Caledonia Min Regulatory News (CMCL)

16 May 2006 08:20

Caledonia Mining Corporation16 May 2006 CALEDONIA MINING CORPORATION Caledonia Mining 1st Quarter Results 2006 Toronto, Ontario - May 16 2006: Caledonia Mining Corporation ("Caledonia") (TSX:CAL, NASDAQ-OTCBB: CALVF, AIM: CMCL) is pleased to announce its operating andfinancial results for the quarter ended 31 March 2006. The financial results arereported in Canadian dollars, except where otherwise stated. Operational Highlights: Barbrook Gold Mine * Completed plant expansion to 15,000 tonnes per month capacity andcommissioned new plant on the January 26th, which resulted in a first quarterwith just over 2 months of revenue. * Production improvements were evident during the first quarter andare expected to continue as mining and milled tonnages are increased. Exploration * Acquired a 100% interest of Falconbridge's prospecting rightsadjoining the Company's Rooipoort Platinum Project, which effectively doublesthe area of the Rooipoort Project. * Received notification from the South African Department of Energyand Minerals that the old mining rights for this acquisition have been convertedto New Order Rights. Corporate/Financial * Completed the private placement, commenced in December 2005, andraised $1,475,065 after expenses through the issue of 15,437,626 common sharesand 15,437,626 share purchase warrants. For the quarter ended March 31, 2006 Caledonia recorded a net loss of$2.3million ($0.006 per share) compared to a net loss of $1.8 million ($0.007per share) during the same period in 2005. The loss in 2006 results fromoperations at Barbrook during the plant expansion, the normal administrationexpenses and ongoing exploration costs during the quarter. Reviewing the quarter, Stefan Hayden, President and Chief Executive Officer,said "This quarter has been mainly focused on the Barbrook Gold Mine in SouthAfrica with the commissioning of the plant expansion, optimizing themetallurgical circuit and ramping up tonnage from the underground mine to 15,000tonnes per month. The commissioning of the plant on January 26 has resulted inonly two months of revenue during this quarter. In April 513 ounces of gold wererecovered from 9,450 tonnes milled, this compares with 902 ounces produced fromthe 19,357 tonnes treated during the two months of operation in the firstquarter. This is expected to further improve as the goldlock-up in the newcircuit is recovered. Underground development continues in a number of ore zones to provide additionalreserves and resources and allow for additional flexibility to the undergroundoperations. At the Rooipoort Platinum Project, we are very excited about the acquisition ofFalconbridge's prospecting rights which effectively doubles the area of theRooipoort project and greatly enhances the potential economic viability of thisproject. The properties are situated at the southern end of the highlyprospective north limb of the Bushveld Complex, some 50km south of the AngloPlatinum open pit mining operation on the Platreef. Intensive exploration isbeing conducted along the entire length of this 110km prospective zone by anumber of companies, including AfriOre, Anooraq, Pan-Palladium, Ivanhoe Nickel &Platinum, PTM and AIM Resources. Caledonia is evaluating the near surface, up-dip extensions of thismineralization on the Rooipoort and Grasvally properties in this "central zone"with the initial aim of drilling and delineating an open pit resource as soon asthe necessary permits have been granted by the South African authorities. Negotiations with a number of large potential end users of cobalt continued andthe economic studies related to producing cobalt carbonates and hydroxides atNama have been updated". For further information please contact: Caledonia Mining BuckBiasStefan Hayden, President and CEO Alex Buck / Nick BiasTel: +27 11 447 2499 Tel: +44 7932 740 452 Further information regarding Caledonia's exploration activities and operations,along with its latest financials may be found at www.caledoniamining.com. The full Quarterly Report is set out below. Certain statements included herein are "forward-looking statements". Managementcautions that forward-looking statements are not guarantees and that actualresults could differ materially from those expressed or implied in theforward-looking statements. Important factors that could cause the actualresults of operations, exploration or development programs, or the financialcondition of the Company, to differ include, but are not necessarily limited to,the risks and uncertainties discussed in documents filed by the Company with thevarious regulatory authorities having jurisdiction. 