Results for the period ended

RNS Number : 9031R

Obtala Resources PLC

08 May 2009

 



8 May 2009

Obtala Resources PLC 

Results for the period ended 31 December 2008

Chairman's Statement

I am pleased to present the first Annual Report of Obtala Resources Plc ('Obtala') for the period from 1 August 2007 to 31 December 2008.  

Obtala is the holding company of a mineral exploration and development Group that was established on 1 August 2007 and which acquired Mindex Invest Ltd in November 2007, followed by the acquisition of Uragold Ltd. in February 2008. 

The Group raised £6.0 million net of costs from investors during the period from 1 August 2007 to 31 December 2008, which included a share placing and admission to the AIM market in April 2008. The Group's loss before tax for the period amounted to £0.2 million and net equity attributable to shareholders of Obtala at 31 December 2008 amounted to £28.3 million inclusive of consolidated cash balances of £3.2 million, and a foreign exchange reserve of £7.5 million arising on retranslation of US$ denominated assets. 

Exploration and development 

The acquisition of Mindex and its 12 Tanzanian mineral licences at a cost of £15.0 million was settled by issue of 100 million new ordinary shares.  The acquisition of Uragold and the 6 Tanzanian mineral licences held in its 75 per cent. subsidiary Uragold (T) Ltd, was for a cash consideration of US$1.86m. Atlas Africa Ltd, a local partner, holds the remaining 25 per cent. of the issued share capital of Uragold (T) but has granted to Uragold the exclusive option to purchase all or part of that 25 per cent. holding for cash of US$0.5 million. This option lapses after 2 years.  

These acquisitions have been treated as a purchase of mining licences and provided the Group with an initial focus in gold, nickel, copper, iron ore and uranium opportunities in Tanzania, East Africa.

Our initial focus on Tanzania is primarily based upon recognition of Tanzania's stable geopolitical environment, established legal system and mining legislation, coupled with a fast growing mining industry with a relatively strong infrastructure to support this. Many of the Group's mineral licence assets have been primarily selected due to their proximity to large existing resources and producing assets which provides us with a favourable regional geology for exploration.

Since the AIM listing in April 2008, the Group has significantly increased its gold prospecting licence areas to 2,175 km2 following the award of 4 prospecting licences. The Group also subsequently acquired a Platinum exploration licence covering an area of 712 km2 as well as a further Uranium exploration licence which increased its Uranium holdings to 1,737 km2. As a result, the Group currently holds a portfolio of base metal mineral exploration licence assets in Tanzania comprised of exclusive or majority interests in a total of 24 licences as follows: 13 Gold; 2 Nickel; 3 Copper; 4 Uranium; 1 Platinum and 1 Iron ore.

In May 2008, the Group also acquired holdings of between 71 per cent. and 75 per cent. in 6 new emerald gemstone mining licences totaling 6 km2 in the Manyara area of Tanzania at a cost of US$450,000 and was subsequently granted a further 100 per cent. owned ruby gemstone licence in July 2008 covering an area of 2.77 km2 in the Morogoro District of Tanzania. These new gemstone licences provide Obtala with the foundations for creating a gemstone division and complement the Group's base metal licences portfolio as well as progressing the Group's strategy of working with local partners in the exploration and development of mineral assets, with an initial focus in Tanzania.  

The Board

The Company's Board has been strengthened since our admission to the AIM market with the appointment of Simon Rollason as Managing Director and the appointment of Professor John Monhemius and Nicholas Clarke as Non-Executive Directors. Simon Rollason has over 18 years experience in mining and geological exploration having worked with both multi-nationals and junior resources companies on nickel, gold, copper, base metals and gemstone projects. Professor Monhemius is Professor of Mineral and Environmental Engineering at Imperial College, London and has over 40 years experience in gold, copper, nickel, zinc and other metals. Nicholas Clarke is a highly experienced Chartered Engineer and company director and is currently a Non-Executive Director to both Caledon Resources Plc and Sunkar Resources Plc. 

Outlook and events subsequent to the year end 

The Board was pleased to announce a placing of 9,450,000 new ordinary shares in February 2009, raising a gross cash amount of £1.6 million to fund potential investment opportunities for quality resource assets in Africa.  

