1st Quarter Results
Rambler Metals & Mining PLC
06 February 2007
Rambler Metals & Mining Plc
MANAGEMENT'S DISCUSSION AND ANALYSIS
for the QUARTER ended OCTOBER 31, 2006
The following management's discussion and analysis ('MD&A') of Rambler Metals &
Mining plc (the 'Company' or 'Rambler') contains forward-looking statements that
involve numerous risks and uncertainties. Our actual results could differ
materially from those discussed in such forward-looking statements as a result
of the risks and uncertainties, including those set forth in this MD&A under '
Forward-Looking Statements' and 'Risk Factors'.
The following discussion provides information that management believes is
relevant to an assessment and understanding of our consolidated results of
operations and financial condition for the quarter ended October 31, 2006. This
discussion should be read in conjunction with our un-audited financial
statements for the period ended October 31, 2006 and the related notes thereto.
These consolidated statements have been prepared in accordance with U.K. GAAP.
This MD&A, which has been prepared as of January 16, 2007, is intended to
supplement and complement our audited consolidated financial statements and
notes thereto for the period ended July 31, 2006 and related annual MD&A. Our
consolidated financial statements are prepared in accordance with UK GAAP and
contain a reconciliation between UK GAAP and Canadian GAAP. The functional
reporting currency in all instances is British Pounds.
OUR BUSINESS
The principal activity of the Company is carrying out development and
exploration on the Rambler Property a mineral exploration property located on
Newfoundland and Labrador's Baie Verte Peninsula.
Results from the exploration programme have confirmed the continuity of
mineralisation and have given impetus to begin the process of estimating the
costs, benefits and environmental requirements of dewatering the former mine in
order to facilitate underground exploration.
SELECTED FINANCIAL INFORMATION
The following selected financial information has been derived from the
consolidated financial statements of the Company for the periods indicated and
should be read in conjunction with such statements and notes thereto. Note that
the Company's financial statements have been prepared in accordance with U.K.
GAAP. Differences between U.K. GAAP and Canadian GAAP are not significant for a
company at the stage of Rambler. Please refer to the GAAP reconciliation
contained in the notes to the financial statements:
Selected Annual Financial Information 3 months 3 months
All amounts in £, except shares and per share ended ended
figures October31 October 31
2006 2005
Revenue - -
Administrative Expenses 94,032 87,968
Interest 43,318 67,111
Net (loss) (50,714) (20,857)
Per share (basic and diluted) (0.13p) (0.09p)
Cash Flow (used) for operating activities (79,435) (53,386)
Cash Flow from financing activities 35,329 45,543
Cash Flow (used) for investing activities (804,786) (264,851)
Management of liquid resources ** 839,771 228,813
Net increase (decrease) in cash (9,181) (43,881)
Liquid resources at end of period 4,581,168 6,660,901
Cash at end of period 48,912 (11,715)
Total Assets 8,260,810 8,211,593
Total Liabilities 581,228 311,835
Working Capital 4,166,758 6,486,860
Weighted average number of shares outstanding 40,030,000 23,766,465
(**Liquid Resources includes all bank deposits other than cash in hand or
deposits payable on demand within one working day)
The Company had no trading activity in the period from April 14, 2004 (date of
incorporation) to February 1, 2005 and had a cash asset of £0.02. Accordingly
comparative statements are not shown above for the three preceding financial
years.
OPERATIONS REVIEW
During the quarter:
• The principal operating activity of the Company was exploration drilling.
• The company appointed a new Vice President of Operations.
• The company made the final payment to acquire the option over the Ming
Property (51190 Newfoundland & Labrador Inc.).
• A comprehensive water sampling programme, preliminary designs for a water
treatment plant and volumetric calculations were completed.
Review of quarters ending October 31, 2006 and October 31, 2005
The Company's only source of income during the quarter was bank deposit
interest.
The Company reported a net loss for the period ending October 31, 2006 of
£50,714 which is an increase of £29,857 from the period ending October 31, 2005.
The loss per share increased from 0.09p to 0.13p. Losses were higher as
administration expenses increased £6,064 to £94,032 and interest income was
£23,793 lower at £43,318 reflecting the lower sum invested in money market
deposits.
Cash flows used for investing activities increased by £539,935 reflecting an
increase in the amount of exploration activity, final settlement of the option
to acquire the Ming property and the purchase of some office equipment. No
further financings were undertaken during the quarter.
