11th Apr 2007 07:02
Aricom PLC11 April 2007 Press Release 11 April 2007 Aricom plc ("Aricom" or the "Group") Preliminary Results for the year ended 31 December 2006 Aricom plc (AIM: TIO), the Anglo-Russian developer of mineral resources, todayannounces its financial results for the year ended 31 December 2006. Thecomplete Annual Review and Financial Statements will be available on the Aricomwebsite following this announcement. Project & Group Portfolio Highlights - Completion of approximately fifty percent of Kuranakh constructionprogramme and confidence in continued success to deliver project on time and onbudget to production in fourth quarter of 2007. (Cumulative spend to year endUS$45 million) - Significant expansion of project portfolio with interests in both K&S(2006) and Garinskoye (2007) projects resulting in diversification into newcommodity group - Independent review of key asset - Continued success in recruitment programme for operations anddevelopment staff Financial Highlights - Net assets at year end US$444 million (2005: US$18 million) - Group loss after tax of US$2.6 million (2005: US$3.7 million) - Group net cash at year end US$90 million (2005: net debt US$2million) - Basic and diluted loss per share US$0.01 (2005: US$0.03) - Reporting under International Financial Reporting Standards one yearahead of AIM requirement Jay Hambro, Chief Executive of Aricom plc, commented: "2006 was a year of growth and consolidation for Aricom as shown in the increasein net assets of over 24 times. I look forward to another year of transformation at Aricom as we continue tobuild upon our outstanding suite of assets." Conference Call A conference call to discuss the announcement will be hosted by Aricom plc, onWednesday, 11 April 2007 at 13:30 UK time. Details to access the conference call are as follows: - The Dial-in number in the UK will be: 0845 245 5269 andinternationally will be +44 (0) 1452 567 588 - with the Conference ID in both cases: 8466218969 In advance of this call, participants should find the analyst workshoppresentation on Aricom's website from 10:00 UK time. - Ends - For further information:Aricom plcJay Hambro, Chief Executive Tel: +44 (0) 20 7201 8939 www.aricom.plc.uk Canaccord AdamsRobert Finlay / Chris Bowman Tel: +44 (0) 20 7050 6500 www.canaccordadams.comAbchurchCharlie Jack / George Parker Tel: +44 (0) 20 7398 7700 www.abchurch-group.com Statement of the Chairman, Dr Pavel Maslovskiy "2006 was an important year of evolution for Aricom. The Group grew from being asmall participant in the titanium dioxide business to also become a potentialmajor player in the global iron ore market with considerable assets. I amdelighted to report on this transformation and look forward to the ongoingdevelopment of these exciting new deposits. Our operational achievements have been matched in the capital markets, where inMarch 2006 we were delighted to raise US$158 million. This has given the Groupthe solid cash base to both optimise the exploration of our current reserveswhilst keeping a keen eye for strategic acquisitions in the future. To reflect the transformation of the Group's asset portfolio there were a numberof key management appointments. I would like specifically to welcome to the teamJay Hambro as Chief Executive, Martin Smith as Technical Director and SirRoderic Lyne as a further non-executive director. They bring with them animportant blend of industry and regional knowledge together with operationalexpertise that will be critical for success in the future. The Kuranakh project moved several important steps towards production during2006. Significantly the project has proved its value to the Group with apositive feasibility study estimating a net present value of over one hundredmillion dollars from its combined production of both titanium dioxide and ironore concentrates. The acquisition of our interests in the K&S deposits with estimated iron orereserves of over half a billion tonnes was a major development for the Group. Atthe outset, Aricom was created to focus on exploiting the value inherent infinding, developing and operating industrial commodity deposits in Russia's FarEast. Prior to the acquisition of our interests in K&S, management had focussedon titanium alone hence this acquisition showed the Group's ability to broadenthe scope into a new industrial commodity whilst adhering to its foundingprinciples. The news on the Garinskoye deposit was a further step in both strengthening anddiversifying the portfolio with the potential addition of a share in a largeiron ore asset with the upside of a significant