24th Sep 2007 07:03
Cluff Gold PLC24 September 2007 24 September 2007 AIM: CLF Cluff Gold plc ("Cluff Gold" or the "Company") Cluff Gold Interim Results for the six months ended 30 June 2007 Highlights • Equity Placing by BMO Capital Markets, WH Ireland Limited and Smith's Corporate Advisory Limited raised US$30.0 million before expenses • Barring unforeseen events, the Angovia gold heap leach project in Cote d'Ivoire on track to commence production by the end of the year 2007 • Construction of the Kalsaka gold heap leach project in Burkina Faso expected to be completed on schedule • Completion of US$5 million earn-in obligation to achieve 60% ownership interest in the Baomahun gold project, Sierra Leone • Cash of US$36.4 million at 30 June 2007 Post Period Events • Updated JORC compliant resource estimate from the Baomahun gold project in Sierra Leone - resource increased to 1,161,000 gold ounces • Scoping Study completed for the Baomahun gold project indicates potentially viable project at 140,000-200,000 ounces annual production Algy Cluff, Chairman, commented: At the Angovia gold heap leach project, in Coted'Ivoire, the project team is working hard to fulfil our objective of deliveringproduction by the end of this year which will mark an important milestone in ourshort history. When full production is under way, Angovia is expected to produceapproximately 40,000 ounces of gold per annum. Simultaneously the project teamhas been driving the development of Kalsaka gold heap leach project in BurkinaFaso. Again I am pleased to report that this project should commence productionearly next year building up to a full production rate of approximately 60,000ounces per annum. Accordingly on an annualised basis we shall be a 100,000 ouncegold producer in 2008. For further information, please contact: Cluff Gold plc WH Ireland LimitedJ.G. Cluff / Charles Lutyens Laurie Beevers / Katy MitchellChairman / Chief Finance Officer Tel: +44 161 832 2174Tel: +44 (0) 20 7340 9790 Seymour Pierce Limited Parkgreen CommunicationsCharles Kernot Louise Goodeve / Justine HowarthDirector Metals and Mining Tel: +44 (0) 20 7851 7480Tel: +44 (0) 20 7107 8000 Cluff Gold PlcCHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT Since my last report the Company has advanced the three principle properties inits portfolio in West Africa. Of these, two are development projects - in Coted'Ivoire and Burkina Faso - and the third, an exploration project in SierraLeone, is moving into the pre-feasibility phase. At the Angovia gold heap leach project, in Cote d'Ivoire, the project team isworking hard to fulfil our objective of delivering production by the end of thisyear which will mark an important milestone in our short history. When fullproduction is under way, Angovia is expected to produce approximately 40,000ounces of gold per annum. Simultaneously the project team has been driving the development of Kalsaka goldheap leach project in Burkina Faso. Again I am pleased to report that thisproject should commence production early next year building up to a fullproduction rate of approximately 60,000 ounces per annum. Accordingly on anannualised basis we shall be a 100,000 ounce gold producer in 2008. In common with many exploration and development companies, the Company raisesfunds in discrete tranches in order to fund its activities. We are very pleasedto have raised US$30.0 million net of expenses by an equity placement in March,which has allowed us to finance the construction of the projects. Drilling has continued at our Baomahun gold project, a joint venture withWinston Mines in Sierra Leone. You will recall that last year our technicalauditors SRK (UK) Ltd signed off on a JORC compliant resource of 880,000 ounces.Following the recent drilling campaign, an increased JORC compliant resourcefigure of 1.16 million ounces has been delineated by an independent consultant.Drilling, currently suspended on account of the seasonal rains, is planned toresume in October. As the resource base has increased significantly - with only25% of the mineralised trend having been drill tested - we judged it appropriateto commission a Scoping Study to determine the parameters that would govern theeconomic viability of the project. This study was recently completed by RSGGlobal Consulting and SENET Engineering of South Africa, and confirmed ourexpectation that Baomahun can be regarded as a project with the capacity toproduce 140,000 - 200,000 ounces of gold per annum. Accordingly we shallcontinue our drilling programme to define the resource which will support such alevel of output. The Company has completed its US$5 million earn-in obligationto achieve a 60% ownership interest in the project. During the six months to 30 June 2007, the Group's loss was US$1.8m compared toa loss of US$1.9m in the corresponding period in 2006. As foreshadowed in ourlast report, the accounts are presented in US dollars being the currency of theprimary economic environment in which the Group operates. In addition, theaccounts are presented for the first time in accordance with InternationalFinancial Reporting Standards (IFRS). I hope that the potential production to which we now look forward willdemonstrate that we have managed the geological and engineering risk inherent inthis business. The political risk is always with us and beyond our control.However it is my judgement that foreign investors are welcome in the countriesin which we operate, including Mali and Ghana where we have explorationlicences, and that the pace of our progress must commend our presence to thehost governments. J G CluffChairman and Chief Executive21 September 2007 Cluff Gold PlcINDEPENDENT REVIEW REPORT TO CLUFF GOLD PLCFor the six months ended 30 June 2007 Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement of changesin equity and the consolidated cash flow statement and related notes. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules of the London Stock Exchange which require that it must be prepared in aform consistent with that which will be adopted in the next annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists 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 andIreland) 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 2007. PKF (UK) LLPLondon, UK21 September 2007 Cluff Gold PlcCONSOLIDATED INCOME STATEMENTFor the six months ended 30 June 2007 Notes 6 months 6 months 12 months to 31 to 30 June to 30 June December 2007 2006 2006 US$ US$ US$OPERATING COSTS General and administrative (2,154,149) (2,001,416) (3,583,899) OPERATING LOSS (2,154,149) (2,001,416) (3,583,899) Interest payable and similar charges (441,207) (147,455) (734,223) Interest receivable and similar income 823,497 237,283 831,222 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,771,859) (1,911,588) (3,486,900)TAXATION - - - LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (1,771,859) (1,911,588) (3,486,900) Loss per share (Cents) - Basic 7 (3.01) (5.80) (8.86) - Diluted 7 (3.01) (5.80) (8.86) Note: The operating loss for the period arises from the Group's continuingoperations. Cluff Gold PlcCONSOLIDATED BALANCE SHEETFor the six months ended 30 June 2007 Notes At 30 At 30 At 31 June June December 2007 2006 2006 US$ US$ US$ASSETSNON-CURRENT ASSETSIntangible assets- exploration costs 9,389,968 11,036,675 5,302,577Property, plant and equipment- mine development costs 19,567,441 - 10,032,390- other 522,197 426,135 350,384Trade and other receivables 17,662 - - TOTAL NON-CURRENT ASSETS 29,497,268 11,462,810 15,685,351 Current assetsTrade and other receivables 8 2,111,462 190,877 540,575Cash and cash equivalents 36,414,459 24,602,412 21,180,012 TOTAL CURRENT ASSETS 38,525,921 24,793,289 21,720,587 TOTAL ASSETS 68,023,189 36,256,099 37,405,938 CAPITAL AND RESERVESEquityShare capital 1,297,882 833,469 844,104Share premium 65,690,386 36,932,202 37,282,361Share option reserve 1,266,003 1,119,032 1,293,315Merger reserve 2,500,366 2,500,366 2,500,366Retained losses (10,034,282) (6,687,111) (8,262,423)Currency translation reserve 3,379,853 636,066 2,799,701 TOTAL EQUITY 64,100,208 35,334,024 36,457,424 URRENT LIABILITIESTrade and other payables 3,922,981 922,075 948,514 Total current liabilities 3,922,981 922,075 948,514 TOTAL EQUITY AND LIABILITIES 68,023,189 36,256,099 37,405,938 Cluff Gold PlcCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2007 Share Cumulative Share Share option Merger translation Retained Total capital premium reserve reserve reserve losses equity US$ US$ US$ US$ US$ US$ US$ BALANCE AT 1 JANUARY 2006 438,127 12,419,639 674,174 2,500,366 (1,104,666) (4,775,523) 10,152,117Loss for the period - - - - - (1,911,588) (1,911,588)Exchange translation - - - - 1,740,732 - 1,740,732differences on consolidationTotal recognised income and - - - - 1,740,732 (1,911,588) (170,856)expenseIssue of ordinary share capital 395,342 26,487,901 - - - - 26,883,243Issue costs - (1,975,338) - - - - (1,975,338)Share option charge - - 444,858 - - - 444,858 BALANCE AT 30 JUNE 2006 833,469 36,932,202 1,119,032 2,500,366 636,066 (6,687,111) 35,334,024 BALANCE AT 1 JANUARY 2006 438,127 12,419,639 674,174 2,500,366 (1,104,666) (4,775,523) 10,152,117Loss for the period - - - - - (3,486,900) (3,486,900)Exchange translation - - - - 3,904,367 - 3,819,624differences on consolidationTotal recognised income and - - - - 3,904,367 (3,486,900) 417,467expenseIssue of ordinary share capital 405,977 26,845,907 - - - - 27,251,884Issue costs - (1,983,185) - - - - (1,983,185)Share option charge - - 619,141 - - - 619,141 BALANCE AT 31 DECEMBER 2006 844,104 37,282,361 1,293,315 2,500,366 2,799,701 (8,262,423) 36,457,424 BALANCE AT 1 JANUARY 2007 844,104 37,282,361 1,293,315 2,500,366 2,799,701 (8,262,423) 36,457,424Loss for the period - - - - - (1,771,859) (1,771,859)Exchange translation - - - - 580,152 - 580,152differences on consolidationTotal recognised income and - - - - 580,152 (1,771,859) (1,191,707)expenseIssue of ordinary share capital 453,778 30,425,038 30,878,816Issue costs (2,017,013) (2,017,013)Share option credit (27,312) (27,312) BALANCE AT 30 JUNE 2007 1,297,882 65,690,386 1,266,003 2,500,366 3,379,853 (10,034,282) 64,100,208 Cluff Gold PlcCONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 6 months