16th Nov 2007 07:00
Falkland Gold and Minerals Ltd16 November 2007 Falkland Gold and Minerals Limited 16 November 2007 AUDITED PRELIMINARY RESULTS for the year ended 30 September 2007 Highlights of the Financial Period • Completed the original work programme ahead of schedule;• 9,894 metres drilled in the year to September 2007;• Final work programme through to December 2007;• Cash balances just under £4.2 million as at 30 September 2007. Enquiries: Falkland Gold & Minerals LimitedRichard Linnell (Chairman) +27 82 440 6710 WH Ireland LtdJames Joyce / Sarang Shah +44 207 220 1666 Chairman's Statement Dear Shareholder This year has been disappointing in that despite the application of much effort,analysis and thought, we have not as yet been able to identify the source of thecoarse gold particles evident in some of the streams in East Falklands. It is now evident that even if we should now achieve this objective, then thelikely occurrence will be too small to exploit economically. We are currentlycarrying out seismic studies to see if we can identify below the peat, the smallsaddle reef structures which are possible hosts to the gold. Derek Reeves's operational report outlines in greater detail the work that hasbeen carried out this year. He will continue with this until the end of the yearwhen the programmes are expected to be complete. This work has been rigorous anddetailed and the results have been shared with our consultants who have not beenable to fault its range and scope. I am satisfied that we have fulfilled our mandate in the Falklands and wouldlike to express my appreciation to the Government and people of the Falklandsfor their support and encouragement over the past three years. Your Directors have decided that if by the year end no economically significantmineralisation has been identified then they intend to deploy the remaining cashbalances, expected to be in the region of £3.5 million, and a fully equipped andexperienced exploration team with two drills and sample processing equipment toprospective areas elsewhere in the world. This resource base will enable us to seek out projects that have high potentialand are relatively early phase as this would complement our skills base. Thisalso implies that we will probably seek projects that are in previouslyunexplored or lightly explored areas and that are relatively difficult toaccess. From a commodity point of view we will actively seek gold and associated metalssuch as uranium but will not ignore any base metal opportunities that maypresent themselves. This coming year may therefore see us acquiring new partners and tackling newtargets with fresh eyes and eagerness together with some solid professionalexperience. I am very excited by these concepts and anticipate an exciting year goingforward. In closing I would like to thank all our stakeholders, my colleagues for theircontinued support and Derek Reeves and his team for their dedication andcommitment. Richard LinnellExecutive Chairman Operating Review The exploration programme for the period 1 October 2006 to 30 September 2007 hasinvolved: • Drilling 84 holes across 6 key target areas (9,894 metres);• Ground geophysical surveys;• Structural interpretation and mapping;• Data reviews by independent consultant;• Soil geochemical sampling; and• Ground radiometric surveys. Drilling programme In total we have drill tested 14 of the original 23 targets being T1N, T2N, T2S,T5, T6, T7, T8W, T8E, T9N, T10, T11, T12, T15E and T20. This work and otherexploration strategies down-graded the remainder of the original targets tonon-drillable targets while new additional targets discovered and drilled beingT22, T23, T24, T25, Black Shale Project, Lafonia A1 and Lafonia A2. Drilling ofthese targets identified structures and features that in conjunction withstructural interpretation, mapping and data reviews by Professor Richard Viljoenhave led the company to focus on key areas for the remainder of the workprogramme. By the end of September 2007, a cumulative total of 27,289 metres ofpredominantly HQ core has been drilled and 11,604 samples had been sent forassaying. Ground geophysics The groundwork programme for this year has focused on Electro-Magnetic ("EM"),Induced Polarisation ("IP") and gravity surveys. Between September 2006 andJanuary 2007, a total of 545 line-km of EM and 30 line-km of IP were collectedfrom Target 25 and Target 11. Of the different methods trialed, EM proved to bethe more applicable to detecting targets within the sediments on the targetareas, while IP and gravity were less successful. The EM identified targets onT25 were subsequently and methodically tested by the drill and favourablestructures were intersected, but these were devoid of significantmineralisation. For T11, EM detected several near surface