27th Sep 2007 07:02
Aurum Mining PLC27 September 2007 For immediate release 27 September 2007 A meeting for analysts will be held at 10am on the morning of the results, 27September 2007, at the offices of Buchanan Communications, 45 Moorfields, LondonEC2Y 9AE. The investor presentation, which will be used at the analyst meeting,is available on Aurum's website, www.aurummining.net. AURUM MINING PLC ("Aurum" or "the Company") Preliminary Results for the year ended 31 March 2007 Aurum Mining plc (AIM: AUR), the gold-mining company focussed on the FormerSoviet Union (FSU) and whose principal asset is the Andash Project in the KyrgyzRepublic, is pleased to announce its preliminary results for the year ended 31March 2007. Highlights •Aurum is on track for initial gold production at Andash in 2008 •Strong balance sheet following £30 million share issue in February 2007 •Identified capex savings at the Zone 1 mine, along with the continuing strength of metal prices, have considerably enhanced the economics of the Andash Project •On-going exploration work will increase Aurum's reserves and offers significant potential upside Sean Finlay, Aurum's Chairman, commented: "The current year promises to betransformational for the Group. We are advanced with the execution of our plansfor the start of construction of the open-cast mine at Andash Zone 1 and lookforward to initial production from the mine in 2008. In addition to becoming anear-term gold producer, Aurum has significant exploration potential from otheropportunities within the Andash licence area, which should increase the value ofour Company significantly. Metal prices are currently strong and the outlookremains positive. We look forward to the future with confidence." For further information: Aurum Mining plc Tel: 020 7478 9050Mark Jones, Chief Executive Officer Chris Eadie, Chief Financial Officer Arbuthnot Securities Tel: 020 7012 2000John Prior John Toll Buchanan Communications Tel: 020 7466 5000Mark Court / Rebecca Skye Dietrich Notes to editors Aurum Mining, which joined the AIM market of the London Stock Exchange in May2004, is a mining company focussed on gold opportunities in the Former SovietUnion. Its principal asset is an exploration licence over the Andash gold andcopper project in the Kyrgyz Republic. A mining licence for Andash Zone 1 wasawarded by the Kyrgyz authorities in 2006. The feasibility study compiled byWardell Armstrong International, also in 2006, confirmed a measured andindicated resource base of 19.2 million tonnes at 1.1 grams per tonne of goldand 0.4% copper, which equates to 1.1 million ozs of gold and gold equivalent.Initial production at Andash Zone 1 is expected in the second half of 2008. TheAndash project also includes Zone 2 and Zone 3 along with Tokhtonysay, Nakhodkaand three other additional exploration areas. Aurum Mining plc CHAIRMAN'S STATEMENT In my Chairman's statement last year I described the year to 31 March 2006 as ayear in which the foundations were firmly laid for the delivery in 2008 ofAurum's primary objective of becoming a gold producer. I am delighted to saythat, in the year to 31 March 2007, we have built extensively on thosefoundations and have full confidence that Aurum is set to become a revenuegenerating gold producer next year. During the year, we made major progress with the Andash Project in the KyrgyzRepublic culminating in February 2007 with a highly successful fundraising inwhich we raised £30 million gross through a share issue to fully fundconstruction of the open-cast mine at Zone 1 of the Andash licence area. Thisfundraising was a very significant achievement, marking one of the largestfundraisings this year in the AIM market's mining sector. The success of thefundraising is a reflection of the commitment of the Aurum management team, thequality of our Andash asset and the capability of our Nominated Adviser andBroker, Arbuthnot Securities. This fundraising, which will allow the Zone 1 mineto be built without the need for debt, followed a substantial amount ofpreparatory work during the year including upgrades to the resource estimate,the award of a mining licence from the Kyrgyz authorities and completion of awestern feasibility study. The Andash Project is Aurum's principal asset which comprises a licence area of53 sq km in northern Kyrgyzstan. Andash forms part of the Tien Shan gold belt,one of the world's largest gold belts, and which stretches across central Asia.Our strategy is to begin production at Zone 1 of the licence area at theearliest opportunity, thereby creating the cash flow to exploit the significantopportunities in other exploration areas. We have previously completed someexploration drilling at Zones 2 and 3 and, during the period, we discovered anew and very exciting target close to Zone 1, which we named Nakhodka. We alsoidentified a substantial prospect at Tokhtonysay, which is adjacent to theKorgontash licence area held by Lero Gold Corporation, a subsidiary of OrielResources plc. These additional opportunities throughout the licence area have the potential toincrease substantially the Andash Project's resource base and thereby to createsignificant value for the Company following the start of production at Zone 1. Zone 1 itself has an extensive resource: our western feasibility study, thepreparation of which was led by Wardell Armstrong International (WAI),identified a JORC compliant proven and probable resource of 16 million tonnes ofore at a grade of 1.05 grammes per tonne (g/t) and 0.4% copper, giving containedgold and gold equivalent of more than 1.1 million ounces. The feasibility studyalso confirmed that Aurum will be a low-cost producer with cash costs for goldand gold equivalent of just US$223 per ounce. The pit design will allow us tomine at a rate of 2 million tonnes per annum with a very low stripping ratio of0.8 of a tonne of waste to 1 tonne of ore. We believe that responsible mining is fundamental to Aurum's success at Andashand therefore we have continued our proactive interaction with the localcommunity with initiatives including our social fund for health and education.As mentioned in our pre-close update, the Kyrgyz Republic is a demandingenvironment in which to operate but we believe our initiatives on the ground,including regular dialogue with senior government officials and with the localcommunity, mean that we will deliver our plans on schedule. It is our intentionto meet all of the social and environmental conditions made in our westernfeasibility study, which has been ratified by the Kyrgyz authorities and towhich we are fully committed. Post year end, we have made significant progress in the preparatory work for theconstruction of the Zone 1 mine. Detailed design work, to meet the requirementsof the Company's mining licence and to enable the physical construction of themine, is progressing well. People Aurum's management team, and Board, was strengthened in the period with theappointment of Chris Eadie as Chief Financial Officer as announced on 17November 2006. Chris is a Chartered Accountant whose broad financial experience,particularly around