to 6 months to 12 months to 31 30 June 30 June December 2007 2006 2006 US$ US$ US$CASH FLOWS USED IN OPERATING ACTIVITIESOperating loss for the period (2,154,149) (2,001,416) (3,583,899)Depreciation 9,311 42,337 99,180Increase in trade and other payables 2,237,591 266,547 292,986(Increase)/Decrease in trade and other receivables (418,550) 1,329,233 (269,272)(Decrease)/Increase in currency revaluation (898,402) 44,907 (650,987)Share option (credit)/charge (27,312) 444,858 619,141 NET CASH FLOWS USED IN OPERATING ACTIVITIES (1,251,511) 126,466 (3,492,851) CASH FLOWS USED IN INVESTING ACTIVITIESInterest receivable 823,497 237,283 831,222Purchase of property, plant and equipment (8,596,655) (384,533) (1,907,086)Purchase of intangible assets (4,861,365) (2,109,709) (4,402,622) NET CASH FLOWS USED IN INVESTING ACTIVITIES (11,481,733) (2,256,959) (5,478,486) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the issue of share capital 30,878,816 28,027,233 28,455,443Issue costs paid (2,017,013) (2,086,833) (2,094,678)Increase in currency revaluation - - 3,132,913Amount funded on behalf of joint venture party (1,170,000) - - NET CASH FLOWS FROM FINANCING ACTIVITIES 27,691,803 25,940,400 29,493,678 NET INCREASE IN CASH AND CASH EQUIVALENTS 14,958,559 23,809,907 20,522,341Cash and cash equivalents at start of period 21,180,012 751,476 751,476Exchange gains/(losses) on cash 275,888 41,029 (93,805) CASH AND CASH EQUIVALENTS AT END OF PERIOD 36,414,459 24,602,412 21,180,012 Cluff Gold PlcNOTES TO THE INTERIM FINANCIAL STATEMENTSFor the six months ended 30 June 2007 1. BASIS OF PREPARATION From January 1 2007, the Group has adopted International Financial ReportingStandards ("IFRS") as adopted by the EU in the preparation of its consolidatedfinancial statements. The financial statements have been prepared under thehistorical cost basis. Information on the impact on accounting policies andfinancial results resulting from the conversion from UK Generally AcceptedAccounting Practice ("UK GAAP") to IFRS is provided later in this report. The financial information is presented in US Dollars being the currency of theprimary economic environment in which the Group operates. The functionalcurrency of the parent company is currently sterling. Prior to 2007, the Grouppresented in Sterling. Operations denominated in other currencies are included in this financialinformation in accordance with the policies set out below. In common with many exploration and development companies, the Group raisesfunds in discrete tranches in order to fund its activities. During the period,additional equity of US$30.0 million net of expenses was raised to fund theAngovia and Kalsaka gold heap leach projects and ongoing exploration at theBaomahun gold project. Prior to 2007, the Group prepared its audited financial statements and unauditedinterim financial statements under UK Generally Accepted Accounting principles(UK GAAP). From 1 January 2007, the Group is required to prepare annualconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Union (EU) and implementedin the UK. As the 2007 annual financial statements will include comparatives for2006, the Group's date of transition to IFRS is 1 January 2006 with the 2006comparatives restated to IFRS. Accordingly the financial information for thesix months to 30 June 2006 has been restated to present the comparativeinformation in accordance with IFRS based on a transition date of 1 January2006. The financial information for the six months ended 30 June 2007 and 30 June 2006is unaudited. The comparative figures for the year ended 31 December 2006 werederived from the Group's audited financial statements for that period as filedwith the Registrar of Companies as restated for IFRS. The financial informationdoes not constitute the financial statements for that period. Those accountsreceived an unqualified audit report which did not contain any statement undersections 237(2) or (3) of the Companies Act 1985. At the date of authorisation of this report the following Standards andInterpretations which have not been applied in these financial statements werein issue but not yet effective: IFRS 8 Operating SegmentsIFRIC 8 Scope of IFRS 2 Share-based PaymentIFRIC 9 Reassessment of Embedded DerivativesIFRIC 10 Interim Financial Reporting and ImpairmentIFRIC 11 Group and Treasury Share TransactionsIFRIC 12 Service Concession Arrangements The directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialstatements of the Group when the relevant standards come into effect for periodscommencing on or after 1 January 2007. 