Amur Minerals Regulatory News (AMC)

23 Jun 2006 07:00

Amur Minerals Corporation23 June 2006 23 June 2006 Amur Minerals Corporation ("Amur" or "the Company") AMUR MINERALS CORPORATION (AIM: AMC) RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Highlights for the year ending 31 December 2005 • Completed second field season on the Kun-Manie nickel-copper licence, including 39 drill holes (5,235 metres) • Resource estimate increased to 209,000 tonnes Ni and 58,500 tonnes Cu • New mineralized zone identified (not yet included in resource estimate) • Environmental baseline study initiated • Raised US$5.5 million capital privately Post- period highlights • Successful admission to trading on AIM on 15 March 2006 • Placing raised an additional US$7 million based upon 12.36 million New Ordinary Shares at 33p per Ordinary Share • Net Assets increased to US$10.3 million on a pro forma basis • Commencement of exploration field season at Kun-Manie Chairman Robert W. Schafer commented: "During 2005, the Company had tremendoussuccess with Kun-Manie and laid the groundwork for our listing in March of thisyear. The year ahead will be equally exciting - if not more so - as we commencea scoping study at Kun-Manie and prepare to file for a discovery with theRussian authorities." ENDS Full Chairman's Statement and Financial Statements follow. Enquiries: Amur Minerals Corp. Nabarro Wells & Co. Limited Parkgreen CommunicationsRobin Young John Wilkes Justine HowarthCEO Director Victoria Thomas+44 (0) 7981 126 818 +44 (0) 20 7710 7400 +44 (0) 20 7493 3713+7 917 520 3491 Chairman's Statement I am pleased to present my Chairman's statement on AMC's first set of annualaccounts as a public company. During 2005, the Company had tremendous successwith Kun-Manie and laid the groundwork for our listing in March of this year.The year ahead will be equally exciting - if not more so - as we commence ascoping study at Kun-Manie and prepare to file for a discovery with the Russianauthorities. In addition, we continue to look at opportunities to grow AMCbeyond Kun-Manie, including both near-production and early stage explorationprojects. 2005 in Review Amur Minerals Corporation's principal asset is the 100% owned Kun-Manieexploration licence, a nickel-copper-PGM deposit located in the Amur Province inthe far east of the Russian Federation. The Kun-Manie licence area isapproximately 950 km(2) and is located 700 km northeast of the capital city ofBlagoveshchensk and is 750km north of the Chinese border. Last year was AMC's second field season at Kun-Manie. With our local drillingcontractor, we completed 39 drill holes for a total of over 5,200 metres in ourprimary areas of Vodorazdelny and Ikenskoe. This work increased the resourceestimate from 20.9 million tonnes - none of which was JORC compliant - to 46.1million tonnes, all of which was JORC compliant. Of this tonnage, 28.4 milliontonnes were in the indicated category at the end of the season, as reported inour Admission Document dated 10 March 2006. The contained metal increased from125,500 tonnes of nickel to 209,000, and the value placed on the project by SRKConsulting increased from US$25-35 million to US$60-80 million. The geometry ofthe Kun-Manie mineralization is such that open cut mining at a low waste:oreratio can be expected. Our accomplishments were not all at the project site. During the year, AMCcompleted two rounds of private financing. The funds received enabled AMC tocomplete the field season and left the Company with enough working capital tocomplete the placing and admission to AIM in early 2006 without unduly strainingresources. In addition, prior to the AIM listing, AMC put a new board in place,restructured the original partnership agreements to eliminate ongoingobligations to the founding partners, and adopted a new Memorandum and Articlesof Association to strengthen corporate governance. Robert W. Schafer23 June 2006 Financial Review During AMC's second year in operation, we reduced administrative expenses byapproximately 6% to US$869,475. We achieved this reduction in overhead expenseseven while we increased the overall scope of operations. In 2005, wecapitalised over US$2.3 million in exploration expenditures, more than a 50%increase from 2004. We improved our ratio of current assets to currentliabilities from 0.03:1 to a healthy 1.3:1. Subsequent to year end, we completed our admission to trading on AIM and raisedgross proceeds of approximately £4.1 million (approximately US$7.1 million) byplacing 12.36 million new Ordinary Shares at a price of 33p per Ordinary Share.AMC's market capitalization immediately following the listing was £28.4m. Set out below is a pro-forma statement of net assets for AMC, which has beenprepared on the basis of the audited accounts as at 31 December 2005, asadjusted for the Placing as set out above. The pro-forma has been prepared forillustrative purposes only and, because of its nature, will not represent theGroup's actual financial position or results. 