18th Sep 2007 12:31
Herencia Resources PLC18 September 2007 Herencia Resources plc ("Herencia" or the "Company") INTERIM FINANCIAL STATEMENTS For the 6 months ended 30 June 2007 As announced on 5 April 2007, with effect from 8 April 2007 Herencia changed itsaccounting reference date to 31 December. On that same date, Herencia confirmed that the next results to be announced bythe Company would cover the six months ending 30 June 2007. The un-auditedinterim accounts of the Herencia Resources Plc and its subsidiary undertakings(the "Group") for the 6 months ended 30 June 2007 are now attached. CHIEF EXECUTIVE'S STATEMENT I am pleased to report on the Company's progress to date. During the period under review the Company raised additional capital toundertake further drilling and exploration of its Paguanta project in Chile. Thereverse circulation (RC) drill program has now been successfully completed with50 holes completed for a total of 5,889m drilled. Assay results from the firstphase of the program (35 holes) have been received with the majority of holesintersecting zinc, silver and lead mineralisation. The significant highergrade results from the first phase of this program have been announced recently. Herencia holds a 50% interest in the Paguanta Project in Northern Chile and isin the process of increasing this interest to 70%. The project, located onthe northern end of the Chilean Porphyry Copper Belt, is approximately 150kmeast of the port of Iquique and 20 km south of a national highway. Paguantacontains old silver-lead-zinc workings, in particular the Englishman Mineencompassing the 'Patricia' zone. Previous surface and underground sampling by Herencia had identified a onekilometre long zinc, silver and lead anomaly. Diamond drilling in late 2006had indicated that the Patricia mineralisation is hosted by at least threesub-parallel, moderate to steeply dipping structures. These generally have acore of higher grade zinc, silver and lead mineralisation within a broadermineralised zone. The success of the 2006 program provided encouragement forthe recent drill program which has again achieved significant results. Please refer to the project announcements at the Company's website(www.herenciaresources.com) for further information on the Company operations. Michael Bohm Chief Executive Officer 18 September 2007 For further information please contact: Michael Bohm, Herencia Resources plc Tel: +61 8 92217466 David Youngman, WH Ireland Limited Tel: +44 161 8322174 GROUP INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 six months ended six months ended 30 June 30 June Notes 2007 2006 (un-audited) (un-audited) £ £Revenue - -Cost of sales - -Gross profit - -Administration expenses (343,931) (315,300)Operating loss 4 (343,931) (315,300)Finance revenue 4 17,766 2,896Loss before taxation (326,165) (312,404)Taxation 6 - -Loss for the period (326,165) (312,404) Loss per ordinary shareBasic 2 (0.10)p (0.16)pDiluted 2 (0.10)p (0.16)p The results shown above relate entirely to continuing operations. There are no recognised gains and losses other than those passing through theincome statement. GROUP BALANCE SHEET FOR THE SIX MONTHS ENDED 30 JUNE 2007 six months ended six months ended 30 June 30 June Notes 2007 2006 (un-audited) (audited) £ £ASSETS Non current assetsIntangible assets 10 1,511,168 886,129Property, plant and equipment 11 55,465 31,772Investments 12 - - 1,566,633 917,901 Current assetsCash and cash equivalents 7 989,645 160,293Trade and other receivables 8 138,686 43,241 1,128,331 203,534 Total assets 2,694,964 1,121,435 LIABILITIESCurrent liabilitiesTrade and other payables 9 30,029 43,435Total liabilities 30,029 43,435 Net Assets 2,664,935 1,078,000 Share Capital 403,100 200,000Share premium account 3,176,825 1,276,925Reserve for own shares - 82,000Translation reserve 4,593 10,893Accumulated losses (919,583) (491,818)Total equity and reserves 2,664,935 1,078,000 GROUP CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 six months ended six months 30 June ended 30 June Notes 2007 2006 (un-audited) (un-audited) £ £Net cash outflow from operating activities 14 (407,519) (357,832) Cash flows from investing activitiesInterest received 17,766 2,896Purchase of property, plant and equipment 982 (34,301)Cash acquired with subsidiary undertakings - Net funds used for investing in exploration 10 (369,048) (226,124) Net cash (utilised by)/generated from investing activities (350,300) (257,259) Cash flows from financing activitiesProceeds from issue of shares 13 700,000 -Issue costs (26,000) -Proceeds from shares issued after the balance sheet date - 82,000 Net cash generated from financing activities 674,000 82,000 Net increase in cash and cash equivalents (83,819) (533,361) Cash and cash equivalents at the beginning of the period 1,073,464 693,654 Cash and cash equivalents at the end of the period 7 989,645 160,293 GROUP STATEMENT OF CHANGES in EQUITY Share Share Reserve for Translation Accumulated Total capital premium own shares reserve losses £ £ £ £ £ £Balance at 1 July 2005 - - - - - - (un-audited)Issue of shares 200,000 1,350,000 - - - 1,550,000Issue of costs - (73,075) - - - (73,075)Shares