29th Jun 2006 07:01
Sierra Leone Diamond Company Ld29 June 2006 For Immediate Release 29 June 2006 SIERRA LEONE DIAMOND COMPANY LIMITED PRELIMINARY ANNOUNCEMENT OF AUDITED FINACIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2005 Sierra Leone Diamond Company Limited ("SLDC" or "the Company") (AIM:SLD) ispleased to provide its preliminary results for the financial year ended 31December 2005. Highlights for the year ended 2005 include: Operational Highlights • 140 high quality kimberlite targets (1 ha to 35 ha in size) • 9 specific diamondiferous targets offer potential of high quality commercial resources • Identified an estimated 100 million ton alluvial mineral deposit • Constructed a large scale (2 mtpa) alluvial mining operation within five months • Second mine to be commissioned by end of 2006 - total increased production capacity of 3 mpta • Independent valuation of Iron Ore Deposit (potentially 1 billion tons) leads to commissioning of RSG Global to carry out an economic resource estimate Financial Highlights •Cash in hand as at 31 December 2005 of US$ 15.5 million •Exploration costs of US$ 13.2 million incurred in the year to date •Net loss for the year of US$ 5.5 million (2004: US$ 7.4 million) •US$ 33.2 million received from successful listing on AIM Commenting on the results David Gadd-Claxton, CEO, stated: "Sierra Leone Diamond Company has made significant progress during the year andto date towards becoming a diamond producer. The exploration program continuesto deliver exciting and significant results. The commencement of alluvialdiamond mining operations will underpin the future working capital for theexploration program. We remain committed to realizing the value of the nondiamond assets. The Company continues to build on the excellent workingrelationships with government and communities in Sierra Leone". For further information please contact: Sierra Leone Diamond Company Limited 44 (0)1442 257246David Gadd-Claxton, President and Chief Executive OfficerMartin Dunham, Chief Financial Officer Buchanan Communications 44 (0)20 7466 5000Bobby MorseBen WilleyNick Melson CHAIRMAN'S STATEMENT "In the two years before listing and the last 12 months of exploration anddevelopment in Sierra Leone, we are now beginning to see the exciting andpositive results of our hard work." This is my first statement to shareholders as Chairman of SLDC and I am pleasedto report on the exciting results and positive progress, the Board andmanagement of the Company has made. The Company has substantially fast tracked the original goals stated at the timeof the Company's listing on AIM. Since listing in February 2005, raising over US$35m, SLDC has progressed withits original hard rock exploration programme with the primary objective ofdiscovering commercial kimberlitic diamond deposits. Historically, Sierra Leonehas produced over 60million carats of diamonds from the Kono alluvial districtalone. No modern exploration method has ever been used in Sierra Leone forkimberlitic diamond pipes or other hard rock minerals. Hard Rock Exploration Achievements SLDC has completed its airborne magnetic survey, interpretation and geologicalmapping of our licence areas in Sierra Leone flying 319,000 line kilometres andhaving taking over 6,000 drainage samples to date as part of the original fouryear exploration programme, which was accelerated and completed within 16months. The hard rock exploration programme has generated initial exploration resultsidentifying more targets than expected for detailed follow-up assessment. Approximately 140 kimberlitic high quality targets, (from 1ha to 35ha in size)have been identified for follow-up ground magnetometry, geological mapping andfollow up sampling programmes. Of these targets, 20 have been prioritised as being of high potential and offerthe opportunity to lead to rapid discovery of large high quality commercialreserves which will springboard the Company towards becoming a major diamondproducer. The Company is continuing it's aggressive exploration programme, on the highpriority kimberlitic targets with a view to developing world class diamondmines. Alluvial Diamonds Achievements The Company has demonstrated commitment to its strategy of becoming selfsufficient to fund on-going hard rock exploration and development programmes bysuccessfully achieving the start-up of its first 2mpta alluvial miningoperation. The mine at Konama, opened by the board and His Excellency Vice President Berewaof Sierra Leone in June 2006, has a state of the art diamond recovery plant andmining fleet with a processing capacity of 2m tpa of diamond ore. SLDC hasstarted the construction of a second mining operation with a capacity of afurther 1m tpa. These combined, will give the company a total of 3m tpa diamondore processing capacity with a mining stripping ratio of 4:1, this relates to atotal mining capacity of 15mpta by December 2006. This capability has been achieved at a cost of just $20m, which benchmarkspositively against the industry standard in Africa that would have required anexpenditure of approximately $50m. The Company continues to undertake a drilling and bulk sampling programme of thelow and high terraces along the Bafi River (over approximately 20km of riverlength) and continuing, to the south, along the low and high terraces of theSewa River (of approximately 60 km river length) in our exploration concessionsnear Sumbuya. Based upon the historic evidence obtained from colonial mining and from P.K.Hall (who acquired data through geological mapping and bulk sampling programmesalong the strike of the low and high terraces and paleo channels of the Bafi andSewa rivers over a seven year period), and correlated with new satelliteimagery, magnetic surveying, drilling and bulk sampling, the Companyconservatively estimates that there is approximately100m tonnes of alluvialgravel deposits, grading a background 0.25 carats per tonne of ore (25 caratsper 100 tonne of ore) with an approximate value of US$500 per carat. The average stone size of recovered diamonds from the alluvial gravel processedto date is 0.5 carat per stone with a large proportion of special diamonds (>10.8 carat). Large stones up to 18 carats have been recovered with an averageindependent valuation of US$1,000 per carat. A significant number of priceless fancies (pink diamonds) of approximately fourcarats have been recovered since SLDC started production at Konama (KonoDistrict). According to Chard, in the past pink diamonds have been independentlyvalued and sold for around tens of thousands of dollars per carat. Other Minerals The Company, under its existing licences, has rights to explore for and developall other minerals (including iron, gold and base metals). Iron Ore The independent technical review carried out by Snowden Industry Miningconsultants, in 2005, indicates the presence of a significant iron ore deposit(estimated 55% - 60% haematite iron ore lump) of 1bn tonnes. This was based on aprevious feasibility study carried out by LKAB (UK) in 1972. The Company has now commissioned RSG Global to carry out a comprehensivetechnical study by conducting geological mapping, together with a largeexploration drilling and bulk sampling program of the deposit to generate anindustry standard resource statement, thus enabling the Company to progress to afeasibility study. Gold