financing and internal control, has already been of greatvalue to the Group. In preparation for the construction and commissioning of the Andash Zone 1 mine,we have expanded our management team at the Andash Mining Company (AMC), ourwholly owned Kyrgyz subsidiary, with some key appointments in general,operational and project management and in financial control. I would like to thank Aurum's dedicated team of staff in the UK and in theKyrgyz Republic and also thank the Company's consultants and other advisers fortheir dedicated work throughout the year. I would also like to express mygratitude for the valuable support from our investors. Financials For the year to 31 March 2007, the Group reported a loss of £1.96 million,compared with a restated loss of £1.55 million in 2006. Cash at bank at thebalance sheet date was a healthy £28.4 million (31 March 2006: £0.3m),reflecting February's £30 million gross fundraising. Careful cost controlremains a key priority at Aurum particularly as we begin to invest funds in theZone 1 mine's construction. As announced on 27 June 2007, we have successfullyidentified significant savings in the forecast capital expenditure (capex) atthe mine, with the result that forecast capex is now expected to be in theregion of US$48.5 million, compared with the western feasibility study estimateof US$55.5 million. Future Opportunities As we move closer to meeting our initial strategic target of bringing Zone 1 ofthe Andash mine into production, the Board intends to review the potential todiversify our asset base to grow the Group and to reduce country and politicalrisk. To this end the Board will allocate time to looking at opportunities that arecomplementary to Andash, whilst ensuring that operationally we maintain ourfocus on delivering the Andash Zone 1 mine. Outlook The current year promises to be transformational for the Group. We are advancedwith the execution of our plans for the start of construction of the open castmine at Andash Zone 1 and look forward to initial production from the mine in2008. In addition to becoming a near-term gold producer, Aurum has significantexploration potential from other opportunities within the Andash licence area,which should increase the value of our Company significantly. Metal prices arecurrently strong and the outlook remains positive for the prolonged Bull Run tocontinue. We look forward to the future with confidence. Sean Finlay Chairman 27 September 2007 CHIEF EXECUTIVE'S REVIEW Our key objectives during the year to 31 March 2007 were the submission of thelocal feasibility study for Andash Zone 1, the award of a mining licence and thecompletion of a fully bankable feasibility study to enable the project financingof the Zone 1 open-cast mine. Achieving these objectives was the focus of muchof our effort during the year, in line with our strategy of bringing Zone 1 intoproduction at the earliest possible date. We also made some important progressduring the year on new exploration opportunities. I am pleased to report that weachieved our key objectives successfully and went on to raise £30 million grossin equity to fully fund construction of the Zone 1 mine. Post year end our effort has been focussed on preparing for the start ofconstruction work at the Zone 1 mine, where we have made considerable progress.We announced in May the employment of technical and management staff at theAndash Mining Company (AMC), and we have subsequently enlarged the AMC team inline with our ongoing needs. The detailed design work, to meet the requirementsof the Company's mining licence, is progressing well. Construction equipment andcontractors are being sourced with key equipment already on order. Deposits of precious and other metals tend to be located in challengingenvironments as a result of weather, infrastructure, political, environmental ortechnical issues. We are highly fortunate with the location of the Andashlicence area, in the Talas Valley in the North West of the Kyrgyz Republic, asit is accessible year round. The technical and geological risks of the AndashProject are low, in part because the Zone 1 ore body is fairly homogeneous,close to the surface and with good geometry allowing an open-cast operation witha low strip ratio, and high mining rates. We have sought to minimise social or environmental problems by working closelywith the local population and have also maintained a regular dialogue with theKyrgyz government and authorities at local, regional and national levels. The Talas Valley has received a lot of attention in the local media as it hoststhe Jerooy deposit, which was formerly held by Oxus Gold, as well as a number ofother exploration opportunities owned by both local and international companies.Non-Governmental Organisations (NGOs) and other interested parties are rightlyconcerned that any future mining operations minimise the impact on the localenvironment and on the social structure in what is largely an agricultural area.Media coverage, particularly around the use of cyanide, has caused concernwithin the local population following the internationally reported cyanide spillin 1998 at the Kumtor mine in western Kyrgyzstan. Although there have beenconcerns within the local community about the use of cyanide, it should be notedthat it is not proposed to use cyanide for the Zone 1 mine. Earlier this year, national government, in an initiative to reassure the localpopulation, requested all companies in the valley to show, through independentassessment, that they were able to meet the highest environmental standards. Aspart of our policy to work with the government we decided to rearrange our plansand hold back on mobilising exploration and site work until July of this year. An independent assessment by Oleg Pechenyuk from the Kyrgyz NGO, 'IndependentEcological Experts', confirmed that our operation is designed to meet thehighest international standards. Although holding back has caused some delays,it has not so far impacted our target of bringing Zone 1 into production in thesecond half of next year. Current relationships with the Kyrgyz authorities aregood, at both national and regional level, and we do not foresee any furtherdisruptions to our timetable at this time. Andash Zone 1 In June 2006, we completed the local feasibility study for Andash Zone 1 and itwas submitted for approval by the Kyrgyz authorities. This study, which coveredthe economic, mining, metallurgical, legal, environmental and social issues ofthe project, was prepared by Ken-Too Research and Design Centre, the leadingindependent Kyrgyz mining consultancy. This study confirmed the resourceestimates previously included in the State Commission of Resources of the KyrgyzRepublic, amounting to gold and gold equivalent of 1.5 million ounces. This study was a key part of our application for a mining licence, which wereceived from the Kyrgyz authorities in November 2006 and which underlined theCompany's good working relationship with the Kyrgyz Republic. This licence wasawarded by the State Agency for Geology and Mineral Resources of the KyrgyzRepublic and is valid