2. PRINCIPAL ACCOUNTING POLICIES OF THE GROUP This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 30 June2007 or are expected to be endorsed and effective (or available for earlyadoption) at 31 December 2007, the Group's first annual reporting under IFRS.Based on these adopted and unadopted IFRS, the directors have made assumptionsabout the accounting policies expected to be applied, which are as set outbelow, when the first annual IFRS financial statements are prepared for the yearending 31 December 2007. The adopted IFRS that will be effective (or available for early adoption) in theannual financial statements for the year ending 31 December 2007 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for the annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 31 December. Transitional arrangements The Group has taken the following optional exemptions contained in IFRS 1 'First-time Adoption of International Financial Reporting Standards' in preparingthe Group's balance sheet on transition to IFRS at 1 January 2006: • Business combinations - the Group has elected not to apply IFRS 3 Business Combinations retrospectively to past business combinations (business combinations that occurred before the date of transition to IFRS). Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and enterprises controlled by the Company (its subsidiaries) made upto 31 December each year. The excess of the cost of acquisition over the fairvalues of the Group's share of identifiable net assets acquired is recognised asgoodwill. Any deficiency of the cost of acquisition below the fair value ofidentifiable net assets acquired (i.e. discount on acquisition) is recogniseddirectly in the income statement. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group. The costs of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are initially measured at fairvalue at acquisition date irrespective of the extent of any minority interest. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used byother members of the Group. All intra-Group transactions, balances, and unrealised gains on transactionsbetween Group companies are eliminated on consolidation. Unrealised losses arealso eliminated unless the transaction provides evidence of an impairment of theasset transferred. Goodwill Goodwill arising on the acquisition of a subsidiary represents the excess of thecost of acquisition over the Group's interest in the net fair value of theidentifiable assets, liabilities and contingent liabilities of the subsidiaryrecognised at the date of acquisition. Goodwill is initially recognised as anasset at cost and is subsequently measured at cost less any accumulatedimpairment losses. For the purpose of impairment testing, goodwill is allocated to each of theGroup's cash-generating units expected to benefit from the synergies of thecombination. Cash-generating units to which goodwill has been allocated aretested for impairment annually, or more frequently when there is an indicationthat the unit may be impaired. If the recoverable amount of the cash-generatingunit is less than the carrying amount of the unit, the impairment loss isallocated first to reduce the carrying amount of any goodwill allocated to theunit and then to the other assets of the unit pro-rata on the basis of thecarrying amount of each asset in the unit. An impairment loss recognised forgoodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included inthe determination of the profit or loss on disposal. Leasing Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operatinglease are also spread on a straight line basis over the lease term. Foreign currencies Transactions in currencies other than the functional currency are recorded atthe rates of exchange prevailing on the dates of the transactions. At eachbalance sheet date, monetary assets and liabilities that are denominated inforeign currencies are retranslated at the rates prevailing on the balance sheetdate. Non-monetary assets and liabilities carried at fair value that aredenominated in foreign currencies are translated at the rates prevailing at thedate when the fair value was determined. Gains and losses arising onretranslation are included in the income statement for the period, except forexchange differences on non-monetary assets and liabilities where the changes infair value are recognised directly in equity. On consolidation, the assets and liabilities of the Group's overseas operationsare translated at exchange rates prevailing on the balance sheet date. Incomeand expense items are translated at the average exchange rates for the period.Exchange differences arising, if any, are classified as equity and transferredto the Group's translation reserve. Such translation differences are recognisedas income or as expenses in the period in which the operation is disposed of. Rates of Exchange to US$1 were as follows: At 2007 At 2006 At 2006 30 June 6 Mth 31 December 12 Mth 30 June 6 Mth 2007 Average 2006 Average 2006 AverageSterling 0.49903 0.50648 0.51093 0.54436 0.54496 0.56126 Mining and development costs Exploration costs are capitalised as intangible fixed assets until a decision ismade to proceed to development. Related costs are then transferred to miningassets. Before reclassification, exploration costs are assessed for impairmentand any impairment loss recognised in the income statement. Subsequentdevelopment costs are capitalised under mining assets, together with any amountstransferred from intangible exploration assets. Mining assets are amortisedover the estimated life of the commercial ore reserves on a unit of productionbasis. Property, plant and equipment Properties in the