21st Feb 2008 07:00
Aricom PLC21 February 2008 Press Release 21 February 2008 Aricom plc ("Aricom" or the "Group") Preliminary Results for the year ended 31 December 2007 Aricom plc (LSE:ORE, OREW), the Anglo-Russian developer of mineral resources,today announces its financial results for the year ended 31 December 2007. Thecomplete Annual Report 2007 will be available on the Aricom website followingthis announcement. Financial Highlights • Profit after tax for 2007 of US$0.1 million (2006: loss after tax of US$2.6 million) • Net assets at year end of US$1,142 million (2006: US$527 million) • Group cash equivalents and short term investments at year end of US$498 million (2006: US$90 million) • Total gross funds raised of US$640 million during the period • Main listing moved from AIM to LSE Main Market and inclusion in FTSE 250 Operational Highlights • Mining process commenced at Kuranakh - 83,000 tonnes of material moved in 2007 • K&S o Initial feasibility study reviewed by WAI - value estimated at US$1.7 billion o 3,700m of drilling completed o 18,000m(3) of trenches completed • Garinskoye • Scoping study completed and reviewed by WAI • 8,400m of drilling completed • 3,500m(3) of trenches completed • Bolshoi Seym exploration commenced. 70,000m(3) of trenches completed • Titanium Sponge plant feasibility study completed • Initial discussions on the proposed Russia-China bridge over the Amur River ongoing Jay Hambro, Chief Executive of Aricom plc, commented: "Aricom has achieved another year of significant development and I am pleased toannounce Aricom reports a maiden profit. The Group commenced 2007 with oneproject due to start mining within the year and a number of other assets needingconfirmation and subsequent funding. I am delighted to report that during 2007,we have presented to the market independent studies on our two most valuableassets and have also secured the equity funding required for their development.Further to this, we have also made excellent progress at each of the otherassets." Production Outlook The Board reconfirms its belief that Aricom will produce saleable concentrate atKuranakh in the first half of 2008. It is estimated that Kuranakh will producetitanomagnetite from June 2008 and this will total c.225,000 tonnes in 2008. Itis also estimated that ilmenite sales will commence in October 2008 and willtotal c.36,000 tonnes for the year. Conference Call A conference call to discuss the announcement will be hosted by Aricom plc, onThursday, 21 February 2008 at 11:00 UK time. Details to access the conference call are as follows: - The dial-in number in the UK will be: 020 3140 9064 and internationally will be +44 20 3140 9064- with the Participant PIN code in both cases: 176444# In advance of this call, participants should find the results presentation onAricom's website from 10:00 UK time. - Ends - For further information:Aricom plcCharles Gordon, Investor Relations Officer Tel: +44 (0) 20 7201 8921 www.aricom.plc.ukAbchurchCharlie Jack/George Parker Tel: +44 (0) 20 7398 7700 www.abchurch-group.com Statement of the Chairman, Dr Pavel Maslovskiy "I am delighted to report on another year of evolution for Aricom. The Group hasgrown from being an explorer to a developer and now to a miner - the nextcrucial step towards delivering shareholder value. Whilst the Kuranakh project made the significant step forward to become anoperational mine, the rest of the portfolio also made critical advances. We havepublished a prefeasibility study on K&S which demonstrates both the ability ofthe project to operate and its economic potential. We have also established thevalue inherent in the Garinskoye project with a scoping study suggestingapproximately US$2 billion of net present value. It has also been a year wherewe cemented our market position with the completion of the second largestsecondary fundraising on London's AIM whilst subsequently moving from AIM to theMain Market of the LSE. The fundraising has allowed the Group to make capitaland investment commitments with increased confidence considering the requiredlong lead times for major mining and processing equipment. Aricom's warm welcomefrom the Main Market and the FTSE 250 has shown how the Group has not justevolved internally but