In March 2009, Obtala acquired a 23.0 per cent. interest in the ordinary shares of Kopane Diamond Developments, an AIM quoted diamond mining company with its main assets in Lesotho, through a private placing cash subscription of £1.75 million. In addition, the Company has made further market purchases of shares in Kopane to increase Obtala's current holding to 28.1 per cent. and I have been appointed to the role of Non-Executive Chairman of Kopane. The funds provided to Kopane under the share subscription will mainly be used to finance development and feasibility study work in respect of Kopane's main kimberlite pipe project at Liqhobong in Lesotho, in which it has a 75 per cent. interest and which has the potential to produce at a rate of over one million carats per annum for 20 years. I believe that this investment will be value enhancing for Obtala shareholders.

Furthermore, Obtala has completed an agreement with the AIM quoted company, Gemstones of Africa Limited ('GOA'), in March 2009 under which GOA purchased an initial 12.5 per cent. interest in the Group's 6 emerald gemstone mining licences in the Manyara area of Tanzania with an option to increase their interest by a further 12.5 per cent. to 25.0 per cent. in total. The purchase and option consideration was settled in exchange for issuing Obtala with shares equivalent to 5.0 per cent. of GOA's issued share capital equating to a value of £450,000. In order to exercise their option, GOA are required to have incurred exploration expenditures on these licence interests of not less than US$75,000 within 24 months of the agreement completion date. This deal complements the exploration activity currently being carried out by Obtala and allows the Group to benefit from the expertise offered by the GOA team to bring these assets in to production. 

I am confident that Obtala will make considerable further progress in its development during 2009. We may use a number of strategies to enhance shareholder value such as developing mineral licence assets using our own team, development in partnership with other groups or by way of disposal of mineral licence assets where appropriate. Furthermore, the Group will continue to evaluate opportunities to acquire additional assets at the exploration, development and production stages both in Tanzania, and globally. 

Finally, I would like to thank my colleagues and our employees for all their hard work in what has been a successful period in the development of the Group.

Francesco Scolaro

Executive Chairman

7 May 2009

Contact:

Simon Rollason - Managing Director Frank Scolaro - Chairman www.obtalaresources.co.uk	[phone]
Obtala Resources plc
Ray Zimmerman/Jonathan Evans	[phone]
Zimmerman Adams International Ltd - Nominated Adviser and Broker

OBTALA RESOURCES PLC

CONSOLIDATED INCOME STATEMENT

For the period from 1 August 2007 to 31 December 2008

		2008
		£000
Administrative expenses		(406)
OPERATING LOSS		(406)
Finance income		207
LOSS BEFORE TAXATION		(199)
Taxation		(16)
LOSS FOR THE PERIOD		(215)
ATTRIBUTABLE TO:
Equity holders of the parent		(215)
LOSS PER SHARE
Basic and diluted (pence)		(0.15)

The loss for the period arises from the Group's continuing operations.

OBTALA RESOURCES PLC

STATEMENTS OF CHANGES IN EQUITY

For the period from 1 August 2007 to 31 December 2008

The Group

	Attributable to the equity holders of the Parent
	Share Capital	Share Premium	Merger Reserve	Foreign Exchange Reserve	Share Based Payment Reserve	Retained Deficit	Total Equity
	£000	£000	£000	£000	£000	£000	£000
At 1 August 2007	-	-	-	-	-	-	-
Loss for the period	-	-	-	-	-	(215)	(215)
Exchange gains on retranslation of foreign operations	-	-	-	7,452	-	-	7,452
Total recognised income and expense for the period	-	-	-	7,452	-	(215)	7,237
Issue of shares	1,775	3,325	16,400	-	-	-	21,500
Expenses on issue of shares	-	(497)	-	-	-	-	(497)
Share based payment expense	-	-	-	-	23	-	23
At 31 December 2008	1,775	2,828	16,400	7,452	23	(215)	28,263

The Company    

			Attributable to the equity holders of the Parent
	Share Capital	Share Premium		Merger Reserve	Share Based Payment Reserve	Retained Deficit	Total Equity
	£000	£000		£000	£000	£000	£000
At 20 December 2007	-	-		-	-	-	-
Loss for the period	-	-		-	-	(57)	(57)
Total recognised income and expense for the period	-	-		-	-	(57)	(57)
Issue of shares	1,775	3,325		16,400	-	-	21,500
Expenses on issue of shares	-	(497)		-	-	-	(497)
Share based payment expense	-	-		-	23	-	23
At 31 December 2008	1,775	2,828		16,400	23	(57)	20,969