course of construction for production, rental oradministrative purposes, or for purposes not yet determined, are carried atcost, less any identified impairment loss. Cost includes professional fees and,for qualifying assets, borrowing costs capitalised in accordance with theGroup's accounting policy. Depreciation of these assets, on the same basis asother property assets, commences when the assets are ready for their intendeduse. Fixtures and equipment are stated at cost less accumulated depreciation and anyrecognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets,other than land and properties under construction, over their estimated usefullives, using the straight-line method, on the following bases: Fixtures and equipment 33% The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theasset and is recognised in income. Intangible fixed assets - deferred exploration and evaluation costs All costs incurred prior to obtaining the legal right to undertake explorationand evaluation activities on a project are written off as incurred. 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 overheads. If an exploration project is successful,the related costs will be transferred to mining assets and amortised over theestimated life of the commercial ore reserves on a unit of production basis.Where a project is relinquished, abandoned, or is considered to be of no furthercommercial value to the Group, the related costs are written off. The recoverability of deferred exploration costs is dependent upon the discoveryof economically recoverable ore reserves, the ability of the Group to obtainnecessary financing to complete the development of the ore reserves and futureprofitable production or proceeds from the disposal thereof. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indicationexists, the recoverable amount of the asset is estimated in order to determinethe extent of the impairment loss (if any). Where the asset does not generatecash flows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. Impairment reviews for deferred exploration and evaluation costs are carried outon a project by project basis, with each project representing a potential singlecash generating unit. An impairment review is undertaken when indicators ofimpairment arise but typically when one of the following circumstances apply:- I. unexpected geological occurrences that render the resource uneconomic; II. title to the asset is compromised; III. variations in metal prices that render the project uneconomic; and IV. variations in the currency of operation. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group has become a party to the contractual provisions of theinstrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call withbanks, other short term highly liquid investments with original maturities ofthree months or less, and bank overdrafts. Bank overdrafts are shown withinborrowings in current liabilities on the balance sheet. Investments Investments are recognised and derecognised on a trade date where a purchase orsale of an investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and areinitially measured at cost, including transaction costs. Investments are classified as either held-for-trading or available-for-sale, andare measured at subsequent reporting dates at their fair value. Where securitiesare held for trading purposes, gains and losses arising from changes in fairvalue are included in net profit or loss for the period. For available-for-saleinvestments, gains and losses arising from changes in fair value are recogniseddirectly in equity, until the security is disposed of or is determined to beimpaired, at which time the cumulative gain or loss previously recognised inequity is included in the profit or loss for the period. Financial liability and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Trade payables Trade payables are not interest bearing and are stated at their fair value. Equity instruments Equity instruments issued by the company are recorded at the proceeds received,net of direct issue costs. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event which it is probable will result in an outflow of economic benefitsthat can be reliably estimated. Provisions for decommissioning costs An obligation to incur decommissioning and site rehabilitation costs occurs whenenvironmental disturbance is caused by the development or ongoing production ofa mining property. Costs are estimated on the basis of a formal closure plan andare subject to regular formal review. Such costs arising from the installation of plant and other site preparationwork, discounted to their net present value, are provided and capitalised at thestart of each project, as soon as the obligation to incur such costs arises.These decommissioning costs are charged against profits over the life of themine, through depreciation of the asset and unwinding or amortisation of thediscount on the provision. Depreciation is included in operating costs while the unwinding of the discountis included as financing costs. Changes in the measurement of a liabilityrelating to the decommissioning of plant or other site preparation work areadded to, or deducted from, the cost of the related asset in the current period. The costs for restoration of site damage, which is created on an ongoing basisduring production, are provided for at their net present values and chargedagainst operating profits as extraction progresses. Changes in the measurementof a liability relating to site damage created during production is chargedagainst operating profit. Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2006. The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value determined at the grant date of equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a binomial or a Black-Scholes valuation model,whichever is more appropriate to the instrument granted. The expected life usedin the model has been adjusted, based on management's best estimate, for theeffect of non-transferability, exercise restrictions, and behaviouralconsiderations. A liability equal to the portion of the goods or services received is recognisedat the current fair value determined at each balance sheet date for cash-settledshare-based payments. Taxation Deferred tax assets are recognised only to the extent that it is probable thatthey will be recovered through sufficient future taxable profit. The carryingamount of deferred tax assets is reviewed at each balance sheet date. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised, based on taxrates and laws that have been enacted or substantively enacted by the balancesheet date. Deferred tax is charged or credited in the income statement, exceptwhen it relates to items charged or credited directly to equity, in which casethe deferred tax is also taken directly to equity. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates and assumptions will, by definition, seldom equal therelated actual results. The estimates and assumptions that have a significantrisk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below. Provisions for decommissioning and site restoration costs Provision is made, based on net present values, for decommissioning and siterehabilitation costs as soon as the obligation arises following the developmentor ongoing production of a mining property. The provision is based on a closureplan prepared with the assistance of external consultants. Management uses its judgement and experience to provide for and (in the case ofcapitalised decommissioning costs) amortise these estimated costs over the lifeof the mine. The ultimate cost of decommissioning and site rehabilitation costis uncertain and cost estimates can vary in response to many factors includingchanges to relevant legal requirements, the emergence of new restorationtechniques or experience at other mine sites. The expected timing and extent of expenditure can also change, for example inresponse to changes in ore reserves or processing levels. As a result, therecould be significant adjustments to the provisions established which wouldaffect future financial results. Useful economic lives of property, plant and equipment and ore reservesestimates Mining assets are amortised over the estimated life of the commercial orereserves on a unit of production basis. There are numerous uncertainties inherent in estimating ore reserves, andassumptions that were valid at the time of estimation may change when newinformation becomes available. These include assumptions as to grade estimatesand cut-off grades, recovery rates, commodity prices, exchange rates, productioncosts, capital costs, processing and reclamation costs and discount rates. Theactual volume of ore extracted and any changes in these assumptions could affectprospective depreciation rates and carrying values. Share-based payments The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value & the vesting period uses management assumptionsin their calculation While management believes the assumptions used are appropriate, a change in theassumptions used would impact the results of the Group. 3. EXPLANATION OF TRANSITION TO IFRS As required by IFRS 1, the impact of the transition from UK GAAP to IFRS isexplained below.The accounting policies set out above have been applied consistently to allperiods presented in thisinterim financial information and in preparing an opening IFRS balance sheet at1 January 2006 forthe purposes of the transition to IFRS. IAS 1 - Presentation of Financial Statements. The form and presentation of theUK GAAP financial statements has been changed to be in compliance with IAS 1. IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS7, presents cash flows in three categories; cash flows from operatingactivities, cash flows from investing activities and cash flows from financingactivities. Other than the reclassification of cash flow into the new disclosurecategories, there are no significant differences between the Group's Cash FlowStatement under UK GAAP and IFRS. Consequently, no cash flow reconciliations areprovided. Purchases of tangible fixed assets under UK GAAP have beenreclassified to purchases of intangible assets and purchases of property, plantand equipment under