has managed to demonstrate transparency and strongcorporate governance. I would like to thank all the people who work within the Group and to welcomethose who joined during 2007. I still believe that one of the most valuableassets that we have in the portfolio is our human resource and this has expandedsignificantly as we move towards production. At a senior level we were fortunateto benefit from the arrival of Brian Egan as Chief Financial Officer. Brianbrings with him an impressive track record of management within largeorganisations operating in Russia and we are glad to have him on board. In a market where the price of both bulk commodities and their transport costsseem to appreciate daily it is an enviable position to be holding a number oflarge deposits, within a full spectrum of mining, development and delineationthat are situated in close proximity to the border of one of the world's largestgrowth markets. We are fortunate with both our geography and our geology and Ilook forward to further bringing the two together to create value for all myfellow Aricom shareholders. Dr Pavel MaslovskiyChairman Aricom plcConsolidated Income Statementat 31 December 2007 2007 2006 Notes US$'000 US$'000Continuing operationsRevenue 4,938 -Cost of sales (3,153) -Gross profit 1,785 -Administrative expenses: Listing costs (3,951) - Share based payments (1,086) (429) Other administrative costs (19,900) (6,907)Other operating income 475 (140)Share of associate's loss (59) -Operating loss (22,736) (7,476)Investment revenues 21,453 5,043Finance costs (602) (122)Loss before tax (1,885) (2,555)Tax credit/(charge) 1,996 (135)Profit/(loss) for the year from continuing 111 (2,690)operations Discontinued operationsProfit for the year from discontinued operations - 108Profit/(loss) for the year 111 (2,582) Attributable to:Equity holders of the parent 1,040 (1,905)Minority interest (929) (677) 111 (2,582) Earnings/(loss) per shareFrom continuing operationsBasic 10 US$0.00 US$(0.01)Diluted 10 US$0.00 US$(0.01) From continuing and discontinued operationsBasic 10 US$0.00 US$(0.01)Diluted 10 US$0.00 US$(0.01) Aricom plcConsolidated statement of recognised income and expensefor the year ended 31 December 2007 2007 2006 US$'000 US$'000 Exchange differences on translation of foreign operations 2,168 -Equity element of deferred tax arising on share options 199 -Net income recognised directly in equity 2,367 - Profit/(loss) for the year 111 (2,582)Total recognised income and expense for the year 2,478 (2,582) Attributable to:Equity holders of the parent 3,208 (1,905)Minority interests (730) (677) 2,478 (2,582) Aricom plcConsolidated balance sheetat 31 December 2007 Restated(1) 2007 2006 Notes US$'000 US$'000Non-current assetsGoodwill 58 58Other intangible assets 427 -Property, plant and equipment 561,438 420,978Investment in associates 2,854 -Financial asset investments - 2,981Deferred tax asset 4,879 -Other non-current assets 112 105 569,768 424,122 Current assetsInventories 2,015 180Trade and other receivables 29,077 6,873Loan receivable from a related party 65,111 -Short-term investments 91,791 -Cash and cash equivalents 406,687 89,668Derivative financial instruments - 18,474 594,681 115,195Total assets 1,164,449 539,317 Current liabilitiesTrade and other payables (12,728) (11,813)Current tax liability (446) - (13,174) (11,813)Net current assets 581,507 103,382 Non-current liabilitiesDeferred tax liability (5,014) -Other non-current liabilities (1,571) (99)Long-term provisions (2,294) - (8,879) (99)Total liabilities (22,053) (11,912)Net assets 1,142,396 527,405 Aricom plcConsolidated balance sheet (continued)at 31 December 2007 Restated(1) Notes 2007 2006 US$'000 US$'000EquityShare capital 2,147 816Share premium account 1,130,638 263,800Own shares (20,256) -Shares to be issued - 83,798Share option reserve 10,378 9,857Translation reserve 1,969 -Other reserves 9,900 -Retained earnings (8,307) (9,628)Equity attributable to equity holders of the parent 1,126,469 348,643Minority interest 9 15,927 178,762Total equity 9 1,142,396 527,405 (1) The 2006 balance sheet has been restated as described in note 2. The financial statements were approved by the Board of Directors and authorisedfor issue on 20 February 2008. They were signed