Interim Financial Results

RNS Number : 5371T

African Minerals Ltd

29 September 2010

 

For immediate Release

 

29 September 2010

 

African Minerals Limited

 

("African Minerals" "AML" or "the Company")

 

INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

African Minerals Limited (AIM:AMI), the iron ore project development company that is developing the Tonkolili project in Sierra Leone, West Africa, is pleased to announce its unaudited interim financial results for the six months ended 30 June 2010, including a review of the Company's operations.

 

HIGHLIGHTS

 

Tonkolili Iron Ore Project 

 

·; Tonkolili Magnetite JORC compliant Mineral Resource estimate increased to 10.5 Bt

·; Pilot Plant Metallurgy indicates potential production of a 70% Fe Magnetite concentrate, at a mass recovery of 26.5% containing low levels of impurities

·; Drilling programme commenced to establish JORC compliant Hematite Resource

·; Three Phase Strategy announced for the development of the Hematite, Saprolite and Magnetite Ore bodies at Tonkolili

 

 

Divestments

 

·; Divestment of Sierra Leone Hard Rock Ltd to Obtala Resources plc in exchange for 9.9% of Obtala's enlarged issued share capital to the value of US$6.9 million

 

Finance 

 

·; US$125 million underwritten cash placing of 20,000,000 shares at US$6.26 (£4.00) per share

·; China Railway Materials Commercial Corporation transaction completed following approval from Government of the People's Republic of China, raising equity of US$247 million for a 12.5% shareholding in AML

·; Cash at bank and short-term investments US$336 million as at 30 June 2010

 

Post period events

 

·; Revised MOU signed with Shandong Iron & Steel Group, China, for US$1.5 billion investment in the project at asset level together with an off take agreement 

·; Mining Lease granted by Government of Sierra Leone with unanimous ratification by Sierra Leone Parliament

·; Environmental Impact Assessment Licence awarded

·; Term sheet signed with Cape Lambert Resources Limited for refurbishment and sale of 33.33% of the Pepel to Marampa port & rail infrastructure for US$45 million

 

 

 

 

Enquiries:

African Minerals Limited	Tel: +44 (0) 1481 726833
Alan Watling Griselda Williams
Canaccord Genuity Limited	Tel: +44 (0) 20 7050 6500
Robert Finlay
Guy Blakeney
Mirabaud Securities Limited	Tel: +44 (0) 20 7878 3360
Rory Scott Pav Sanghara
Pelham Bell Pottinger Limited	Tel: +44 (0) 20 7861 3232
Klara Kaczmarek Philip Dennis

 

 

 

 

CHAIRMAN'S STATEMENT

 

The first half of 2010 has seen African Minerals make outstanding progress at our flagship Tonkolili iron ore project, establishing an exceptionally strong base from which to develop what we believe will be Africa's largest iron ore mining operation. Support from the Government of Sierra Leone, strategic partnership with the People's Republic of China, and the ongoing confidence of our shareholders have enabled African Minerals to initiate its three phase development strategy in order to bring Tonkolili into production by Q4 2011.

 

Our strong relationship with Sierra Leone was further enhanced when, in August, the national parliament unanimously voted in favour of the Mining Lease for the Tonkolili project and infrastructure. The Company was also awarded an Environmental Impact Assessment Licence for the project. Although these were necessary steps in bringing the mine into production, the overwhelming support received by the Government and Parliament of Sierra Leone is an endorsement of the mutual benefits that this project will bring and represents a major milestone in the Company's development. Establishment of the Fiscal Regime allows African Minerals to develop Tonkolili with greater financial clarity and to move forward with its three phase strategy to develop the port, rail and mine site facilities required to support the projects. We warmly thank His Excellency the President of the Republic of Sierra Leone, his Cabinet and the Members of Parliament for their support and we look forward to continuing our long-term relationship with the Government of Sierra Leone.

 

Over this accounting period we made a number of significant announcements, not least of which was the near doubling of our Resource to 10.5 billion tonnes, making the Tonkolili deposit the world's largest reported JORC compliant Magnetite Iron Ore mineral resource. We are currently undergoing an expedited drilling programme to establish a JORC compliant Hematite Resource overlaying our existing Magnetite Ore Resource. To date over 170,000 metres of diamond core drilling have been completed and the mine is being developed in preparation for our Phase 1 production. The Definitive Feasibility Study on the Magnetite Resource was paused in Q2 2010 to allow us to focus on our Hematite drilling programme. We plan to resume the DFS once an engineering study for the Hematite Resource has been completed towards year end 2010.

 

Central to our development programme is the three phase production strategy devised to target the DSO, Saprolite and Magnetite Iron Ore bodies at Tonkolili. The Company believes this three phase strategy will deliver the opportunity to self-fund part of the expansion of the project's production capacity from 10 mtpa up to 25 mtpa of Hematite product and then a further 45 mtpa of Magnetite product.

 

Phase I construction has already commenced, with the refurbishment of Pepel Port and existing narrow gauge railway infrastructure from Pepel to Lunsar, as well as the new rail construction from Lunsar up to Tonkolili. Phase I will create capacity for up to 10 mtpa, and the production of DSO Lump and Fines is due to commence in Q4 2011. As the true form of the mining project takes shape and we expand our production through Phases II and III, we will continue to focus on streamlining our operations to ensure that a low cost of production is achieved through maximising efficiencies in all aspects of our operations.