31-Dec-05 Note (1) 31-Dec-05NON-CURRENT ASSETS Audited Placing (US$ Pro-Forma (US$ 000's) 000's) (US$ 000's) Capitalised exploration costs 3,915 3,915Property, plant and equipment, net 11 11 Total non-current assets 3,926 3,926 CURRENT ASSETS Cash at bank 2,042 5,796 7,838 Other current assets 252 252 Total current assets 2,294 5,796 8,090 Total assets 6,220 5,796 12,016 CURRENT LIABILITIESTrade and other payables 1,710 1,710 Total current liabilities 1,710 1,710 NET ASSETS 4,510 5,796 10,306 SHAREHOLDERS' EQUITYShare capital (net of share issuance costs) 10,123 5,796 15,919Accumulated losses (5,613) (5,613) Total shareholders' equity 4,510 5,796 10,306 NOTES: (1) The Placing proceeds are calculated after taking account of the listing expenses. With the additional capital, AMC's pro-forma net assets increased toapproximately US$10 million, the majority of which was represented by cash.This healthy balance sheet will enable us to complete this year's explorationworks at Kun-Manie and devote resources toward completion of a scoping study inthe next 12 months. Strategy Review The principal aim of Amur Minerals Corporation is to locate, evaluate, acquire,explore and develop mineral properties, primarily in the far east of Russia.The growth in AMC will come from several sources: • Continuing to expand the already identified resource at Kun-Manie; • Identifying new targets at Kun-Manie and developing potentially economic mineralization; • Acquiring new exploration licences, primarily in the far east of Russia; and • Acquiring near-production stage projects. With a portfolio of projects, AMC can realise value by: • Taking an asset through bankable feasibility stage and into production; • Entering into joint venture agreements or farm-in agreements on specific assets where appropriate; and • Maximizing the value of assets at an appropriate stage of their development by producing them ourselves or selling them at a premium to book value. Immediate plans In 2006, we are continuing exploration activities within the Kun-Manie licencearea. This programme will include ground geophysics, approximately 4,000 metresof drilling, 600 linear metres of trenching, geochemical sampling and geologicalmapping within the main geological structure identified as the Krumkon Trend. Completion of the Vodorazdelny and Ikenskoe programme will ultimately providethe Company with a resource drilled at an appropriate spacing to allow for thecalculation of a resource estimate suitable for submission to the StateCommittee of Reserves (GKZ). The timing of the submission is planned for Q4 06or Q1 07. Once approved, AMC will have met its final obligation required underthe terms of its exploration licence. Though not required until December 2008,the Company intends to complete this obligation as soon as possible to allow AMCto apply for a discovery and subsequently convert the five year explorationlicence into a Mining / Production licence which will have a 20 year life. While the majority of this work will be in-fill drilling to further define andappraise the Vodorazdelny and Ikenskoe targets, we will also step out to thetarget known as Maly Krumkon. Geologic mapping results, geochemical samplingand trenching confirm the presence of anomalous nickel values in excess of0.40%. The zone is mapped as having a length of more than one kilometre with athickness ranging from 3 to 70 metres. Diamond core drilling is scheduled forthis area during May and June at programme start up. The Mineral Resource estimate prepared by SRK Consulting for the Kun-Manieproject is summarised in the table below. The estimate includes both Indicatedand Inferred Mineral Resources as defined by the Australasian Code for Reportingof Mineral Resources and Ore Reserves ("JORC Code"). Competent Person's Independent Mineral Resource Estimate, as published in ourAdmission Document dated 10 March 2006: Mineralised Tonnage Ni Ni Cu Cu Pt Pt Pd PdArea (Mt) (%) (t) (%) (t) (g/t) (Kg) (g/t) (Kg) VodorazdelnyIndicated 7.1 0.60 42,900 0.17 12,000 0.2 1,100 0.1 1,000Inferred 3.6 0.62 22,500 0.19 6,700 0.2 700 0.2 600Sub-Total 10.7 0.61 65,400 0.17 18,700 0.2 1,800 0.2 1,600IkenskoeIndicated 21.3 0.42 89,500 0.12 25,800 0.2 3,400 0.2 3,800Inferred 14.1 0.39 54,200 0.10 14,000 0.1 1,200 0.1 1,800Sub-total 35.4 0.41 143,600 0.11 39,800 0.1 4,600 0.2 5,600Total Indicated 28.4 