until 31 December 2017, but can be extended on theidentification of additional resources in other zones of the licence area. Concurrent with the local feasibility study and mining licence application,Wardell Armstrong International, the leading UK mining consultant withparticular expertise in the Former Soviet Union, was compiling the westernfeasibility study to enable the project financing of the Zone 1 mine. Thisstudy, which was prepared in association with engineering consultants GBM andground engineering and environmental services group Golder Associates, wascompleted in December 2006. The western feasibility study, which confirmed a JORC proven and probablereserve at Andash Zone 1 of more than 1.1 million ounces of gold and goldequivalent, underlined the attractive economics of the Zone 1 mine. The minewhich will be open pit, will be a low cost operation, the forecasted cashoperating costs are US$223 per ounce, well under the forecast industry averagein 2007 of US$350. The orebody, which outcrops, gives a stripping ratio of just0.8 to 1. The pit geometry allows high production rates; the planned ore miningrate of 2 million tonnes per annum giving a pit life of approximately 9 years. A summary of WAI's feasibility study is available on Aurum's website. We had been considering a number of options for the financing of the Zone 1 minebut, given the persuasiveness of the western feasibility study, we decided tomaximise the equity component of the financing to avoid the effect of the goldhedging demands that debt providers would almost certainly have required. Alongwith our Nominated Adviser and Broker, Arbuthnot Securities, we decided tofinance the mine entirely through equity via a share placing that successfullyraised £30 million before expenses via a placing of new shares at 100p a share. On 26 February 2007, we announced the successful result of this fundraising, thenet proceeds from which are sufficient to wholly fund the construction andcommissioning of the Zone 1 mine and to support the Company's explorationprogramme in other parts of the Andash licence area. This fundraising was amajor step in the development of the Company and an endorsement of Aurum'sacquisition, in January 2005, of the Andash licence area. A further benefit of funding the mine exclusively through equity has been ourability to manage the project internally. In April 2007, we announced theemployment of Jeff Geissmann as Operations Director of AMC and NormanLivingstone as Project Manager of AMC. The team was further complemented by theemployment of Andrew Howson as Financial Controller in May 2007. Using theconsiderable experience of the team, particularly in mine construction andcommissioning, we have been able to eliminate the need for an externalengineering procurement and construction management contract, which would havebeen required by a debt provider. In addition we have enhanced flexibility inthe sourcing of plant and equipment, which we are able to do locally. This approach, as previously announced, has allowed us to identify significantsavings in the forecast capital expenditure of the mine, which is now expectedto be in the region of US$48.5 million compared with the western feasibilitystudy estimate of US$55.5 million. These capex savings will assist the Companyto advance other prospects within the Andash licence area to feasibility andprovide us with the option to look at other growth opportunities. In the current year, we are making good progress in preparation for the start ofconstruction of the Zone 1 mine, and we expect to begin production in the secondhalf of 2008. A decision was made by the executive team in July of this year to manage partsof the open pit mine on a selective mining basis. This will allow us to avoidmany of the non pay dykes that are a feature of the ore body, as well as allowus to manage the low and high grade areas to maximise recovery in the processplant. In August this year we decided to equip the mine with a mining fleet thatprovides full flexibility, so that both mass and selective mining opportunitiescan be addressed. The mining fleet and all auxiliary and support equipment wasplaced on order in August, with delivery scheduled for February 2008. Final design for the new access road to site has been completed and we arecurrently waiting for permission for the road build programme to start. All thenecessary road building equipment was ordered in April this year, and arrived onschedule in August. The detailed design phase that needs to be completed by the end of November ison schedule, and all long lead time equipment has been identified. Themanufacturer of the two 3.7 MW Ball Mills, which is the longest lead timecomponent, has committed to schedule and deliver the mills to site in advance ofany critical path time line, and we are currently finalising contracts for theirpurchase. Environment A statement of environmental impacts required by the Kyrgyz government (Stage 1of the local environmental standard (OVOS)) has been submitted and accepted bythe regulatory authorities. Comments of independent ecological experts weresought and relayed to AMC in July for consideration in the Stage 2 OVOSsubmission. A suitable response to these comments was made by AMC in a letter tothe State Agency for Geology and Mineral Resources in August, and this wasaccepted and noted by the State Agency in November 2006. The latest information on layout and design has been transmitted to the KuperoBazaar authorities. Whilst no official response is required by the authorities,at this stage, we believe that we have had a generally positive reaction to thefinal design layout given in the western feasibility study. The Stage 2 OVOS (Impact Assessment and Mitigation) will be linked in to theTechnical Design due in November 2007 and allows for further minor changes to beincorporated. The Environmental and Social Impact Assessment (ESIA) process led by ourconsultants WAI runs on a parallel timeline to the OVOS process. Environmentaland social issues were addressed in the western feasibility study. A workingdraft of the ESIA report was made available to AMC for review and comment inJune of 2007. Further work is progressing towards completing a social impactassessment, community development programme, environmental monitoring andmanagement plan, mine closure and rehabilitation plan. A final version of the ESIA will be published after receipt of permission fromthe authorities and consideration of attached conditions. The Stage 2 OVOS will include the compilation and State approval of maximumpermissible discharges, emissions and solid wastes for the construction andoperational phases of the project. These will be incorporated into theprovisions of the initial ecological passport for the project. All environmental assessment documents and project descriptions were provided tothe Kazakh authorities (Jambal Oblast and Ministry of Environment) as requiredby the UN Espoo convention of the assessment of impacts in transborder context,in March 2007. A public meeting was held in Tarac, Kazakhstan in March 2007.Principal concluding