 

Having laid the foundations in 2009 and in the first six months of 2010, the Company is poised to become a significant producer of iron ore into the global market. Furthermore, levels of interest in West Africa's vast natural resources are steadily increasing, particularly with regard to the region's enormous potential to deliver iron ore projects of significant scale and quality.

 

At the level of the global market, we have witnessed many of the major iron ore players signing agreements, particularly with the rapidly developing nations of China and India, to guarantee buyers in newly discovered iron ore areas. Equally, large Chinese and Indian steel producers are seeking to secure a stable and reliable supply of raw materials to meet rising demand for steel in their own domestic markets. African Minerals has taken a keen interest in developing such strategic relationships with the ever growing Chinese infrastructure and steel companies.

 

The business was boosted during the first half of 2010 through a US$247 million investment agreement signed with China Railway Materials Commercial Corporation ("CRM"), a major integrated service provider in the railway industry and one of the leading three steel traders in China. The agreement with CRM secures financing for the first stage of iron ore production in the first years of operation. Furthermore, the agreement with CRM builds a strong foundation from which to secure funds for the second phase of production and opens the door to increased Asian investment into the business.

 

We also completed a US$125 million cash placing in February to support the construction of critical infrastructure required for the first phase of production at Tonkolili.

 

African Minerals has been successful in securing an MOU for US$1.5bn of development capital from Shandong Iron & Steel Group ("Shandong"), which will be used to develop the Tonkolili project and related infrastructure. Shandong is currently due to complete its due diligence process in October. Subject to the results of that due diligence and agreement on final documentation, the target date for signing the Subscription and Off-take Agreements with Shandong is 20 November 2010.

 

Upon the finalisation of financing arrangements, we intend to move forward with a plan that will see approximately US$ 1.75 billion of direct foreign investment into Sierra Leone over the next two years that will result in the development of the Tonkolili Project to the point where it can produce and export 35 million tonnes per year of Hematite Iron Ore product between the first and second phases. In future years, we and our strategic partners plan to expand the project further.

 

In addition to these financing arrangements we have also signed a Term Sheet with Cape Lambert Resources Ltd, to share infrastructure between Pepel and Marampa reducing the development requirements for both companies.

 

The Company has also streamlined and consolidated its portfolio and the business to focus our efforts and resources on Tonkolili. In January we transferred the entire issued share capital of Sierra Leone Hard Rock Ltd, our former license holder for our diamond operations in the country to Obtala Resources plc in return for 9.9% of their business. This investment allows us to benefit from an indirect exposure to the strengthening diamond market without requiring any further funding or management of any further diamond related activities by the Company.

 

During the first half of this year we welcomed Mr. Dermot Coughlan and Mr. Liu Guoping to the Board of Directors. Mr. Coughlan brings with him a wealth of operational, financial and corporate governance expertise in the manufacturing, engineering and mining industries, including experience at Rio Tinto plc and other major companies. He also brings with him significant advisory and board experience with some of the largest companies in the world, as well as having served on the boards of philanthropic, community and educational boards. We are already benefiting from his significant impact on the Board of African Minerals.

 

We were also very pleased to welcome Mr. Liu who joins the African Minerals' Board as a Vice-President with China Railway Materials Commercial Corporation. As a significant shareholder (12.3%) in the Company, we are sure CRM will continue to enhance the Company's partnerships in Asia and we look forward to Mr. Liu's contribution to the success of the Company.

 

We were sorry to see Mr. Craig Smith resign from his post as CFO and would like to thank Craig for the time and effort he has spent helping to develop the Company. We wish him well in the future.

 

OUTLOOK

The timing of the development of the Tonkolili project could not be better. Iron ore demand continues to rise and the Tonkolili project is set to lead iron ore supply out of the West African region.

 

In conclusion, we are enthusiastic and extremely positive about the future prospects for African Minerals as we continue to develop and grow into a producing iron ore company. Once again I would like to thank the Government and people of Sierra Leone for their continued support, as well as the Board of Directors for their unending commitment to the vision of the Company, and our Shareholders for their confidence in our project. Also, I would like to thank each employee for their hard work and dedication to strengthening and carrying this vision forward. I look forward to the next six months as we continue to build towards production in 2011.

 

Frank Timis,

Executive Chairman

 

 

OPERATIONAL REVIEW

 

African Minerals is very pleased to announce that having been awarded both the Mining Lease by the Government and Parliament of Sierra Leone as well as the Environmental Impact Assessment Licence, and having successfully raised over US$370 million of capital so far this year through the market and our strategic partnership with CRM, we have been able to commence expediting Phase I of our three phase development strategy and are making preparations to bring 10 mtpa of DSO Hematite Iron Ore into production by Q4 2011. The first half of this year has seen mine and infrastructure development in preparation for production move forward on budget and on schedule as we progress towards delivery of first ore on ship in 2011.

 

MINING

The first half of 2010 has seen African Minerals deliver a 10.5 Bt JORC Compliant Magnetite Iron Ore Resource in February, with pilot plant tonnage scale metallurgy indicating that the production of a 70% Fe concentrate with low levels of impurities is possible using a conventional Magnetite processing circuit.