targets (>100 m) whilethe IP although penetrating deeper, detected similar structures to that of thosedetected by the EM. The T11 anomalies (EM and IP) were tested by the drill andnarrow structures were intersected, but these were devoid of significantmineralisation. Data review and structural mapping and interpretation A review of all data and subsequent new structural mapping and interpretationidentified that the alluvial gold recovered from the streams is associated witha zone of tight, east-west folding which has affected the Bluff Cove and PortSussex formations other rock formations. These formations contain favourableinterbedded shales and sandstone units that could, given the correct structuraltraps, be targets for Slate Belt type gold and in particular "Saddle Reef"styled mineralisation. Past drilling has drilled structures (i.e. T25) but theseonly contained weak or no mineralisation and the recent interpretation hasfocused on potential "Saddle Reef" locations to the east of T25 known as theCeritos Project. In addition the interpretation identified structurallyfavourable targets in Lafonia (T11) that could be the source of the goldrecovered in streams of which targets being A-1, A-2, and B-2 are currently thefocus of work. Soil and stream sampling Geochemical data on the soil/clay horizon over targets T18 and T20 (WestFalklands) resulted in an anomaly on T20 that was drilled while negative resultsfrom T18 down graded this target. The geochemical anomaly from T20 wasattributed to a wide intrusive unit that was tested by the drill but though asignificant geological intersection was identified it is devoid ofmineralisation. East Falklands target Lafonia A-2 was recently sampled with 1,196 soil samplescollected from a grid that covers the identified structural system and eventhough the results are pending, initial sub-surface drilling targetingstructures suggests that the intersected structures will not be mineralised. Ground radiometric surveys A review of the uranium potential within the licence identified a number ofanomalies with the Karoo type sediments that were subsequently checked with anewly acquired modern scintillometer. A total of some 300 line-km of surveyswere undertaken of which only minor uranium anomalies were encountered thoughnone were of economic interest. Review of prospects The exploration work has been focused on the three key project areas - BlackShale Project, Ceritos Project and Lafonia targets A-1, A-2 and B-2 with adrilling programme designed to test for deposits of potential commercialinterest scheduled for completion by end of 2007. Black Shale Project Following on from the work outlined last year, the exploration focus has been onnine key areas where structures (shears, faults and fractures) and dykestraverse the unique anomalous Carbonaceous Shale zone ("CSH"). Sub-peat soilsampling utilising the method pioneered by the Company has resulted in some5,000 samples collected. All of the blocks sampled have identified key anomalieswith the two more prospective blocks being B and E, with the Block E anomalyrated the higher (gold = 0.018 ppm). Drilling of the gold anomaly within Block Eis under way to test for a deposit of commercial interest that if successfulwill also give encouragement to follow-up on the remainder of the Black Shaleblocks where anomalies have been detected by this method. Ceritos Project The review highlighted that if bedrock gold is to be found then it is likely toconform to one of the various forms of gold vein emplacement styles found in "Slate Belt" goldfields. The alluvial gold recovered in the streams in theproject area is associated with a zone of tight, east-west folding which hasaffected amongst other rock sequences the Bluff Cove and Port Sussex Formationsand it is these formations that contain favourable interbedded shale's andsandstone units that could, given the correct structural traps, be favourabletargets for Slate Belt type gold, in particular "Saddle Reef" styledmineralisation. Gold veins associated with "Saddle Reefs" are to be found in theanticlinal hinges of tight folds in a sequence of alternating shale's andsandstones which provide the competency contrast for the emplacement of theveins. An example of the proposed "Saddle Reef" styled environment was locatedat the L'Antioja Arroyo cutting to the east of the Ceritos Project confirmingthat the proposed model exits. This style of mineralisation is generallyrestricted to small localised areas of less than 25 metres width but "stacked"to give multiple mineralised zones. In order to pin-point these potential "Saddle Reefs" within the anticlinalhinges beneath the peat and to test with the drill, the Company has commissionedgeophysical contractors to acquire 4.2 line-km of ground reflection seismicwithin the Ceritos