30th Mar 2005 07:00
Cluff Gold PLC30 March 2005 30 March 2005 Cluff Gold plc ("Cluff Gold" or "the Company") Preliminary Results for the Year to December 2004 Highlights - Flotation on AIM raised £6.5 million before expenses - Cluff Gold's portfolio of mineral interests at various stages of development in the Mining Cycle in Burkina Faso, Sierra Leone, Cote d'Ivoire, Ghana and Senegal given an independent valuation estimated at US$ 16.3 million - Successful acquisition of the Mount Yaoure exploration licence in Cote D'Ivoire which contains the Angovia gold mine, located 240kms north-west of the capital Abidjan Post Year End Highlights - Acquisition of the entire issued share capital of both Cluff Mining (West Africa) Limited (a subsidiary of which has a 78% interest in the Kalsaka Gold project in Burkina Faso) and Cluff Mining (Zimbabwe) Holdings Limited from the Ridge Mining Group for a total consideration of US$ 5.01million - Initial drilling has intersected exciting grades at the Baomahun deposit in Sierra Leone, where up to 5,000 metres of drilling is planned over the next few months For further information, please contact: Cluff Gold Numis Securities Parkgreen CommunicationsJ.G. Cluff / Douglas Chikohora John Harrison Justine Howarth / Cathy Malins Chairman / Technical Director Tel: 020 7776 1500 Tel: 020 7493 3713Tel: 020 7340 9790 Chairman and Chief Executive's Statement It is with pleasure that I set out my first Chairman's Statement for thisCompany. To begin with I should re-state the policy by which the Cluff GoldGroup has been governed since its inception in November 2003. That is, quitesimply, to aim to become a producer of gold in West Africa with an initialtarget to have the capacity to produce 300,000 ounces within two years. Thisobjective is based on the reserves and resources contained in our projects inSierra Leone, Burkina Faso and the Ivory Coast. We are however intending toestablish ourselves in Mali and to define resources based on our explorationlicences in Senegal and Ghana. This philosophy is founded on our management's long work experience in WestAfrica and our belief that it is in West Africa that the larger gold discoveriesof the future will most likely eventuate. Your management seeks to eliminate asmuch of the geological risk as possible whilst accepting that the volatility ofthe region argues that political risk be to an extent covered by investing in aspread of countries. I must emphasise, however, that the quality of the geologyis our imperative. Notwithstanding the perceived political risk it is our experience that WestAfrica is in most respects as investor friendly as anywhere and that ismanifest, for example, from the sophisticated nature of the mining investmentcodes which operate there at present. During the ensuing six months we shall variously be engaged in pre-feasibilitystudy work in Sierra Leone, in exploration in Senegal and Ghana and in phaseddevelopment actively in Burkina Faso and the Ivory Coast. There will accordinglybe ample opportunity for management to add real value to your Company. As you will know the Company was admitted to AIM last December and in theprocess raised £6.5 million before expenses. We are therefore in a position toadvance our projects to the point, in the autumn, where project finance will berequired. I would like to take this opportunity to thank our Nominated Adviserand Broker, Numis Securities, and our joint Financial Adviser, Ambrian Partners,for their assistance with the IPO and their continued support for the Company. Finally, I am pleased to say that our board is to be strengthened in the nearfuture both by the appointment of the Rt Hon Francis Maude, who has variouslybeen Financial Secretary to the Treasury, Shadow Chancellor of the Exchequer aswell as a director of Salomon Brothers and of Morgan Stanley together with EdHaslam, who was previously the Chief Executive of Lonmin plc. JG CluffChairman and Chief Executive Financial Review The consolidated net loss after taxation of the Group in respect of the periodended 31 December 2004 amounted to £1,139,539 (loss per share £1.27). TheGroup's only source of income during the year arose from bank deposit interest,which amounted to £18,550. The net assets of the Group amounted to approximately £6.0 million as at theyear end which includes intangible assets amounting to approximately £0.6million. Intangible assets relate to accumulated deferred exploration andevaluation costs in respect of the Group's gold interests in West Africa. TheGroup's accounting policy is to capitalise these costs pending determination ofthe feasibility of the project to which they relate. On 7 November 2003 Cluff Gold UK Ltd issued 2,999,800 ordinary shares of 1p eachat par. At 31 December 2004, these shares were fully paid. On 8 December 2003Cluff Gold UK Ltd issued a further 5,000,000 ordinary shares of 1p each at 20pto