30th Sep 2005 07:30
African Gold PLC30 September 2005 Annual Results for the year ended 31 March 2005 DIRECTORS' REPORT The directors present their report and the audited financial statements of thegroup for the year ended 31 March 2005. BUSINESS REVIEW AND FUTURE PROSPECTSThe group's main activities are in gold production, mineral exploration anddevelopment. Further information concerning the activities of the group and itsfuture prospects are contained in the Chairman's Statement and the Review ofOperations. RESULTS AND DIVIDENDThe loss for the year after taxation was £532,316 (2004: £245,586). The directors do not propose that a dividend be paid (2004: £Nil). CREDITOR PAYMENT POLICYIt is the company's normal practice to agree terms of transactions, includingpayment terms, with suppliers and provided suppliers perform in accordance withthe agreed terms it is the company's policy that payment is made accordingly.Trade creditors of the company at 31 March 2005 represented 25 days (2003: 8days) of annual purchases, including capital expenditure. DIRECTORS AND THEIR INTERESTS IN SHARES OFTHE COMPANY The current directors areas follows: D. HorganJ. FinnO. BaringH. SlackJ. AndersonG. Young (Appointed 7 December 2004) J. Donohoe resigned as director on 27 October 2004. J. J. Teeling resigned asdirector on 29 September 2005. The directors in office had the following beneficial interests in the ordinaryshares of the company at 31 March 2005 and 31 March 2004: Ordinary Shares Options Warrants 31/3/2005 31/3/2004 31/3/2005 31/3/2004 31/3/2005 31/3/2004 Number Number Number Number Number NumberJ.J. 16,750,000 16,750,000 6,660,000 4,760,000 - -TeelingD. 5,680,000 5,680,000 2,600,000 800,000 - -HorganO. 5,000,000 5,000,000 5,000,000 2,700,000 5,000,000 5,000,000BaringH. Slack 5,000,000 5,000,000 2,250,000 1,450,000 5,000,000 5,000,000J. Finn 2,345,000 5,000,000 4,170,000 3,170,000 - -J. 5,000,000 5,000,000 1,950,000 1,250,000 5,000,000 5,000,000AndersonG. Young - - - - - - SUBSTANTIAL SHAREHOLDINGSAt 31 August the Share Register records that the following shareholders held 3%or more of the issued ordinary share capital of the company, excluding those ofthe directors: Number of % Ordinary SharesJohn Teeling 16,750,000 5.28BNY (OCS) Nominees Limited 14,075,000 4.43Willbro Nominees Limited 13,282,000 4.18Roy Nominees 460051 11,410,000 3.59Nutraco Nominees Limited 10,643,000 3.35 CHARITABLE AND POLITICAL DONATIONSThe company made no political or charitable contributions during the year. AUDITORSA resolution to reappoint the auditors, Deloitte &Touche, will be proposed atthe annual general meeting. By Order of the Board: James Finn Company Secretary 29th September 2005 STATEMENT OF DIRECTORS' RESPONSIBILITIES United Kingdom company law requires the directors to prepare financialstatements for each financial year which give a true and fair view of the stateof affairs of the company and the group as at the end of the financial year andof the profit or loss of the group for that year. In preparing those financialstatements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; and • state that all accounting standards which they consider to be applicable have been followed. The directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of thecompany and of the group and to enable them to ensure that the financialstatements are prepared in accordance with accounting standards generallyaccepted in the United Kingdom and comply with the Companies Act, 1985. They arealso responsible for safeguarding the assets of the company and the group andhence for taking reasonable steps for the prevention and detection of fraud andother irregularities. INDEPENDENT AUDITORS' REPORTTO THE MEMBERS OF AFRICAN GOLD PLC We have audited the financial statements of African Gold Plc for the year ended31 March 2005 which comprise the consolidated profit and loss account, theconsolidated balance sheet, the company balance sheet, the consolidated cashflow statement, the consolidated statement of total recognised gains and losses,the reconciliation of movement in equity shareholders' funds and the relatednotes 1 to 24. These financial statements have been prepared under theaccounting policies set out therein. This report is made solely to the company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the company's members those matters we are required tostate to them in an