remarks were supportive of the project and approvedprogression to detailed design and the stage 2 OVOS. Social Impact assessment During the review period and into the new financial year we continued toestablish good working relationships with the local population of Kupero Bazaar,NGO's and regional and local government. A Community Development Officer has been appointed to provide continuity in thepublic participation process and to provide the main communication link betweenAMC and the stakeholders. We have held a number of public consultations: round table discussions andpublic meetings, with representatives of the local communities, NGO's and localgovernment. Our objective of sharing information centred around the following: •the beneficial impact for the local community from a well managed producing mine; •the social, economic and environmental impact the mine will have on the local community; and •the enhanced life style offered, by creating local job opportunities. Key concerns shared: •how the mining activity will affect the local environment; •how it can be controlled; •lack of information and understanding about the technical process of mining. AMC is continuing to work closely with the local community by providingfinancial help for various projects. The new AMC information centre will beopened in Kupero Bazaar in September 2007 to provide a venue for sharinginformation. It will provide details of the proposed mining and processingactivity, the economic impact and the benefits it will provide to the localcommunity and will include a 'book of comments' that will allow individuals toseek clarification or share concerns. This will complement the information packsthat were given to every household in the local villages in August this year. AMC has carried out public relations activities designed to promote andstimulate the development of the mining sector of the country, protection of theenvironment, rendering assistance to vulnerable groups of the population, aswell as preserving and reviving Kyrgyz national values. AMC also participated inthe implementation of a number of projects and charity events to supporttechnical progress, health and education in the Talas region. During the year AMC rendered financial support for the Council of Veterans, theCouncil for Women, local government schools, kindergartens, hospitals as well asassistance for farmers. Exploration Whilst our primary focus is to bring the Zone 1 deposit into production during2008, we have also made significant progress during the year under review at theother opportunities within the Andash licence area, which benefit from theconsiderable exploration work carried out in the Soviet era. We were particularly excited to discover a new mineralised zone, which we namedNakhodka, which is in close proximity to Zone 1 and is a possible faultedextension of the Zone 1 orebody. This new area shares with Zone 1 identicalbedding structures, the same host rocks and the same chemical elements both intype and grade. Trenching results showed strong mineralisation running 9.9metres (m) at 7.89g/t of gold and 9m at 5.04 g/t of gold, considerably higherthan results obtained in Zone 1 trenches. Also during the period, we conducted further successful exploration work atTokhtonysay, which was originally discovered during the Soviet era and containsseven outcropping mineralised zones. Four of these zones are situated within theAndash licence area whilst the other three are within the adjacent Korgontashlicence area, which is held by Lero Gold Corporation, a subsidiary of OrielResources plc. Results from our geophysical study, announced in December 2006, were highlyencouraging. Trenching work revealed gold grades as high as 27.9g/t and coppergrades of 0.77 per cent. The close proximity of Nakhodka and Tokhtonysay to the Zone 1 mine creates thepotential, following further drilling, to extend the mine life significantly. Of the money raised in February, US$2 million has been allocated to theexploration programme. At the end of August, exploration teams who will completea full geophysical survey of Nakhodka and start core drilling at Tokhtonysay,were mobilised. We expect to report initial findings before the 2007 calendaryear end. Summary We made very considerable progress during the year under review and entered thecurrent year with the full funding in place to construct and commission the Zone1 mine and to progress the other substantial opportunities within the Andashlicence area. Our immediate priority is the completion of the preparatory workto allow the construction of the Zone 1 mine, which is on track to beginproduction in the second half of 2008. Mark Jones Chief Executive 27 September 2007 Aurum Mining plc Consolidated profit and loss account for the year ended 31 March 2007 Year ended Year ended 31 March 2007 31 March 2006 Restated Note £'000 £'000Administrative expenses Exceptional items 22 - (252)Other (1,938) (1,305) Total administration expenses and operating (1,938) (1,557)loss Interest receivable and similar income 4 154 21Interest payable and similar expense 5 (175) (14) Loss on ordinary activities before taxation (1,959) (1,550) Tax on loss on ordinary activities 6 - - Loss on ordinary activities after taxation (1,959) (1,550) Retained loss for the financial year 16 (1,959) (1,550) Loss per share - basic and diluted 18 (13.38p) (16.30p) All amounts relate to continuing activities. Aurum Mining plc Consolidated statement of total recognised gains and losses for the year ended31 March 2007 Year ended Year ended 31 March 2007 31 March 2006 Restated £'000 £'000 Loss for the financial year (1,959) (1,550) Exchange translation differences (93) 14 Total recognised gains and losses for financial (2,052) (1,536)year Prior year adjustment- share based payments (299) Total gains and losses recognised since last (2,351)statements Aurum Mining plc Consolidated and Company balance sheets as at 31 March 2007 Group Group Company Company Notes 2007 2006 2007 2006 Restated Restated £'000 £'000 £'000 £'000Fixed assetsIntangible assets 8 - 1,305 - -Tangible fixed assets 9 5,123 263 6 8Investments in 10 - - 3,213 665subsidiary undertakings ----- ------- -------- -------- 5,123 1,568 3,219 673 ----- ------- -------- --------Current assetsStocks 11 184 11 - -Debtors: amounts 12 94 85 59 26falling due within oneyearDebtors: amounts 12 - - 2,802 1,211falling due after oneyear ----- ------- -------- --------Total Debtors 94 85 2,861 1,237Cash at bank and in 28,356 321 28,279 284hand ----- ------- -------- -------- 28,634 417 31,140 1,521Creditors: amounts 13 (351) (339) (322) (257)falling due within oneyear ----- ------- -------- -------- Net current assets 28,283 78 30,818 1,264 ----- ------- -------- -------- Total assets less 33,406 1,646 34,037 1,937current liabilities Convertible Loan Note 23 - (643) - (643) ----- ------- -------- --------Net assets 33,406 1,003 34,037 1,294 ----- ------- -------- --------Capital and reservesCalled up share capital 14 455 95 455 95Other reserve 16 250 304 250 304Share premium 16 32,941 1,687 32,941 1,687Merger Reserve 16 498 498 498 