Adm Energy Regulatory News (ADME)

18 May 2006 07:00

Pan Pacific Aggregates PLC18 May 2006 18 May 2006 Pan Pacific Aggregates Plc Preliminary results for the period ended 31 December 2005 Chairman's statement The Board of Pan Pacific Aggregates plc ("PPA" or the "Company") is pleased toannounce its maiden preliminary results for the period ended 31 December 2005.The Company has experienced an eventful and successful year in 2005 with theCompany making significant advances from its incorporation in December 2004. Inthe first quarter of 2005, the Company acquired 97.3% of Consolidated Tri-SilMinerals Inc ("Tri-Sil") and 100% of Global Industrial Services Canada Inc ("GISC") and successfully raised £2.5 million gross of pre IPO funds to provideworking capital for the first phase of exploration drilling, resourcedelineation and infrastructure development of the Sechelt mining project. During the year Pan Pacific Aggregates Ltd ("PPA Ltd"), a wholly ownedsubsidiary of PPA, map staked a large area of the Sechelt Peninsula resulting inPPA Ltd, Tri-Sil and GISC being the recorded holders of 94 mineral claimscovering 72,295 acres of the Sechelt Peninsula. The Company ended the financial year raising a further £2.54 million grossthrough the placing of 3,175,000 new Ordinary Shares at £0.80 per share. TheCompany also entered into a subscription agreement under which it is entitled tocall for the subscription of shares or the advance of loans in an amount up to£460,000 in mid 2006. The Company gained admission to the AIM Market of theLondon Stock Exchange plc on 16 December 2005, with a market capitalization of£50.85 million. The completion of the Company's phase I exploration drilling program resulted inthe Company having a mine extractable resource of 750 million tonnes with theprospect of a significant increase in its resource once the Company's phase IIdrilling program is complete. The net proceeds of the recent IPO placing are funding our working capitalrequirements based on phase II of exploration and project development. Theseincorporate further resource definition, environmental and Large Producerpermits for the Northern Sechelt Carbonate Project and a bankable feasibilitystudy. PPA began 2005 as a newly independent mining exploration company and hasachieved some major goals and important milestones. We have put in place astrong Board of Directors, a strong Technical Advisory Committee, and acompetent management team, with a good blend of commercial, financial andtechnical industrial mineral and construction aggregate industry experience. Weentered 2006 as a publicly traded junior mining company, to enhance our futuregrowth potential and provide access to further capital in the future. Current trading During the first quarter of 2006, the Company has completed an extensive programof helicopter airborne geophysics over the most geologically favourable portionsof the Sechelt property. Utilising the DIGHEM system operated by Fugro AirborneSurveys, 720 line kilometres of magnetometer and 7 channel electromagnetic(resistivity) surveys were flown at 125 metre line spacing. The preliminarysurvey results were much better than expected. Carbonate rocks and skarn (garnet/wollastonite) areas showed distinct signatures in both magnetic susceptibilityand electrical conductivity of these rocks. These signatures have allowed theCompany to extend known areas of mineralisation and identify several new areaswith exploration potential. Exploration programs for 2006 will follow up and assess the airborne resultswith geological mapping, ground geophysics in selected areas to further definegeological contacts and core drilling to assess mineral quality and quantity. The Company has prepared a comprehensive Assessment Report for its activitiesduring the 2005 exploration program, which has been filed with the BritishColumbia, Ministry of Energy, Mines and Petroleum Resources. This report is adetailed description of all activities and results of those activities that tookplace during the 2005 exploration season, providing details of geologicalmapping, ground geophysics, infrastructure development and diamond drilling. Thereport was prepared and reviewed by Canadian certified, Qualified Persons and iscompliant with Canadian 43-101 reporting standards. A compilation of all historical and current mineral exploration work on theSechelt property has now been substantially completed. This investigationincluded analysis of all available work by previous operators and explorationcompanies, the preparation of geological plans and cross-sections showingsurface mapping, diamond drill holes and related chemistry/assay results, andresource estimates. This key information greatly compliments the results fromthe 2005 exploration program and will assist the Company in directing the 2006exploration program and a bankable feasibility study. The Company began the Environmental Impact Assessment study ("EIA) and theprocess to apply for a Large Producer mining permit in August 2005 and filed theProject Description for the Sechelt Carbonate project in November 2005. TheCompany remains on track to submit its Large Producer mining permit applicationin January 2007 which would allow it to produce up to 6 million tonnes perannum. In January 2006 the Company and the