high grade area and a vastresource estimate of over two and a half billion tonnes. It has been a good year for Aricom. The Group has developed its existingprojects to plan, whilst acquiring excellent new assets and now possessesfinancial reserves to develop these and others that the Russian Far East mayoffer. Furthermore through its close access to the Trans Siberian and BAMrailroads, Aricom will continue to benefit from its proximity to the Chineseborder, where much of the world commodities continue to be consumed. I look forward to reporting further expansions and developments to the portfolioover the next twelve months." Dr Pavel Maslovskiy ChairmanAricom plc Consolidated income statementfor the year ended 31 December 2006 Note Year ended Year ended 31 December 31 December 2006 2005 US$'000 US$'000Continuing operationsRevenue - -Cost of sales - - -------- ------- -------- -------Gross profit - - Administrativeexpenses (7,336) (3,301)Otheroperatingexpenses (140) (235) -------- -------Operating loss (7,476) (3,536) Investmentrevenues 5,043 227Finance costs (122) (561) -------- -------Loss before tax (2,555) (3,870) Tax (135) (1) -------- ------- Loss for theyear fromcontinuingoperations (2,690) (3,871) Discontinued operations Profit forthe year fromdiscontinuedoperations 108 123 -------- ------- Loss for theyear (2,582) (3,748) ======== ====== Attributable to:Equity holdersof the parent (1,905) (3,356)Minorityinterest (677) (392) -------- ------- (2,582) (3,748) ======== ======Loss per shareFrom continuing operationsBasic 9 US$(0.01) US$(0.03) ========= ========= Diluted 9 US$(0.01) US$(0.03) ========= =========From continuing anddiscontinued operationsBasic 9 US$(0.01) US$(0.03) ========= =========Diluted 9 US$(0.01) US$(0.03) ========== ========= Aricom plc Consolidated statement of recognised income and expense for the year ended 31 December 2006 2006 2005 US$'000 US$'000 Loss for the year (2,582) (3,748) ------- -------Total recognised income and expense for the year (2,582) (3,748) ======= ======= Attributable to:Equity holders of the parent (1,905) (3,356)Minority interests (677) (392) ------- ------- (2,582) (3,748) Aricom plcConsolidated Balance Sheetat 31 December 2006 Note 31 December 31 December 2006 2005 US$'000 US$'000Non-current assetsGoodwill 58 -Property, plant andequipment 420,978 18,441Financial assetinvestments 2,981 2,900Other non-currentassets 105 161 ======= ------- 424,122 21,502 ======= ------- Current assetsInventories 180 98Trade and otherreceivables 6,873 2,760Cash and cashequivalents 89,668 9,447Derivativefinancialinstruments 18,474 -Assets held forsale - 1,954 115,195 14,259 ======= =======Total assets 539,317 35,761 ======== =======Current liabilitiesTrade and otherpayables (11,813) (3,702)Obligations underfinance leases - (502)Bank overdrafts andloans - (10,013)Deferredconsideration (83,798) -Liabilitiesdirectly associatedwith assetsclassified as heldfor sale - (175) ======== ======== (95,611) (14,392) ======== =========Net currentassets/(liabilities) 19,584 (133) ======= =========Non-current liabilitiesObligations underfinance leases - (781)Other non-currentliabilities (99) (2,900) -------- ------- (99) (3,681) ======= =======Total liabilities (95,710) (18,073) ======== ========Net assets 443,607 17,688 ======== ========EquityShare capital 8 816 242Share premiumaccount 8 263,800 24,526Share optionreserve 8 9,857 553Retained earnings 8 (9,628) (7,723) ======== ========Equityattributable toequity holders ofthe parent 264,845 17,598 Minority interest 8 178,762 90 ======== =======Total equity 8 443,607 17,688 ======== ======= The financial statements were approved by the board of directors and authorisedfor issue on 10 April 2007. They were signed on its behalf by: G J Hambro, Director P B Howes, Director10 April 2007 10 April 2007 Aricom plcConsolidated cash flow statementfor the year ended 31 December 2006 Note Year ended Year ended 31 December 31 December 2006 2005 US$'000 US$'000 Net cash usedin operatingactivities 3 (8,457) (7,442) Investing activities Interestreceived 4,502 227Disposal ofsubsidiary,net of cashdisposed (291) -Purchases ofproperty,plant andequipment (32,552) (9,753)Purchases ofinvestmentsand other noncurrent assets (2,886) -Purchase ofoption (9,000)Acquisitions,net of cashacquired (24,790) - -------- ------- Net cash usedin investingactivities (65,017) (9,526) ------- ------- Financing activitiesNew loansraised 1,216 -Repayments ofborrowings (10,013) -Repayments ofobligationsunder financeleases (1,347) (778)New financeleaseobligations - 2,099Proceeds onissue ofshares 169,199 20,492Share