auditors' report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company and the company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the statement of directors' responsibilities, the company'sdirectors are responsible for the preparation of the annual report and thefinancial statements in accordance with applicable United Kingdom law andaccounting standards. Our responsibility is to audit the financial statements inaccordance with relevant United Kingdom legal and regulatory requirements andauditing standards. We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with the Companies Act1985. We also report if, in our opinion, the Report of the Directors is notconsistent with the financial statements, if the company has not kept properaccounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regardingdirectors' remuneration and transactions with the company and other members ofthe group is not disclosed. We read the Chairman's Statement, the Review of Operations and the Report of theDirectors for the above year and consider the implications for our report if webecome aware of any apparent misstatements, or material inconsistencies with thefinancial statements. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standardsissued by the Auditing Practices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significant estimates andjudgements made by the directors in the preparation of the financial statementsand of whether the accounting policies are appropriate to the circumstances ofthe company and the group, consistently applied and adequately disclosed. Independent Auditors' Report to the Members of African Gold PLC (Continued) We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion, we also evaluated the overalladequacy of the presentation of information in the financial statements. Fundamental uncertainties: Deferred development assets In forming our opinion, we have considered the adequacy of the disclosures madein the financial statements concerning the valuation of intangible assets,tangible assets, investments and amounts owed by group undertakings. Therealisation of the intangible assets of £5,966,810 (2004: £251,230) and tangibleassets in Ghana of £141,538 (2004: £Nil) included in the consolidated balancesheet; together with investments in subsidiary of £1,459,537 (2004: £Nil) andamounts owed by group undertakings of £4,366,729 (2004: £2,562) in the companybalance sheet, is dependent on the successful development of mineral reserves.We draw attention to further details given in Notes 9, 10, 11 and 13. Ouropinion is not qualified in this respect. Going concern basis In forming our opinion, we have considered the adequacy of the disclosures madein Note 1(ii) of the financial statements concerning the uncertainty as to theability of the group to raise the necessary funding to continue its explorationand development programme. In view of the significance of this uncertainty weconsider that it should be drawn to your attention. Our opinion is not qualifiedin this respect. Opinion In our opinion the financial statements give a true and fair view of the stateof affairs of the company and the group as at 31 March 2005 and of the loss ofthe group for the year then ended and have been properly prepared in accordancewith the Companies Act,1985. Deloitte & ToucheChartered Accountants and Registered Auditors Deloitte &Touche HouseEarlsfort TerraceDublin 2 29th September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2005 Notes 2005 2004 £ £TURNOVER 2 7,129 8,833Cost of sales (23,645) (15,148) -------- ------GROSS LOSS (16,516) (6,315)Administrative expenses (539,029) (237,574) -------- ------OPERATING LOSS (555,545) (243,889)Interest receivable and similar income 23,544 -Interest payable and similar charges 3 (315) (1,697) -------- ------LOSS ON ORDINARY ACTIVITIES 4 (532,316) (245,586)BEFORE TAXATIONTax on loss on ordinary activities 5 - - -------- ------RETAINED LOSS ON ORDINARY (532,316) (245,586)ACTIVITIES AFTER TAXATION -------- ------LOSS PER SHARE - basic and diluted 8 (.20p) (.15p) -------- ------The results arise from continuing operations. CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2005 Notes 2005 2004 £ £FIXED ASSETS Tangible assets 9 278,262 15,952Intangible assets 10 5,966,810 251,230 -------- ------- 6,245,072 267,182 -------- -------CURRENT ASSETS Stocks 12 9,949 222Debtors 13 63,560 2,590Cash at bank 