26th Sep 2006 07:01
Aricom PLC26 September 2006 Aricom PLC Interim Report for the six months to 30 June 2006 Aricom plc ("Aricom" or "the Group" or "the Company") issues these interimfinancial results for the six months to 30 June 2006 ("the Period") further tothe trading update released in July. It is planned that the Group will issue afull operational and development update on Monday 2 October which will includedetails of the Kuranakh feasibility studies and an update of work undertaken atKimkanskoye and Sutarskoye. Highlights of the interim financial results include: - Net assets of US$361million (31 December 2005: US$18 million)- Cash of US$114million (31 December 2005: US$9.5 million)- US$158 million gross raised from fundraising in March 2006- US$1.3 million of finance leases repaid during the Period- US$10 million loan repaid during the Period- US$8.6 million capital expenditure on Kuranakh bringing the total cumulative spend to US$23.6 million at 30 June 2006 (Total at 31 December 2005: US$15.0 million)- US$2.9 million acquisition of 49% of Bolshoi Seym- Consolidation of LLC Rubicon, the company holding the Kimkanskoye and Sutarskoye licences- Creation of effective group financial structure in preparation for growth programme Pavel Maslovskiy, Chairman commented: "This financial report shows the excellent progress made by Aricom during thefirst half of the year. Our acquisitions have considerably strengthened ourasset portfolio and our successful fund-raising activities earlier in the yearprovide us with an encouragingly strong balance sheet going forward. We are nowvery well positioned as a development company with a large constructionprogramme underway." "Our decision to exit the titanium dioxide pigment trading business furtherenables management to focus on activities with the greatest potential. Thistransaction realised a small profit. We are pleased by the ongoing developmentof the Kuranakh ilmenite and titanomagnetite deposits, for which offtakecontracts have already been signed. We remain on track to start production therein Q4 2007." "We look forward to delivering a full operational and development update onMonday 2 October." Enquiries: Jay Hambro Aricom plc 020 7201 8939Tim Grey The Millbrook Partnership 07796 072 298 / 020 7520 9455 Finance Director's statement The financial highlights presented in these unaudited interim accounts cover the6 months to 30 June 2006. The accounts are presented in accordance with UnitedKingdom generally accepted accounting principles ("UK GAAP"). On 19 April 2006, following shareholder approval, the Company was granted anoption to purchase 50% of LLC Rubicon for up to 123,782,467 Aricom shares fromPhilotus Holdings Ltd (which is a company beneficially owned by Mr. Peter Hambroand Dr. Pavel Maslovskiy). The Company paid US$9 million in cash for the optionand also granted Philotus Holdings Ltd the right, but not the obligation, toreinvest US$9 million in the shares of the Company at a price of 28p per share.Philotus Holdings Ltd exercised this option on 8 June 2006. On 30 June 2006, the Company acquired the other 50% of the capital of LLCRubicon not held by Philotus Holdings Ltd from LLC Evrokom-M, (a company ownedby Russian Financial Investors). The consideration paid was US$25 million incash and 100 million Aricom shares being a total consideration of US$101million. Deferred consideration, contingent on the outcome of an independentvaluation, amounts to a maximum of a further 65 million shares in the Company. Both the above transactions to acquire stakes in LLC Rubicon involve thepurchase of intermediate Cyprus holding companies which hold the shares in LLCRubicon, which holds the licences to the Kimkanskoye and Sutarskoye iron oredeposits in the Evreyskaya Avtonomnaya Oblast in the far east of Russia, closeto the border with China. On 30 June 2006, the Company disposed of LLC Chemelt to its operating managementrealising a profit of US$45,000 in the process and freeing up a considerableamount of working capital. LLC Chemelt has been disclosed as a discontinuingoperation. In July, following completion of the sale, LLC Chemelt repaid formerintercompany loans of US$735,000 to the Group. During the six months to 30 June 2006, the Company successfully raised US$169million: US$158 million from a placing of shares at 45p (US $152 million net ofexpenses) and a further US$11 million through both the exercise of an optiongranted in 2005 to Canaccord Adams and through Philotus Holdings Ltd reinvestingUS$9 million in the Company's shares. The Group has implemented Financial Reporting Standard 20 Share-based paymentswhich requires options granted to employees and third parties to be recognisedas