5th Dec 2006 09:40
Falkland Gold and Minerals Ltd05 December 2006 Falkland Gold and Minerals Limited AUDITED PRELIMINARY RESULTS for the year ended 30 September 2006 Falkland Gold and Minerals Limited an AIM Company exploring for gold in theFalkland Islands announces its preliminary results for the year ended 30September 2006. Highlights • Exploration work now focusing on three areas - Target 11 (GloriousHill), Target 25 and Black Shale Project; • Project review with British Geological Survey confirms Black Shalemineral potential; • Second major ground magnetic survey completed - December 2005; • July to September - drilling continued through the winter with 11,445metres drilled in the year to Sept 2006; • Sample Preparation Laboratory upgrade finished in Q2 2006 with newdrying oven, crusher and pulveriser; • Cash balances just under £5.8m as at 30 Sept 2006; Enquiries: Falkland Gold & Minerals LimitedRichard Linnell (Chairman) +27 82 440 6710 Chairman's Statement This year has seen solid progress from the team in the Falkland Islands whichhas continued to conduct a professional exploration programme through the use ofgeochemical, geophysical and drilling techniques. The ground geochemistry work has continued with the use of a probe whichpenetrates the peat to take a sample of the soil and clay immediately below. Theresults of this help refine target definition (improving our ability to drillanomalies accurately). As at the end of October 2006, twelve of the original twenty three targets hadbeen drill tested and a total of 18,034 metres drilled with 7,856 samples sentfor analysis. As reported last year, the drilling has given our team a much betterappreciation of the geology. As a result, three new targets T22, T23, and T24were generated to the south of Area 6. The work completed on T22, T23 and T24involved ground magnetic surveys that provided definition of the intersection ofthe linear dykes with the carbonaceous shale that resulted in the drilling of 5holes in T22, 6 holes in T23 and 4 holes in T24. While it is not possible to claim that we have discovered any economicquantities of gold we have made good progress in focusing our attention on threetargets. These are Glorious Hill (Target 11), Target 25 (a new target locatedwithin Area 6 north east of Goose Green) and the Black Shale Project which iscontinuing to develop and here our focus is to confirm the potential of thisprospect. Drilling on these targets commenced in November 2006. The drilling programme, sub peat soil sampling, geochemical and a variety ofgeophysical programmes have isolated encouraging anomalies that, coupled withthe distribution of gold grains found during stream sediment sampling, give uscause to believe we are getting much closer to establishing the source of someof the gold. As was referred to in last year's Annual Report, the new Mining Legislation waspromulgated on 27 May 2005 and, as a result of our admission to AIM, our licencewas extended to 31 July 2009. We are required to relinquish 50 per cent of thelicence area by 16 January 2007 and the Board met in the Falklands in Novemberto discuss this and our plan has been submitted. Based on the work to date, webelieve the ground that we are releasing is sterile and that there is no purposein reapplying for it. Under the new legislation, the Company is also applying for three ExplorationLicences that will cover the three areas the work programme is now focused onwhile retaining our Prospecting Licence over the remaining land. The ExplorationLicences will provide the Company with new tenure that can be converted tomining licences in the future if required. We continue to pay close attention to the environment in which we operate andcareful rehabilitation takes place at all our work sites. The health and safetyof our team remains a high priority and our performance in the past year hasbeen good. Relationships, both with the local administration and with the local community,remain excellent and, as our Operations Manager reports, the new Governor hasalready been apprised of the exploration programme. Financially, your Company remains in a healthy position with good financialcontrols. The average monthly cash burn is £155,000 and cash balances at the endof the year were just under £5.8 million. During the year, funds associated with RAB Capital plc acquired the entireshareholdings of Falkland Islands Mineral Development Limited and South AtlanticResources Limited raising their stake to 62%. This matter was reported in ourpress release of 16 December 2005. While the performance of the share price has reflected our inability to releasepositive results, your Board's view is that the original premise for explorationremains valid and that this coming year could not only delineate the sources ofthe gold but also establish their potential viability. I would like to thank my deputy Chairman, David Hudd for his support and work inthe audit committee and the rest of the directors Mark Fresson, Rob Weinberg andPeter Bojtos. Special thanks go to Derek Reeves who heads up the Falkland operations and hasmaintained high levels of morale and performance during a long explorationperiod. Richard