931,654 2,471,422 -------- ------- 1,005,163 2,474,234 -------- -------CREDITORS : (Amounts falling due 14 (576,174) (100,630)within one year) -------- -------NET CURRENT ASSETS 428,989 2,373,604 -------- -------TOTAL ASSETS LESS LIABILITIES 6,674,061 2,640,786 -------- -------CAPITAL AND RESERVES Called-up share capital 15 3,123,979 2,348,677Share premium 16 8,611,296 4,842,803Profit and loss account - deficit 17 (5,061,214) (4,550,694) -------- -------SHAREHOLDERS' FUNDS - ALL EQUITY 6,674,061 2,640,786 -------- -------The financial statements were approved by the Board of Directors on 29thSeptember 2005 and signed on its behalf by: O. Baring Director COMPANY BALANCE SHEET AS AT 31 MARCH 2005 Notes 2005 2004 £ £FIXED ASSETS Intangible assets 10 - 251,230Investments 11 1,459,537 - -------- ------- 1,459,537 251,230CURRENT ASSETS Debtors (due after more than one year) 13 4,366,729 2,562Cash at bank 883,317 2,469,153 -------- ------- 5,250,046 2,471,715 -------- -------CREDITORS : (Amounts falling due 14 (158,269) (83,383)within one year) -------- -------NET CURRENT ASSETS 5,091,777 2,388,332 -------- -------TOTAL ASSETS LESS CURRENT LIABILITIES 6,551,314 2,639,562 -------- -------CAPITAL AND RESERVES Called-up share capital 15 3,123,979 2,348,677Share premium 16 8,611,296 4,842,803Profit and loss account - deficit 17 (5,183,961) (4,551,918) -------- -------SHAREHOLDERS' FUNDS - ALL EQUITY 6,551,314 2,639,562 -------- -------The financial statements were approved by the Board of Directors on 29thSeptember 2005 and signed on its behalf by: O. Baring Director CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2005 Notes 2005 2004 £ £ -------- -------NET CASH OUTFLOW FROM 19(a) (88,313) (257,092)OPERATING ACTIVITIES -------- -------RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 23,544 -Interest paid (315) (1,697) -------- -------NET CASH INFLOW/(OUTFLOW) FROM 23,229 (1,697)RETURNS ON INVESTMENTSAND SERVICING OF FINANCE -------- -------CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPayments to acquire tangible fixed assets (302,899) (262,636)Payments to acquire intangible fixed assets (3,618,637) -Receipts from sales of tangible fixed assets - 251Payments to acquire subsidiaries 21 (69,787) - -------- -------NET CASH OUTFLOW FROM (3,991,323) (262,385)CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT -------- -------NET CASH OUTFLOW BEFORE FINANCING (4,056,407) (521,174) -------- -------- --------FINANCING: Issue of ordinary share capital 2,516,639 2,988,286 -------- -------- --------NET CASH INFLOW FROM FINANCING 2,516,639 2,988,286 -------- -------- --------(DECREASE)/INCREASE IN CASH 19(b) (1,539,768) 2,467,112 -------- ------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2005 2005 2004 £ £Loss attributable to group shareholders (532,316) (245,586)Currency translation adjustments 21,796 (9,128) -------- ------Total recognised loss for the year (510,520) (254,714) -------- ------RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS/(DEFICIT) FOR THE YEARENDED 31 MARCH 2005 2005 2004 £ £Total recognised loss for the year (510,520) (254,714)Issue of shares 4,543,795 2,988,286 -------- -------Net change in equity shareholders' funds 4,033,275 2,733,572Opening equity shareholders' funds/(deficit) 2,640,786 (92,786) -------- -------Closing equity shareholders' funds 6,674,061 2,640,786 -------- ------- NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2005 1. PRINCIPAL ACCOUNTING POLICIES The principal accounting policies are summarised below. They have all beenapplied consistently throughout the current and preceding year. (i) Basis of preparationThe financial statements have been prepared under the historical costconvention, and in accordance with applicable laws and accounting standardsgenerally accepted in the United Kingdom. (ii) Going concern basis The financial statements have been prepared on the going concern basis thevalidity of which is dependent upon a number of assumptions. The mostsignificant of these are: • The group will have access to capital markets and the ability to raise cash through equity placings, sufficient to meet the costs of the ongoing exploration and development programmes and to fund other potential projects in Zimbabwe and Ghana. • The Inez mine will continue to produce sufficient quantities of minerals to provide sufficient working capital for the ongoing activities of the Zimbabwean