2006 FIRST QUARTER HIGHLIGHTS Barbrook Gold Mine * Completed plant expansion to 15,000 tonnes per month capacity andcommissioned new plant in late January.* Production improvements were evident during first quarter and areexpected to continue as mining and milled tonnages are increased. Exploration * Acquired a 100% interest in prospecting rights covering a total areaof 4,315.8 hectares adjoining the company's Rooipoort PGE project. Subsequent tothis acquisition Caledonia received notification from the DME that the oldmining rights for this acquisition had been converted to New Order Rights. Corporate/Financial * Mr. Steve Curtis was appointed Vice President Finance and Chief Financial Officer, replacing Mr. M. Tombs who has completed his employment contract. * Completed the private placement commenced in December 2005 and raised $1,475,065 after expenses through the issue of 15,437,626 common shares and 15,437,626 share purchase warrants. 2006 OBJECTIVES * Optimise gold production at Barbrook Mine in South Africa by treating at least 15,000 t.p.m. * Continue developing additional reserves/resources at Barbrook Mine. * Complete metallurgical studies to confirm viability of economic gold recovery from Daylight & Victory ores at Barbrook Mine. * Improve safety awareness at Barbrook Mine and further develop necessary programs to ensure a safe operation. * Further explore the polymetallic resource on the farms Rooipoort and Grasvally which form the Rooipoort PGE/Ni/Cu Exploration Project in South Africa. * Increase the land holdings around the Rooipoort Exploration Project area. * Drill identified extensions to the known ore zones on the Eersteling and Zandrivier Mining Licence areas. * Continue with negotiations to conclude an agreement with a cobalt end producer to purchase cobalt concentrate produced at Nama and/or form strategic alliances to achieve this objective. * Seek a joint-venture partner to commence an exploration program at the Kadola copper/cobalt and the Eureka copper/gold properties in Zambia. * Pursue possible acquisitions and/or strategic partnerships to expand Caledonia's portfolio of properties. * Expand the Board of Directors to address ongoing Corporate Governance requirements. * Implement succession plans for senior executive and operational staff. * Strengthen the Investor Relations and Public Relations functions within Caledonia. * Conclude necessary agreements to satisfy the South African Black Economic Empowerment ("BEE") requirements. * Arrange necessary financing to support the activities required to meet these objectives. President's Message Now that the commissioning of the plant expansion at the Barbrook Gold Mine inSouth Africa has been completed, all efforts are focused on optimizing themetallurgical circuit and ramping up tonnage from the underground mine to reachand exceed the planned tonnage of 15,000 tonnes per month. A number of miningareas outside the main French Bob zone are being developed to provide additionalreserves and resources, and to allow mining to take place in a number of otherore zones thereby providing additional flexibility to the undergroundproduction. Exploration work continued at the Rooipoort Platinum Project, south of Mokopanein South Africa, but has been limited by excessive rainfall. Soil sampling willresume as soon as conditions permit. In March Caledonia concluded an agreementto acquire a 100% interest in Falconbridge's prospecting rights covering thefarms Moordrift 289KR, Jaagbaan 291KR, and portions of Grasvally 293KR, a totalarea of 4,316 hectares and adjacent to the western and southern boundaries ofthe Rooipoort Project area. This acquisition greatly enhances the potentialeconomic viability of the Rooipoort Project as it effectively doubles theexploration area, which is underlain by Bushveld Complex rocks with proven PGEpotential. At the end of the quarter, Mike Tombs, CFO left Caledonia's employ at the end ofhis employment contract. I wish to thank