Total assets include accumulated deferred exploration expenditures which
increased £2,064,937 to £3,478,194 and office equipment additions of £34,630.
A summary of quarterly results is not included in this MD&A as the main
jurisdiction in which the Company is registered does not require quarterly
reporting. Accordingly, no summary of quarterly results is available at this
time.
Subsequent Event
Since the year end, the board resolved to seek a dual listing for the Company's
shares on a Canadian stock exchange.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
The Company continues to rely on shareholder funding to finance its operations.
With finite cash resources and no material income, the liquidity risk is
significant and is managed by controls over expenditure. Success will depend
largely upon the outcome of ongoing and future exploration and evaluation
programmes and, in common with many exploration companies, the Company is likely
to raise finance for its exploration and appraisal activities in discrete
tranches.
The majority of the Company's expenses are incurred in Canadian Dollars. The
Company's principal exchange rate risk is therefore related to movements between
the Canadian Dollar and the British Pound.
The Company's cash resources are held in British Pounds and Canadian dollars.
The Company has a downside risk to any strengthening of the Canadian Dollar as
this would increase expenses in British Pound terms and accelerate depletion of
cash resources. Any weakening of the Canadian Dollar would however result in
the reduction of expenses in British Pound terms and preserve cash resources.
Additionally, any such movements would affect the Consolidated Balance Sheet
when the net assets of the Canadian subsidiary are translated into British
Pounds.
The holding of significant cash balances in Canadian Dollars is kept under
constant review and surplus funds are held on deposit on the most advantageous
term of deposit available for up to three month's maximum duration. There are
no fixed, floating rate or interest free financial liabilities by way of
borrowing. Floating rate financial assets comprise of interest earning bank
deposits at rates set by reference to the prevailing LIBOR or equivalent prime
rate. Fixed rate financial assets are cash held on fixed term deposit.
Cash and short terms deposits were as follows:
At October 31, 2006 Fixed Rate Assets Floating Rate Assets Total
Currency
British Pound 2,804,519 21,342 2,825,861
Canadian $ 1,776,649 27,570 1,804,219
Total 4,581,649 48,912 4,630,080
At July 31, 2006 Fixed Rate Assets Floating Rate Assets Total
Currency
British Pound 2,850,071 17,176 2,867,247
Canadian $ 2,591,989 39,772 2,631,761
Total 5,442,060 56,948 5,499,008
At October 31, 2005 Fixed Rate Assets Floating Rate Assets Total
Currency
British Pound 5,450,100 (33,916) 5,416,184
Canadian $ 1,210,801 22,201 1,233,002
Total 6,660,901 (11,715) 6,649,186
Excluding interest received, the Company utilised £884,221 (2005: £318,237) of
available liquid resources during the quarter ended October 31, 2006. This
material increase was primarily a result of a more active drilling programme and
settlement of the final payment to acquire the Ming property
No financing activities took place during the quarter.
The Company's liquid resources of £4,630,080 are expected to be sufficient to
fund the Company's existing level of exploration and development activities to
the end of fiscal 2007. At January 16, 2007, the Company had £3,502,484 in
cash.
Related Party Transactions
Brian Dalton and John Baker, directors of the company are also directors of
Altius resources Inc ('Altius'), a 30% shareholder in the company. Altius
provides the management of the exploration programs at the Rambler property in
Newfoundland. According to the terms of a service contract dated March 7, 2005,
Altius has agreed to manage approved exploration projects on behalf of Rambler.
Altius has therefore carried out all Phase I exploration programs and all
subsequent programs in accordance with such budgets approved by Rambler. Altius
can employ or engage employees, consultants or contractors to carry out these
exploration programs on commercial terms and must report in a timely manner to
Rambler on the results of all programs. All costs associated with the
exploration programs are recharged to Rambler and Altius receives a 7%
management fee on all expenditures. In addition, Altius provides certain
accounting and finance services and some secretarial services to Rambler based
on the same compensation arrangement. This arrangement was entered into as
Rambler has limited exploration staff and Altius, being the previous owner of
the Rambler property, had personnel with the necessary knowledge and experience
to conduct the exploration programs. The Company was invoiced £658,012 by
Altius and at the end of the period, Altius were owed £503,362. The following
consultancy fees and expenses were also payable at October 31, 2006:
S. Neamontis, expenses (Executive Director) £1,073 (July 31, 2006: £14,407)
Altius Mineral Corporation, consultancy fees £8,800 (July 31, 2006: £5,500)
Going Concern
The Company is in an early stage of development, and while it has significant
cash resources, it does not generate any significant revenues and its success
will depend largely upon the outcome of its exploration and evaluation
programmes.
