Preliminary Financial Results

25th Nov 2009 07:00



CHINA GOLDMINES PLC

("China Goldmines", "CGM", the "Company", or the "Group")

PRELIMINARY FINANCIAL RESULTS

FOR THE YEAR ENDED 30 JUNE 2009 

Financial Highlights

Post year end:

Operational Highlights

High grades achieved in drilling (e.g. 4.35 metres @ 24.1 g/t)

Underground sampling with results up to 114.93 g/t

For further information contact:

China Goldmines plc
Frank Vanspeybroeck (CEO)	+86 731 489 0755
Marinko Vidovich (CFO)	+61 8 6216 5200
Brewin Dolphin Ltd (Nomad)
Alex Dewar (Nominated Adviser) Threadneedle Communications Laurence Read/ Beth Harris	+44 (0)131 529 0276 +44 (0)20 7653 9855

Chairman's Report 

The year ended 30 June 2009 has been a challenging one for the Company. The global financial crisis has lead to a significant decline in economic and investment activity across the world. The contraction of many of the world's leading economies had considerable impact on share markets, the availability of capital and currency movements. In addition to the macroeconomic challenges facing the Company we also encountered various operational difficulties (in the province of Hunan within the Peoples Republic of China), as the Company attempted its first full year of commercial gold production, including security breaches, theft and cultural issues. 

China Goldmines began producing gold in early 2008. However, throughout the year we began to experience increasing operational disturbances that were outside of the Company's control. These arose in part from Chinese cultural issues in managing the mines and interaction with the local population. In May 2009, there was a significant attack at our Xiang Lu mine site and the Bao Mu Yuan Plant. Fifty or more thieves broke in and raided the high grade ore/concentrate and threatened staff. We were forced to close down the Xiang Lu operations to ensure the safety of the Company's workers and to avoid more theft of high grade ore.

These setbacks were particularly frustrating because of our notable achievements during the year. We had identified high-grade stopes for production and completed our 15,000 metre drilling programme, with drilling results that confirmed the likelihood of continuity of the ore body in both strike length and depth. We maintained an excellent safety record, with no serious injuries. Six of the eight gold mines were in operation, while two were in development, and mine production in March and April was delivering promising results. However, as the security situation grew increasingly serious, preventing us from processing higher-grade mining which would fund planned development, we were restricted to mining only small regions within the Mining Licence at a time. Given the widespread nature of the incidents, local authorities were ineffectual in assisting us. 

These problems, combined with the additional capital required to develop the underground infrastructure to deliver a higher and more sustainable level of gold production and profitability, resulted in the board seeking joint venture partners. Discussions were held with a number of international and local JV parties which ultimately led to the board considering the disposal of the project in order to ensure that we would be able to retain some value for the project rather than continuing to manage and operate in a very difficult operational environment and face an uncertain future. 

The offer from Cosmos Castle Management Limited to purchase Westralian Resources Pty. Ltd. was put to shareholders at a General Meeting on 21 September 2009 and was approved. The purchase has been completed and the funds were received on 29 September 2009. The consideration paid by Cosmos, expressed in US Dollars was USD$26.3m. Of the total consideration, USD$2.9m is held in trust as a contingency to cover outstanding liabilities of Westralian Resources Pty. Ltd. and Hunan Westralian Mining Co. Ltd., as well as certain costs by CGM and its subsidiary, Global Resource Ventures Limited, in fulfilling their commitments under the Share Purchase Agreement up to 31 December 2009

Following the closing of the disposal we retain funds of USD$24.7m (including the USD $2.9m held in trust) and are well placed to add significant shareholder value through investments in other companies and/or projects.  We are identifying a number of project opportunities which we will appraise against the objective of delivering value to shareholders.

At a corporate level, there were some significant changes to the Board personnel during the year. The Board wishes to extend its appreciation and thanks to the former Chairman, Mr Lance Browne and non-executive director/company secretary, Mr Alex Worrall, who both recently left the Board to pursue other opportunities.

On behalf of the Board, I wish to acknowledge the commitment of our managers and staff, in particular, Frank Vanspeybroeck (CEO), our staff on site and the team in Perth. Their commitment and persistence in working in difficult operating conditions has been noteworthy. 