operations. • The political and economic situations in Zimbabwe, including the hyper-inflation of the Zimbabwean currency, will stabilise sufficiently, to allow production at the mine to continue and to support economic precious metals markets for sales from the mine. The financial statements therefore do not include any adjustments relating tothe recoverability of recorded asset amounts or of liabilities that may ariseshould the entity be unable to continue as a going concern. (iii) Turnover Turnover represents sales of gold outside the group net of discounts and salestaxes. Turnover is recognised when the risks and rewards of ownership havepassed to the purchaser. (iv) Basis of consolidation The consolidated financial statements include the accounts of African Gold plcand all subsidiaries made up to 31 March 2005. 1. PRINCIPAL ACCOUNTING POLICIES (Continued) (v) Tangible fixed assets Tangible fixed assets are stated at cost, net of depreciation and any provisionfor impairment. • Mineral Interests: Mineral interests are amortised on a unit of production basis over the estimated operating life of the mine based on the directors' estimate of proven and probable reserves. • Plant and Equipment and Motor Vehicles : Plant and equipment and motor vehicles are depreciated over their estimated useful lives on a straight line basis at the rate of 10% and 20% per annum respectively. Intangible fixed assets - deferred development expenditure Mineral exploration costs are capitalised until the results of the projects,which are based on geographic areas, are known. Mineral exploration costsinclude an allocation of administration and salary costs as determined bymanagement. If the project is successful, the related exploration costs arewritten off over the life of the estimated ore reserve on a unit of productionbasis. Where a project is terminated, the related exploration costs are writtenoff immediately. Investments Investments are stated at the lower of cost and directors' valuation. Foreigncurrencies Assets and liabilities in foreign currencies are translated into Sterling at therate ruling at the balance sheet date. Transactions are converted at the rateruling at the date of the transaction. Exchange differences arising from foreigncurrency borrowings to the extent that they are regarded as an adjustment tointerest costs are capitalised when such borrowings can be directly linked tospecific capital development. Other exchange differences are dealt with in theprofit and loss account. The group's policy is to apply UITF 9- "Accounting for Operations inHyper-Inflationary Economies" in respect of material assets and liabilities heldin hyper-inflationary economies. For the purposes of consolidation the balance sheets of the foreign subsidiariesare translated at the closing rate and the profit and loss accounts at theaverage rate during the year. Any translation gain or loss is transferreddirectly to reserves. The rate of exchange used in respect of the Zimbabweandollar, which is a hyper-inflationary currency, is the rate as quoted by theReserve Bank of Zimbabwe, which at 31 March 2005 was Sterling £1 : ZimbabweDollar $11,369 (31 March 2004 : Sterling £1 : Zimbabwe Dollar $7,949.83). 1. PRINCIPAL ACCOUNTING POLICIES (Continued) (ix) Stock Stock is valued at the lower of cost and net realisable value. (x) Gold in process of production In accordance with normal practice in the gold mining industry, no account istaken of gold in the process of production. (xi) Pension fund Current service costs are charged to income systematically over the expectedremaining working lives of the employees who are members of the fund. Unfundedliabilities in respect of prior service are funded by annual instalments,charged against income over periods recommended by the actuaries. (xii) Deferred tax Deferred taxation is accounted for in respect of all timing differences. Adeferred tax asset is only recognised when it is more likely than not, the assetwill be recoverable in the foreseeable future, out of suitable taxable profitsfrom which the underlying timing differences can be recovered. 