institutional and other investors for a total consideration of £1,000,000.Costs incurred on this financing amounted to £65,909 and have been set againstthe share premium account. During August 2004 Cluff Gold UK Ltd issued 820,606 ordinary 1p shares at 55ppursuant to a placing. Total consideration received amounted to £451,333. Costsincurred on the placing amounted to £7,067 and have been set against the sharepremium account. On 29 November 2004 the Company acquired the whole of the issued capital ofCluff Gold UK Ltd in consideration of the issue or transfer to the shareholdersof Cluff Gold UK Ltd of a total of 8,820,606 ordinary shares credited as fullypaid. An amount of £1,320,151 has been included in the merger reserve. Thisamount arises on consolidation, as a result of the issue of shares in theCompany to acquire the entire issued share capital of Cluff Gold UK Ltd. On 15 December 2004, the Company was admitted to AIM where it raisedapproximately £5.63 million (net of expenses) by way of the placing of 11.82million new ordinary shares at 55p per share. Since the period end, the Companyhas satisfied the cash consideration of approximately £2.42 million in respectof the exercise of the options over the Ridge Mining gold assets in West Africaand Zimbabwe. Completion took place on 7 January 2005. With the finance provided by the December placing, management is focused onadvancing our projects in Burkina Faso and Ivory Coast to the project financephase, continue pre-feasibility study work at the Baomahun project in SierraLeone and advance exploration projects in Ghana and Senegal. JAW AlpenFinance Director Operational Review Baomahun, Sierra Leone Cluff Gold UK Ltd has a right to earn a 60% interest in the Baomahun project inSierra Leone on the earlier of it incurring exploration expenditure of US$5million or completing a bankable feasibility study. This right is to be acquiredfrom Winston Mines which owns the two exploration licences relating to Baomahuncovering an area of approximately 137km2. The Baomahun deposit is located about 180km east of the capital, Freetown, inthe Southern Province of Sierra Leone. The geological setting is similar to theLake Victoria goldfields in Tanzania and a total of five zones of mineralisationhave been identified covering a combined strike length of 3.4km. Some 29 holes have been drilled since 1980 in the Eastern Zone over 200m ofstrike where a mineral resource of 1.07 million tonnes at a grade of 5.97 g/t,equivalent to 204,700 ounces of gold has been delineated to date. ACA Howe, whocompleted a competent persons report on the project consider that thisestimation is likely to be conservative. Four further zones have been delineatedby soil sampling, outcrop and limited drilling. In the Central Zone, drillintercepts over 300m of strike have identified 22.3m at 5.09 g/t, 19.9m at 9.4 g/t and 5m at 8.78 g/t. The Western zone contains two areas showing parallel trends with gold-in-soilanomalies each over 1km of strike and another area containing gold-in-soilanomalies over a further 900m of strike. A drilling programme of up to 5000 metres is underway. When completed this willenable a better estimation of resources over the zones and identify furthertargets for future work. The company completed a 1,592 line kilometre helicopter borne magnetic andradiometric geophysical survey covering the 137.8 square kilometres Baomahun andVictoria licences. The results of this survey have been received and arecurrently being interpreted. It is expected that the interpretation will assistwith further regional target generation in the two contiguous licence areas. Thetwo licences have been renewed for a further one year renewable term as per thecountry's mining laws. The Directors believe that the Baomahun deposit has the potential to contain aresource of at least 1,000,000 ounces of gold. At the 2004 Mines and Money WorldCongress in London, Sierra Leone received the Country Award. The award was forthe country that had shown the most improvement, in terms of attractiveness tomineral investors, during the past 12 months. The other finalists in thiscategory were Canada, Mongolia, Senegal, Thailand and Zambia. Kalsaka, Burkina Faso The project is located approximately 150km north west of Ouagadougou, thecapital of Burkina Faso, and contains an oxide gold mineral resource that hasalready been demonstrated, by a feasibility study, to be technically amenable toopen-pit mining and processing via heap leaching. Cluff Mining (West Africa) Ltd is the operator of a joint venture at Kalsakawith a local company, IMAR-B. Part of the project is covered by an exploitationdecree which is held by the Kalsaka Exploitation Company in which Cluff Mining(West Africa) Ltd has a 78% interest, IMAR-B a 12% interest and the Burkina Fasogovernment a 10% free carried interest. The decree covers an area of some 25km2for an initial