498Shares to be issued 16 2,548 - 2,548 -Profit and loss account 16 (3,286) (1,581) (2,655) (1,290) ----- ------- -------- --------Shareholders' funds 17 33,406 1,003 34,037 1,294 ----- -------- -------- -------- The financial statements were approved by the Board of Directors and authorisedfor issue on 27 September 2007 and were signed on its behalf by: Chris Eadie Chief Financial Officer Aurum Mining plc Consolidated cash flow statement for the year ended 31 March 2007 Note Year ended Year ended 31 March 2007 31 March 2006 £'000 Restated £'000 Net cash outflow from operating (a) (1,847) (967)activities ------ -------Returns on investments and servicing offinanceInterest received and similar income 154 21 ----- ------ Net cash inflow from returns oninvestments and servicing of finance 154 21 ------ -------Capital expenditurePurchase of tangible fixed assets (111) (138)Deferred exploration expenditure (1,080) (486)Sale of assets 2 ------ -------Net cash outflow from capital expenditure (1,189) (624) ------ ------- Cash outflow before management of liquid (2,882) (1,570)resources & financing ------ ------- FinancingIssue of ordinary shares 32,624 -Issue of convertible Loan Notes (net of - 947issued costs)Expenses paid in connection with share (1,707) -issues ------ -------Net cash inflow from financing 30,917 947 ------ -------Increase/(decrease) in cash (c) 28,035 (623) ------ ------- Significant non-cash transactions are as follows: Capital expenditure: Shares to be issued of £2,548,000 have been capitalised within miningproperties. Financing: From 14/11/2006 to 31/03/2007 convertible debt of £643,000 was converted intoordinary shares. Notes to the consolidated cash flow statement for the year ended 31 March 2007 (a) Reconciliation of operating loss to net cash outflow from operatingactivities 2007 2006 Restated £'000 £'000 Operating loss (1,938) (1,557)Depreciation of tangible fixed assets 77 64Loss on sale of tangible fixed assets 5 -Share based payments 347 299(Increase)/decrease in stocks (173) (11)(Increase)/decrease in debtors (9) 180Decrease/(increase) in creditors 12 58Foreign exchange movements 7 14Interest payable and similar expense (175) (14) ----- -----Net cash outflow from operating (1,847) (967)activities ----- ----- (b) Reconciliation of net cash flow to movement in the net cash 2007 2006 £'000 £'000 Increase/(decrease) in net cash in the 28,035 (623)year(Increase)/decrease in debt on (issue)/ 643 (643)redemption of convertible Loan Notes ----- -----Movement in net funds/(debt) 28,678 (1,266)Opening net (debt)/funds (322) 944 ----- -----Closing net funds/(debt) 28,356 (322) ----- ----- (c) Analysis of net funds At 1 April Cash flow Non cash At 31 March 2006 movement 2007 £'000 £'000 £'000 £'000 Cash at bank and in hand 321 28,035 - 28,356 Debt due after more thanone yearConvertible Loan Note (643) 643 - -------- ------- -------- -------- (322) 28,035 643 28,356 -------- ------- -------- -------- Notes forming part of the financial statements The financial information set out in this preliminary statement does notcomprise Aurum Mining's statutory accounts within the meaning of section 240(5)of the Companies Act 1985. The statutory accounts of Aurum Mining for the yearended 31 March 2007 will be delivered to the Registrar of Companies for Englandand Wales following the Company's annual general meeting and have also been sentto shareholders today. Copies will be available from the Company's registeredoffice at 26 Curzon Street, London, W1 7TQ, and will also be available atAurum's website, www.aurummining.net. The auditors have reported on those accounts; their reports were unqualified anddid not contain statements under s237(2) or (3) Companies Act 1985. 1Accounting policies Basis of preparation The financial statements have been prepared in accordance with currentlyapplicable Accounting Standards in the United Kingdom, which have been appliedconsistently, and under the historical cost convention. In preparing thesefinancial statements the Group has adopted FRS20 'share-based payment' for thefirst time. Basis of consolidation Aurum Mining Plc, together with its subsidiaries as listed in note 10, is amining and exploration group that is focused on opportunities in the territoriesof the Former Soviet Union. The consolidated financial statements incorporate the results of Aurum MiningPlc and all of its subsidiaries as at 31 March 2007 using the acquisition methodof accounting. The acquisition method includes the results of subsidiaryundertakings from the date of acquisition. The Company has taken advantage of Section 230 of the Companies Act 1985 in notpresenting its own profit and loss account. The Company's loss for the year was£1,711,805 (2006: loss of £1,253,892 as restated). Stocks Stock is valued at lower of cost and net realisable value. Cost is based on thecost of purchase on a first in, first out basis. Net realisable value is basedon estimated selling price less additional costs to disposal. Fixed asset investments Investments held as fixed assets are stated at cost less provision for anyimpairment to their carrying value. Tangible fixed assets Tangible fixed assets are stated at cost less depreciation. Depreciation isprovided to write off the cost, less estimated residual values, of all tangiblefixed assets, evenly over their expected useful lives. It is calculated onstraight line basis at the following rates: Office and computer equipment: 20% to 33% per annum Plant and Equipment: 20% to 33% per annum Vehicles 33% per annum Mining properties Once a decision is made to proceed with the development of a mining project,exploration and evaluation expenditure other than that on buildings, machineryand equipment is capitalised under tangible fixed assets as mining properties,together with any amount transferred from unevaluated mining properties. Miningproperties are amortised over the estimated life of the reserves on a 'unit ofproduction' basis. Unevaluated mining properties All costs associated with mining development and investment are capitalised on aproject-by-project basis pending determination of the feasibility of theproject. Costs incurred include appropriate technical and administrativeexpenses but not general overheads. When a decision is made to proceed todevelopment, the related expenditures will be transferred to mining properties.Where a licence is relinquished, a project is abandoned, or is considered to beof no further commercial value to the company, the related costs will be writtenoff. The recoverability of deferred mining costs and mining interests is dependentupon the discovery of economically recoverable reserves, the ability of thecompany to obtain necessary financing to complete the development of reservesand future profitable production or proceeds from the disposition of recoverablereserves. Costs on productive areas are amortised over the life of the area of interest towhich such costs relate on a unit of production output basis. Impairment of assets The Group assesses at each reporting date whether there is an indication that anasset may be impaired. If