Bisichi Regulatory News (BISI)

28 Apr 2006 07:00

27 April 2006 BISICHI MINING PLC Preliminary Results for the year ended 31 December 2005 2005 2004 Turnover up 16.8% ‚£13,485,000 ‚£11,548,000 Profit before interest, tax and ‚£5,471,000 ‚£5,028,000depreciation up 8.8% Profit before tax up 4.9% ‚£4,206,000 ‚£4,011,000 Diluted earnings per share up 16.3% 30.19p 25.96p Dividend per share up 12.5% 2.25p 2.00p * Group profits up despite short term problem with South African coal mine * Pegasus Coal Reserve to be acquired from BHP Billiton for ZAR 51.5 million * Continuous miner back in operation and producing at near optimum levels * New order mining rights granted to Black Wattle Colliery. * High average selling price achieved for both domestic and export coal * Strong performance from UK property portfolio underpins Group profits Commenting, Michael Heller, chairman of Bisichi Mining PLC said:"2005 was a year which clearly demonstrated both the promise and challengesinherent in the Group's South African mining operations and the benefits of theGroup's holding of significant property assets in the UK. We are among thefirst coal mines in South Africa to be granted new order mining rights and ittestifies to our leadership in the areas of empowerment and social development.Meanwhile, our growth strategy in South Africa will continue to focus onacquiring and developing high quality reserves like Pegasus. With a provenmanagement team and a solid and well-tested business model in place, I amconfident that 2006 will be another year of opportunity for Bisichi Mining."ENDFor further information, please call:Andrew HellerTom KearneyRobert Corry, Bisichi Mining PLC 020 7415 5030Christopher Joll MJ2 Ltd 020 7491 7776CHAIRMAN'S STATEMENTI am pleased to be able to inform shareholders that, despite a short termproblem at our South African mine, 2005 has been a satisfactory year forBisichi Mining PLC, with group profit on ordinary activities before taxationincreasing by 4.9 percent to ‚£4,206,000 (2004: ‚£4,011,000).2005 was a year which clearly demonstrated both the promise and challengesinherent in our South African mining operations. In April 2005, Bisichi MiningPLC, together with our local partner Endulwini Resources, successfullynegotiated the terms for the ZAR 51.5 million purchase of the Pegasus CoalReserve from Ingwe Collieries Limited, a wholly-owned subsidiary of BHPBilliton. The approximately 12 million in situ tonne reserve, located close toour operations at the Black Wattle Colliery, contains both export grade and lowphosphorous coal and is suitable for mining by the open cast method. Subject tothe conversion of the prospecting and mining rights under South Africa's newMineral and Petroleum Resources Development Act, we anticipate commencingoperations in 2007. We are confident that we will be mining this high-yielding,low cost deposit well into the next decade. Our growth strategy in South Africawill continue to focus on acquiring and developing high quality reserves likePegasus.But 2005 was also a year of challenges. In December 2005, we informedshareholders that there was a temporary cessation of operations in thecontinuous miner section, the same section where a fatality had recentlyoccurred. This fatality, the first of a Black Wattle employee to occur inunderground mining in the mine's history, has led to a comprehensive review ofBlack Wattle's safety and operational procedures to ensure that such anincident will not be repeated. Prior to the suspension of the continuous minersection, we were achieving record tonnage at the mine, although, as part of ourmining plan, this was in areas of declining yield. The net effect of thesuspension of the continuous miner section combined with the lower yields hashad a negative impact on Black Wattle's contribution to overall net earnings in4th Quarter of 2005 and will continue to have a negative effect on earnings inthe 1st Half of 2006, albeit on a reducing basis. 2005's results have also beenimpacted by the writing off of expenses of ‚£288,000 incurred during a corporatefundraising exercise which was suspended due to the fatality and the suspensionof the continuous miner section. Faced with these challenges, the minemanagement took steps to restore the profitability of mining operations atBlack Wattle Colliery, the details of which are provided in the Mining Review.Nonetheless, I am particularly pleased to report to shareholders that thecontinuous miner is back in operation and performing at near optimum levels.The 1st Half of 2006 will be impacted by the performance of Black WattleColliery. However, the prompt action taken by your company's management,coupled with the high average selling price for domestic and export productsthat we have achieved, give me the confidence to state that the 2nd Half of2006 should see an improvement in profitability.Perhaps more than in any year in our recent history, Bisichi Mining PLC's UKretail property portfolio, managed by London & Associated Properties PLC, hasproved