project In 2005, Dr A F Wilkinson was commissioned by the Company to carry out a fullgeological assessment of the gold deposit potential in the known historicalmining areas. The results of his study have identified four large Greenstone gold targets. Alarge number of gold flakes have been recovered directly associated with threeof these targets. The Company intends to undertake a geo-chemical sampling programme of the fourtarget areas. Other Minerals - Strategy In conjunction with our iron ore and gold studies, the Company is exploringdifferent corporate opportunities to maximise the values of any other mineralassets it finds.. This could involve a joint venture or a total spin-out ofthese assets at a market value which will substantially increase shareholdervalue. Social and Community Co-operation During the last two years the Company has been involved in local communitysupport. This has included the construction and ongoing maintenance in ouroperational areas. These include: •The construction of a primary school in the Kono District •The construction of a large community market facility •Construction and maintenance of the rural infrastructure •Community sports facilities •Advising local community on sanitation and health In addition, the Company pays agricultural compensation wherever its activitiesimpact on the local communities farming activities. The Company now employs some 1,000 people, 90% of which are Sierra Leonecitizens, in our exploration, production and administrative divisions. TheCompany is committed to citizen development by means of its entrenched bestpractice training, health and development programs. Board, Management and Staff The Board of SLDC was strengthened during the year with the appointment inFebruary of David Gadd-Claxton as President and Chief Executive Officer.Formerly, David was a non-executive director of the Company. Furtherappointments during the year included, in March, Martin Dunham as ChiefFinancial Officer, in July, Francesco Scolaro as non-executive director and inSeptember, Michael Wittet also as a non-executive director. In July, Allan Dolan resigned as Vice-Chairman and director of the Company, andRoss Lawrence resigned as a non-executive director. As a part of the Company's senior management team, Paul Young was appointed asVice-President Exploration early in 2006. Paul has over 20 years experience inthe mining industry and was previously employed as Exploration Manager for DeBeers in Botswana and as Chief Geologist with the Debswana Diamond MiningCompany. His experience in the diamond exploration and production environmentadds greatly to the technical depth of the Company. Our people, in particular senior management in the exploration and operationdivisions, are key to the future growth of SLDC. On behalf of the Board and theshareholders, I thank all of our staff in Sierra Leone and the UK for thecommitment and enthusiasm they have shown. I would also express my appreciationof the cooperation and hard work of the Sierra Leone Government. Outlook Having spent over three years in exploration of Sierra Leone, we are nowbeginning to see the fruits of our labours. During 2006, I expect SLDC togenerate ongoing revenue from the alluvial operations, the exploration programto develop further potential hard rock targets and capitalising on thenon-diamond assets to generate further value for the shareholders. Frank TimisChairman29 June 2006 REVIEW OF OPERATIONS "SLDC accomplishes significant progress to becoming a diamond producer. We havecompleted our aeromagnetic (HRAM) programme, collected more than 6,000 soilsamples and have successfully commenced large scale alluvial mining operations.Independent reports on our non diamond assets have been commissioned to realisetheir value" New Licences Granted and Upgraded The Company was granted three further exclusive prospecting licences, fordiamonds, gold and other minerals, covering approximately 693 square kilometresin the North Sula, Tonkolili District and Jombohun areas and also, anexploration licence covering 54 square kilometres in the Baoma district ofSierra Leone. Furthermore, the Company was informed by General Investigations and DevelopmentCompany Limited, our joint venture partner, that the Company's interest in EPL 3/96, in the Kamakwie area, has increased from 30 to 55 percent. In January 2006, SLDC upgraded exclusive prospecting licences 16/96 and 17/96,covering approximately 512 square kilometres in the Peyima and Tefeya Districts(Kono area) of Sierra Leone, into one exploration licence. This licence liesjust to the west of, and down stream, of the well known Koidu diamond kimberlitepipes. Approximately 160 square kilometres of the new exploration licence hasbeen converted into a 10 year mining lease (extension possible for further 10 or15 years) spread across the Nimiyama, Nimikor, Sandor and Kamara Chiefdoms,along the Bafi River in the Kono area. Hard Rock Exploration Programme Data received to date confirms the discovery of a new kimberlite province inNorth West part of country in the Kamakwie area, previously thought to bebarren. Several drainages with kimberlitic indicator minerals have been found inthe Company's NW, Sewa and NE property blocks. The largest two diamonds reportedto be found in the vicinity of the Company's NW properties from recent artisanalalluvial mining were 56ct and 28ct respectively. High Resolution Aero Magnetic Survey ("HRAM") In June 2005, the Company completed the HRAM survey of the country flying176,570 line kilometres in 2005 and bringing the grand total flying to 319,312line kilometres. Final data was delivered in October and in-house interpretationof HRAM survey is in progress. Certain blocks of data have been sent out toindependent geophysical consultants for evaluation and interpretation. To date, 146 targets in the Northwest Block, 24 in the Sewa River Block and 16in the vicinity of the Marampa and Tonkolili iron ore deposits have beenidentified from both the in-house and geophysical consultants for follow-up soilsampling and ground magnetometry. Within the identified targets there are nine specific diamondiferous targetsthat have been identified with greater potential of offering high qualitycommercial resources and as such these have been prioritised within the followup programme. A specifically focussed work programme consisting of drilling andbulk sampling will begin imminently on two large kimberlitic diamondiferoustargets. Reconnaissance Stream Sampling Program As of 31 December 2005, the Company had collected a total of 5,217reconnaissance stream sediment (RSS) samples from the NW, NE, Sewa and CostalBlocks of licences. 