Cloudified Holdings Limited Regulatory News (CHL)

21 Nov 2005 15:33

Churchill Mining plc21 November 2005 CHURCHILL MINING PLC Annual Report For the Period 2nd November 2004 to 30th June 2005 Chairman's Statement Dear Shareholder, It is with great pleasure that I present the 2005 Annual Report and FinancialStatements. This past year has been amongst the most exciting ever experienced in the globalresources industry with both the mining and energy sectors booming on the backof improved investor sentiment, record commodity prices and enhanced sectorprofitability. China's rampant growth which is underpinned by an emerging middle class has madeit a large consumer of raw commodities and it is because of this situation thatresource companies such as Churchill Mining Plc are presented with a uniqueopportunity to explore new projects in a climate of accelerating demand. Whilst still a fledgling company, having only listed in April 2005, the team atChurchill has been working hard at growing shareholder value on two fronts:firstly, by exploring its South Woodie Woodie manganese project in WesternAustralia and secondly, by pursuing other niche mining opportunities in Asia. Your board continues to be encouraged by its South Woodie Woodie manganeseproject on both a macro and micro level. On a macro level the price for qualitylump manganese ore remains robust and should stay this way given manganese is anon-substitutable element used in the making of steel. On a micro level, South Woodie Woodie early structural modeling and field worksampling has identified many new target areas to follow up, some of which situnder surface cover. Part of Churchill's program moving forward will be to use acombination of specialized aeromagnetic and ground gravity explorationtechniques to further refine these targets for drilling. Churchill has also made solid progress at South Woodie Woodie in the realms ofresource title security and Native Title clearance. Exploration Licenses for thecompany's project area are now fully granted and at the time of writing,Churchill and the area's Traditional Owners have agreed a schedule under whichheritage clearance for the first stage of our planned reverse circulationdrilling exploration program at Enacheddong Creek will be progressed. TheEnacheddong Creek prospect is an area where surface manganese grading up to 51%Manganese has been mapped and sampled over a strike distance of approximately1.5km. Given China's spiraling need for raw commodities (along with a fast-growingIndian economy) Churchill Mining has also been hunting for other nicheinvestment opportunities in Asia. The company has already reviewed potentialopportunities and we feel confident that another asset will be secured in theshort-to-medium term. For explorers and miners these are exciting times. I am very much lookingforward to the year ahead. In conclusion, on behalf of the Directors I would like to thank you for yourongoing support of the Company's activities. I would also like to thank ourjoint Managing Directors, James Hamilton and Paul Mazak, for their untiringefforts. David QuinlivanChairmanChurchill Mining plc Operating Review The South Woodie Woodie Manganese Project BackgroundThe company's principal asset is three large exploration leases in the EastPilbara region of Western Australia covering approximately 490 squarekilometres. Owned via Churchill Mining's wholly-owned subsidiary, Planet MiningPty Ltd, the project sits approximately 400km southeast of Port Hedland in thehighly prospective Pilbara manganese province. The South Woodie Woodie manganese project was discovered in 1977 by theAustralian and New Zealand Exploration Company (ANZECO) during an infra-redaerial survey. Follow-up reconnaissance mapping and sampling identified twoareas of outcropping manganese mineralisation, the biggest of which is namedEnacheddong Creek. At Enacheddong Creek, ANZECO identified near-surface mineralisation extendingover a strike length of approximately 700 metres. Surface sampling by ANZECOalong three lines, each 100 metres long and 80 metres apart, returned averagesof 34.2% Manganese, 40.3% Manganese and 41.7% Manganese. Six other shorter linesbetween 5 to 20 metres long returned a weighted average of 35.5% Manganese, withthe best sample returning 51.1% Manganese. Churchill Mining's primary objective since listing in April 2005 has been torevisit this historical work at South Woodie Woodie and to enhance it via theintroduction of modern and systemised exploration techniques. Enacheddong CreekIn May 2005 Churchill Mining organised a field visit to Enacheddong Creek. Thecompany's consulting geologists Ravensgate Pty Ltd ("Ravensgate") took 125 soiland rock chip samples. The results were very encouraging for a number of important reasons: a) The anomaly returned high-grade results at surface with rock-chips grading up to 51.5% Manganese, with low concentrations of iron, phosphorus and silica. Of the 74 samples collected 77% (57samples) had a manganese percentage of greater than 30%. b) Sampling under soil cover along the southern extension of the main outcropping zone returned manganese results 40 times higher than the soil background level indicating a high probability level of manganese mineralisation extending under thin soil cover. c) The results of soil sampling, coupled with further rock chip sampling to the south, more than doubled the known strike of manganese mineralisation to 1500m. d) A new anomaly of at least 300 metres in length was located approximately 500m to the east of the main Enacheddong Creek discovery. This discovery returned encouraging results including rock chip samples of up to 40.3% Mn. Churchill's geological team has subsequently returned to Enacheddong Creek toplan a drilling program to test the manganese potential of the area at depth.This design