shishalh Nation (Sechelt Indian Band)announced the signing of a Participation Agreement that establishes a frameworkfor the Memorandum of Understanding signed in October 2005.The ParticipationAgreement also paves the way to develop the process for future discussions andreflects our commitment and further reinforces the principles of mutual respectnecessary for a potential working relationship between PPA and the SecheltIndian Band. Outlook Our vision is to become the preferred supplier of high quality constructionaggregates and industrial minerals within the Pacific Rim. The outlook for the construction aggregates industry in British Columbia (BC)and the West Coast of North America is extremely positive. Investment in heavyengineering projects in BC is expected to almost double in the next two years to$14 billion and spending in civil and industrial projects, especially those inthe transportation sector, are forecast to grow from $7.5 billion to $20billion. Much of this growth is being fuelled by pipeline construction, airportand seaport expansions, highway improvements and projects related to the 2010Winter Olympics being held in Vancouver. The story is similar in the United States coastal markets of Washington andOregon, and in California alone, spending on infrastructure development isexpected to exceed US$220 billion over the next ten years, as the stateimplements the Governor's strategic plans to improve transportation and portfacilities. Consumption of construction aggregates in California is over 250 million tonnesper annum and in the second half of 2005 and first quarter of 2006, managementmet with some of the largest producers and consumers of construction materialsin the San Francisco Bay area. Preliminary discussions with these potential target customers and strategicpartners to determine their interest in possible long term supply contracts orjoint venture partnerships were very positive and will be pursued further in2006. The growing demand for construction aggregates in the local Vancouver market andin the high population density areas of San Francisco Bay, Los Angeles and SanDiego, coupled with a diminishing supply of permitted resources and reserves inCalifornia, represents a unique and timely opportunity which PPA is wellpositioned to take advantage of in the future. Growth potential for the company is considered excellent and management willwork in the best interests of all stakeholders to realise this growth. In orderto fulfil this growth potential the Company will need to raise further fundsfrom either existing or new investors. Donald Nicholson Chairman & CEO Enquiries to: Alan Whitehead, Chief Operating Officer 001 604 637 7581 William Voaden, Non-Executive Director 020 7628 3989 Louis Castro/Alex Collins, Insinger de Beaufort 020 7190 7000 Consolidated income statementfor the period from 13 December 2004 to 31 December 2005 Note £'000Revenue 28Cost of sales (27) _______ Gross profit 1 Administrative expenses (1,556) _______ Loss from operations 3 (1,555) _______ Financial income 5 272 _______ Loss on ordinary activities before taxation (1,283) Taxation 6 - _______ Loss on ordinary activities after taxation (1,283) _______Attributable to: Equity holders of the parent (1,282)Minority interest (1) _______ Loss for the period after taxation and deficit carried forward 17 (1,283) _______ Loss per ordinary shareBasic and diluted (pence) 7 (2.3) _______ All amounts relate to continuing activities. Consolidated statement of recognised income and expensesfor the period from 13 December 2004 to 31 December 2005 Consolidated statement of recognised income and expenses £'000 Loss for the period (1,283) Exchange differences arising on the translation of foreignsubsidiaries (300) _______ Total recognised losses for the period (1,583) _______Attributable to:Equity holders of the parent (1,581)Minority interest (2) _______ (1,583) _______ Consolidated balance sheet at 31st December 2005 Note £'000 £'000Assets:Non-current assetsIntangible assets 8 2,408Tangible assets 9 87 _______Total non current assets 2,495 Current assetsInventories 11 48Receivables 12 88Cash and cash equivalents 1,389 _______Total current assets 1,525 _______ Total assets 4,020 Liabilities:Current liabilities 13 (466) Non-current liabilities 14 (166) _______Total liabilities (632) _______ Total net assets 3,388 _______Capital and reserves attributable to equity holders of the company Called up share capital 15 64Share premium account 15 4,906Foreign exchange reserve 16 (300)Retained losses 16 (1,283) _______ 3,387Minority Interest 1 _______ Total equity 17 3,388 _______ The financial statements were approved and authorised for issue by the Board on17 May 2006 William VoadenDirector Company balance sheet at 31 December 2005 Note £'000 £'000Assets: Non-current assetsInvestments and advances 10 3,909 _______ Total non current assets 3,909Current assetsReceivables 12 30Cash and cash equivalents 1,255 _______Total current assets 1,285 _______ Total assets 5,194Liabilities:Current liabilities 13 (253) _______Total liabilities (253) _______ Total net assets 4,941 _______ Capital and reserves attributable to equity holders of the company Called up share capital 15 64Share premium account 15 4,906Retained losses 16 (29) _______ Total equity 17 4,941 _______ The financial statements were approved and authorised for issue by the Board on17 May 2006 William VoadenDirector Consolidated cash flow statementfor the period from 13 December 2004 to 31 December 2005 £'000 £'000Operating activitiesNet loss for ordinary activities (1,283) Adjustments forDepreciation 4Foreign exchange gains (254)Interest receivable (18)Minority interest 1 _______ (267) _______ Operating loss before changes in working capital and provisions (1,550) Increase in trade and other receivables (88)Increase in inventories (48)Increase in trade and other payables 632 _______ 496 _______ Cash outflows from operating activities (1,054) Investing activitiesForeign exchange gains 254Interest received 18Purchase of tangible fixed assets (91)Acquisition of intangible assets (2,708) _______Cash flows from investing activities (2,527) Financing activitiesIssue of ordinary share capital (net of issue costs) 4,970 _______Cash flows from financing activities 4,970 _______ Increase in cash 1,389Cash and equivalents at beginning of the period - _______ Cash and equivalents at end of the period 1,389 _______ Notes forming part of the financial statementsfor the period from 13 December 2004 to 31 December 2005 1 Accounting policies Basis of preparation The principal accounting policies adopted in the preparation of the financialstatements are set out below. The policies have been consistently appliedthroughout the current period presented, unless otherwise stated. Thesefinancial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs and IFRIC interpretations) issued by theInternational Accounting Standards Board (IASB) and with those parts of theCompanies Act 1985 applicable to companies preparing their accounts under IFRSs.The financial statements have been prepared on the going concern basis for thereasons noted in note 22 to the financial statements. Basis of Consolidation Where the Company has the power, either directly or indirectly, to govern thefinancial and operating policies of another entity or business so as to obtainbenefits from its activities, it is classified as a subsidiary. The consolidatedfinancial statements present the results of the company and its subsidiaries("the group") as if they formed a single entity. Intercompany transactions andbalances between Group companies are therefore eliminated in full. The Company has taken advantage of the exemption allowed under section 230 ofthe Companies Act 1985 and has not presented its own profit and loss account inthese financial statements. The Group loss for the period includes a loss aftertax and before dividends paid and payable of £29,000 in respect of the Companywhich is dealt with in the financial statements of the parent Company. Business combinations The consolidated financial statements incorporate the results of businesscombinations using the acquisition method. In the consolidated balance sheet,the acquiree's identifiable assets, liabilities and contingent liabilities areinitially recognised at their fair values at the acquisition date. The resultsof acquired operations are included in the consolidated income statement fromthe date on which control is obtained. Foreign currency Transactions entered into by group entities in a currency other than thereporting currency of the parent company are recorded at the rates ruling whenthe transactions occur. Foreign currency monetary assets and liabilities aretranslated at the rates ruling at the balance sheet date. Exchange differencesarising on the retranslation of unsettled monetary assets and liabilities aresimilarly recognized immediately in the income statement. On consolidation, the results of overseas operations are translated into PoundsSterling at rates approximating to those ruling when the transactions tookplace. All assets and liabilities of overseas operations are translated at therate ruling at the balance sheet date. Exchange differences arising ontranslating the opening net assets at opening rate and the results of overseasoperations at actual rate are recognized directly in equity (the "foreignexchange reserve"). Exchange differences recognized in the income statement ofgroup entities' separate financial statements on the translation of long-termmonetary items forming part of the group's net investment in the overseasoperation concerned are reclassified to the foreign exchange reserve. On disposal of a foreign operation, the cumulative exchange differencesrecognised in the foreign exchange reserve relating to that operation up to thedate of disposal are transferred to the income statement as part of the profitor loss on disposal. The exchange rates applied in the financial statements are as follows: £1: C$Official rate as at 31 December 2005 2.004Average rate for 2005 2.174 Revenue Recognition Sales of mineral production are recognised at the time of delivery of theproduct to the purchaser. Share-based payments Where share options are awarded to employees, the fair value of the options atthe date of grant is charged to the income statement over the vesting period.Non-market vesting conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount recognised over the vesting period is based onthe number of options that eventually vest. As long as all other vestingconditions are satisfied, a