the merit of our long term strategy of supporting our overseas mininginvestments with a significant investment in UK property. The sale of theKippax site in Leeds and the compulsory purchase of the Ritz site in Bradford,as part of that City's redevelopment, have contributed substantially to thisyear's profits and have offset some of the impact of the short term problems atBlack Wattle Colliery. This portfolio was valued at 31 December 2005 byindependent charter surveyors at ‚£15.6 million, an increase of 18.1%.Shareholder funds now stand at ‚£16.4 million compared to ‚£13.0 million a yearago, an increase of 26.3%To underline our confidence in the future of Bisichi Mining, your directors arerecommending a dividend of 2.25p, compared to 2.0p per share in the previousyear, an increase of 12.5%. This will be paid on 14 August 2006 to shareholderson the register as of 21 July 2006.In closing, I would like to the thank the staff of Bisichi Mining, itssubsidiaries in both the United Kingdom and South Africa and our associates andpartners in South Africa for their contribution and continued commitment toyour company. With a proven management team and a solid and well-testedbusiness model in place, I am confident that 2006 will be another year ofopportunity for your company.MICHAEL HELLERChairman27 April 2006MINING REVIEW20 April 2006 v6OverviewAs the Chairman has stated, 2005 was a mixed year for our coal miningoperations in South Africa.On the plus side, the agreement to acquire the Pegasus Coal Reserve from BHPBilliton represents an important investment in the future for Bisichi and itspartner, Endulwini Resources. This good quality, excellent-yielding deposit hashighly favourable geological conditions which will allow the entire reserve tobe mined using the opencast method. We intend to begin the development andmining of the Pegasus Coal Reserve in 2007. This project very much representsthe future for Bisichi in South Africa.However, at our principal direct mining operation, the Black Wattle Colliery,the combination of the decisions taken in the short term to mine lower yieldingsections throughout the year and a fatal accident in the 4th Quarter severelyaffected the productivity of our operations. Although we have taken decisiveactions to rectify the situation, the mine has taken time to recover.Nonetheless, during this difficult period we have taken steps to ensure thatBlack Wattle has maintained a high average selling price for both its exportand domestic products.Pegasus Coal ReserveIn April 2005, Bisichi Mining and its partner, Endulwini Resources,successfully negotiated the terms of acquisition for the Pegasus Coal Reservefrom Ingwe Collieries Limited, a wholly-owned subsidiary of BHP Billiton. Thereserve, located approximately 40 km from our existing operations at the BlackWattle Colliery, contains approximately 12 million in situ tonnes of exportgrade and low phosphorous coal. The average depth of the coal is approximately17 meters (compared to 40 meters at the Black Wattle Colliery). The strip ratio(i.e, the ratio of overburden to coal) of the reserve averages about 2.2 to 1,making it ideal for mining using the opencast method.In June 2005, we agreed the terms of an offtake arrangement with BHP Billiton,whereby a fixed amount of the coal mined from the reserve would be purchased bythat company for the life of the reserve. Given the prevalence of lowphosphorous coal in the reserve and its proximity to Ferrobank, we believe thereserve is ideally suited to serve the ferrochrome market, which has had andcontinues to have a strong demand for low phosphorous reductants.We are currently in the process of applying for conversion of the mining rightsunder South Africa's new Mineral and Petroleum Resources Development Act and weintend to begin opencast operations at the site in 2007. In the meantime, weare carrying out the necessary feasibility, environment and engineeringstudies.Production: Black Wattle CollieryAs we stated in last year's Report & Accounts, mining of a lower yieldingsection of the reserve was planned in order to take advantage of our stronglong term contract prices, thereby enabling us to extract coal that would haveotherwise been sterilised. Provided production levels could offset the declinein yield, this was a prudent decision which allowed us to mine more efficientlyusing the continuous miner and to extend the life of mine. For the bulk of theyear we managed to achieve this, primarily from the continuous miner section,and we set new levels of production. For much of 2005, production at the BlackWattle Colliery averaged above 110,000 metric tonnes per month and during the2nd Half up until December, averaged 118,000 metric tonnes per month. However,the fatal accident during the 4th Quarter, which was the first undergroundfatality in Black Wattle's history, had an immediate and dramatic effect onproduction and profitability; all the more so since the accident occurred inthe key production section where our continuous