In common with many exploration companies, the Company raises finance for its
exploration and appraisal activities in discrete tranches. Further funding is
raised as and when required and when any of the Company's projects move to the
development stage, specific financing will be required.
Impairment Assessments of Development Projects and Exploration Properties
The carrying value of assets are reviewed and tested when events or changes in
circumstances suggest that the carrying amount may not be recoverable. A
comparison of the carrying value of the assets of the mine or project is
compared to the expected future cash flows associated with the project.
Expected future cash flows are based on a probability-weighted approach applied
to potential outcomes and a reduction of assets is made to fair value as a
charge to earnings if the discounted expected future cash flows are less than
the carrying amount. Fair value is estimated by discounting the expected future
cash flows using a discount factor that reflects the risk free rate of interest
for a term consistent with the period of expected cash flows.
Stock Based Compensation
In 2007 fiscal year, the Company will grant a number of key individuals employee
stock options. The number of share options being granted is considered by the
directors to be consistent with companies of a similar size and profile to
Rambler.
RISK FACTORS
An investment in Rambler should be considered highly speculative due to its
present stage of development, the nature of its operations and certain other
factors. An investment in Rambler's securities should only be made by persons
who can afford the total loss of their investment. The risk factors which
should be taken into account in assessing Rambler's activities and an investment
in securities of Rambler include, but are not limited to, those set out below.
Should any one or more of these risks occur, it could have a material adverse
effect on the value of securities of Rambler and the business, prospects,
assets, financial position or operating results of Rambler, any one of which may
have a significant adverse effect on the price or value of any securities of
Rambler.
The risks noted below do not necessarily comprise all those faced by Rambler and
are not intended to be presented in any assumed order of likelihood or magnitude
of consequences.
Dependence on a Single Property
Rambler's activities are focused primarily on the Rambler Property. Any adverse
changes or developments affecting this property would have a material and
adverse effect on Rambler's business, financial condition, results of operations
and prospects.
Success of Current and Future Exploration Cannot be Assured
The exploration and development of mineral deposits involves significant
financial risks over a prolonged period of time, which even a combination of
careful evaluation, experience and knowledge cannot eliminate. While discovery
of a mineral structure may result in substantial rewards, few properties which
are explored are ultimately developed into producing mines. Major expenditure
may be required to establish mineral reserves by drilling and to construct
mining and processing facilities at a site. It is impossible to ensure that
exploration will ever result in the discovery of an economically viable mineral
deposit or in a profitable commercial mining operation.
Liquidity and Investment Risk
The share prices of publicly quoted companies can be volatile. The price of
shares is dependent upon a number of factors some of which are general or market
or sector specific and others that are specific to the Company.
Although the Ordinary Shares are traded on AIM, this should not be taken as
implying that there will be a liquid market for them. An investment in the
Ordinary Shares may be difficult to realize. Accordingly, each prospective
investor should view his purchase of the Ordinary Shares as a long-term
investment and should not consider such purchase unless he is certain he will
not have to liquidate his investment for an indefinite period of time.
The value of the Ordinary Shares may go down as well as up. Investors may
therefore realise less than their original investment, or sustain a total loss
of their investment.
The directors, their associates and Altius control approximately 54% of the
Company's share capital. As a result, these shareholders will be able to
exercise significant influence or control over matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions.
Copper Price Volatility
Rambler's revenues, if any, are expected to be derived from the extraction and
sale of copper concentrate. The price of copper has fluctuated widely,
particularly in recent years, and is affected by numerous factors beyond
Rambler's control including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, interest rates,
global or regional consumption patterns, speculative activities and increased
production due to new extraction developments and improved extraction and
production methods. In recent years the price of copper has been affected by
changes in the worldwide balance of copper supply and demand, largely resulting
from economic growth and political conditions in China and other major
developing economies. While this demand has resulted in higher prices for
copper in recent years, if Chinese economic growth slows, it could result in
lower supplies for copper. The effect of these factors on the price of copper
cannot be accurately predicted. Any material decrease in the prevailing price
of copper for any significant period of time would have an adverse and material
impact on the economic evaluations contained in this MD&A and on Rambler's
results of operations and financial condition.