charge is made irrespective of whether the marketvesting conditions are satisfied. The cumulative expense is not adjusted forfailure to achieve a market vesting condition. Where equity instruments are granted to persons other than employees, the incomestatement is charged with the fair value of goods and services received. Mineral rights Mineral rights, included within intangible fixed assets, are recorded at costless any provision for diminution in value. Amortisation will be over theestimated life of the commercial ore reserves on a unit of production basis. Licences for the exploration of natural resources will be amortised over thelower of the life of the licence and the estimated life of the commercial orereserves on a unit of production basis. Unevaluated mining properties In accordance with the full cost method, all costs associated withmineral property 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. If a mineral property development projectis successful, the related expenditures will be amortised over the estimatedlife of the commercial ore reserves on a unit of production basis. Where alicence is relinquished, a project is abandoned, or is considered to be of nofurther commercial value to the company, the related costs will be written off. Unevaluated mining costs are assessed at each year end and wherethere are indications of impairment the related costs will be written off. Therecoverability of unevaluated mining costs is dependent upon the discovery ofeconomically recoverable reserves, the ability of the group to obtain necessaryfinancing to complete the development of reserves and future profitableproduction or proceeds from the disposition of recoverable reserves. Investments Fixed assets investments are stated at cost less provision for diminution invalue. Property, plant and equipment Items of property, plant and equipment are initially recognised at cost. As wellas the purchase price, cost includes directly attributable costs and theestimated present value of any future costs of dismantling and removing items.The corresponding liability is recognised within provisions. Depreciation is provided on all other items of property and equipment to writeoff the carrying value of items over their expected useful economic lives. It isapplied at the following rates: Vehicles & equipment - 20% per annum straight lineLeasehold improvements - Straight line over the length of the leaseMining equipment - 10% per annum straight line Tangible assets are subject to impairment tests whenever events or changes incircumstances indicate that their carrying amount may not be recoverable. Wherethe carrying value of an asset exceeds its recoverable amount (ie the higher ofvalue in use and fair value less costs to sell), the asset is written downaccordingly. Where it is not possible to estimate the recoverable amount of anindividual asset, the impairment test is carried out on the asset'scash-generating unit (ie the lowest group of assets in which the asset belongsfor which there are separately identifiable cash flows). Any impairment charge is included in the administrative expenses line item inthe income statement, except to the extent they reverse gains previously recognised in the statementof recognised income and expense. Inventories Inventories are initially recognized at cost, and subsequently carried at thelower of cost and net realisable value. Cost comprises all costs of purchase,costs of conversion and other costs incurred in bringing the inventories totheir present location and condition. Weighted average cost is used to determine the cost of ordinarilyinterchangeable items. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount ofan asset or liability in the balance sheet differs to its tax base. This policyis followed except for where differences arise on the initial recognition ofgoodwill, goodwill for which amortisation is not tax deductible, the initialrecognition of an asset or liability in a transaction which is not a businesscombination and at the time of the transaction affects neither accounting ortaxable profit and investments in subsidiaries and jointly controlled entitieswhere the Group is able to control the timing of the reversal of the differenceand it is probable that the difference will not reverse in the foreseeablefuture. Recognition of deferred tax assets is restricted to those instances where it isprobable that taxable profit will be available against which the difference canbe utilised. The amount of the asset or liability is determined using tax ratesthat have been enacted or substantially enacted by the balance sheet date andare expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legallyenforceable right to offset current tax assets and liabilities and the deferredtax assets and liabilities relate to taxes levied by the same tax authority oneither the same taxable Group company or different Group entities which intendeither to settle current tax assets and liabilities on a net basis or to realisethe assets and settle the liabilities simultaneously, in each future period inwhich significant amounts of deferred tax assets or liabilities are expected tobe settled or recovered. Tax The components of income tax on the profit or loss from ordinary activities arecurrent and deferred