OBTALA RESOURCES PLC BALANCE SHEETS As at 31 December 2008
		Group	Company
		2008	2008
		£000	£000
ASSETS
Non-current assets
Investments in subsidiaries		-	19,805
Intangible exploration and evaluation assets		25,167	-
Plant and equipment		66	20
Total non-current assets		25,233	19,825
Current assets
Trade and other receivables		37	15
Short-term investments		15	15
Cash and cash equivalents		3,184	1,371
Total current assets		3,236	1,401
TOTAL ASSETS		28,469	21,226
LIABILITIES
Current liabilities
Trade and other payables		(190)	(257)
Current tax liabilities		(16)	-
TOTAL LIABILITIES		(206)	(257)
NET ASSETS		28,263	20,969
EQUITY
Equity attributable to equity holders of the parent
Share capital		1,775	1,775
Share premium		2,828	2,828
Merger reserve		16,400	16,400
Foreign exchange reserve		7,452	-
Share based payment reserve		23	23
Retained deficit		(215)	(57)
TOTAL EQUITY		28,263	20,969

Approved by the board and authorised for issue on 7 May 2009

F Scolaro                                     M Bretherton

Executive Chairman                    Finance Director

OBTALA RESOURCES PLC CASH FLOW STATEMENTS For the period from 1 August 2007 to 31 December 2008
		Group	Company
		2008	2008
		£000	£000
OPERATING ACTIVITIES
Operating loss		(406)	(199)
Adjustment for non-cash items:
Depreciation of plant and equipment		12	5
Foreign exchange gains		278	-
Share based payments		23	23
Purchase of short-term investments		(15)	(15)
Increase in trade and other receivables		(37)	(15)
Increase in trade and other payables		190	257
Net cash inflow from operations		45	56
INVESTING ACTIVITIES
Purchases of plant and equipment		(78)	(25)
Purchase of mining licences*		(2,131)	-
Expenditure on mining licences		(862)	-
Loan to subsidiary undertakings		-	(1,805)
Finance income		207	142
Net cash outflow from investing activities		(2,864)	(1,688)
FINANCING ACTIVITIES
Proceeds from issue of share capital		6,500	3,500
Expenses of issue of share capital		(497)	(497)
Net cash inflow from financing activities		6,003	3,003
INCREASE IN CASH AND CASH EQUIVALENTS		3,184	1,371
Cash and cash equivalents at 1 August 2007/ 20 December 2007		-	-
CASH AND CASH EQUIVALENTS AT 31 December 2008		3,184	1,371

*Excludes £15.0 million non cash element of acquisition consideration settled in shares, see note 5.

OBTALA RESOURCES PLC

NOTES TO THE FINANCIAL STATEMENTS

For the period from 1 August 2007 to 31 December 2008

1. ACCOUNTING POLICIES

BASIC OF ACCOUNTING

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union ('IFRS'). The financial statements have been prepared under the historic cost convention except for short-term investments, which are included at fair value.

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate those of Obtala Resources Plc and all of its subsidiary undertakings for the period. 

Obtala Resources Plc was incorporated on 20 December 2007 as a new Plc holding company created specifically for implementing a reorganisation in relation to Obtala Limited. This entailed the purchase by Obtala Resources Plc of the entire share capital of Obtala Limited on 29 February 2008 in a process that did not change the economics, operations or shareholder structure of the Obtala Group and the directors have therefore treated this as a simple reorganisation using the pooling of interests method of accounting.

Obtala Limited was incorporated on 1 August 2007 and the consolidated financial statements for the Obtala Group are for the period from 1 August 2007 to 31 December 2008.

As provided by section 230 of the Companies Act 1985, no income statement is presented for Obtala Resources Plc. The loss after tax dealt with in the income statement of the Company for the period ended to 31 December 2008 amounted to £57,000.

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half of the voting rights. The existence and effects of potential voting rights are considered when assessing whether the Group controls the entity. Subsidiaries are fully consolidated from the date control passes.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The costs of an acquisition are measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at acquisition date irrespective of the extent of any minority interest. The difference between the cost of acquisition of shares in subsidiaries and the fair value of the identifiable net assets acquired is capitalised as goodwill and reviewed annually for impairment. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the income statement.