Exploration, Mining and Processing Licences
The Company's proposed exploration, mining and processing activities are
dependent upon the grant of appropriate licences, concessions, leases, permits
and regulatory consents, which may be withdrawn or made subject to limitations.
There is no guarantee that, upon completion of any exploration a mining licence
or lease will be granted with respect to exploration territory. There can be no
assurance that any exploration licence will be renewed or if so, on what terms.
These licences place a range of past, current and future obligations on the
Company. In some cases there could be adverse consequences for breach of these
obligations, ranging from penalties to, in extreme cases, suspension or
termination of the relevant licence or related contract.
Short Operating History
The Company does not have a long established trading record. The Company is at
an early stage of development and success will depend upon its ability to manage
the exploration of the Rambler Property and to identify and take advantage of
further opportunities that may arise.
The Company has not earned profits to date and there is no assurance that it
will do so in the future.
The Company plans to explore and develop its properties through the use of third
party contractors and consultants. However, there can be no assurance that it
will be able to complete its exploration programmes on time or to budget, or
that the current personnel, systems, procedures and controls will be adequate to
support the Company's operations. Any failure of management to identify problems
at an early stage could have an adverse impact on the Company's financial
performance.
Dependence on Key Personnel
The Company relies on a limited number of key directors and personnel. However,
there is no assurance that the Company will be able to retain such key directors
and personnel. If such personnel do not remain active in the Company's business,
its operations could be adversely affected.
Dependence on Third Parties
The Company makes use of independent consultants and contractors in the
development of its business and operations, and, in particular, has secured the
services of Altius for the management of the initial exploration programme at
the Rambler Property. Accordingly, the success of the Company's operations will
be dependent upon the performance of services by such third parties, and failure
to do so may seriously affect or prevent the Company from fulfilling its planned
operational goals.
Acquisition Strategy
It is the intention of the Company to grow through the development of the
Rambler Property and through acquisition. However, there can be no assurance
that the Company will be able to successfully identify and acquire other base
metal properties business beyond the Rambler Property.
Although it is the Company's intention to utilize the issuance of new Ordinary
Shares to satisfy all or part of any consideration payable for acquisitions,
prospective vendors may not be prepared to accept these shares
The ability of the Company to make appropriate acquisitions is dependent upon
suitable opportunities becoming available to the Company.
Additional Requirement for Capital
The Company will need to raise additional capital in due course to fund the
Company's anticipated future operations. Future development of the Rambler
Property, future acquisitions, base metal prices, environmental rehabilitation
or restitution, revenues, taxes, capital expenditures and operating expenses and
geological and processing successes are all factors which will have an impact on
the amount of additional capital required.
Any additional equity financing may be dilutive to shareholders and debt
financing, if available, may involve restrictions on financing and operating
activities. There is no assurance that additional financing will be available on
terms acceptable to the Company. If the Company is unable to obtain additional
financing as needed, it may be required to reduce the scope of its operations or
anticipated expansion, forfeit its interests in some or all of its properties,
incur financial penalties and reduce or terminate its operations.
Geological Risks
Geological conditions can only be predicted with a certain degree of accuracy.
Any base metal exploration programme entails risks relating to the location of
economic orebodies and the development of appropriate metallurgical processes.
While the Company has had the benefit of a review of the Rambler Property by a
qualified independent geologist, no assurance can be given that any exploration
programme on the Rambler Property or on any properties acquired by the Company
will result in any new commercial mining operation or in the discovery of new
resources.
Currency
Fluctuations in currency exchange rates may adversely affect our financial
position. Our management has determined the British pound as our reporting
currency. Fluctuations in currency exchange rates, particularly equipment
acquisition costs denominated in currencies other than British Pounds, may
significantly impact our financial position and results. We do not have in place
a policy for managing or controlling foreign currency risks since, to date, our
primary activities have not resulted in material exposure to foreign currency
risk.
Currency fluctuations may affect the cash flow that the Company hopes to realize
from its operations, as minerals and base metals are sold and traded on the
world markets in United States dollars. The Company's anticipated costs will be
incurred primarily in British Pounds sterling and Canadian Dollars.
Environmental Regulations
We are subject to substantial environmental and other regulatory requirements
and such regulations are becoming more stringent. All phases of our development
operations are subject to environmental regulations. Environmental legislation
is evolving in a manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees. There is no assurance
that future changes in environmental regulation, if any, will not adversely
affect our operations. Environmental hazards may exist on the properties in
which we hold interests which are presently unknown to us and which have been
caused by previous or existing owners or operators of the properties.