Clive Donner

Non-Executive Chairman

Business Review

Following the financial year under review the Company disposed of WES, its operating subsidiary through which it held its interest in the Guanzhuang mining project. Following the completion of the disposal on 29 September 2009, the Company is classified as an Investing Company under the AIM Rules for Companies.

At the start of the financial year the Company was focussed on expanding gold production following the consolidation of the mining licences and the investment in the administration and infrastructure of the Company.

Operations were becoming increasingly disrupted by theft and local disputes. These had the consequence of preventing the Company from processing sufficient gold to fund the necessary development of the mining infrastructure and operations.

The directors examined various alternatives for preserving shareholders value in the Guanzhuang mining project which ultimately led the Company to dispose of WES to Cosmos Castle Management Limited.

The Group made a loss for the 2009 year before taxation of USD$36,203,861, (2008: USD$(4,260,569). The loss attributable to shareholders was USD$36,203,861, (2008: USD$(3,800,361).

The directors do not propose a dividend, (2008: nil).

Disposal of Principle Asset and Future Investment Strategy

Following the disposal, the Company is now classified under the AIM Rules for companies as an investing company. Post sale transaction the Company now has cash reserves of USD$24.7m. China Goldmines proposes to identify and acquire holdings in natural resources, minerals and/or metals companies and/or assets which the Directors believe are undervalued and will enhance shareholder value.  

Accordingly a new investment strategy for the Company has been determined for your Company, with your Board laying down the following guiding principles:

Review of Operations

China Goldmines attempted during the 2009 year to sustain commercial gold mining production but  encountered a number of issues in developing and optimising the Project. Continued security breaches, theft and other local community issues have had a significant impact on the Company's ability to develop and optimise the Project. Management had sought to address this situation by putting in place additional security arrangements and conducting a comprehensive review of the mining operations. The Company also revised its business strategy, which ultimately led the Board to consider the merits of selling the Project.

A number of alternative solutions were assessed and reviewed by the Directors, including Chinese and international joint-venture partners, conventional equity raisings and a potential sale of the Project. The Directors estimated that the Project required an injection of substantial capital in order to develop the underground infrastructure to achieve higher and more sustainable gold production in order to become a profitable gold producer. The Directors concluded that the proposed disposal of the Project represented the best alternative to preserve shareholder value.

Geological

Prior to August 2008, there were eight small independent mining licences for the following mines: Shen Jia Ya (SJY), De Sheng (DS), Bao Mu Yuan (BMY), Xiao Chong Zi (XCZ), Zheng Jia Shan (ZJS), Jiu Fa (JF), Jin Zhu Wan (JZW) and Xiang Lu (XL). In August 2008, the Company combined these eight gold-mining rights into one and renamed it as Hunan Westralian Guanzhuang Gold Mine. The combined area of mining rights accumulated to 6.3126km2.

Exploration

Exploration drilling achieved a total of 15,000 metres for surface drilling to December 2008. The underground drilling completed approximately 2,000 metres. Underground sampling, together with underground drilling, continued to confirm the continuity of the orebodies, both along strike and with depth. The Company, since December 2008, focused purely on underground drilling that would assist mine production.

Underground drilling directly connected with identifying zones for immediate mining was conducted in the second half of the financial year. Underground drilling and channel sampling to the extension of Xiang Lu (XL) decline 3 had discovered a high grade orebody. A 25 degree decline almost perpendicularly entered into an orebody 5m thick, at an average grade of 160.8 g/t.

Channel sampling along the grade line of the decline (1m above the floor, across the thickness of the orebody) gave the following grades:

Channel sample length across the orebody thickness (m)	Grade (g/t)	Accumulated thickness (m)	Grade for the accumulated thickness (g/t)
0.6	916.74	First 0.6m	916.74
1.3	123.68	First 1.9m	374.1
0.5	46.06	First 2.4m	305.8
1.2	4.28	First 3.6m	205.3
1	0.57	First 4.6m	160.8

The Company determined this to be a significant high grade gold mineralisation which was to be earmarked for immediate production and processing, prior to the decision to suspend mining activity in Xiang Lu.