issuecosts (6,415) (1,970)New bank loansraised - 6,114Loans made toCJSC SG MTPprior toacquisition (360) -Loansreceivablerepaid 735 - ------- -------Net cash fromfinancingactivities 153,015 25,957 ------- -------Net increasein cash andcashequivalents 79,541 8,989 Cash and cashequivalents atbeginning ofyear 9,543 1,157 Effect offoreignexchange ratechanges 584 (603) ------- ------- Cash and cashequivalents atend of year 89,668 9,543(1) ======== ========== (1) Cash and cash equivalents per the cash flow statement for the year ended 31December 2005 includes US$96,000 cash and cash equivalents within disposalgroups, which are classified as "assets held for sale" in the balance sheet. Notes to the financial informationfor the year ended 31 December 2006 1. Financial information The financial information has been prepared in accordance with InternationalFinancial Reporting Standards. The accounting policies applied in preparing thefinancial information are consistent with those adopted and disclosed in theGroup's IFRS Restatement published on 10 April 2007. The financial information set out above does not constitute the Group'sstatutory accounts for the year ended 31 December 2006 but is derived from theGroup's statutory accounts for that period. The auditors' report on thestatutory accounts for the year ended 31 December 2006 was unqualified and didnot contain statements under section 237(2) of the Companies Act 1985 (regardingadequacy of accounting records and returns) or under section 237(3) (regardingprovision of necessary information and explanations). The statutory accounts for the year ended 31 December 2006 have not yet beendelivered to the Registrar of Companies. 2. Dividends There is no current intention to pay a dividend. In due course, the Board ofDirectors will consider the payment of dividends, if and when it is in aposition to do so. 3. Reconciliation of operating loss to net cash outflow from operatingactivities Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 US$'000 US$'000 Operating loss from continuing operations (7,476) (3,536)Operating profit from discontinued operations 32 190Adjustments for:Depreciation of property, plant and equipment 430 189Depreciation capitalised (319) (175)Loss on disposal of fixed assets 9 11Share option expense 429 114Other non-cash adjustments (109) - ------- ------- Operating cash flows before movements in workingcapital (7,004) (3,207) Decrease/(increase) in inventories 298 (799)Increase in receivables (2,936) (2,713)Increase/(decrease) in payables 2,519 (301) ------- -------Cash used in operations (7,123) (7,020) Interest paid (1,290) (422)Income tax paid (44) - ------- ------- Net cash used in operating activities (8,457) (7,442) ======= ======== Additions to fixtures and equipment during the year amounting to US$1,779,000 in2005 were financed by finance leases which were repaid in 2006. Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less or investments withmaturities up to 12 months which can be liquidated for no significant financialpenalty. 4. Currency of financial statements The currency rates used in the preparation of the financial information set outherein are as follows: 2006 2005 Closing Average Closing AverageUS$ : Russian Roubles 26.33 27.18 28.78 28.57Pound Sterling : US$ 1.96 1.86 1.72 1.80 5. Acquisitions and disposals On 22 March 2006, the Group acquired a 49 per cent interest in LLC Ural Mining,a Russian company holding the licence for the development of the Bolshoi Seymiron ore and ilmenite deposit in the Amur region in the Far East of Russia. TheGroup has also entered into heads of agreement in relation to the proposedestablishment of a new holding company for Ural Mining with Timia, a companyrelated to Interros, a large Russian private investment group which is a majorshareholder in OJSC Norilsk Nickel and OJSC Polyus. The new holding companywould be owned as to 49 per cent by Aricom and 51 per cent by Timia. On 19 April 2006, following shareholder approval, the Company was granted anoption to purchase a 50 per cent interest in the Kimkanskoye and Sutarskoye (Kand S) iron ore deposits through the acquisition of 50 per cent of LLCKimkano-Sutarskiy Gorno-Obogatitelniy Kombinat ("LLC KS GOK") (formerly namedLLC Rubicon) in exchange for the issue of up to 123,782,467 new Aricom sharesfrom Philotus (which is a company beneficially owned by Mr Peter Hambro and DrPavel Maslovskiy). The Company paid US$9 million in cash for the option and alsogranted Philotus the right but not the obligation, to reinvest US$9 million inshares in Aricom plc at £0.28. Aricom gave notice