Mike for his efforts on theCorporation's behalf. I would like to welcome Steve Curtis as the new CFO. Stevepreviously worked in the mining sector and has extensive experience as FinancialDirector in the South African manufacturing industry. Negotiations with a number of large potential cobalt end-users continued and theeconomic studies related to producing cobalt carbonates and hydroxides at Namaare being updated. "Signed"S. E. HaydenPresident and Chief Executive Officer Management's Discussion and AnalysisExpressed in Canadian Dollars This discussion provides updated information to the Management Discussion andAnalysis contained in the Caledonia's Annual Report for 2005 which have beenfiled on SEDAR and are available at www.sedar.com or on the Corporation'swebsite at www.caledoniamining.com, where no comments are made there are noupdates to report. OPERATIONAL REVIEW Barbrook Mines Limited The metallurgical plant expansion at the Barbrook Gold Mine was completed inDecember, the change over to the new plant commenced on January 3rd andcommissioning of the new plant was started on January 26th. During February andMarch the plant throughput was progressively increased, reaching 10,500 tonnesin March. Tonnage from underground was constrained by a series of oversizedrocks in the orepass system which created a bottleneck and diluted the minedgrade from underground. These rocks originated in a waste pillar which sloughedinto the stope. The reduction in Gold Sales Revenue for the quarter compared with the sameperiod in 2005 is due to the lack of production in January while the plant wasbeing commissioned, accumulations of gold in the metallurgical circuit whichhave not yet been recovered, in addition there was a gold theft of approximately60 ounces of gold from Barbrook during the quarter. The 'ultra-fine milling' section of the plant was not fully operational duringthe quarter and was temporarily replaced by recommissioning secondary grindingin the Sala mill until the density control system to the Ultra Fine Millingcircuit is installed and commissioned early May 2006. Excessive gold lockup inthe circuit was identified and steps are being taken to reduce this. Underground development is continuing in the Taylors, French Bob, Twalas,Victory and Brown zones to develop additional resources in these zones. Barbrook mine - 2006 Production Results First Quarter AprilOre mined Tonnes 27,565 7,982Development advance Meters 795 329Ore milled Tonnes 19,357 9,450Grade milled g/t 3.78 3.04Gold recovered Ounces 902 513 CONSOLIDATED FINANCIAL RESULTS For the quarter ended March 31, 2006 Caledonia recorded a net loss of$2,3million ($0.006 per share) compared to a net loss of $1.8 million ($0.007per share) during the same period in 2005 and a net loss of $1.7 million ($0.007per share) in the first quarter of 2004. The loss in 2006 results fromoperations at Barbrook, the normal administration expenses and ongoingexploration costs during the quarter. Financing The private placement, initiated during December 2005, was completed in Januaryand February 2006. In 2006 15,437,626 units, each consisting of one common shareand one share purchase warrant, were issued raising $1,475,065 net of expenses.In all, this placement raised $3,180,633 after expenses and issued 33,287,626units. In April 2006 the company commenced a private placement to raise additionalfunds. To date this placement has raised $2 million from the sale of 16,666,667units. Each unit consists of one common share and one share purchase warrant.These funds will be used for general working capital and opportunities as theymay arise. Summary of Quarterly Results The following information is provided for each of the eight most recentlycompleted quarters of the company: (in thousands of Canadian dollars except pershare amounts) Q1-2006 Q4-2005 Q3-2005 Q2-2005 Q1-2005 Q4-2004 Q3-2004 Q2-2004Net Salesor $418 $453 $743 $965 $481 $469 $202 $30TotalRevenues(Net loss) - total ($2,266) ($2,054) ($2,564) ($3,276) ($1,786) ($4,569) ($2,250) ($1,435)- per share undiluted ($0.006) ($0,006) ($0.008) ($0.011) ($0.007) ($0,015) ($0.008) ($0.005)- persharediluted ($0.006) ($0,006) ($0.008) ($0.011) ($0.007) ($0,015) ($0.008) ($0.005) Note: As there are no extraordinary items the disclosed net loss per share isidentical to the total loss before