tax. Current tax is based on the profit or loss from ordinary activities adjusted foritems that are non-assessable or disallowed and is calculated using tax ratesthat have been enacted or substantively enacted by the balance sheet date. Income tax is charged or credited to the income statement, except when the taxrelates to items credited or charged directly to equity, in which case the taxis also dealt with in equity. Provision for abandonment costs Provision for abandonment costs are recognised at the commencement of mining.The amount recognised is the present value of the estimated future expendituredetermined in accordance with local conditions and requirements. Acorresponding tangible fixed asset of an amount equivalent to the provision isalso created. This is subsequently depreciated as part of the capital costs ofproduction. Any change in the present value of the estimated expenditure isreflected as an adjustment to the provision and the fixed assets. Financial instruments The Group's financial assets consist of current account or short term depositsat variable interest rates. Any interest earned is accrued monthly andclassified as interest. Trade and other receivables are stated at cost lessimpairment losses. The Group's financial liabilities consist of trade and other payables. Thetrade and other payables are stated at their cost. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents aredefined as cash and short term deposits. Leased assets A lease is classified as an operating lease if it does not transfersubstantially all the risks and rewards incidental to ownership. 2 Segmental analysis The Group operates in one business segment, the exploration for and extractionof construction aggregates and industrial minerals. The company has interestsin one geographical segment being Canada. 3 Group loss on ordinary activities Period from 13 December 2004 to 31 December 2005 £'000's This has been arrived at after charging: Auditors' remuneration - group and company - audit services 21 Directors' remuneration 32 Employee Salaries and other benefits 86 Depreciation 4 Office Lease 88 _______ 4 Salaries Group Company Period from Period from 13 December 13 December 2004 to 2004 to 31 December 31 December 2005 2005 Average number of employees (including Directors) 7 2 ________ ________ £'000 £'000 Gross Salaries (including Directors) 118 32 ________ ________ Directors' Remuneration 32 32 ________ ________ 5 Financial Income Financial income during the period relates to net realized foreign exchangegains amounting to £253,875 and interest from bank deposits amounting to£17,573. 6 Taxation on loss from ordinary activities There is no tax charge arising for the Group for the period. The tax assessed for the period differs from the standard rate of corporationtax in the UK. The differences are explained below: Period from 13 December 2004 to 31 December 2005 £'000 Loss on ordinary activities (1,283) _______ Loss on ordinary activities at the standard rate of corporation tax in the UK of 30% (385) Disallowed expenditure 42 Amounts not taxable in year (83) Tax losses carried forward 426 _______ Tax charge for the period - _______ Factors that may affect future tax charges At 31 December 2005, the company had tax losses of approximately £426,000carried forward which will be utilised against future profits. However theselosses are only recoverable against future profits, the timing of which isuncertain and as a result no deferred tax asset is being recognised in relationto these losses. 7 Loss per share Loss per ordinary share has been calculated using the weighted average number ofshares in issue during the relevant financial periods. The weighted averagenumber of equity shares in issue for the period is 56,104,116 and the losses forthe group for the period are £1,283,347..Due to the losses incurred during theperiod, a diluted loss per share has not been calculated as this would serve toreduce the basic loss per share. 8 Intangible assets Group Unevaluated Mineral mining rights properties Total £'000 £'000 £'000 Cost Additions and at end of period 609 2,099 2,708 Exchange movements (66) (234) (300) _______ _______ _______ At 31 December 2005 543 1,865 2,408 Amortisation Provided for the period and at end of period - - - _______ _______ _______ Net book value At 31 December 2005 543 1,865 2,408 _______ _______ _______ The unevaluated mining properties relate to the acquisition of the Group'sassets in British Colombia. Details on the acquisition of intangible assets areprovided in note 19. 9 Tangible assets Leasehold Vehicles and Mining Group improvements equipment equipment Totals £'000 £'000 £'000 £'000 Cost Additions and at end of period 29 13 49 91 _______ _______ _______ _______ Deprecation Charge for the period and at end of period 2 1 1 4 _______ _______ _______ _______ Net book value At 31 December 2005 27 12 48 87 _______ _______ _______ _______ 10 Investments and advances Company Loans to Investment group in subsidiaries undertakings Total £'000 £'000 £'000 Cost Additions and at end of period 776 3,133 3,909 _______ _______ _______ Net book value At 31 December 2005 776 3,133 3,909 _______ _______ _______ The principal subsidiaries of the Group, all of which have been includedin these consolidated financial statements are as follows: Country of Proportion of Name Incorporation ownership interest Pan Pacific Aggregates Ltd Canada 100% Consolidated Tri-Sil Minerals Inc (*1) Canada 97.3% Global Industrial Services Canada Inc Canada 100% (*1) The minority shareholders of Consolidated Tri-Sil Minerals Inc areunrelated and the Group consolidate the total activity of this subsidiary andaccount separately for the Minority Interest. 