term of 20 years. Cluff Mining (West Africa) Ltd has an 80% interest in the remaining part of theproject area under the joint venture, with the balance being held by IMAR-B.Under the joint venture agreement, Cluff Mining (West Africa) Ltd is required tofund 100% of exploration expenses. In its report, SRK Consulting estimates that the orebodies identified to date atthe project comprised within the exploitation decree contain a mineral resourceof 600,000 ounces of gold (13.7 [email protected]/t) and, at a gold price of US$400 perounce, an ore reserve of 290,000 ounces of gold (5.1 [email protected]/t). SRK Consultinghas calculated that the Kalsaka project comprised within the exploitation decreehas a net present value post tax and royalties of US$9.3 million based, interalia, on a five year mine life, a discount rate of 12% per annum. However, SRK Consulting opines that the deposits at Kalsaka, including theexploration licence area, have the potential to host a resource at leastequivalent to that already defined. This would imply a total mineral resource ofnot less than 1,200,000 ounces of gold. On this basis, the potential mine life would be between 10 and 20 years. In2003, the Kalsaka feasibility study and the environmental impact assessment werecompleted by SRK Consulting in Cardiff and SGS in Accra, Ghana respectively. Areview and update of the Project Capital and Operating costs is underway beforeconsidering the development options for the project. Yako, Burkina Faso The Yako permits comprise an aggregate area of 442km2 situated to the southwestof, and contiguous to, Kalsaka. They are currently held by the local subsidiaryunder exploration licences (with a 10% free carried government interest in anyproduction), which were granted in June 2004 for an initial period of threeyears. Exploration activity has been carried out on the permit areas since the mid1980s. Ridge Mining initially acquired the property in 1996 and in 1997 outlinedan inferred mineral resource of 2.5 million tonnes grading 1.9 g/t, equivalentto 150,000 ounces of gold. To date only one of four anomalies thus far identified at the deposit, has beendrill-tested. The Directors believe that once the other anomalies, which arealong strike, are drill tested the Yako permit could potentially contain a totalresource of at least 300,000 ounces of gold. Due to the increased importance of the Kalsaka project and a preliminaryassessment that anticipates a high cement requirement for agglomeration, Yakohas become a lower priority target and further exploration work is on holdpending the development of the Kalsaka project. The Company has agreed with a subsidiary of Anglo American Corporation to pay ita 2% net smelter return on gold produced from Yako. Mt. Yaoure, Cote d'Ivoire The Mt. Yaoure permit is located 40km northwest of Yamoussoukro, the politicalcapital of Cote d'Ivoire, and covers a surface area of 534km2. The licence areaincludes the Angovia gold mine which operated between 1998 and 2003. The minereportedly produced over 180,000 ounces of gold during this period by heapleaching some 2 million tonnes of oxide material. The Cote d'Ivoire governmenthas issued a certificate to CMA, a subsidiary of COGEMA, the French uraniummining group, evidencing that it has complied with the work prescribed by themining regulations relating to the protection of the environment and therestoration of the part of the licence area covered by the Angovia gold mine. In late 2004, the Company concluded the purchase of exploration data coveringthe Mt Yaoure licence including drill assay results from drilling around theAngovia Mine. The data was purchased from the previous licence holder, COMINOR,a subsidiary of COGEMA. The information includes drill results which identified satellite gold depositsnear the recently closed down Angovia Gold Mine. Internal reports by COMINORhave reported a resource of 900,000 tonnes at a grade of 3.7 g/t based ondrilling done to 2001. Additional reverse circulation drilling totalling 3,500metres was completed in 2002. The drill results indicate encouraging goldintersections in four neighbouring prospects. This offers the prospects ofdeveloping the deposits utilising a centrally located plant. A review of the drill data including resource calculation incorporating the 2002drill results will be undertaken. Check drilling to confirm the reported drilldata may be necessary as part of future project development. The Company hasagreed in principle to acquire most of the oxide processing plant on site fromthe government who recently exercised their pre-emption right on the equipment.The plant has operated for five years up to 2003 and has produced up to 40,000ounces of gold annually during the time. Cost estimates on rehabilitating andreassembling of the plant will be undertaken in the second quarter of 2005 aspart of the Angovia study. The infrastructure