0.47 132,300 0.13 37,800 0.2 4,500 0.2 4,800Total Inferred 17.7 0.43 76,700 0.12 20,700 0.1 1,900 0.1 2,400Grand Total 46.1 0.45 209,000 0.13 58,500 0.1 6,400 0.2 7,200 Copies of audited accounts will be sent to shareholders by 27 June 2006. Copiesof the annual report and accounts will be made available from the offices ofNabarro Wells & Co. Limited, Saddlers House, Gutter Lane, London EC2V 6HS AMC had a General shareholders meeting on 10 February 2006. Because of therecent date of this meeting, the Company intends to next hold it's next Generalmeeting on 19 September 2006. Notices for this Annual General Meeting areexpected to be posted to Shareholders in July. Notes 31 December 2005 31 December 2004 (Restated)NON-CURRENT ASSETSCapitalised exploration costs 3 3,914,904 1,558,144Property, plant and equipment 3 11,346 11,571 Total non-current assets 3,926,250 1,569,715 CURRENT ASSETS Cash and cash equivalents 2,042,008 124,613 Other receivables 4 251,705 130 Total current assets 2,293,713 124,743 Total assets 6,219,963 1,694,458 CURRENT LIABILITIESTrade and other payables 5 1,709,724 3,655,915 Total current liabilities 1,709,724 3,655,915 SHAREHOLDERS' EQUITY Share capital 7 14,690 4,417Share premium 7 10,107,939 2,089,085 Accumulated losses (5,612,390) (4,054,959) Total shareholders' equity 4,510,239 (1,961,457) Total liabilities and shareholders'equity 6,219,963 1,694,458 Approved on behalf of the Board on 22 June 2006. David Wood The accompanying notes form an integral part of these financial statements. Note Year ended 31 11 month period December 2005 from incorporation to 31 December 2004 (Restated) Administrative expenses 9 (863,372) (922,570)Partnership agreement termination 5 (666,875) (50,625) Operating loss (1,530,247) (973,195) Grant of carried equity shares 8 - (3,051,500) Foreign currency exchange loss (36,662) (30,942) Bank interest received 9,478 678 Loss before tax (1,557,431) (4,054,959) Taxation 6 - - Loss for the period 10 (1,557,431) (4,054,959) Loss per share: basic & diluted 11 201 1,615 Adjusted loss per share: basic & diluted 11 0.05 0.40 The accompanying notes form an integral part of these financial statements. 11 month period Year from ended incorporation to Note 31 December 31 December 2004 2005 (Restated)Cash flow from operating activities:Net Loss before Taxation (1,557,431) (4,054,959)Adjustments to reconcile loss before tax to net cash usedin operating activities:Depreciation 3 8,434 2,905Share based payment 67,000 -Grant of carried equity shares - 3,051,500Investment income (9,478) (678)Decrease/(increase) in accounts receivable 52 (128)Increase in accounts payable 321,983 364,161 Net cash used in operating activities (1,169,440) (637,199) Cash flow from investing activities:Exploration expenditure (2,342,670) (1,350,890)Purchase of property, plant and equipment (8,209) (14,476)Interest received 9,478 678 Net cash used in investing activities (2,341,401) (1,364,688) Cash flow from financing activities:Proceeds from issue of share capital 7 5,086,200 2,207,500Proceeds form prepaid share capital 459,500 -Financing costs associated with share issues * 7 (117,464) (81,000) Net cash from financing activities 5,428,238 2,126,500 Net change in cash and cash equivalents 1,917,395 124,613 Cash and cash equivalents brought forward 124,613 - Cash and cash equivalents carried forward 2,042,008 124,613 Material non-cash transactions Financing costs satisfied by the issue of shares 125,300 - * Includes commissions paid on financing raised and prepayment of costsassociated with listing. The accompanying notes form an integral part of these financial statements. Share capital Share Accumulated Notes premium account losses Total Incorporation - - - - Net loss for the period aspreviously stated - - (1,003,459) (1,003,459) Grant of carried equity shares 8 - - (3,051,500) (3,051,500) Net loss after restatement - - (4,054,959) (4,054,959) Shares issued 7 4,417 - - 4,417 Premium on shares issued 7 - 2,203,085 - 2,203,085 Costs associated with issue ofshare capital - (114,000) - (114,000) Balance at 31 December 2004 4,417 2, 089,085 (4,054,959) (1,961,457) Net loss for the year - - (1,557,431) (1,557,431) Shares issued 7 10,273 - - 10,273 Premium on shares issued 7 - 5,274,330 - 5,274,330 Premium on share options - 3,045,397 - 3,045,397 Issue of warrants - - - 3,079,280 Costs associated with issue ofshare capital - (300,873) - (300,873) Balance at 31 December 2005 14,690 10,107,939 (5,612,390) 4,501,239 The future of the Group's retained earnings for distribution will be determinedby the individual companies' constitutions and legislation in their respectivecountries, being the British Virgin Islands, Cyprus and the Russian Federationand will not necessarily correspond to the amounts shown in the Company'sfinancial statements. Note 10 details the losses incurred by each Groupcompany. The accompanying notes form an integral part of these financial statements. 