BHR.L Regulatory News (BHR)

7 May 2008 07:00

Carnegie Minerals plc07 May 2008 Carnegie Minerals Plc ("Carnegie" or the "Company") Preliminary results for the year ended 31 December 2007 Carnegie Minerals Plc, the mineral sands resource company, is pleased toannounce audited results for the year ended 31 December 2007. Highlights Senegal (50/50 contributing Joint Venture with Astron Ltd) • Drilling of the first target at Niafarang resulted in a relatively small but high grade Indicated Mineral Resource being calculated for this deposit. Planning for an environmental impact study over this area is well advanced. • Many of the priority exploration targets generated by the airborne geophysical survey were drilled resulting in several new mineralisation intersections. • Many targets are still to be drilled in the licence area. USA • Since the year end, a Cooperative Research and Development Agreement has been entered into with the United States Geological Survey (an agency of the United States Government). This agreement seeks to help both parties identify areas with high potential for mineral deposits containing titanium, iron and zirconium. Other • Since the year end, the Company's 50% free carried interest in The Gambia project has entered a significant dispute with the Gambian Government. This is currently the subject of legal actions from both sides, but the project's carrying cost is fully provided for. The possible restart of operations here is uncertain at the time of writing. The Chairman, Timothy Jones, said: "Whilst 2007 saw continued good progress, with developing production in TheGambia and encouraging results from our evaluations of the Senegal deposits, adispute with the Gambian Government early in 2008 has created uncertainty as tothe future of the Company's Gambian operations. The directors view the Gambiaas a relatively small part of the Company's potential growth going forward andhave taken immediate steps to refocus the Company's efforts in areas of greaterstability whilst continuing to follow up exploration results in Senegal." For further information, call: Alan Hopkins, Managing Director, Carnegie Minerals Plc 020 7831 3113Romil Patel / Olly Cairns, Blue Oar Securities Plc 020 7448 4400 / 61 8 6430 6431Billy Clegg /Edward Westropp, Financial Dynamics 020 7831 3113 Chairman's statement A year of good progress has been overshadowed by an ongoing dispute between TheGambian Government and our joint venture company in that country. In January2008, operations were suspended by The Gambian Government who subsequentlycancelled the mining licence. The allegations that the joint venture companyhas been commercially mining titanium, iron ore and uranium from its mineralsands licence are strongly refuted. It has previously been made clear to TheGambian Government that a component of mineral sands is titanium and iron oxideand that trace amounts of uranium of no commercial value are usual for suchdeposits. This action has reinforced the Company's planned next phase to seekhigh potential projects in low sovereign risk areas. Of great concern to us is the withholding of the passport of Charlie Northfield,the in country manager for The Gambian joint venture company, by the Gambianauthorities. Carnegie is working to the utmost to regain Charlie's full freedomand have the strongly disputed charges of economic crimes against him and thejoint venture company dropped. In financial terms, by accounting for our share of the joint venture losses andby writing off the associated goodwill, we have eliminated the entire value ofthe project from the group balance sheet. The Company made good progress with its evaluations in neighbouring SouthernSenegal. This resulted in the modelling of a small but high grade mineral sandsdeposit at Niafarang with it being categorised as an Indicated Mineral Resourceas defined by the JORC Code 2004. We also undertook an exploration drilling programme in Southern Senegal overmany of the priority targets identified by our airborne geophysical survey. Thisresulted in several new mineralised intersections that have potential forfurther investigation. Many of the exploration targets identified within thelicence area have yet to be tested. Strategically, the Company's goal in this area is to discover further areas ofmineralisation that can significantly add to the explored Niafarang deposit.These areas in Senegal have not been not subject to any negative SenegaleseGovernment action. A significant first step in the refocus of international project work to areasof lower political risk was the signing in March 2008 of a strategic researchagreement with the US Geological Survey (USGS), an agency of the United StatesGovernment. This co-operation involves combining the Company's resources anddata with USGS data and experience in profiling geologic, geochemical andgeophysical mineral indicators so that the capability of both parties