 

A concerted drilling programme, which commenced in May, is currently underway to establish a JORC compliant resource for the Hematite Iron Ore body which overlays the Magnetite Resource. Currently management estimates potential resources of up to 200 Mt of Hematite DSO and 1.3 Bt of Saprolite Iron Ore, however this drilling is only expected to be completed by November this year, and results of the metallurgy testing currently being undertaken by BE Enterprises will follow shortly thereafter.

 

Our three phase production strategy, announced in June 2010, will enable African Minerals to address the three different Iron Ore bodies - Hematite DSO, Saprolite and Magnetite - in manageable stages and design, finance and construct the related infrastructure in conjunction with the mining of these different phases of the Tonkolili Iron Ore mineralisation. Phase I infrastructure and mine development have already begun and production of the Hematite DSO Lumps & Fines is due to commence in Q4 2011.

 

 Alongside the Hematite drilling programme, the mine site infrastructure is progressing successfully, with the construction of the interim mine camp, infrastructure pad and clearance work for the mine area preparation nearing completion.

 

The mine team will complete mining tender selection during Q3 and begin mobilising the mining fleet early in January in support of the mine haul road development, raw water dam construction and finally the tailings dam construction. The staged processing plant strategy is progressing well, with the manufacturing of the Stage 1 plant progressing in conjunction with the second stage fixed plant moving into the procurement phase during October to allow successful completion in Q3 of 2011.

 

The trial pit activities move into operations in support of further large scale geological model validation, with the mining activities poised for Q4 2010 operations.

 

 

INFRASTRUCTURE

 

RAIL

Our Phase I all-rail solution development commenced in May of this year, with the rehabilitation of the existing 74km of railway from Pepel Port to Lunsar, and the construction of the new 126km railway line from Lunsar to Tonkolili. This work is being carried out by four contractors, with RACEC rehabilitating the existing rail infrastructure, and WHBO, Dawnus, and Basil Read constructing the rail road alignment and formation between Lunsar and Tonkolili, using engineering designs prepared by WorleyParsons and Jeffares & Green. This work is currently on schedule and on budget. Rail and sleepers are currently being shipped to Sierra Leone and due for arrival imminently, whilst our first two locomotives are currently being constructed in South Africa. Construction of the ore cars is about to be awarded this month.

 

We are pleased to announce that our first construction locomotive was delivered to Sierra Leone on 2nd September 2010, and was greeted by the President of Sierra Leone in a welcoming ceremony at the main port in Freetown.

 

PORT

Pepel Port rehabilitation is well underway and will be designed to handle a capacity of 10mtpa of DSO Hematite Iron Ore for Phase I. The port materials handling infrastructure has been designed by ELB. Clearance work in preparation for the construction of the stockyard and port operating facilities is progressing on schedule as is the development of the offices and campsite at the port. Civil concrete contractors have mobilised this month, in preparation for the structural and mechanical contractors who will mobilise in November to construct the conveyor gantries and transition towers. Looking ahead, the stacker will arrive early in 2011and development has begun on the automation of the port operating plant. Contracts for dredging services and marine engineering are in final negotiations as is the contract for transhipment services.

 

In addition to this work at Pepel for Phase I, we have also commenced preparation work for the design and development of Phase II's Tagrin Point Port. The Marine and Landside geotechnical work, environmental & social baseline studies are well advanced in support of the engineering design for Phase II.

 

HEALTH & SAFETY

African Minerals has a clear vision in all matters of HSE&S and Risk, which will enable us to match best practices within the mining industry and, wherever possible, exceed them. AML aims to set the benchmark standard for West Africa and become the mining operation of choice for professionals in this region. Our goal is to ensure a consistent level of good Health, Safety, Security, Risk and Emergency Response management in the short term, by applying a risk based approach. This year we have conducted a full review and restructuring of HSE&S, and put key management in place to cover all our strategic positions. We have implemented a structured incident reporting/response procedure, and engaged an international standard emergency evacuation service provider. Going forward we plan to develop comprehensive capacity to support the requirements of our expanding construction phase, and at the same time plan for the implementation of the operational mining phase of AML in Sierra Leone.

 

ENVIRONMENT

African Minerals' commitment to the environment is unparalleled. Meeting the government and licensing demands and continuing to first and foremost protect the environment in which we work, AML has ongoing biodiversity offset programmes for mitigation and enhancement currently underway. During 2010 an ESHIA for Phase I was completed and the Environmental Impact Assessment Licence was granted by the Government of Sierra Leone in conjunction with the Mining Lease.

 

CORPORATE & SOCIAL

African Minerals continues to build strong relationships with national and local governments and organizations. Consultation Committees have been established in seven chiefdoms to manage community needs for Phase I project activities; crop compensation amounts have been agreed through consultation with affected parties and the Ministry of Agriculture, Forestry and Food Security; a Social Impact Assessment for Phase I has been completed including a Stakeholder Engagement Plan, Community Development Action Plan and a Resettlement Policy Framework and employment offices are currently being opened up in three key chiefdoms to provide easier access for communities to AML job opportunities. We have helped the community through employment programmes, by donating building supplies to youth groups and providing a generator for non-stop broadcasting of a radio station. African Minerals continues to support our ongoing scholarship programme for school children and provision of education facilities in the project areas. We are also focussed on providing infrastructure and facilities to improve local health through the building of potable water wells, supporting the improvement of health facilities and working to assist with the central eradication of malaria in the region.