has been worked-up in conjunction with obtaining the necessaryground disturbance approvals from the West Australian Department of Industry andResources and Heritage Clearance from the region's Traditional Owners. At time of going to press, the Directors were confident that all approvals wouldbe granted and a suitable rig sourced so that drilling could start in December2005 or by the beginning of calendar 2006 (weather permitting). Regional ReviewEncouraged by both numerous sightings of manganese occurrences throughout theproject area and the lack of previous exploration, from May through to July2005, Churchill commissioned a regional study of the South Woodie Woodie area.The study had two aims, firstly to map these surface formations and secondly toidentify prospective structural/lithological targets. Historically, manganese concentrations in the Pilbara were thought to beprimarily controlled by supergene enrichment in the weathering profile close tosurface through the repeated ingress of manganese-rich groundwater intofavourable sites. However, more recent work in the area by other companies exploring for manganesehas been driven by a new hydrothermal geological model. Churchill has done muchinvestigative work into understanding more about this model whereby hydrothermalfluids permeate along fertile structures/faults and precipitate manganese intofavourable lithological settings. This new model has important implications formanganese exploration. Firstly, manganese deposits may be found at some depthbeneath younger cover and secondly, host rock other than the Carawine Dolomiteare potential sources for ore. The review completed by Ravensgate found that Churchill's ground did have thenecessary structural orientations and favourable lithological host rocksincluding Carawine Dolomite and shale. It also identified 33 new target areas tobe visited and consequently the company prioritised seven anomalies - Baldwin,Callaghan, Disraeli North, Disraeli South, Disraeli West, Enacheddong Creek andWalpole - as "Priority 1" targets. Target RefinementFollowing on from its Regional Review, Churchill conducted another round offield work in August 2005. The company's consulting geologists collected 101rock chip, gravel and soil samples from 15 target areas predominantly in thenorthern portion of its tenement holdings. Of these, three (Disraeli North, Disraeli South and Baldwin) returned bestgrades of 54.6% Manganese, 56% Manganese and 39% Manganese respectively. Otherprospects, including the Wilson prospect, returned anomalous manganese to 23%,while several others yielded low grade, but anomalous manganese. Mostencouraging was the fact that some of the areas lay proximal to outcroppingdolomite that is intersected by regionally prospective fault zones. In September 2005 Churchill commissioned another field visit using structuralexpert Dr Michael Jones from Lithofire Consulting Geologists to review thegeological model and the targeting process. Native Title and HeritageAt listing, Churchill had two tenements still waiting granting via the NativeTitle process. These tenements have now been granted and therefore the wholeland package is accessible to explore. In October 2005 the company participatedin an ethnographic survey of the Enacheddong Creek area with representativesfrom the Yamatji Marla Barna Baba Maaja Aboriginal Corporation. This survey willhelp formalise the allowance of ground disturbing activities such as drilling inthis particular area. Looking AheadThe company remains optimistic about the future of manganese and manganeseprices. Whilst new sources of manganese ore are being commissioned world-wide,few have the grade quality and low percentage of deleterious elements whichmakes product from the East Pilbara so desired. Churchill's approach to South Woodie Woodie in calendar 2006 will focus ondrilling and target generation. The company has made significant strides sincelisting in laying the groundwork for such a program. The company's first target,Enacheddong Creek, is almost ready for drilling and a number of other prospectsare approaching a similar status. The company remains committed to pursuing the new structural-hydrothermalgeological model which has had such a big impact on manganese exploration inrecent years. Consequently Churchill will be embarking on a campaign of airborneand ground geophysics to look "under cover" in 2006. Given the expandingparameters and attractiveness of South Woodie Woodie, Churchill may alsoconsider using a joint venture partner to share some of costs/rewards of thisprogram. Offshore OpportunitiesSince listing, Churchill has continued to review other resource opportunitiesboth in Australia and offshore. The company continues to be encouraged byChinese and Indian growth forecasts and consequently has expanded its targetingrequirements to include energy assets, most particularly coal. The company isoptimistic that it will secure a second asset in calendar 2006. James T HamiltonJoint Managing Director Paul G MazakJoint Managing Director Directors' Reportfor the period ending 30th June 2005 The Directors are pleased to present their report and the consolidated financialstatements of the company and its subsidiary for the period 2nd November 2004 to30th June 2005. Principal ActivitiesThe principal activities of the group are to explore for manganese and otherbase metals and to acquire further projects and investments in the miningsector. Review of ActivitiesA detailed review of the group's activities and future plans is contained withinthe operating review. Results and DividendsLoss on ordinary activities of the group after taxation amounted to £100,329. The Directors do not propose the payment of a dividend. The following have been Directors of the company during the financial year ended30th June 2005:David QuinlivanJames