	1,047,423	2,560,413
	1,461,847	1,210,247	2,884,228
Less: intersegment sales	(176,196)	(162,824)	(323,815)
	1,240,651	1,047,423	2,560,413
Segmental results
UK	(306,334)	(340,769)	(924,398)
USA	(917,558)	(523,186)	(1,071,531)
Mexico	(347,361)	(585,852)	(728,059)
	(1,571,253)	(1,449,807)	(2,723,988)
Current and deferred tax	11,276	54,448	272,349
Loss for the period	(1,559,977)	(1,395,359)	(2,451,639)
	Unaudited  six months ended 30 June		Audited Year ended 31 December
	2011	2010	2010
	£	£	£
Net assets/(liabilities)
UK	(741,372)	(810,138)	479,491
USA	3,186,385	3,038,030	3,298,105
Mexico	2,422,510	2,622,572	2,634,763
	4,867,523	4,850,464	6,412,359

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 reserves

The other reserves represent recognition of the equity component of the convertible loan notes.

Cumulative translation reserves

The translation reserves comprise 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.

Directors, Secretary and Advisers

Directors:                                                                 Sir Richard Francis Needham, Non-Executive Chairman

                                                                                     David Newton, Chief Executive Officer

                                                                                     Steven Danforth Van Nort, Executive Director

                                                                                     Leavitt Clark Arnold, Executive Director

                                                                                     Matthew Charles Idiens, Executive Director

                                                                                     Kristopher Hefton, Executive Director

Company Secretary:                                            Matthew Charles Idiens

Company Number:                                              4573663

Registered Office:                                                Metic House, Ripley Drive, Normanton

                                                                                     West Yorkshire, WF6 1QT

Nominated Adviser and Broker:                    Allenby Capital Limited

                                                                                     Claridge House

                                                                                     32 Davies Street

                                                                                     London W1K 4ND

Solicitors to the Company:                               Hammonds

                                                                                     2 Park Lane

                                                                                     Leeds, LS3 1ES

Auditor:                                                                    Baker Tilly UK Audit LLP

                                                                                     2 Bloomsbury Street

                                                                                     London, WC1B 3ST

Registrars:                                                               Capita Registrars

                                                                                     The Registry

                                                                                     34 Beckenham Road

                                                                                     Beckenham

                                                                                     Kent, BR3 4TU

Financial Public Relations:                               Threadneedle Communications Limited

                                                                                     7 Ludgate, Broadway

                                                                                     London, EC4V 6DX

Bankers:                                                                   Barclays Bank Plc

                                                                                     Level 27

                                                                                     1 Churchill Place

                                                                                     London, E14 5HP

 

END

 

 

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