in the area is good and includes a hydroelectric dam sixkilometres from the Angovia mine site. Seripe, Ghana The Seripe permit is located in the northwestern region of Ghana approximately220km northwest of Kumasi. The Seripe permit was granted to Cluff Mining (WestAfrica) Ltd in October 2004 for a period of one year. Seripe is stillessentially an early stage prospect that has several interesting and unexplainedanomalies. Niokolo, Senegal Niokolo is located in eastern Senegal approximately 800km east of Dakar, thecapital of Senegal, close to, and along strike of, Sabodala, the site ofSenegal's only official gold producing mine. An exploration licence comprisingan area of 380km2 has been agreed in principle for Cluff Mining (West Africa)Ltd, although not yet signed as a Mining Convention is still being negotiatedwith the Ministry of Mines. Cluff Mining (West Africa) Ltd has not conducted any exploration work at Niokoloto date and no data is available regarding any previous exploration activity.The planned work programme comprises standard early stage exploration work oncethe negotiations on the Mining Convention have been concluded. The Directors donot currently attribute any value to the Niokolo deposit. Maligreen, Zimbabwe The Maligreen permit area lies approximately 240km south west of Harare, thecapital of Zimbabwe. The permit is held as a joint venture between Pan AfricanMining (Private) Ltd and Cluff Mining (Zimbabwe) Ltd. The deposit lies immediately to the north of the Leo Hurst Shear Zone whichpasses through three greenstone belts. It is possible that the Maligreen depositlies on a splay off the main shear zone. The deposit has been the subject of aconsiderable amount of exploration and engineering work. The orebodies are up to 15m in width, extend for a strike length of up to 500mand are open at depth. The shallow oxide material averages 15m and has beenlargely mined. The underlying sulphide resource has been estimated to contain320,000 ounces of gold at a grade of 4.8g/t. DD ChikohoraTechnical Director Cluff Gold plcConsolidated Profit and Loss Accountfor the period ended 31 December 2004 Notes £ Turnover - Cost of sales -Gross profit - Administration expenses (1,158,089)Operating loss 4 (1,158,089) Interest receivable and similar income 5 18,550Loss on ordinary activities before taxation 4 (1,139,539) Tax on loss on ordinary activities 7 -Loss on ordinary activities after taxation (1,139,539) Loss per share - undiluted 8 (1.27) All transactions arise from continuing operations. There were no gains or losses for the period other than those included in theProfit and Loss Account. Cluff Gold plcConsolidated Balance Sheetas at 31 December 2004 Notes £ £Fixed assets Intangible 9 602,822Tangible 10 8,400Investments 11 165,845 777,067Current assetsDebtors 12 31,522Cash at bank and in hand 5,920,062 5,951,584Creditors: amounts falling due within one year 13 (696,016) Net current assets 5,255,568 Net assets 6,032,635 Capital and reserves Called up share capital 15 208,793Share premium account 16 5,643,230Merger reserve 17 1,320,151Profit and loss account 18 (1,139,539)Equity shareholders' funds 19 6,032,635 Cluff Gold plcCompany Balance Sheetas at 31 December 2004 Notes £ £Fixed assets Intangible 9 132,275Investments 11 88,206 220,481Current assets Cash at bank and in hand 5,847,925Creditors: amounts falling due within one year 13 (1,172,254)Net current assets 4,675,671 Net assets 4,896,152 Capital and reservesCalled up share capital 15 208,793Share premium account 16 5,643,230Profit and loss account 18 (955,871)Equity shareholders' funds 19 4,896,152 Cluff Gold plcConsolidated Cash Flow Statementfor the period ended 31 December 2004 Notes £ £Net cash outflow from operating activities 20 (947,123) Returns on investments and servicing of finance -Interest received 18,550Capital expenditure Purchase of intangible fixed assets (349,940)Purchase of tangible fixed assets (13,148)Purchase of investments (165,845)Net cash outflow from capital expenditure (528,933) Net cash outflow before managementof liquid resources and financing (1,457,506)Management of liquid resourcesIncrease in short term deposits (5,843,000)Financing Issue of ordinary share capital 7,908,357Issue costs (530,789)Net cash inflow from financing 7,377,568 Increase in cash 21 77,062 The cash flows arising from the issue of ordinary share capital includes shareissues by the subsidiary prior to the date of merger. Cluff Gold plcNotes to the Financial Statementsfor the period ended 31 December 2004 1 Nature of business and going concern The Group is at an early stage of development and its planned activities are theacquisition, exploration and development of gold resource properties in severalcountries in West Africa and in Zimbabwe. In common with many exploration companies, the Group raises funds in discretetranches and the proceeds of the December 2004 