1. General a) Company Amur Minerals Corporation ("Company") was incorporated as a holding company inthe British Virgin Islands on 28 January 2004 as Croesus Resources GroupLimited. It changed its name to Amur Minerals Corporation on 31 January 2006.On 2 February 2006 the Company was re-registered as a business company under theBritish Virgin Islands Business Companies Act 2004. On 28th January 2004 allthe Group companies referred to below came under common control from which timethey have been consolidated. Although, the Company officially acquired theshare capital of its subsidiaries on the dates mentioned below, the managementof the Company had full control over the operating and financial policies of allGroup companies since their incorporation. The Company and its subsidiaries ("Group") locates, evaluates, acquires, explores and develops mineral propertiesand projects primarily in the Russian Far East. The Company's registered office is located at Kingston Chambers, P.O. Box 173,Road Town, Tortola, British Virgin Islands. The average number of employees forthe Group for the period to 31 December 2005 was 11 (2004: 6 employees). There is no single ultimate beneficial owner of the Company. The Company is the 100% owner of a Cypriot company called Irosta Trading Limited("Irosta"). The whole issued share capital was transferred to the Company on 14July 2004. Irosta was incorporated in the Republic of Cyprus on 9 October 2003. Irosta holds 100% of the shares in ZAO Kun-Manie (Kun-Manie), which holds a 5year exclusive exploration license valid until 31 December 2008. The license isfor an area located north of the Amur Province of Russia, where Kun-Manie isinvolved in the exploration of metals. Kun-Manie was incorporated in Russia on14 April 2003 and was acquired by Irosta on 25 March 2004. The Group includes the following companies as at 31 December 2005 and 31December 2004: Country of Percentage Principal Incorporation Holding Activities Amur Minerals Corporation British Virgin Islands Parent Company Investment Holding CompanyIrosta Trading Limited Cyprus 100% Investment Holding CompanyZAO Kun - Manie Russia 100% Exploration & mining Company The Group's principal place of business is in the Russian Federation. In December 2005 SRK Consulting completed an independent mineral resourceestimate based on the analytical results from the exploration data set for allholes and trenches that had been completed over the exploration life of theproject, inclusive of the work undertaken and results obtained during the 2005exploration field season. SRK Consulting is a global entity specializing in theassessment of mining resources. SRK reports an Indicated Mineral Resource forKun-Manie of 28.4 Mt with a mean grade of 0.47% Ni, 0.13% Cu, 0.2 g/t Pt and 0.2g/t Pd and an Inferred Mineral Resource of some 17.7 Mt with a mean grade of0.43% Ni, 0.12% Cu, 0.1 g/t Pt and 0.1 g/t Pd. SRK reports the resource estimateas defined by the JORC Code. SRK considers that the resource estimate representsonly a portion of that likely to be demonstrated to be present. b) Russian Business Environment Whilst there have been improvements in the economic situation in the RussianFederation in recent years, the country continues to display somecharacteristics of an emerging market. These characteristics include, but arenot limited to, the existence of a currency that is not freely convertible inmost countries outside the Russian Federation, restrictive currency controls andrelatively high inflation. The prospects for future economic stability in the Russian Federation arelargely dependant on the effectiveness of the economic measures undertaken bythe government, together with legal, regulatory and political developments. 