to exercise its option on 4April 2007 which, subject to the approval of the Federal Anti-Monopoly Serviceof the Russian Federation ("FAS") will give the Group a 100 per cent interest inthe K and S deposits. The exercise price will be satisfied by the issue of123,782,467 shares in accordance with the option agreement approved byshareholders on 18 April 2006. The market value of the shares on 4 April 2007was £0.625. Consequently the exercise price equated to US$159.6 million. On 30 June 2006, the Group acquired the 50 per cent interest in K and S not heldby Philotus. The consideration paid was US$25 million in cash and 100 millionshares issued at a time when the market price was £0.415 being a totalconsideration of US$101million. Deferred consideration, contingent on theoutcome of an independent valuation, amounted to a maximum of a further 65million shares in the Company. On 4 April 2007, having received the results ofthe independent valuation, the Company issued a notice to Malavasia, the vendorcompany confirming that the 65 million shares would be issued. The market priceof the shares was £0.625 valuing the 65 million shares at US$83.8 million. LLCKS GOK has been consolidated with effect from 30 June 2006 which is the date onwhich the Group gained control through the purchase of the stake and theappointment of an employee of the Group as the sole director of KS GOK. Both the above transactions to acquire interests in K and S involve the purchaseof intermediary Cyprus holding companies which hold the interests in LLC KS GOK,which owns the licences to the K and S iron ore deposits in the EvreyskayaAvtonomnaya Oblast in the far east of Russia, close to the border with China. On 30 June 2006, the Group disposed of LLC Chemelt, its Russian titanium dioxidetrading subsidiary. Under IFRS LLC Chemelt has been presented as a disposalgroup in the 2005 balance sheet and income statement. The Group made a smallprofit on the sale. In July 2006, following completion of the sale, LLC Chemeltrepaid former intercompany loans of US$735,000 to the Group. 6. Post balance sheet events On 8 January 2007, a former director exercised options over 850,000 shares at aprice £0.15. On 11 January 2007, the Group acquired the 26 per cent in Olekminsky Rudnikwhich it did not already own taking its interest in the Kuranakh project to 100per cent.The purchase price was US$11million which was paid in January 2007. Acquisition of stake in Giproruda On 16 March 2007 Brasenose Services Limited, a 100 per cent subsidiary of Aricomplc entered into agreements to acquire a 68.49 per cent stake in Giproruda, ahighly respected Russian engineering company based in St Petersburg for totalconsideration of approximately US$8 million. Completion of this transaction isdependent on receipt of Russian Federal Antimonopoly Service permission. Thisprocess is expected to take up to three months. LLC Giproruda is an engineering firm specialising in non precious metals mineand processing plant design. Potential investment by IFC On 20 March 2007 Aricom agreed to a potential investment from the InternationalFinance Corporation ("IFC") of US$20 million in newly issued shares with amatching number of warrants. The investment proposal is subject to further duediligence, approval by IFC's Board and the execution of documentation; thetarget date for the investment is May 2007. Under the proposal, IFC would subscribe US$20m for new shares at a price pershare equal to the lesser of £0.59 per share or the five day volume weightedaverage shares price prior to the date of issue (the "Investment Price"). Theproposed new shares will be ordinary shares in Aricom ranking pari passu withall existing ordinary shares then in issue. At the same time Aricom would grantIFC warrants to subscribe for the same number of shares as they subscribe for atan exercise price with a 25 per cent premium to the Investment Price. Followingthe date Aricom notifies the IFC of cumulative gross revenue of US$40m, Aricomwill be able to require the IFC to exercise the warrants if the shares trade ata 60 per cent premium to the Investment Price in the two years following thisdate and at a 30 per cent premium to this price after two years. Acquisition of interest in Garinskoye iron ore licence On 30 March 2007, the Group entered into an agreement to subscribe for 60 percent of the shares in Lapwing Ltd, a Cyprus Company which holds 100 per cent ofthe share capital of LLC Garinskiy Mining & Metallurgical Complex (previouslyknown as OOO Amurmining) ("Garinskiy"), the company holding the licence for theGarinskoye deposit. The amount