toidentify terrains with high potential for minerals of interest is significantlyimproved. This next generation of scientifically substantiated exploration targets will bea priority undertaking for the Company. We believe this provides a platform forthe Company to seek and procure quality project involvements in areas where wehave expertise and working together with world leading partnerships in this lowsovereign risk part of the world. Outlook With the current turbulent world financial markets and the untimely GambianGovernment action affecting The Gambian project, 2008 poses significantchallenges to our group. Out of adversity also comes the potential to reachhigher levels and certainly the management team is focused on forging newproject opportunities in more stable areas with significant potential whilefollowing up results in Senegal. We thank all our shareholders who have continued to support the Company duringthis period of change and refocus. Finally, I should like to pay tribute to my predecessor, Alan Burns, who hasretired from the board as part of a broader scaling back of his businessinterests. Alan founded the company and led us successfully through IPO andbeyond as a listed business. Timothy JonesChairman7 May 2008 Review of Operations "Overcoming Challenges and Grasping New Opportunities" 2007 was a very active year for the Company with good progress made on ourassets in Senegal. Following the year end, we have faced significant challengesarising from the legal dispute with The Gambian Government over the JVoperations there. However, we have looked to diversify our operations towardsdeveloped, lower risk, countries such as the new opportunities opening up in theUSA. Senegal (50% contributing JV with Astron Ltd) In Southern Senegal, the Company completed the initial 3-year explorationprogramme in full compliance with the conditions of its exclusive explorationlicence that was subsequently extended by the Senegalese Government for afurther 3 years to November 2010. In accordance with the Senegalese mininglegislation, Carnegie surrendered some already explored areas amounting to 27%of the original license area and retained about 550 km2 for further exploration. Exploration of the Niafarang mineral sands deposit was completed in 2007resulting in an independent Indicated Mineral Resource estimate as defined bythe JORC Code 2004: Indicated Mineral Resource (50% Carnegie interest) Sand Grade Mineral Assemblage (% of total heavy minerals) (million tonnes) (% of total heavy Ilmenite Zircon Rutile Leucoxene minerals) 4.8 12.4 75.2 13.7 2.3 0.4 Carnegie negotiated the mining licence conversion procedures with the SenegaleseDepartment of Mines and Geology in September 2007 and has commissioned anindependent and reputable Senegalese consulting firm for the statutoryenvironmental impact assessment (EIA) of the Niafarang mining project as thefirst step in the licence conversion process. In addition to this work on the Niafarang deposit, a substantial drillingprogramme in Southern Senegal was undertaken to test the exploration targetsidentified in the north and in the south of the licence area. In May - July2007, 8,000 line metres of air-core drilling in two of these areas, usingAustralian drilling company Wallis Drilling, intersected some new mineralisationzones that warrant follow up exploration. The intersected mineralised zones arerelated to linear radiometric and magnetic features extending parallel to thecoast and identified based on the high resolution airborne geophysical surveyover the licence area flown in 2006. These heavy mineral intersections are encouraging. Further drilling is plannedfor mineralisation zones as well as drill testing of the yet to be testedgeophysical and other exploration targets in the eastern part of the licencearea. NEW OPPORTUNITIES Carnegie entered into a Cooperative Research and Development Agreement with theUS Geological Survey (USGS), an agency of the United States Government. A majorobjective of the collaboration for the Company is to improve its assessment andmodelling tools thereby allowing it to better identify areas with high potentialfor mineral deposits containing titanium, iron, zirconium as well as rare-earthelements - anywhere in the world we operate. The USGS have been at the forefront of mineral deposit research for over 125years and the work in the USA creates an opportunity for the Company toinvestigate and develop new projects in highly prospective geographical regionswith low sovereign risk. The objectives of the collaboration with the USGS are to: • define areas with potential for mineral deposits containing metals such as titanium, iron, zirconium and rare-earth elements; • enable researchers from both parties to interpret geologic terrains favourable for staged field geological investigations; • further test modelling methods developed by the USGS that integrate geologic, geochemical, and