The Company's operations are subject to environmental regulation inherent in the
mineral exploration, mining and processing industry (including regular
environmental impact assessments and permitting). Environmental legislation and
permitting are likely to evolve in a manner which will require stricter
standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their directors and employees.
Ineffective environmental management or accidental spillage of toxic materials
could result in a significant environmental disaster resulting in large clean-up
costs, potential fines or mine closure.
The Company is unable to predict the effect of additional environmental law and
regulations which may be adopted in the future, and the cost of the Company's
operations may be increased by changes in legislative requirements or increased
legal liabilities within the jurisdictions in which the Company operates or will
operate.
Lack of Earnings and Dividend Record
We have no earnings or dividend record. We have not paid dividends on our
Ordinary Shares since incorporation and do not anticipate doing so for the
foreseeable future. Payments of any dividends will be at the discretion of the
board of directors after taking into account many factors, including our
financial condition and current and anticipated cash needs.
Uninsurable Losses
The Company as a participant in exploration and mining programmes, may become
subject to liability for hazards that cannot be insured or against which it may
elect not to be insured because of high premium costs.
FORWARD-LOOKING INFORMATION
This MD&A contains 'forward-looking information' which may include, but is not
limited to, statements with respect to the future financial or operating
performance of the Company, its subsidiaries and its projects, exploration
expenditures, costs and timing of the development of new deposits, costs and
timing of future exploration, requirements for additional capital, government
regulation of mining exploration, environmental risks, title disputes or claims
and limitations of insurance coverage. Often, but not always, forward-looking
statements can be identified by the use of words such as 'plans', 'expects', 'is
expected', 'budget', 'scheduled', 'estimates', 'forecasts', 'intends', '
anticipates', or 'believes' or variations (including negative variations) of
such words and phrases, or state that certain actions, events or results 'may',
'could', 'would', 'might' or 'will' be taken, occur or be achieved. Forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company and/or its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. Such factors include, among others, general business, economic,
competitive, political and social uncertainties; the actual results of current
exploration activities; conclusions of economic evaluations; fluctuations in the
relative value of United States Dollars, Canadian Dollars and British Pounds;
changes in planned parameters as plans continue to be refined; future prices of
metals and commodities; possible variations of ore grade or recovery rates;
failure of equipment; accidents and other risks of the mining exploration
industry; political instability, insurrection or war; delays in obtaining
governmental approvals or financing or in the completion of development or
construction activities, as well as those factors discussed in the section
entitled 'Risk Factors' in this MD&A. Although the Company has attempted to
identify important factors that could cause actual actions, events or results to
differ materially from those described in forward-looking statements, there may
be other factors that cause actions, events or results to differ from those
anticipated, estimated or intended. Forward-looking statements contained herein
are made as of the date of this MD&A and the Company disclaims any obligation to
update any forward-looking statements, whether as a result of new information,
future events or results or otherwise. There can be no assurance that forward-
looking statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements.
RAMBLER METALS AND MINING PLC.
UNAUDITED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED OCTOBER 31, 2006
(EXPRESSED IN BRITISH POUNDS)
The accompanying unaudited financial statements of Rambler Metals and Mining
PLC. (the 'Company') have been prepared by and are the responsibility of the
Company's management. These statements do not include all of the
information and disclosures that would be required by UK GAAP for annual
audited financial statements and have been prepared for the sole purpose of
supporting an application to list the company's shares on the TSX Venture
Exchange in Canada.. The quarterly financial statements should be read in
conjunction with the Company's audited financial statements including the
notes thereto for the year ended July 31, 2006.
These statements have been approved by the Audit Committee and the Board of
Directors of the Company.