HamiltonPaul MazakMelissa SturgessAndrew Bell (resigned 11th February 2005) Remuneration CommitteeThe remuneration committee consists of the independent non-executive directorswho are David Quinlivan & Melissa Sturgess. The committee's aim is to ensurethat the executive directors are rewarded for their contribution to the groupand are motivated to enhance the return to shareholders. The remuneration committee will be responsible for reviewing the performance ofthe executive directors, setting their remuneration, considering the grant ofoptions under any share option scheme and, in particular the price per share andthe application of performance standards which may apply to any such grant. Thecommittee is chaired by Melissa Sturgess. In addition, they have regard to pay and conditions for other employees in thegroup especially the arrangements for directors of subsidiaries who are notdirectors of the company. The remuneration committee meets on an "as required"basis. Directors' Remuneration Service Contracts - Directors Summary Effective Notice Notice Special terms date of contract period from from Company apply on early Director terminationDirectorsDavid 12/02/2005 6 months 6 months noneQuinlivanJames 12/02/2005 6 months 6 months noneHamiltonPaul 12/02/2005 6 months 6 months noneMazakMelissa 12/02/2005 6 months 6 months noneSturgess Non-Executive Directors Non-executive directors' remuneration consists of an annual fee for theirservices as members of the board and of selected committees. Non-executivedirectors' remuneration is determined by the board Management Contracts - Directors Effective Notice period Notice period Special terms that date of from Director from Company apply on early contract termination James 1/03/2005 6 months 6 months Balance of Hamilton outstanding fees are payable. Paul 1/03/2005 6 months 6 months Balance of Mazak outstanding fees are payable. The company has entered into a management contract with Boston Noble Pty Ltd("Boston") to provide the service of Mr James Hamilton and Mr Paul Mazak tomanage and develop the business of the company. Boston is paid a base fee of GDP110,000 per annum for the provision of these services. Auditable informationThe following information has been audited by the company's auditors, asrequired by Schedule 7A to the Companies Act 1985. Directors' Remuneration Directors Fees Management Consulting Fees 2005 Total £ £ £ExecutiveJames Hamilton 1,576 23,711 25,287Paul Mazak 1,576 23,711 25,287Non-ExecutiveDavid Quinlivan 1,576 - 1,576Melissa Sturgess -Smith 1,576 - 1,576 Directors' Interests in Shares The directors who held office at 30th June 2005 had, at that time, the followingbeneficial interests in the shares of the company: Ordinary shares David Quinlivan (a) 3,779,528James Hamilton 10,488,172Paul Mazak 5,000,000Melissa Sturgess- Smith (b) 1,259,823 (a) These shares are held in the name of Borden Holdings Pty Ltd which is acompany controlled by Mr David Quinlivan.(b) These shares are held in the name of Vail Capital Pty Ltd which is a companycontrolled by Ms Melissa Sturgess. There have been no changes in directors' interests in shares since the year-end. Directors' Share Options Executive Date of grant Number Balance Option exercise Expiry dateShare of options at end of price penceOption yearSchemes DavidQuinlivan 8/4/2005 1,000,000 1,000,000 2p 8/4/2010James 8/4/2005 3,000,000 3,000,000 2p 8/4/2010HamiltonPaul 8/4/2005 3,000,000 3,000,000 2p 8/4/2010MazakMelissaSturgess 8/4/2005 2,000,000 2,000,000 2p 8/4/2010 -------- -------- Total 9,000,000 9,000,000 -------- -------- The market price of the company's shares on 30th June 2005 was 2.12 pence andthe range of closing prices from the 15th April 2005 to 30th June 2005 was 2.12pence to 2.62 pence. Re-election of DirectorsThe Articles of Association require one-third of the directors who are subjectto retirement by rotation to retire and submit themselves for re-election eachyear. The Articles of Association also require any directors appointed by theboard to retire at the next annual general meeting. Any such director may, ifwilling to act, be re-elected. Annual General MeetingDetails of the company's forthcoming annual general meeting are set out in aseparate circular that will be sent to all shareholders with the annual reportand accounts. Corporate GovernanceThe company recognises the importance of, and is committed to, high standards ofcorporate governance. The company's shares are traded on the AlternativeInvestment Market of the London Stock Exchange and the company is not thereforerequired to report on compliance with the combined Combined Code appended to thelisting rules. Compliance with the general principles of good governance has been effected bythe company in the following way: The board comprises the non-executive chairman, the two joint managing directorsand one non-executive director. The board is satisfied that, having consideredthe background and current circumstances of each of the non-executive directors,there are no relationships or other matters which could affect their respectivejudgement in carrying out their duties. Accordingly, the non-executive directorsare considered by the board to be independent of management. David Quinlivan is the senior independent non-executive director. Thenon-executive directors have disclosed to the chairman and the company Secretarytheir significant commitments other than their directorship of the company. Alldirectors have access to the company secretary and may take independentprofessional advice at the company's expense. Each director may also receiveappropriate training as necessary and a record of training undertaken ismaintained by the company secretary. The board receives detailed proposal papers in advance of meetings, togetherwith management presentations to facilitate