Mining Background

CGM had eight mining operations, divided into the east section and west section. The east section had four operations: Zheng Jia Shan, Xiang Lu, Jin Zhu Wan and Jiu Fa. The west section had four operations: Shen Jia Ya, Bao Mu Yuan, Xia Chong Zi and De Sheng. CGM was upgrading the west section operations, where the four operations had been connected, while upgrading was also being undertaken on the east section, where the four mines were not connected as a result of ventilation and other factors. Within the CGM mining operations, underground access is made available by adits and declines. Materials are hoisted by winches. An emergency compartment is placed every 20m in the declines.

Production

During the financial year, the Company's mining operation was making the transition from remnant mining, while refurbishing the mines to target new high-grade mine development. This progress was materially impeded by escalating local disruption culminating in a large scale robbery in May 2009. As a result CGM scaled down active mining to ensure increased security coverage by resorting to measures such as temporarily closing access to the high-grade orebodies.

A solution to the mining operations was to develop a centralised hoisting and processing facility for the long-term and sustainable development of the Guanzhuang Project. A mine feasibility study program was initiated in June 2009. In June 2009, the Company was also in the process of preparing the necessary reports and designs for its central project to be approved by the County Government and to obtain the construction permits for its central shaft, processing plant, tailing dams, power upgrade and the transfer of land title to the Company.

2009 Summary Mining Results

Period	Tonnes
Q1: Jul 08 to Sep 08 Q2: Oct 08 to Dec 08 Q3: Jan 09 to Mar 09 Q4: Apr 09 to Jun 09	7,552 23,519 13,578 14,555
Total Tonnes Mined	59,204

Summary of Production to 30 June 2009

Quarter	Tonnes	Head Grade	Recovery	Oz's
1 Jul to 30 Sep 09 1 Oct to 31 Dec 09 1 Jan to 31 Mar 09 1 Apr to 30 Jun 09	7,552 18,091 8,911 11,962	4 4 5.3 10	95% 93% 93% 95%	903 2,214 1,417 3,677
	46,516			8,211

The 8,211 ounces of gold produced from our production mills included gold concentrate and doré bars from gravity concentration. The gold was sold to the Chinese refinery and after costs associated with "refining," the Company received net proceeds for 3,177 ounces of gold, for a net consideration of USD2.9m.

Mine Safety

CGM developed its internal (western) safety procedures which held a proud record in China.

Disposal of Entire Issued Capital of Westralian Resources Pty Ltd

On 29 September 2009, the Company disposed of the entire issued share capital of Westralian Resources Pty Ltd, the JV Company to the Guanzhuang Gold Project via Hunan Westralian Mining Co. Ltd (China). The gross consideration paid by Cosmos Castle Management Limited (the Purchaser) was USD$26.35m, of which USD$2.9m is held in trust to cover outstanding liabilities of Westralian Resources Pty Ltd or its subsidiary Hunan Westralian Mining Co. Ltd, and is expected to be released in January 2010.

Investing Policy

After Settlement of the Sale of Westralian Resources Pty Ltd

After the Closing Date, 29 September 2009, CGM was required to use its reasonable endeavours and act regularly and diligently to:-

Warranties in Accordance with the Share Purchase Agreement

China Goldmines and Global Resource Ventures Limited provided warranties, jointly and severally, to Cosmos and its successors in title, subject to any matters disclosed. The warranties are concerned with the following matters:

The warranties expire 12 months from the Closing Date. The maximum liability of CGM and GRV under the warranties is USD$10,000,000 with Cosmos permitted to select any basis of claiming damages available to it as well as any other rights or remedy which is available.

Directors' Report 

The Directors present their Annual Report and Group Accounts of China Goldmines plc for the year ended 30 June 2009.

Consolidated Income Statement

	Note	Year Ended 30 June 2009 $	Year Ended 30 June 2008 $
Revenue		396,740	523,635
Salaries and employee benefits		(2,619,097)	(1,719,889)
Office expenses and professional fees		(3,124,949)	(2,814,823)
Consulting expenses		(715,588)	(1,161,254)
Travel and accommodation expenses		(214,864)	(384,463)
Mining expenses		-	(1,343,585)
Impairment of intangible assets	4	(18,388,341)	-
Other expenses		(1,214,752)	(267,997)
Operating loss		(25,880,851)
Other gains and losses	1	(10,688,330)	1,909,520
Financial income		365,320	998,287
Loss before tax		(36,203,861)	(4,260,569)
Tax		-	-
Loss for the year		(36,203,861)	(4,260,569)
Attributable to:
Equity holders of the company		(36,203,861)	(3,800,361)
Minority interest		-	(460,208)
		(36,203,861)	(4,260,569)
Earnings per share		2009 Cents	2008 Cents
Basic and diluted	2	(74.68)	(9.37)