miner was operating. Thedecision to suspend operations of the continuous miner, coupled with continuedmining of the lower yielding sections by the less-productive traditionaldrill-and-blast sections, created a situation with high fixed costs anddepressed production - a negative position from which we are only justbeginning to emerge.During the period in which the continuous mining section was suspended, we tookthe opportunity to overhaul the machine and to lower it by 300mm. Thismodification now means that the continuous miner can operate in sections oflower seam height, thus allowing us to access more areas of the mine formerlyrestricted to the drill and blast sections. The overhaul took approximately onemonth and I am pleased to report that the continuous miner is now back inoperation on a three-shift basis. As with any major reconfiguration ofmachinery, however, there is a built-in start up period over which thecontinuous miner will gradually attain the production levels expected of it. Weanticipate that the continuous miner will be working to optimum productioncapacity during the 2nd Quarter of 2006. As well as carrying out the technicalimprovements on the continuous miner, we conducted the feasibility workrequired to access the underground coal reserves north of the current miningarea. The extensive borehole data available has revealed that these reserveshave better yields and more favourable mining heights and we anticipateentering this area by the 2nd Half of 2006.As shareholders have previously been advised, Black Wattle also has reservesthat can be mined by opencast methods. As reported in last year's accounts, wehave received permission from the Middelburg Town Council (the owners of thesurface rights) to mine these reserves by opencast methods. We are now in thefinal process of completing the necessary consultative and environmental workrequired for approval by the Department of Minerals and Energy (DME) and we arehopeful of receiving approval during the course of 2006. As soon as we receivepermission to opencast mine we will do so, as this is a substantially cheaperproduction method than underground mining and will enable us to increaseoverall production at higher margins.New Order Mining Rights: Black Wattle CollieryI am pleased to report that the DME has granted the Black Wattle Colliery neworder mining rights in accordance with the Mineral and Petroleum ResourcesDevelopment Act of 2002. The Black Wattle Colliery is one of the first coalmines in South Africa to be granted new order mining rights under the newlegislation. This is an important milestone which signifies that we are fullycompliant with all the prevailing mining, social, labour, and black economicempowerment legislation in South Africa.Marketing: Black Wattle CollieryOne of the key drivers of Black Wattle's earnings has been the strength of ourcontracted sales into our two main markets: a US$-based income from long-termthermal coal export sales via the Richards Bay Coal Terminal ("RBCT") and aZAR-based income resulting from long-term contracts to supply low phosphorouscoal to the South African ferrochrome market.Given the volatility of the export coal price we have witnessed over the periodfrom June 2004 to the present, our US$ fixed price FOB export contract hasproven both prudent and profitable. Our experience in exporting coal has put usin a strong position now that RBCT has agreed to expand from its existingcapacity of 72 million metric tonnes to 92 million metric tonnes starting in2008. We welcome the expansion of RBCT and expect to play an active role in theexport markets in the years to come.In the South African market, in July 2005 we received a 19 percent increase inthe price of our coal supply contract to the ferrochrome industry. The premiumprice we receive for this product plays an important role in determining themine's overall level of profitability. During the period that operations weresuspended in the continuous miner section, our production of low phosphorouscoal ceased as well. Accordingly, during the period from December 2005 throughFebruary 2006, low phosphorous production was minimal. I am pleased to say thatwe are now back in the low phosphorous market and are returning to our budgetedlevel of monthly production.The domestic South African market has also proven to be quite robust. On 1April 2006 we received an almost 15 percent increase in the price we receivefor domestic steam coal. Today, the domestic market now rivals the exportmarket in terms of margin per tonne and demand remains very strong.Health and SafetyThe health and safety of our employees is of utmost importance. Black WattleColliery constantly monitors its full compliance with all prevailing SouthAfrican mine health and safety legislation. In addition to the requisitepersonnel appointments and assignment of direct health and safetyresponsibilities on the mine, a system of Hazard Identification and RiskAssessments has been designed, implemented and maintained at Black