issued after 30 June 2006 82,000 82,000Exchange differences ontranslation of foreignoperations - - - 10,893 - 10,893Net loss for the period - - - - (491,818) (491,818) Balance at 30 June 2006(audited) 200,000 1,276,925 82,000 10,893 (491,818) 1,078,000 Balance at 1 July 2006 (audited) 200,000 1,276,925 82,000 10,893 (491,818) 1,078,000Issue of shares 121,100 1,967,900 - - - 2,089,000Issue costs - (68,000) - - - (68,000)Transfer from reserve 82,000 (82,000) - - -Exchange differences onretranslation of foreignoperations - - - (6,300) - (6,300)Net loss for the period - - - - (427,765) (427,765) Balance at 30 June 2007(un-audited) 403,100 3,176,825 - 4,593 (919,583) 2,664,935 The accompanying notes form part of this financial report. NOTES TO THE FINANCIAL REPORTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2007 1. Accounting policies The principal accounting policies, all of which have been applied consistentlyto all the periods for which the financial reports have been presented are setout below. 1.1. Basis of preparation The interim financial information for the six months ended 30 June 2007 isun-audited and does not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985. The financial reports have been prepared using the historical cost conventionand are presented in UK pound sterling. In addition, the financial reports havebeen prepared in accordance with the International Financial Reporting Standards("IFRS") including IFRS 6, Exploration for and Evaluation of Mineral Resources,as adopted by the European Union ("EU"). The Company has changed its accounting reference date from 30 June to 31December. The last audited statutory financial statements of the Group coveredthe period from the Company's date of incorporation of 27 January 2005 to 30June 2006. The next audited statutory financial statements of the Group will befor the eighteen months ending 31 December 2007. The interim financial information for the six months ended 30 June 2007 has beenprepared pursuant to AIM rule 18 and represents the half yearly report for thesix months then ended. AIM rule 18 states "An AIM company must prepare ahalf-yearly report in respect of the six month period from the end of thefinancial period for which financial information has been disclosed in itsadmission document and at least every subsequent six months thereafter (apartfrom the final period of six months preceding its accounting reference date forits annual audited accounts)." The Group financial statements are presented in UK pound sterling. 1.2. Basis of consolidation Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are de-consolidated from the date that controlceases. The purchase method of accounting is used to account for the acquisitionof subsidiaries by the Company. The cost of an acquisition is measured as thefair value of the assets given, equity instruments issued and liabilitiesincurred or assumed at the date of exchange, plus costs directly attributable tothe acquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date. The excess of the cost of acquisition overthe fair value of the Group's share of the identifiable net assets acquired isrecorded as goodwill. Goodwill arising on acquisitions is capitalised andsubject to an impairment review, both annually and when there are indicationsthat the carrying value may not be recoverable. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated. All the companies over which the Company has control, apply, where appropriate,the same accounting policies as the Company. 1.3. Goodwill Goodwill is the difference between the amount paid on the acquisition of thesubsidiary undertakings and the aggregate fair value of their separable netassets - of which oil and gas exploration expenditure is the primary asset.Goodwill is capitalised as an intangible asset and in accordance with IFRS3 'Business Combinations' is not amortised but tested for impairment when there areany indications that its carrying value is not recoverable. As such, goodwill isstated at cost less any provision for impairment in value. If a subsidiaryundertaking is subsequently sold, goodwill arising on acquisition is taken intoaccount in determining the profit and loss on sale. 1.4. Foreign currency translation Transactions in foreign currencies are translated into sterling at the rate ofexchange ruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the rate of exchange rulingat the balance sheet date. The resulting exchange gain or loss is dealt with inthe profit and loss account. The assets and liabilities of the foreign subsidiary undertakings are translatedinto Sterling at the rates of exchange ruling at the year end and their resultsare translated at the average exchange rate for the period. Exchange differencesresulting from the retranslation of net investments in subsidiary undertakingsare treated as movements of reserves. 1.5. Cash and cash equivalents The company considers all highly liquid investments, with a maturity of 90 daysor less to be cash equivalents, carried at the lower of cost or market value. 