2. SEGMENTAL ANALYSIS The group's turnover relates to the sale of precious minerals to third parties. The analysis of turnover and the operating loss before taxation and the netassets/(liabilities) employed by geographical segment is shown below: Turnover by Operating Loss Net assets/(liabilities) origin and destination employed 2005 2004 2005 2004 2005 2004 £ £ £ £ £ £United - - (503,770) (223,641) 2,187,455 2,655,514KingdomZimbabwe 7,129 8,833 (51,775) (20,248) 86,938 (14,728)Ghana - - - - 4,399,668 ------------ ------- ------ ------- ------- ------- ------ 7,129 8,833 (555,545) (243,889) 6,674,061 2,640,786 ----------- ------- ------ ------- ------- ------- ------ 3. INTEREST PAYABLE AND SIMILAR CHARGES 2005 2004 £ £ ------------------------------- ------- ---- Interest payable on loans and bank overdraft 315 1,697 repayable within five years ------------------------------- ------- ---- Total finance costs 315 1,697 ------------------------------- ------- ---- 4. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 2005 2004 £ £ This is stated after charging/(crediting): Auditors' remuneration - group 16,800 12,400 Auditors' remuneration - company 8,400 8,000 Depreciation - owned assets 35,792 563 Profit on disposal of fixed assets - (251) ------------------------------ ------ ------- Amounts were charged by the group auditors of £1,500 in 2005 £1,500) in (2004: 5. respect of non- audit services. TAXATION ON ORDINARY ACTIVITIESNo charge to taxation arises in the current year as the company has incurredlosses. No deferred tax asset has been recognised on accumulated tax losses asthe recoverability of any assets is not likely in the foreseeable future. At theyear-end deferred tax assets totalling £406,000 (2004: £216,000) were notrecognised. Current tax reconciliation 2005 2004 £ £Loss on ordinary activities before tax (532,316) (245,586) -------- ------Current tax at 30% (2004: 30%) (159,695) (73,676)Effects of: Transfer to deferred tax asset (not recognised) (159,695) 73,676Expenses not deductible for tax purposes - - -------- ------Total current tax charge - - -------- ------ 6. EMPLOYEE INFORMATION The average monthly number of persons, including executive directors, employedby the group during the year was: 2005 2004 Number NumberManagement and administration 5 2Operatives 170 62 -------- ------ 175 64 -------- ------Staff costs for the above persons: £ £Wages and salaries 387,550 23,088Social security costs 1,587 2,912Other pension costs 1,407 620 -------- ------ 390,544 26,620 -------- ------Capitalised as deferred development expenditure 341,527 -Charged to profit and loss account 49,017 26,620 -------- ------ 390,544 26,620 -------- ------Pension fundsPensions are provided for salaried employees of African Gold Zimbabwe (Private)Limited through the Mining Industry Pension Fund, which is independentlyadministered as a money purchase scheme. The subsidiary's obligations under thescheme are limited to 5% of pensionable emoluments on the lower level employeesand 10% on senior management. The fund is subject to an actuarial valuation thelast of which, carried out at 31 December 2003, revealed that this fund wasactuarially sound. In addition all employees of the subsidiary are members of the National SocialSecurity Authority scheme. Contributions are limited to specific contributions,currently 3% of pensionable emoluments. All contributions are charged to theprofit and loss account in the year to which they relate. 7. DIRECTORS' EMOLUMENTS 2005 2004 £ £ Fees for professional services rendered by directors 110,000 51,667 Pensions - - -------- ----- 8. LOSS PER SHARE Basic earnings per share is computed by dividing the profit or loss aftertaxation for the year available to ordinary shareholders by the sum of theweighted average number of ordinary shares in issue and ranking for dividendduring the period. Diluted earnings per share is computed by dividing the profitor loss after taxation for the year by the weighted average number of ordinaryshares in issue, adjusted for the effect of all dilutive potential ordinaryshares that were outstanding during the year. The following sets forth the computation for basic and diluted earnings pershare (EPS): 2005 2004 £ £ --------- --------Numerator Numerator for basic EPS retained loss (532,316) (245,586) --------- --------Denominator Number NumberDenominator for basic EPS 266,876,212 166,648,348Effect of diluted securities - options 27,540,000 19,140,000 --------- -------- 294,416,212 185,788,348 --------- --------Basic EPS (0.20p) (0.15p)Diluted EPS (0.20p) (0.15p) --------- --------The basic and diluted loss per share are the same as the effect of theoutstanding share options is anti-dilutive and therefore excluded. 