24th Mar 2006 07:01
Cluff Gold PLC24 March 2006 24 March 2006 AIM: CLF Cluff Gold plc ("Cluff Gold" or "the Company") Preliminary Results for the Year to 31 December 2005 Highlights • Gold resources increase significantly • Resources more than double at the Company's flagship Baomahun Gold Project in Sierra Leone O Independent consultants believe Baomahun project ''offers very good potential for the discovery of high-grade multi-million ounce gold deposit'' • Airborne geophysical survey of the contiguous 137km2 Baomahun and Victoria licences identified 12km strike of banded iron formation (BIF) O BIF intimately associated with sulphides and high grade gold values in drilled out targets • First phase of validation drilling completed at the Angovia Gold Project, Cote d'Ivoire O High gold values intersected in 29 out of 38 holes drilled including 5m @ 20.72g/t and 21m @ 4.58g/t in holes 7 and 24 respectively O Drilling confirmed and supported the estimates of a resource potential of the order of 800 000 ounces • Successful Placing of 1,894,900 new ordinary shares of 1p each at a price of 45p to raise £852,705 gross primarily with North American investors - December 2005 Post Year End Highlights • Conditional Placing agreement signed with BMO Nesbitt Burns Inc. for the purposes of placing 22,600,000 new ordinary shares of 1p each at a placing price of 68p to raise approximately £15.4 million before expenses - March 2006 Further Key Developments • Acquisition of Cluff Mining (West Africa) Limited and Cluff Mining (Zimbabwe) Holdings Limited from Ridge Mining Group for a total consideration of US$5.01million - January 2005 • Appointment of Edward Haslam, previously Chief Executive of Lonmin, to the Board as joint Deputy Chairman • Joint venture agreement signed to acquire 90% interest in the Karbasso licence in Mali - September 2005 • Disposal of all joint venture interests in Zimbabwe for US$50,000 - December 2005 Chairman, J.G. Cluff commented, "This has been a very progressive year for theCompany. We are proving our ability to develop our projects successfully and ourchallenging work programmes are reflected by the substantial increase in goldresources achieved within just one year - up from 138,000 ounces to over amillion ounces, on meeting the provisions of the earn-in agreement at theBaomahun project. We continue to believe strongly in our strategy to focus onWest Africa, a region which holds the potential for major new gold discoveries,and our local contacts and knowledge mean we are well placed to benefit fromthis prospective environment. With the recent strengthening of the Board andour continued strong shareholder support, I look forward to the coming year withconfidence and enthusiasm." For further information, please contact: Cluff Gold Numis Securities Parkgreen CommunicationsJ.G. Cluff / Douglas Chikohora John Harrison Justine Howarth / Cathy MalinsChairman / Technical Director Tel: +44 (0) 20 7776 1500 Tel: +44 (0) 20 7493 3713Tel: +44 (0) 20 7340 9790 Chairman's Statement Since my last Chairman's statement your management, drawing on the net proceedsof £5.6m raised in the IPO in December 2004, has sought to advance the value ofyour Company primarily by a significant drilling programme on the Baomahunlicence in Sierra Leone and validation drilling at the Angovia deposit in Coted'Ivoire. Your Company has, having disposed of our joint venture interests in Zimbabwe,gold interests in four West African Countries: Sierra Leone, Cote d'Ivoire,Burkina Faso and Mali. The Company's attributable gold resource has increasedfrom 138,000 ounces at the time of the Company's IPO in December 2004 to overone million ounces at the end of 2005. This assumes that the 60% earn-inprovisions are fulfilled at Baomahun in Sierra Leone. This resource position hasbeen achieved through the acquisition of Cluff Mining (West Africa) Ltd fromRidge Mining plc and resource drilling at both Baomahun and Angovia. In order to further increase the Company value, the short-term strategy is toundertake the following: • Investigate both the existing and potential mineralised target zones at Baomahun by further core drilling • Undertake a drilling programme at Angovia to further define resources out of the estimated potential of 800,000 ounces • Undertake additional drilling within the Kalsaka satellite deposits to increase reserves • Commence exploration on the Karbasso Licence in Mali Your board still has a strong conviction for our strategy of concentrating onexploration and development in West Africa. The region hosts geology which holdsout the prospect of substantial world class deposits, complemented by wellstructured mining investment codes which actively encourage foreign investment.In December 2005, BMO Nesbitt Burns Inc. of Toronto and Numis Securities Ltdarranged a small placing to raise £852,705 before expenses, primarily with NorthAmerican investors. The excellent response we gained from investors in NorthAmerica has subsequently led to the Company signing a conditional placingagreement with BMO Nesbitt Burns Inc. on 13 March 2006 to raise approximately£15.4 million before expenses. By way of due diligence BMO Nesbitt Burns Inc. commissioned L.R. KilpatrickAssociates Inc. of Toronto to produce a report into the Company activities. Inthis report, referring to our joint venture property in Sierra Leone, they statethat the