extraordinary items. EXPLORATION AND PROJECT DEVELOPMENT Eersteling Gold Exploration Project Logging and sampling of trenches in the central Pienaar area of the Eerstelingmine was ongoing during the quarter, it was however limited as mobility over theexploration was restricted by heavy rains. A total of 64 trench channel sampleswere collected for analysis and 85 meters were logged in two trenches. Rooipoort and Grasvally Platinum Exploration Project Soil geochemical sampling planned for the Rooipoort Platinum Exploration Projectnear Mokopane (Potgietersrus), South Africa was also delayed by exceptionalrainfall conditions. In March Caledonia concluded an agreement, on behalf of its wholly owned SouthAfrican subsidiary company Eersteling Gold Mining Company Limited("Eersteling"), with Falconbridge Ventures of Africa (Pty) Ltd ("Falconbridge"),to acquire a 100% interest in Falconbridge's prospecting rights covering thefarms Moordrift 289KR, Jaagbaan 291KR, and portions of Grasvally 293KR, a totalarea of 4,315.8 hectares. This acquisition effectively doubles the area ofCaledonia's Rooipoort Project underlain by Bushveld Complex rocks with provenPGE potential. The Rooipoort Project properties are situated at the southern end of the highlyprospective north limb of the Bushveld Complex, some 50km south of the AngloPlatinum open pit mining operation on the Platreef. Intensive exploration isbeing conducted along the entire length of this 110km prospective zone by anumber of companies, viz. AfriOre, Anooraq, Pan-Palladium, Ivanhoe Nickel &Platinum, PTM and AIM Resources. The Moordrift, Jaagbaan and Grasvally farms adjoin the western and southernboundary of Caledonia's Rooipoort (PGE/Au/Ni/Cu) Project area and contain thedown dip extension of PGE/Ni/Cu mineralization that was recently discovered byCaledonia on the western side of Rooipoort farm. Falconbridge conducted limitedexploration drilling on the Rooipoort boundary and on Grasvally and intersectedthe down dip extension of the mineralisation intersected by Caledonia, describedabove. Results from this drilling program are available in the Press Release ofMarch 13, 2006 which is available on the Caledonia website at (www.caledoniamining.com). Falconbridge drilled 19 holes focused on an additional PGE mineralised horizonsituated to the west of this earlier drilling (Western Target Zone). Thelocation of these holes and the results of this drilling can be found in theInvestor Centre on the Caledonia website (www.caledoniamining.com) underTechnical Reports, in the document titled "Rooipoort PGE/Au/Ni/Cu Project -Falconbridge Property Acquisition - Drilling Results". This reef horizon is characterized by a highly favourable 3 Pt: 1 Pd ratio.Falconbridge concentrated on following up their best intersection in holeMD03-02 (6.86 m @3.38g/t Pt; 1.23 g/t Pd; 0.57 g/t Au; 0.23% Ni; and 0.29% Cu)as a probable conformable structure. Caledonia's interpretation of rockalteration and of the aeromagnetic data indicates the possibility of moreirregular vertical "cathedral type" structures that could have been missed byFalconbridge's vertical drilling for a planar west dipping reef. Caledonia is evaluating the near surface, up-dip extensions of thismineralization on the Rooipoort and Grasvally properties in this "central zone"with the initial aim of drilling and delineating an open pit resource as soon asthe necessary permits have been granted by the South African authorities. This property and data acquisition opens up an extensive new target area of PGEmineralisation and greatly enhances the potential economic viability ofCaledonia's Rooipoort PGE/Au/Ni/Cu Project by more than doubling the areaunderlain by highly prospective PGE/Au/Ni/Cu mineralised stratigraphy alreadyidentified by drilling. Subsequent to this acquisition the DME advised that it had converted the oldmining rights to New Order Rights. Application to the South African authoritiesto transfer these Falconbridge rights to Eersteling has commenced. SUPPLEMENT TO THE FINANCIAL STATEMENTS As at April 30, 2006 the following securities were outstanding: • 402,819,429 common shares. • 16,898,000 common share purchase options at an average price of $0.21 maturing at various dates until February 1, 2015. • 33,287,626 common share purchase warrants exercisable at a price of $0.20 per share until February 3, 2008 and 16,666,667 share purchase warrants exercisable at a price of $0.15 per share until April 28, 2007. Caledonia Mining Corporation Consolidated Balance Sheets (in thousands of Canadian dollars) March 31, December 31,(Unaudited) 2006 2005Assets CurrentCash and short term deposits $293 $1,076Accounts receivable 415 768Inventories 362 90Prepaid expenses 332 330 --------- --------- 1,402 2,264Investment at cost 79 79Capital assets 9,769 9,156Mineral properties 11,081 10,839 --------- --------- $22,331 $22,338 ---------------------------------- --------- --------- Liabilities and Shareholders' EquityCurrent $281 $197Bank overdraftAccounts payable 3,059 2,392 --------- --------- 3,340 2,589Asset retirement obligation (Note 4) 389 377 --------- --------- 3,729 2,966 Shareholders' Equity (Note 1)Share capital 181,528 180,053Contributed surplus 944 923Deficit (163,870) (161,604) --------- --------- 18,602 19,372 --------- --------- $22,331 $22,338 ---------------------------------- --------- --------- On behalf of the Board: "Signed" DirectorF. C. Harvey "Signed" DirectorJ. Johnstone Caledonia Mining Corporation Consolidated Statements of Deficit (in thousands of Canadian dollars) For the three months ended March 31,(Unaudited) 2006 2005 2004 Deficit, beginning of period (161,604) (151,924) (141,945)Net (loss) for the period (2,266) (1,786) (1,725) --------- --------- ---------Deficit, end of period ($163,870) ($153,710) ($143,670) Consolidated Statements of Operations (in thousands of Canadian dollars except per share amounts) For the three months ended March 31,(Unaudited) 2006 2005 2004 Revenue and operating costsRevenue from sales $418 $481 $140Operating costs 2,350 1,748 1,315 --------- --------- ---------Gross profit (loss) (1,932) (1,267) (1,175) --------- --------- --------- Costs and expensesGeneral and administrative 255 496 299Other expense (income) (Note 3) 79 23 264 --------- --------- --------- 334 519 563 --------- --------- --------- (Loss) before non-controlling interest (2,266) (1,786) (1,738)Non-controlling interest - - 13 --------- --------- ---------Net (loss) for the period ($2,266) (1,786) ($1,725)--------------------------- --------- --------- ---------Net (loss) per share (Note 2)Basic and fully diluted ($0.006) ($0.007) ($0.007)--------------------------- --------- --------- --------- Caledonia Mining Corporation Consolidated Statements of Cash Flows (in thousands of Canadian dollars) For the three months ended March 31,(Unaudited) 2006 2005 2004 Cash provided by (used in) Operating activitiesNet (loss) for the period ($2,266) ($1,786) ($1,725) Adjustments to reconcile net cash from 213 192 90operations (note 4) Changes in non-cash working capital 746 (143) 12Balances (note 4) --------- --------- --------- (1,307) (1,737) (1,623) --------- -------- --------- Investing activitiesExpenditures on capital assets (730) (187) (187)Expenditures on mineral properties (305) (1,156) (183) --------- --------- --------- (1,035) (1,343) (370) --------- --------- --------- Financing activitiesBank overdraft increase 84 - -Issue of share capital net of issue costs 1,475 - 9,282 --------- --------- --------- 1,559 - 9,282 --------- --------- --------- Increase (decrease) in cash for the period (783) (3,080) 7,289Cash and cash equivalents, beginning of period 1,076 6,470 4,179 --------- --------- ---------Cash and cash equivalents, end of period $293 $3,390 $11,468 --------- --------- --------- Caledonia Mining Corporation Summary of Significant Accounting Policies(Unaudited) For the three months ended March 31, 2006, 2005 and 2004 Nature of Business The Company is engaged in the acquisition, exploration and development ofmineral properties for the exploitation of base and precious metals. The abilityof the Company to recover the amounts shown for its capital assets and mineralproperties is dependent upon the existence of economically recoverable reserves;the ability of the Company to obtain the necessary financing to completeexploration and development; and future profitable production or proceeds fromthe disposition of such capital assets and mineral properties. Basis of Presentation These financial statements have been prepared on the basis of a going concern,which contemplates that the Company will be able to realize