9. TANGIBLE ASSETS Mining Plant Motor Total Interests and Vehicles EquipmentGROUP £ £ £ £Cost At 1 April 2004 9,197 7,678 34 16,909Exchange movements (2,765) (2,309) (10) (5,084)Additions 90,353 137,385 75,161 302,899 ------- --------- ------- ------At 31 March 2005 96,785 142,754 75,185 314,724 ------- --------- ------- ------Depreciation 386 549 22 957At 1 April 2004Exchange movements (115) (165) (7) (287)Charge for year 6,014 14,741 15,037 35,792 ------- --------- ------- ------At 31 March 2005 6,285 15,125 15,052 36,462 ------- --------- ------- ------Net Book Value At 31 March 2005 90,500 127,629 60,133 278,262 ------- --------- ------- ------At 31 March 2004 8,811 7,129 12 15,952 ------- --------- ------- ------Mining interests at 1 April 2004 refer to the costs to date of acquiring anddeveloping the mines at Inez, Zimbabwe. At 31 March 2005, the net book value of the total tangible assets at the Inezmine, was £136,724 and at the mines in Ghana, was £141,538. As outlined further in Note 10, the value of the group's tangible assets inGhana is dependent on the successful development of economic mineral reserves. 10. INTANGIBLE ASSETS Deferred Development Expenditure Group Company £ £ Cost At 1 April 2004 251,230 251,230 Additions 4,256,043 - Acquisitions 1,459,537 - Transferred to subsidiary company - (251,230) -------- ------- At 31 March 2005 5,966,810 - -------- ------- Net Book Value 5,966,810 - At 31 March 2005 -------- ------- At 31 March 2004 251,230 251,230 -------- -------Deferred development expenditure relates to prospecting and exploration inGhana. The directors have reviewed the deferred development expenditure at 31 March2005 and based on valuations prepared by third party consulting geologists, aresatisfied that the value at the balance sheet date of the intangible asset isnot less than book value. The realisation of this intangible fixed asset is dependent on the successfuldevelopment of economic ore reserves. Should this prove unsuccessful, the valueincluded in the balance sheet would be written off. 11. INVESTMENTS Group Company Group Company 2005 2005 2004 2004 £ £ £ £At cost; unlisted - - - -Opening balance---------------------- ----------------------Additions: Subsidiaries acquired, (Note 21) - 1,459,537 - - ---------------------- ----------------------Closing balance - 1,459,537 - ----------------------- ----------------------As outlined further in Note 10, the value of the company's investments insubsidiaries is dependent on the successful development of economic mineralreserves. The subsidiaries of the company at 31 March 2005, which have been consolidated,were:Company Percentage Total allotted Country of Name Ownership Capital incorporation Nature and operations of business African Gold 100% 20,000,000 Ordinary Zimbabwe Mining andZimbabwe Shares of exploration(Private) Limited Z$1 each for gold African Gold (Ireland) 100% 2 Ordinary Shares Republic of DormantLimited of €1.269738 each Ireland Inez Mine (Private) 2 Ordinary Shares Zimbabwe DormantLimited 100% of Z$1 each Owere Mines Limited* 70% 90,000 Ordinary Ghana Mining and Shares of 1 Cedis exploration each for gold Alpina Group Limited 100% 16,500 Ordinary British Virgin Holding Shares of US$1 each Islands Company Alpinore Limited* 100% 99,000 Ordinary Ghana Mining and Shares of 1,000,000 exploration Cedis each for gold * Indirectly held. 12. STOCKS Group Group 2005 2004 £ £Raw materials 9,949 222 In the opinion of the directors, the replacement costs of stock does not differsignificantly from the amounts shown above. 13. DEBTORS Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Other debtors: - due within one year 63,560 - 2,590 - Amounts owed by group undertakings: - after more than one year - 4,366,729 - 2,562 ------------------------------------------------------ 63,560 4,366,729 2,590 2,562 -------------------------------------------------------As outlined further in Note 10, the value of amounts owed to the company bygroup undertakings is dependent on the successful development of economicmineral reserves. 