31st Oct 2006 10:13
UMC Energy PLC31 October 2006 UMC ENERGY PLC ("UMC" or "the Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2006 CHAIRMAN'S STATEMENT For the six month period ended 31 July 2006 Activities over the half-year have been focussed on investigating acquisitionopportunities to enable the Company to implement its investing strategy. Weexamined a number of opportunities in the energy field. In particular a numberof energy-related projects in Kazakhstan, including oil and gas opportunities,were examined. Following extensive and at times very promising negotiations,the Company was unable to bring these discussions to a satisfactory conclusion. We also examined a promising uranium exploration opportunity in Madagascar and Iam pleased to advise that at an extraordinary general meeting held on 30 October2006, shareholders resolved to approve the acquisition by the Company of theentire issued share capital of URAMAD (UK) Ltd. URAMAD (UK) Ltd owns 80% of the issued capital of URAMAD S.A. ('URAMAD'). Theremaining 20% of URAMAD is owned by OMNIS, the Malagasy state mining body. The shares in URAMAD (UK) Ltd are being acquired from Cline Mining Corporation('Cline'), in exchange for which the Company will allot to Cline 12,272,667ordinary shares, which is equivalent to 40% of the Company's enlarged sharecapital. In addition, on completion of the acquisition, the Company willreimburse Cline US$339,938 in respect of amounts advanced by Cline to URAMAD. URAMAD will on completion of the acquisition own eight exploration permitsissued by the government of Madagascar covering approximately 9,994 squarekilometres (the 'Permits'). The Permits, which have been granted for 10 years,expiring in 2015 and 2016, are located in the Morondava Basin, which is infilledand layered with sediments, most notably the Karoo formation that hosts uraniummineralisation. The areas were previously identified and explored during theuranium cycles of 1956 to 1963 and 1979 to 1982 by the United Nations (PUND) andOMNIS respectively. Later, the French uranium company Cogema took on largepermits and continued regional exploration that terminated in the late 1990swith the down turn in uranium prices and demand. URAMAD will on completion ofthe acquisition own the data base for the Morondava Basin that includes theresults of earlier airborne geophysical/radiometric surveys, drill logs for 790drill holes (approximately 83,000 metres of drilling) with indicated uraniumvalues and visible uranium mineralization associated with targets picked from7,000 radioactive anomalies, recorded and plotted. The acquisition will close following the transfer of the legal title to thePermits from CGMM to URAMAD, which is subject only to official procedures beingcompleted in Madagascar. As described in the Admission Document dated 13October 2006, URAMAD has beneficial ownership of the Permits and completion ofthe Acquisition is subject to the transfer of the legal title to the Permitstaking place by 31 October 2006, with an option on the part of the Company toextend that date to 31 December 2006. The Company has decided that it willexercise that option and will continue to fund the exploration programmedescribed in the Admission Document. Until the completion of the transfer oflegal title, the Company is funding the exploration programme by way of a loanto URAMAD, which is refundable in the event that transfer of legal title to thePermits is not achieved by 31 December 2006. Following completion of the acquisition, the Company has agreed to finance theinitial exploration expenditure of at least US$1 million. The Company's initial focus will be to identify and outline suitable explorationtargets on the Permits through a combination of airborne geophysical surveys,tectonic and structural geology studies and the review of URAMAD's historicalexploration database including confirmation drilling on the Folakara Permits. Thereafter, it is expected that exploration work will focus on developing drilltargets. Field work and target evaluation will involve ground scintillometersurveys, following up on the airborne anomalies, trenching, geological mapping(regional and detailed) and sedimentary and geochemical studies. Oncecompleted, and as warranted, drilling of priority targets will be considered. The Directors believe that the uranium market is facing a growing supply deficitdue to a lack of investment in the uranium industry for a period of over 20years. Since the mid 1980s, demand has exceeded primary supply and, in 2004,mine production only supplied 60% of the total nuclear reactor requirements.The majority of the balance came from secondary sources, principally, governmentand commercial inventories and these stockpiles are finite and diminishing. TheDirectors believe that new mine supply is emerging, but not sufficiently