LinnellExecutive Chairman OPERATING REVIEW The exploration programme for the period 1 October 2005 to 30 September 2006 hasinvolved: • drilling 64 holes across 11 of the identified targets (11,445 m);• ground geophysical surveys;• soil geochemical sampling;• stream sediment geochemical sampling;• gold particle sample collection from streams and characterisation studies;• British Geological Survey (BGS) data review; and• shallow trenching at T11 and Area 6. Drilling Programme In total we have drill tested twelve of the original twenty three targets beingT1N, T2N, T2S, T5, T6, T7, T8W, T8E, T9N, T10, T12, and T15E. As a result ofthis work, four further targets have been identified - T22, T23, T24 and T25which have already been partially drilled. As a result of drilling targets T22and T23 and the review conducted by the BGS, the prospectivity for a mineraldeposit hosted by an identified zone within a carbonaceous black shaleassociated with a regional sedimentary unit has been highlighted. The BlackShale Project activities have led to the selection of ten key prospective areaswhich are being reviewed for further work in the forthcoming year. By the end of October 2006, a cumulative total of 18,034 metres of predominantlyHQ core had been drilled and 7,856 samples had been sent for assaying. Ground Magnetics and Geophysics The groundwork programme has extended beyond that originally planned at the dateof the November 2004 prospectus. So far, outside contractors have been used toconduct 2 major surveys. Between March and May 2005, a 1,500 line km survey wasperformed across targets T2S, T2N, T8E, T9N, T9S-1 to 3, T10, T18 and T20. Asecond, 1,676 line km survey was conducted in late 2005 across targets T1, T5,T7, T8W, T12, T15, T23 and T24. These surveys have allowed the refinement ofprospective targets and developed our understanding of the underlying geologyand structures. Further ground geophysics was planned over three areas with the methods to beused being Electro-Magnetic ("EM"), Induced Polarisation ("IP") and gravity. Thesurveys on Target 11 (Glorious Hill Prospect) and Target 25 were completed inOctober 2006. The surveys identified new anomalies in the target areas and theCompany has commenced the methodical testing of these anomalies by drilling. Sampling and Trenching We have been acquiring geochemical data on the soil/clay horizon in four of sixplanned areas being Target 11 ("Glorious Hill Prospect"), Target 9S, Area 6 andthe Warrah prospect. We are looking for a geochemical signature or 'halo' ofmineralised zones that are related to weathered mineral deposits. We have beenassaying for a range of minerals to identify concentration spikes of pathfinderelements such as arsenic, mercury, silver, antimony, copper and lead. This sampling method was successful in delineating a gold soil anomaly overTarget 11 that was confirmed by shallow trenching (nine trenches and over 2,400trench samples taken). This has been followed up with the ground geophysicalsurveys to delineate sub-surface targets that are currently being drill tested. Regional stream sediment geochemical sampling from streams to the north, southand west of the Target 11 area have identified several key areas that, oncurrent understanding, could represent an extension of a similar zone to thatidentified at Target 11. Work has been scheduled to follow up on these newareas. Five parcels of particulate gold have been collected from the streams drainingfrom Target 25 and Target 11 and were delivered to the BGS for characterisationstudy. A similar study was completed in the early stages of the Falkland Islandsexploration and this additional study has provided confirmation on the findingsof that earlier work. The studies have assisted in developing our understandingof the source of the gold. Both pieces of work concluded that the gold particlesare derived from an epithermal source and that in most cases the transportdistance is minimal indicating the source should be nearby. Review of Prospects The Board visited the Falkland Islands operations in November 2006 to review therelinquishment plan and the exploration prospects including viewing the threekey areas now being focused on - Target 25, Target 11 and the Black ShaleProject. Those prospects are considered in more detail below. Target 25 Target 25 is located at the base of Mt Usborne within the regional prospectknown as Area 6 and was originally identified from ground magnetic data acquiredin November 2005. This ground magnetic data identified an area of structuralinterest in association with a displaced north-south dolerite dyke. Target 25also "straddles" the upper reaches of two major streams from which goldparticles have been recovered. These particles have been characterised by theBritish Geological Survey as having a likely epithermal source. The current areaunder investigation is some 2.5 square kilometres in size. The recent ground geophysical survey was commissioned to provide additional dataof the structure and geology beneath the peat covered terrain that will allowfurther drilling to be planned to identify the source of the gold in thisprospect. The geophysical survey identified several