14. CREDITORS :(Amounts falling due within one year) Group Company Group Company 2005 2005 2004 2004 £ £ £ £Trade creditors 312,286 - 10,943 -Other creditors 118,884 52,171 32,430 26,126Accruals 145,004 106,098 57,257 57,257 -------- -------- -------- ------ 576,174 158,269 100,630 83,383 -------- -------- -------- ------ 15. CALLED-UP SHARE CAPITAL Authorised1,000,000,000 (2004: 1,000,000,000) ordinary shares of 1p each Allotted, Called-up and Fully Paid Opening balance 234,867,690 (2004: 138,789,923) ordinary shares of 1p each Issued during the year 77,530,199 (2004: 96,077,767) ordinary shares of 1p each Closing balance 312,397,889 (2004 : 234,867,690) ordinary shares of 1p each The aggregate consideration received in respect of the 77,530,199 (2004:96,077,767) shares issued during 2005 was £4,515,531 (2004: £2,988,286) and theshares were issued to acquire exploration assets and to meet the on-goingliabilities of the group, as summarised below. Movements in Issued Share CapitalDate Event Number Issued price of shares Sterling £8 June 2004 Cost of acquisition 17,000,000 0.081758 June 2004 Acquisition of licences 5,607,016 0.0817511 November 2004 Placing for cash 28,000,000 0.0513 December 2004 Acquisition of licences 2,623,183 0.0682513 January 2005 Exercise of warrants 5,000,000 0.0214 February 2005 Exercise of warrants 2,000,000 0.0218 March 2005 Placing for cash 17,300,000 0.06 A total number of 27,540,000 (2004: 19,140,000) share options were in issue at31 March 2005. These options are exercisable, at prices ranging between 1p and12.5p (being the market price at the time of issue of the share options), forthe period up to seven years from the date of granting the options unlessotherwise determined by the board. 16. SHARE PREMIUM ACCOUNT 2005 2004 £ £ At 1 April 2004 4,842,803 2,815,295 Arising on shares issued during the year 3,892,479 2,186,221 Share issues costs (123,986) (158,713) -------- ------- At 31 March 2005 8,611,296 4,842,803 -------- -------17. PROFIT AND LOSS ACCOUNT Group Company £ £ Accumulated deficit at 1 April 2004 (4,550,694) (4,551,918) Exchange gain on retranslation of opening 21,796 - reserves Loss for the year (532,316) (632,043) --------- --------- Accumulated deficit at 31 March 2005 (5,061,214) (5,183,961) --------A separate profit and loss account for the company has not been prepared aspermitted by Section 230 of the Companies Act 1985. 18. MATERIAL NON-CASH TRANSACTIONS There were no material non-cash transactions during the year other than as setout in note 15. 19. CASH FLOW STATEMENT(a) Reconciliation of operating loss to 2005 2004 net cash outflow from operating activities £ £ Operating loss (555,545) (243,889) Depreciation 35,792 563 Profit on disposal of assets - (251) Exchange movements 26,593 19,222 (Increase)/decrease in stocks (9,727) 229 (Increase)/decrease in debtors (60,970) 582 Increase/(decrease) in creditors 475,544 (33,548) -------- ------ (88,313) (257,092) -------- ------ (b) Analysis of net debt At 1 April At 31 March 2004 Cash flow 2005 £ £ £ Cash in hand and at bank 2,471,422 (1,539,768) 931,654 ------------------------- -------- ------- (c) Reconciliation of net cash flow to 2005 2004 movement in net debt £ £ (Decrease)/increase in cash in the year (1,539,768) 2,467,112 -------- -------- -------- Change in net funds resulting from cash flows (1,539,768) 2,467,112 Net funds at start of year 2,471,422 4,310 -------- -------- -------- Net funds at end of year 931,654 2,471,422 -------- ------- 20. RISK MANAGEMENT The group's financial instruments comprise cash balances and various items suchas trade debtors and trade creditors which arise directly from tradingoperations. The main purpose of these financial instruments is to raise financeto fund group operations. The group does not enter into any derivative transactions, and it is the group'spolicy that no trading in financial instruments shall be undertaken. The main financial risk arising from the group's financial instruments iscurrency risk. The board reviews and agrees policies for managing this risk andthey are summarised below. Interest rate riskAside from equity finance, the group finances its operations through aninsignificant level of lease financing. The group's exposure to interest raterisk is considered to be minimal. Financial assets:The group has no financial assets, other than short-term debtors and immaterialamounts of stock and cash at bank. Financial liabilities:None of the group's financial liabilities are subject to interest charges at 31March 2005 (2004 : Nil). Interest of £315 was paid on short term borrowingsduring the year on an overdraft facility. Liquidity riskAs regards liquidity, the group's policy has