to be subscribed is approximately US$27 million.The Group has also entered into an agreement to purchase an option to acquire afurther 25 per cent of the shares in Lapwing Ltd. The cost of the option isUS$19.7million and the exercise price is US$100 million. Both agreements areconditional on receipt of Russian Federal Antimopoly Service ("FAS") approval. Acquisition of K and S On 4 April 2007, having received the results of the independent valuation, theCompany issued a notice to Malavasia, the vendor company confirming that 65million shares in deferred consideration would be issued to that company relatedto the purchase of a 50 per cent stake in the Kimkanskoye and Sutarskoye ("K andS") deposits. The market price of the shares was £0.625 valuing the 65 millionshares at US$83.8 million. Aricom gave notice to exercise its Philotus Option on 4 April 2007 which,subject to the approval of the Federal Anti-Monopoly Service of the RussianFederation ("FAS") will give the Group a 100 per cent interest in the K and Sdeposits. The exercise price will be satisfied by the issue of 123,782,467shares in accordance with the option agreement approved by shareholders on 18April 2006. The market value of the shares on 4 April 2007 was £0.625.Consequently the exercise price equated to US$159.6 million. 7. Explanation of transition to IFRS This is the first year that the Group has presented its financial statementsunder IFRS. The following disclosures are required in the year of transition.The last financial statements under UK GAAP were for the year ended 31 December2005 and the date of transition to IFRS was therefore 1 January 2005. The Group published financial information in accordance with IFRS for the yearended 31 December 2005 and the interim period ended 30 June 2006 as required byIFRS 1 First time adoption of International Financial Reporting Standards ("IFRS1"), on 10 April 2007 in its news release entitled Restatement to InternationalReporting Standards. The news release is published on the Company's websitewww.aricom.plc.uk and includes explanations of the significant UK GAAP to IFRSdifferences and reconciliations for: • total shareholders equity as at 1 January 2005 (the date of transition to IFRS), 31 December 2005 and 30 June 2006; and + • profit attributable to shareholders for the year ended 31 December 2005 and the period ended 30 June 2006. A summary of the detailed information presented in the news release is provided below. Changes to the Group's reported financial information for the year ended 31 December 2005 as a result of the adoption of IFRS are summarised as follows: First time adoption of IFRS The rules for first-time adoption of IFRS are set out in IFRS 1 First time adoption of International Financial Reporting Standards. These transition rules have been applied to the amounts reported previously under UK GAAP to arrive at the IFRS financial statements. While the applicable Standards and Interpretations in force at the first reporting date, 1 January 2005, have been applied to the financial statements from that date, the Group has availed itself of certain exemptions given under IFRS 1 in the application of particular Standards to prior periods. These exemptions are: IFRS 3 Business combinations A first time adopter may elect not to apply retrospectively IFRS 3 Business Combinations to past business combinations. Aricom acquired LLC Chemelt, Brasenose Services Ltd ("Brasenose"), RTC Ltd ("RTC") and Arfin Ltd ("Arfin") on 31 December 2003, the date of flotation on AIM. The Company has elected not to retrospectively apply the requirements of IFRS 3 to these acquisitions. Accordingly, the Company has elected not to apply IAS 21 The Effects of Changes in Foreign Exchange Rates retrospectively to fair value adjustments and goodwill arising in these business combinations. The following Standards have been adopted early by the Group: o • IFRS 6 Exploration for and Evaluation of Mineral Resources is applicable to the Group from 1 January 2006. However the Group has adopted this standard early from 1 January 2005. All other Standards and Interpretations applicable as at 31 December 2005 have been applied in the preparation of the financial statements for the year ended 31 December 2005. The preparation of the interim 2006 IFRS financial information was in accordance with IFRS applicable as at 30 June 2006. UK GAAP Change under IFRS IFRS US$'000 US$'000 US$'000 Income Statement Revenue 7,363 (7,363) - ------------------------------------------- Net loss from continuing (3,634) (237) (3,871) operations ------------------------------------------- Profit