conductors three of which exhibitstrong readings compared to the surrounding tillite rock unit. These conductorshave been classified as T25 Central, T25 North and T25 East and coincide withgeophysical gravity lows. The Company is now drilling to determine the source ofthe conductors. This should ascertain if the new targets are the source of thegold from this area or provide further geological data to assist in thedelineation of the gold source. An assessment of areas of low conductivity isalso in progress. The current drilling schedule allows for the drilling of several preliminaryholes in each of the three conductors. Once drilled the Company will then assessthe geology in the recovered core and be able to plan the follow-up drillingaccording to the prospectivity of each conductor. Target 11 - Glorious Hill Prospect As reported in the last operational update a gold in soils anomaly over Target11 was to be followed up with ground geophysical surveys to delineate asub-surface target that could be tested with the drill. The geophysical surveywas completed in October 2006 with the electromagnetic (EM) survey proving to bethe most effective in acquiring quality data due to the survey conditions andground conditions. The Company is currently focusing on an area of some 20 square kilometres withinwhich gold in soils anomalies exist. It is within this area that the conductorshave been identified from the EM survey. Five key conductors numbered from 1 to 5 in priority order have been segregatedfrom the survey. A drilling programme has been designed to commence testing ofthe anomalies, beginning with Anomaly 1. Drilling commenced in mid November withresults expected to be received in a progressive manner. The Company willre-design the drilling programme as and when required in order to continue thework to delineate the source of the gold. Work is continuing to compare the latest geophysical data to the existingdatabase in order to evaluate the extension of the gold anomalies to the northand south of the current defined area. Black Shale Project The Black Shale Project covers an area of some 16 square kilometres lying in alow valley to the South of the Area 6 region. The current database of geologicalfindings and assay results have allowed the generation of three conceptualstyled models of mineralisation: • "saddle-reef" like structures in the vicinity of the identified dolerite dykes and the major Goose Green Lineament that extends to and near Target 11; • mesothermal quartz veins - on contact with dykes and on contacts with the tillite and the shale; • black-shale hosted nickel-zinc-molybdenum-platinum group elements The work to date, including the drilling of 19 holes, has confirmed zones ofanomalous mineral chemistry that could be expected to exist in the vicinity ofthe conceptual models. The anomalous mineralisation is associated with a uniquezone varying from some 40 metres to 100 metres in width within the black shale(250 metres to some 380 metres thick). This zone is characterised by anincreased concentration of sulphides chiefly pyrite, high levels of carbonaceousmaterial, quartz and carbonate veining as well as folding and brecciation. Thezone has been termed the Carbonaceous Shale zone (CSH) and it is this zone thatwill be the focus of the Company's work in order to explore for and delineate aneconomic mineral concentration. The exploration focus will be where dykes and large fractures traverse the CSH.They act as conduits for fluids that can precipitate minerals immediatelyadjacent to the dykes and fractures within the CSH. Ten such areas have beenselected for exploration involving sub-peat soil sampling on closely spacedsample grids as well as possible electromagnetic surveys. Health and Safety The Company has maintained a high level of health and safety compliance in theperiod. Management continues to refine and amend policies as and when needed inorder to maintain the required standards of a company in the explorationindustry. It is pleasing to report that only 8 minor incidents have beendocumented since the start of operations with no lost time injuries to date. Government Relations The Company continues to develop the excellent working relationship with theFalkland Islands Government by inviting government officials to inspect theoperations on a regular basis. The newly appointed Governor of the Falkland Islands, HE Governor Alan Huckle,has been briefed on the operations and an invitation to inspect the explorationsites during the summer period has also been extended. Outline of Work in progress The exploration work underway and planned for the coming months comprises: • Drilling the newly identified geophysical anomalies at Target 25 andTarget 11; • Collecting soil samples to confirm the extension of the gold anomalyidentified at Target 11; • Collecting soil samples from West Falkland targets - Target 18; • Assessment and review of the data associated with the Black ShaleProject to confirm the potential of this unit to host a mineral deposit. Thereview will also involve the collection of sub-peat soil samples from areas ofstructural interest as well as conducting geophysical tests over a smallselected