1.6. Deferred taxation Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the interim financial information. Deferred tax isdetermined using tax rates (and laws) that have been enacted or substantiallyenacted by the balance sheet date and are expected to apply when the relateddeferred tax is realised or the deferred liability is settled. Deferred tax assets are recognised to the extent that it is probable that thefuture taxable profit will be available against which the temporary differencescan be utilised. 1.7. Exploration and development costs All costs associated with mineral exploration and investments are capitalised ona project by project basis, pending determination of the feasibility of theproject. Costs incurred include appropriate technical and administrativeexpenses but not general corporate overheads. If an exploration project issuccessful, the related expenditures will be transferred to mining assets andamortised over the estimated life of the commercial ore reserves on a unit ofproduction basis. Where a licence is relinquished or project abandoned, therelated costs are written off. Where the Group maintains an interest in aproject, but the value of the project is considered to be impaired, a provisionis made against the relevant capitalised costs. The recoverability of all exploration and development costs is dependent uponthe discovery of economically recoverable reserves, the ability of the Group toobtain necessary financing to complete the development of the reserves andfuture profitable production or proceeds from the disposition thereof. Amounts recorded for these assets represent costs and are not intended toreflect present or future values. 1.8. Impairment of exploration and development costs The carrying value of unevaluated areas is assessed on at least an annual basisor when there has been an indication that impairment in value may have occurred. The impairment of unevaluated prospects is assessed based on the Directors'intention with regard to future exploration and development of individualsignificant areas and the ability to obtain funds to finance such explorationand development. 2. Loss per share The basic loss per ordinary share of (0.10)p (2006; (0.16p)) for the Group hasbeen calculated by dividing the loss for the period of £326,165 (2006: £312,404)by the weighted average number of ordinary shares in issue of 313,035,433(2006: 200,000,000). The diluted loss per share has been kept the same as the basic loss per share asthe potential issue of further shares in connection with the acquisition ofTarapaca Resources (Bermuda) Limited decreases the basic loss per share, thusbeing anti-dilutive. 3. Segmental information During the period, the Group was organised into its main business segment asmineral exploration. The primary segmental reporting is determined to be geographical segmentaccording to the location of the asset. There are two reporting geographicalsegments. Geographical segment Australia Chile Total6 months ended 30 June 2007 £ £ £Administration expenses (126,894) (62,411) (189,305)Finance revenue 17,766 - 17,766Foreign exchange loss (38,501) (116,125) (154,626)Loss before taxation (147,629) (178,536) (326,165)As at 30 June 2007Intangible assets - 1,511,168 1,511,168Property, plant and equipment - 55,465 55,465Trade and other receivables - 138,686 138,686Cash and cash equivalents 897,543 92,102 989,645Trade and other payables (18,960) (11,069) (30,029)Net assets 878,583 1,786,352 2,664,9356 months ended 30 June 2006Administration expenses (98,185) (217,115) (315,300)Finance revenue 2,896 - 2,896Loss before taxation (95,289) (217,115) (312,404)As at 30 June 2006Intangible assets - 886,129 886,129Property, plant and equipment - 31,772 31,772Trade and other receivables - 43,241 43,241Cash and cash equivalents 154,041 6,252 160,293Trade and other payables (31,580) (11,855) (43,435)Net assets 122,461 955,539 1,078,000 At the end of the financial period, the Group had not commenced commercialproduction from its exploration sites and therefore had no turnover in theperiod. 30 June 30 June 2007 2006 (un-audited) (audited) £ £4. Cash and cash equivalents Cash at bank and in hand 989,645 160,293 5. Trade and other receivables Other receivables 138,686 43,241 138,686 43,241 6. Trade and other payables Accruals and deferred income 30,029 43,435 30,029 43,435 7. Intangible assets Goodwill Exploration and Total development costs CostAs at 1 July 2006 500,000 386,129 886,129Additions - 625,039 625,039At 30 June 2007 500,000 1,011,168 1,511,168 ImpairmentAs at 1 July 2006 - - -Impairment during the period - - -As at 30 June 2007 - - - Carrying amountAs at 30 June 2007 500,000 1,011,168 1,511,168 The exploration and development costs relate to expenditure incurred at the Iquique and Paguanta projectslocated in Chile, South America. The goodwill of £500,000 arose on acquisition of Tarapaca Resources (Bermuda) Limited, a company incorporatedin Bermuda (note 12). In accordance with the accounting policy, the Directors have assessed the value of goodwill and theexploration and development costs carried in the accounts as intangible fixed assets. In the opinion of theDirectors, no impairment provision is considered necessary. 