proper consideration and debate ofmatters brought before it. The board is primarily responsible for the strategicdirection of the group. Major strategic initiatives involving significant costor perceived risk are only undertaken following their full evaluation by theboard. Matters of an operational nature are delegated to the group's management. Progress on key initiatives is reported regularly and minuted, together withroutine matters such as financial performance and current trading. During the year period from incorporation to 30 June 2005 three board meetingswere held. The directors attended as follows: Board of Directors Number of meetings AttendanceDavid Quinlivan 3 1James Hamilton 3 2Paul Mazak 3 3Melissa Sturgess- Smith 3 2 Internal AuditDue to the size of the group it is not economically viable or considerednecessary to employ Internal Auditors. Audit CommitteeChaired by David Quinlivan the committee comprises the independent non-executivedirectors. The audit committee is responsible for ensuring that appropriatefinancial reporting procedures are properly maintained and reported on and formeeting with the group's auditors and reviewing their reports on the accountsand the group's internal controls. It also reviews the performance of the group's auditors to ensure anindependent, objective, professional and cost-effective relationship ismaintained. As well as reviewing the company's published financial results, thecommittee reviews the group's corporate governance processes (including riskanalysis), accounting policies and procedures, reporting to the board on anycontrol issues identified. The audit committee meets twice per year to reviewthe interim and annual financial statements and to consider any other associatedmatters. Supplier Payment PolicyThe group's policy, in relation to all of its suppliers, is to negotiate itsterms of payment when agreeing the terms of the transactions, to ensure thatthose suppliers are made aware of the terms of payment and to abide by thoseterms provided that it is satisfied that the supplier has provided the goods orservices in accordance with the agreed terms and conditions. The group does notfollow any universal code or standard on payment practice but subsidiarycompanies are expected to establish payment terms consistent with localprocedures, custom and practice. Trade Creditors of the group at 30th June 2005represent 23 days purchases. Political ContributionsDuring the year the company made no political contributions. Charitable DonationsDuring the year the group made no charitable donations. Major ShareholdersAs at 30th June 2005, the directors were aware of the following shareholdings inthree per cent or more of the company's shares (excluding those of thedirectors). Number of ordinary shares Per centPershing Keen Nominees Limited 10,364,016 9.35%Willbro Nominees Limited 10,250,000 9.25%The Wade Routeledge Superannuation Fund 7,716,535 6.96%Bellmin Limited 5,000,000 4.51%Morstan Nominees Limited 5,000,000 4.51%The Hardwick Family Trust 4,976,378 4.49% AuditorsChapman Davis LLP have indicated their willingness to accept reappointment asauditors of the company and a resolution proposing their reappointment iscontained in the notice of annual general meeting and will be put to theshareholders at the annual general meeting. Conversion to IFRSThe company is preparing to report consolidated financial statements inconformity with International Financial Reporting Standards (IFRS) and isworking closely with its professional advisers in relation to implementation. Going ConcernThe directors confirm that, after making enquiries, they have a reasonableexpectation that the group has adequate resources to continue in operationalexistence for the foreseeable future. For this reason, they continue to adoptthe going concern basis in preparing these accounts. By Order of the BoardChurchill Mining plcJames HamiltonDirector18th November 2005 Statement of Directors' Responsibilities Company law requires the Directors to prepare financial statements for eachfinancial period which give a true and fair view of the state of affairs of thecompany and the group and of the profit and loss for that period. In preparingthose financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and group will continue in business. The Directors confirm that they have complied with the above requirements inpreparing the financial statements. The Directors are responsible for keepingproper accounting records which disclose with reasonable accuracy at any timethe financial position of the company and group and to enable them to ensurethat the financial statements comply with the requirements of the Companies Act1985. They have general responsibility for taking such steps as are reasonableto safeguard the assets of the group and to prevent and detect fraud and otherirregularities. Financial information is published on the company's website. The maintenance andintegrity of this website is the responsibility of the Directors; the workcarried out by the auditors does not involve consideration of these matters and,accordingly, the auditors accept no responsibility for any changes that mayoccur to the financial statements after they are initially presented on thewebsite. It should be noted that legislation in the United Kingdom governing thepreparation and dissemination of financial statements may differ fromlegislation in other jurisdictions. Independent Auditors' Reportto the Members of Churchill Mining plc We have audited the financial statements which comprise the Group Profit andLoss Account, the Balance Sheets, the Group Cash Flow Statement and the relatednotes. We have also audited the disclosures required by Part 3 of Schedule 7A tothe Companies Act 1985 contained in the Directors' Report relating to Director'sRemuneration ('the