Cerillion Regulatory News (CER)

29 Jun 2005 10:00

Celtic Resources Holdings PLC29 June 2005 29th June 2005 Celtic Resources Holdings Plc ("Celtic", "Celtic Resources",or "the Company") Full year results for the year ending 31 December 2004 - Pre-tax profits of US$5.7 Million for 2004- Entry of Barrick Gold Corporation as largest shareholder (8.9%) andparticipant in IG Alrosa deal- Major progress towards completion of US$280 million deal with IG Alrosa andfull ownership of Nezhdaninskoye mine and 5.9 M oz Kyuchus deposit- Successful startup of Suzdal Sulphide Project incorporating BIOX(R) Technology Financial Highlights- Like-for-like pre-tax profit up from US$2.7 million to US$4.7 million for thecorresponding period- Pre tax profit for the year of US$5.7 million including US$1 million from thesale of hydrocarbon assets to Victoria Oil & Gas Plc- Dividend of 11.9 pence per share in Eureka Mining Plc shares paid in April2004- Shareholders' funds increased from US$66.5 million to US$94.8 million Russia- The entry of Barrick Gold Corporation into the Company as the largestshareholder and a strategic relationship with Barrick for the development ofgold properties in Russia and Kazakhstan, thus providing a strong endorsement ofthe Company's work in the FSU to date and of our potential- Major progress achieved towards final completion of our negotiations with IGAlrosa to acquire full ownership of the Nezhdaninskoye gold mine and the 5.9 Moz Kyuchus gold deposit in Yakutia- Completion of the deal expected soon and EGM seeking shareholder approval tofollow Kazakhstan- Suzdal sulphide treatment plant completed and first gold poured in May 2005- Gold production in 2004 was 31,809 ounces from heap leaching oxide ores atSuzdal and Zherek Victoria Oil & Gas Plc- The successful sale of our hydrocarbon assets to Victoria Oil & Gas Plc inexchange for shares and repayment of debt was completed in July 2004 The Company's annual report and accounts are being sent to shareholders and willbe available on our website shortly. For more information please contact: Kevin Foo / Kate Dexter Smith Leesa Peters / Laurence ReadCeltic Resources Holdings Plc Conduit PRTel: + 44 (0) 20 7921 8800 Tel: +44 (0)20 7618 8760Investors@celticresources.com Tel: +44 (0) 781 215 9885 leesa@conduitpr.com www.celticresources.com CHAIRMAN'S STATEMENTFOR THE YEAR ENDED 31ST DECEMBER 2004 Dear Shareholders I am pleased to report a satisfactory year of progress for the Company. With thesale of our hydrocarbon assets to Victoria Oil & Gas Plc, we achieved ourcorporate objective of becoming a pure gold miner operating in the Former SovietUnion (FSU). Major Developments The major events of the period were: •Our fourth consecutive year of profits, with pre-tax profits of US$5.7m •Gold production from Kazakhstan operations of 31,809 ounces •The entry of Barrick Gold Corporation into the Company as our largest shareholder and a strategic relationship for the development of gold properties in Russia and Kazakhstan, thus providing a strong endorsement of the Company's work in the FSU to date and of our potential •Successful completion and commissioning of the Suzdal Sulphide Project incorporating BIOX(R) technology •Major progress achieved towards final completion of our negotiations with IG Alrosa to acquire full ownership of the Nezhdaninskoye gold mine and another important gold asset in Yakutia •Growth in the value of our investments in Eureka Mining Plc and Victoria Oil & Gas Plc Group Objective The Group objective set last year remains: "To be one of the largest gold minersin the FSU, with annual gold production of over 500,000 ounces, from a resourceof over 30m ounces of gold, with production costs in the lowest world quartile." Increased Ownership of Nezhdaninskoye and Acquisition of Kyuchus Shareholders will be aware of the protracted negotiations with IG Alrosaconcerning the acquisition of 100% of the Nezhdaninskoye gold mine andadditional gold assets in Yakutia. These have been complex and have involvedextensive technical, legal and financial due