2. Significant accounting policies a) Basis of Preparation These financial statements have been prepared in United States Dollars under thehistorical cost convention and in accordance with applicable InternationalFinancial Reporting Standards ("IFRS") for the purposes of shareholders. b) Comparative figures The comparative figures are from the date of incorporation (28 January 2004) ofthe Company to 31 December 2004. As this period is not for 12 months, thecomparative figures are not directly comparable with those for the year ended 31December 2005. c) Principles of Consolidation These consolidated financial statements include accounts of the Company and itssubsidiaries as set out in note 1. All significant inter-company balances andtransactions are eliminated. d) Measurement and presentation currency The measurement currency of the Group is considered to be the US Dollar, as themajority of exploration financing is in US Dollars. Furthermore, any futuresales will be in US Dollars. The financial statements have been presented in US Dollars in accordance withthe Company's accounting policy. For the purpose of these financial statementsother currencies have been translated into US Dollars on the following basis: (I) Share capital, capitalized exploration costs and fixed assets at the rate ruling on the date of the relevant transaction. (II) Liabilities and current assets at the rate ruling at the end of the accounting period. (III) Income Statement items at the average rate for the period. The rates of exchange used to translate from other currencies into US Dollarswere as follows (currency per US Dollar): Closing rate at 31 Closing rate at December 2005 31 December 2004 Russian Rouble(RUR) 28.74 27.75 Average rate for 12 Average rate for 11 months to 31 December months from incorporation 2005 to 31 December 2004 Russian Rouble(RUR) 28.29 28.81 Exchange differences arising on the application of the above policy toindividual transactions and accounts have been dealt with through the Statementof Income and Expenditure. The RUR has limited convertibility outside theRussian Federation and, accordingly, presentation of RUR amounts in US Dollarsshould not be construed as a representation that RUR amounts have been, couldbe, or will be in the future, convertible into US dollars at the exchange rateshown, or at any other exchange rate. e) Financial instruments Where the fair value of the financial asset or liability is materially below thecarrying amount, the carrying amount is written down to fair value. f) Accounting estimates and assumptions The preparation of financial statements requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe reported amounts of revenues and operating costs during the reportingperiod. Actual results could differ from these estimates. The accompanying financial statements reflect management's assessment of theimpact of the Russian business environment on the operations and the financialposition of the Company. The future business environment may differ frommanagement's assessment. The impact of such differences on the operations andthe financial position of the Company may be significant. g) Cash and cash equivalents Cash consists of cash and bank balances only. h) Other receivables Other receivables are stated at estimated realisable values after providingagainst debts where recoverability is bad and/or doubtful. i) Fixed assets Tangible fixed assets are stated at cost less accumulated depreciation.Depreciation is provided on all tangible fixed assets at rates calculated towrite off the cost or valuation of each asset on a straight-line basis over itsexpected useful life as follows: Useful life (years) Motor vehicles 2Office and computer equipment 3-8 The costs of maintenance, repairs and replacement of minor items of tangiblefixed assets are charged to current expenditure. Renewals and betterments arecapitalised. j) Exploration and evaluation assets The Group has taken advantage of an early adoption of IFRS 6, Exploration forand Evaluation of Mineral Resources. It is the Group's policy to capitalisecosts with respect to agreements entered into with third parties to performgeological works. Costs are recognised on a percentage of completion basis, andno amortisation has yet been applied. If economically recoverable ore reservesare developed, capitalised costs of the related property are reclassified asmining assets and amortised using the unit-of-production method. When a propertyis abandoned, all related costs are written off to operations. If, aftermanagement review, it is determined that the carrying amount of a mineralproperty is impaired, that property is written down to its estimated netrealisable value. A mineral property is reviewed for impairment whenever eventsor changes in circumstances indicate that its carrying amount may not berecoverable. The carrying amounts for mineral properties do not necessarily represent presentor future values. Their recoverability is dependent upon the discovery ofeconomically recoverable reserves, the ability of the Company to obtain thenecessary financing to complete the exploration and development of its mineralproperties, and attain future profitable production, or proceeds from thedisposition of its mineral properties. k) Income taxes Income tax expense represents the sum of the tax currently payable and deferredtax. Taxable profit differs from net profit as reported due to income taxeffects of permanent and timing differences. Non-profit based taxes are includedwithin administrative expenses. l) Costs associated with the issue of share capital Costs associated with the issue of shares, net of any taxes, have been set offagainst the share premium account. m) Share-based payments Goods or services received or acquired in a share-based payment transaction arerecognised when the goods are obtained or as the services are received. Goods or services received and the corresponding increase in equity are measuredat the fair value of the goods or services received. 