Consolidated Statement of Recognised Income & Expenditure

	Year Ended 30 June 2009 $	Year Ended 30 June 2008 $
Loss for the year	(36,203,861)	(4,260,569)
Exchange differences on translation of foreign operations	5,681,438	(1,428,978)
Total recognised income and expense for the year	(30,522,423)	(5,689,547)
Attributable to:
Equity holders of the parent	(30,522,423)	(5,229,339)
Minority interests	-	(460,208)
	(30,522,423)	(5,689,547)

Consolidated Balance Sheet

	Note	Year Ended 30 June 2009 $	Year Ended 30 June 2008 $
Non-current Assets
Intangible assets	3	5,898	704,974
Mining properties	4	21,385,440	32,372,602
Property, plant and equipment	5	2,350,920	1,371,728
Trade and other receivables	6	319,760	821,958
		24,062,018	35,271,262
Current Assets
Inventories	7	1,246,749	502,683
Trade and other receivables		151,082	118,617
Cash and cash equivalents		6,192,290	25,147,806
		7,590,121	25,769,106
Total Assets		31,652,139	61,040,368
Current Liabilities
Trade and other payables	8	(3,139,086)	(2,004,892)
Total Liabilities		(3,139,086)	(2,004,892)
Net Assets		28,513,053	59,035,476
Equity
Share capital	9	919,975	919,975
Share premium account		66,169,804	66,169,804
Foreign exchange reserve		4,249,508	(1,431,930)
Reverse acquisition reserve		61,344	61,344
Retained earnings		(42,875,425)	(6,671,564)
Equity attributable to equity holders of the parent company		28,525,206	59,047,629
Minority interest		(12,153)	(12,153)
Total Equity		28,513,053	59,035,476

Consolidated Statement of Changes in Equity

	Attributable to Members of China Goldmines
	Share Capital  $	Share Premium Reserve $	Foreign Exchange Reserve $	Reverse Acquisition  Reserve $	Retained Earnings $	Total	Minority Interest $	Total Equity
Balance at 30 June 2007	390,151	6,725,683	(2,952)	61,344	(2,871,203)	4,303,023	448,055	4,751,078
Exchange differences on translation of foreign operation	-	-	(1,428,978)	-	-	(1,428,978)	-	(1,428,978)
Net income/(expense) recognised directly in equity	-	-	(1,428,978)	-	-	(1,428,978)	-	(1,428,978)
Loss for the year	-	-	-	-	(3,800,361)	(3,800,361)	(460,208)	(4,260,569)
Total recognised income and expense for the year	-	-	(1,428,978)	-	(3,800,361)	(5,229,339)	(460,208)	(5,689,547)
Issue of shares	529,824	63,417,004	-	-	-	63,946,828	-	63,946,828
Equity issue transaction costs	-	(3,972,883)	-	-	-	(3,972,883)	-	(3,972,883)
Balance at 30 June 2008	919,975	66,169,804	(1,431,930)	61,344	(6,671,564)	59,047,629	(12,153)	59,035,476
Exchange differences on translation of foreign operation	-	-	5,681,438	-	-	5,681,438	-	5,681,438
Net income/(expense) recognised directly in equity	-	-	5,681,438	-	-	5,681,438	-	5,681,438
Loss for the year	-	-	-	-	(36,203,861)	(36,203,861)	-	(36,203,861)
Total recognised income and expense for the year	-	-	5,681,438	-	(36,203,861)	(30,522,423)	-	(30,522,423)
Balance at 30 June 2009	919,975	66,169,804	4,249,508	61,344	(42,875,425)	28,525,206	(12,153)	28,513,053