an expense at their fair value. For options granted in previous periods, thecomparatives and opening retained earnings have been adjusted as required by thestandard. The effect of implementing the standard is set out in Note 1. The Group has also implemented FRS 25 Financial Instruments: Disclosure andPresentation and FRS 26 Financial Instruments: Measurement where appropriate.The effect of implementing these standards is set out in Note 1. The Group hasalso adopted FRS 23 The effects of changes in Foreign Exchange Rates. There wasno impact on adoption of this standard. During the period, the Group entered into financial instruments to reduce partof the exposure to the Rouble related to the capital expenditure on the mine andbeneficiation plant being constructed at Olekma and Kuranakh. These instrumentshave been fair valued through the profit and loss account. This programme locksin US$1.5m per month of Roubles for 17 months. Fixed assets have increased by US$234 million, reflecting the good progress madeon developing the Company's assets at Kuranakh and the acquisition of 50% of LLCRubicon. Finance leases entered into in the previous year have been fully repaid and theGroup had no debt at 30 June 2006 other than external debt acquired with LLCRubicon which amounted to US$7 million. At 30 June 2006, the Group had cash balances of US$114 million held in the mainoperating currencies of the Group. Total shareholder funds were US$265 million at the Period end. INDEPENDENT REVIEW REPORT TO ARICOM PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated profit andloss account, the consolidated balance sheet, the consolidated cash flowstatement, the consolidated statement of total recognised gains and losses andrelated notes 1 to 14. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLP Chartered AccountantsLondon25 September 2006 Consolidated Profit and Loss Account Note Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 Six Six months to months to Year to 31 30 June 30 June December Discont- Discont- Discont- Continuing inuing Continuing inuing Continuing inuing operations operations Total operations operations Total operations operations Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000------------------------------------------------------------------------------------------------------------- Turnover - 6,997 6,997 - 2,762 2,762 - 7,363 7,363Cost of Sales - (6,400) (6,400) - (2,567) (2,567) - (6,773) (6,773) ------------------------------------------------------------------------------------------ Gross profit - 597 597 - 195 195 - 590 590 Sellingexpenses - (566) (566) - (144) (144) - (429) (429) Administrativeexpenses (2,223) - (2,223) (1,509) - (1,509) (3,272) - (3,272)Otheroperatingexpenses,net (76) - (76) (254) 75 (179) (264) 29 (235) ------------------------------------------------------------------------------------------Operating(loss)/profit (2,299) 31 (2,268) (1,763) 126 (1,637) (3,536) 190 (3,346) ------------------------------------------------------------------------------------------ Profit on saleof subsidiaries 45 - -Net interestReceivable/(payable) 1,216 (504) (401) --------- --------- ---------Loss on ordinaryactivities before taxation (1,007) (2,141) (3,747) Taxation 3 (12) - (1) ------------------------------------------------------------------------------------------ Loss aftertaxation (1,019) (2,141) (3,748) Minorityinterests 88 186 392 ------------------------------------------------------------------------------------------ Loss on ordinaryactivitiesaftertaxation andminorityinterests (931) (1,955) (3,356) --------- --------- --------- Basic anddiluted lossper ordinaryshare 6 $0.00 $(0.02) $(0.03) --------- --------- --------- Consolidated Statement of Total Recognised Gains and Losses Unaudited Unaudited Audited 2006 2005 2005 Six months to 30 June Six months to 30 Year to 31 June December US$'000 US$'000 US$'000------------------------------------------------------------------------------------ Share option reserve 68 497 553Loss for the period (931) (1,955) (3,356) ------------------------------------------------------Total recognised losses/gains for the period (863) (1,458) (2,803) ------------------------------------------------------Prior year adjustments (asexplained in note 1) - -------------------Total gains and lossesrecognised since last annual report andfinancial statements (863) =================== Consolidated Balance Sheet Notes Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 30 June 30 June 31 December US$'000 US$'000 US$'000---------------------------------------------------------------------------Fixed AssetsTangible assets 252,470 11,141 18,445 252,470 11,141 18,445 --------------------------------Current Assets Stocks 17 308 1,371Debtors: due within one year 5,732 827 3,341Debtors: due after more than one year 42 909 3,061Cash at bank and in hand 11 114,149 8,454 9,543 -------------------------------- 119,940 10,498 17,316 Creditors, amounts falling due within one year (11,202) (1,483) (14,392) -------------------------------- Net Current Assets 108,738 9,015 2,924 -------------------------------- Total Assets less Current Liabilities 361,208 20,156 21,369 Creditors, amounts falling due after one year (289) (1,049) (3,681) -------------------------------- Net Assets 360,919 19,107 17,688 -------------------------------- Capital and ReservesCalled up equity share capital 4 816 242 242Share premium 4 273,000 24,395 24,526Share option reserve 4 295 497 553Profit and loss account 4 (8,654) (6,323) (7,723) Equity shareholders' funds 265,457 18,811 17,598 -------------------------------- Minority interests 95,462 296 90 -------------------------------- Total capital employed 360,919 19,107 17,688 -------------------------------- The accompanying notes are an integral part of this balance sheet. These financial statements were approved by the Directors on 25 September 2006. G J Hambro P B Howes Consolidated Statement of Cash Flow Notes Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 Six Six months to months to Year to 31 30 June 30 June December US$'000 US$'000 US$'000----------------------------------------------------------------------------- Net cash outflow fromoperating activities 5a (3,627) (2,440) (7,020) -------------------------------- Returns on investmentsand servicing of financeInterest received 1,517 122 227Interest paid (395) (121) (422) -------------------------------- --------------------------------Net cash inflow/(outflow) from returnson investments and servicing of finance 1,122 1 (195) -------------------------------- Taxation paid (12) - - --------------------------------Capital Expenditureand Financial InvestmentPurchase of tangible fixed assets (8,751) (5,755) (9,753)Purchase of investments (11,940) - - -------------------------------- (20,691) (5,755) (16,968) -------------------------------- Acquisitions and DisposalsPurchase of subsidiary undertakings 7 (25,042) - -Cash acquired with subsidiaries 7 331 - -Cash disposed of with subsidiaries 8 (311) - - -------------------------------- Net cash outflow on acquisitions and disposals (25,022) - - -------------------------------- Cash outflow before Financing (48,230) (8,194) (16,968) Financing Activities Net (repayments of)/receipts from borrowings (8,797) (3,899) 6,114Gross receipts from issuing ordinary shares 169,199 20,492 20,492Share issue costs (6,415) (2,101) (1,970)Finance lease repaid (1,347) (595) (778)Increase in finance lease debt - 2,099 2,099 -------------------------------- Net cash inflow from financing activities 152,640 15,996 25,957 -------------------------------- Increase in cash at bank and in hand 5b 104,410 7,802 8,989 -------------------------------- Notes to the Financial Information 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information presented is for the 6 months to 30 June 2006. The financial information is for the first six months of 2006 and does notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985 and is presented on the basis of the accounting policies set out in thefinancial statements of Aricom plc for the period ended 31 December 2005, exceptas described below. This interim report should be read in conjunction with the statutory accountsfor the year ended 31 December 2005, a copy of which has been delivered to theRegistrar of Companies. The auditors' report on those accounts was not qualifiedand did not contain statements under Section 237(2) or (3) of the Companies Act1985. Changes in Accounting Policies FRS 20 Share-based payments The Company has applied the requirements of FRS 20 Share-based payment. Inaccordance with the transitional provisions, FRS 20 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested at 1January 2006. The Group issues equity-settled share-based payments to certain employees andunder various contracts with third parties. Equity-settled share-based paymentsare measured at fair value (excluding the effect of non market-based vestingconditions where appropriate) at the date of grant. The fair value determined atthe date of grant of the equity-settled share-based payments is expensed on astraight line basis over the vesting period, based on the group's estimate ofshares that will eventually vest and adjusted for the effect of non market-basedvesting conditions where appropriate. Fair value is measured by use of a Black Scholes model or a binomial model