on its behalf by: G J Hambro, Director B Egan, Director20 February 2008 20 February 2008 Notes to the financial information for the year ended 31 December 2007 1. Financial information The financial information has been prepared in accordance with InternationalFinancial Reporting Standards. The financial information set out above does not constitute the Group'sstatutory accounts for the year ended 31 December 2007 but is derived from theGroup's statutory accounts for that period. The auditors' report on thestatutory accounts for the year ended 31 December 2007 was unqualified and didnot contain statements under section 237(2) of the Companies Act 1985 (regardingadequacy of accounting records and returns) or under section 237(3) (regardingprovision of necessary information and explanations). The statutory accounts for the year ended 31 December 2007 have not yet beendelivered to the Registrar of Companies. 2. Restatement of comparatives During the current year the Directors have re-assessed the accounting treatmentof the deferred consideration payable in respect of the acquisition of LLCKimkano-Sutarskiy Gorno-Obogatitelniy Kombinat ("KS GOK") in the 31 December2006 balance sheet. This has no effect on the value attributed to the asset, theloss for the year or the cash flows reported in the published 2006 FinancialStatements. The deferred consideration in relation to the first 50% interest in KS GOKacquired from Malavasia Enterprises Inc. comprised ordinary shares, at an amountdependent on the outcome of the valuation. Therefore, the consideration has nowbeen accounted for in accordance with IFRS 2 "Share-based Payments" as anequity-settled share-based payment and been classified as equity (shares to beissued) rather than as a current liability as previously reported. Thisincreased reported net assets as at 31 December 2006 by US$83.8 million. These ordinary shares were issued during the current year, and hence thisbalance is no longer recognised at the balance sheet date. 3. Dividends There is no current intention to pay a dividend. In due course, the Board ofDirectors will consider the payment of dividends, if and when it is in aposition to do so. 4. Reconciliation of operating loss to net cash outflow from operatingactivities 2007 2006 US$'000 US$'000 Operating loss from continuing operations (22,736) (7,476)Operating profit from discontinued operations - 32Adjustments for: Depreciation of property, plant and equipment 859 430 Depreciation capitalised (390) (319) Loss on disposal of fixed assets 134 9 Share option expense 1,086 429 Share of associates' loss 59 - Listing costs 3,951 - Other non-cash adjustments 6 (109)Operating cash flows before movements in working capital (17,031) (7,004) (Increase)/decrease in inventories (1,811) 298 Decrease/(increase) in receivables 14,785 (2,936) (Decrease)/increase in payables (8,619) 2,519Cash used in operations before interest and tax (12,676) (7,123) Interest paid - (1,290) Income tax paid (190) (44)Net cash used in operating activities (12,866) (8,457) 5. Currency of financial statements The currency rates used in the preparation of the financial information set outherein are as follows: 2007 2006 Closing Average Closing AverageRussian Rouble: GB£ 49.01 51.04 51.59 50.03Russian Rouble: US$ 24.55 25.58 26.33 27.18US$: GB£ 1.98 1.98 1.96 1.86 6. Asset acquisitions Acquisition of minority interest in Olekma On 11 January 2007 the Group acquired the 26% interest in LLC Olekminsky Rudnik("Olekma") that it did not already own, taking its interest in the Kuranakhproject to 100%. The purchase price of US$11 million was paid in January 2007. It was concluded that the US$11 million paid reflected the fair value of 26% ofthe Kuranakh project. In accordance with the Group's accounting policy foracquiring minority interests, the percentage of the assets and liabilitiesacquired have been recognised at this fair value, resulting in an US$12.1million increase in the carrying value of Kuranakh. Acquisition of minority interest in KS GOK On 4 April 2007, the Company notified Philotus Holdings Limited that it wantedto exercise the option to purchase the 50% interest in KS GOK it did not alreadyown. Following the receipt of approval from the Russian Federal