4,065 of these samples have been sent to independent external laboratories forheavy liquid separation and kimberlitic indicator mineral (KIM) sorting, ofwhich the Company has received kimberlitic indicator mineral sorting resultsfrom 2,298 of these samples. Routine, systematic micro-probing of visually selected minerals is in progresswith a current and continuingly expanding database of 3,665 individual proberesults available to the Company for kimberlitic indicator confirmation andcomparison. Sewa River Block At year-end, nine RSS drainage sites had returned probe-confirmed kimberliticilmenites and chromites with kimberlitic ilmenite dominating the recoveries; aprogramme of follow-up stream sediment (FSS) sampling is planned for 2006 onceall sample results have been received. Two aeromagnetic follow-up soil samples (AMF) collected over aeromagnetictargets have returned kimberlitic ilmenites to date; microprobe results for alarge number of AMF samples are awaited. Ground magnetometry surveys are in progress over the five best-rated targetsfrom the interpretation of the aeromagnetic survey. Northeast Block In the licences located in the Kono area, eight RSS drainage sites returnedvarying combinations of microprobe confirmed kimberlitic ilmenites and chromiteswith two samples sites containing diamond inclusion chromites. A further eightRSS sites were followed-up on visually sorting results of the RSS programme. Two of these drainage sites are located close to known kimberlite dykes andfissures. All microprobe analyses of these samples are currently being processed. Northwest Block Results from the RSS sampling identified 28 drainages with potential KIM by theyear end. These samples contain various amounts of confirmed kimberliticilmenites and chromites with five of these samples containing diamond inclusionchromites. To date, 20 of the drainages had been followed-up with 182 FSS samples, mineralsorting has indicated that six of these drainages have detectable mineral trainsbut no microprobe confirmation is yet available. These mineral trains have yetto be traced back to their source. Complimentary to the FSS sampling, 522 follow-up soil (AMF) samples werecollected over 114 of the 141 identified aeromagnetic targets. 100 samples werefound to be barren of KIM, with14 samples awaiting confirmation by microprobeanalysis of a number of visually identified indicator grains. Orientation surface loam sampling around one of the diamond producing "swamps"in the Kamakwie region generated a NW trending picro-ilmenite soil anomaly;shallow auger drilling and pitting of the soil anomaly led to the discovery of avery narrow kimberlitic fissure. Gori Hills Block In the Gori Hills group of licences, RSS sampling is complete but not all finalresults have been received. To date, eight RSS drainage sites haveprobe-confirmed singleton KIM, seven of these being kimberlitic chromites andone kimberlitic ilmenite. Follow-up sampling of these drainage sights will beinitiated once all results have been received. Coastal Block The RSS sampling of the Costal Block of licences commenced in October 2005, atyear-end sampling was still in progress and no results have been received. Alluvial Mining Activity Sewa River At the beginning of the 2005, it was decided to assess the Sewa River for itsalluvial mining potential. The Company relocated its mining team to this area,purchased US$ 1.5 million of earth moving equipment and a five tonnes per hour(tph) diamond processing plant to bulk sample the area. The sampling plant andassociated mining equipment have the capacity to process 5,000 tons of alluvialgravels per month. The monsoon season commenced in July, this as expectedrestricted the progress of operations on the Sewa River. Drilling of the alluvial terraces on the Sewa River continues to confirmprevious estimates of their extent. Limited sampling of these terraces hasconfirmed that these terraces are diamondiferous, with a total of 272 stonesbeing recovered during the course of the programme. The Company has so farcompleted 980 boreholes / pits and outlined an initial potential resource of330,000 cubic metres of gravels, with gravel band thicknesses up to 11 metres inplaces. The largest diamond recovered from this alluvial sampling is a gemquality 3.2 carat stone. Kono Area Preliminary assessments at the Kono mining lease area have shown significantpotential for river-bed and terraces of previously un-worked alluvial gravels.The granting of the new mining lease allowed the Company to commence large scalealluvial diamond mining operations in the areas of the Bafi River which runsthrough the mining lease. The mining lease covers approximately 160 squarekilometres of land and of this lease area SLDC has identified an area of 13square kilometres as being of immediate interest with alluvial diamondconcentrations occurring in river channel gravels, floodplain gravel, terracegravels, gravel residues in soil and swamps. An existing diamond processing facility was acquired during the first quarter of2006. The Company has successfully commenced mining operations by commissioningnew and existing mining equipment, new mobile wash plants, upgrading the newlyacquired 100 tph dense media separation ("DMS") diamond processing plant andflow sort (x-ray) final recovery unit. The Konama Camp was upgraded to providemore office space and accommodation. This operation now gives SDLC the capacity to extract and process two milliontpa of alluvial gravels. Initial production from the alluvial operation is encouraging and results areshowing that from the gravels processed the average stone size is 0.5 carat andwithin the stones recovered, there is a large proportion of stones over 10.8carats (special stones). To date, SDLC has recovered stones of up to 18 caratsfrom alluvial mining operations in the Kono area. The Company is also excited by the recovery of a significant number of pinkdiamonds (identified by SLDC's own trained diamond sorters) that have beenrecovered, ranging in size up to 5 carats, which offers considerable potentialwith regard to maximising the cash-flow potential of the mining lease. In the second half of 2006 SLDC will further increase production capacity withthe commissioning of further mobile washing plants, a second DMS processingplant and diamond recovery unit which will provide the Company with a furtherone million tonnes per annum capacity. This addition will provide a combinedtotal of three million tonnes per annum production capacity SLDC is focused on acquiring equipment that is mobile and as such can be appliedin the most appropriate locations that are identified by the ongoing drillingand bulk sampling programmes as being of greatest potential. Previous Diamond Production in Sierra Leone Sierra Leone was mined from the 1930's until 1965 by Sierra Leone SelectionTrust ("SLST"), a British colonial alluvial diamond mining company, holding theexclusive mineral rights to Sierra Leone. It is documented that they extractedapproximately 20 million carats from these operations and that official totalproduction from the 1930's until now is in excess of 50 million carats.Estimates of smuggled diamonds are significant, being up to twice the officialnumbers. The only reliable data on production comes from a report "The Diamond Fields ofSierra Leone" produced in 1968 by P K Hall. The report indicates that diamondrecovery from alluvial production from the Bafi River has averaged approximately50 carats per 100 tons of alluvial gravels mined. When this information iscorrelated with new satellite imagery, magnetic surveying, drilling and bulksampling results, the Company conservatively estimates 100million tonnes ofalluvial gravel deposits grading a background 0.25 carats per tonne of ore (25carats per 100 tonne of ore) Independent consultants confirm that Sierra Leone produces the second highestquality diamonds in the world, the average value of Sierra Leone diamonds beingwell above the world average. The Company estimated the average value of thediamonds recovered