auditable part'). Respective Responsibilities of Directors and AuditorsThe Directors' responsibilities for preparing the Annual Report and thefinancial statements in accordance with applicable United Kingdom law andaccounting standards are set out in the Statement of Directors'Responsibilities. Our responsibility is to audit the financial statements and the auditable partof the Directors' Report relating to Directors' Remuneration in accordance withrelevant legal and regulatory requirements and United Kingdom Auditing Standardsissued by the Auditing Practices Board. This report, including the opinion, hasbeen prepared for and only for the Company's members as a body in accordancewith Section 235 of the Companies Act 1985 and for no other purpose. We do not,in giving this opinion, accept or assume responsibility for any other purpose orto any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the financial statements give a trueand fair view and whether the financial statements and the auditable part of theDirectors' Report relating to Directors' Remuneration have been properlyprepared in accordance with the Companies Act 1985. We also report to you if, inour opinion, the Directors' Report is not consistent with the financialstatements, if the Group has not kept proper accounting records, if we have notreceived all the information and explanations we require for our audit, or ifinformation specified by law regarding Directors' remuneration and transactionsis not disclosed. We read the other information contained in the Annual Report and consider theimplications for our report if we become aware of any apparent misstatements ormaterial inconsistencies with the financial statements. The other informationcomprises only the Directors' Report, the Chairman's Statement and the OperatingReview. Basis of Audit OpinionWe conducted our audit in accordance with auditing standards issued by theAuditing Practices Board. An audit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures in the financial statements andthe auditable part of the Directors' Report relating to Directors' Remuneration.It also includes an assessment of the significant estimates and judgements madeby the Directors in the preparation of the financial statements, and of whetherthe accounting policies are appropriate to the Group's circumstances,consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsand the auditable part of the Directors' Report relating to Directors'Remuneration are free from material misstatement, whether caused by fraud orother irregularity or error. In forming our opinion we also evaluated theoverall adequacy of the presentation of information in the financial statements. OpinionIn our opinion:• the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 30th June 2005 and of the loss and cash flows of the Group for the period then ended;• the financial statements have been properly prepared in accordance with the Companies Act 1985; and• those parts of the Directors' Report relating to Directors' Remuneration required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly prepared in accordance with the Companies Act 1985. Chapman Davis LLPChartered Accountants and Registered AuditorsLondon 18th November 2005 Churchill Mining plc Group Profit and Loss Accountfor the period from 2nd November 2004 to 30th June 2005 2005 Note £ Group turnover - Administrative & operating expenses (113,383) ---------- Group operating loss 4 (113,383) Other operating income 7,448 Interest receivable 5,606 Loss on ordinary activities before taxation 3, 7 (100,329) Taxation on profit on ordinary activities 6 - ---------- Loss on ordinary activities after taxation (100,329) (Loss) for the financial year (100,329) ========== Loss per share (pence)Basic 7 (0.30p)Diluted 7 (0.30p) All results relate to continuing operations. There are no recognised gains orlosses other than the loss for the period. Churchill Mining plcConsolidated and Company Balance SheetAs at 30th June 2005 Group Company 2005 2005 Note £ Fixed assetsIntangible fixed assets 8 21,788 -Tangible fixed assets 9 53,419 16,000Investments 10 - 239,479 ---------- --------Total Fixed Assets 75,207 255,479 ---------- -------- Current assetsDebtors 11 33,803 25,408Cash at bank and in hand 12 751,106 635,125 ---------- --------Total Current Assets 15 784,909 660,533 Creditors due within one year 13,14 (33,304) (17,940) ---------- --------Net current assets 751,605 642,593 ---------- --------Total assets less current liabilities 826,812 898,072 Creditors due after one year - - ---------- --------Net assets 826,812 898,072 ========== ======== Capital and reservesCalled up share capital 18 110,800 110,800Share premium reserve 19(a) 816,341 816,341Profit and loss account 19(a) (100,329) (29,069) ========== ========Equity shareholders' funds 19(b) 826,812 898,072 ========== ======== Approved by the Board on 18th November 2005James Hamilton / Paul MazakChurchill Mining plcJoint Managing Director Churchill Mining plc Group Cash Flow Statementfor the period from 2nd November 2004 to 30th June 2005 2005 Note £ Cash flows from operating activitiesNet outflow from operating activities 20(a) (101,900) ---------- Returns on investments and servicing of financeInterest received 5,606 ----------Net cash inflow from returns on investment andservicing of finance 5,606 ----------Capital expenditure and financial investmentPayments of tangible fixed assets (5,878)Purchase of mining assets and development (28,036) ----------Net cash outflow for capital expenditure and financialinvestment (33,914) ---------- Movement in liquid resourcesIncrease in short-term deposits with banks (649,536) ----------Cash outflow before financing (779,744)FinancingIssue of share capital 1,020,000Expenses of share issues (148,859)Net cash from acquisition of subsidiary 10,173 ----------Net cash inflow from financing 881,314 ========== Increase in cash in the period 20(b) 101,570 ========== Notes to the Accounts 1. Basis of Preparation and ConsolidationThe financial statements of the Company and its subsidiaries are made up to 30thJune and the 31st December each year. No comparative information is disclosed asthe Company was incorporated on 2nd November 2004 and these financial statementsconstitute the initial accounts. A separate Company Profit and Loss Account dealing with the results of ChurchillMining plc (the Company) has not been presented, as permitted by Section 230 ofthe Companies Act 1985. In common with many exploration companies, the Company raises its finance forexploration and development programmes in discrete tranches. Further fundingwill be raised as and when required. The Directors are of the opinion that the existing cash reserves at the 30thJune 2005 of £751,106 are adequate to undertake the exploration and developmentprogramme to beyond the end of the 2006 financial year. 2. Accounting PoliciesAccounting ConventionsThe financial statements of the Company and its subsidiary undertaking areprepared under the historical cost convention and are prepared in accordancewith applicable accounting standards in the United Kingdom and the Companies Act1985. Basis for ConsolidationThe consolidated financial statements incorporate the financial statements ofthe Company, its subsidiary undertakings and associated undertakings. Goodwillrepresents the excess of the purchase consideration over the fair value ofattributable net assets at the date of acquisition. Exploration, evaluation and development expenditureExploration, evaluation and development expenditure incurred is accumulated inrespect of each identifiable area of interest. These costs are carried forwardonly if they relate to an area of interest for which rights of tenure arecurrent and in respect of which: (i) such costs are expected to be recouped through successful development and exploitation or from sale of the area; or (ii) exploration and evaluation activities in the area have not, at balance date, reached a stage which permit a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing. Exploration, evaluation and development expenditure (continued)Accumulated costs in respect of areas of interest which are abandoned arewritten off in full against profit in the year in which the decision to abandonthe area is made. A regular review is undertaken of each area of interest to determine theappropriateness of continuing to carry forward costs in relation to that area ofinterest. Foreign CurrenciesTransactions denominated in foreign currencies are translated into sterling atcontracted rates or, where no contract exists, at average monthly rates.Monetary assets and liabilities denominated in foreign currencies which are heldat the year-end are translated into sterling at year-end exchange rates.Exchange differences on monetary items are taken to the Profit and Loss Account. Intangible Fixed Assets and AmortisationIntangible assets acquired as part of an acquisition are capitalised at theirfair value where this can be measured reliably. Mining rights and similar assetsare capitalised where they are considered to have an enduring benefit, and areamortised over their useful economic lives from the date that they arecapitalised. Other licences are written off to the profit and loss account asincurred. DepreciationTangible fixed assets are stated at cost/valuation less accumulateddepreciation. Depreciation of tangible fixed assets is provided where it isnecessary to reflect a reduction from book value to estimated residual valueover the estimated useful life of the asset to the Group. Depreciation of tangible fixed assets is calculated by the straight-line methodand the annual rates applicable to the principal categories are: Plant and machinery - between 5 per cent and 25 per centFixtures and fittings - between 15 per cent and 33 per centComputers and electronic equipment - between 20 per cent and 50 per cent Impairment of Fixed Assets and GoodwillFor acquired goodwill an impairment review is carried out at the end of thefirst full year following an acquisition and in other periods if events orchanges in circumstances indicate that the carrying value may not berecoverable. When a review for impairment is conducted, the recoverable amountis assessed by comparison of the carrying value of the asset against the higherof net realisable value or value in use. The value in use is determined fromestimated discounted future cash flows. Operating LeasesAll operating lease payments are charged to the Profit and Loss Account on astraight line basis over the life of the lease. Deferred TaxationDeferred taxation is accounted for in respect of all timing differences. Adeferred tax asset is only recognised when it is more likely than not, the assetwill be recoverable in the foreseeable future, out of suitable taxable profitsfrom which the underlying timing differences can be recovered. Deferred taxassets are not discounted. 3. Segmental AnalysisThe loss on ordinary activities and net assets are attributable to the followinggeographical segments: Loss on ordinary activities Net Assets 2005 2005 £ £United Kingdom (29,070) 658,860Australia (71,259) 167,952 ------------ ---------- (100,329) 826,812 ============ ========== 4. Loss on Ordinary Activities Before Taxation 2005 £Loss on ordinary activities before taxation is stated after charging: Operating leases - Land and buildings 2,128Depreciation of tangible fixed assets: 239Auditors' remuneration for audit: 6,132To Chapman Davis LLP (Company £5,000)Auditors' remuneration for non-audit services 2,000(other assurance and compliance services) Total fees paid or payable to Rix Levy Fowler Fowler for audit of the subsidiarycompany was 1,132. Total fees paid or payable to Chapman Davis LLP for non-auditservices in the year were £17,000 relating to accounting and taxation servicesof which £7,000 has been charged to the profit and loss account in the year and£10,000 has been written off to share premium in respect of costs relating tothe Company's AIM listing. The company has taken advantage of Section 230 of the Companies Act 1985 and hasnot included its own profit and loss account in these financial statements. TheCompany loss for the year was £29,069. 