asdeemed most appropriate for each individual issue. The expected lives used inthe models have been adjusted based on management's best estimate, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. The requirement is to account for the cost of options granted to employees andfor services. Some options were granted in previous periods and the comparativeshave been adjusted in accordance with the first time adoption provisions of thestandard. Restatement summarised Restatement Restatement adjustment - Transitional adjustment directors' - share Balance adjustment brokers' options at share expensed before 1 January options as Restated charged to administrative restatement 2005 share expenses balance premium (salary) US$'000 US$'000 US$'000 US$'000 US$'000 ------------------------------------------------------------Balance sheetShare premiumAs at 30 June 2005 24,721 - (326) - 24,395As at 31 December 2005 24,852 - (326) - 24,526 Share options reserveAs at 1 January 2005 - - - 113 113As at 30 June 2005 - 113 326 58 497As at 31 December 2005 - 113 326 114 553 Profit and loss accountAs at 1 January 2005 (4,254) - - (113) (4,367)As at 30 June 2005 (6,152) (113) - (58) (6,323)As at 31 December 2005 (7,496) (113) - (114) (7,723) ------------------------------------------------------------ FRS 25 Financial Instruments: Disclosure and Presentation and FRS 26 FinancialInstruments: Measurement The group has elected to adopt FRS 26 in the current period. The group'sactivities expose it primarily to the financial risks of changes in foreigncurrency. The group uses foreign exchange forward contracts to hedge itsexposure to foreign currency rates. The group does not use derivative financialinstruments for speculative purposes. The use of financial derivatives is governed by the group's treasury strategyapproved by the board of directors. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Derivatives embedded in other financial instruments or other host contracts aretreated as separate derivatives when their risks and characteristics are notclosely related to those of host contracts and the host contracts are notcarried at fair value, with gains or losses reported in the income statement. There has been no effect on opening balances and comparatives of implementationas the standard is not required to be applied retrospectively. FRS 23 The effects of changes in Foreign Exchange Rates This standard is required to be applied in periods to which FRS 25 and 26 havebeen applied. Accordingly, Aricom has adopted the requirements from 1 January2006. The individual financial statements of each group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each group company are expressed in UnitedStates Dollars (US$), which is the functional currency of the Company, and thepresentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at the rates prevailingon the balance sheet date. Non-monetary items carried at fair value that aredenominated in foreign currencies are translated at the rates prevailing at thedate when the fair value was determined. Non-monetary items that are measured interms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on theretranslation of monetary items, are included in profit or loss for the period.Exchange differences arising on the retranslation of non-monetary items carriedat fair value are included in profit or loss for the period except fordifferences arising on the retranslation of non-monetary items in respect ofwhich gains and losses are recognised directly in equity. For such non-monetaryitems, any exchange component of that gain or loss is also recognised directlyin equity. There has been no impact on adoption of this standard. 2. EXCHANGE RATES The rates of exchange at the balance sheet dates were as follows: 30 June 2006 30 June 2005 31 December 2005Russian Roubles : 27.0789 28.6721 28.7825US$US$ : Pound 1.8491 1.7930 1.7188US$ : Euro 1.2779 1.2098 1.1842 The representation of figures in US Dollars should not be construed as meaningthat underlying amounts can or will be settled in dollars. 3. TAX ON LOSS ON ORDINARY ACTIVITIES Note Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 Six Six months to months to Period to 30 June 30 June 31 December US$'000 US$'000 US$'000------------------------------------------------------------------------------------Current taxation 12 - 1Deferred taxation - - - 12 - 1 -----------------------------------Factors affecting the tax charge forthe periodLoss on ordinary activities before tax (1,007) (2,141) (3,747) ----------------------------------- Tax at 30% thereon (302) (642) (1,124)Expenditure for which no tax benefitis recognised at30% thereon 314 642 1,125 -----------------------------------Current tax charge for the period 12 - 1 ----------------------------------- No deferred tax asset has been recognised in respect of losses. The asset wouldbe recoverable if suitable taxable profits were to arise in future periods. 