Antimonopoly Service ('FAS') on 9 August 2007,the Company acquired the remaining 50% interest in KS GOK, in consideration forthe issue of 123,782,467 ordinary shares to Philotus. The number of ordinary shares issuedwas determined in accordance with the option agreement, and approved by theIndependent Directors, following a valuation report from Wardell ArmstrongInternational Ltd ("WAI"). The cost of the net assets acquired at this date was considered to be the fairvalue determined as at 20 April 2007, this being the date of the settlement ofthe deferred consideration outstanding with respect to the acquisition of thefirst 50% controlling interest in KS GOK, which closely followed the date theCompany served notice to Philotus in respect of the exercise of the option toacquire the remaining 50% interest. The total consideration for the acquisition of the 50% interest held by PhilotusHoldings Ltd was comprised of the following: US$'000Cash consideration 9,000Issue of an option to Philotus 9,200Issue of 123,782,467 ordinary shares in Aricom to Philotus at market value (£0.52) 131,077 149,277 Following the completion of the acquisition of this asset in August 2007, thedifference between the fair value of the net assets acquired, determined as at20 April 2007, based on the agreed number of ordinary shares to be issued andthe share price at that date, and the fair value of the purchase considerationbased on the share price when the shares were actually issued, has beenrecognised in equity. Following the acquisition of this 50% interest, theCompany now indirectly holds 100% of KS GOK. The net impact of the acquisitionof this 50% interest was the recognition of a credit of $41.4 million to equity. Acquisition of Garinskoye Deposit On 24 September 2007, Aricom UK Limited ("Aricom UK"), a wholly owned subsidiaryof Aricom, subscribed for ordinary shares in Lapwing Limited ("Lapwing"),pursuant to an agreement dated 29 March 2007. At the time of this subscription,Aricom UK Limited expected to obtain a 60% ownership interest in Lapwing, andadditional subscriptions were required to be made by Aricom UK's co-shareholdersat the same price. There were expected to be four further shareholders inLapwing, namely Olis Constructions Limited ("Olis") with 25% and three othershareholders with the remaining 15% (the "Additional Holders"). The AdditionalHolders did not subscribe for any additional shares and consequently theirinterest in Lapwing was diluted to a total of 0.52% with Aricom UK holding70.22% and Olis holding 29.26%. Consideration for the acquisition of this asset was the settlement of a loanissued by the Group to Lapwing for €20.22 million, in exchange for 20,220,000shares at €1 each in Lapwing and it was accounted for as an asset acquisitionrather than a business combination. Under the same agreement, Aricom UK acquired for a premium of US$19.7 million anoption to purchase a further 25% interest. The exercise period of the option wastwo years from the date of subscription but could be shortened in certaincircumstances. This option wasterminated in December 2007, and the original terms varied under an agreementdated 13 December 2007, (the "Acquisition Agreement"). Under this AcquisitionAgreement, Olis conditionally agreed to sell to Aricom its entire 29.26%interest in Lapwing, the acquisition being subject to Aricom obtainingShareholder approval. Aricom Shareholders approval was obtained on 15 February2008 and the 29.26% interest in Lapwing was acquired on the same date. Set out in the table below is a summary of the assets and liabilities acquiredat 24 September 2007: US$'000 Net assets acquiredMining properties and leases 49,641Assets under construction 2,185Other fixed assets 10Inventories 10Receivables 12,496Cash and cash equivalents 427Payables (19,354)Amounts payable in respect of mineral licence (1,963)Short-term loans from Group company (2,892)Net assets 40,560Aricom share of net assets acquired 28,481Total consideration 28,481 Satisfied by:Settlement of loan in exchange for 20,220,000 shares at €1 per share 28,481Net cash inflow arising on acquisition Cash and cash equivalents acquired 427 7. Business Combination On 28 May 2007, the Group's acquisition of a 68.49% interest in Giprorudareceived FAS