WattleColliery. Furthermore, a system of health and safety training, information andinstruction is conducted on an ongoing basis. Finally, inspection andenforcement is provided through counselling, retraining, correctivecounselling, and where appropriate, discipline. Immediately following thefatality at Black Wattle Colliery our mine management launched a comprehensivereview of the mine's safety standards, operational procedures and codes ofpractices to ensure that everything possible was being done to ensure thehealth and safety of Black Wattle employees.ProspectsAlthough the net effect of the suspension of the continuous miner section andthe lower yields has had a negative impact on Black Wattle's contribution tooverall net earnings in 4th Quarter of 2005 and will have a negative effect onearnings in the 1st Half of 2006, the 2nd Half of 2006 should see animprovement in profitability.2005 has been a year that has tested our teams in London and South Africa.However, we have been particularly well served by our strong management team atBlack Wattle, led by Mr. Robert Grobler. As evidenced by the Pegasusacquisition, the scale of the opportunities open to us in South Africa are justbeginning to be realised. I am confident that the decisions made by yourcompany's management team during this challenging period will have a positiveeffect on the business in the years to comeANDREW HELLERManaging Director27 April 2006Bisichi Mining PlcConsolidated income statementfor the year ended 31 December 2005 Notes Year Year ended ended 31Dec 31 Dec 2005 2004 ‚£'000 ‚£`000 Group Turnover 1 13,485 11,548 Operating costs (12,037) (9,123) __________ __________ Operating profit before adjustments 1 1,448 2,425 Gains on held for trading investments 177 - Increase in value of investment 2,393 1,868property Exceptional items 2 124 - Share of profit in joint ventures 522 92 __________ __________ Operating profit 1 4,664 4,385 Interest receivable 76 25 Interest payable (534) (399) __________ __________ Profit before tax 4,206 4,011 Taxation 3 (687) (788) __________ __________ Profit for the period 3,519 3,223 __________ __________ Profit attributable to equity 3,256 2,786shareholders Profit attributable to minority 263 437interest __________ __________ 3,519 3,223 __________ __________ Earnings per share 4 31.15p 26.66p __________ __________ Diluted earnings per share 4 30.19p 25.96p __________ __________Bisichi Mining PlcConsolidated balance sheetAs at 31 December 2005 2005 2004 ‚£'000 ‚£'000 Assets Non-current assets Value of investment properties 15,625 14,990attributable to group Fair value of head lease 153 343 Property 15,778 15,333 Plant and equipment 5,604 5,046 Investments in Joint Ventures 2,519 1,476 Other Investments 424 384 Deferred tax 241 243 Total non-current assets 24,566 22,482 Current assets Inventories 124 36 Trade and other receivables 4,578 2,533 Assets held for trading investments 629 403 Interest derivative 36 - Cash and cash equivalents 488 950 5,855 3,922 Total assets 30,421 26,404 Liabilities Current liabilities Borrowings (2,382) (1,490) Trade and other payables (4,432) (3,629) Current tax liabilities (91) (315) (6,905) (5,434) Non-current liabilities Borrowings (4,368) (5,580) Finance lease liabilities (153) (343) Deferred tax (2,582) (2,048) (7,103) (7,971) (14,008) (13,405) Net assets 16,413 12,999 Equity Share capital 1,045 1,045 Other reserves 170 232 Retained earnings 14,606 11,388 Total shareholders' equity 15,821 12,665 Minority interest in equity 592 334 Total equity 16,413 12,999 Bisichi Mining PlcConsolidated CASH FLOW STATEMENTFor the year ended 31 December 2005 Year Year ended ended 31 December 31 December 2005 2004 ‚£'000 ‚£'000 Cash flows from operating activities Operating profit 4,664 4,385 Depreciation 807 644 Share based payment expense 23 5 Unrealised gain on investment held for (177) (89)trading Unrealised gain on investment properties (2,393) (1,868) Share of profit of joint ventures (522) (92) Hedging 82 - ___ ___ Cash flow before working capital 2,484 2,985 Change in inventories (89) 9 Change in trade and other receivables (753) (1,004) Change in trade and other payables 750 1,598 Change in provisions (136) 6 Acquisitions of held for trading (24) (49)investments Proceeds from held for trading investments 99 148 ___ ___ Cash generated from operations 2,331 3,693 Interest received 76 25 Interest paid (534) (399) Income tax paid (331) (466) ___ ___ Cash flow from operating activities 1,542 2,853 ___ ___ Acquisition of reserves, plant and (1,348) (2,211)equipment Proceeds from sale of investment 482 -properties, reserves, plant and equipment Acquisitions of investments (41) (49) ___ ___ Cash flow from investing activities (907) (2,260) ___ ___ Cash flow from financing activities Borrowings drawn 23 1,541 Borrowings repaid (1,927) (291) Equity dividends paid (209) (188) ___ ___ Cash flow from financing activities (2,113) 1,062 ___ ___ Net (decrease) increase in cash and cash (1,478) 1,655equivalents ___ ___ Cash and cash