placing raised approximately£5.63m net of expenses. The Directors consider these funds to be sufficient toexercise the option agreements referred to in note 11 and carry out furtherspecific exploration and project work on the properties acquired from Ridge andthose already in the Company portfolio. The funds are also forecast to providesufficient working capital until mid 2006. The Directors therefore consider itappropriate to prepare these financial statements on the going concern basis. However, these proceeds will not be sufficient to fund bankable feasibilitystudies or bring any projects into production and, in due course, furtherfunding will therefore be required for these projects. In the event that theGroup is unable to secure further finance it may not be able to fully developthese projects. 2 Accounting policies (a) Basis of preparation The financial statements have been prepared under the historical cost conventionand in accordance with applicable United Kingdom Accounting Standards. The year end of the Company is 31 December. However, this first set of financialstatements has been prepared from the date of incorporation, being 6 July 2003,to 31 December 2004. Consequently, these financial statements presentinformation for the period to 31 December 2004, and no comparative information.The principal accounting policies of the Company are set out below. (b) Basis of consolidation The Group accounts consolidate the accounts of Cluff Gold plc and its subsidiaryundertaking. The acquisition by the Company of Cluff Gold UK Ltd in November2004 was accounted for in accordance with the principles of merger accountingset out in Financial Reporting Standard 6 on "acquisitions and mergers".Accordingly, the consolidated financial statements are presented as if CluffGold UK Ltd had been controlled by the Company throughout the period from itsincorporation. As permitted by Section 230 of the Companies Act 1985, a separate profit andloss account is not presented in respect of the Company. The Company's loss forthe year is £955,871. (c) Deferred exploration costs All costs associated with mineral exploration and investments are capitalised ona project-by-project basis, pending determination of the feasibility of theproject. Costs incurred include appropriate technical and administrativeexpenses, as well as associated finance costs, but not general overheads. If anexploration project is successful, the related costs will be transferred tomining assets and amortised over the estimated life of the commercial orereserves on a unit of production basis. Where a project is relinquished,abandoned, or is considered to be of no further commercial value to the Company,the related costs are written off. The recoverability of deferred exploration costs is dependent upon the discoveryof economically recoverable ore reserves, the ability of the Company to obtainnecessary financing to complete the development of ore reserves and futureprofitable production or proceeds from the disposition thereof. (d) Tangible fixed assets and depreciation Depreciation is calculated to write down the cost of all tangible fixed assetsby equal annual instalments over their expected useful lives. The periodsgenerally applicable are: Office equipment, fixtures and fittings three yearsComputers three years (e) Investments Investments are recorded at cost less amounts written off. 2 Accounting policies (continued) (f) Foreign currency Transactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. Any gain or loss arising from a change in exchange rates subsequent to thedate of the transaction is included as an exchange gain or loss in the profitand loss account. (g) Deferred taxation Deferred taxation is provided on material timing differences between theincidence of income and expenditure for taxation and accounting purposes on afull provision basis in accordance with FRS. Deferred tax assets are only recognised when they arise from timing differenceswhere their recoverability in the short term is regarded as being probable.Deferred tax balances are not discounted. (h) Operating leases Operating lease rentals are charged to the Profit and Loss Account on a straightline basis over the term of the lease. (j) Liquid resources In accordance with FRS 1 "Cash Flow Statements", for cash flow purposes, cashincludes net cash in hand and other bank deposits payable on demand within oneworking day, and liquid resources include all of the Group's other bankdeposits. (k) Pension costs Contributions in respect of the Directors' personal defined contribution schemesare charged to the Profit and Loss Account in the period in which they are paid. 3 Segmental analysis Loss before taxation Net assetsBy geographical location: £ £UK (1,096,192) 5,646,837Burkina Faso (438) 172,004Sierra Leone (5,798) 197,262Cote d'Ivoire - 16,532Ghana (9,580) -Zimbabwe (8,404) -Senegal (19,127) -Total (1,139,539) 6,032,635 4 Operating loss The loss on ordinary activities before taxation is stated after: Period to 31 December 2004Auditors' remuneration: - audit services 19,146 41,178Depreciation: tangible fixed assets - other 4,748Amortisation of intangible fixed assets -Operating lease rentals - land and buildings 68,818Exchange differences - The Board reviews the nature and extent of non-audit services to ensure thatindependence is maintained. 