5. Employees and Directors' RemunerationA detailed analysis of Directors' remuneration, including salaries,performance-related bonuses and long-term incentives, is provided in theDirectors' Remuneration Report. A summary of the total remuneration of theDirectors is comprised as follows:- 2005 £'000 Directors' fees , salaries and taxable benefits 6,304Fees for management consulting services 47,422 -------- Total Directors' remuneration 53,736 ======== The average number of employees in the Group was nil as the joint managingdirectors are employed under management consulting agreements. 6. Taxation on profit on ordinary activitiesa) Analysis of charge in the period 2005 £'000Current taxUK corporation tax -Australian tax - --------- Total - ========= No deferred tax asset has been recognised on accumulated tax losses as therecoverability of any such assets is not likely in the foreseeable future. Atthe year end deferred tax assets totalling £40,907 were not recognised. b) Factors affecting tax charge for the period Loss on ordinary activities before tax (100,329)Loss on ordinary activities multiplied by standard rate ofcorporation taxin the U.K. of 30% (30,099) Effects of:Tax losses carried forward 30,099 ---------Current tax - ========= 7. Loss per Share 2005 £'000 Loss attributable to ordinary shareholders (100,329) -------- Number of Shares Weighted average number of shares used in the calculationof basic loss per share 33,426,849 ======== Effect of dilutive share options 172,267 --------- Weighted average number of shares used in the calculationof diluted loss per shares 33,599,116 ========= Basic loss per share (0.30p) Diluted loss per share (0.30p) Basic earnings per share is computed by dividing the profit or loss aftertaxation for the year available to ordinary shareholders by the sum of theweighted average number of ordinary shares in issue. The calculation for dilutedearnings per share uses the weighted average number of ordinary shares on issueadjusted by the effects of all dilutive potential ordinary shares that wereoutstanding during the year. No diluted loss per share is presented as theeffect of the exercise of outstanding options is to decrease loss per share. 8. Intangible Fixed Assets Group 2005 £Deferred Development ExpenditureAdditions during the year 21,522Disposals -Amounts written off -As at 30th June 2005 21,522 GoodwillAdditions during the year 266 -----------Total Intangible Fixed Assets at 30th June 2005 21,788 ----------- -----------Net Book amount at 30th June 2005 21,788 ----------- Company 2005Total Intangible Fixed Assets at 30th June 2005 Nil 9. Tangible Fixed AssetsGroup Mining Assets Property, Plant and Equipment Total £ £ £CostAdditionsduring theyear 47,780 5,878 53,658 ------- ---------- ----------DepreciationCharge for theyear - 239 239Disposals - - -Impairment - - - ------- ---------- ----------At 30th June2005 - 239 239 Net book amount ------- ---------- ----------At 30th June2005 47,780 5,639 53,419 ------- ---------- ---------- Company Mining Assets Property , Plant and Equipment Total £ £ £CostAdditionsduring theyear 16,000 - 16,000 ------- ---------- ----------At 30th June2005 16,000 - 16,000 ------- ---------- ---------- Net bookamount ------- ---------- ----------At 30th June2005 16,000 - 16,000 ------- ---------- ---------- 10. Fixed Asset Investments Company - Interests in Group Companies Interests in Group companies £Additions during the period ending 30th June2005 239,479 ------------- Notes: 1. On 11th February 2005 following completion of an agreed offer for the entire issued capital of Planet Mining Limited registered in Australia 40,000,000 new ordinary shares of 0.1p each were issued to the shareholders of Planet.2. On the 27th June 2005 the company subscribed for 4,900,000 fully paid ordinary shares in Planet Mining Limited at an issue price of A$0.10 each. There was no difference between the book value and the fair value of the assetsacquired. The net assets acquired were as follows:- £ Cash at bank and in hand 10,173Mining Assets 25,267Debtors 5,663Creditors (1,369) ------------ Total 39,734 ============ 11. Debtors Group Company 2005 2005 £ £Amounts falling due within one year:Other debtors 25,049 16,654Prepayments and accrued income 8,754 8,754Deferred tax assets - - ---------- ----------Total debtors 33,803 25,408 ---------- ---------- 12. Cash at Bank and in Hand Cash at bank and in hand includes cash in transit, cash deposits and bankbalances of 751,106(Company 635,125) 13. Creditors Due Within One Year Group Company 2005 2005 £ £Amounts falling due within one year:Trade Creditors 13,242 637Owed to subsidiary undertakings - 6,341Other creditors and accruals 20,062 10,962 ---------- ----------Total debtors 33,304 17,940 ---------- ---------- 14. Interest Rate and Currency Profile of Gross Financial Liabilities Floating rate Fixed rate Non-interest bearing liabilities liabilities liabilities £ £ £At 30thJune 2005Sterling - - 11,599AustralianDollar - - 21,705 -------- --------- ----------Grossfinancialliabilities - - 33,304 -------- --------- ---------- 15. Interest Rate and Currency Profile of Gross Financial Assets Floating rate Fixed rate Non-interest Total assets assets bearing assets Financial Assets £ £ £ £ At 30thJune2005Sterling 78,587 556,538 25,408 660,533AustralianDollar 22,983 92,998 8,395 124,376 -------- -------- --------- ---------Grossfinancialassets 101,570 649,536 33,803 784,909 -------- -------- --------- --------- 16. Currency RiskThe group does not hedge its exposure to foreign investments held in foreigncurrencies. The group is exposed to translation and transaction foreign exchangerisk and takes profits or losses as they arise. The group seeks to minimise itsexposure to currency risk by closely monitoring exchange rates. 