 

The projects already provide substantial employment opportunities for the people of Sierra Leone and, with our development plans approved, we look forward to the time when we will become the largest tax payer in Sierra Leone and a major contributor to the Country's redevelopment and improved standards of living.

 

FINANCIAL REVIEW

 

The financial performance of the Company for the six month period to 30 June 2010 mainly reflects expenditure on the development of the Company's iron ore assets in Sierra Leone.

 

Loss after taxation for the six month period ended 30 June 2010 was US$31.5 million (2009: US$5.1 million). Loss per share was 13.6 US cents (2009: 2.7 US cents).

 

The total assets of the Group amounted to approximately US$599 million (2009: US$157 million) as at the period end, which includes intangible assets amounting to approximately US$121 million (2009: US$87 million)and tangible fixed assets amounting to approximately US$81 million (2009: US$12 million). Intangible assets relate to accumulated deferred exploration and evaluation costs in respect of the Company's licence interests in Sierra Leone. The Company's accounting policy is to capitalise these costs pending determination of the feasibility of the project to which they relate.

 

As at 30 June 2010, the Company had cash and short-term investments of US$336 million (2009: US$9.6 million).

 

 

 

The information in this press release that relates to magnetite metallurgy is based on information compiled and reviewed by Rodney Elvish, who is a Fellow and CPMet of the Australasian Institute of Mining and Metallurgy ("AusIMM"). Mr. Elvish is an independent consultant to the Company, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Elvish has reviewed this press release and consents to the inclusion in the press release of the matters based on his information in the form and context in which this appears.

 

The information in this press release that relates to geological exploration is based on information compiled by Marcus Reston, who is a Fellow of the Geological Society of London ("FGS"), and a Member of the Australian Institute of Geoscientists ("AIG"). Mr Reston General Manager: Geology & Exploration, is a full-time employee of the Company, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr. Reston has reviewed this press release and has consented to the inclusion in this press release of the matters based on his information in the form and context in which this appears.

 

INDEPENDENT REVIEW REPORT TO AFRICAN MINERALS LIMITED

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

 

 

 

SHIPLEYS LLP

Chartered Accountants

London, UK

28 September 2010

AFRICAN MINERALS LIMITED

CONSOLIDATED INCOME STATEMENT

For the six month period ended 30 June 2010

 

		Period ended		Period ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
	Note	US$		US$		US$
Continuing Operations
Revenue		534,905		160,727		160,727
Cost of sales		(452,893)		-		-
Gross profit		82,012		160,727		160,727
Impairment of intangible fixed assets	6	(3,858,705)		-		-
Net operating expenses	4	(35,101,813)		(4,167,186)		(1,812,138)
Profit on disposal of subsidiary		-		2,193,116		13,594,833
Operating (loss)/profit		(38,878,506)		(1,813,343)		11,943,422
Dividend receivable		7,347,477		-		-
Finance income		26,723		116,708		191,619
(Loss)/profit before tax		(31,504,306)		(1,696,635)		12,135,041
Tax		-		-		-
(Loss)/profit from continuing operations		(31,504,306)		(1,696,635)		12,135,041
Discontinued Operations
Loss for the period from discontinued operations		-		(3,422,723)		(26,011,707)
Loss for the period		(31,504,306)		(5,119,358)		(13,876,666)
Other comprehensive income		-		-		-
Total comprehensive loss for the period		(31,504,306)		(5,119,358)		(13,876,666)
Attributable to equity holders of the parent		(31,504,306)		(5,119,358)		(13,876,666)
Basic loss per share - cents	5	(13.61)		(2.73)		(6.95)
Basic earnings/(loss) per share continuing activities - cents	5	(13.61)		(0.90)		6.07
Diluted loss per share - cents	5	(13.61)		(2.73)		(6.95)
Diluted earnings/(loss) per share continuing activities - cents	5	(13.61)		(0.90)		5.78

 

 

 

AFRICAN MINERALS LIMITED

CONSOLIDATED BALANCE SHEET

At 30 June 2010

 

		30 June		30 June		31 December
		2010		2009		2009
	Note	US$		US$		US$
Non-current assets
Intangible fixed assets	6	121,311,475		86,822,911		83,506,886
Tangible fixed assets	7	80,863,103		12,656,707		4,874,362
Total non-current assets		202,174,578		99,479,618		88,381,248
Current assets
Inventories		1,190,289		2,748,812		1,587,022
Trade and other receivables		15,402,957		28,877,727		22,378,452
Financial assets at fair value through profit or loss		44,291,304		16,731,768		42,207,102
Short-term investments		330,000,000		-		71,742,400
Cash and cash equivalents		6,089,227		9,629,563		4,904,921
Assets of disposal group classified as held for sale		-		-		7,388,947
Total current assets		396,973,777		57,987,870		150,208,844
Total assets		599,148,355		157,467,488		238,590,092
Equity
Share capital	8	2,725,426		1,876,924		2,136,396
Share premium account		667,188,491		210,810,325		310,055,096
Equity reserves		13,787,000		10,827,950		13,251,459
Profit and loss account		(124,252,726)		(87,276,557)		(95,597,009)
Attributable to equity holders		559,448,191		136,238,642		229,845,942
Minority interest		-		8,516,692		-
Total equity		559,448,191		144,755,334		229,845,942
Non-current liabilities
Provisions		773,268		1,165,364		731,094
Total non-current liabilities		773,268		1,165,364		731,094
Current liabilities
Trade and other payables		38,926,896		11,546,790		7,490,833
Liabilities of disposal group classified as held for sale		-		-		522,223
Total current liabilities		38,926,896		11,546,790		8,013,056
Total liabilities		39,700,164		12,712,154		8,744,150
Total equity and liabilities		599,148,355		157,467,488		238,590,092