diligence. The entry of BarrickGold Corporation into our Company late last year as our largest shareholder alsomeant that further dialogue with IG Alrosa was needed. All three parties haveactively worked to develop a new deal. I can report that the parties have signed non-binding heads of agreement which,when carried to completion, will have the following key components:- Celtic acquiring full ownership of the Nezhdaninskoye mine- The Company will also acquire full ownership of the Kyuchus gold prospect inNorthern Yakutia. This is a very attractive development project with over 5.9mounces of gold in the Russian C1 and C2 categories- The parties are entering into certain agreements aimed at providing financefor the rapid development of these assets and having certain rights of firstrefusal regarding future acquisitions in Russia and in Kazakhstan. Barrick willalso have the option to take a 50% interest in and management control ofNezhdaninskoye and Kyuchus in exchange for the provision of capital to theseprojects- The consideration for the Nezhdaninskoye and Kyuchus transactions is to be acombination of the issue of Celtic ordinary shares and cash. The cash componentwill be provided by the issue to Barrick of Celtic shares using the US$75mpre-emptive financing right previously announced which is to be augmented by afurther placing of shares at US$7.56 per share. The total consideration of thedeal, including debt repayments from SVMC, is approximately US$280m- When the transaction is closed, IG Alrosa and Barrick will hold approximateinterests of 26% and 22% respectively of Celtic's increased share capital.I should strongly emphasise that these arrangements are subject to contract,Regulatory Approval and Shareholder Agreement. It is not yet a closed deal. Atpresent these detailed contracts are under final negotiation. All parties areactively working to bring the deal to a close at the earliest opportunity. Oil and Gas Assets Last year saw Celtic complete its corporate reorganisation to become a goldproducer and developer focused on the FSU. In August, we sold our Kazakhstan andUK hydrocarbon assets to Victoria Oil & Gas Plc, a new AIM quoted companychaired by Celtic's Managing Director, Kevin Foo. The consideration was 6.483mVictoria Oil & Gas shares and the repayment of a £0.3m loan to Celtic. We retainmost of these shares today and the holding of now 7.8% has risen in value from£2.18m to £2.82m since the transaction. Eureka Mining Plc Celtic, having distributed half of its interest to shareholders as a dividend,retains a 21% holding in Eureka Mining Plc which is expected soon to beproducing molybdenum concentrates from its Shorskoye project in Kazakhstan.Eureka also recently acquired a portfolio of exciting copper projects inSouthern Russia, containing a total resource of 609m tonnes of ore with anaverage grade of 0.55% copper and 0.18g/t gold. Financial Results We continue to generate profits. The pre-tax level reported US$5.7m for 2004,compared to US$14.4m in 2003, a figure which was boosted by US$11.7m from thesale of exploration assets to Eureka. At the end of the year, the Group heldUS$30.5m in cash which had been increased by Barrick Gold Corporation'ssubscription for new shares. Shareholders' funds rose from US$66.5m to US$94.8mat the year end. In the past, accounting principles have allowed us to treat SVMC as a subsidiaryand to consolidate its individual assets and liabilities. This year it istreated as an associate and shown as a single amount in financial assets. Thischange is the primary reason for most of the significant differences in theindividual assets and liabilities in the Consolidated Balance Sheet. Agreement with Barrick Gold Corporation In December, we were very pleased to announce that we have entered into astrategic relationship with Barrick Gold Corporation to develop Celtic's currentand future gold assets in Yakutia and Kazakhstan. Canadian-based Barrick is oneof the world's leading gold producers with unsurpassed experience in developingand managing very large gold mines. This relationship