in its sampling programme to be approximately US$500 percarat. This gives SLDC a level of confidence that it will progressively generatecash flows with the increase in capacity of the mining operations. Non-Diamond Assets Iron Snowden Industry Mining Consultants (Pty) Ltd were retained to carry out anassessment of the iron ore potential within the Company's license areas. TheCompany is now in receipt of a desk top study regarding its large Marampa and Tonkolili iron ore deposits. Previous resource estimates had indicated aresource of over 600 million tons of iron ore at Tonkolili and SLDC managementestimate the potential total resource being in excess of 1 billion tons. SLDC is seeking joint venture partners for this development or may considerother opportunities to increase shareholder value. Gold An independent consultant was retained to carry out a similar assessment of theCompany's gold potential. The report concluded that there are a large number ofrecorded gold occurrences in Sierra Leone, the majority of which relate toartisinal alluvial mining activity within and marginal to the Greenstone belts.These areas should be the priority for any future exploration work. An exceptionmay occur on our Sula Mountain licence, where the Sierra Leone Geological Surveyrecorded high gold values associated with niobium- bearing ilmeno-rutile.Elsewhere, gold from down-slope accumulations might also be processed if thismaterial needs to be stripped during the exploitation of a primary source. Rare Earth Elements (REE) Sierra Leone contains historical, documented occurrences of niobium richminerals, columbite and columbite-tantalite, in alluvial environments at anumber of different localities within the company's property portfolio.Historical production totalled 4.25 tons of crude columbite for mineral testwork. Routine micro probe analyses of grains as part of the kimberlite programme haveconfirmed the occurrence of these niobium rich minerals in the Company's NE & NWblock's of licences. An independent consultant has been retained to assess the exploration potentialof these occurrences. Environment It is the Company's objective to adhere to appropriate international benchmarksin all spheres of its activities. Environmental impact will be managed with alldue caution and respect to the environment in which the Company operates. Themining method allows for minimal disturbance to the environment and strip miningallows for the immediate replacement of removed soils. An Environmental ImpactAssessment (EIA) program will be implemented and all stake holders will beinvolved. •Government (National and Local) •Local Communities •SLDC •External Consultants and Auditors It is SLDC's philosophy to operate an inclusive policy with the stakeholders andrecognising these responsibilities the Company will embark upon an educationprogram and the structural inclusion of stakeholders in monitoring committees ofall environmental activities. Stakeholder and Community Support The presence of SLDC in Sierra Leone has had an immediate demonstrable impact onthe local community both in terms of contributing to economic development andimprovement in infrastructure. SLDC works collaboratively with local communitiesand where practical makes use of its equipment and resources to assist ininfrastructure projects, such as creation of communal facilities, maintainingwater pumps for ongoing provision of potable water and improving local accessroutes through road resurfacing and bridge building. With its exploration and mining operations, SLDC provides legitimate employmentopportunities for over 1,000 skilled and semi-skilled Sierra Leonean citizenswith additional temporary opportunities for many more. Initiatives are being putin place to reduce the requirement on external resources (currently around 80expatriate staff) and so increase the percentage of local staff through furtherdeveloping local skills. SLDC is committed, wherever possible, to the local procurement of equipment andsupplies so that revenue generated from the mining operation can bere-introduced into the local business communities. As the production of diamondsfrom the mining lease increases and sales are accelerated SLDC is also boughtinto transparent relationships with government agencies, aiming to be recognisedas making a positive contribution to Sierra Leone's national economy. David Gadd-ClaxtonChief Executive Officer29 June 2006 SIERRA LEONE DIAMOND COMPANYCONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2005 Year ended Year ended 31 December 31 December Note 2005 2004 US$ US$ ------ --------- --------- Net operating expenses 2,3 (6,351,396) (7,392,953) --------- --------- Operating loss (6,351,396) (7,392,953) Interest receivable 7 829,689 6,243 --------- ---------Loss before tax (5,521,707) (7,386,710) Tax 8 525,088 - --------- --------- Loss for the year (4,996,619) (7,386,710) Loss per share-Basic 9 5.32c 15.72c All activities are continuing operations. There were no recognised gain and losses other than those stated above. Statement of changes in equity is shown in Note 20. CONSOLIDATED AND COMPANY BALANCE SHEETSAt 31 December 2005 Group Company Group Company Note 2005 2005 2004 2004 US$ US$ US$ US$ ------ --------- --------- --------- --------Non-current assetsIntangible fixedassets 11 22,208,036 - 8,992,420 7,767Tangible fixedassets 12 6,240,249 - 2,929,859 -Investments 13 - 2 - 2Debtors 14 - 33,629,811 - 14,014,711Deferred taxasset 8 525,088 - - - --------- --------- --------- -------- 28,973,373 33,629,813 11,922,279 14,022,480 --------- --------- --------- --------Current assetsTrade and otherreceivables 14 234,462 25,007 955,693 190,613Short terminvestments 15,17 15,480,000 15,480,000 - -Cash and cashequivalents 17 461,843 222,786 2,692,087 2,391,268 --------- --------- --------- -------- 16,176,305 15,727,793 3,647,780 2,581,881 --------- --------- --------- --------Total assets 45,149,678 49,357,606 15,570,059 16,604,361 --------- --------- --------- -------- Current liabilitiesTrade and otherpayable 16 (210,625) (106,717) (1,715,689) (397,510) --------- --------- --------- -------- (210,625) (106,717) (1,715,689) (397,510) --------- --------- --------- -------- --------- --------- --------- --------Net current assets 15,965,680 15,621,076 1,932,091 2,184,371 --------- --------- --------- -------- --------- --------- --------- --------Total liabilities (210,625) (106,717) (1,715,689) (397,510) --------- --------- --------- -------- --------- --------- --------- --------Net assets 44,939,053 49,250,889 13,854,370 16,206,851 --------- --------- --------- -------- EquityShare capital 18 967,632 967,632 700,632 700,632Share premium account 20 54,255,510 54,255,510 21,318,189 21,318,189Equity reserves 20 3,211,082 3,211,082 334,101 334,101Translation reserve 20 (311,744) (194,858) (311,744) (194,858)Profit and lossaccount 20 (13,183,427) (8,988,477) (8,186,808) (5,951,213) --------- --------- --------- --------Total Equity 20 44,939,053 49,250,889 13,854,370 16,206,851 --------- --------- --------- -------- The financial statements were approved by the Board on 28 June 2006 and weresigned on its behalf by: MARTIN DUNHAMDirector and Chief Financial Officer CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2005 Year ended Year ended 31 December 31 December Note 2005 2004 US$ US$ ------ --------- ---------Net