5 Interest receivable Period to 31 December 2004 £Bank interest receivable 18,550 6 Directors' remuneration Directors' remuneration during the period was as follows: Period to 31 December 2004 £Emoluments 154,393Pension 14,962Social security 20,098Total staff costs 189,453 Details of the Directors' interests in the shares of the Company and shareoptions over the Company are set out in the Directors' Report. The average number of employees during the period, all of whom were Directors,was: NumberOperations 1Administration 2 37 Tax on loss on ordinary activities No corporation tax is payable for the period. The tax assessed for the period is different to the standard rate of corporationtax in the UK of 30%. The differences are explained as follows: Period to 31 December 2004 £Loss on ordinary activities before tax (1,139,539)Loss on ordinary activities multiplied by standard rate of corporation tax in the (341,862)UK of 30%Effect of:Expenses not deductible for tax purposes 52,178Difference between capital allowances and depreciation (549)Unrelieved tax losses carried forward 290,233Total current tax - There is a potential deferred tax asset of £290,000 at 31 December 2004,relating primarily to carried forward tax losses. This asset has not beenrecognised in the financial statements because of the uncertainty as to theincidence and timing of future taxable income against which the asset may berecovered. 8 Earnings per share The calculation of earnings per ordinary share on the net basis is based on theloss on ordinary activities after taxation of £1,139,539 and on 895,881 ordinaryshares being the weighted average number of ordinary shares in issue. No dilutedloss per share is presented as the effect on the exercise of share option wouldbe to decrease the loss per share. 9 Intangible fixed assets Exploration & evaluation costs £Group Cost -Additions 602,822At 31 December 2004 602,822AmortisationCharge in the period -At 31 December 2004 -Net book valueAt 31 December 2004 602,822 Company Cost -Additions 132,275At 31 December 2004 132,275Amortisation Charge in the period -At 31 December 2004 -Net book valueAt 31 December 2004 132,275 10 Tangible fixed assets Office equipment fixtures and fittings £Group Cost -Additions 13,148At 31 December 2004 13,148Depreciation Charge in the period 4,748At 31 December 2004 4,748Net book amount at 31 December 2004 8,400 11 Fixed asset investments Total fixed asset investments comprise: Group Company 31 December 2004 31 December 2004 £ £Other fixed asset investments 165,845 88,206 Group The fixed asset investment represents a US$300,000 payment made to Ridge GoldMines, in accordance with the terms of an option agreement to acquire the goldassets of Ridge Mining in West Africa ("the West Africa Option") for a totalconsideration of US$5,000,000. In order to extend the West Africa Option period, Cluff Gold UK Ltd paid RidgeGold Mines option fees of $25,000 on 1 October 2004 and 1 November 2004. Theseamounts, along with the initial option payment of $150,000 and the second optionpayment of $100,000 are deductible from the $5 million payable on exercise andcompletion of the West Africa Option. An option payment of $9,999 is required toexercise an option over Ridge's Zimbabwe gold interests ("the Zimbabwe Option").Cluff Gold UK Ltd also paid Ridge agreed monthly payments of $15,000 as acontribution to the running costs of West Africa and Zimbabwe gold interests.The completion of the acquisition of the option companies took place on 7January 2005. Company Cluff Gold plc's investment is in the 100% owned subsidiary company Cluff GoldUK Ltd. This company is incorporated in the UK and its activity is mineralexploration and development. 