any such indication exists, or when annual impairmenttesting for an asset is required, the Group makes an estimate of the asset'srecoverable amount. An asset's recoverable amount is the higher of an asset's orcash-generating unit's fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups ofassets. Where the carrying amount of an asset exceeds its recoverable amount,the asset is considered impaired and is written down to its recoverable amount.In assessing value in use, the estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset.Impairment losses of continuing operations are recognised in the profit and lossaccount in those expense categories consistent with the function of the impairedasset. An assessment is made at each reporting date as to whether there is anyindication that previously recognised impairment losses may no longer exist ormay have decreased. If such indication exists, the recoverable amount isestimated. A previously recognised impairment loss is reversed only if there hasbeen a change in the estimates used to determine the asset's recoverable amountsince the last impairment loss was recognised. If that is the case the carryingamount of the asset is increased to its recoverable amount. That increasedamount cannot exceed the carrying amount that would have been determined, net ofdepreciation or amortisation, had no impairment loss been recognised for theasset in prior years. Such reversal is recognised in the profit and lossaccount. After such a reversal the depreciation or amortisation charge isadjusted in future periods to allocate the asset's revised carrying amount, lessany residual value, on a systematic basis over its remaining useful life. Environmental provisions Appropriate and adequate provision is made for rehabilitation costs over theestimated period of exploration activity. As at 31 March 2007 no environmentaldamage had occurred and hence no provision has been made. Operating leases Amounts payable under operating leases are charged against income on astraight-line basis over the lease term. Foreign currency transactions Monetary assets and liabilities denominated in foreign currencies are translatedinto sterling at rates of exchange ruling at the balance sheet date.Transactions in foreign currencies are translated into sterling at the rate ofexchange ruling at the date of the transaction. Exchange differences are takento the profit and loss account as they arise. Results of overseas subsidiariesand their balance sheets are translated at year end rate. Exchange differenceswhich arise from the translation of the opening net assets of foreignsubsidiaries are taken to reserves. Deferred Taxation FRS 19 'Deferred tax' requires deferred taxation to be recognised in full inrespect of transactions or events that have taken place by the balance sheetdate and which could give rise to an obligation to pay more or less taxation inthe future. Deferred tax assets are only recognised to the extent they aredeemed recoverable. The Group has chosen not to discount deferred tax balances,as permitted by FRS 19. National Insurance on share options To the extent that the share price as at balance sheet date is greater than theexercise price of outstanding options, provision for any National Insurancecontributions has been made based on the prevailing rate. The provision isaccrued over the performance period attaching to the award. Convertible Debt In accordance with FRS4 and FRS25, the company has classified the convertibledebt in issue as a compound financial instrument. Accordingly, the Companypresents the liability and equity component separately on the balance sheet. Theclassification of the liability and equity component is not reversed as a resultof a change in the likelihood that the conversion option will be exercised. Nogain or loss arises from initially recognising the components of the instrumentseparately. Interest on the debt element of the loan is accreted over the termof the loan. Costs associated with raising debt are set off against the grossvalue of monies received. Financial instruments In relation to the disclosures made in note 19: short term debtors and creditors are not treated as financial assets orfinancial liabilities except for the currency disclosures; and • the Group does not hold or issue derivative financial instruments fortrading purposes. Liquid resources For the purposes of the cash flow statement, liquid resources are defined asshort term deposits. Share-based payments The cost of equity-settled transactions with suppliers of goods and services ismeasured by reference to the fair value of the good or service received, unlessthat fair value cannot be estimated reliably. The fair value of the good orservice received is recognised as an expense as the Group receives the good orservice. The cost of equity-settled transactions with employees, andtransactions with suppliers where fair value cannot be estimated reliably, ismeasured by reference to the fair value of the equity instrument. The fair valueof equity-settled transactions with employees is recognised as an expense overthe vesting period. The fair value of the equity instrument is determined at thedate of grant, taking into account market based vesting conditions. The fairvalue is determined using an option pricing model. No expense is recognised for awards that do not ultimately vest, except forawards where vesting is conditional upon a market condition, which are treatedas vesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated,representing the extent to which the vesting period has expired and management'sbest estimate of the achievement or otherwise of non-market conditions, thenumber of equity instruments that will ultimately vest, or in the case of aninstrument subject to a market condition, be treated as vesting as describedabove. The movement in cumulative expense since the previous balance sheet dateis recognised in the income statement, with a corresponding entry in equity. Adoption of FRS 20 - Share- Based Payment The Group has adopted Financial Reporting Standard (FRS) 20 'Share-basedPayment' during the year. The adoption of this standard constitutes a change inaccounting policy. Therefore, the impact has been reflected as a prior yearadjustment in accordance with FRS 3 'Reporting Financial Performance'. The standard requires that where shares or rights to shares are granted to thirdparties, including employees, a charge should be recognised in the profit andloss account based on the fair value of the shares at the date the grant ofshares or right to shares is made. The adoption of FRS 20 has resulted in a net increase in the loss for the yearof £347,312 and for the year ended 2006 the net increase in the loss was£298,799. There is no impact on the net assets of the Group. The share-based payments expense has been included in the administrativeexpenses line of the consolidated profit and loss account. 