has progressed verypositively and is expected to help Celtic reach its goal of becoming a majorgold producer. Importantly, the decision by Barrick to invest in Celtic and toparticipate actively in discussions with us and IG Alrosa to expedite aconclusion to the Nezhdaninskoye negotiations is, I believe, an endorsement ofCeltic.Celtic shareholders approved the issue of new shares and warrants to Barrickwhich raised US$28.9m in early January 2005. Barrick now holds 3.7m shares andis currently Celtic's largest shareholder with 8.9%. Celtic has also grantedBarrick a pre-emptive right to subscribe for further new ordinary shares up toan aggregate total of US$75m in any placing or other equity fund raising Celticundertakes. In addition, the exercise of warrants in Celtic that Barrick holdswould bring in some US$20.9m. Litigation As we are now seeking to settle amicably the dispute over the ownership of 60%of our 50% of the shares of SVMC, the various cases we initiated have beenpostponed by mutual agreement. We are the respondent in an arbitration brought by Arduina Holdings BV in theLondon Court of International Arbitration. The claim arises from an unsuccessfulassociation with Arduina in November 2002. The Directors have been advised thatthis claim has no merit. We are vigorously defending Celtic against Arduina'sallegations and assert that we have no liability in the proceedings because allagreements between the parties are null and void and of no legal effect. Thehearing is scheduled to start on 11 July 2005. The FutureCompleting the arrangements with IG Alrosa and Barrick remains our highestpriority. At Suzdal, the new BIOX(R) plant is fully commissioned and annual goldproduction should exceed 100,000 ounces in 2006 while Zherek could reach itsfull potential of 50,000oz/yr by 2007. The cash flow from these operations, the new developments at Nezhdaninskoye andKyuchus, together with the support of its major shareholders will enable Celticto apply its skills to acquiring other gold projects in the FSU. Our long termtarget is to become a top 10 world gold producer. I would like to thank sincerely all of our employees for their hard work andcommitment over the year. Celtic will soon be in a very strong position to growinto a resource rich low cost gold miner, which will result in increasedshareholder value. Peter HannenChairman 28 June 2005 MANAGING DIRECTOR'S REVIEW OF OPERATIONSFOR THE YEAR ENDED 31ST DECEMBER 2004 Celtic is now a gold miner focused on projects in the Former Soviet Union (FSU).The Group's major asset is its 50% ownership of SVMC, operator of theNezhdaninskoye gold mine in Yakutia, Russia. Negotiations with IG Alrosacontinued throughout 2004 and in past months to conclude the agreed acquisitionof the balance of SVMC and another asset and progress is reported in theChairman's letter. In Kazakhstan, the Suzdal mine produced 11,598 ounces of gold from oxide oresand we successfully built and commissioned the sulphide project expansion, whichincorporates the BIOX(R) bacterial leaching process for refractory gold ores.This project was completed substantially with in-house and local Kazakhstanresources, a notable achievement. At the 75%-owned Zherek open pit, heap leachmine, gold production rose to 20,211 ounces. Kazakhstan Gold Mines We have successfully completed development of the Suzdal Sulphide ProjectExpansion and commenced underground mining operations at Suzdal. First gold fromthe sulphide plant was poured in May 2005. At the nearby Zherek mine goldproduction increased last year from 11,270 ounces to 20,211 ounces and isforecast to continue rising. The Company, in co-operation with its majorshareholder Barrick, will review further attractive gold productionopportunities in this country. Suzdal Gold Mine In 2004, oxide ore was mined from Pits 2-9, Pit 2 and from the transition zonein Pits 1&3. The leaching of stacked ore was suspended as planned during thewinter months because of sub-zero temperatures, as leaching of low grade ore isnot economical during harsh winter conditions. Total gold production