12 Debtors Group 31 December 2004 £Amounts falling due within one yearOther debtors 512Prepayments and accrued income 31,010 31,522 13 Creditors Group Company 31 December 2004 31 December 2004 £ £Amounts falling due within one yearAmount due from subsidiary undertaking - 794,500Other creditors 90,556 -Accruals and deferred income 605,460 377,754 696,016 1,172,254 14 Financial instruments The Group uses financial instruments comprising cash, liquid resources and itemssuch as short term debtors and creditors that arise from its operation. Theprincipal risks relate to currency exposure and liquidity. Short term debtorsand creditors have been excluded from the following disclosures. a) Currency rate risk During the period the operating currency of the Group was sterling, being thecurrency in which the majority of the Group's expenses were incurred. The Groupuses forward contracts to hedge currency risk where appropriate. At 31 December 2004 the Company had a forward exchange contract to buyUS$4,710,000 on 5 January 2005. This was used to exercise the Ridge options as referred to in note 11. b) Liquidity risk To date the Group has relied on shareholder funding to finance its operation.The Group has no borrowings or borrowing facilities. As the Group has limitedcash resources and no material income, the liquidity risk is significant and ismanaged by control over expenditure. c) Interest rate risk There is considered not to be any material interest rate risk. The Group'spolicy is to retain surplus funds as short term deposits, usually of one weekand four week duration, at prevailing market rates. The fair value of allfinancial instruments is approximately equal to book value due to their shortterm nature. The only financial assets held by the Group at 31 December 2004 were sterlingcash and deposits totalling £5,920,062. Deposits earned interest by reference toLIBOR. 15 Share capital 31 December 2004 Number £AuthorisedOrdinary shares of 1p each 100,000,000 1,000,000Allotted, called up and fully paidOrdinary shares of 1p each 20,879,288 208,793 Allotments during the period a) On incorporation the authorised share capital of the Company was £100,000divided into 100,000 ordinary shares of £1 each. By an ordinary resolutionpassed on 29 November 2004, the authorised share capital was increased to£1,000,000 by the creation of an additional 900,000 ordinary shares of £1 eachand each £1 share was sub-divided into 100 ordinary shares of 1p each, therebycreating a total of 100,000,000 ordinary shares. b) On 29 November 2004, the Company acquired the whole of the issued capitalof Cluff Gold UK Ltd in consideration of the issue to the shareholders of CluffGold UK Ltd of a total of 8,820,606 ordinary shares credited as fully paid. c) On 15 December 2004, by a placing and admission to AIM, the Company issued11,818,182 ordinary shares of 1p for cash consideration of 55p each. d) Pursuant to the terms of the Baomahun agreement with Winston Mines dated 18June 2004, Cluff Gold UK Ltd agreed that it shall pay to Winston MinesUS$400,000 in cash of which US$250,000 was satisfied by the issue to WinstonMines of ordinary shares in the Company to the value of US$250,000 at theplacing price of 55p being 240,500 ordinary shares at the prevailing exchangerate of US$1.89 : £1. 15Share capital (continued) Allotments during the period (continued) a) In November 2004, the Company granted options over 1,000,000 ordinaryshares of 1p each at 20p per share to the Directors and three consultants,exercisable between March 2006 and March 2014. These options replace optionswhich were originally granted to holders in March 2004 by Cluff Gold UK Ltdprior to the acquisition of the whole of the issued share capital of Cluff GoldUK Ltd by Cluff Gold plc on 29 November 2004. Contingent rights to the allotment of shares b) In November 2004, the Company granted options, conditional on admission,over a further 1,000,000 ordinary shares of 1p each at 55p per share to theDirectors and two consultants, exercisable between November 2006 and November2014. c) Pursuant to agreements dated 29 November 2004 the Company has granted toAmbrian Partners Limited and certain of its Directors and employees options tosubscribe for such number of ordinary shares totalling in aggregate 309,581ordinary shares ("option shares") which are exercisable at any time during theperiod ending on 7 December 2006 ("option period") as set out below; Directors and employees - 120,000 ordinary shares at 20p option price Ambrian - 189,581 ordinary shares at 55p option price. d) On certain issues of new ordinary shares by the Company ("new shares")during the option period the number of option shares to which Ambrian isentitled shall be increased by such number of ordinary shares as equals 1.5% ofsuch new shares. e) The Company has granted Numis an option to subscribe for 208,793 ordinaryshares. The option is for a period of four years from date of Admission (15December 2004) and the option price is the placing price of 55p. f) The Company has granted Stancroft Trust Limited, a Company controlled byMr NW Berry, an option to subscribe for 200,000 ordinary shares. The option isfor a period of three years from the date of Admission and the option price isthe placing price of 55p. 16 Share premium account and reserves Group Company £ £At 6 July 2003 - -Movement for the period 5,643,230 5,643,230Balance as at 31 December 2004 5,643,230 5,643,230 The movement on Share Premium Account in the period has arisen as follows: £Premium on shares issued under the terms of the placing on AIM on 15 December 2005 6,381,818 Premium on 240,500 ordinary shares issued to Winston on admission 129,870Less costs of flotation written off (868,458) 5,643,230Included within the cost of flotation is £56,000 excluding VAT in respect of non-audit servicesprovided by the auditors. 