The purchase of the entire share capital of Mindex Invest Ltd and Uragold Ltd by Obtala Limited has been treated as a purchase of assets. Intangible assets have been recognised at cost for the mining licenses held by the respective companies at the time of their acquisition. These transactions are outside the scope of IFRS 3 Business Combinations.

Intra-group transactions

All intra-group transactions, balances, and unrealised gains on transactions between group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group. All financial statements are made up to 31 December 2008.

INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries are stated in the parent company balance sheet at cost less provision for any impairment.

SEGMENTAL REPORTING

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

FOREIGN CURRENCIES

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling, which is the Company's functional and presentation currency.

Transactions and balances

In individual companies transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the income statement for the period.

In the consolidated financial statements, the assets and liabilities of subsidiaries with different functional currencies to the Company are retranslated into sterling at the rate ruling at the balance sheet date. The results and cash flows are retranslated into sterling using average rates of exchange. Exchange adjustments arising when the opening net assets and the profits for the period are translated into sterling are taken directly to a foreign exchange reserve and reported directly in equity. Exchange gains and losses arising on long-term intragroup foreign currency loans used to finance the subsidiary undertakings, which are deemed to be part of the net investment in the subsidiary, are also taken directly to equity. On disposal of a subsidiary with a different functional currency to the Company, the deferred cumulative exchange differences recognised in equity relating to that particular operation are recognised in the income statement. 

Foreign currency translation rates:

	At 31 December  2008	Annual average for period
US dollars	1.448	1.875
Tanzanian shilling	1,950	2,290

INTANGIBLE EXPLORATION AND EVALUATION ASSETS

All costs associated with mineral exploration and evaluation including the costs of acquiring prospecting licenses, rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource, are capitalised as intangible exploration and evaluation assets and subsequently measured at cost. The costs are allocated to base mineral/gemstone groupings within a region ('field'), which are treated as cash-generating units ('CGU')/projects because the underlying geological and risks and rewards of exploration within a field are considered to be similar.  

If an exploration project is successful, the related expenditures will be transferred at cost to plant and equipment and amortised over the estimated life of the commercial ore reserves on a unit of production basis.

Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned, or is considered to be of no further commercial value to the Company, the related costs are written off to the income statement. 

The recoverability of deferred exploration costs is dependent upon the discovery of economically viable ore reserves, the ability of the Company to obtain necessary financing to complete the development of ore reserves and future profitable production or proceeds from the extraction thereof.

PLANT AND EQUIPMENT

Plant and equipment assets are stated at historical cost.

Depreciation is provided on all plant and equipment assets at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:

Motor vehicles                          over 3 years
Fixtures and equipment            over 3 years
Computer and IT equipment    over 3 years 

IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS AND PLANT AND EQUIPMENT

Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, an asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying value. Impairment losses are recognised in the income statement immediately.

Impairment reviews for intangible exploration and evaluation assets are carried out on the basis of mineral/gemstone fields with each field representing a single CGU. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:

• unexpected geological occurrences that render the resources uneconomic;

• title to the asset is compromised;

• variations in mineral/gemstones prices that render the project uneconomic;

• variations in the currency of the operation; and

• the Group determines that it no longer wishes to continue to evaluate or develop the field.

  FINANCIAL ASSETS AND LIABILITIES

Financial assets and liabilities are classified at fair value through profit or loss when either they are held for trading or when they are initially recognised at fair value. The Group classifies its financial assets and liabilities as follows:

Trade and other receivables

Trade and other receivables do not carry any interest and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment.

Impairment provisions are recognised when there is objective evidence that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

Short-term investments

Short-term investments are valued at closing bid-market price at the reporting date.

Trade and other payables

Trade and other payables are not interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than 3 months.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax from proceeds.

LEASES

Leases where the lessor retains substantially all of the risks and rewards of ownership are classified as operating leases and the rentals payments are charged to the income statement on a straight-line basis over the lease term.

SHARE BASED PAYMENTS

The share option programme entitles certain employees and directors to acquire shares of the Company. These options are granted by the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black Scholes valuation model, taking into account the terms and conditions under which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

PENSION COSTS

Contributions by the Group to personal pension schemes are charged to the income statement on a straight-line basis as they become due.

TAXATION 

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax payable is based on taxable profit for the period. The Company's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. 

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon rates enacted and substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are those in relation to the impairment of intangible exploration and evaluation assets.