equivalents at 1 January 507 (1,179) Exchange adjustment 2 31 ___ ___ Cash and cash equivalents at 31 December (969) 507 ___ ___ Bisichi Mining PlcConsolidated STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFor the year ended 31 December 2005 Share Translation Other Retained Total Minority Total reserve earnings capital reserves interest equity ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance at 1 January 1,045 (137) 86 8,790 9,784 (116) 9,6682004 Revaluation of - - - 1,868 1,868 - 1,868investment properties Other income statement - - - 918 918 437 1,355movements Profit for the year - - - 2,786 2,786 437 3,223 Exchange adjustments - 278 - - 278 13 291 Total recognised - 278 - 2,786 3,064 450 3,514income and expense for the period Dividend - - - (188) (188) - (188) Equity share options - - 5 - 5 - 5 _____________ ____________ ____________ ____________ ____________ ____________ ____________ Balance at 31 December 1,045 141 91 11,388 12,665 334 12,9992004 Adoption of IAS39 Movement on fair value - - - 82 82 - 82of derivatives Revaluation of current - - - 89 89 - 89assets held for trading _____________ ____________ ____________ ____________ ____________ ____________ ____________ Balance as at 1 1,045 141 91 11,559 12,836 334 13,170January 2005 Revaluation of - - - 2,393 2,393 - 2,393investment properties Movement on fair value - - - (58) (58) - (58)of derivatives Other income statement - - - 921 921 263 1,184movements Profit for the year - - - 3,256 3,256 263 3,519 Exchange adjustment - (85) - - (85) (5) (90) Total recognised - (85) - 3,256 3,171 258 3,429income and expense for the period Dividend - - - (209) (209) - (209) Equity share options - - 23 - 23 - 23 _____________ ____________ ____________ ____________ ____________ ____________ ____________ Balance at 31 December 1,045 56 114 14,606 15,821 592 16,4132005 _____________ ____________ ____________ ____________ ____________ ____________ ____________Bisichi Mining PlcACOUNTING POLICIES AND NOTES TO ACCOUNTSBasis of accountingThe results for the year ended 31 December 2005 have been prepared inaccordance with International Financial Reporting Standards (IFRS) as adoptedby the European Union, for the first time. The reported comparative periodresults have been restated on this basis. The financial statements have beenprepared under the historical cost convention, except for the revaluation ofcertain properties and financial instruments. The principal accounting policiesare described below.Basis of consolidationThe group accounts incorporate the accounts of Bisichi Mining Plc and all ofits subsidiary undertakings, together with the group's share of the results ofits joint ventures and associates.In preparing these financial statements, advantage has been taken of theexemptions allowed by IFRS1, first-time adoption of IFRS as follows:Financial Instruments: Recognition and Measurement (IAS 39)The comparative periods have not been restated for IAS39, particularly inrespect of financial instruments. Where appropriate, the fair value of theseinstruments at the start of 2005 was passed through reserves, and thesubsequent movement in 2005 is reported in the group income statement. Thegroup has not applied the hedge accounting treatment that would allow movementson hedges to be deferred in equity.Business Combinations that occurred before the opening IFRS balance sheet date(IFRS 3 "Business Combinations")Bisichi has elected not to apply IFRS 3 retrospectively to businesscombinations that took place before the transition date of 1 January 2004. As aresult, all prior business combination accounting has been frozen at thetransition date. This includes any goodwill that was previously recognised as adeduction from equity.Share-based Payments (IFRS 2 "Share-based Payment")Bisichi has elected only to apply IFRS 2 to all share option schemes whereoptions have been granted since 7 November 2002 and were not fully vested at 1January 2005.TURNOVERTurnover comprises sales of coal and property rental income. Turnover isrecognised when delivery of the product or service has been made and when thecustomer has a legally binding obligation to settle under the terms of thecontract and has assumed all significant risks and rewards of ownership.Turnover is only recognised on individual sales when all of the significantrisks and rewards of ownership have been transferred to a third party. In mostinstances turnover is recognised when the product is delivered to the locationspecified by the customer, which is typically when loaded into transport, wherethe customer pays the transportation costs.Rental income is recognised in the group income statement on a straight-linebasis over the term of the lease.INVESTMENT PROPERTIESInvestment properties comprise freehold and long leasehold land and buildings.Investment properties are carried at fair value in accordance with IAS 40`Investment Properties'. Properties are recognised as investment propertieswhen held for long-term rental yields, and after consideration