17 Merger reserve Group £At 6 July 2003 -Movement for the period 1,320,151At 31 December 2004 1,320,151 The movement for the period arises on consolidation, as a result of the mergeraccounting for the acquisition of the entire issued share capital of Cluff GoldUK Ltd. 18 Profit and loss account Group Company £ £At 6 July 2003 - -Loss arising in period (1,139,539) (955,871)At 31 December 2004 (1,139,539) (955,871) 19 Reconciliation of movement in shareholders' funds Group Company Period to Period to 31 December 2004 31 December 2004 £ £Loss for the financial period (1,139,539) (955,871)Merger reserve arising on consolidation 1,320,151 -New share capital subscribed 5,852,023 5,852,023Net increase in shareholders' funds 6,032,635 4,896,152Shareholders' funds at beginning of the period - -Shareholders' funds at end of period 6,032,635 4,896,152 20 Reconciliation of operating loss to operating cash flow Group 2004 £Operating loss (1,158,089)Depreciation 4,748Increase in debtors (16,421)Increase in creditors 222,639Net cash outflow from operating activities (947,123) 21 Reconciliation of cash to net funds At Cash flow 31 December 2004 £ £Cash at bank and in hand 77,062 77,062Short term deposits (included within cash at bank and in hand 5,843,000 5,843,000in the balance sheet)Net funds 5,920,062 5,920,062 22 Contingent liabilities and commitments Under an 'earn-in' agreement dated 18 June 2004, the Company has committed tospend US$750,000 on the work programme at the Baomahun mines project in SierraLeone in the period to April 2005. The Company has also committed to pay to thelicence holder US$400,000 of which US$250,000 was satisfied by the issue ofordinary shares in Cluff Gold plc to this value at 55p per share and at anexchange rate of US$1.89: £1.00. 23 Commitments under operating leases The Company has annual commitments under non-cancellable operating leases asfollows: Land and buildings £Operating leases which expire in two to five years 62,807 24 Post balance sheet events On 7 January 2005, Cluff Gold UK Ltd completed the acquisition of the entireissued share capital of both Cluff Mining (West Africa) Ltd (a subsidiary whichhas a 78% interest in the Kalsaka Gold project in Burkina Faso) and Cluff Mining(Zimbabwe) Holdings Limited from the Ridge Mining Group for a totalconsideration of US$5.01 million. The acquisitions were made following theexercise of options contained in agreements made on 10 February 2004 (andamended on 10 September 2004) between (i) Ridge Gold Mines Limited, Cluff GoldUK Ltd and Ridge Mining plc in respect of the shares in Cluff Mining (WestAfrica) Ltd; and (ii) Ridge Gold Mines Limited and Cluff Gold UK Ltd in respectof the shares in Cluff Mining (Zimbabwe) Holdings Limited. The considerationpayable in respect of each agreement was US$5 million and US$10,000respectively. 25 Related party transactions a) Ms E Carr, a Director, provided consultancy services to the Company duringthe period amounting to £91,700 excluding VAT. At the period end the amountoutstanding was £40,500 excluding VAT and is included in accruals. b) During the period the Company purchased an option agreement for US$300,000from Ridge Mining plc (formerly Cluff Mining plc), of which Mr JG Cluff was alsoa Director. Cluff Gold UK Ltd also entered into other transactions in the periodwith Ridge Mining UK Ltd (formerly Cluff Mining UK Ltd) amounting to £3,937.£Nil was outstanding at the period end. c) Ridge Mining UK Ltd, of which Mr JG Cluff was also a Director, invoiced£23,357 for rental of office space and consultancy in the period. d) Mr DD Chikohora, a Director, has a 1% royalty over the Kalsaka projectwhich was assigned to Cluff Gold UK Ltd on exercise of the West Africa option. e) A bonus arrangement was agreed with Ms E Carr whereby a further sum was tobe paid to her on the placing of ordinary shares on AIM on 15 December 2004.This sum amounts to £65,200 excluding VAT and was outstanding at the period end. f) The Company has granted Stancroft Trust Limited, a company controlled byMr NW Berry, an option to subscribe for 200,000 ordinary shares. The option isfor a period of three years from the date of admission (15 December 2004) andthe option price is the placing price of 55p. Mr NW Berry is a Non-ExecutiveDirector of the Company. g) Stancroft Trust Limited, entered into an agreement with the Company wherebyStancroft Trust Limited agreed to underwrite the Company's placing of ordinaryshares on AIM. The agreed fee was £100,000 and 200,000 share options at anexercise price of 55p. The cash component was outstanding at the period end. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Amara Mining