at Suzdalfor the year was 11,598 ounces at a cash cost of approximately US$216/oz - thereduced production and increased costs are due to the exhaustion of the oxideores and the conversion of the mine to exploit the sulphide orebodies directlybelow the oxide zones. SULPHIDE PROJECT EXPANSION The sulphide ores are refractory and conventional cyanidation techniques yieldlow gold recoveries. Evaluation of alternative treatment methods and test workshowed that the sulphide ore is amenable to conventional flotation techniqueswhere the sulphide minerals containing the gold are concentrated. Theseconcentrates can then be oxidised using bacterial oxidation and gold recoveredthrough a CIL and elution plant. The decision to convert to the mining of the sulphide orebodies with goldextraction incorporating the BIOX(R) process was taken in late 2003. Theconstruction of the project included two main sections both housed in the samebuilding complex. The first part was the crushing, grinding, flotation andfiltration sections which were built from existing equipment that was sourcedlocally in the FSU and then refurbished and installed. The second part was theconstruction of new "state of the art" BIOX(R), CIL and gold elution facilities,including two fully lined tailings management facilities, and a cyanidedetoxification plant. The commissioning of the crushing circuit commenced in November 2004 with thegrinding and flotation following in December 2004. A concentrate filter wassourced and installed in December 2004 to enable production and sale ofconcentrate to proceed, while construction of the BIOX(R) and CIL facilitieswere finalised, and the inoculum (bacteria) volume was built up to full-scaleproduction volumes. The full commissioning of the production treatmentfacilities was completed in May 2005 and commercial production has begun. The total project cost including mine development, plant and equipment,infrastructure development, tailings facilities, working capital, owner's costsand camp expansions will be approximately US$43m. Of this, the plant and EPCMcost of US$35m is some US$6m above budget due to escalating stainless steelcosts and delays in imported equipment and consequential project delays of somefive months. Nevertheless, this cost reflects the major savings to be made bymaximising the use of local Kazakhstan equipment, engineering institutes andpeople. To build a similar project using an "all western" approach has beenestimated to cost more than US$90m. CURRENT AND FUTURE OPERATIONS The development of underground mining at Suzdal commenced in August 2004. Todate this has included over 256m of horizontal ore development on threedifferent mining levels as well as excavation of exploration crosscuts andraises on those levels. This work, albeit in a limited area, has been veryencouraging in confirming the resource estimates with respect to ore widths andextents along the strike, and grades encountered. In fact, sampled gradesintersected so far exceed the resources estimates with some in-situ values beingwell in excess of 50g/t Au. Nevertheless, the Company plans to completeadditional underground drilling to confirm orebody dimensions and grades and toupgrade resources to reserves. The Sulphide Treatment Plant is designed toproduce in excess of 100,000 ounces of gold per annum from 300,000 tonnes ofsulphide ore at a nominal cash cost of US$170 per ounce. Table 1: Suzdal production figures for years 2000 - 2004 2000 2001 2002 2003 2004 Forecast 2005 -------- -------- -------- -------- ------- -----------Oxide ore mined Tonnes 124,000 248,000 233,000 187,000 127,865 20,400 Grade g/t Au 6.0 6.2 5.7 3.5 2.7 0.8 Stacked on heap Tonnes 169,000 307,000 355,000 213,000 163,553 50,000 Grade g/t Au 6.14 5.46 4.22 3.39 2.62 1.04 Sulphide ore mined Tonnes - - - - 252,782 61,314 Grade g/t Au - - - - 6.2 16.65 Sulphide ore treated Tonnes - - - - - 157,351 Grade g/t Au - - - - - 13.93 Gold production Ounces 24,244 42,341 36,875 21,167 11,598 53,629 Total cash cost US$/oz sold 225 155 163 195 216 241 Zherek Gold Mine From the