The Group is required to perform an impairment review, for each CGU to which the asset relates, when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is based upon the Directors' judgements and are dependent upon the discovery of economically recoverable ore reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposal until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows. 

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group that have not been applied in these financial statements were in issue but not yet effective or endorsed (unless otherwise stated): 

		Effective Date
IFRS 2	Share based payment (amendments)	1 January 2009
IFRS 3	Business Combinations (revision)	1 July 2009
IFRS 5	Non-current Assets Held for Sale and Discontinued Operations (amendments)	1 July 2009
IFRS 6	Exploration for and Evaluation of Mineral Resources (amendment)	1 January 2010
IFRS 7	Financial Instruments: Disclosures (amendments)	1 January 2009
IFRS 8	Operating Segments	1 January 2009
IFRS 8	Operating Segments (amendments)	1 January 2010
IAS 1	Presentation of Financial Statements (revision)	1 January 2009
IAS 1	Presentation of Financial Statements (amendments)	1 January 2009
IAS 7	Statement of Cash Flows (amendments)	1 January 2009
IAS 8	Accounting Policies, Changes in Accounting Estimates and Errors (amendment)	1 January 2009
IAS 10	Events after the Reporting period (amendments)	1 January 2009
IAS 18	Revenue (amendments)	1 January 2009
IAS 19	Employee Benefits (amendments)	1 January 2009
IAS 27	Consolidated and Separate Financial Statements (revision)	1 July 2009
IAS 27	Consolidated and Separate Financial Statements (amendments)	1 January 2009
IAS 32	Financial Instruments: Presentation (amendments)	1 January 2009
IAS 36	Impairment of Assets (amendments)	1 January 2009
IAS 39	Financial Instruments: Recognition and Measurement (amendments)	1 January 2009

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

2. SEGMENTAL REPORTING 

The Group is currently in the process of exploration and development of mineral projects, all of which are located in Tanzania.

The Group's primary reporting segments are geographical segments, being the UK and Tanzania.

The following table shows the geographical segment analysis of the Group's loss before tax for the period and balance sheet net assets at 31 December 2008:

		Tanzania	UK	Inter-group elimination	Total
		£000	£000	£000	£000
Income statement
Revenue		585	-	(585)	-
Administrative expenses		(604)	(387)	585	(406)
Segment loss before interest		(19)	(387)	-	(406)
Finance income					207
Loss before tax					(199)
Taxation					(16)
Loss after tax					(215)
Balance sheet
Assets		26,014	5,031	(2,576)	28,469
Liabilities:
Current tax liability		-	(16)	-	(16)
Other		(2,679)	(87)	2,576	(190)
Net assets		23,335	4,928	-	28,263
Other segment items:
Depreciation		(7)	(5)	-	(12)
Foreign exchange		7,452	-	-	7,452
Capital expenditure:
Plant and equipment		(53)	(25)	-	(78)
Intangible exploration and evaluation assets		862	-	-	862

3. LOSS PER SHARE

    Basic loss per share is based on the net loss for the period of £215,000 attributable to equity holders of the parent related to the weighted average number of ordinary shares in issue during the period of 142,997,104. Fully diluted loss per share is the same as basic loss per share.

4. INVESTMENTS IN SUBSIDIARIES

	Shares	Loans	Total
	2008	2008	2008
The Company	£000	£000	£000
Cost at incorporation	-	-	-
Additions	18,000	1,805	19,805
Cost at 31 December 2008	18,000	1,805	19,805

There has been no impairment loss to investments in subsidiaries in the period. 

At 31 December 2008 the Company has investments in subsidiaries where it holds 50% or more of the issued ordinary share capital of the following companies: 

Undertaking	Sector	Country of incorporation	% of issued ordinary share capital
Obtala Limited	Holding Company	England & Wales	100.0
Obtala Resources (T) Limited	Resources	England & Wales	100.0
Mindex Invest Ltd.	Resources	British Virgin Islands	100.0
Uragold Ltd.	Holding Company	England & Wales	100.0
Uragold (T) Ltd	Resources	Tanzania	75.0

The investment in Obtala Limited is held directly by the Company. The investments in Mindex Invest Ltd., Uragold Ltd. and Obtala Resources (T) Limited are held by Obtala Limited and the investment in Uragold (T) Ltd is held by Uragold Ltd.