swiftlyto meet growing demand. The Directors believe that the case for nuclear energy is strengthening.According to many energy analysts it is the only credible base load forelectricity with a proven track record that can compete, economically andenvironmentally, with fossil fuels. The Directors believe that key factors indriving nuclear energy growth include: • global electricity demand forecast to double within the next 25 to 30 years; • nuclear energy's role in reducing greenhouse gases, addressing concerns over global warming; • nuclear energy is now, arguably, the cheapest source of electricity; • there are over 150 new nuclear reactors either under construction, planned and proposed; which represents a substantial increase on the current global fleet of 441 reactors; • there is potential for a programme of building reactors in China, USA and Russia, or, in India's case, just supplying its underutilised, existing reactors, which will create further demand; and • the increasing political will to embrace nuclear energy. The Directors believe that the supply-demand gap in the uranium market is realand primary uranium production needs to rise significantly to fill it. Althoughthe Directors believe that primary uranium supply is increasing, it is not fastenough as lead times for new uranium mines are very long, sometimes over 20years, and there have been no new major uranium deposits discovered in the lasttwo decades. Bob Cleary 30 October 2006 INDEPENDENT REVIEW REPORT TO UMC ENERGY PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 31 July 2006, set out on pages 5 to 10. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved, by the directors. The AIM Rulesrequire that the accounting policies and presentation applied to the interimfigures should be consistent with those applied in preparing the precedingannual accounts except where any changes, and the reasons for them, aredisclosed. 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 United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress 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 31 July 2006, except for any adjustments that may be required in order tocomply with FRS 20 as stated in note 7. Sawin & Edwards Chartered Accountants 15 Southampton Place WC1A 2AJ 31 October 2006 UNAUDITED PROFIT AND LOSS ACCOUNT For the six months ended 31 July 2006 Note Six month ended 31 Period 13 January July 2006 2005 to 31 January 2006 (Unaudited) (Audited) £ £ Administrative costs (184,797) (362,878) Operating loss before (184,797) (362,878)exceptional itemsExceptional costs 2 (59,826) (191,880) Operating Loss (244,623) (554,758)Interest receivable 50,493 57,743 Loss on ordinary activities (194,130) (497,015)before taxationTax on loss on ordinary 3 - -activities Loss on Ordinary Activities (194,130) (497,015)After Taxation Loss per share (pence) 4 1.05 3.76Fully diluted loss per share 4 0.75 2.36(pence) The Company has no recognised gains or losses other than the results for theperiod as set out above. UNAUDITED BALANCE SHEET 31 July 2006 Note As at 31 July 2006 As at 31 January (Unaudited) 2006 £ (Audited) £Fixed AssetsIntangibles 5 - - Current AssetsDebtors 43,415 626,778Cash at bank and in hand 2,664,146 2,391,408 2,707,561 3,018,186Creditors: Amounts falling due (56,043) (172,538) within one year Net Current Assets 2,651,518 2,845,648 Total assets less current 2,651,518 2,845,648liabilities Capital and ReservesCalled up share capital 920,450 920,450Share premium account 2,422,213 2,422,213Profit and loss account (691,145) (497,.015) Shareholders' Funds 6 2,651,518 2,845,648 The interim results were approved by the Board on 30 October 2006 and signed ontheir behalf by: Bob ClearyDirector UNAUDITED CASH FLOW STATEMENT for the six months ended 31 July 2006 Six month ended Period 13 31 July 2006 January 2005 to (Unaudited) 31 January 2006 £ (Audited) £Reconciliation of operating loss to netcash inflow / (outflow ) from operatingactivitiesOperating loss (244,623) (554,758)Decrease / (increase) in debtors 583,363 (626,778)(Decrease) / increase in creditors (116,495) 172,538Write down of fixed asset investment - 86,281 Net cash inflow / ( outflow) from 222,245 (922,717)operating activities CASH FLOW STATEMENTNet cash flow from operating activities 224,245 (922,717) Returns on investments and servicing of financeInterest received 50,493 57,743 Capital Investment and FinancialInvestmentIntangible fixed assets - (86,281) Cash inflow / (outflow) before financing 272,738 (951,255)FinancingProceeds from share issue - 3,342,663 Increase in Cash 272,738 2,391,408 Reconciliation of net cash flow tomovement in net funds Increase in cash in the period 272,738 2,391,408 Net funds brought forward 2,391,408 - Net funds carried forward 2,664,146 2,391,408 Analysis of changes in net funds At 31 July At 31 January 