 

 

 

AFRICAN MINERALS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

For the six month period ended 30 June 2010

 

		Period ended		Period ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
		US$		US$		US$
Loss for the period		(31,504,306)		(5,119,358)		(13,876,666)
Share-based payments		4,267,057		2,523,109		5,383,474
Depreciation of tangible fixed assets		421,698		2,464,080		4,795,445
Amortisation of intangible fixed assets		-		1,404,285		-
Impairment of intangible fixed assets		3,858,705		-		19,320,508
Loss on disposal of tangible fixed assets		-		-		592,594
Profit on disposal of subsidiary		-		(2,193,116)		(13,594,833)
Profit on disposal of financial assets		(59,535)		-		-
Decrease/(increase) in financial assets at fair value
through profit or loss		16,842,288		(3,241,433)		(15,070,620)
Unrealised foreign exchange (gain)/loss		2,887,256		(1,752,149)		(2,967,778)
Dividend receivable		(7,347,477)		-		-
Interest received		(26,723)		(116,708)		(191,619)
Operating cash flow before working capital changes		(10,661,037)		(6,031,290)		(15,609,495)
Decrease/(increase) in inventories		396,733		(1,028,626)		(1,248,578)
Increase in trade and other receivables		(763,643)		(6,385,311)		(4,799,977)
Increase in provisions		42,174		-		58,281
Increase in trade and other payables		31,436,063		5,846,634		1,820,306
Net cash flow from operating activities		20,450,290		(7,598,593)		(19,779,463)
Cash flows from investing activities
Interest received		26,723		116,708		191,619
Proceeds of sales of tangible assets		-		-		1,125,127
Proceeds on disposal of financial assets		199,128		-		-
Payments to acquire tangible assets		(76,410,439)		(464,833)		(920,911)
Payments to acquire intangible assets		(41,663,294)		(11,466,829)		(32,516,393)
Investment in subsidiary		-		11		-
Increase in short term deposits with banks		(258,257,600)		-		(71,742,400)
Net cash inflow/(outflow) from investing activities		(376,105,482)		(11,814,943)		(103,862,958)
Cash flows from financing activities
Proceeds of ordinary share issue		355,037,287		-		98,995,407
Proceeds of exercise of options		1,652,742		183,934		692,770
Proceeds of exercise of warrants		149,469		-		-
Net cash inflow from financing activities		356,839,498		183,934		99,688,177
Net increase/(decrease) in cash and cash equivalents		1,184,306		(19,229,602)		(23,954,244)
Cash and cash equivalents at beginning of period		4,904,921		28,859,165		28,859,165
Cash and cash equivalents at end of period		6,089,227		9,629,563		4,904,921

 

 

AFRICAN MINERALS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six month period ended 30 June 2010

 

		Share		Profit and
	Share	premium	Equity	loss
	capital	account	reserves	account	Total
	US$	US$	US$	US$	US$
As at 1 January 2010	2,136,396	310,055,096	13,251,459	(95,597,009)	229,845,942
Allotments during the period	589,030	373,991,060	(829,047)	-	373,751,043
Issue expenses - shares	-	(16,911,545)	-	-	(16,911,545)
Share-based payments	-	-	4,267,057	-	4,267,057
Reserves transfer - options	-	-	(2,848,589)	2,848,589	-
Reserves transfer - warrants	-	53,880	(53,880)	-	-
Loss for the period	-	-	-	(31,504,306)	(31,504,306)
As at 30 June 2010	2,725,426	667,188,491	13,787,000	(124,252,726)	559,448,191
As at 1 January 2009	1,875,174	209,136,256	9,942,383	(82,302,856)	138,650,957
Allotments during the period	1,750	182,184	-	-	183,934
Share-based payments	-	-	2,523,109	-	2,523,109
Reserves transfer - options	-	-	(145,657)	145,657	-
Reserves transfer - warrants	-	1,491,885	(1,491,885)	-
Loss for the period	-	-	-	(5,119,358)	(5,119,358)
As at 30 June 2009	1,876,924	210,810,325	10,827,950	(87,276,557)	136,238,642

 

AFRICAN MINERALS LIMITED

NOTES TO THE INTERIM FINANCIAL STATEMENTS

For the six month period ended 30 June 2010

 

1. ACCOUNTING POLICIES

The interim financial statements, which are unaudited, have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" adopted by the International Accounting Standards Board (IASB). This interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 31 December 2009 and any public announcements made by the Company during the interim reporting period.

 

The unaudited interim financial statements for the six months ended 30 June 2010 do not constitute statutory accounts and have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2009.

 

The financial information for the year ended 31 December 2009 has been extracted from the statutory accounts for that period. The auditors' report for the year ended 31 December 2009 was unqualified.

 

The financial information for the six months ended 30 June 2009 has been extracted from the interim results released to 30 June 2009 and amended where necessary to separately disclose the results of continuing and discontinued operations.