4 Net interest receivable and similar income Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Bank interest receivable 154 10Exchange gains - 11 ------ ------ 154 21 ------ ------ 5 Interest payable and similar expense Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Interest payable on convertible Loan Notes 107 14Exchange losses 68 - ------ ------ 175 14 ------ ------ 6 Taxation No current or deferred tax charge has arisen in the current year. The Company and the Group have incurred tax losses for the year and acorporation tax charge is not anticipated. The potential benefit of thesecarried forward taxation losses calculated at the rates of tax prevailing in thecountries in which the losses were incurred amount to approximately £479,000.This amount has not been recognised in the financial statements as the recoveryof this benefit is dependent on the future profitability of certainsubsidiaries, the timing of which cannot be reasonably foreseen. The Directors believe that there have been no breaches of foreign taxregulations and that all necessary provisions have been made in these accounts. The tax assessed for the year is different than the standard rate of corporationtax in the UK. The differences are explained below: Year ended Year ended 1 March 31 March 2007 2006 Restated £'000 £'000 Loss on ordinary activities before 1,959 1,550taxation ------- ------ Loss on ordinary activities at the (465)standard rate of corporation tax in theUK of 30% (2006: 30%) (588) Effects of:Expenses not deductible for tax 109 95purposesUnutilised tax losses carried forward 479 370 ------- ------Current tax charge - - ------- ------ 8 Intangible assets Unevaluated mining properties Group £'000CostAs at 1 April 2006 1,305Foreign currency re-translation (70)Additions during the year 3,628Transfer to mining properties (4,863) --------At 31 March 2007 - --------Net book value - At 31 March 2007 --------At 31 March 2006 1,305 -------- The Company had no intangible assets at 31 March 2007 or at 31 March 2006. 9 Tangible fixed assets Office and Plant, Mining Total computer equipment Properties equipment and vehiclesGroup £'000 £'000 £'000 £'000 CostAt 1 April 2006 30 299 - 329Foreign currency (2) (34) - (36)re-translationAdditions 7 104 - 111Disposals - (10) - (10)Transfer from - - 4,863 4,863unevaluated miningproperties ---- ------ ----- ------At 31 March 2007 35 359 4,863 5,257 ---- ------ ----- ------DepreciationAt 1 April 2006 9 57 - 66Foreign currency - (6) - (6)re-translationCharge for the year 7 70 - 77Disposals - (3) - (3) ---- ------ ----- ------At 31 March 2007 16 118 - 134 ---- ------ ----- ------Net book value 19 4,863 5,123 At 31 March 2007 241 ---- ----- ------ ------ At 31 March 2006 21 242 - 263 ---- ------ ----- ------ 9 Tangible fixed assets (Continued) Office and computerCompany equipment £'000CostAt 1 April 2006 13Additions 1 --------At 31 March 2007 14 -------- DepreciationAt 1 April 2006 5Charge for the year 3 --------At 31 March 2007 8 --------Net book value 6 At 31 March 2007 --------At 31 March 2006 8 -------- 10 Fixed asset investments Investments in subsidiaryCompany undertakings £'000 CostAt 1 April 2006 665Additions 2,548 --------At 31 March 2007 3,213 -------- The Company had the following subsidiary undertakings at the end of the yearwhich has been included in the consolidated financial statements: Percentage Country Activity interest of incorporation Kaldora Company Limited 100 British Virgin Holding company Islands Andash Mining Company 100 Kyrgyz Republic Mining and exploration 11 Stocks Group Group Company Company Year Year Year Year ended ended 31 March ended ended 31 March 2006 31 March 2007 31 March 2006 2007 £'000 £'000 £'000 £'000Raw materials and 184 11 - -consumables ------- ------ -------- -------- 12 Debtors Group Group Company Company Year Year Year Year ended ended 31 March ended ended 31 March 2006 31 March 2007 31 March 2006 2007 £'000 £'000 £'000 £'000Amounts falling duewithin one year:Other debtors 32 38 - -Prepayments and accrued 62 47 59 26income ------- ------ -------- -------- 94 85 59 26 ------- ------ -------- --------Amounts falling dueafter more than oneyear:Amounts owed by - - 2,802 1,211subsidiary undertakings ------- ------- -------- --------Total debtors 94 85 2,861 1,237 ------- ------ -------- -------- Amounts owed by subsidiaries are unsecured, interest free and fall due forrepayment in 2008. 13 Creditors: Amounts falling due within one year: Group Group Company Company Year Year Year Year ended ended ended ended 31 March 31 March 31 March 31 March 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Trade creditors 11 170 7 143Other creditor - 6 - -Other taxation and 46 5 38 2social securityAccruals and deferred 294 158 277 112income ------ ------ -------- -------- 351 339 322 257 ------ ------ -------- -------- 14 Share capital Authorised 2007 2006 2007 2006 Number Number £'000 £'000 Ordinary shares 200,000,000 200,000,000 2,000 2,000of 1p each Allotted, issued and fully paid 2007 2006 2007 2006 Number Number £'000 £'000 Ordinary 45,467,005 9,505,775 455 95shares of 1peach On 25 April 2006, 81,915 ordinary shares of 1p were allotted at 47 pence pershare to W H Ireland on the exercise of share options. On 12 May 2006, 2,777,778 ordinary shares of 1p were issued at a premium of 89pence for cash. From 14 November 2006 to 31 March 2007, 2,857,135 ordinary shares of 1p wereallotted following the conversion of Loan Notes of £1,000,000 issued on 15February 2006 at the previously agreed conversion price of 35 pence per share. On 28 February 2007, 30,000,000 ordinary shares of 1p were issued at a premiumof 99 pence for cash. On 31 March 2007, 244,402 ordinary shares of 1p were allotted following theconversion of accrued interest on Loan Notes issued on 15 February 2006 at thepreviously agreed conversion price of 35 pence per share. 16 Reserves Group Merger Other Share Profit and Shares to reserve reserve Premium loss account be issued £'000 £'000 £'000 £'000 £'000 At 1 April 2006- as 498 304 1,687 (1,581) -restatedLoss for the year - - - (1,959) -Share based payments - - - 347Equity proportion ofconvertible Loan Notes - (54) - - -Exchange differences on - - - (93) -retranslationIssue of 81,915 sharesfollowing exercise ofshare options - - 38 - -Issue of 2,777,778shares at a premium of89 pence - - 2,472 - -Issue of 30,000,000shares at a premium of99 pence - - 29,700 - -Share issue costs - - (1,707) - -Issue of 3,101,537shares followingconversion of Loan Notesand accrued interest - - 751 - -Shares to be issued - - - - 2,548 ------ ------ ------- ------- -------At 31 March 2007 498 250 32,941 (3,286) 2,548 ------ ------ ------- ------- ------- Shares to be issued represent the further consideration payable at year end forthe acquisition of Kaldora Company Limited. Per the acquisition agreement, thefurther consideration of US $5 million was to be satisfied in shares. The issueof shares was completed on 24 April 2007, refer to note 24 for more details. 