from discontinued - 123 123 operations ------------------------------------------- Loss for the year (3,634) (114) (3,748) ------------------------------------------- Balance Sheet Net Assets 17,688 - 17,688 ------------------------------------------- Earnings per share Loss per share (basic) US$(0.03) US$(0.03) Changes arise principally due to the following adjustments: IFRS 2 Share-based Payment: The fair value of share-based payments is calculated at the date of grant using an option pricing model and is recognised over the performance period. This has resulted in an additional charge of US$114,000 in the income statement for the year ended 31 December 2005. IFRS 5 Non-current Assets held for Sale and Discontinued Operations stipulates certain criteria for an asset to be shown as held for sale, which differ from the provisions under UK GAAP (FRS3.4). It was concluded that under IFRS 5 at 31 December 2005 LLC Chemelt and its subsidiaries ("LLC Chemelt") was held for sale as the Board had approved active marketing of the company for sale. The effect of determining LCC Chemelt as held for sale is to recognise all of the related assets on one line on the balance sheet "assets held for sale" and disclose all liabilities related to those assets as "liabilities associated with assets held for sale". These assets and liabilities are measured at the lower of their carrying value and fair value less costs to sell, and are not depreciated from the point at which they are considered to be held for sale. It was anticipated at the time that LLC Chemelt would be sold for a profit (as it had net liabilities), and hence the assets and liabilities were measured at their carrying amounts. As the LLC Chemelt Group was sold in the year ended 31 December 2006, IFRS 5 requires the profit from the discontinued operations to be disclosed as one line on the face of the Income Statement for both the year ended 31 December 2005 and 31 December 2006. 8. Group combined statement of reserves and reconciliation of movement in shareholders' funds Share Share Retained Share Minority Total equity capital premium loss option interests account reserve US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Balance at 1 January 2005 169 6,403 (4,367) 113 482 2,800Total recognised income and expense - (3,242) - (392) (3,634)Share-based payments (326) (114) 440 - -Shares issued 73 20,419 - - - 20,492Expenses on issue of equity shares (1,970) (1,970) ------- -------- ------- -------- ------- ---------Balance at 31 December 2005 242 24,526 (7,723) 553 90 17,688Minority on acquisition - - - - 179,351 179,351Minority on disposal (2) (2)Total recognised income and expense - - (1,476) - (677) (2,153)Share-based payments - 326 (429) 9,304 - 9,201Shares issued 574 245,363 - - - 245,937Expenses on issue of equity shares - (6,415) - - - (6,415) ------- -------- ------- -------- ------- ---------Balance at 31 December 2006 816 263,800 (9,628) 9,857 178,762 443,607 ======== ========= ======== ======== ======== ========== 9. Loss per ordinary share From continuing and discontinued operations The calculation of the basic and diluted loss per share is based on the following data: Loss 2006 2005 US$'000 US$'000 Loss for the purposes of basic loss per share being net loss attributable to equity holders of the (1,905) (3,356) parent ======= ======= Number Number '000 '000 Number of shares Weighted average number of ordinary shares for the purposes of basic loss per share 336,081 125,614 ========= ======== From continuing operations 2006 2005 US$'000 US$'000 Net loss attributable to equity holders of the parent (1,905) (3,356) Adjustments to exclude profit for the year from discontinued operations (108) (123) ------- --------- Loss from continuing operations for the purpose of basic loss per share excluding discontinued (2,013) (3,479) operations ======== ========= 2006 2005 US$ US$ Basic loss per share (0.01) (0.03) Diluted loss per share (0.01) (0.03) The denominators used are the same as those detailed above for both basic and diluted loss per share from continuing and discontinued operations. Basic and diluted EPS are the same because the only outstanding share options are anti-dilutive as the Group has made a loss. From discontinued operations 2006 2005 US$ US$ Basic loss per share 0.00 0.00 ======= ======== Diluted loss per share 0.00 0.00 ======= ======== END This information is provided by RNS The company news service from the London Stock ExchangeEND This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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