3. FIXED ASSETS Vehicles, and office & Exploration and Total computer equipment evaluation assetsCost or valuation: At 28 January 2004 - - -Additions 14,476 1,558,144 1,572,620 At 31 December 2004 14,476 1,558,144 1,572,620Additions 8,209 2,356,760 2,364,969 At 31 December 2005 22,685 3,914,904 3,937,589 Accumulated depreciation: At 28 January 2004 - - -Charge for the year 2,905 - 2,905 At 31 December 2004 2,905 - 2,905Charge for the year 8,434 - 8,434 At 31 December 2005 11,339 - 11,339 Net book value:At 31 December 2004 11,571 1,558144 1,569,715 At 31 December 2005 11.346 3,914,904 3,926,250 4. OTHER RECEIVABLES 31 December 2005 31 December 2004 Other debtors 76 128Deferred listing costs 251,627 -Unpaid share capital 2 2 251,705 130 5. TRADE AND OTHER PAYABLES 31 December 2005 31 December 2004 Exploration and evaluation creditors 221,344 207,254Accrued listing costs 146,212 -Partnership Termination Compensation 552,000 50,625Subscription funds received 334,500 -Warrant Premium to be returned 125,000 -Share option provision - 3,051,500Accruals and other creditors 330,668 346,536 1,709,724 3,655,915 Partnership Termination Agreement Included above is US$552,000 payable as compensation under the termination ofthe Partnership Agreement. On 8 December 2005 the Company entered into atermination deed with Anturium Resources SA, Polar Star Capital and ResourceInvestment Group Inc (collectively the "Russian Partners"), under which theRussian Partners will receive compensation in lieu of the fees not paid andshares envisaged under the Partnership Agreement. As per the termination deed,the Russian Partners received a one time payment of $165,500 within 5 days ofthe signing of the agreement, followed by 24 payments of US$23,000 per month tobe paid monthly by the 30th day of each month for 24 months starting fromJanuary 2006. In March 2006, the Company settled this liability in full. Accordingly, theliability at 31 December of US$552,000 has been shown as a current liability. Subscription Funds Received Subscription funds received consist of moneys received under subscriptionagreements for new shares which were issued to the subscribers on 10 January2006. Warrant Premium to Be Returned On 10 December 2005, the Company notified warrant holders of its intention tolist its shares on AIM. According to the terms of the Warrant Agreements,Warrant Holders had the right to exercise the Warrant by giving notice to theCompany at any time during the period of 14 days starting on (and excluding) thedate when it receives notice of a listing, or at any other time during theWarrant Period. One warrant holder submitted a notice of exercise and paid thepremium prior to a meeting of warrant holders on 10 January, at which theCompany agreed to allow the warrants to be redeemed in a cashless exercise (seenote 18). The premium was subsequently returned to this Warrant Holder as hechose instead the cashless exercise. 6. TAXATION Reconciliation of tax charge: 31 December 2005 31 December 2004 Loss per accounts (1,557,431) (4,054,959) Tax at domestic income tax rate - 0% - -Tax at domestic income tax rate - 10% (3,921) (3,013)Tax at domestic income tax rate - 24% (39,453) (16,128) Tax effect of expenses not allowable for tax 39,453 14,479 Loss available for carry forward for future relief 3,921 4,662 Tax charge - - There is no material difference between the accounting and tax base. The Group has significant exposure to the Russian business and fiscalenvironment through its business and operations being largely based in Russia. Russia currently has a number of laws related to various taxes imposed by bothfederal and regional governmental authorities. Laws related to these taxes havenot been in force for significant periods, in contrast to more developed marketeconomies; therefore, implementing regulations are often unclear; and fewprecedents with regard to tax related issues have been established.Furthermore, the Russian Tax Service is in the process of developing andrefining its methods of regulation. These facts create tax risks in Russiasubstantially more significant than those typically found in countries with moredeveloped tax systems. Tax declarations, together with other legal complianceareas (such as customs and currency control matters) are subject to review andinvestigation by a number of authorities, who are enabled by law to imposeextremely severe fines, penalties and interest charges. As a result of thesefactors, the Group is unable to determine whether or not the inspectingauthorities would challenge the taxation treatment of certain transactionsrecorded by the Group. 