17. Fair Values of Financial Assets and LiabilitiesThe fair value of the group's financial instruments approximate to their bookvalue 18. Share Capital Ordinary Shares Number of shares £Group and CompanyAuthorisedOrdinary shares of 0.1 pence each at 30th June2005 10,000,000,000 10,000,000 Called up and fully paidOrdinary shares of 0.1 pence each 110,800,000 110,800At 30th June 2005 During the year the Company issued the following ordinary shares of 0.1p toprovide funding the company's operations :- On incorporation 2nd November 2004 - two ordinary shares were issued. On 11th February 2005 19,999,998 ordinary shares of 0.1p each were issued, fullypaid at par to raise 20,000 On 11th February 2005 40,000,000 ordinary shares of 0.1p each were issued, fullypaid at par value to acquire the entire issued share capital of Planet MiningLimited. On 15th April 2005 50,000,000 ordinary shares of 0.1p each were issued fullypaid at 2p per share pursuant to placing and admission to the AlternativeInvestment Market. The total funds raised before expenses were 1,000,000. Thedifference between the total consideration of 1,000,000 and the total nominalvalue of 50,000 has been credited to the share premium account. On the same date800,000 ordinary shares of 0.1p were issued for non-cash consideration for thepurchase of Mining Assets at 2p per share. OPTIONSThe company has granted options to subscribe for ordinary 0.1p shares as follows Date Granted/ Start of exercise period Number of options Exercise price Expiry date 8/04/2005 9,000,000 2p 8/04/2010 15/4/2005 3,000,000 2p 15/04/2010 15/4/2005 960,000 2p 15/04/2010 19. Capital and Reservesa) Called up Share premium Profit Total share capital reserve and loss account Shareholders'Funds £ £ £ £GroupIssue ofshare 110,800 965,200 - 1,076,000capitalExpenses ofshare issues - (148,859) - (148,859)Loss for thefinancial - (100,329) (107,777)year -------- --------- --------- ----------At 30th June2005 110,800 816,341 (100,329) 826,812 -------- --------- --------- ---------- CompanyIssue ofshare 110,800 965,200 - 1,076,000capitalExpenses ofshare issues - (148,859) - (148,859)Profit forthe - - (29,069) (29,069)financialyear -------- --------- --------- ----------At 30th June2005 110,800 816,341 (29,069) 898,072 -------- --------- --------- ---------- b) Reconciliation of Movement in Shareholders' Funds Group 2005 £(Loss)/retained profit for the financial year (100,329)Issues of share capital (net of expenses) 927,141 ----------Closing equity shareholders' funds 826,812 ---------- 20. Consolidated Cash Flow a) Reconciliation of Operating Profit to Net Cash Flow from 30th June 2005Operating Activities £Group operating loss (113,383)Add/less non cash items in operating lossDepreciation, amortisation and impairment 239Foreign exchange differences 7,448Increase in debtors (28,147)Increase/(decrease) in creditors 31,953 ----------Net cash outflow from operating activities (101,900) ---------- b) Analysis of Changes in Net Funds 30th June 2005 £Cash and current bank accounts 101,570Deposit with banks 649,536 ----------Net funds at the end of the year 751,106 ---------- c) Reconciliation of Net Cash Flow to Movement in Net 30th June 2005Funds £Increase in cash in the year 751,106 Net funds at the start of the year - ----------Net funds at the end of the year 751,106 ----------ComprisingLiquid resources - term deposits 649,536Cash 101,570 21. Commitments 2005a. Operating Lease Commitments Land and buildings £Annual commitments under non-cancellable operating leasesexpiring:Within one year 13,046Within two to five years 6,523After five years - The company has a property lease for the First Floor, Churchill Court, Unit 8331-335 Hay Street, Subiaco Western Australia which is a non-cancellable sublease with a 1.5 year term, with rent payable monthly in advance. An optionexists to renew the lease at the end of the term for an additional term of 1.5years. b. Exploration Commitments 2005In order to maintain current rights of tenure to exploration £tenements the company has the following discretionary explorationexpenditure up until the expiry of leases. These obligations arenot provided for in the financial statements and are payable:- not later than 1 year 46,307- later than 1 year but not later than 5 years 218,423- later than 5 years - -------- 264,730 --------If the company decides to relinquish certain leases and/or does notmeet these obligations, assets recognised in the balance sheet mayrequire review to determine the appropriateness of carrying values.The sale, transfer or farm-out of exploration rights to thirdparties will reduce or extinguish these obligations. 22. Contingent Assets and LiabilitiesThere were no contingent liabilities or assets at 30th June 2005. 23. Related Party TransactionsThe Group had the following material transactions with related parties duringthe year ending June 2005. 2005 £a.) Boston Noble Pty Ltd - a company associated with 47,423Mr James Hamilton and Mr Paul MazakConsulting /management fees b.) Bushvale Holdings Pty Ltd - a company associatedwith Mr Russell Hardwick who is a director ofof Planet Mining Limited- Consulting & secretarial services 4,223 c.) Churchill Mining plc- Management Fees received by the parent entity 4,071 This information is provided by RNS The company news service from the London Stock Exchange