start of mining to the end of 2004 some 614,000 tonnes of oxide ore atan average grade of 2.69g/t were stacked on heap leach pads at Zherek and atotal of 31,481 ounces of gold was produced at an approximate average cash costof US$296/ounce. During 2004, total gold output at Zherek increased to 20,211 ounces of gold andwas produced at an average cash cost of US$254/ounce. The increased productionwas due to leaching higher grade ores. CURRENT AND FUTURE OPERATIONS Gold production from Zherek should rise to 23,000 ounces this year and increasefurther in 2006. During this period we will review the feasibility of convertingZherek to a sulphide operation with a concentrate being trucked to the newSuzdal processing plant some 28km away. There is potential to increase theexisting Russian category resources especially in the sulphide zone and we planfurther drilling to delineate the orebodies. Table 2: Zherek production figures for years 2003 - 2004 Forecast 2003 2004 2005 -------- -------- --------- Ore mined Tonnes 293,411 320,957 360,000 Grade g/t Au 2.00 3.37 2.55 Stacked on heap Tonnes 352,891 339,684 360,000 Ore grade g/t Au 1.91 3.30 2.55 Gold production Ounces 11,270 20,211 23,000 Total cash cost US$/oz sold 370 254 276 Russian Gold Mines NEZHDANINSKOYE GOLD MINE SVMC continued to develop orebodies underground and carry out plant andmetallurgical tests. Production continued from remnant low grade vein blocks inthe upper part of the mine. During the year 82,993 tonnes of ore were processedat an average grade of 4.58g/t and a total of 9,154 ounces of gold were producedin dore and concentrates. To open up new reserves SVMC has deepened the mine below the 650m Level (AMSL)to the 600m Level via a ramp system in the footwall of the 7-15 veins;concurrently the 7-15 veins were developed as sub levels. The ramp targets thedown dip reserves of a number of high grade narrow vein systems as well asproviding access and haulage to Zone 1 reserves below the 700m Level. Development to the north of the ramp system on 650m Level gained access to thereserves on vein 8 below the 700m Level where stope preparation has begun. SVMC,supported by Celtic and Barrick specialists, is preparing a mine startup plan inanticipation of completion of the IG Alrosa - Celtic - Barrick deal. Kyuchus Gold Deposit Subject to completion of contracts between Celtic, IG Alrosa and Barrick, anadditional asset that Celtic will acquire is the Kyuchus Gold Deposit. Kyuchus is an advanced gold project in northern Yakutia with substantial RussianCategory reserves and resources. It is located some 200km from the mouth of theYana River where it enters the Arctic Ocean and 40km from the settlement of UstKuyga. The Kyuchus deposit is located within Mesozoic sediments and in a majoranticline structure which forms part of an arcuate mobile belt which developedduring continental collision towards the end of the Jurassic period. Themineralization occurs in a number of steep dipping "vein zones", each comprisedof a series of individual quartz veins. These vein zones can reach thicknessesof up to 20m in places, although the average thickness is reported to be justover 4m. A significant amount of exploration work has been completed at Kyuchus and, asis typical for steep dipping tabular gold vein deposits in Russia, this hascomprised both drilling and underground development and has enabled theproduction of C1 and C2 classified estimates of tonnes and grade and thedevelopment of a good understanding of the orebody geometry and mineralisationstyle. The above geological work has been supplemented by a certain amount of analysisin other technical areas, which, though not yet to feasibility study standard,has enabled the production of underground and open pit conceptual mining andprocessing scenarios and infrastructure requirements. Kyuchus has been independently considered by SRK to be a gold prospect with realpotential. A pre-feasibility study, which is assessing both underground and openpit mining plus a combination of the two, is currently underway. Celticenvisages a