been to ensure continuity offunding primarily through fresh issues of shares. Short term funding is achievedthrough utilising overdraft facilities and optimising the management of workingcapital. Foreign currency riskAlthough the group is based in the UK, it has investments in overseassubsidiaries which operate in Zimbabwe and Ghana and whose revenues aredenominated in US Dollars. Expenditure in Zimbabwe is denominated primarily inZim dollars. Zimbabwe is a hyper-inflationary economy. The group's policy is toapply UITF 9 - "Accounting for Operations in Hyper-Inflationary Economies" inrespect of material assets and liabilities held in hyper-inflationary economies,however, as the operations in Zimbabwe are not material to the group, UITF 9 hasnot been applied. For consolidation purposes in these financial statements, theofficial exchange rate set by the Reserve Bank of Zimbabwe has been used. At 31March 2005 this rate was Sterling £1 : Zimbabwe Dollar $11,369 (2004 : Sterling£1 : Zimbabwe $7,949.83). Expenditure in Ghana is denominated in Ghana Cedis. The group's policy for dealing with exchange differences is outlined in note 1under the heading "Foreign Currencies". The group balance sheet is currentlyexposed to fluctuations in the Zim Dollar/Sterling exchange rates. 20. RISK MANAGEMENT (CONTINUED) Foreign currency risk (continued) The group does not presently utilise swaps or forward contracts to manage itscurrency exposures, although such facilities are considered and may be usedwhere appropriate in the future. The group seeks to minimise its exposure to currency risk by closely monitoringexchange rates, and restricting the buying and selling of currencies topredetermined exchange rates with specified bands. The functional currency of the majority of the group's operations is in GhanaCedis, and the reporting currency is Sterling pounds. The net currency exposureof the net (liabilities)/assets of the group at the balance sheet dates was asfollows: Ghana Total Zim dollars Stg pounds Cedis Euro £'000 £'000 £'000 £'000 £'000 31 March 2005 6,674 87 2,189 4,400 (2) 31 March 2004 2,641 (34) 2,634 - 41 Political RiskThe group's activities consist of gold production and other explorationactivities, primarily in Zimbabwe and Ghana, and are therefore subject to anumber of significant potential risks including: o Hyperinflation (Zimbabwe only)o Price fluctuationo Uncertainties over development and operational costs Operational and environmental riskso Political and government instabilityo The nature of such risks are that they fall outside the control and influence of the directors. 21. ACQUISITION OF SUBSIDIARY On 26 May 2004, the company completed the acquisition of Alpina Group Limited.The consideration in the acquisition was 17,000,000 ordinary shares at8.175p in African Gold plc. £ Details of the acquisition are as follows: -------Net assets acquired (at fair value) Exploration licences 1,459,537 -------Satisfied by: Shares allotted 1,389,750Cash 69,787 ------- 1,459,537 ------- 22. RELATED PARTY TRANSACTION An amount of £25,000 (2004: £61,361) was paid to Oliver Baring in respect ofcommission on share placings during the year. An amount of £5,295 was paid to First Africa (EA) Limited during the year forprofessional services. Oliver Baring is a director of First Africa (EA) Limited.At 31 March 2005, £10,589 was included in creditors in respect of amounts due toFirst Africa (EA) Limited for professional services (2004: £Nil). The group has availed of an exemption available in FRS8 from disclosingtransactions between group companies. 23. COMMITMENTS The group has various commitments to incur prescribed levels of explorationexpenditure in accordance with exploration licence agreements. 24. POST BALANCE SHEET EVENTS On 12 September 2005, trading in the company's shares on AIM was suspendedfollowing confirmation by the directors that negotiations were at an advancedstage to enter into an agreement to acquire the entire share capital of MwanaAfrica Holdings (Pty) Limited ("Mwana"), in exchange for shares of the company.Mwana holds mineral mining interests in Zimbabwe and the Democratic Republic ofthe Congo including the Bindura and Ashanti Mines. The acquisition, ifsuccessful would constitute a reverse take-over under AIM listing rules andwould be subject to shareholders' approval. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Asa Resources