Statement of Consolidated Cash Flows

		Year Ended  30 June 2009 $	Year Ended  30 June 2008 $
Operating Loss		(25,880,851)	(7,168,376)
Adjustments for:
Net exchange differences		(333,772)	(20,253)
Depreciation of property, plant and equipment		628,332	122,727
Impairment of property, plant and equipment		174,451	-
Amortisation and impairment of intangible assets		19,081,174	145,270
Operating cash flows before movements in working capital		(6,330,666)	(6,920,632)
(Increase) in inventories		(741,999)	(502,683)
Decrease/(Increase) in receivables		484,198	(449,863)
Increase in trade and other payables		1,422,962	1,289,638
Net cash outflow from operating activities		(5,165,505)	(6,583,540)
Investing activities
Interest received		365,320	998,287
Payments for licences, exploration and development expenditure		(8,940,449)	(29,193,392)
Payments for environmental deposits		(14,907)	(303,863)
Purchases of property, plant and equipment		(1,529,522)	(1,247,931)
Net cash used in investing activities		(10,119,558)	(29,746,899)
Financing activities
Proceeds on issue of ordinary share capital		-	62,775,554
Payments for share issue expenses		-	(3,972,881)
Net cash from financing activities		-	58,802,673
Net (decrease)/increase in cash and cash equivalents		(15,285,063)	22,472,234
Cash and cash equivalents at beginning of year		25,147,806	2,594,152
Movement in foreign exchange rate		(3,670,453)	81,420
Cash and cash equivalents at end of year		6,192,290	25,147,806

Notes to the Preliminary Financial Results Announcements:-

1.  Other gains and losses

	Year ended 30 June 2009 $	Year ended 30 June 2008 $
Foreign exchange (losses)/gains	(10,688,330)	1,909,520

2.  Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data: 

		Year Ended  30 June 2009 $	Year Ended 30 June 2008 $
Earnings Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent		(36,203,861)	(3,800,361)
		Number	Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share		48,475,411	40,572,413
Basic earnings per share		(74.68) cents	(9.37) cents

There are no dilutive instruments.

3.  Intangible assets

	Business  Licences Held $	Software $	Total $
Cost
At 30 June 2007	441,394	26,826	468,220
Additions	-	394,321	394,321
Exchange differences	-	86,649	86,649
At 30 June 2008	441,394	507,796	949,190
Additions	-	41,310	41,310
Exchange differences	-	(79,623)	(79,623)
At 30 June 2009	441,394	469,483	910,877
Accumulated Amortisation
At 30 June 2007	(14,713)	(4,316)	(19,029)
Charge for the year	(14,713)	(124,204)	(138,917)
Exchange differences	-	(86,270)	(86,270)
At 30 June 2008	(29,426)	(214,790)	(244,216)
Charge for the year	(14,713)	(280,666)	(295,379)
Impairment	(397,255)	-	(397,255)
Exchange differences	-	31,871	31,871
At 30 June 2009	(441,394)	(463,585)	(904,979)
Carrying Amount
At 30 June 2009	-	5,898	5,898
At 30 June 2008	411,968	293,006	704,974

Refer to Note 4 for details of the impairment.

4.  Mining properties

	Land  Comp.  Costs $	Explor.  Expend. $	Mine Develop. Expend. $	Mining Licences $	Total $
Cost
At 30 June 2007	-	1,780,785	-	-	1,780,785
Additions	119,771	824,016	3,645,980	24,209,304	28,799,071
Exchange differences	7,141	-	-	1,792,337	1,799,478
At 30 June 2008	126,912	2,604,801	3,645,980	26,001,641	32,379,334
Additions	534,523	2,082,265	5,341,995	-	7,958,783
Exchange differences	522	(113,316)	(405,843)	106,930	(411,707)
At 30 June 2009	661,957	4,573,750	8,582,132	26,108,571	39,926,410
Accumulated Amortisation At 30 June 2007	-	-	-	-	-
Charge for the year	(6,353)	-	-	-	(6,353)
Exchange differences	(379)	-	-	-	(379)
At 30 June 2008	(6,732)	-	-	-	(6,732)
Charge for the year	(145,869)	-	-	-	(145,869)
Impairment	-	(4,573,750)	(8,582,132)	(5,232,459)	(18,388,341)
Exchange differences	(28)	-	-	-	(28)
At 30 June 2009	(152,629)	(4,573,750)	(8,582,132)	(5,232,459)	(18,540,970)
Carrying Amount
At 30 June 2009	509,328	-	-	20,876,112	21,385,440
At 30 June 2008	120,180	2,604,801	3,645,980	26,001,641	32,372,602

The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. 