11. Inventories £'000 Crushed aggregate 48 _______ There is no material difference between the carrying values ofinventories and their replacement cost. 12 Receivables Group Company 2005 2005 £'000 £'000 Goods and services tax recoverable 34 - Prepaid expenses 26 26 Security deposit for reclamation bonding 12 - Cash held in trust account 2 - Other receivables 14 4 ________ ________ Total receivables 88 30 ________ ________ All amounts shown under receivables fall due for payment within one year. 13 Current Liabilities Group Company 2005 2005 £'000 £'000 Trade payables 376 253 Other payables 36 - Deferred consideration (see below) 54 - _______ _______ 466 253 _______ _______ All amounts fall due for payment within one year. Deferred consideration In September 2003, Global Industrial Services Canada Inc. ("GISC") entered intoa Purchase and Sale Agreement (the "Agreement) subsequently modified by a seriesof four amendments, the last of which is dated 14 February 2005. The Agreementis between Rudy C Riepe ("Riepe") and GISC whereby GISC purchased all rights,title and interest of Riepe to a group of mineral claims located on the SecheltPeninsula, British Columbia. The purchase price includes the following: • C$500,000 payable to or on behalf of Riepe as to C$350,000 in 70monthly instalments and C$150,000 in 30 monthly instalments which commenced inJanuary 2005; • A 3 per cent. net smelter return royalty derived from the sale ofany ores, concentrates or metals produced from the claims; and • A royalty on commencement of production equal to: • C$1.00 per dry metric tonne of material sold from the claims, up toC$3m, payable quarterly from 1 January 2005; and thereafter • C$0.50 per dry metric tonne of material sold at a price greater thanC$12 per tonne; and • C$0.25 per dry metric tonne of material sold at less than C$12 pertonne. As at 31 December 2005 a total of C$442,140 (£220,673) is payable pursuant tothis agreement, of which £54,233 is due within the next twelve months and£166,440 is payable thereafter. 14 Non-current liabilities £'000 Deferred consideration (see note 13) 166 ______ 15 Share capital Allotted, called up and fully paid ordinary shares Share Company Authorised of £0.001 each Premium Number Number £ £ 14 December 2005 100,000,000 50,000,000 50,000 - 16 March 2005 - 1,666,666 1,667 498,333 1 April 2005 - 1,166,667 1,167 348,833 3 May 2005 - 1,166,667 1,167 348,833 6 June 2005 - 1,166,667 1,167 348,833 21 June 2005 - 936,764 936 230,093 1 July 2005 - 1,166,667 1,167 348,833 28 July 2005 - 1,250,000 1,250 229,612 1 August 2005 - 1,166,667 1,166 348,834 7 October 2005 - 700,000 700 209,300 16 December 2005 - 3,175,000 3,175 2,536,825 __________ __________ __________ __________ 100,000,000 63,561,765 63,562 5,448,329 Issue costs - - - (542,302) __________ __________ __________ __________ 100,000,000 63,561,765 63,562 4,906,027 __________ __________ __________ __________ On or shortly after incorporation, 50,000,000 shares were issued toa number of shareholders at par. On 21 June 2005, the Company issued a further 936,764 sharesat a price of £0.2466 per share. The costs associated with this issue were£12,607. On 28 July 2005, a further 1,250,000 shares were issued at a price of £0.1847. 8,200,001 shares were issued throughout the period at a price of £0.30 pershare. The costs associated with these issues were £119,733. On Admission to AIM on 16 December 2005, the company issued a further 3,175,000shares at a price of £0.80. Costs associated with this issue were a further£409,962. Share options At 31 December 2005, the following share options have been granted and areoutstanding in respect of the ordinary shares: Number of options Outstanding Granted Exercised at Final during during 31 December exerciseExercise price the period the period 2005 date £0.80 4,150,000 - 4,150,000 16 December 2008 The 4,150,000 £0.80 options were granted to certain Directors, employees andconsultants of the Group under an unapproved share option scheme. The optionswere granted as to 3,950,000 on 20 October 2005 and 200,000 on 1 November 2005. These options are exercisable as to one-third of the total number of shares(rounded down to the nearest share) on or after the second anniversary of thedate of Admission to AIM (16 December 2005). The options over the remainingtwo-thirds of the shares are exercisable on or after the third anniversary ofthe date of Admission. The fair values of the options have been calculated using the Black Scholesmethod of valuing options for the period from the date of issue to 31 December2005. The Black Scholes pricing model takes into account factors specific toshare incentive plans such as the vesting periods of the Plan, the expecteddividend yield on the Company's shares and expected early exercise of the shareoptions. Fair Value of options Inputs to the Valuation model The fair values of awards granted under the Share Option Plan have beencalculated using the Black Scholes pricing model that takes into account factorsspecific to share incentive plans such as the vesting periods of the Plan, theexpected dividend yield on the Company's shares and expected early exercise ofshare options. 