Balance Sheet
(Unaudited)
As at October 31, 2006 and July 31, 2006
(expressed in British Pounds)
October 31 July 31
2006 2006
Fixed assets
Intangible assets (note 3) £3,478,194 £2,894,278
Tangible fixed asset (note 4) 34,630 2,884
£3,512,824 £2,897,162
Current assets
Cash and cash equivalents 48,912 56,948
Investments 4,581,168 5,442,060
Prepaid expenses and deposits 117,906 113,490
4,747,986 5,612,498
Current liabilities
Accounts payable and accrued liabilities 581,228 736,431
Net current assets 4,166,758 4,876,067
Total assets less current liabilities £7,679,582 £7,773,229
Capital and reserves
Share capital (Note 5)
Authorized
1,000,000,000 Ordinary shares of 1p each
Issued 400,300 400,300
40,030,000 (2006 - 40,030,000) ordinary shares
Share premium account 7,164,625 7,164,625
Merger reserve 120,000 120,000
Profit and loss account (5,343) 88,304
£7,679,582 £7,773,229
Operations, going concern (Note 1)
Approved by the Board of Directors:
Consolidated Profit and Loss account
(Unaudited)
For the three months ended October 31, 2006 and 2005
(expressed in British Pounds)
Three Month Three Month
Period Period
Ended Ended
October 31 October 31
2006 2005
Turnover
General and administrative - -
Operating loss (94,032) (87,968)
(94,032) (87,968)
Interest and other income 43,318 67,111
(Loss) on ordinary activities before and after taxation £ (50,714) (20,857)
Basic and diluted loss per share p (0.13) (0.09)
Weighted Average number of shares outstanding 40,030,000 23,766,465
Group statement of Total Recognized Gains and Losses
(Loss)/profit on ordinary activities after taxation (50,714) (20,857)
Foreign exchange rate differences (42,933) 65,262
Total recognized gains and loss for the financial period (93,647) 44,395
Statement of Cash Flows
(Unaudited)
For the three months ended October 31, 2006 and 2005
(expressed in British Pounds)
Three Month Three Month
Period Ended Period Ended
October 31 October 31
2006 2005
Cash flows from operating activities
Operating loss for the
period £ (94,032) £ (87,968)
Items not affecting cash
Depreciation 2,467 -
Decrease in prepaid expenses and deposits 430 50,337
Increase/(decrease) in accounts payable and
accrued liabilities 11,700 (15,755)
(79,435) (53,386)
Cash flows from returns on investment and servicing
of finance
Bank interest received 35,329 45,543
35,329 45,543
Cash flows from (applied to) investing activities
Purchase of property, plant and equipment (34,213) -
Purchase of 51190 Newfoundland & Labrador Inc (138,797) (46,678)
Additions to mineral properties (631,776) (218,173)
(804,786) (264,851)
Cash flows from management of liquid resources
Cash withdrawn from/(placed in) other liquid
investments 839,711 228,813
839,711 228,813
Decrease in cash and cash equivalents (9,181) (43,881)
Cash and cash
equivalents - Beginning of period 56,948 23,337
Foreign exchange differences 1,145 8,829
Cash and cash equivalents - End of period £ 48,912 £ (11,715)
Notes to Financial Statements (Unaudited)
For the three months ended October 31, 2006 and 2005
(expressed in British Pounds)
1. NATURE OF OPERATIONS AND GOING CONCERN
Operations
The Group owns copper and gold mining properties in Baie Verte, Newfoundland,
Canada, which were inactive when acquired in February 2005.
Going concern
These financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and liquidation of liabilities during the
normal course of business as they come due.
At October 31, 2006, the company has working capital of £4.17 million. The funds
required to continue operations and exploration activities during this period
have been financed primarily from the issue of equity.
Management estimates that these funds will be sufficient to meet the company's
existing obligations for the coming year.
The Company's ability to continue as a going concern, and the recoverability of
its mineral properties and property, plant and equipment, is dependent on the
copper price, its ability to fund its development and exploration programs, and
manage and generate positive cash flows from operations in the future. These
financial statements do not reflect the adjustments to carrying values of assets
and liabilities and the reported expenses and balance sheet classifications that
would be necessary should the going concern assumption be inappropriate, and
these adjustments could be material.
In common with many exploration companies, the Company raises finance for its
exploration and appraisal activities in discrete tranches. Further funding is
raised as and when required. When any of the Group's projects move to the
development stage, specific financing will be required.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The accompanying unaudited quarterly financial statements are prepared in
accordance with generally accepted accounting principals ('GAAP') in the UK.
These financial statements have been prepared to support an application to list
the company's shares on the TSX-V exchange in Canada and they do not include all
of the information and disclosures required by UK GAAP for annual audited
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included in these financial
statements. The quarterly financial statements should be read in conjunction
with the company's audited financial statements including the notes thereto for
the year ended July 31, 2006.
A reconciliation to Canadian GAAP is provided in note 9.