7. SHARE CAPITAL 31 December 2005 31 December 2004 Number of Shares (par value USD 1 each): Authorised 50,000 50,000 Issued and fully paid 14,688 4,415 Issued but not fully paid 2 2 Total issued 14,690 4,417 Share issues in the year have been as follows: Number of shares Issue price Capital Premium Total Period from incorporation to 31December 2004 2 1 2 - 2Shares issued 3,215 500 3,215 1,604,285 1,607,500Cost of share issue (81,000) (81,000)Shares issued 1,200 500 1,200 598,800 600,000Cost of share issue (33,000) (33,000) As at 31 December 2004 4,417 4,417 2,089,085 2,093,502 Year ended 31 December 2005:Shares issued 91 500 91 45,409 45,500Carried equity shares 6,103 500 6,103 3,045,397 3,051,500Shares issued 1,771 1,000 1,771 1,769,229 1,771,000Cost of share issue (92,330) (92,330)Shares issued 2,308 1,500 2,308 3,459,692 3,462,000Cost of share issue (208,543) (208,543) As at 31 December 2005 14,690 14,690 10,107,939 10,122,629 During 2005, 158.3 shares were issued to satisfy commissions totaling US$125,330on fundraising. An additional 67 shares were issued in lieu of management feesand expense reimbursements totaling US$67,000. All these shares were issued ata fair value to the value of the services provided based on recent share issuesat the time of issue. All ordinary shares carry equal voting rights and rights to dividends. Onincorporation 2 ordinary shares were issued at par to directors of the Companyas nominees, being Jonathan Charles Rowell Morley-Kirk and Michael John KerrisonNosworthy. Payment for these shares is outstanding at the end of each year. The initial seed capital investors and Foxley Associates Limited ("Foxley"), acompany registered in the British Virgin Islands and trading under the nameProteus International, entered into a Formation Agreement in November 2003.Under the Formation Agreement, Foxley and its Russian Partners were to be issuedfree shares in order to maintain an equity interest in the Company up to 50%.The rights of the Russian Partners and Foxley to these carried equity shares waslimited to the lesser of the amount of the Work Program and Corporate Funding,as defined in an initial budget, subject to a maximum of US$12.5 million ("theCarried Equity Limit"). As the Company received only one of the originallyanticipated licenses, the Carried Equity Limit was reached at US$3.85 million.To satisfy this sum the Directors of Amur Minerals Corporation issued 2,034shares to Foxley and its designees on 27 May 2005, and issued an additional4,069 shares to entities nominated by the Russian Partners on 8 December 2005.In December 2005 a termination agreement was signed with the Russian Partnerswhereby the Russian Partners would receive compensation in lieu of fees andshares envisaged under the Partnership Agreement (See note 5) The remaining shares are owned by other entities, with no single entity owning asignificant proportion. Prior to the formation of the Group, the Company issued seed capital, being theinitial equity capital issued. This seed capital was issued between December2003 and November 2004 with the Company issuing 4,415 shares at an initialsubscription price of US$ 500 for each share. In addition, each subscriber ofshares of the seed capital shares received one five year warrant for every twoshares subscribed which entitled the holder to subscribe for an additional shareat the initial subscription price. Furthermore, the founding partners wereentitled to 50% of the warrants as part of their carried interests. 2,253warrants relating to initial shares issued were granted in 2004, the warrantsthat related to the founding partners carried equity issue were issued in 2005when the share were issued. These warrants have been valued at fair value by thedirectors, and since the warrants were issued prorata the fair value of thewarrants was zero. There were 4,506.1 warrants shares outstanding as at 31December 2005. The warrants have all now been converted into shares. Furtherdetails are set out in note 18. 