Project. Successful target generation by this method will seeresults of commercial interest if present, tested by year end. Lafonia Project Structural interpretation of the Lafonia region utilising satellite imagery,aerial magnetic data, aerial radiometrics and digital terrain models (DTM)matched with the study of the gold anomalies in the streams identified threestructural corridors each with structural zones - The Eastern StructuralCorridor comprising the Goose Green Fracture Zone (GGFZ), and Darwin FractureZone (DFZ); The Central Structural Corridor comprising the Central Fracture Zone(CFZ) and The Western Structural Corridor comprising the West One Fracture Zoneand West Two Fracture Zone. Within the Eastern Structural Corridor and Central Structural Corridor severaltargets were identified of which three targets are of priority these being A-1,A-2 and B-2. Exploration work including drilling of structural features to test forcommercial potential is scheduled for completion by the year's end. Derek ReevesOperations Manager Financial Review Operating loss The operating loss for the year under review was £3,995,347 (2006: £1,610,920).After interest and other income, the loss on ordinary activities before tax was£3,701,589 (2006: £1,325,811). The dramatic increase in the loss, as compared to2006, arose because of the need to write off the Intangible Fixed Assets. TheCompany has a policy of capitalising costs associated with exploration projects.In the event of licence relinquishment, project abandonment or a project beingassessed as having no further commercial value, the related costs must bewritten off. As there is insufficient evidence to suggest there is an economicmineral resource within the Company's licence area, the Board has written offall of the costs associated with the Falkland Islands exploration project. Thatwrite off amounted to £2,642,882 for the year to 30 September 2007 (2006:£208,224) and means the Company is no longer carrying an intangible asset in itsbalance sheet. Cash flow Despite the increase in the loss for the period, the year to 30 September 2007has actually seen a reduction in the cash outflow being £1,605,740 as comparedto £1,877,037 for the year to 30 September 2006. This resulted from threefactors. First, there was a significant drop in the operational capitalexpenditure, because most of the operational equipment had been acquired in theprior periods. Second, the survey costs were not as high as in 2006 and third,the tax charge was lower (a direct result of the expected reduction in interestincome). Outlook The Company still has valuable operational equipment and expertise. That,coupled with the cash resources available to it (£4,177,216 as at 30 September2007) means FGML should be well placed to continue its exploration activityelsewhere. It is in this light that the Board continues to view the Company as agoing concern. Mark FressonFinance Director Profit and Loss Accountfor the year ended 30 September 2007 Note Year ended Restated 30.9.07 Year ended 30.9.06 £ £ Administrative expenses (3,995,347) (1,610,920) Operating loss (3,995,347) (1,610,920)Interest receivable and similar income 257,612 262,289Other income 36,146 22,820 Loss on ordinary activities before (3,701,589) (1,325,811)taxationTax on loss on ordinary activities 4 (48,935) (127,103) Loss for the financial year after (3,750,524) (1,452,914)taxation Loss for the year (3,750,524) (1,452,914) Year ended Year ended 30.9.07 30.9.06 Loss per ordinary share basic and diluted 2 (4.79)p (1.86)p Continuing operationsNone of the Company's activities were acquired or discontinued during thecurrent year or previous period. Total recognised gains and lossesThe Company has no recognised gains or losses other than the losses for thecurrent year or previous period. Balance Sheetat 30 September 2007 At At Restated Restated 30.9.07 30.9.07 At At 30.9.06 30.9.06 £ £ £ £Fixed assetsIntangible assets - 1,834,282Tangible assets 217,898 442,132 217,898 2,276,414Current assetsDebtors 39,469 35,771Cash at bank and in hand 4,177,216 5,782,956 4,216,685 5,818,727Creditors: amounts falling due withinone year (140,273) (136,427) Net current assets 4,076,412 5,682,300 Net assets 4,294,310 7,958,714 Capital and reservesCalled up share capital 1,565 1,565Share premium 10,209,182 10,209,182Other reserves 242,080 155,960Profit and loss account (6,158,517) (2,407,993) Shareholders' equity funds 4,294,310 7,958,714 Cash Flow Statementfor the year ended 30 September 2007 Note Year ended Restated 30.9.07 Year ended 30.9.06 £ £ Net cash flow from operating activities (916,577) (888,099) Returns on investments and servicing offinanceInterest received 257,612 262,289Other income 36,146 22,820 Capital expenditurePurchase of intangible fixed assets (850,075) (963,699)Purchase