3. MINERAL PROPERTIES
OCTOBER 31 JULY 31
2006 2006
Balance - Beginning of period £ 2,894,278 £ 1,096,817
Additions:
Development costs 616.905 1,734,537
Foreign exchange differences (32,989) 62,924
Balance - End of period £ 3,478,194 £ 2,894,278
ACCUMULATED OCTOBER 31 JULY 31
COST AMORTIZATION 2006 2006
Acquisition allocation £ 268,232 £ - £ 268,232 £ 270,846
Underground development 3,209,962 - 3,209,962 2,623,432
£ 3,478,194 £ - £ 3,478,194 £ 2,894,278
4. PROPERTY, PLANT AND EQUIPMENT
ACCUMULATED OCTOBER 31
COST AMORTIZATION 2006
NET
Office equipment £ 37,443 £ 2,813 £ 34,630
£ 37,443 £ 2,813 £ 34,630
ACCUMULATED JULY 31
COST AMORTIZATION 2006
NET
Office equipment £ 3,245 £ 361 £ 2,884
£ 3,245 £ 361 £ 2,884
5. SHARE CAPITAL
Number of Stated
shares value
Balance - Beginning of period 40,030,000 £ 400,030
Balance - End of period 40,030,000 £ 400,030
At 31 October 2006 the Company had outstanding warrants to subscribe for 320,000
shares of 1p each at a price of 55p per ordinary share exercisable by 8 April
2007.
At 31 October 2006 the Company had granted an option to subscribe for 100,000
shares of 1p each at a price of 32p per share. The option expires on 7 June
2016.
6. RELATED PARTY TRANSACTIONS
Brian Dalton and John Baker, directors of the company are also directors of
Altius Resources Inc ('Altius'), a 30% shareholder in the company. Altius
provides the management of the exploration programs at the Rambler property in
Newfoundland. According to the terms of a service contract dated March 7, 2005,
Altius has agreed to manage approved exploration projects on behalf of Rambler.
Altius has therefore carried out all Phase I exploration programs and all
subsequent programs in accordance with such budgets approved by Rambler. Altius
can employ or engage employees, consultants or contractors to carry out these
exploration programs on commercial terms and must report in a timely manner to
Rambler on the results of all programs. All costs associated with the
exploration programs are recharged to Rambler and Altius receives a 7%
management fee on all expenditures. In addition, Altius provides certain
accounting and finance services and some secretarial services to Rambler based
on the same compensation arrangement. This arrangement was entered into as
Rambler has limited exploration staff and Altius, being the previous owner of
the Rambler property, had personnel with the necessary knowledge and experience
to conduct the exploration programs. Accordingly, Altius provided the
management of the exploration programs at the Rambler property in Newfoundland
until 31 October 2006. During the period the group were invoiced £658,012 (July
31, 2006:£1,814,109) by Altius and at the end of the period, Altius were owed
£503,362 (July 31, 2006: £542,230).
The following expenses reimbursements were payable to directors at October 31,
2006:
S Neamonitis £1,073 (July 31, 2006: £14,407)
The following consultancy fees were payable at October 31, 2006:
Altius Mineral Corporation for the consultancy services of
J Baker & B Dalton £8,800 (July 31, 2006: £5,500)
These balances were all outstanding at the period end.
7. SEGMENTED INFORMATION
The Company has one operating segment consisting of an exploration and
evaluation operation located in Baie Verte, Newfoundland, Canada. During the
periods ended October 31, 2006 and 2005 all of the Company's capital assets and
operations were in Canada.
8. FINANCIAL INSTRUMENTS
The Group uses financial instruments comprising cash, liquid resources and items
such as short-term debtors and creditors that arise from its operations. These
financial instruments are the sole source of finance for the Group's operations.
The principal risks relate to currency exposure and liquidity. Short term
debtors and creditors have been excluded from the following disclosures:
Currency rate risk
The majority of the Group's expenses are incurred in the Canadian Dollar. The
Group's principal exchange rate exposure is therefore related to movements
between the Canadian Dollar and Sterling.
The Group's cash resources are held in Sterling and Canadian Dollars. The Group
has a downside exposure to any strengthening of the Canadian Dollar as this
would increase expenses in Sterling terms and accelerate the depletion of the
Group's cash resources. Any weakening of the Canadian Dollar would however
result in the reduction of the expenses in Sterling terms and preserve the
Group's cash resources. In addition, any such movements would affect the
Consolidated Balance Sheet when the net assets of the Canadian subsidiary are
translated into Sterling.