2006 2006Cash at bank and in hand 2,391,408 - Cash inflow in period 272,738 2,391,408Cash at bank and in hand 2,664,146 2,391,408 NOTES TO THE UNAUDITED INTERIM RESULTS For the six months ended 31 July 2006 1. Accounting policies Basis of Accounting The interim results for the six months to 31 July 2006 have been prepared underthe historical cost convention, are unaudited and do not constitute statutoryaccounts in accordance with Section 240 of the Companies Act 1985. Foreign Currencies 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. Deferred tax asset No recognition has been made of the deferred tax asset in respect of currentlosses as the directors are of the opinion that this may not be realisable inthe foreseeable future. Intangible Assets - Exploration Expenditure Costs relating to the acquisition, exploration and development of miningprojects are capitalised under intangible assets. When it is determined thatsuch costs will be recouped through successful development and exploitationor alternatively by sale of such interests acquired, the expenditure will betransferred to tangible assets and depreciated over the expected productive lifeof the asset. Whenever a project is considered no longer viable, the associatedexploration expenditure is written off to the profit and lossaccount. 2. Exceptional Items The Company was originally established to earn a 75% interest in potentiallyeconomic uranium bearing blocks in the Labrador Trough in Canada. Followingreceipt of the results of airborne magnetic, radiometric and ground gravityprograms and following analysis of those results by the Company's independentconsulting geologist, the Directors resolved on 31 March 2006 not to pursue thisoption interest. There was no cost incurred on the project for the 6 monthperiod ended 31 July 2006. For the period ended 31 January 2006 the cost ofthis project, including the option fee of £86,281, was £100,780. The Company also examined opportunities to acquire uranium and oil/gasproperties in Kazakhstan. Following extensive negotiations, the Companywas unable to conclude any acquisitions. The cost incurred in relation to these activities for the period ended 31 July2006 was £59,826 and £91,100 for the period ended 31 January 2006. 3. Taxation No provision for corporation tax has been provided for, due to losses incurredin the current and previous periods. 4. Loss per Share The loss per share has been calculated by dividing the loss after taxation of£194,130 (January 2006: £497,015) by the weighted average number of Ordinaryshares in issue of 18,409,001 (January 2006: 13,201,074). Fully diluted loss per share has been calculated using the weighted averagenumber of ordinary shares in issue, diluted for the effect of share options inexistence at the period end of 7,574,500 ( January 2006: 7,874,500) 5. Intangible fixed assets Exploration Expenditure 31 July 2006 31 January 2006 (Unaudited) (Audited) £ £Balance brought forward - -Additions - 86,281Write down - (86,281) Balance carried forward - - 6. Reconciliation of movement in shareholders' funds Six months ended 31 Period 13 January July 2006 2005 to 31 January (Unaudited) 2006 (Audited) £ £ Loss for the period (194,130) (497,015) Issue of shares-nominal value - 920,450Issue of shares-premium - 2,422,213Net (deficit) / addition to funds (194,130) 2,845,648Opening shareholder funds 2,845,648 - Closing shareholder funds 2,651,518 2,845,648 7. FRS 20 Share based payments The Company has not yet implemented the requirements of FRS20 in relation to itsshare options and warrants. The directors are of the opinion that the costsinvolved in obtaining an independent valuation of the options and warrants isunjustified at the interim stage. The Company will incorporate the necessaryadjustments in the full statutory year end accounts. As no options or warrantswere granted or vested in the six month period the effect of any adjustmentwould be to reserves only. 8. Post balance sheet date events In September 2006, the Company entered into an Acquisition Agreement with ClineMining Corporation pursuant to which the Company will acquire all the issuedshare capital of URAMAD (UK) Ltd and thereby an 80% interest in URAMAD S.A.Other than this matter, there has not arisen in the interval between the end ofthe financial year and the date of this report any item, transaction or event ofa material and unusual nature likely, in the opinion of the Directors, to affectsignificantly the operations of the Company, the results of those operations orthe state of affairs of the Company, in subsequent financial years. 31 October 2006 Enquiries: Hugh Oram Nabarro Wells & Co Ltd Tel: 020 7710 7400 Annie Richards UMC Energy plc Tel: 020 7514 1480 Charles Vivian Pelham Public Relations Tel: 020 7743 6670 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
UEP.L