IFRS. There is no change to the reported losses in the year ended 31 December 2006 asa result of the transition to IFRS. RECONCILIATION OF BALANCE SHEET AS AT 31 DECEMBER 2005 Notes UK GAAP IFRS IFRS At 31 December Adjustment At 31 December 2005 2005 US$ US$ US$ASSETSNON-CURRENT ASSETSIntangible assets- exploration costsProperty, plant and equipment 8,455,266 - 8,455,266- mine development costs - - -- other 80,793 - 80,793Negative goodwill i (89,152) 89,152 - TOTAL NON-CURRENT ASSETS 8,446,907 89,152 8,536,059 CURRENT ASSETSTrade and other receivables 1,520,109 - 1,520,109Cash and cash equivalents 751,476 - 751,476 TOTAL CURRENT ASSETS 2,271,585 - 2,271,585 TOTAL ASSETS 10,718,492 89,152 10,807,644 CAPITAL AND RESERVESEquityShare capital 438,127 - 438,127Share premium 12,419,639 - 12,419,639Share option reserve 674,174 - 674,174Merger reserve 2,500,366 - 2,500,366Retained losses (5,969,341) 1,193,818 (4,775,523)Currency translation reserve ii - (1,104,666) (1,104,666) TOTAL EQUITY 10,062,965 89,152 10,152,117 CURRENT LIABILITIESTrade and other payables 655,527 - 655,527 Total current liabilities 655,527 - 655,527 TOTAL EQUITY AND LIABILITIES 10,718,492 89,152 10,807,644 Explanation of notes i. The adoption of IFRS 3 has resulted in the write off to reserves ofnegative goodwill previously capitalised under UK GAAP. ii. The adoption of IAS 21 has resulted in the exchange differencearising on consolidation of overseas subsidiaries to be shown as a separatereserve from the transition date. RECONCILIATION OF BALANCE SHEET AS AT 30 JUNE 2006 Notes UK GAAP IFRS IFRS At 30 June 2006 Adjustment At 30 June 2006 US$ US$ US$ ASSETSNON-CURRENT ASSETSIntangible assets- exploration costs 11,036,675 - 11,036,675Property, plant and equipment- mine development costs - - -- other 426,135 - 426,135Negative goodwill i (94,020) 94,020 - TOTAL NON-CURRENT ASSETS 11,368,790 94,020 11,462,810 CURRENT ASSETSTrade and other receivables 190,877 - 190,877Cash and cash equivalents 24,602,412 - 24,602,412 TOTAL CURRENT ASSETS 24,793,289 - 24,793,289 TOTAL ASSETS 36,162,079 94,020 36,256,099 CAPITAL AND RESERVESEQUITYShare capital 833,469 - 833,469Share premium 36,932,202 - 36,932,202Share option reserve 1,119,032 - 1,119,032Merger reserve 2,500,366 - 2,500,366Retained losses (6,145,065) (542,046) (6,687,111)Currency translation reserve ii - 636,066 636,066 TOTAL EQUITY 35,240,004 94,020 35,334,024 CURRENT LIABILITIESTrade and other payables 922,075 - 922,075 Total current liabilities 922,075 - 922,075 TOTAL EQUITY AND LIABILITIES 36,162,079 94,020 36,256,099 Explanation of notes i. The adoption of IFRS 3 has resulted in the write off to reserves ofnegative goodwill previously capitalised under UK GAAP. ii. The adoption of IAS 21 has resulted in the exchange differencearising on consolidation of overseas subsidiaries to be shown as a separatereserve from the transition date. RECONCILIATION OF BALANCE SHEET AS AT 31 DECEMBER 2006 Notes UK GAAP IFRS At 31 December IFRS At 31 December 2006 Adjustment 2006 US$ US$ US$ASSETSNON-CURRENT ASSETSIntangible assets- exploration costs 5,302,577 - 5,302,577Property, plant and equipment- mine development costs 10,032,390 - 10,032,390- other 350,384 - 350,384Negative goodwill i (100,281) 100,281 - TOTAL NON-CURRENT ASSETS 15,585,070 100,281 15,685,351 CURRENT ASSETSTrade and other receivables 540,575 - 540,575Cash and cash equivalents 21,180,012 - 21,180,012 TOTAL CURRENT ASSETS 21,720,587 - 21,720,587 TOTAL ASSETS 37,305,657 100,281 37,405,938 CAPITAL AND RESERVESEquityShare capital 844,104 - 844,104Share premium 37,282,361 - 37,282,361Share option reserve 1,293,315 - 1,293,315Merger reserve 2,500,366 - 2,500,366Retained losses (5,563,003) (2,699,420) (8,262,423)Currency translation reserve ii - 2,799,701 2,799,701 TOTAL EQUITY 36,357,143 100,281 36,457,424 CURRENT LIABILITIESTrade and other payables 948,514 - 948,514 Total current liabilities 948,514 - 948,514 TOTAL EQUITY AND LIABILITIES 37,305,657 100,281 37,405,938 Explanation of notes i. The adoption of IFRS 3 has resulted in the write off to reserves ofnegative goodwill previously capitalised under UK GAAP. ii. The adoption of IAS 21 has resulted in the exchange differencearising on consolidation of overseas subsidiaries to be shown as a separatereserve. 4. SEGMENT REPORTING Business segments The Group has only one business segment, namely the exploration for, anddevelopment of, projects focused on gold. This is considered to be the primaryreporting segment for the Group. Geographical segment The Group reports by geographical segment as its secondary reporting segment.All the Group's activities are related to exploration for, and production of,gold in Africa with indirect support provided by the UK office. In presentinginformation on the basis of geographical segments, segment assets and cost ofacquiring them are based on the geographical location of the assets. Segmentcapital expenditure is the total cost incurred during the period to acquiresegment assets that are expected to be used for more than one period. There was no Group turnover in the period. 