Amortisation of the costs carried forward for the development phase and the mining licences is not being charged pending the commencement of commercial levels of production. The business licences are being amortised over 30 years, and software over 5 years, and land compensation costs over 2 years.

The Company shall start to amortise its mining related intangible assets when the relevant area of interest is capable for commercial production (i.e. when the relevant mining assets are available for use).

The development costs incurred on the area of interest prior to commercial production are capitalised/expensed in accordance with the Company's accounting policies applicable.

Management has determined that the area of interest (Shenjiaya Project) owned by the Company is yet to be capable for commercial production at the balance sheet date and no amortisation is charged on the relevant mining related intangible assets.

 

5.  Property Plant and Equipment 

		Construction in progress $		Leasehold improvements  $	Motor  vehicles  $		Furniture, fittings and  equipment  $	Total  $
Cost
At 30 June 2007		-		16,567	69,845		224,879	311,291
Additions		-		-	54,965		1,192,966	1,247,931
Exchange differences		-		-	7,342		10,910	18,252
Disposals		-		(16,567)	-		-	(16,567)
At 30 June 2008		-		-	132,152		1,428,755	1,560,907
Additions		208,497		-	185,847		1,114,896	1,509,240
Exchange differences		-		-	(532)		(96,095)	(96,627)
At 30 June 2009		208,497		-	317,467		2,447,556	2,973,520
Accumulated depreciation
At 30 June 2007			-	(13,920)		(14,582)	(42,525)		(71,027)
Charge for the year			-	-		(3,950)	(118,777)		(122,727)
Exchange differences			-	-		1,751	(11,096)		(9,345)
Disposals			-	13,920		-	-		13,920
At 30 June 2008			-	-		(16,781)	(172,398)		(189,179)
Charge for the year			-	-		(16,127)	(228,601)		(244,728)
Exchange differences			-	-		58	(14,299)		(14,241)
Impairment			-	-		-	(174,452)		(174,452)
At 30 June 2009			-	-		(32,850)	(589,750)		(622,600)
Carrying amount
At 30 June 2009			208,497	-		284,617	1,857,806		2,350,920
At 30 June 2008			-	-		115,371	1,256,357		1,371,728

No assets are pledged as security for liabilities.

Refer to Note 4 for details of the impairment.

6.  Trade and other receivables

Amounts due after more than one year

			30 June 2009 $	30 June 2008 $
Prepayments Environmental remediation deposits			- 319,760	518,095 303,863
			319,760	821,958
The environmental remediation deposits were paid to the Land and Resources Department of Hunan Province. The deposit represents an environmental security bond over the eight operating gold mines. The environmental deposit remains in place for the duration of the mining licence.

7.  Inventories

			30 June 2009 $	30 June 2008 $
Raw materials and stores - at cost Work in progress - at cost Finished goods - at cost			596,274 82,908 567,567	360,286 142,397 -
			1,246,749	502,683

8.  Trade and other payables

			30 June 2009 $	30 June 2008 $
Trade payables			186,585	371,897
Other payables and accruals			2,952,501	1,632,995
			3,139,086	2,004,892

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 60 days, (2008: 55 days).

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

9.  Share Capital 

	30 June 2009 $	30 June 2008 $
Authorised:
55,000,000 ordinary shares of £0.01 each	1,043,678	1,043,678
Issued and fully paid:
48,475,411 ordinary shares of £0.01 each	919,975	919,975

(2008: 48,475,411 ordinary shares of £0.01 each) 

On 7 February 2006, 7,500,000 shares of £0.01 ($0.02) each were placed at a premium of £0.59 ($1.04) each.

The Company has one class of ordinary shares which carries no right to fixed income. 

On 7 August 2007, 900,000 shares were placed at 140 pence per share to raise £1,260,000 to meet immediate working capital needs.

On 22 October 2007 25,025,416 million shares were placed at 120 pence per share to raise £30,000,000 to secure the transfer of the eight gold mines and then to invest in the consolidation and development of the existing mining activities. Costs of $3,972,883 arose on the placement of the shares.