approval. A cash consideration of $8,148,000 was paid and transferof ownership was effected on 8 June 2007. Gipropruda is a highly respected Russian engineering company based in StPetersburg specialising in non-precious metals mine and processing plant design. Russian legislation limited the Group's voting power until such time that theRussian Federal Financial Market Service approved Aricom's mandatory offer tominority shareholders. Accordingly, Giproruda was recognised as an associatebetween 8 June and 12 July 2007. On 13 July 2007, the Group obtained the fullvoting rights in respect of its 68.49% interest in Giproruda after a mandatoryoffer to minority shareholders was made in accordance with Russian legislation.Subsequent to this date Giproruda is considered to be a subsidiary of Aricom. Set out in the table below is a summary of the fair values of the assets andliabilities acquired in the business combination. Book value Fair value Fair value adjustments US$'000 US$'000 US$'000Net assets acquiredProperty, plant and equipment 1,211 10,954 12,165Deferred tax asset 49 - 49Other non-current assets 21 - 21Inventories 11 - 11Contracts in progress 1,661 - 1,661Trade and other receivable 1,494 - 1,494Cash and cash equivalents 1,800 - 1,800Trade and other payables (2,416) - (2,416)Deferred tax liability (259) (2,629) (2,888)Net assets 3,572 8,325 11,897Aricom share of net assets acquired 8,148Total consideration 8,148 Satisfied by:Cash 8,148 Net cash outflow arising on acquisitionCash consideration 8,148Less cash and cash equivalents acquired (1,800) 6,348 The fair values set out above were determined as at 8 June 2007, this being thedate the consideration for the 68.49% interest was paid and the transfer ofownership effective. The Directors consider that these fair values substantiallyreflect the fair values of the net assets acquired as at 13 July 2007, the dateat which the mandatory offer to minority shareholders was made and the Groupreceived full voting rights. No goodwill arose on acquisition as the consideration payable was equal toAricom's share of the fair value of the net assets acquired. The fair value ofthe net assets includes the Directors' valuation of the Company's interest inthe property that Giproruda occupies. On 21 September 2007, the mandatory offer to minority shareholders lapsed. Atotal of 2,073 shares were tendered under the offer, at a total cost ofUS$232,000. The majority of the shares tendered were purchased by 1 October2007, increasing the Group's interest in Giproruda to 70.28% from 68.49%. In accordance with the Group's accounting policy for acquiring minorityinterests, the percentage of the assets and liabilities acquired should berecognised at their value. A fair value exercise was undertaken at 1 October2007, and there was no significant change in the fair values of the net assetsacquired, in comparison to the fair values set out above. Giproruda added US$4,938,000 to the Group's revenue and US$1,224,000 positivecontribution to the Group's loss before tax for the period between the date ofthe business combination and the balance sheet date. If the acquisition of Giproruda had been completed on the first day of thefinancial year, Group revenues for the period would have been US$7,938,000 andgroup profit attributable to equity holders of US$1,266,000. 8. Post balance sheet events Acquisition of additional shareholder interests in Lapwing On 25 January 2008, Aricom acquired the 0.1% ownership interest in Lapwing heldby PBO Handelsges M.B.H. ("PBOH"), one of the additional shareholder's.Consideration for the acquisition of this minority interest was the issue byAricom of 8.43 ordinary shares for every 1 Lapwing Share held by PBOH, resultingin the issue of 252,900 ordinary shares on 5 February 2008 when the market valuewas £0.6875 per ordinary share. The total purchase consideration for theacquisition of this minority interest was US$0.3 million. Acquisition of 29.26% minority interest in Lapwing and settlement of amountsowed by Olis On 15 February 2008, shareholder approval was obtained for the acquisition ofOlis' 29.26% interest in the issued share capital of Lapwing, the holdingcompany that owns Garinskiy, which in turn holds the Garinskoye licence. Theacquisition