 

2. DIVIDENDS

 

No dividends were paid or proposed during the period.

 

3. SEGMENT REPORTING

 

		Gold and
Business Segments	Iron Ore	base metals	Diamonds	Infrastructure	Corporate	Total
Period ended 30 June 2010	US$	US$	US$	US$	US$	US$
Revenue	-	534,905	-	-	-	534,905
Operating loss	(374,240)	(2,042,715)	-	(1,269,226)	(35,192,325)	(38,878,506)
Dividend receivable	-	-	-	-	7,347,477	7,347,477
Finance income	-	-	-	-	26,723	26,723
Tax	-	-	-	-	-	-
Loss for the period	(374,240)	(2,042,715)	-	(1,269,226)	(27,818,125)	(31,504,306)
Total assets	157,530,369	9,116,113	-	34,401,470	398,100,403	599,148,355
Total liabilities	2,445,116	15,691	-	775,382	36,463,975	39,700,164
Cash utilised in operations	1,928,791	515,628	-	16,040	17,989,831	20,450,290
Cash flows from investing	(93,219,060)	-	-	(24,854,673)	(258,031,749)	(376,105,482)
Cash flows from financing	-	-	-	-	356,839,498	356,839,498
Net movement in cash and cash equivalents	(91,290,269)	515,628	-	(24,838,633)	116,797,580	1,184,306
Payments to acquire tangible assets	(51,589,212)	-	-	(24,821,227)	-	(76,410,439)
Payments to acquire intangible assets	(41,629,848)	-	-	(33,446)	-	(41,663,294)
Depreciation of tangible fixed assets	376,189	828	-	8,408	36,273	421,698
Amortisation of intangible fixed assets	-	-	-	-	-	-
Impairment of intangible fixed assets	-	2,576,119	-	1,282,586	-	3,858,705

 

 

Geographical segments	Sierra Leone	Canada	Bermuda	UK	Guernsey	Total
Period ended 30 June 2010	US$	US$	US$	US$	US$	US$
Revenue	534,905	-	-	-	-	534,905
Total assets	204,645,625	127,929	392,991,106	719,058	664,637	599,148,355
Total liabilities	3,732,389	-	34,170,889	293,108	1,503,778	39,700,164
Cash utilised in operations	2,396,224	-	19,027,628	(469,593)	(503,969)	20,450,290
Cash flows from investing	(118,073,732)	-	(258,031,802)	16	36	(376,105,482)
Cash flows from financing	-	-	356,839,498	-	-	356,839,498
Net movement in cash and cash equivalents	(115,677,508)	-	117,835,324	(469,577)	(503,933)	1,184,306
Payments to acquire tangible assets	(76,410,439)	-	-	-	-	(76,410,439)
Payments to acquire intangible assets	(41,663,294)	-	-	-	-	(41,663,294)
Depreciation of tangible fixed assets	399,211	-	-	14,074	8,413	421,698
Amortisation of intangible fixed assets	-	-	-	-	-	-
Impairment of intangible fixed assets	1,282,586	2,576,119	-	-	-	3,858,705

 

 

		Gold and
Business Segments	Iron Ore	base metals	Diamonds	Infrastructure	Corporate	Total
Period ended 30 June 2009	US$	US$	US$	US$	US$	US$
Revenue	-	-	160,727	-	-	160,727
Operating loss	(873,212)	(16,347)	160,727	(1,207)	(1,083,304)	(1,813,343)
Finance income	-	-	-	-	116,708	116,708
Tax	-	-	-	-	-	-
Loss for the period from discontinued operations	-	-	(3,422,723)	-	-	(3,422,723)
Loss for the period	(873,212)	(16,347)	(3,261,996)	(1,207)	(966,596)	(5,119,358)
Total assets	76,524,782	11,713,497	27,660,387	4,985,333	36,583,489	157,467,488
Total liabilities	1,020,795	531,370	497,993	153,452	10,508,544	12,712,154
Cash utilised in operations	(1,108,989)	(313,386)	(326,196)	2,707	(5,852,729)	(7,598,593)
Cash flows from investing	(9,076,765)	(816,096)	(50,073)	(1,941,852)	69,843	(11,814,943)
Cash flows from financing	-	-	-	-	183,934	183,934
Net movement in cash and cash equivalents	(10,185,754)	(1,129,482)	(376,269)	(1,939,145)	(5,598,952)	(19,229,602)
Payments to acquire tangible assets	326,642	-	11,252	80,074	46,865	464,833
Payments to acquire intangible assets	8,750,134	816,096	38,821	1,861,778	-	11,466,829
Depreciation of tangible fixed assets	917,462	3,397	1,496,499	12,010	34,712	2,464,080
Amortisation of intangible fixed assets	-	-	1,404,285	-	-	1,404,285
Impairment of intangible fixed assets	-	-	-	-	-	-

 

 