4. GROUP COMBINED STATEMENT OF RESERVES AND RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Share Profit Share Share option and loss Capital premium reserve account Total US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2006 (restated) 242 24,526 553 (7,723) 17,598Loss for the period - - - (931) (931)Share option reserve - 326 (258) - 68Issue of share capital 574 254,563 - 255,137Share issue costs incurred in the period - (6,415) - - (6,415) ------------------------------------------- At 30 June 2006 816 273,000 295 (8,654) 265,457 ------------------------------------------- On 13 February 2006, 1,979,450 shares were issued at a price of £0.28 per shareunder an option granted in relation to the March 2005 fundraising. On 18 April2006, the number of ordinary £0.001 shares in issue was increased by the issueof 200,000,000 shares at a price of £0.40 per share. On 15 June 18,262,987shares were issued at a price of £0.28 per share under an option granted toPhilotus Holdings Ltd to invest US$9 million. On 30 June 100,000,000 shares wereissued at a deemed price of £0.415 as part of the consideration for the purchaseof 50% of LLC Rubicon. The total number of ordinary shares in issue was therebyincreased to 453,611,121. The US$255 million relating to the issue of sharecapital consists of cash received of US$169 million, US$9 million related to thenon-cash cost of the option issued to Philotus Holding Ltd and US$77 millionnon-cash consideration of 100 million shares. 5. NOTES TO THE CASH FLOW STATEMENT a) RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Note Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 Six Six months to months to Year to 31 30 June 30 June December US$'000 US$'000 US$'000Operating loss from continuing (2,299) (1,763) (3,536)operationsOperating profit from 9 31 126 190discontinuing operationsDepreciation charges 190 83 189Depreciation charges capitalised (174) (34) (175)Write down of fixed assets - - 11Increase in debtors (2,881) (947) (2,713)Increase/(decrease) in creditors 977 (226) (301)Decrease / (increase) in stock 461 264 (799)Non-cash items - share options expense 68 57 114 ----------------------------------Net cash outflow from operating activities (3,627) (2,440) (7,020) ---------------------------------- b) ANALYSIS OF CHANGE IN NET DEBT Closing Opening Acquisitions Foreign Balance Balance of Disposal of exchange 30 Jun 1 Jan 2006 Cashflow subsidiaries subsidiaries movement 2006 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000-------------------------------------------------------------------------------------------------------Cash at bank and in hand 9,543 104,410 - - 196 114,149Debt due after more than one year - - - - - -Debt due within one year (8,797) 8,797 - - - -Loans acquired with subsidiaries - - (7,006) - - (7,006) External loans disposed withsubsidiaries (1,216) - - 1,216 - -Lease creditors (1,283) 1,347 - - (64) - -----------------------------------------------------------------Net (debt)/cash (1,753) 114,554 (7,006) 1,216 132 107,143 ----------------------------------------------------------------- c) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT Unaudited Unaudited Audited 2006 2005 2005 Six Six months to months to Year to 31 30 June 30 June December US$'000 US$'000 US$'000--------------------------------------------------------------------------Increase in cash 104,410 7,802 8,989Decrease/(increase) in debt 8,797 3,899 (6,114)Decrease/(increase) in finance leases 1,347 (1,504) (1,321) ---------------------------------Increase in net cash resulting from cash flows 114,507 10,197 1,554Loans acquired with subsidiaries (7,006) - -External loans disposed with subsidiaries 1,216 - -Foreign exchange movements 132 (505) (565) ---------------------------------Increase in net cash for the period 108,896 9,692 989Net debt at beginning of period (1,753) (2,742) (2,742) ---------------------------------Net cash/(debt) at end of period 107,143 6,950 (1,753) --------------------------------- 6. LOSS PER ORDINARY SHARE Note Unaudited Unaudited Audited 1 Restated Restated 2006 2005 2005 Six months Six months Year to 31 to 30 June to 30 June Dec-----------------------------------------------------------------------------Basic and diluted loss per ordinaryshare Net loss for the period (US$'000) (931) (1,955) (3,356)Weighted average basic number ofordinary shares('000) 218,260 117,942 125,614 ---------------------------------Basic and diluted loss per ordinary share (US$) 0.00 (0.02) (0.03) Profit from discontinuing operations (US$'000) 34 91 138Basic and diluted profit fromdiscontinuing operations per ordinary share (US$) 0.00 0.00 0.00 Loss from continuing operations(US$'000) (965) (2,046) (3,518) Basic and diluted loss fromcontinuing operationsper ordinary share (US$) 0.00 (0.02) (0.03) Basic and diluted EPS are the same because the only outstanding share optionsare anti-dilutive as the Group has made a loss. The profit from discontinuing operations and loss from continuing operationsrefer to the profit or loss on those operations after taxation and minorityinterests. 