was completed on 15 February 2008, resulting in an increase in the70.22% interest in the project held by Aricom UK at 31 December 2007 to 99.58%,including the 0.1% interest acquired on 25 January 2008 detailed above. Theevents leading to the acquisition of this additional 29.26% interest and thepurchase consideration are set out below. Pursuant to an agreement dated 29 March 2007, Aricom UK paid US$19.7 million toacquire an option over Olis' expected 25% interest in Lapwing for US$100million. Subsequent to this, Olis' interest in Lapwing increased to 29.26%. The Option had an exercise period of two years which commenced when Aricom UKsubscribed for shares in Lapwing. However this exercise period could be broughtforward following the receipt of a positive feasibility study for Garinskoye,the generation of US$50 million in aggregate net profit or a change of controlof the Company. Aricom UK and Olis subsequently terminated the option under the AcquisitionAgreement and Olis conditionally agreed to sell its entire 29.26% interest inLapwing, the acquisition being subject to the Company obtaining Shareholdersapproval. The consideration for the acquisition of this additional interest comprised theissue of 28,265,903 ordinary shares in the Company and cash considerationcomprising the net proceeds of the placing of the 42,750,000 ordinary sharescompleted by the Company on 18 December 2007, less an agreed allocation of costsincurred in respect of this Placing. Following entry into the Acquisition Agreement, under a separate agreement dated19 December 2007, another member of the Aricom Group, Aricom Treasury Limited,agreed to advance a secured loan of up to US$65 million to Olis on commercialterms. The loan was drawndown in two tranches on 19 and 20 December 2007, andwas repayable at the earlier of the completion of the Acquisition Agreement andthe maturity date of the loan, being 30 June 2008. The acquisition of this additional interest has taken place following thereceipt of Shareholder approval on 15 February 2008. The total considerationcomprised the issue of 28,265,903ordinary shares at a market value of £0.705 per ordinary share on 15 February2008, and the cash consideration payable under the Acquisition Agreement whichwas offset against the loan and interest receivable from Olis. The totalpurchase consideration for the acquisition of this minority interest wasUS$122.3 million. 9. Group combined statement of reserves and reconciliation of movement inshareholders' funds Restated Restated Share Share (1) (2) Retained Share Translation Minority (1) capital premium Own Shares to loss option reserve interests Total account shares be issued reserve equity US$'000 US$'000 US'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2006 242 24,526 - - (7,723) 553 - 90 17,688Acquisition of minority interest - - - - - - - 179,351 179,351Disposal of minority interest - - - - - - - (2) (2)Total recognised income and expense - - - - (1,476) - - (677) (2,153)Share-based payments - 326 - - (429) 9,304 - - 9,201Shares issued 574 245,363 - - - - - - 245,937Shares to be issued - - - 83,798 - - - - 83,798Expenses on issue of equity shares - (6,415) - - - - - - (6,415) Balance at 31 December 2006 816 263,800 - 83,798 (9,628) 9,857 - 178,762 527,405 Share Share Retained Share Translation Other Minority capital premium Own Shares to loss option reserve reserves interests Total account shares be issued reserve equity US$'000 US$'000 US'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2007 816 263,800 - 83,798 (9,628) 9,857 - - 178,762 527,405Revaluation of minority interest - - - - - - - (9,246) 9,246 -Acquisition of minority interest - - - - - - - 42,575 (183,481) (140,906)Minority interest at date of acquisition - - - - - - - - 15,859 15,859Total recognised income and expense - - - - 1,040 - 1,969 - (730) 2,279Option purchased over minority interest - - - - - - - (19,700) - (19,700)Equity element of deferred tax arising on share options - - - - - 199 - - - 199Share-based payments - - - - - 603 - - - 603Directors' options exercised - - - - 281 (281) - - - -Shares issued in respect of of deferred consideration 130 102,160 - (83,798) - - - - - 18,492Shares acquired by EBT 33 20,223 (20,256) - - - - - - -Other shares issued 