6 months to 6 months to 12 months to 30/06/07 30/06/06 31/12/06 US$ US$ US$ Total assets UK 47,443,145 25,317,118 23,315,501 Burkina Faso 7,522,975 5,886,113 6,390,824 Sierra Leone 9,539,485 4,107,436 5,843,303 Cote d'Ivoire 3,218,695 945,432 1,767,365 Mali 298,889 - 88,945 Total 68,023,189 36,256,099 37,405,938 Capital expenditure on property, plant and equipment UK 10,151 17,012 843,545 Burkina Faso 6,353,162 36,170 88,632 Sierra Leone 78,557 98,763 120,045 Cote d'Ivoire 2,946,848 237,728 690,146 Mali 49,882 - 44,438 Total 9,438,600 389,673 1,786,806 Capital expenditure on intangibles UK - - - Burkina Faso (71,362) 425,828 630,281 Sierra Leone 2,110,313 1,185,794 2,538,471 Cote d'Ivoire 1,428,353 493,932 1,202,878 Ghana 33,261 4,547 - Mali 157,238 9,669 30,992 Angola 49,360 - - Other 1,412 - - Total 3,708,575 2,119,770 4,402,622 5. CAPITAL AND RESERVES Shares issued On 12 April 2006, by way of placing, the Company issued 22,600,000 new ordinaryshares of 1p for cash consideration of 68p each. On 24 October 2006, the Company issued 120,000 new ordinary shares of 1p each atthe option price of 20p each to Ambrian directors and employees which representsthe exercise of options granted on its placing and admission to AIM. On 24 October 2006, the Company issued 28,410 new ordinary shares of 1p each atthe option price of 45p each to Ambrian Partners Limited which represents theexercise of options granted on 27 April 2006 after placing and admission to AIM. On 24 October 2006, the Company issued 189,582 new ordinary shares of 1p each atthe option price of 55p each to Ambrian Partners Limited which represents theexercise of options granted on its placing and admission to AIM. On 21 December 2006, the Company issued 200,000 new ordinary shares of 1p eachto Mr DD Chikohora at the option price of 20p each which represents the exerciseof options granted on its placing and admission to AIM. Mr Chikohara is aDirector of the Company. On 30 January 2007. the Company issued 35,975 new ordinary shares of 1p eachbeing 7,195 new ordinary shares of 1p each to each of the followingNon-Executive Directors ( E Carr, N Berry, R Danchin, T Wadeson & E Haslam) at avalue of 69.5p each in accordance with their letters of appointment. On 20 March 2007, by way of placing, the Company issued 22,600,000 new ordinaryshares of 1p for cash consideration of 68p each. Merger reserve The acquisition by the company of Cluff Gold UK Limited in November 2004 wasaccounted for in accordance with the merger accounting principles set out in UKFinancial Reporting Standard 6 and Schedule 4(A) of the Companies Act 1985whereby the consolidated financial statements were presented as if the businesspreviously carried out through Cluff Gold (UK) Limited had always been owned andbeen controlled by the company. The transitional requirements of IFRS 1 allow prospective application of IFRS 3for all business combinations subsequent to the transition date (1 January2006). Accordingly this acquisition has not been re-stated in accordance withthat standard. Translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of operations that do not have a USdollars functional currency. Exchange differences arising are classified asequity and transferred to the Group's translation reserve. Such translationdifferences are recognised in the income statement in the period in which theoperation is disposed of. Share option reserve The share option reserve includes an expense based on the fair value of shareoptions issued since 7 November 2002 and unvested at 30 June 2007. Dividends The directors do not recommend the payment of a dividend. 6. SHARE BASED PAYMENTS The Company granted 5,128,784 share options between 30 November 2004 and 31December 2006 & 230,000 between 1 January 2007 & 30 June 2007. The options areexercisable between 29 November 2004 and 31 December 2019 subject to the vestingconditions set by the Board at the time of grant. The share options are valuedbi-annually and take into account options that have lapsed during the period.The share options in issue at 1 January 2007 had a fair value, under IFRS 2Share-based Payments, of between 5.5p and 41.6p each. At 30 June 2007 the amount (credited)/charged to the accounts was (US$27,312)(30 June 2006: US$444,858, 31 December 2006: US$619,141) 7. LOSS PER SHARE The calculation of loss per ordinary share on total operations is based onlosses of US$1,771,859 (30 June 2006: US$1,911,588, 31 December 2006:US$3,486,900) and the weighted average number of ordinary shares outstanding of58,857,480 (30 June 2006: 32,942,514, 31 December 2006: 39,368,861). There isno difference between the diluted loss per share and the basic loss per sharepresented. At 30 June 2007 there were 4,056,793 share options in issue which have apotentially dilutive effect on a basic profit per share in the future. 8. TRADE AND OTHER RECEIVABLES Included within trade & other receivables is an amount of US$1,170,000 due fromWinston Mines Limited being a payment receivable under the Earn-in Agreement forthe Baomahun gold project. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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