8. PRIOR YEAR ADJUSTMENT During the year the company issued 6,103 shares, in accordance with TheFormation Agreement (which is explained in more detail in note 7). Under International Financial Reporting Standard (IFRS) No 2 entitledShare-based Payment, these shares are recorded in the financial statements attheir fair value of the equity instruments granted at the measurement date.However, ours is a new start up company with no prior history and the companyhas not been able to establish a fair value of the carried equity shares whenthey were granted. Therefore, the company has adopted paragraph 24 of IFRS2, andis applying the intrinsic value of the carried equity shares on a time basis.The intrinsic value has been estimated based on a private placement valuingshares at US$500 shortly after formation. IFRS 2 became effective for annual periods beginning on or after 1 January 2005,which has given rise to a prior year adjustment in respect of the above. Thishas had the effect of increasing the loss for 2004 by US$3,051,500 with acorresponding effect on the total assets of the company. This particular grantof carried equity shares will not have any effect on the results or assets ofany subsequent accounting periods. 9. ADMINISTRATIVE EXPENSES Year ended Period from incorporation 31 December 2005 to 31 December 2004 Salaries & wages 308,948 141,386Management fees 105,000 397,500Travel and subsistence 159,162 208,681Professional fees 134,738 81,983Depreciation 8,434 2,905Bank charges 6,793 3,165Rent 28,044 19,556Other expenses 112,253 67,394 863,372 922,570 The average number of employees of the group was 11 (2004:6) 10. GROUP LOSSES The Group companies' losses are made up as follows: Year ended Period from incorporation 31 December 2005 to 31 December 2004 Amur Minerals Corporation 1,353,836 3,957,631Irosta Trading Limited 39,209 30,128ZAO Kun-Manie 164,386 67,200 1,557,431 4,054,959 11. LOSS PER SHARE Basic and fully diluted loss per share are calculated and set out below. Theeffects of warrants outstanding at the respective year ends are anti-dilutiveand have therefore been excluded from the following calculations. Year ended Period from incorporation 31 December 2005 to 31 December 2004 Net loss for the year (1,557,431) (4,054,959)Average number of shares for the year/period 7,757 2,511Basic and diluted loss per share (201) (1,615) Adjusted average number of shares for the year/period 31,026,419 10,045,640Adjusted basic and diluted loss per share (0.05) (0.40) The adjusted figures presented above take account of the share split that waseffected in 2006 (note 18). Subsequent to the year end, the Company has issued new shares. The number ofshares outstanding at the date of these financial statements is 86,203,938shares of no par value. 12. CURRENCY ANALYSIS AND RISKS 31 December 2005 Denominated in RUR GBP $ Cash and cash equivalents 15,038 - 2,026,970Other receivables 76 245,753 5,877Warrant premium to be returned - - (125,000)Exploration and evaluation creditors (221,344) - -Other payables (317) (202,003) (826,560) Net Exposure (206,547) 43,750 746,787 31 December 2004 Denominated in RUR $ Cash and cash equivalents 13,170 111,443Other receivables 128 2Exploration and evaluation creditors (207,254) -Share option provision - (3,051,500)Other payables (86,633) (310,528) Net Exposure (280,589) (3,250,583) The main financial risk faced by the Group relates to currency risk exposure dueto its Rouble based contract with Dalgeophysica. The Group's functional currencyand financing is the USD, and therefore if the Rouble strengthens its positionsagainst the USD, this has a negative impact on the Group. Given theunpredictability in currency exchange rates movement, this exposure can giverise to a material change (either favorable or unfavorable) in the future. Management reviews its currency risk exposure periodically and since the yearend has started to hedge part of its exposure by buying and holding on depositRoubles in order to cover a proportion of the current year's anticipated Roubleexpenditures. 13. COMMITMENTS Geological works A contract for geological works was entered into with Dalgeophysica on 22February 2005. This agreement relates to works to be performed from March 2005until March 2006. The total value of this contract is approximately US$ 2.3million. As at 31 December 2005, the Group had incurred approximately US$2.1million in respect of this commitment. A further contract for geological works was entered into withDalgeophysica on 16 January 2006 for geological works. This agreement commencedin February 2006 and finishes in March 2007. The total value of the contract isapproximately US$ 1.95 million. This information is provided by RNS The company news service from the London Stock Exchange