property exhibits "considerable merit" and "offers good potential forthe discovery of a high grade multi million ounce gold deposit." It will be yourmanagement's primary task during 2006 to validate that statement. During the period under review I am pleased that Edward Haslam, previously ChiefExecutive of Lonmin, has joined the board and has been appointed joint DeputyChairman. JG CluffChairman and Chief Executive Consolidated Profit and Loss Account Year ended Period ended 31 December 2005 31 December 2004 Notes £ £Turnover - - Cost of sales - -Gross profit - - Administration expenses (1,094,920) (1,158,089)Operating loss 4 (1,094,920) (1,158,089) Net Interest receivable and similar income 35,786 18,550 (1,059,134) (1,139,539) Profit on disposal of a subsidiary undertaking 23,741 -Loss on ordinary activities before taxation (1,035,393) (1,139,539)Tax on loss on ordinary activities (450) -Loss on ordinary activities after taxation (1,035,843) (1,139,539) Loss per share - undiluted 5 (0.05) (1.27) All transactions arise from continuing operations. Consolidated statement of total recognised gains and losses Year ended Period ended 31 December 2005 31 December 2004 £ £Loss for year (1,035,843) (1,139,539)Exchange loss on re-translation of net assets of subsidiary undertaking (58,766) -Total recognised loss for the year (1,094,609) (1,139,539) Consolidated Balance SheetAs at 31 December Notes 2005 2004 £ £Fixed assetsIntangible 6 4,859,348 602,822Negative goodwill 7 (51,237) -Tangible 46,433 8,400Investments - 165,845 4,854,544 777,067Current assetsDebtors 873,626 31,522Cash at bank and in hand 431,883 5,920,062 1,305,509 5,951,584Creditors: amounts falling due within one year (376,740) (696,016) Net current assets 928,769 5,255,568 Net assets 5,783,313 6,032,635 Capital and reserves Called up share capital 229,536 208,793Share premium account 6,467,774 5,643,230Merger reserve 1,320,151 1,320,151Profit and loss account (2,234,148) (1,139,539)Equity shareholders' funds 5,783,313 6,032,635 Consolidated Cash Flow Statement Year ended Period ended 31 December 2005 31 December 2004 Notes £ £Net cash outflow from operating activities 10 (2,252,541) (947,123) Returns on investments and servicingof financeNet Interest received 35,786 18,550Taxation paid (450) - Capital expenditurePurchase of intangible fixed assets (1,655,293) (349,940)Purchase of tangible fixed assets (58,219) (13,148)Purchase of investments - (165,845)Net cash outflow from capital expenditure (1,713,512) (528,933) Acquisitions and DisposalsAcquisition of subsidiary undertakings (2,421,718) -Net cash acquired with subsidiary undertakings 10,088 -Disposal of subsidiary undertaking 28,882 -Net cash outflow from acquisitions and disposalsof subsidiary undertakings (2,382,748) -Net cash outflow before managementof liquid resources and financing (6,313,465) (1,457,506)Management of liquid resourcesDecrease / (Increase) in short term deposits 5,427,945 (5,843,000) FinancingIssue of ordinary share capital 927,703 7,908,357Issue costs (102,417) (530,789)Net cash inflow from financing 825,286 7,377,568 (Decrease) / Increase in cash (60,234) 77,062 Notes 1. Basis of financial information The financial information set out above does not constitute the group'sstatutory information for the years ending 31 December 2005, but is derived fromthose financial statements. The financial statements for 2005 will be deliveredprior to the Company's Annual General Meeting. The auditors have not yetreported on these financial statements, however they anticipate issuing anunqualified report which will not contain statements under the Companies Act1985, s237 (2) or (3). 2. Nature of business and going concern The Group is at a relatively early stage of development and its plannedactivities are the acquisition, exploration and development of gold deposits inWest Africa. In common with many exploration companies, the Group raises funds in discretetranches and the proceeds of the December 2005 placing raised approximately£852k before expenses. The Directors consider these funds to be sufficient tocarry out further specific exploration and project work on the properties in theCompany portfolio and to provide sufficient working capital until May 2006. TheCompany has signed a conditional placing agreement on March 13 2006 in order toraise approximately £15.4m before expenses. It is expected that this placingwill close 12 April 2006. Details of the placing are included in the PostBalance Sheet Events note. Given the signed conditional placing agreement, the strength of the assetscurrently in the Company's portfolio, the positive nature of the market and thestrong gold price, the Directors consider it appropriate to prepare thesefinancial statements on the going concern basis. 