geophysical indicators; and • assess mineral resource potential using the synthesis and analysis of USGS geosciences databases. The domestic and international locations jointly selected for study support bothUSGS's mission to assess the mineral resources of the US and the world andCarnegie's exploration strategy. The benefits of this exchange include sharingof data, the refinement of mineralogical methods, and an expanded suite ofmineralogical and chemical data for the US national-scale assessments. Under the terms of this 3-year joint project, Carnegie is providingapproximately USD1million in cash and in-kind services in the form of labour,external consulting and contractual costs to the project. The USGS is providingin-kind resources in the form of labour, equipment, facilities, information, andcomputer software estimated at USD225,000. At the time of writing this report, the database research as well as fieldinvestigations in the USA has been already started by a joint USGS and Carnegieteam. We believe that this strategic partnering in the USA can provide a strongtechnical platform from which quality project involvement opportunities canarise. Since the end of the period under review, in February 2008, the Company raised£1.0 million net of expenses on the AIM market. This provides thefinancial platform for the Company to meet its share of exploration expendituresin Southern Senegal and to fund the initial exploration in the USA under thejoint project with the USGS. Carnegie has conducted preliminary investigations on the previously announcedIndonesian prospect and further participation is currently under review. The Gambia (50/ 50 joint venture with Astron Ltd - Astron funded 100%) Through 2007 and until the disruption of the mining operations by the GambianGovernment in January 2008, the Carnegie / Astron JV operating company "JointVenture Company" in The Gambia was able to successfully commission all 4 planneddredging and gravity concentration processing units at the Sanyang and Batukunkudeposits. The dry mining fleet had been acquired from The Peoples Republic ofChina and arrived in The Gambia in 2007. This enabled the production of primaryconcentrate as a precursor to the commissioning of the secondary concentratorsthat would have enabled the production of higher value concentrates. The keycomponents of the magnetic separation processing unit were already deliveredinto the country and the delivery of the remaining equipment and commissioningof this concentrate upgrade plant was scheduled for middle of 2008. Theconstruction of onsite infrastructure such as laboratories, workshops, storesand offices was mostly completed. At 31 December 2007, a total of 166 personnel were employed in The Gambiacomprising 135 Gambians and 31 expatriates (mostly dredging specialists from thePeople's Republic of China). Since the beginning of the mining operations, the Joint Venture Company exportedto the offtake partner more than 45,000 tonnes of primary heavy mineralconcentrates with an additional 35,000 tonnes produced and currently stockpiledat the Sanyang mining site. The Joint Venture Company met the production targetin primary HMC terms for 2007 and was well on its way to achieving its fullproduction and processing capacity in 2008. Subsequent to year end, the Joint Venture Company received a notice cancellingits mining licence and a significant legal dispute has arisen. The GambianGovernment has announced that the Joint Venture Company has been illegallymining strategic minerals in addition to its mineral sands licence, which theJoint Venture Company vigorously disputes. The Company has fully provided forits investment to date in this area, by recognising its share of joint lossesand by writing off the associated goodwill. Alan HopkinsManaging Director7 May 2008 Consolidated income statement for the year ended 31 December 2007 Notes 2007 2006 £ £ Revenue - management fees 81,606 25,844Administrative expenses (1,270,126) (471,640)Other operating income - 183,970Operating loss (1,188,520) (261,826)Share of losses of joint venture (598,719) (73,369)Finance income - bank interest 34,016 26,670Loss before tax (1,753,223) (308,525)Tax expense - -Loss for the year/period attributable to equity holders of the parent entity (1,753,223) (308,525) Loss per share attributable to equity holders of the parententity Basic and diluted 2 (3.188)p (1.187)p Consolidated statement of recognised income and expense for the year ended 31 December 2007 2007 2006 £ £ Foreign exchange (loss)/gain on retranslation ofoverseas operations (60,533) 6,768Net (loss)/income recognised directly in equity (60,533) 6,768Loss for the year (1,753,223) (308,525)Total recognised income and expense for the year (1,813,756) (301,757) Attributable to:Equity holders of the parent (1,813,756) (301,757) Consolidated balance sheet at 31 December 2007 Notes 2007 2006 £ £AssetsNon-current assetsIntangible