Geographical segments	Sierra Leone	Canada	Bermuda	UK	Guernsey	Total
Period ended 30 June 2009	US$	US$	US$	US$	US$	US$
Revenue	-	-	160,727	-	-	160,727
Total assets	121,915,717	3,035,295	31,807,235	387,559	321,682	157,467,488
Total liabilities	2,164,105	488,704	9,639,308	97,238	322,799	12,712,154
Cash utilised in operations	(3,079,089)	-	(2,245,105)	(869,411)	(1,404,988)	(7,598,593)
Cash flows from investing	(10,952,582)	(932,204)	116,621	(14,752)	(32,026)	(11,814,943)
Cash flows from financing	-	-	183,934	-	-	183,934
Net movement in cash and cash equivalents	(14,031,671)	(932,204)	(1,944,550)	(884,163)	(1,437,014)	(19,229,602)
Payments to acquire tangible assets	417,968	-	-	14,819	32,046	464,833
Payments to acquire intangible assets	10,534,625	932,204	-	-	-	11,466,829
Depreciation of tangible fixed assets	2,464,080	-	-	-	-	2,464,080
Amortisation of intangible fixed assets	1,404,285	-	-	-	-	1,404,285
Impairment of intangible fixed assets	-	-	-	-	-	-

 

4. NET OPERATING EXPENSES

 

	Period ended		Period ended		Year ended
	30 June		30 June		31 December
	2010		2009		2009
	US$		US$		US$
Depreciation of tangible fixed assets	421,698		2,464,080		4,795,445
Depreciation of tangible fixed assets
transferred to disposal group	-		(1,496,599)		(2,917,394)
Loss on disposal of tangible fixed assets	-		-		592,594
Employee costs	1,224,426		1,693,648		5,872,123
Foreign exchange differences	8,439,305		(1,378,574)		(2,452,731)
Other operating charges	3,966,574		3,602,955		5,609,247
Profit on disposal of financial assets	(59,535)		-		-
Financial assets at fair value
through profit or loss - fair value losses	16,842,288		(3,241,433)		(15,070,620)
	30,834,756		1,644,077		(3,571,336)
Share-based payments:
Shares	1,107,673		-		-
Options (see note 9)	3,143,277		2,523,109		5,383,474
Warrants (see note 9)	16,107		-		-
	4,267,057		2,523,109		5,383,474
	35,101,813		4,167,186		1,812,138

 

5. LOSS PER SHARE

 

	Period ended		Period ended		Year ended
	30 June		30 June		31 December
	2010		2009		2009
	US$		US$		US$
Loss for the period	(31,504,306)		(5,119,358)		(13,876,666)
Continuing operations	(31,504,306)		(1,696,635)		12,135,041
Discontinued operations	-		(3,422,723)		(26,011,707)
Basic earnings/(loss) per share - cents
	Shares		Shares		Shares
Basic weighted average number of common shares in issue	231,403,129		187,528,629		199,628,275
Basic loss per share - cents	(13.61)		(2.73)		(6.95)
Basic earnings/(loss) per share continuing activities - cents	(13.61)		(0.90)		6.07
Diluted earnings/(loss) per share - cents
	Shares		Shares		Shares
Basic weighted average number of common shares in issue	231,403,129		187,528,629		199,628,275
Adjustment for share options	-		-		10,202,154
	231,403,129		187,528,629		209,830,429
Diluted loss per share - cents	(13.61)		(2.73)		(6.95)
Diluted earnings/(loss) per share continuing activities - cents	(13.61)		(0.90)		5.78

 

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period.

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares and dividing the profit attributable to equity holders of the company by the adjusted weighted average number of ordinary shares in issue during the period. For share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to outstanding share options.

 

6. INTANGIBLE FIXED ASSETS

 

					Total
					US$
Cost
At 1 January 2010					117,787,996
Additions					41,663,294
As at 30 June 2010					159,451,290
Amortisation
At 1 January 2010					34,281,110
Impairment					3,858,705
As at 30 June 2010					38,139,815
Net book value
At 30 June 2010					121,311,475
At 31 December 2009					83,506,886

 

Intangible fixed assets comprise of the cost of purchasing mineral exploration licences and certain deferred exploration expenditure on the Company's mineral licences. The Board of Directors regularly assesses the potential of each mineral licence and impairs any deferred exploration expenditure that it believes to be unrecoverable. The Board of Directors undertook an impairment review of the Group's intangible fixed assets as at 30 June 2010. The impairment charge for the current period was US$3,858,705 (2009: US$nil). The resultant impairment charges were as follows:

 

	Net book value		Net book value
	as at 30 June		as at 30 June
	2010 before		2010 after
	impairment	Impairment	impairment
	charge	charge	charge
Project	US$	US$	US$
Canada - nickel exploration	2,576,119	2,576,119	-
Sierra Leone - coal exploration	1,282,586	1,282,586	-
	3,858,705	3,858,705	-

 

7. TANGIBLE FIXED ASSETS

 

		Assets being		Plant &		Fixtures &
		constructed		machinery		fittings		Total
		US$		US$		US$		US$
Cost
At 1 January 2010		-		7,383,267		559,208		7,942,475
Additions		75,784,488		625,951		-		76,410,439
Transfer to intangible assets		-		-		-		-
Disposals		-		-		-		-
As at 30 June 2010		75,784,488		8,009,218		559,208		84,352,914
Depreciation
At 1 January 2010		-		2,802,992		265,121		3,068,113
Charge for the year		-		380,066		41,632		421,698
Disposals		-		-		-		-
As at 30 June 2010		-		3,183,058		306,753		3,489,811
Net book value
At 30 June 2010		75,784,488		4,826,160		252,455		80,863,103
At 31 December 2009		-		4,580,275		294,087		4,874,362

 