has been givento a number of factors including length of lease, quality of tenant andcovenant, value of lease, management intention for future use of property,planning consents and percentage of property leased. Investment properties arerevalued annually by professional external surveyors and included in thebalance sheet at their fair value. Gains or losses arising from changes in thefair values of assets are recognised in the consolidated income statement inthe period to which they relate. In accordance with IAS 40, investmentproperties are not depreciated. The difference between the book value of theinvestment property and the first valuation on recognition as an investmentproperty is taken to reserves in accordance with IAS 40. Properties held foruse in the business or in the course of restoration, renovation or held fordevelopment or sale, are not recognised as investment properties and are heldat depreciated historical cost.PROPERTY PLANT AND EQUIPMENTThe cost of property, plant and equipment comprises its purchase price and anycosts directly attributable to bringing the asset to the location and conditionnecessary for it to be capable of operating in accordance with agreedspecifications. Freehold land is not depreciated. Other property, plant andequipment is stated at historical cost less accumulated depreciation.Mine developmentThe purpose of mine development is to establish secure working conditions andinfrastructure to allow the safe and efficient extraction of recoverablereserves. Depreciation on mine development is not charged until full productioncommences or the assets are put to use. On commencement of full production,depreciation is charged over the life of the mine on a straight-line basis.Surface mine developmentExpenditure incurred prior to the commencement of working surface mine sites,net of any residual value andtaking into account the likelihood of the site being mined, is capitalisedwithin property, plant and equipment and charged to the income statement overthe life of the recoverable reserves of the scheme.Other assetsThe cost, less estimated residual value, of other property, plant and equipmentis written off on a straight-line basis over the asset's expected useful life.Residual values and useful lives are reviewed, and adjusted if appropriate, ateach balance sheet date. Changes to the estimated residual values or usefullives are accounted for prospectively. Heavy surface mining and other plant andequipment is depreciated at varying rates depending upon its expected usage.The depreciation rates generally applied are:Mining equipment The shorter of its useful life or the life of the mineMining reserves Over the expected life of the reservesMotor vehicles 25-33 per centOffice equipment 10-33 per centEMPLOYEE BENEFITSShare based remunerationThe company operates a long-term incentive plan and share option scheme. Thefair value of the conditional awards of shares granted under the long-termincentive plan and the options granted under the share option scheme aredetermined at the date of grant. This fair value is then expensed on astraight-line basis over the vesting period, based on an estimate of the numberof shares that will eventually vest. At each reporting date, the fair value ofthe non-market based performance criteria of the long-term incentive plan isrecalculated and the expense is revised. In respect of the share option scheme,the fair value of options granted is calculated using a binomial model.PensionsThe company operates a defined contribution pension scheme. The contributionspayable to the scheme are expensed in the period to which they relate.FOREIGN CURRENCIESMonetary assets and liabilities are translated at year end exchange rates andthe resulting exchange rate differences are included in the consolidated incomestatement within the results of operating activities if arising from tradingactivities and within finance cost/income if arising from financing.For consolidation purposes, income and expense items are included in theconsolidated income statement at average rates, and assets and liabilities aretranslated at year end exchange rates. Translation differences arising onconsolidation are taken directly to reserves. Where foreign operations aredisposed of, the cumulative exchange differences of that foreign operation arerecognised in the consolidated income statement when the gain or loss ondisposal is recognised.FINANCIAL INSTRUMENTSBank loans and overdraftsBank loans and overdrafts are included as financial liabilities on the groupbalance sheet at the amounts drawn on the particular facilities. Interestpayable on those facilities is expensed as a finance cost in the period towhich it relates.Finance lease liabilitiesFinance lease liabilities arise for those investment properties held under aleasehold interest and accounted for as investment property. The liability isinitially calculated as the present value of the minimum lease payments,reducing in subsequent reporting periods by the