30 June 30 June 2007 2006 (un-audited) (audited) £ £8. Property, plant and equipment Plant and equipmentAt cost 61,424 34,301Accumulated depreciation (5,959) (2,529)Total property and equipment 55,465 31,772 Movements in carrying amountsMovement in the carrying amounts for each class of plant and equipment between the beginning and end of the financial period:Balance at the beginning of the period 31,772 -Additions at cost 27,123 34,301Disposals - -Depreciation expense (3,430) (2,529)Carrying amount at the end of the period 55,465 31,772 9. Fixed asset investments Company name Country of registration or Class Shares incorporation held %DirectTarapaca Resources (Bermuda) Limited Bermuda Ordinary 100IndirectTarapaca Holdings (BVI) Ltd British Virgin Islands Ordinary 100Iquique Resources (Chile) SA Chile Ordinary 100Paguanta Resources (Chile) SA Chile Ordinary 100 The principal activity of Iquique Resources (Chile) SA and Paguanta Resources (Chile) SA was mineralexploration whereas Tarapaca Resources (Bermuda) Limited and Tarapaca Holdings (BVI) Ltd are holdingcompanies. 30 June 30 June 2007 2006 (un-audited) (audited) £ £10. Called up share capital Authorised:10,000,000,000 ordinary shares of £0.001 each 10,000,000 10,000,000 Allotted, issued and fully paid:384,066,666 ordinary shares (2006: 200,000,000 ordinary shares) 403,100 200,000 The following shares in the Company were issued during the period: • On 10 July 2006, the Company completed a private placement raising a capital sum of £571,000 from the issue of38,066,667 ordinary shares at a price of 1.5p per share. (Of the £571,000 cash raised, £82,000 was received prior to 1July 2006). • On 30 October 2006, the Company raised a capital sum of £900,000 from the issue of 90,000,000 ordinary sharesat a price of 1p per share. • On 15 March 2007, the Company raised a capital sum of £700,000 from the issue of 56,000,000 ordinary shares ata price of 1.25p per share. The movements in the share capital are summarised below: Number of £ shares As at 1 July 2006 200,000,000 200,000Issued on 10 July 2006 38,066,666 38,067Issued on 30 October 2006 90,000,000 90,000Issued on 15 March 2007 56,000,000 75,033At 30 June 2007 384,066,666 403,100 The details of shares and options issued after 30 June 2007 are set out in note 12. The share premiums arising as a result of above transactions were as follows: £ As at 1 July 2006 1,276,925Issued on 10 July 2006 532,933Issued on 30 October 2006 810,000Issued on 15 March 2007 656,042Issue costs (99,075)As at 30 June 2007 3,176,825 11. Control No one party is identified as controlling the Company. 12. Subsequent events Other than the following no matter or circumstances have arisen since the end of the reporting date and the date of thisreport which significantly affect or may significantly affect the results of the Group as presented in this financialreport. Pursuant to the Acquisition Agreement for the acquisition of the Tarapaca Group of Companies in November 2005, there area further 50,000,000 Ordinary Shares at £0.001 per share that may be allotted to Mineral securities Limited subject tocertain performance criteria. The performance criteria are the investment by the Group of at least US$2,000,000 in theProjects within 36 months of the date of the Acquisition Agreement. These shares we issued post balance date inSeptember 2007. 13. Related party transactions During the last 12 months, the Company raised a capital sum of £2,171,000through the issue of its own shares and Mineral Securities Limited ("Minsec") acompany in which some of the directors of the Company are directors andshareholders as stated in the Directors' interests paragraph in the Directors'report, has invested £650,000. During the last 12 months, the Company also entered into an Alliance Agreementwith Minsec. Under the alliance, Herencia will utilize its established officeand technical team based in Chile together with Minsec's technical andcommercial team based in Perth. Minsec will provide Herencia Resources plc withaccess to its experienced team of geological, mining and commercial personnel toassist Herencia in both the evaluation and potential future development of anynew resource opportunities. John Bottomley, the secretary of the Company is an employee of Sprecher GrierHalberstam LLP, a firm of solicitors. During the last 12 months this partnershipwas paid a sum of £14,684 in respect of legal and secretarial services to theCompany. These related party transactions are based on independent third party commercialrates. The Directors who have interests in these transactions did notparticipate in the decision making process relating to these transactions. 14. Contingent liabilities and capital commitments The Group had no contracted capital commitments at 30 June 2007. The Group had no contingent liabilities at 30 June 2007. 15. Decommissioning expenditure The Directors have considered the environmental issues and the need for anynecessary provision for the cost of rectifying any environmental damage, asmight be required under local legislation. In their view, no provision isnecessary for any future costs of decommissioning or any environmental damage. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Herencia Resources