8. CALLED UP SHARE CAPITAL

 

		Period ended			Period ended
		30 June			30 June
	Number of	2010		Number of	2009
	shares	US$		shares	US$
Authorised
Common shares of US$ 0.01 each	350,000,000	3,500,000		350,000,000	3,500,000
Preference shares of US$ 0.001 each	100,000,000	100,000		100,000,000	100,000
Issued and fully paid
At 1 January	213,639,654	2,136,396		187,517,441	1,875,174
Allotments during the period	58,902,956	589,030		175,000	1,750
At 30 June	272,542,610	2,725,426		187,692,441	1,876,924

 

i. On 11 February 2010 20,000,000 new shares were issued by way of a placing for gross proceeds of US$125,288,000 before issue expenses of US$8,161,545.

ii. On 18 February 2010, 50,000 new common shares were issued for consideration of US$38,580 on the exercise of share options.

iii. On 9 March 2010, 133,333 new common shares were issued for consideration of US$101,323 on the exercise of share options.

iv. On 17 March 2010, 133,333 new common shares were issued for consideration of US$149,469 on the exercise of share warrants.

v. On 23 March 2010, 1,099,999 new common shares were issued for consideration of US$829,276 on the exercise of share options.

vi. On 19 April 2010, 50,000 new common shares were issued for consideration of US$38,443 on the exercise of share options.

vii. On 22 June 2010, 33,579,474 new common shares were issued for consideration of US$246,660,832 before expenses of US$8,750,000.

viii. On 22 June 2010, 3,000,000 new common shares with a value at grant date of US$839,973 were issued on the achievement of corporate objectives under the Employee Share Scheme.

ix. On 23 June 2010, 836,817 new common shares were issued for consideration of US$630,049 on the exercise of share options.

x. On 24 June 2010, 20,000 new common shares were issued for consideration of US$15,071 on the exercise of share options.

 

9. EQUITY RESERVES

 

a.) OPTIONS

The Group has issued share options under a share option scheme adopted by the Group on 5 November 2004. Movements in share options over US$ 0.01 common shares in the Company in the period were as follows:

				Number of options
As at 1 January 2010				16,648,455
Options granted in the period				3,000,000
Options exercised in the period				(2,190,149)
As at 30 June 2010				17,458,306

 

The stock-based compensation recognised as an expense in the period to 30 June 2010 was US$3,143,277 (2009: US$2,523,109). A transfer of US$2,848,589 was made from the equity reserve to the profit and loss reserve during the period (2009: US$145,657). This represented the reversal of the charge previously made through the Income Statement for options exercised during the period.

 

b.) WARRANTS

Movements in warrants over US$ 0.01 common shares in the Company in the period were as follows:

				Number of warrants
As at 1 January 2010				266,667
Warrants exercised in the period				(133,333)
As at 30 June 2010				133,334

 

The stock-based compensation recognised as an expense in the period to 30 June 2010 was US$16,107 (2009: US$nil). In the period a transfer of US$53,880 (2009: US$nil) was made from the equity reserve to the share premium account representing the reversal of the charge made against the share premium account prior to 2010 for warrants exercised in the period. In the period, a transfer of US$nil (2009: US$1,491,885) was made from the equity reserve to the share premium account representing the reversal of the charge made against the share premium account prior to 2010 for warrants lapsed in the period.

 

10. POST BALANCE SHEET EVENTS

 

On 13 July 2010, the Company announced that it had entered into a strategic, binding Memorandum of Understanding with Shandong Iron & Steel Group Co Limited in respect of its iron ore project at Tonkolili and the related infrastructure projects.

 

11. RELATED PARTY TRANSACTIONS

 

During the six month period ended 30 June 2010 the following related party transactions occurred:

 

Rent and administration services, excluding VAT, amounting to US$272,471 (2009: US$57,473) and security deposits amounting to US$31,472 (2009: US$30,057) were charged by Eastern Petroleum Corporation Limited, a company of which Frank Timis is a director and has an ownership interest. In the balance sheet as at the period end, trade and other receivables included prepaid rent of US$nil (2009: US$17,346) and security deposits amounting to US$76,711 (2009: US$34,692) owed by Eastern Petroleum Corporation Limited.

 

Legal fees, excluding VAT, amounting to US$515,071 (2009: US$109,622) were charged by Clyde & Co LLP, a firm of which Christopher Duffy is a partner. In the balance sheet as at the period end, trade and other payables included US$96,842 (2009: US$62,314) owed to Clyde & Co LLP.

 

12. REPORTING JURISDICTIONS

 

The Company is a reporting issuer in certain Canadian jurisdictions. However, the company is a "designated foreign issuer" as defined in Canadian National Instrument 71-102 and is subject to foreign regulatory requirements, including those of the AIM market of the London Stock Exchange. As such, the company is exempt from certain requirements otherwise imposed on reporting issuers in Canada. In particular, financial statements of the company may be prepared under International Financial Reporting Standards or accounting principles that meet the non-Canadian disclosure requirements to which the Company is subject.

 

13. INTERIM REPORT

 

The Interim Report will be sent to shareholders. In addition, copies will be available from the offices of African Minerals (Guernsey) Limited at Third Floor, Dixcart House, Sir William Place, St Peter Port, Guernsey, Channel Islands, GY1 2GX and available for download from the Company's website at http://www.african-minerals.com.