cash from Operating activities 22 (3,548,533) (4,869,678) --------- ---------Cash flows from Investing activities Interest received 829,689 6,243Payments to acquire tangible assets (4,420,105) (2,933,305)Payments to acquire intangible assets (13,215,616) (10,558,105)Decrease in short term deposits with banks 23 (15,480,000) - --------- ---------Net cash inflow/(outflow) from Investingactivities (32,286,032) (13,485,167) --------- --------- Cash flows from Financing activitiesProceeds of ordinary share issue 33,204,321 20,855,599Increase in other reserves 400,000 186,804 --------- ---------Net cash inflow/(outflow) from Financingactivities 33,604,321 21,042,403 --------- --------- Net (decrease)/increase in cash and cashequivalents 24 (2,230,244) 2,687,558 --------- --------- Cash and cash equivalents at beginning of year 2,692,087 4,529 --------- --------- Cash and cash equivalents at end of year 461,843 2,692,087 ========= ========= NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) adopted by the International AccountingStandards Board (IASB), and interpretations issued by the StandingInterpretations Committee of the IASB. Basis of accounting The Group financial statements have been prepared in accordance with thehistorical cost convention and are presented in US dollars. All values arerounded to the nearest dollar. This is the first year in which the group has prepared its financial statementsunder IFRS and the comparative financial information has been restated fromCanadian generally accepted accounting practices (Canadian GAAP) to comply withIFRS. There has been no material change to the current year or comparativefinancial information as a result of the restatement. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision only affects that period, or in the periodof revision and future periods if the revision affects both current and futureperiods. The accounting policies that follow set out the policies that apply in preparingthe consolidated financial statements for the year ended 31 December 2005. Basis of Consolidation The consolidated income statement, balance sheets and cash flow statementinclude the financial information of Sierra Leone Diamond Company and itssubsidiaries. Subsidiaries are those entities over whose financial and operatingpolicies the Group has the power to exercise control. Where necessary, theaccounting policies of the subsidiaries are changed to ensure consistency withthe policies adopted by the Group. Intangible fixed assets Purchased intangible assets comprise of the cost of purchasing mineralexploration properties, licence fee payments for mineral property licences anddeferred exploration costs. Intangible fixed assets are shown at cost. The company records its interest in mineral properties by capitalising alldirect and indirect costs of acquiring, exploring for and developing miningproperties as separate areas of interest. When the areas of interest are broughtinto production, the costs will be amortised using the unit-of-production methodbased on the estimated proven reserves of minerals. Where a property shows nopromise from prior exploration results or is dormant, the properties may beallowed to lapse, and would be written down to a nominal value, where aninterest in properties remained, or written off if the Group did not retain aninterest. The carrying amount of the Group's intangible assets are reviewed at eachbalance sheet date to determine whether there is any indication of impairmentand whether the carrying value of such property should be written down.Management will also consider whether exploration costs incurred should becharged against earnings rather than being deferred where an impairment isidentified. Amounts recorded for mineral properties represent costs incurred to date. Therecoverability of amounts shown for mineral properties is dependent upon thediscovery of economically recoverable reserves and future production or proceedsfrom the disposition thereof. Tangible Fixed Assets Plant and machinery, fixtures and fittings, motor vehicles and leaseholdimprovements are shown at cost less accumulated depreciation. The cost oftangible fixed assets is their purchase cost, together with any incidental costof purchase. Depreciation is calculated so as to write off the cost of the intangible fixedassets on a straight-line basis over the expected useful lives of the assetsconcerned. The principal annual rates used for this purpose are: % Plant and machinery 20-30Fixtures and fittings 20-30 Subsequent expenditure relating to a fixed asset item is capitalised when it isprobable that future economic benefits from the use of the asset will beincreased. All other subsequent expenditure is recognised as an expense in theperiod in which it is incurred. Repairs and maintenance which neither materiallyadd to the value of assets nor appreciably prolong their useful lives arecharged against income. Surpluses/(deficits) on the disposal of fixed assets arecredited/(charged) to income. The surplus or deficit is the difference betweenthe net disposal proceeds and the carrying amount of the asset. Financial instruments: Trade and other receivables Trade and other receivables originated by the Group are stated at cost lessprovision for doubtful debts. Cash and cash equivalents Cash and cash equivalents are measured at fair value, based on the relevantexchange rates at balance sheet date. Short-term Investments Deposits with financial institutions that are not repayable on demand withoutpenalty are classified as short-term investments and are included withininvesting activities in the cash flow statement. Interest on short-terminvestments is recognised on an accruals basis over the life of the investment. Derivative instruments Derivative instruments are measured at fair value. Operating leases Leases where the lessor retains the risks and rewards of ownership of theunderlying asset are classified as operating leases. Payments made underoperating leases are charged against income on a straight-line basis over thelease term. Deferred taxation Deferred tax arises when the actual tax consequence of a particular transactionarises in a period different from the period in which the transaction itself isincluded in the financial statements. Deferred tax is provided using the fullliability method and is calculated using enacted, or substantively enacted, taxrates and laws expected to apply when these differences are reversed. A deferred tax asset is recognised to the extent that it is probable that futuretaxable profits will be available against which the associated unused tax lossesand deductible temporary differences can be utilised. A valuation allowance isrecoded against any future income tax assets if it is more likely than not thatthe asset will not be realised. Foreign Currencies Transactions denominated in foreign currencies are recorded at exchange rates asof the date of the transaction. Monetary assets and liabilities denominated inforeign currencies at the balance sheet date are reported at the rates ofexchange at that date. Any gain or loss arising from a change in exchange rates subsequent to the dateof the initial transaction is included as an exchange gain or loss in the profitand loss account. Share- based payments The Group issues equity-settled share-based payments to certain