10.  Contingent liabilities

There were no material contingent liabilities of the Group or Company at the Balance Sheet date. 

11.  Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and related parties are disclosed below.

Trading transactions 

During the year, Group companies entered into the following transactions with related parties who are not members of the Group:

	Purchase of goods / services		Amounts owed to related parties
	2009 $	2008 $	2009 $	2008 $
Bowlane Nominees Ltd	343,200	295,096	-	-
Jinan Limited	288,000	242,776	-	-
Metallurgical Management Services (Pty) Ltd	32,800	20,655	-	-
Wildewood Limited	19,000	26,000	-	-
Linq Corporate Pty Ltd	113,200	72,000	-	-

Bowlane Nominees Ltd and Immo Services (WA) Pty Ltd are companies that provide managerial services to the Group, on behalf of Frank Vanspeybroeck, a director of China Goldmines plc. USD$343,200 (2008: USD$295,096) was paid in accordance with his agreed service agreement.

Jinan Limited is a company that provides financial and accounting services to the Group, on behalf of Marinko Vidovich, a director of China Goldmines plc. $288,000 (2008: $242,776) was paid in accordance with his agreed service agreement.

Metallurgical Management Services (Pty) Ltd is a company that provides metallurgical consultancy services to the Group. Evan Kirby is a director of both this company and China Goldmines plc. USD$32,800 (2008: USD$20,655) was paid in accordance with commercial rates.

Wildewood Limited is a company in which Mr Worrall is a director and shareholder, supplies consultancy services to the Company for Mr Worrall who is a director of China Goldmines plc. USD$19,000 (2008: USD$26,000) was paid in accordance with commercial rates.

Linq Corporate Pty Ltd, a company of which Mr Donner is a director, has provided in the period corporate consultancy services utilising a number of Linq Corporate employees amounting to USD$113,200 (2008 : USD$72,000).

All services were provided under normal commercial terms. 

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. 

Remuneration of key management personnel 

The emoluments of the directors, who are the key management personnel of the Group, were USD$253,000 (2008: USD$284,000). These do not include the amounts paid in consultancy fees noted on the previous page.

12.  Events after the Balance Sheet Date

The carrying values of assets disposed of were written down to equal the value of proceeds received as at 30 September 2009. The effect on the income statements for the year ending 30 June 2009 is summarised as follows:

	Consolidated $	Company $
Impairment of investment in subsidiary	-	195,224
Impairment of loans to related parties	-	24,171,937
Impairment of plant and equipment	174,552	-
Impairment of mining properties	18,388,341	-
Net impact of disposal on income statements	18,562,893	24,367,161

13.  Other information

The financial information set out above does not constitute group's statutory financial statements for the years ended 30 June 2009 and 30 June 2008 but is derived from them. The 2008 financial statements have been filed with the Registrar of Companies; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Whilst the auditors have not reported on the financial statements for the year ended 30 June 2009, they anticipate issuing an unqualified report which will not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 30 June 2009 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information set out in this announcement was approved by the Board of Directors on 24 November 2009.

Significant Accounting Policies for the year ended 30 June 2009

China Goldmines Plc (the "Company") is a company domiciled in the United Kingdom. The consolidated financial statements of the Company for the year ended 30 June 2009 comprise those of the Company and its subsidiaries (together referred to as the "group") and the group's interest in associates and jointly-controlled entities.

The financial statements were authorised for issue by the directors on 24 November 2009.

Basis of Preparation

The consolidated financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU.

The financial statements are presented in USD. They are prepared on the historical cost basis. However, the financial information included in this announcement does not in itself contain sufficient information to comply with IFRS.

The accounting policies applied in preparing this financial information are consistent with the group's financial statements for the year ended 30 June 2009. New accounting standards that came into force in the year did not require restatement of comparatives nor had any significant impact on the group's consolidated results or financial position.

The preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions about the reported amounts of assets and liabilities, income and expenses and the disclosure of contingent assets and liabilities. The estimates and associated assumptions are based on experience. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognised from the period in which the estimates are revised.

The consolidated financial statements of the group are prepared for the year ended 30 June 2009.

ENDFR PUGRAGUPBGQC

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