assets 474,991 448,288Property, plant and equipment 78,603 84,366Interests in joint ventures - 656,150 553,594 1,188,804 Current assetsTrade and other receivables 21,024 78,637Cash and cash equivalents 215,737 1,205,322 236,761 1,283,959Total assets 790,355 2,472,763LiabilitiesCurrent liabilitiesTrade and other payables 146,672 108,200Total liabilities 146,672 108,200Net assets 643,683 2,364,563 Equity attributable to equity holders of parentShare capital 3 550,000 550,000Share premium 4 969,851 969,851Merger reserve 4 839,346 839,346Foreign exchange reserve 4 (53,765) 6,768Warrant reserve 4 250,000 250,000Retained earnings 4 (1,911,749) (251,402)Total equity attributable to equity holders of the parent 643,683 2,364,563 Consolidated cash flow statement for the year ended 31 December 2007 2007 2006 £ £Net cash flow from operating activitiesLoss for the year/period (1,753,223) (308,525)Depreciation and amortisation 13,162 7,648Share-based payment expense 92,877 57,123Share of losses of joint venture 598,719 73,369Impairment of goodwill 168,875 -Capitalised exploration expense (138,147) -Interest received (34,016 ) (26,670)Foreign exchange loss (68,182) (21,966)Movement in working capital: - trade and other receivables 57,613 (78,399) - trade and other payables 38,472 (163,560)Cash flow from operations (1,023,850) (460,980) Cash flow from investing activitiesPurchase of property, plant and equipment (10,401) (80,536)Disposal of property, plant and equipment 10,650 -Net funds acquired with subsidiary undertakings - 225,317Interest received 34,016 26,670Net cash flow from investing activities 34,265 171,451 Cash flow from financing activitiesIssue of shares - 2,025,000 Listing expenses and share issue costs - (530,149) Net cash flow used in financing activities - 1,494,851 Net (decrease)/increase in cash and cash equivalents (989,585) 1,205,322Cash and cash equivalents at 31 December 2006 1,205,322 -Cash and cash equivalents at 31 December 2007 215,737 1,205,322 Cash and cash equivalents comprises of:Cash available on demand 180,603 58,496Short-term deposits 35,134 1,146,826 215,737 1,205,322 Notes to the preliminary results 1 Basis of preparation The financial information in this announcement has been prepared in accordancewith International Financial Reporting Standards (IFRS and IFRICinterpretations) issued by the International Accounting Standards Board (IASB)and adopted by the European Union and with those parts of the Companies Act 1985applicable to companies preparing their accounts under IFRS. The financial information set out in this announcement does not constitute thecompany's statutory accounts for the years ended 31 December 2007 or 2006, butis derived from those accounts. Statutory accounts for the period ended 31December 2006, prepared under IFRS, have been delivered to the Registrar ofCompanies and those for the year ended 31 December 2007 will be deliveredfollowing the company's annual general meeting. The auditors reported on theseaccounts; their reports were unqualified and did not contain a statement unders237(2) or (3) of the Companies Act 1985. 2 Loss per share The calculation of basic loss per ordinary share is based on a loss of£1,753,223 (2006: £308,525) and on 55,000,000 ordinary shares (2006: 25,981,873)being the weighted average number of ordinary shares in issue during the period.There is no difference between diluted loss per share and the basic loss pershare presented as the Company reported a loss for the period. The company has issued share options and warrants over ordinary shares both ofwhich could potentially dilute basic earnings per share in the future. Post 31December 2007, the company paced an additional 28,000,000 ordinary shares at 4pence each. 3 Share capital 2007 2007 2006 2006 Number of shares £ Number of shares £Authorised: - Ordinary shares of 1p each 100,000,000 1,000,000 100,000,000 1,000,000Issued and fully paid: - Ordinary shares of 1p each 55,000,000 550,000 55,000,000 550,000 4 Reserves Share Foreign Share Premium Merger exchange Warrant Retained Total Capital Account reserve reserve reserve earnings equity £ £ £ £ £ £ £At 3 February 2006 - - - - - - -On placing of shares 550,000 1,500,000 - - - - 2,050,000Expenses of placing - (530,149) - - - - (530,149)Arising on acquisition - - 839,346 - - - 839,346On issue of warrants - - - - 250,000 - 250,000Gain/(loss) for the period - - - 6,768 - (308,525) (301,757)Fair value of share based payments - - - - - 57,123 57,123At 31 December 2006 550,000 969,851 839,346 6,768 250,000 (251,402) 2,364,563At 1 January 2007 550,000 969,851 839,346 6,768 250,000 (251,402) 2,364,563Loss for the period - - - (60,533) - (1,753,223) (1,813,756)Fair value of share based payments - - - - - 92,876 92,876At 31 December 2007 550,000 969,851 839,346 (53,765) 250,000 (1,911,749) 643,683 This information is provided by RNS The company news service from the London Stock Exchange