7. ACQUISITION OF SUBSIDIARY UNDERTAKINGS LLC Rubicon On 30 June 2006, the Company acquired a 50% share in LLC Rubicon, a companybased in Russia. Consideration for this acquisition consisted of US$25 millionin cash and 100 million ordinary shares in Aricom plc, issued when the marketprice was 41.5p per share. Details of net assets acquired are as follows: Fair Value LLC Rubicon adjustment Total US$'000 US$'000 US$'000---------------------------------------------------------------- Mining properties and 11,971 191,737 203,708leasesAssets under construction 182 182Other fixed assets 2 2Stocks - -Debtors - -Cash 331 331Creditors due within one (17) (17)yearShort-term external loans (7,006) (7,006)Short-term loans from Vendor (6,276) (6,276) ------------------------------------Net (liabilities)/assets (813) 191,737 190,924 ------------------------------------Aricom share of assets acquired 95,462Consideration Consideration 101,738Receipt of rights to short term loan (6,276) ----------- 95,462 ----------- Deferred consideration of up to 65 million ordinary shares in Aricom plc iscontingent on the results of an independent valuation which is to be carried outunder the terms of the sale and purchase agreement. As the amount payable iscontingent upon the outcome of the valuation and at this point it is consideredthat a reliable estimate of this valuation cannot be made, no liability has beenrecognised at 30 June 2006. 8. DISPOSAL OF SUBSIDIARIES LLC Chemelt and CJSC Chemelt-East On 30 June 2006, the Company sold its 100% share in LLC Chemelt, a company basedin Russia and holding 75% of CJSC Chemelt-East. Details of net assets sold areas follows: Total US$'000--------------------------------------------------Fixed assets 3Stocks 893Debtors 1,482Cash 311Creditors due within one (761)yearShort term loans (1,216)Loans owed to Aricom (735) ----------Net liabilities (23)Minority interest (in Chemelt-East) (2)Aricom share of net liabilities sold (25) ----------Gain on disposal 45 ----------Consideration 20 ========== LLC Chemelt was acquired by its management, who continue to have a key role inother aspects of the Group's business. 9. DISCONTINUING OPERATIONS STATEMENT OF CASH FLOW Note Unaudited Unaudited Audited 2006 2005 2005 Six Six months to months to Period to 30 June 30 June 31 December US$'000 US$'000 US$'000--------------------------------------------------------------------------Net cash inflow/(outflow) fromoperating activities 10 75 291 (606)Returns on investmentsand servicing of financeInterest paid (20) (57) (57) ---------------------------------Net cash inflow/(outflow) fromreturns on investments and servicing of finance 55 234 (663)Taxation Paid (4) - - Capital Expenditureand Financial InvestmentPurchase of tangible fixed assets - (2) (3) --------------------------------- - (2) (3) Cash inflow/(outflow) before Financing 51 232 (666) Financing Activities Net receipts/(repayments) from borrowings 136 (9) 702 ---------------------------------Net cash inflow/(outflow) from financing activities 136 (9) 702 --------------------------------- Increase in cash at bank and in hand 187 223 36 --------------------------------- 10. NOTES TO THE DISCONTINUING OPERATIONS CASH FLOW STATEMENT a) RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES Unaudited Unaudited Audited 2006 2005 2005 Six Six Year to 31 months to months to December 30 June 30 June US$'000 US$'000 US$'000--------------------------------------------------------------------------Operating profit from discontinuing operations 31 126 190Depreciation charges 1 1 2Increase in debtors (800) (169) (274)Increase in creditors 463 67 196Decrease / (increase) in stocks 380 266 (720) -------------------------------Net cash inflow/(outflow) from operating activities 75 291 (606) ------------------------------- b) ANALYSIS OF CHANGE IN NET DEBT Closing Opening Foreign Balance Balance exchange 30 Jun 1 Jan 2006 Cashflow movement 2006 US$'000 US$'000 US$'000 US$'000------------------------------------------------------------------------------Cash at bank and in hand 