The holding of significant cash balances in Canadian Dollars is kept under
constant review.
Liquidity risk
To date the Group has relied on shareholder funding to finance its operations.
As the Group has finite cash resources and no material income, the liquidity
risk is significant and is managed by controls over expenditure.
Interest rate risk
The Group's policy is to retain its surplus funds on the most advantageous term
of deposit available up to twelve month's maximum duration. There are no fixed,
floating rate or interest free financial liabilities by way of borrowing.
Financial assets
The floating rate financial assets comprise interest earning bank deposits at
rates set by reference to the prevailing LIBOR or equivalent to the relevant
country. Fixed rate financial assets are cash held on fixed term deposit.
At the period end the cash and short term deposits were as follows:
Average
Average interest
Fixed Floating period for rate for
Rate rate rates are fixed rate
Assets assets Total fixed assets
£ £ £ Months %
31 October 2006
Sterling 2,804,519 21,342 2,825,861 1 3.93
Canadian $ 1,776,649 27,570 1,804,219 4 3.32
Total 4,581,168 48,912 4,630,080
31 July 2006
Sterling 2,850,071 17,176 2,867,247 1 3.94
Canadian $ 2,591,989 39,772 2,631,761 10 3.85
Total 5,442,060 56,948 5,499,008
31 October 2005
Sterling 5,450,100 (33,916) 5,416,184 1 4.07
Canadian $ 1,210,801 22,201 1,233,002 4 2.45
Total 6,660,901 (11,715) 6,649,186
Fair value of financial assets
There is no material difference between fair value and book value
9. RECONCILIATION TO CANADIAN GAAP
Under Canadian GAAP, the purchase price discrepancy of GBP 228,531 arising on
the 2005 acquisition of 51190 Newfoundland and Labrador Inc. ('51190') is
regarded as a temporary difference and tax effected at 51190's combined
effective Canadian federal and provincial income tax rate of 36.12%, resulting
in a future tax liability of GBP 82,545. This purchase price discrepancy will be
amortized over the life of the assets to which it relates. The future tax
liability recognized under Canadian GAAP is regarded as a monetary liability and
is required to be denominated in the local currency, regardless of the
functional currency in which the subsidiary operates.
Under Canadian GAAP, the operations of 51190 would be considered to be
integrated with the operations of Rambler Metals and Mining plc (the 'Company').
As a result, monetary assets and liabilities would be translated at the exchange
rate at the balance sheet date, non-monetary assets and liabilities would be
translated at historical exchange rates, and revenue and expenses would be
translated at the average exchange rate for a period. The Company translated
capitalized expenditures incurred based on the balance sheet exchange rate,
which under Canadian GAAP would be recorded at the historical exchange rate. As
a result, capitalized exploration and evaluation costs would not be translated
at the balance sheet date, and the foreign exchange impact disclosed in the
financial statements of GBP32,989 (July 31, 2006: GBP (62,924)) would be
reversed.
In addition, the foreign exchange impact recorded within shareholders' equity
would be recorded in the income statement.
Under Canadian GAAP, the issue of warrants on March 31, 2005 and the issue of
share options during the period ended July 31, 2006 would have been fair valued.
No adjustment has been made with respect to these issues, as the impact is not
considered material. Were these issues to be fair valued, disclosure would be
required of the valuation assumptions, including strike price, share price
volatility, risk free rate of return, and dividend rate.
The application of Canadian GAAP would result in an increase in capitalized
exploration and evaluation costs GBP 82,545 at October 31, 2006 (July 31, 2006 -
increase of GBP 82,545) attributable to a future tax liability of GBP 82,545
(July 31, 2006 - GBP 82,545).
The application of Canadian GAAP would have impacted the Company's reported
results for 2006 and 2005 as follows:
Period from August 1, Period from September 1, Period from August 1,
2006 to October 31, 2005 to July 31, 2006 2005 to October 31, 2005
2006
£ £ £
Net loss under UK GAAP (50,714) (72,946) (20,857)
Foreign exchange (loss)/gain (9,943) (40,387) 40,255
Net (loss)/profit under (60,657) (113,333) 19,398
Canadian GAAP
Net loss/(profit) per share
based on Canadian GAAP (0.15)pence (0.28)pence 0.08pence
This information is provided by RNS
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