apportionment of payments tothe lessor.Interest rate derivativesThe group uses derivative financial instruments to manage the interest raterisk associated with the financing of the group's business. No trading in suchfinancial instruments is undertaken.At each reporting date, these interest rate derivatives are recognised at fairvalue, being the estimated amount that the group would receive or pay toterminate the agreement at the balance sheet date, taking into account currentinterest rates and the current credit rating of the counterparties. The gain orloss at each fair value remeasurement is recognised immediately in the incomestatement.Held for trading investmentsFinancial assets/liabilities held for trading or short-term gain are measuredat fair value and movements in fair value are charged/credited to the incomestatement in the period.Trade receivablesTrade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated recoverable amounts.Trade payablesTrade payables are not interest bearing and are stated at their nominal value.JOINT VENTURESInvestments in joint ventures, being those entities over whose activities thegroup has joint control, as established by contractual agreement, are includedat cost together with the group's share of post acquisition reserves, on anequity basis.INVENTORIESInventories are stated at the lower of cost and net realisable value. Costincludes materials, direct labour and overheads relevant to the stage ofproduction. Net realisable value is based on estimated selling price less allfurther costs to completion and all relevant marketing, selling anddistribution costs.DEFERRED TAXDeferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the tax computations, and isaccounted for using the balance sheet liability method. Deferred taxliabilities are generally recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporarydifferences can be utilised. In respect of the deferred tax on the revaluationsurplus, this is calculated on the basis of the chargeable gains that wouldcrystallise on the sale of the investment portfolio as at the reporting date.The calculation takes account of indexation on the historical cost of theproperties and any available capital losses.Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the group income statement, except when it relates toitems charged or credited directly to equity, in which case it is also dealtwith in equity.DIVIDENDSDividends payable on the ordinary share capital are recognised as a liabilityin the period in which they are approved.CASH AND CASH EQUIVALENTSCash comprises cash in hand and on-demand deposits. Cash equivalents comprisesshort-term, highly liquid investments that are readily convertible to knownamounts of cash and which are subject to an insignificant risk of changes invalue. 1 SEGMENTAL ANALYSIS 31 December 31 December 2005 2004 ‚£ ‚£ Revenue Mining 12,278 10,317 Property 1,086 1,054 Other 121 177 _______ _______ 13,485 11,548 _______ _______ Operating profit before adjustments Mining 1,008 1,852 Property 436 490 Other 4 83 _______ _______ 1,448 2,425 _______ _______ Operating profit Mining 1,066 1, 784 Property 3,417 2,518 Other 181 83 _______ _______ 4,664 4,385 _______ _______ 2 EXCEPTIONAL ITEMS 31 December 31 December 2005 2004 ‚£ ‚£ Gain on sale of investment 412 - properties Costs in relation to suspended fund (288) - raising _______ _______ 124 - _______ _______ 3 TAXATION 31 December 31 December 2005 2004 ‚£ ‚£ Based on the results for the year: Corporation tax at 30% (2004: 30%) 154 272 Adjustment in respect of prior years (1) 26 - UK _______ _______ 153 298 Deferred tax 534 490 _______ _______ 687 788 _______ _______ * EARNING PER SHARE Both the basic and diluted earnings per share calculations are based on aprofit of ‚£3,256,000 (2004: ‚£2,786,000). The basic earnings per share have beencalculated on 10,451,506 (2004: 10,451,506) ordinary shares being in issueduring the period. The diluted earnings per share have been calculated on thenumber of shares in issue of 10,451,506 (2004: 10,451,506) plus the dilutivepotential ordinary shares arising from share options of 334,746 (2004: 280,664)totalling 10,786,252 (2004: 10,732,170). * FINANCIAL INFORMATION The above financial information does not constitute statutory accounts withinthe meaning of section 240 of the Companies Act 1985. The financial informationhas been extracted from the groups annual report and accounts for the yearended 31 December 2005 on which the auditors have not yet expressed an opinion,but for which an unqualified report is expected. Statutory accounts for theyear ended 31 December 2004 which were prepared under UK generally acceptedaccounting principles (UKGAAP), have been delivered to the Registrar ofCompanies; the report of the auditors on those accounts was unqualified and didnot contain a statement under Section 237(2) or (3) of the Companies Act 1985. * Board approval These preliminary results were approved by the Board of Bisichi Mining PLC on27 April 2006.ENDBISICHI MINING