Obtala Limited and Uragold Ltd. operate wholly or mainly in England & Wales; Mindex Invest Ltd., Obtala Resources (T) Limited and Uragold (T) Ltd. operate wholly or mainly in Tanzania.

All of the subsidiaries are included in the consolidated group financial statements.

5. INTANGIBLE EXPLORATION AND EVALUATION ASSETS

The Group	Mindex Licences	Uragold Licences	Total Licences
	2008	2008	2008
	£000	£000	£000
Cost and book value at 1 August 2007	-	-	-
Purchase of mining licences	15,957	1,174	17,131
Expenditure on exploration and evaluation	840	22	862
Foreign exchange differences	6,700	474	7,174
Cost and book value at 31 December 2008	23,497	1,670	25,167

Mindex Licences

The Mindex licenses comprise 25 Tanzanian licences held by Mindex Invest Ltd and the Uragold licences comprise 6 Tanzanian licenses held by Uragold (T) Ltd. Following the year end, the Group has obtained the option to acquire an additional 5 gold licences at a cost of US$200,000 per licence.

On 29 November 2007, Obtala Limited acquired 100 per cent. of the issued share capital of Mindex Invest Ltd. by issue of 100,000,000 new ordinary shares at 15 pence per share for £15,000,000 together with the settlement in cash of costs of £56,000, which coupled with net liabilities at acquisition of £121,000, resulted in a cost of £15,177,000 attributed to the purchase of the Mindex mining licences.

On 15 May 2008, Mindex Invest Ltd acquired holdings of between 71 per cent. and 75 per cent. in 6 new gemstone mining licences totalling 6 km2 in the Manyara area of Tanzania for a cash consideration of £229,000 (US$450,000).  

In addition, Mindex Invest Ltd. has also acquired one additional ruby licence, three additional gold licences and one platinum and uranium licence for £173,000 (US$250,000), £135,000 (US$195,000) and £243,000 (US$350,000) respectively. The additional 6 licences cover 2,896km2 in Tanzania.

Uragold Licences

On 8 February 2008, Obtala Limited acquired 100 per cent. of the issued share capital of Uragold Ltd. (including its 75 per cent. Uragold (T) Ltd. subsidiary which together comprise the Uragold Group), for a cash consideration of £952,000 (US$ 1.86m) together with the settlement in cash of costs of £41,000 and the repayment of a loan of £181,000 resulting in a total cost of £1,174,000 attributed to the purchase of Uragold mining licences.

The above values of intangible exploration assets acquired represent the cash and non-cash consideration paid by the Group at the time of their acquisition.

There were no triggers for carrying out an impairment review in the period. The Directors have considered the following factors:

• Geology and lithology on each licence as outlined in the most recent CPRs (independent Competent Person's Reports from the mining and earth resources consultancy company, Wardell Armstrong International Limited)

• The expected useful lives of the licenses and the ability to retain the license interests when they come up for renewal 

• Comparable information for large mining and exploration companies in the vicinity of each of the licenses

• History of exploration success in the regions being explored by Mindex and Uragold

• Local infrastructure

• Climatic and logistical issues

• Geopolitical environment

The Directors consider that there has been no impairment loss to intangible exploration and evaluation assets in the period.

6.   RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES

Capital risk management

The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The overall strategy of the Company and Group is to minimise costs and liquidity risk.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings and in the Group Statement of Changes in Equity.

The Group is exposed to a number of risks through its normal operations, the most significant of which are exploration, credit, foreign exchange and liquidity risks. The management of these risks is vested in the Board of directors.

Categorisation of financial instruments

Financial assets/liabilities	Held for trading	Loans and receivables	Financial liabilities at amortised cost	Total
	£000	£000	£000	£000
Trade and other receivables	-	16	-	16
Short-term investments	15	-	-	15
Cash and cash equivalents	-	3,184	-	3,184
Trade and other payables	-	-	(190)	(190)
	15	3,200	(190)	3,025

Management of exploration risk

    The Group is exposed to exploration risk in respect of its mineral license projects. The Group mitigates this risk by having established mineral investment project appraisal processes and asset monitoring procedures which are subject to overall review by the Board. 

Management of market risk

The most significant area of market risk to which the Group and Company are exposed is interest risk. 

As the Group has no significant borrowings its risk is limited to the reduction of interest received on cash surpluses held. This risk is mitigated by using fixed-rate deposit accounts.  