1,168 769,371 - - - - - - - 770,539Expenses on issue of equity shares - (24,916) - - - - - - - (24,916)Change in purchase consideration of KS GOK - - - - - - - (3,729) (3,729) (7,458) Balance at 31 December 2,147 1,130,638 (20,256) - (8,307) 10,378 1,969 9,900 15,927 1,142,3962007 (1) The Own shares reserve represents the cost of shares in Aricom plc heldby the EBT to satisfy the awards under the Group's Long Term Incentive plan. (2) During the current year the Directors have re-assessed the accountingtreatment of the deferred consideration payable in respect of KS GOK in the 31December 2006 balance sheet. The deferred consideration payable has beenre-classified as equity (shares to be issued) rather than as a current liabilityas previously reported. 10. Profit per ordinary share The calculation of the basic and diluted earnings/(loss) per share is based onthe following data: 2007 2006 US$'000 US$'000Earnings/(loss) Profit/(loss) for the purposes of basic and diluted profit/(loss) per share 1,040 (1,905)being net loss attributable to equity holders of the parent Number NumberNumber of shares '000 '000Weighted average number of ordinary shares for the 791,263 336,081 purposes of basic profit/(loss) per shareEffect of dilutive potential ordinary shares 12,447 -Weighted average number of ordinary shares for the 803,710 336,081 purposes of diluted earnings/(loss) per share US$ US$Basic earnings/(loss) per share 0.00 (0.01)Diluted earnings/(loss) per share 0.00 (0.01) From continuing operations 2007 2006 US$'000 US$'000Profit/(loss) attributable to equity holders of the parent 1,040 (1,905)Adjustments to exclude profit for the year from discontinued operations - (108)Profit/(loss) from continuing operations for the purpose of basic loss per share 1,040 (2,013)excluding discontinued operationsEffect of dilutive potential ordinary shares - -Profit/(loss) from continuing operations for the purpose of diluted earnings per 1,040 (2,013)share excluding discontinued operations US$ US$Basic earnings/(loss) per share 0.00 (0.01)Diluted earnings/(loss) per share 0.00 (0.01) The Company had financial instruments issued as at 31 December 2007 which arepotentially dilutive: 21,176,372 options and 133,000,000 warrants. From discontinued operations 2007 2006 US$'000 US$'000 Basic loss per share - 0.00Diluted loss per share - 0.00 11. Contingent Liabilities The Group was involved in two related legal proceedings in which LLC AREK 'Geologiya' (the 'Claimant'), an unsuccessful bidder in the tender through whichthe Garinskoye licence (the 'Licence') was awarded, sought to void the grant ofthe Licence to LLC Amurmining (now LLC Garinskiy Mining and MetallurgicalComplex, a Group subsidiary). The first action (the 'Amur action') was filed in a commercial court in AmurRegion of Russia where the Garinskoye deposit is located. The second action (the'Moscow action') was filed in a commercial court in Moscow where Rosnedra, theauthority which issued the Licence, is located. Rosnedra is named as a defendantin both actions; Garinskiy is named as defendant in the Amur action and as aninterested party in the Moscow action. In November 2007 the court of first instance dismissed the Claimant's claim andrefused to recognise the decision of the tender committee on the results of thetender as unlawful, Rosnedra's order approving the results of the tender as voidand the Licence as invalid. The Claimant appealed this decision, however on 28January 2008 the Moscow court of appeal upheld the decision of the court offirst instance. Therefore, the claims of LLC AREK 'Geologiya' to challenge thetender results were rejected. This decision may be appealed within two monthsfrom the date of the decision. Initially, the Amur action was suspended pending the outcome of the Moscowaction. After the decision in the Moscow action the Amur action was revived andthe Company expects that the decision in the Amur action will follow thedecision in the Moscow action. The Company believes that the Claimant's claims are of a limited merit and thattherefore these proceedings do not represent a material threat to the Garinskoyelicence or the Group. -Ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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