20 October 1 NovemberGrant date 2005 2005 Share price at date of grant £0.80 £0.80Exercise price £0.80 £0.80Volatility 51% 51%Option life 5 years 5 yearsDividend yield 0% 0%Risk-free investment rate 4.37% 4.37%Employee turnover 0 0 Volatility has been based on the following: (i) the annualised volatility of the Company's shares since itsfloatation on the AIM market. (ii) the volatility of comparable listed companies in the mining, oiland gas sector, based on historical share price information from the LondonBusiness School for a ten year period dating back to 1995. Based on the above assumptions, the fair values of the options granted areestimated to be: 20 October 16 NovemberGrant date 2005 2005 Fair value £0.39 £0.39 Expense arising from share-based payments Based on the fair values shown above, the expense arising from share options inthe period was immaterial and has not been recorded in the profit and lossaccount for the period. This is due to the short period of time between thegrant date of the options and the year end. Warrants As at 31 December 2005, the following share warrants have been granted and areoutstanding in respect of the ordinary shares: Number of warrants Outstanding Granted Exercised at Final during during 31 December exerciseExercise price the period the period 2005 date £0.30 7,500,000 700,000 6,800,000 16 March 2007£0.30 416,667 - 416,667 16 December 2007£0.80 635,618 - 635,618 16 December 2007 The Company entered into an agreement with RAB Special Solutions LP ('RAB') on16 March 2005 pursuant to which RAB was granted 7,500,000 warrants which entitlethe holder to subscribe for new ordinary shares at an exercise price which isthe lesser of £0.30 per share or the weighted average price for the shares forthe first 10 days of trading on AIM after Admission. The warrants areexercisable in whole or part at any time within 2 years of the date of issue.700,000 of these warrants were exercised on 7 October 2005. On 16 March 2005 the Company entered into an agreement with Insinger de Beaufortwhereby Insinger de Beaufort was granted warrants which entitle the holder tosubscribe for 416,667 shares at an exercise price of £0.30 per share. Thewarrants are exercisable in whole or in tranches of not less than £25,000 at anytime within 2 years of the date of Admission to AIM. On 12 December a secondagreement was entered into with Insinger de Beaufort pursuant to which Insingerde Beaufort was granted, conditional upon Admission to AIM, warrants thatentitle the holder to subscribe for 381,371 ordinary shares exercisable at theAIM initial placing price. The warrants are exercisable in whole or in tranchesof not less than £25,000 at any time within 2 years of the date of Admission. On 12 December 2005, an agreement was entered into with VSA Resources ('VSA')whereby VSA was granted, conditional upon Admission, warrants that entitle theholder to subscribe for 254,247 ordinary shares exercisable at the AIM initialplacing price. The warrants are exercisable in whole or in tranches of not lessthan £25,000 at any time within 2 years of the date of Admission. 16 Reserves Share Foreign Retained premium exchange loss Group account reserve reserve Total £'000 £'000 £'000 £'000 As at 13 December 2004 - - - - Issue of shares 5,448 - - 5,448 Issue costs (542) - - (542) Loss for year - - (1,283) (1,283) Cumulative translation adjustment - (300) - (300) _______ ________ ________ ________ As at 31 December 2005 4,906 (300) (1,283) 3,323 ________ ________ ________ ________ The share premium account holds the balance of consideration received inexcess of the par value off the shares. The foreign exchange reserve relates to the differences arising ontranslation of the overseas subsidiaries transactions from C$ into £ inaccordance with the accounting policy set out in note 1. Profit and loss reserve can be used in future years to accumulate andoffset and future profit and loss from ordinary activity. Share Retained premium loss Company account reserve Total £'000 £'000 £'000 As at 13 December 2004 - - - Issue of shares 5,448 - 5,448 Issue costs (542) - (542) Loss for year - (29) (29) ________ ________ ________ As at 31 December 2005 4,906 (29) 4,877 ________ ________ ________ 17 Reconciliation of movements in shareholders' funds Period from 13 December 2004 to 31 December 2005 £'000 Group Loss for the year (1,283) Cumulative translation adjustment (300) Issue of shares 64 Share premium 4,906 Minority interest 1 ________ As at 31 December 2005 3,388 ________ Company Loss for the year (29) Issue of shares 64 Share premium 4,906 ________ As at 31 December 2005 4,941 ________ 18 Capital commitments The Group is committed to an operating lease in respect of offices in Vancouver.Rental on the lease totals £29,702 for the year and the commitments expirewithin twelve months of the balance sheet date. 19 Acquisition of Intangible Assets On 31 March 2005 the Group acquired Global Industrial Services Canada Inc("GISC") for C$700,000, the assumption of certain indebtedness and futureproduction royalty payments. The excess of consideration over fair value arisingon this transaction has been allocated and included within additions in theperiod for mineral rights. The excess of consideration over fair value iscalculated as follows: £ Consideration (C$ 700,000) 306,040 Net assets acquired (C$ 8,424) (3,643) _______ Excess of consideration over fair value 302,397 _______ Also on 31 March 2005 the group acquired Consolidated Tri-Sil Minerals Inc.