16 Reserves (continued)Company Merger Other Share Profit and Shares to reserve reserve Premium loss account be issued £'000 £'000 £'000 £'000 £'000 At 1 April 2006- as 498 304 1,687 (1,290) -restatedLoss for the year - - - (1,712) -Share based payments - - - 347Equity proportion ofconvertible Loan Note - (54) - - -Issue of 81,915 sharesfollowing exercise ofshare options - - 38 - -Issue of 2,777,778shares at a premium of89 pence - - 2,472 - -Issue of 30,000,000 -shares at a premium of99 pence - - 29,700 -Share issue costs - - (1,707) - -Issue of 3,101,537shares followingconversion of Loan Notesand accrued interest - - 751 - -Shares to be issued - - - - 2,548 ------ ------ ------- ------- -------At 31 March 2007 498 250 32,941 (2,655) (2,548) ------ ------ ------- ------ ------- 17 Reconciliation of movement in equity shareholders' funds Group Group Company Company Year Year Year ended Year ended ended ended 31 March 31 March 31 March 31 March Restated Restated 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Loss for the year (1,959) (1,550) (1,712) (1,254)Issue of ordinary shares 32,678 - 32,678 -Expense of share issue (1,707) - (1,707) -Convertible Loan Note 643 - 643 -conversionShare based payments 347 299 347 299Shares to be issued 2,548 - 2,548 -Equity proportion of (54) 54 (54) 54convertible Loan NoteExchange differences on (93) 14 - -retranslationIssue of warrants - 250 - 250 -------- -------- -------- --------Addition/(reduction) in 32,403 (933) 32,743 (651)shareholders' fundsOpening shareholders' 1,003 1,936 1,294 1,945funds -------- -------- -------- --------Closing shareholders' 33,406 1,003 34,037 1,294funds -------- -------- -------- -------- 18 Loss per ordinary shares The calculation of loss per share of 13.38 pence (2006: 16.30 pence as restated)is based on the loss for the year of £1,959,000 (2006: £1,550,000 as restated)and on the weighted average number of shares in issue during the year of14,645,392 (2006: 9,505,775). Due to the losses incurred during the year a diluted loss per share has not beendisclosed as this would serve to reduce the basic loss per share. There are options and warrants outstanding at the end of the year that couldpotentially dilute basic earnings per share in the future. These are detailed innote 15. 22 Exceptional items On 7 December 2004 the Company entered into an agreement with Geocentr wherebythe Company agreed to make available a facility of up to $170,000. The loancarries an interest rate of 5% and was due for repayment not later than 31 March2006. The amount lent to Geocentr was £89,366. The purpose of the Loan was toenter into a strategic relationship with a view to acquire a substantial equitystake in Geocentr. The acquisition of Geocentr could not be completed within theconditional agreement's terms and therefore was terminated. As part of theconditional agreement entered into with Loyal Wealthy, it was agreed that thebenefit of an outstanding loan of £89,366 to Geocentr would be assigned to LoyalWealthy. On 3 August 2004 the Company entered into an agreement with Power ProductsInternational ("PPI") under which the Company would make available to PPI aninterest free loan of up to £163,000 to assist in the refurbishment of adrilling rig owned by PPI in consideration for the right to require PPI to carryout drilling into the last quarter of 2005. The debt is to be repaid by theprovision of drilling services at the Andash mine in Krgyzstan to the Company atcost price. Following repayment of the debt the Company will have the right torequire PPI to carry out drilling in Central Asia at any time of year for threeyears on three months notice at a discounted rate of 120% of cost. The Board made full provision in the 2006 accounts against the above loans dueto uncertainty regarding the eventual recovery of the balances outstanding. 23 Convertible Loan Notes Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 ------- ------ -------- --------Convertible Loan Notes - 643 - 643 ------- ------ -------- -------- During the prior year, Loan Notes with a par value of £1,000,000 were issued forcash (being £1 per Loan Note) on 15 February 2006 (the 'Commencement Date'). TheLoan Notes were secured on the Group's interest in the Andash Project. Interest was payable on the Loan Notes from the Commencement Date to the earlierof the date of redemption or the date of conversion. Interest was accrued at 11%until the first anniversary of the Commencement Date and thereafter at 10 percent per annum. The Loan Notes were convertible at the lesser of 35p per ordinary share and theprice at which any fundraising took place. The ordinary shares so issued rankpari passu in all respects with the existing ordinary shares in issue. Each Loan Note holder received one warrant entitling him to subscribe for 1ordinary share (each a 'Warrant') for each £1 of Loan Notes subscribed for. TheWarrants, which are transferable (in whole or in part) are exercisable at 45pper share at any time prior to 15 February 2016. The ordinary shares to be soissued will rank pari passu in all respects with the existing ordinary shares inissue. In accordance with the provisions of FRS4 and FRS25, the Company treated thesimultaneous issue of the convertible Loan Notes and warrants as a compositefinancial instrument. The Company apportioned the proceeds of the loan basedupon the fair value of the loan and the fair value of the warrants issued and asa result £53,850 of the proceeds from the loan was classified as equity. Costsincurred on raising the loan amounts of £53,252 were set against the loanamount. From 14 November 2006 to 31 March 2007, all of the Loan Notes were converted aswas accrued interest of £86,000 into ordinary shares. This resulted in the issueof 3,101,537 ordinary shares of 1p at the conversion price of 35 pence pershare. 24 Post balance sheet events As part of the acquisition of Kaldora, the Company agreed to pay US$5 million indeferred consideration to the vendors of Kaldora Company Limited. Theconsideration was settled by the Company issuing 2,500,000 ordinary shares of 1pat a fixed price of US$2 per share on 24 April 2007 as follows: • 1,500,000 ordinary shares to Kantanna Company Ltd, a company controlled by Oleg Kim, the former General Director of the AMC • 500,000 ordinary shares to Jake Consultants Ltd, a company controlled by David Bryans, a consultant to Aurum. • 500,000 ordinary shares to John Webster, Non-Executive Director of the Company. Aurum Mining Kazakhstan LLP was incorporated on 26 April 2007. The Company hasbeen set up for the purpose of assisting the Group in reviewing potentialinvestment opportunities in Kazakhstan, which neighbours the Kyrgyz Republic. John Webster, a Non-Executive Director of the Company has agreed to becontracted directly to supply consulting and engineering services to the Companyand as such he is expected to play a key role in the construction of the Andashmine. In order to allow Mr Webster to fulfil this role, he stepped down from theBoard of the Company on 1 May 2007. In September 2007, AMC entered into a contract to acquire the entire miningfleet for the Andash Zone 1 mine. The total value of the contract was US$7million. The assets acquired include all the excavators, haul fleet, bulldozers,graders and support vehicles required for the mine. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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