of tangible fixed assets (83,911) (183,245) Cash outflow before financing (1,556,805) (1,749,934) Taxation 4 (48,935) (127,103) (Decrease) in cash in the period (1,605,740) (1,877,037) Reconciliation of operating loss to net cash outflow from operating activities Year ended Restated 30.9.07 Year ended 30.9.06 £ £ Operating loss (3,995,347) (1,610,920)Share based payment 86,120 86,120Depreciation, amortisation and impairment 2,992,502 566,686(Increase)/decrease in debtors (3,698) 25,230Increase in creditors 3,846 44,785 Net cash outflow from operating (916,577) (888,099)activities Reconciliation of movements in shareholders' equity funds Year ended Restated 30.9.07 Year ended 30.9.06 £ £ Loss for the financial year (3,750,524) (1,452,914)Share based payment expense 86,120 86,120 Net reduction in equity (3,664,404) (1,366,794)Opening shareholders' equity funds 7,958,714 9,325,508Closing shareholders' equity funds 4,294,310 7,958,714 Notes to the Financial Statementsfor the year ended 30 September 2007 1. Basis of preparation The financial statements are prepared in accordance with UK accounting standardsas adopted by the Company under the historical cost convention on a goingconcern basis. Going concern The financial statements are prepared on a going concern basis which theDirectors believe to be appropriate for the following reasons. The Directorshave decided that unless the remaining work program in the Falkland Islandsidentifies deposits likely to be of commercial interest by the end of 2007, itwill cease its exploration activities in the Falklands. However, the Companywill continue with its on going purpose of exploration activities and theDirectors are actively pursuing and considering alternative prospects outsidethe Falkland Islands. The Company has a pool of staff with a good skill set andis well equipped with the appropriate hardware which can be deployed to othermineral prospects. The Directors have prepared projected cash flow information for the periodending twelve months from the date of their approval of these financialstatements. If the decision is made to cease exploration in the Falkland Islandsin December 2007, the Company will have cash balances of approximately £3.5million. This would be sufficient to support an annual level of explorationactivity, similar to what FGML has undertaken on the Falkland Islands over thelast few years, for between 18 months and 2 years. Therefore, on the basis ofthis cash flow information, the Directors consider that the company will be ableto continue in operational existence for the foreseeable future by meeting itsliabilities as they fall due. As is common with many exploration companies, thecompany may need to raise additional funds for exploration and capital projectsas and when required. However, there can be no certainty in relation to these matters, which may castsignificant doubt on the company's ability to continue as a going concern. Thecompany may, therefore, be unable to continue realising its assets anddischarging its liabilities in the normal course of business but the financialstatements do not include any adjustments that might result from the basis ofpreparation being inappropriate. 2. Loss per share The basic and diluted loss per ordinary share is based on losses of £3,750,524(12 months to 30 September 2006: £1,452,914) and the weighted average number ofordinary shares outstanding of 78,250,000 (30 September 2006: 78,250,000). 3. Dividends The Directors do not recommend payment of a dividend (2006: £nil). 4 Taxation Analysis of the tax charge: Year ended Year ended 30.9.07 30.9.06 £ £Current tax:UK corporation tax Current 48,946 49,761 prior year (11) 77,342 Tax on loss on ordinary activities 48,935 127,103 Factors that may affect future tax charges The Company has accumulated pre-trading expenditure carried forward amounting toapproximately £2.68m (2006: £1.81m). This may affect future tax charges should the Company produce taxable tradingprofits in future periods. 5 Statutory information The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30 September 2006 and 2007 but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theRegistrar of Companies and those for 2007 will be delivered following theCompany's Annual General Meeting. The auditors have reported on these accounts;their reports were unqualified and did not contain statements under the FalklandIslands Companies Act 1948. Copies of the Annual Report and Accounts will be posted to all shareholders withthe AGM circulars. Further copies will be available from the Company's headoffice at 5 Charterhouse Square, London, EC1M 6PX, United Kingdom. Telephone +44(0) 20 7253 7670. The Report will also be published on the Corporate website atwww.fgml.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BPC.L