96 243 (28) 311Debt due within one year (1,815) (136) - (1,951)------------------------------------------------------------------------------ (1,719) 107 (28) (1,640)------------------------------------------------------------------------------ c) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT Unaudited Unaudited Audited 2006 2005 2005 Six Six months to months to Year to 31 30 June 30 June December US$'000 US$'000 US$'000--------------------------------------------------------------------------Increase in cash 187 223 36(Increase)/decrease in debt (136) 9 (702) --------------------------------Increase in net cash / (debt)resulting from cash flows 51 232 (666)Foreign exchange movements 28 22 5 --------------------------------Increase in net cash for the period 79 254 (661)Net debt at beginning of period (1,719) (1,058) (1,058) --------------------------------Net cash/(debt) at end of period (1,640) (804) (1,719) -------------------------------- 11. CASH Cash balances include US$21 million of restricted cash which consists of depositsand guarantee deposits which are readily available only after more than 3 monthsfrom the balance sheet date. 12. SEGMENTAL INFORMATION Unaudited Unaudited Audited 2006 2005 Restated Six Six 2005 months months to 30 to 30 June June Profit/ Profit/ (Loss) (Loss) Loss before before before tax and tax and tax and minority Net minority Net minority Net Turnover interest Assets Turnover interest Assets Turnover interest Assets $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000--------------------------------------------------------------------------------------------------a) By class ofbusinessTrading -Discontinuingoperations 6,997 39 2,762 91 972 7,363 138 1,779Minedevelopment -Continuing operations - (1,630) 221,991 - (717) 7,249 - (1,507) 13,784Corporate - 584 138,928 - (1,458) 10,886 - (2,264) 2,125---------------------------------------------------------------------------------------------------Total 6,997 (1,007) 360,919 2,762 (2,084) 19,107 7,363 (3,633) 17,688---------------------------------------------------------------------------------------------------b) GeographicalAnalysis byoriginUnited Kingdom - 121 138,928 - (1,649) 10,886 - (2,603) 2,125Russia 6,997 (1,128) 221,991 2,762 (435) 8,221 7,363 (1,030) 15,563---------------------------------------------------------------------------------------------------Total 6,997 (1,007) 360,919 2,762 (2,084) 19,107 7,363 (3,633) 17,688--------------------------------------------------------------------------------------------------- 13. DERIVATIVE FINANCIAL INSTRUMENTS The Group utilises financial instruments to potentially increase the yield on asmall proportion of its deposits. Currency derivatives The Group utilises currency derivatives to hedge significant future transactionsand cash flow. The Group is party to foreign currency forward contracts in themanagement of its exchange rate exposures. The instruments purchased aredenominated in US Dollars. At the balance sheet date, the total notional amount of outstanding foreignforward exchange contracts that the Group has committed are US$24 million (2005:nil). At 30 June 2006 the fair value of the Group's currency derivatives is aliability of US$289,000. This estimate is based on the difference between theforward rate at 30 June 2006 and the exchange rate locked in under the foreigncurrency forward contracts. These foreign currency derivatives have not beendesignated as hedges. Accordingly changes in the fair value of these foreigncurrency derivatives of US$289,000 have been charged to profit and loss in theyear (2005: nil). 14. POST BALANCE SHEET EVENTS On 14 July 2006, Tom Swithenbank resigned as a Director of the Company andGeorge Jay Hambro was appointed by the Board as Chief Executive. On 1 August2006, Sir Malcolm Field stepped down as Chairman and will remain as the seniorindependent director of the Company. Dr Pavel Maslovskiy was appointed Chairmanon 1 August 2006 having previously been joint deputy Chairman. On 17 July 2006 4,100,000 options were granted to directors of the Company witha strike price of £0.42. The options vest after 3 years and are then exercisablewithin a further 3 year period. Shareholder information Company Secretary Registered numberHeather Williams 4897906FCIS Registered office Auditors10-11 Grosvenor Place Deloitte & Touche LLPLondonSW1X 7HH NomadTelephone: +44 (0) 20 7201 8939 Canaccord Adams LimitedFacsimile: +44 (0) 20 7201 8938 Joint BrokersEmail: Canaccord Adams [email protected] JPMorgan Cazenove Limited Website:www.aricom.plc.uk Registrars Capita This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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