("Tri-Sil") on the conversion of purchased debt totalling C$1,089,100. Thisprovided the Company with a 97.31 percent interest in the share capital ofConsolidated Tri-Sil Minerals Inc. The excess of consideration over fair valuearising on this transaction has been allocated and included within mineralrights. The excess of consideration over fair value is calculated as follows: £ Consideration 25,827 Net assets acquired (C$ 50,267) (17,672) _______ Excess of consideration over fair value 8,155 _______ Mineral rights GISC Tri-Sil Total £ £ £Net assets at point ofBusiness combinations 3,643 17,672 21,315Fair value adjustment 302,397 8,155 310,552Deferred Exploration expenditure in period 211,259 - 211,259 ________ ________ ________ Total Mineral rights 517,299 25,827 543,126 ________ ________ ________ Unevaluated mining properties PPA Ltd. GISC Tri-Sil Total £ £ £ £ Unevaluated mining properties acquired - - 96,057 96,057Deferred exploration expenditure in period 1,303,416 - 465,510 1,768,926 ________ ________ ________ ________ Total unevaluated mining properties 1,303,416 - 561,567 1,864,983 ________ ________ ________ ________ 20 Cash flow notes Movement in net funds At At beginning end of period Cash flow of year £'000 £'000 £'000 Cash in hand and at bank - 1,389 1,389 ________ ________ ________ Cash and cash equivalent comprise: £'000 Cash available on demand 1,389 Short term deposits - ________ 1,389 ________ 21 Financial instruments The Group's financial instruments, other than its investments, comprise cash anditems arising directly from its operation such as trade receivables and tradepayables. The Group seeks to obtain a favourable interest rate on its cash balances. Allassets and liabilities are at the floating interest rate. At the year end theGroup had a cash balance of £1,389,206. The Group has three overseas subsidiaries all of which operate in BritishColombia and whose expenses are mainly denominated in C$. Foreign exchange riskis inherent in the group's activities and is accepted as such. The majority ofparent company expenses are denominated in sterling. Management review the Group and Company's exposure to currency risk,interest rate risk, liquidity risk and credit risk on a regular basis andconsider that through this review they manage the exposure of the Group andCompany. No formal policies have been put in place in order to hedge the Groupand Company's activities to the exposure to currency risk or interest risk. Asthe Group enters commercial production this may be considered. The Group andCompany manage the interest rate risk associated with the Group cash assets byensuring that interest rates are as favourable as possible, whether this isthrough investment in floating or fixed interest rate deposits, whilst managingthe access the Group requires to the funds for working capital purposes. The Group's financial instruments, other than its investments, comprise cash anditems arising directly from its operations such as trade receivables and tradepayables. The Group seeks to obtain favourable interest rate in its cash balances throughthe use of bank deposits. At the year end the group had a cash balance of £1,389,206 comprising of thefollowing balances. £'000British pounds 1,255Canadian Dollars 134 _______ 1,389 _______ Included above are amounts of £1,253,100 and C$260,320 held within floating ratedeposit accounts. Interest rates are based on respective bank prime interestrates. 22 Going concern At the balance sheet date the Group held cash of £1,389,206. In order todevelop the Group's unevaluated mining projects and continue in operationalexistence, the Group will need to raise further funds by issuing new shares toeither existing shareholders or new investors. The Directors have commencedplans to issue further shares and expect to complete this before the currentcash reserves are exhausted although this is not expected before January 2007.If it is not possible to raise sufficient further funds the Group is unlikely tobe able to continue in operational existence. At the very least, the Groupwould need to rein back its current exploration and development programme andconsider writing down the carrying value of the unevaluated mining properties.These financial statements have been prepared on a going concern basis as theDirectors are confident the Group will be able to raise the required funds. Thefinancial statements do not include the adjustments that would result if theGroup was unable to continue as a going concern. 23 Annual report and accounts The annual report and accounts will be sent to shareholders today and copieswill be available from the company's registered office at 7 Devonshire Square,Cutlers Gardens, London EC2M 4YH. This information is provided by RNS The company news service from the London Stock Exchange