medium sized open pit operation followed by an underground mine toextract up to 600,000 tonnes of ore per year. Group Gold Resources Inventory The Group resources inventory as of June 2005 is shown in Table 3. On a 100%ownership basis of Nezhdaninskoye and Zherek, Celtic holds over 17m ounces ofgold in the Russian B, C1 and C2 categories. These are equivalent to JORCMeasured, Indicated and Inferred categories respectively. The Australian Joint Ore Reserve Committee (JORC) is the most commonly usedwestern standard for ore reserve definition. We have not included any estimatesfor Resources in the Russian "P" or Prognostic category, which is classified asmineral potential. For instance, at Nezhdaninskoye there are estimated to beover 12.5m ounces of P1 category ore which with further development should beupgraded to C2 and C1 classifications. In addition, many orebodies are known to extend laterally and at depth. AtKyuchus, the Russian State Committee for ore resources verify P1 categoryresources of 2.0m ounces. Table 3 Group Resources Inventory Category Tonnes Gold grade Gold ---------- -------- ------------ ------ (M) (g/t) (Moz) Russia-------- Nezhdaninskoye B+C1 45.7 4.8 7.1 C2 49.0 5.3 8.3 Total Nezhdaninskoye B+C1+C2 94.7 5.1 15.4 Kazakhstan------------Suzdal Oxide C1+C2 0.8 1.1 0.03Suzdal Sulphides C1+C2 4.2 9.4 1.27Total Suzdal C1+C2 5.0 8.5 1.3Zherek Oxide C1+C2 1.4 2.5 0.1Zherek Sulphides C2 2.8 5.5 0.5Total Zherek C1+C2 4.2 4.6 0.6Total Group 103.7 5.4 17.3Total Attributable* 55.3 5.3 9.4* Figures adjusted to 50% ownership of Nezhdaninskoye and 75% of Zherek SRK Consulting Russian Resource/Reserve Estimates During the extensive due diligence conducted for the proposed transaction withIG Alrosa, considerable technical reviews and audits of assets were conducted bySRK Consultants. SRK completed work to provide audited Mineral Resource Statements for bothproperties as classified using the terms and guidelines of the JORC Code, andthis is summarised in Table 4. In terms of Russian classified resources, which in our experience are very closeto JORC standards, the total C1+C2 resource figure for Nezhdaninskoye andKyuchus is 120m tonnes at an average grade of 5.45 g/t containing 21.3m ouncesof gold. At Nezhdaninskoye, the orebodies contain silver at an average of 4-6times the gold grade. Table 4: SRK Audited Mineral Resource Statement to JORC Code Mine Resource Category Tonnes Gold Grade Gold (M) (g/t) (Moz) ------------ ------------ ---------- ---------- ---------- Kyuchus Indicated 6.6 10.1 2.1 Sub-Total 6.6 10.1 2.1 Inferred 7.3 9.6 2.2 Nezhdaninskoye Measured 3.1 6.7 0.7 Indicated 34.6 5.2 5.8 Sub-Total 37.7 5.3 6.5 Inferred 40.2 5.7 7.4 Combined Measured 3.1 6.7 0.7 Indicated 41.2 6.1 7.9 Sub-Total 44.3 6.0 8.6 Inferred 47.5 6.3 9.6 Grand Total 91.8 6.3 18.2 In ConclusionFinally, I should like to thank all employees for their extraordinary effortsthis year under, at times, difficult conditions. The building and operation ofthe Suzdal Sulphide Plant, using substantially local resources, was a newbenchmark for Celtic and the determination of our Russian based teams inachieving substantial progress despite many external constraints, was admirable.We look to the future with a determination to meet all challenges in achievingour objective. Kevin FooManaging Director28 June 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 $000 $000 Turnover 13,584 12,105 Cost of sales (7,145) (6,787) -------- --------Gross profit 6,439 5,318 Administrative expenses (4,266) (2,909) Foreign currency exchange gains 2,809 586 -------- --------Operating profit 4,982 2,995 Profit on disposal of investments, including shares ofsubsidiaries 962 11,659 Loan interest payable (374) (348) Interest receivable 102 110 -------- --------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,672 14,416 Taxation (2,295) (1,458) -------- --------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,377 12,958 Minority interest (581) - -------- --------GROUP PROFIT FOR THE YEAR 2,796 12,958 Dividend paid (7,626) - -------- -------- RETAINED (LOSS)/PROFIT CARRIED FORWARD (4,830) 12,958 ======== ======== All income and expenditure arises from continuingoperations US Cents US Cents Earnings per share 7.66 41.86 Fully diluted earnings per share 7.38 38.69 CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2004 2004 2003 $000 $000FIXED ASSETSIntangible assets 20,039 55,387Tangible assets 28,106 11,719Financial assets 47,178 7,830 -------- ------- 95,323 74,936 ======== ------- CURRENT ASSETSStock 7,071 3,248Financial assets - 8,017Debtors 5,465 6,871Cash at bank and in hand 30,494 7,713 -------- ------- 43,030 25,849 Creditors: (amounts falling due within one year) (13,664) (10,479) -------- -------Net current assets 29,366 15,370 Creditors: (amounts due after more than one year) (28,265) (20,251) Provision for liabilities and charges (1,120) (398) -------- -------Net Assets 95,304 69,657 ======== ======= Financed by: CAPITAL AND RESERVESCalled up share capital - equity 11,310 9,249- non equity 3,184 3,184Capital conversion reserve 61 61Share premium - equity 86,376 55,982Profit and loss account - equity 7,407 2,696Employee Benefit Trust Reserve- equity (13,507) (4,623) -------- -------Shareholders' funds 94,831 66,549 Minority interest - equity 473 3,108 -------- ------- 95,304 69,657 ======== ======= CONSOLIDATED CASHFLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004 Notes 2004 2003 $000 $000NET CASH OUTFLOW FROM OPERATING ACTIVITIES (a) (11,059) (7,347) -------- ------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 102 110Interest paid (2,336) (1,120) -------- ------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE (2,234) (1,010) -------- ------- TAXATION PAID (1,573) (1,060) -------- ------- CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire intangible fixed assets (9,701) (17,723)Proceeds on disposal of tangible assets - 71Payments to acquire tangible fixed assets (19,236) (6,952)Purchase of subsidiary undertakings - (274)Proceeds of sale of subsidiary undertakings - 300 -------- ------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE ANDFINANCIAL (28,937) (24,578)INVESTMENT -------- ------- NET CASH OUTFLOW BEFORE FINANCING (43,803) (33,995) -------- ------- FINANCING Issue of ordinary share capital 42,997 20,782Costs associated with shares issued during the year - (501) -------- ------- 42,997 20,281Net increase in loans 23,703 18,996 -------- -------NET CASH INFLOW FROM FINANCING 66,700 39,277 -------- ------- INCREASE IN CASH (c) 22,897 5,282 ======== ======= NOTES TO CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004(a) Reconciliation of operating profit to net cash outflow 2004 2003 from operating activities $000 $000 Operating profit 4,982 2,995 Expenses satisfied with EBT shares 955 - Depreciation and fixed asset write down 1,617 1,447 Increase in stocks (5,171) (1,347) Increase in debtors (6,199) (2,742) Increase/(decrease) in creditors 4,855 (1,964) Settled on Employee Benefit Trust (10,933) (4,623) Exchange movements (1,165) (1,113) -------- ------- (11,059) (7,347) ======== ======= Disposal and(b) Analysis of net funds 31 December SVMC Cash 31 December At 2003 reclassification flow At 2004 $000 $000 $000 $000 Cash in hand and at 7,713 (116) 22,897 30,494 bank --------- ---------- ------- --------- Loans falling due (913) - (6,439) (7,352) within one year Loans falling due in (18,083) 11,049 (17,264) (24,298) more than one year --------- ---------- ------- --------- (18,996) 11,049 (23,703) (31,650) --------- ---------- ------- --------- (11,283) (10,933) (806) (1,156) ========= ========== ======= ========= (c) Reconciliation of net cash flow to movement in net 2004 2003 funds $000 $000 Increase in cash in the period 22,897 5,282 Cash inflow from increase in debt (23,703) (18,996) Cash outflow on sale of subsidiaries (116) (12) Inflow from SVMC debt elimination 11,049 Net (deficit)/surplus at start of year (11,283) 2,443 -------- ------- Net funds/(defecit) at end of year (1,156) (11,283) ======== ======= This information is provided by RNS The company news service from the London Stock Exchange