directors,officers, employees and consultants. Equity-settled share-based payments aremeasured at fair value (excluding the effect of non market-based vestingconditions) at the date of the grant. The fair value determined at the grantdate of the equity-settled share-based payments is expensed on a straight-linebasis over the vesting period, based on the group's estimate of shares that willeventually vest and adjusted for the effect of non market- based vestingconditions. Fair value is measured by use of the Black-Scholes pricing model. The expectedlife used in the model has been adjusted, based on management's best estimate,for the effects of non-transferability, exercise restrictions and behaviouralconsiderations. Segment Reporting A segment is a distinguishable component of the Group that is engaged either inproviding mining or exploration activities, or in providing products or serviceswithin a particular environment, which is subject to risks and rewards that aredifferent from those of other segments. The basis of segment reporting isrepresentative of the internal structure used for management reporting. During the 2005 financial year, the Group was involved in exploration activitiesonly, with mining activities to commence in 2006. Geographical segments havetherefore been used as the primary method of segmentation. 2. GEOGRAPHICAL ANALYSIS OF EXPENSES Bermuda Sierra Leone UK Total US$ US$ US$ US$ -------- -------- -------- -------- Depreciation 7,767 1,090,136 11,812 1,109,715Employee costs 148,190 - 171,609 319,799Foreign exchange 478,608 2,807 1,376,032 1,857,447differencesOther operating charges 161,679 - 425,775 587,454Share-based payments 2,476,981 - - 2,476,981 -------- -------- -------- -------- 3,273,225 1,092,943 1,985,228 6,351,396 3. NET OPERATING EXPENSES a) Total operating expenses 2005 2004 US$ US$ --------- --------- Depreciation 1,109,715 388,606Employee costs 319,799 222,255Foreign exchange differences 1,857,447 (140,593)Other operating charges 572,649 1,074,490 --------- --------- 3,859,610 1,544,758Share-based payments:Options (Note 19a) 1,040,379 147,297Warrants (Note 19a) 1,436,602 -Common shares* - 5,700,898 --------- --------- 2,476,981 5,848,195 --------- --------- 6,336,591 7,392,953 --------- --------- * In 2004, the following transactions arose relating to common share-basedpayments: 2004Note US$ ---------i) 168,491ii) 4,043,788iii) 1,488,619 --------- 5,700,898 --------- a) Total operating expenses i) In June 2004, the Company issued 500,000 common shares to a company controlled by an officer and director of the Company in exchange for the remaining 10% interests in certain of the Company's subsidiaries. An amount of $168,491 was expensed in the Income Statement. ii) In June 2004, the Company issued 12,000,000 common shares in exchange for six prospecting licences and one exploration licence in Sierra Leone from a shareholder and two companies related by common ownership and directorship. Consideration comprised of 12,000,000 common shares of the Company and the assumption of $337,151 of indebtedness due to a company related to an officer and director of the Company. The acquisition was accounted for at the carrying value of licences acquired as reflected in the accounts of the vendor. The difference between the carrying amount of the licences and the fair value of the consideration paid of $4,043,788 was expensed in the Income Statement. iii) In June 2004, the Company issued 4,330,000 common shares in respect of past services for US$1,457,186. Of these common shares 2,550,000 shares were issued to a company controlled by an officer and director of the Company and 200,000 shares were issued to directors of the Company. In November 2004, the Company issued 50,000 common shares to a consultant for total consideration of US$31,433 in respect of past services. The total amount of $1,488,619 was expensed in the Income Statement. b) Net operating expenses include: 2005 2004 US$ US$ --------- ---------Operating leases - land and buildings 71,235 -Auditors' remuneration - audit fees 135,000 45,009 --------- --------- 4. DIRECTORS' EMOLUMENTS The aggregate emoluments of the directors of the Company for the year ended 31December 2005 are set out below: 2005 2004 US$ US$ ---------- ----------Aggregate emoluments 724,667 141,000 ---------- ---------- Detailed disclosures of the director's remuneration and interests in shares andoptions over the Company's shares are shown in the Report of the RemunerationCommittee. No director has retirement benefits accruing to him as a result of his servicesto the Group. 5. EMPLOYEE INFORMATION The number of persons (including non-executive directors) employed by the Groupduring the period was 174 who were employed in exploration and mining. 6. EMPLOYEE COSTS The staff costs for the employees shown in note 5 (including non-executivedirectors) were: 2005 2004 US$ US$ ---------- ----------Staff costsWages and salaries 3,718,477 1,236,311Social security costs 62,784 10,451 ---------- ---------- 3,781,261 1,246,762 ---------- ---------- Staff costs include an amount of $3,461,412 (2004: $1,024,507) capitalised aspart of intangible assets. 7. INTEREST RECEIVABLE 2005 2004 US$ US$ ---------- ----------Interest receivable on short term investments 829,689 6,243 ---------- ---------- 8. TAXATION There is no corporation tax charge for the current year or the previous year dueto the losses incurred. The Group has tax losses of approximately US$15,000,000,which will be carried forward, subject to agreement with the relevant taxauthorities. A deferred tax asset of £525,088 has been recognised during the year in respectof the following timing differences: 2005 2004 US$ US$ ---------- ----------Tax losses and short term timing differences 15,832,084 -Differences between capital allowances and depreciation (14,081,791) - ---------- ---------- 1,750,293 -Provided at 30% 525,088 - ---------- ---------- 9. LOSS PER SHARE Basic and diluted loss per share is calculated by dividing the loss attributableto ordinary shareholders of US$ 4,996,619 (2004: $7,386,710) by 93,763,064(2004: 46,986,173) shares, being the weighted average number of ordinary sharesin issue during the year. 10. PARENT COMPANY RESULT FOR THE FINANCIAL YEAR The parent company's result for the year was a loss of US$ 3,037,264 (2004; loss$5,200,226). NOTES TO THE FINANCIAL STATEMENTS 11. INTANGIBLE FIXED ASSETS Group US$----------------------------- --------CostAt 1 January 2005 8,992,420Additions 13,215,616----------------------------- --------As at 31 December 2005 22,208,036----------------------------- --------Amortisation At January 2005 -Charge for the year ------------------------------ --------As at 31 December 2005 ------------------------------ --------Net book valueAt 31 December 2005 22,208,036----------------------------- --------At 31 December 2004 8,992,420----------------------------- -------- Intangible fixed assets comprise of the cost of purchasing mineral explorationlicences and certain deferred exploration expenditures on the Company's minerallicences located in Sierra Leone. The directors regularly assess the potentialof each mineral licence and write off any deferred exploration expenditure thatthey believe to be unrecoverable. 