	31 December 2008
	Fixed rate	Floating rate	Total
Group	£000	£000	£000
Cash and cash equivalents	2,353	831	3,184

The impact of a 10 per cent. increase/decrease in the average base rates would be £3,000 on the total cash and cash equivalents balances and on equity.

Management of credit risk 

The principal financial assets of the Company and Group are bank balances and cash assets. The Company and Group deposit surplus liquid funds with counterparty banks that have high credit ratings. 

No aged analysis of financial assets is presented as no financial assets are past due at the reporting date with the exception of trade and other receivables, which the Directors do not consider to be material.

Management of foreign exchange risk

The Company and Group have a limited level of exposure to foreign exchange rate risk through their foreign currency denominated cash balances.

	GBP	USD	TZS	2008
Group	£000	£000	£000	£000
Cash and cash equivalents	2,303	874	7	3,184

The table below summarises the impact of a 10 per cent. increase/decrease in the relevant foreign exchange rates versus the pound sterling rate, on the Group's pre tax profit for the period and on equity:

		2008
Impact of 10% rate change		£000
Cash and cash equivalents		98

Management of liquidity risk  

The Group and Company seek to manage liquidity risk by regularly reviewing cash flow budgets and forecast to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is sufficient liquidity for the foreseeable future.

The Group and the Company had cash and cash equivalents at 31 December 2008 as set out below.

Cash and cash equivalents	Group	Company
	2008	2008
	£000	£000
Cash at banks	3,184	1,371

7. RELATED PARTY TRANSACTIONS

Trading transactions 

During the period the Group companies entered into the following transactions with related parties: 

	Transactions in period	Balance at 31 December
	2008	2008
	£000	£000
Loans to subsidiary undertakings	1,805	1,805
Loans from subsidiary undertakings	175	175
Loans between subsidiary undertakings	43	43
	Transactions in period	Balance at 31 December
	2008	2008
	£000	£000
Transactions with other related parties:
Advisory fees	12	12
Property recharges	20	4
Placing fees	37	-

All of the loan amounts referred to above are unsecured and are repayable on demand. The advisory fees and property recharges are from Ora Capital Limited (formerly Ora Capital Partners plc) a shareholder of the Company. The placing fees were payable to Novum Securities Limited, a subsidiary of Ora Capital Limited.

Transactions with key management personnel

The Group's key management personnel comprised only the Executive Directors of the Company.

	Short-term employment benefits
	Salaries & fees	Employer's national  insurance contributions	Share based payments	Total cost to company
	£000	£000	£000	£000
Francesco Scolaro	21	2	-	23
Simon Rollason*	95	9	10	114
Michael Bretherton	8	1	-	9
	124	12	10	146

*Joined 1 July 2008, appointed to the Board on 22 September 2008.

8. POST BALANCE SHEET EVENTS

On 20 February 2009 the Company completed a placing of 9,450,000 new ordinary shares at 17p raising a gross amount of £1,606,500.

On 13 March 2009 the Company completed an agreement with the AIM quoted company, Gemstones of Africa Limited ('GOA'), under which GOA purchased an initial 12.5 per cent. interest in the Group's 6 emerald gemstone mining licences in the Manyara area of Tanzania with an option to increase their interest by a further 12.5 per cent. to 25.0 per cent. in total. The purchase and option consideration was settled in exchange for issuing Obtala with shares equivalent to 5.0 per cent. of GOA's issued share capital equating to a value of £450,000. In order to exercise their option, GOA are required to have incurred exploration expenditures on these licence interests of not less than US$75,000 within 24 months of the agreement completion date.

On 30 March 2009 the Company acquired 23 per cent. of Kopane Diamond Developments ('Kopane'), an AIM quoted diamond mining company with its main assets in Lesotho for a total consideration of £1,750,000. The funds were raised to finance work in respect of the Definitive Feasibility Study ('DFS') and Environmental and Social Impact Assessment of Kopane's Main Pipe Project at Liqhobong in Lesotho and for general working capital purposes. Under the terms of the acquisiton, Francesco Scolaro has been appointed to the Board of Kopane and has assumed the role of Non-Executive Chairman.  

The full financial statements are available on the website at www.obtalaresources.co.uk and will be made available to the shareholders as per Rule 20 of the AIM Rules for Companies.

 

END

 

 

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