3. Intangible fixed assets accounting policy i) Deferred Exploration Costs All costs associated with mineral exploration and investments are capitalised ona project-by-project basis, pending determination of the feasibility of theproject. Costs incurred include appropriate technical and administrativeexpenses, as well as associated finance costs, but not general overheads. If anexploration project is successful, the related costs will be transferred tomining assets and amortised over the estimated life of the commercial orereserves on a unit of production basis. Where a project is relinquished,abandoned, or is considered to be of no further commercial value to the Company,the related costs are written off. The recoverability of deferred exploration costs is dependent upon the discoveryof economically recoverable ore reserves, the ability of the Company to obtainnecessary financing to complete the development of ore reserves and futureprofitable production or proceeds from the disposition thereof. ii) Goodwill Goodwill (positive and negative) is recognised as the difference betweenconsideration paid and the fair value of the assets acquired. Negative goodwillis recognised in the profit and loss account over the periods that non-monetaryacquired assets are recovered. 4. Segmental analysis 2005 2004 Operating loss Net assets Operating loss Net assetsBy geographical location: £ £ £ £UK (1,060,005) 2,934,189 (1,114,742) 5,646,837 Burkina Faso - 2,249,734 (438) 172,004Sierra Leone - 429,397 (5,798) 197,262Cote d'Ivoire - 169,993 - 16,532Ghana (13,708) - (9,580) -Zimbabwe (1,675) - (8,404) -Mali (19,532) - - -Senegal - - (19,127) -Total (1,094,920) 5,783,313 (1,158,089) 6,032,635 5. Earnings per share The calculation of earnings per ordinary share on the net basis is based on theloss on ordinary activities after taxation of £1,035,843 (2004: £1,139,539) andon 21,092,466 (2004: 895,881) ordinary shares being the weighted average numberof ordinary shares in issue. No diluted loss per share is presented as theeffect on the exercise of share option would be to decrease the loss per share. 6. Intangible fixed assets Deferred exploration and evaluation costsGroup £ Cost At 31 December 2004 602,822Acquisitions 2,659,999Exchange loss on re-translation (58,766)Additions 1,655,293At 31 December 2005 4,859,348AmortisationAt 31 December 2004 -Charge in the year -Balance at 31 December 2005 - Net book valueAt 31 December 2005 4,859,348At 31 December 2004 602,822 7. Acquisitions On 7 January 2005, Cluff Gold UK Ltd completed the acquisition of the entireissued share capital of both Cluff Mining (West Africa) Ltd (a subsidiary whichhas a 78% interest in the Kalsaka Gold project in Burkina Faso) and Cluff Mining(Zimbabwe) Holdings Limited from the Ridge Mining Group for a totalconsideration of US$5.01 million. The acquisitions were made following theexercise of options contained in agreements made on 10 February 2004 (andamended on 10 September 2004) between (i) Ridge Gold Mines Limited, Cluff GoldUK Ltd and Ridge Mining plc in respect of the shares in Cluff Mining (WestAfrica) Ltd; and (ii) Ridge Gold Mines Limited and Cluff Gold UK Ltd in respectof the shares in Cluff Mining (Zimbabwe) Holdings Limited. The considerationpayable in respect of each agreement was US$5 million and US$10,000respectively. These acquisitions are analysed as follows: Book Value Adjustments Fair Value 2005 2005 £ £ £Assets and liabilities acquiredDeferred exploration costs 6,020,661 (3,360,662) 2,659,999Other fixed assets 4,954 - 4,954Debtors 22,248 - 22,248Cash at Bank 10,088 - 10,088Creditors (63,630) - (63,630)Net assets acquired 5,994,321 (3,360,662) 2,633,659Consideration on acquisition 2,582,422Goodwill arising on acquisition (51,237) The goodwill has arisen following the acquisition of the entire issued sharecapital of Cluff Mining (West Africa) Ltd from the Ridge Mining Group. Net assets acquired were valued in accordance with FRS 7 "Fair values inacquisition accounting". The difference between consideration and net assetvalues has been taken as negative goodwill on acquisition. The fair value adjustment has arisen from the assessment of the projectsacquired by way of completion of the Ridge Mining option on 7 January 2005. The Company sold the entire share capital and associated debt of its 100% ownedUK subsidiary, Cluff Mining (Zimbabwe) Holdings Limited, to a subsidiary ofMwana Africa plc for the sum of US$50,000 effective date 31 December 2005. 8. Contingent Liabilities Under the terms of the Baomahun Earn in Agreement, Cluff Gold UK Ltd (a whollyowned subsidiary), has the right to earn a 60% interest in the explorationlicences held by Winston Mines. This right shall be earned by Cluff Gold UK Ltdon the earlier to occur of either the delivery to Winston Mines a bankablefeasibility study in respect of the licences or confirmation that Cluff Gold UKLtd has incurred expenditure in the aggregate total sum of US$5,000,000. 9. Post Balance Sheet Events The Company signed a conditional placing agreement with BMO Nesbitt Burns Inc.on 13 March 2006 for the purposes of placing 22,600,000 new ordinary shares of1p each in the Company at a placing price of £0.68 per share, to raiseapproximately £15.4 million before expenses. The placing is conditional on,inter alia, shareholders of the Company passing resolutions to disapplypre-emption rights and to give the directors authority to allot the shares beingpassed at an extraordinary general meeting of the Company's shareholders andupon the shares being admitted to trading on AIM. 10. Reconciliation of operating loss to operating cash flow 2005 2004 £ £Operating loss (1,094,920) (1,158,089)Depreciation 25,139 4,748Shares issued to Directors 20,002 -Increase in debtors (819,855) (16,421)(Decrease)/ Increase in creditors (382,907) 222,639Net cash outflow from operating activities (2,252,541) (947,123) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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