12. TANGIBLE FIXED ASSETS Plant & Fixtures & machinery fittings TotalGroup US$ US$ US$----------------------------- -------- -------- --------Cost1 January 2005 2,746,526 595,940 3,342,466Additions 4,081,431 338,674 4,420,105Disposals - - ------------------------------ -------- -------- --------At 31 December 2005 6,827,957 934,614 7,762,571----------------------------- -------- -------- -------- Depreciation1 January 2005 363,355 49,252 412,607Charge for the year 992,660 117,055 1,109,715Disposals - - ------------------------------ -------- -------- --------At 31 December 2005 1,356,015 166,307 1,522,322----------------------------- -------- -------- --------Net book valueAt 31 December 2005 5,471,942 768,307 6,240,249----------------------------- -------- -------- --------At 31 December 2004 2,383,171 546,688 2,929,859----------------------------- -------- -------- -------- 13. INVESTMENTS Group Company Group Company 2005 2005 2004 2004 US$ US$ US$ US$ ------- -------- ------- -------Cost and net book value At 1 January 2005 - 2 - 2Additions - - - - ------- -------- ------- -------31 December 2005 - 2 - 2 ------- -------- ------- ------- The Company's investment comprises of a 100% interest in SLDC (UK) Limited acompany incorporated in the United Kingdom, which holds a 100% interest in SLDCManagement Limited a company incorporated in Sierra Leone. The principal activity of SLDC (UK) Limited is to provide accounting, legal andhuman resource services for the Group. The principal activity of SLDC Management Limited is to hold a 100% interest inSLDC Exploration Limited, which is the Group's operating company in SierraLeone. 14. TRADE AND OTHER RECEIVABLES Group Company Group Company 2005 2005 2004 2004 US$ US$ US$ US$ -------- -------- -------- ------- Non-currentAmounts owed by Groupcompanies - 33,629,811 - 14,014,711 -------- -------- -------- ------- - 33,629,811 - 14,014,711 -------- -------- -------- -------CurrentTrade receivables 49,438 5,926 113,651 19,118VAT Recoverable 28,006 - - -Other debtors 14,872 - 739,047 171,495Due From Related Party - - 98,995 -Prepayments and accruedincome 142,146 19,081 4,000 - -------- -------- -------- ------- 234,462 25,007 955,693 190,613 -------- -------- -------- ------- 15. SHORT TERM INVESTMENTS Group Company Group Company 2005 2005 2004 2004 US$ US$ US$ US$ Short term deposits with banks 15,480,000 15,480,000 - - -------- -------- --------- -------- 15,480,000 15,480,000 - - -------- -------- --------- -------- 16. CURRENT LIABILITIES Group Company Group Company 2005 2005 2004 2004 US$ US$ US$ US$ -------- -------- -------- --------Trade creditors 170,988 106,717 1,347,958 284,268Other taxation and social security 39,637 42,687 -Due to related party - - 325,044 113,242 -------- -------- -------- -------- 210,625 106,717 1,715,689 397,510 -------- -------- -------- -------- 17. FINANCIAL INSTRUMENTS The financial risks faced by the Group include liquidity risk, interest raterisk, market price risk and currency risk. The Board reviews and agrees policiesfor managing each of these risks. The Group's main objective in using financial instruments is the maximisation ofreturns from funds held on deposit and, when appropriate, the generation ofadditional resources for the Group's operations through the issue of shares. TheGroup's policy is to raise cash in advance of when it is required by issues ofequity and when market conditions are appropriate. Short term debtors and creditors have been excluded from the followingdisclosures. The breakdown of the Group and Company financial assets as at 31 December 2005is shown below: Group Company Group Company 2005 2005 2004 2004 US$ US$ US$ US$ -------- -------- -------- --------Cash and bank balances 461,843 222,786 2,692,087 2,391,268Short term investments:Short term deposits withbanks 15,480,000 15,480,000 - - -------- -------- -------- -------- 15,941,843 15,702,786 2,692,087 2,391,268 -------- -------- -------- -------- Financial assets consist of short-term deposits in Sterling which earn a fixedrate of interest of 3.5625%. The Group has no financial liabilities. 18. CALLED UP SHARE CAPITAL 2005 2004Authorised US$ US$ -------- ---------250,000,000 common shares of US$ 0.01 each 2,500,000 2,500,000 -------- ---------100,000,000 preference shares of US$ 0.01 each 1,000,000 1,000,000 -------- --------- Alloted, called up and fully paid -------- ---------96,763,240 (2004: 70,063,240) common shares of US$0.01 each 967,632 700,632 -------- --------- On 15 February 2005 the Company's shares were admitted to AIM of the LondonStock Exchange. The Company allotted 26,700,000 US$ 0.01 common shares at 75pence raising US$ 37,528,157 before expenses of US$ 4,323,836. 2005 2004Alloted, called up and fully paid US$ US$ -------- ---------As at 1 January 700,632 218,332Issued during the year 267,000 482,300 -------- ---------As at 31 December 2005 967,632 700,632 -------- --------- 19. EQUITY RESERVES a.) OPTIONS The Group has issued share options under a share option scheme adopted by theGroup on 5 November 2004. Movements in share options over US$ 0.01 common sharesin the Company in the year were as follows: Number of options---------------------- -----------As at 1 January 2005 6,975,000Options granted in the year 4,950,000Options lapsed in the year (800,000)Options exercised in the year ----------------------- -----------As at 31 December 2005 11,125,000---------------------- ----------- The fair value of options granted during the year was estimated using theBlack-Scholes pricing model with the following significant assumptions: Expected life (years) 5.00Risk-free interest rate 3.5%Volatility 40%Weighted average fair value per option $0.33 The stock-based compensation recognised as an expense in the year to 31 December2005 was US$1,040,379 (2004: US$147,197). Total options existing at 31 December 2005 over US$ 0.01 ordinary shares in theCompany are summarised below: Date of grant Number of Exercise Expiry Date Note options Price ------------ ------------ ------------ ------------ ------------ 21 November 2004 1,825,000 50p 21 November 1 200721 November 2004 2,250,000 50p 21 November 1 200921 November 2004 1,650,000 50p 21 November 2 200921 November 2004 200,000 50p 21 November 4 200930 November 2004 100,000 50p 30 November 3 200916 December 2004 150,000 50p 16 December 3 200910 February 2005 250,000 75p 10 February 3 201031 March 2005 2,000,000 75p 31 March 2010 21 November 2005 2,000,000 50p 1 November 2010 219 July 2005 300,000 75p 19 July 2010 27 September 2005 400,000 75p 7 September 2 2010 ------------ ------------ ------------ ------------ ------------ Note 1: Subject to the rules of share option scheme each of these options were fullyvested on 10 May 2005. Note 2: Subject to the rules of the share option scheme each of these options wereexercisable as follows: - one-third of the share options on the first anniversary of the date of grant - a further third of the share options on the second anniversary of the date of grant - the final third of the share options on the third anniversary of the date of grant; provided that the option holder has remained a director or employee of theCompany or one of its subsidiaries throughout the one-year period prior to theapplicable anniversary of the date of grant. Except that any share options thathave previously vested cannot be cancelled by the Company unless the employee isdismissed for cause. Note 3: The performance based