area to gauge the effectiveness of the geophysical techniques. Derek Reeves Operations Manager Profit and loss accountfor the year ended 30 September 2006 Note Year ended Year ended 30.9.06 30.9.05 £ £ Administrative expenses (1,524,800) (1,108,203) Operating loss 2 (1,524,800) (1,108,203) Interest receivable and similar income 262,289 324,843Interest payable and similar charges - (2,133)Other Income 22,820 - Loss on ordinary activities before (1,239,691) (785,493)taxation Tax on loss on ordinary activities 4 (127,103) - Loss for the financial year after taxation (1,366,794) (785,493) Loss for the year (1,366,794) (785,493) Year ended Year ended 30.9.06 30.9.05 Loss per ordinary share basic and diluted (1.75) p (1.09)p Continuing operations None of the Company's activities were acquired or discontinued during thecurrent year or previous period. Total recognised gains and losses The Company has no recognised gains or losses other than the losses for thecurrent year or previous period. Balance sheetat 30 September 2006 2006 2006 2005 2005 £ £ £ £Fixed assetsIntangible assets 1,834,282 1,158,218Tangible assets 442,132 537,938 2,276,414 1,696,156Current assetsDebtors 35,771 61,001Cash at bank and in hand 5,782,956 7,659,993 5,818,727 7,720,994Creditors: amounts falling due withinone year (136,427) (91,642) Net current assets 5,682,300 7,629,352 Net assets 7,958,714 9,325,508 Capital and reservesCalled up share capital 1,565 1,565Share premium 10,209,182 10,209,182Profit and loss account (2,252,033) (885,239) Shareholders' equity funds 7,958,714 9,325,508 Cash flow statementfor the year ended 30 September 2006 Year ended Year ended 30.9.06 30.9.05 £ £ Net cash outflow from operating (888,099) (869,413)activities Returns on investments and servicing offinanceInterest received 262,289 324,843Other Income 22,820 - Capital expenditurePurchase of intangible fixed assets (963,699) (534,127)Purchase of tangible fixed assets (183,245) (686,886) Cash outflow before financing (1,749,934) (1,765,583) FinancingIssue of Ordinary shares - 10,362,925Share issue costs - (1,113,482)Taxation (127,103) - (Decrease)/Increase in cash in the period (1,877,037) 7,483,860 Reconciliation of operating loss to net cash outflow from operating activities Year ended Year ended 30.9.06 30.9.05 £ £ Operating loss (1,524,800) (1,108,203)Depreciation and Amortisation 566,686 225,778Decrease/(increase) in debtors 25,230 (55,586)Increase in creditors 44,785 68,598 Net cash outflow from operating (888,099) (869,413)activities Reconciliation of movements in shareholders' equity fundsfor the year ended 30 September 2006 Year ended Year ended 30.9.06 30.9.05 £ £ Loss for the financial year (1,366,794) (785,493)New share capital subscribed (net of issue costs) - 9,300,693 Net addition to shareholders' equity funds (1,366,794) 8,515,200Opening shareholders' equity funds 9,325,508 810,308 Closing shareholders' equity funds 7,958,714 9,325,508 Notes to the Financial Statementsfor the year ended 30 September 2006 1. Basis for financial information The financial information has been prepared in accordance with UK accountingstandards as adopted by the Company, using the accounting policies set out inthe Annual Report for the year ended 30 September 2006. The financial information set out above does not constitute the Company'sstatutory accounts for the year ended 30 September 2006 or 2005 but is derivedfrom those accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies, and those for 2006 will be delivered following theCompany's Annual General Meeting. The auditors have reported on these accounts;their reports were unqualified and did not contain statements under theCompanies Act 1948, as applied in the Falkland Islands. 2. Loss per share The basic and diluted loss per ordinary share is based on losses of £1,366,794(12 months to 30 September 2005: £785,493) and the weighted average number ofordinary shares outstanding of 78,250,000 (30 September 2005: 72,227,260). There is no difference between the diluted loss per share and the basic loss pershare presented as the Company reported a loss for the period, in accordancewith Financial Reporting Standard Number 22 (FRS22), the share options in issueare not considered dilutive. 3. Dividends The Directors do not recommend payment of a dividend (2005: £nil). 4 Taxation Analysis of the tax charge Year ended Year ended 30.9.06 30.9.05 £ £Current tax:UK corporation tax: - - current 49,761 - - prior year 77,342 - Tax on loss on ordinary activities 127,103 - Factors that may affect future tax charges The Company has accumulated pre-trading expenditure carried forward amounting toapproximately £1.8m (2005: £0.9m). This may affect future tax charges should theCompany produce taxable trading profits in future periods. Copies of the Annual Report and Accounts will be posted to all shareholders.Further copies will be available from the Company's head office at 5Charterhouse Square, London, EC1M 6PX, United Kingdom. Telephone +44 (0) 20 72537670. The Report will also be published on the Corporate website atwww.fgml.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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