options vest upon certain performance milestones beingmet. The vesting period for these is not determinable and an expense is onlyrecognised upon actual vesting. Note 4: Subject to the rules of the share option scheme, these performance based shareoptions became fully vested during the year. b.) WARRANTS Movements in warrants over US$ 0.01 common shares in the Company in the yearwere as follows: Number of warrants---------------------- -----------As at 1 January 2005 *13,200,001Warrants granted in the year 1,335,000Warrants lapsed in the year -Warrants exercised in the year ----------------------- -----------As at 31 December 2005 14,535,001---------------------- ----------- On 2 September 2005 the exercise period of the 13,200,001 warrants existing at 1January 2005 were extended by a further two years. * The warrants are owned by Timis Diamond Corporation (TDC), which is a whollyowned by CA Fiduciary Services Limited as sole trustee of the Timis Trust. FrankTimis is a beneficiary of the Timis Trust. The charge included in the Income Statement relating to the increase in theexercise period of these warrants was US$1,436,602 (2004: US$ nil). The fair value of warrants included as a share issue cost and charged to theShare Premium Account was US$400,000 (2004: US$ nil). The fair value of warrants was estimated using the Black-Scholes pricing modelwith the following significant assumptions. Expected life (years) 1.83Risk-free interest rate 3.5%Volatility 40%Weighted average fair value per option $0.10 Total warrants existing at 31 December 2005 over US$ 0.01 ordinary shares in theCompany are summarised below: Date of grant Number of Exercise Price Original Expiry Revised Expiry warrants US$ Date Date------------ ------------ ------------ ------------ ------------ March 2004 9,250,001 1.063 February 2006 February 2008July 2004 3,950,000 0.63 June 2006 June 2008February 2005 1,335,000 1.41 August 2006 August 2006------------ ------------ ------------ ------------ ------------ On 26 April 2006, the Company issued 4,528,000 common shares on the exercise ofcertain share purchase warrants for a consideration of US$ 4,000,000. 20. STATEMENT OF CHANGES IN EQUITY Group Share Profit and Share premium Equity Translation loss Total Total capital account reserves reserves account 2005 2004 US$ US$ US$ US$ US$ US$ US$ -------- -------- -------- -------- -------- -------- --------As at 1 January 2005 700,632 21,318,189 334,101 (311,744) (8,186,808) 13,854,370 51,380Net proceedsfrom issue of common shares 267,000 32,937,321 - - - 33,204,321 20,855,599Share-basedpayments - - 2,876,981 - - 2,876,981 334,101Loss for the financial year - - - - (4,996,619) (4,996,619) (7,386,710) -------- -------- -------- -------- -------- -------- --------As at 31 December 2005 967,632 54,255,510 3,211,082 (311,744) (13,183,427) 44,939,053 13,854,370 -------- -------- -------- -------- -------- -------- -------- Company Share Profit and Share premium Equity Translation loss Total Total Capital account reserves reserves account 2005 2004 US$ US$ US$ US$ US$ US$ -------- -------- -------- -------- -------- -------- --------As at 1 January 2005 700,632 21,318,189 334,101 (194,858) (5,951,213) 16,206,851 217,377Net proceedsfrom issue of common shares 267,000 32,937,321 - - - 33,204,321 20,855,599Share-basedpayments - - 2,876,981 - - 2,876,981 334,101Loss for the financial year - - - - (3,037,264) (3,037,264) (5,200,226) -------- -------- -------- -------- -------- -------- --------As at 31December 2005 967,632 54,255,510 3,211,082 (194,858) (8,988,477) 49,250,889 16,206,851 -------- -------- -------- -------- -------- -------- -------- 21. OPERATING LEASE COMMITMENTS At 31 December, the Group had annual commitments under non-cancellable operatingleases expiring; Group 2005 Group 2004 Land & Land & buildings buildings US$ US$ ---------- ----------Within one year 17,492 -After five years 43,000 25,833 ---------- ---------- The Company had no other financial commitments at 31 December 2005. 22. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES 2005 2004 US$ US$ ---------- ----------Operating loss (6,351,396) (7,392,953)Adjustments for:Share-based payments 2,476,981 *4,359,576Depreciation of tangible fixed assets 1,109,715 388,606Decrease/(increase) in debtors 721,231 (941,295)Decrease in creditors (1,505,064) (1,283,612) ---------- ----------Net cash flow from operating activities (3,548,533) (4,869,678) ---------- ---------- *- excludes $14,88,619 (Note 3a.iii). 23. RECONCILIATION OF NET CASH FLOW TO NET FUNDS 2005 2004 US$ US$ ---------- ----------(Decrease)/Increase in cash in year (2,230,244) 2,687,558Cash inflow from short term deposits 15,480,000 - ---------- ----------Change in net funds from cash flows 13,249,756 2,687,558 ---------- ---------- Net funds at start of year 2,692,087 4,529 ---------- ----------Net funds at end of year (see note 24) 15,941,843 2,692,087 ---------- ---------- 24. ANALYSIS OF MOVEMENTS IN NET FUNDS 1 January Cash 31 December 2005 flows 2005 US$ US$ US$ --------- --------- ---------Cash at bank and in hand 2,692,087 (2,230,244) 461,843Short term deposits - 15,480,000 15,480,000 --------- --------- ---------Net funds 2,692,087 13,249,756 15,941,843 --------- --------- --------- 25. RELATED PARTY TRANSACTIONS a.) Due to related parties As at 31 December 2005, the Company had a receivable from a company (the"related company") related to an officer and director of the Company in theamount of US$nil (2004 - US$98,995). These advances are non-interest bearing andhave no fixed terms of repayment. The remainder of amounts due to other related parties at 31 December 2005 isUS$nil (2004 - US$325,044). These related parties consist of shareholders,officers and directors of the Company and companies controlled or significantlyinfluenced by shareholders and officers of the Company. The amounts arenon-interest bearing, unsecured and have no fixed terms of repayment. b.) Transactions During the year ended 31 December 2005, the Company incurred US$36,939 (2004 -US$27,725) for administration services by a company related to an officer anddirector of the Company. During the year ended 31 December 2005, the Company incurred US$93,026 (2004 -US$48,095) for financial consulting services by a shareholder of the Company. 26. POST BALANCE SHEET EVENTS On 9 February 2006, the Company issued 1,930,000 common shares and paid US$2,000,000 to acquire a diamond processing plant and sundry mining equipmentlocated in Sierra Leone. On 26 April 2006, the Company issued 4,528,000 commonshares on the exercise of certain share purchase warrants for a consideration ofUS$ 4,000,000. 27. REPORTING JURISDICTIONS The Company is a reporting issuer in certain Canadian jurisdictions.However, the company is a "designated foreign issuer" as defined in CanadianNational Instrument 71-102 and is subject to foreign regulatory requirements,including those of the Alternative Investment Market of the London StockExchange. As such, the company is exempt from certain requirements otherwiseimposed on reporting issuers in Canada. In particular, financial statements ofthe company may be prepared under International Financial Reporting Standards oraccounting principles that meet the non-Canadian disclosure requirements towhich the company is subject. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMI.L