assets and dischargeliabilities in the normal course of business. The Company's ability to continueas a going concern is dependent upon attaining profitable operations andobtaining sufficient financing to meet its liabilities, its obligations withrespect to operating expenditures and expenditures required on its mineralproperties. Measurement Uncertainties Preparation of the financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the reported amountsof revenues and expenses during the reporting period. The more significant areasrequiring estimates relate to mineral resources, future cash flows associatedwith capital assets and mineral properties. Management's calculation of reservesand resources and cash flows are based upon engineering and geological estimatesand financial estimates including gold prices and operating costs. The amountultimately recovered could be materially different than the estimated values. Principles of Consolidation The consolidated financial statements include the accounts of the Companytogether with all its subsidiaries. All significant inter-company balances andtransactions have been eliminated on consolidation. The Company's consolidated (all 100% owned) subsidiaries are Barbrook MinesLimited ("Barbrook"), Eersteling Gold Mining Company Limited (100% owned sinceJune 2004) ("Eersteling") Greenstone Management Services (Proprietary) Limited,Fintona Investments (Proprietary) Limited, Maid O' Mist (Proprietary) Limited,Caledonia Mining (Zambia) Limited, Caledonia Kadola Limited, Caledonia NamaLimited and Caledonia Western Limited. Cash and Cash Equivalents Cash and cash equivalents represent cash on hand in operating bank accounts andmoney market funds Inventories Inventories are stated at the lower of cost, which is determined on thefirst-in, first-out basis, and net realizable value. Revenue Recognition Revenue from the sale of precious metals is recognized when the benefits ofownership are transferred and the receipt of proceeds is substantially assured. Capital Assets Producing AssetsProducing assets are recorded at cost less grants, accumulated amortization andwrite-downs. Producing assets are amortized using the straight line method basison the estimated useful lives of the assets. The estimated useful life of theproducing assets ranges up to 10 years. Repairs and maintenance expenditures arecharged to operations; major improvements and replacements which extend theuseful life of an asset are capitalized and amortized over the remaining usefullife of that asset. Barbrook continues to undertake activities to re-establishcommercial operations and has been presented as a producing asset in thesefinancial statements for 2006, 2005 and 2004. As of December 31, 2002, theCompany did not have any producing capital assets. Non-Producing AssetsNon-producing assets are recorded at cost less write downs. During non-producingperiods, no amortization is recorded. At the time of commercial production, the assets are reclassified as producingand amortized in the manner described above. Mineral Properties Producing PropertiesWhen and if properties are placed in production, the applicable capitalizedcosts are amortized using the unit-of-production method on the ratio of tonnesof ore mined or processed to the estimated proven and probable mineral reservesas defined by the Canadian Institute of Mining, Metallurgy and Petroleum.Barbrook continues to undertake activities to re-commence commercial operationsand has been presented as a producing asset in these financial statements for2006, 2005 and 2004. For the 2002 fiscal year the Company did not have anyproducing mineral properties. Non-Producing PropertiesCosts relating to the acquisition, exploration and development of non-producingresource properties which are held by the Company or through its participationin joint ventures are capitalized until such time as either economicallyrecoverable reserves are established, or the properties are sold or abandoned. A decision to abandon, reduce or expand activity on a specific project is basedupon many factors including general and specific assessments of mineralreserves, anticipated future mineral prices, anticipated costs of developing andoperating a producing mine, the expiration date of mineral property leases, andthe general likelihood that the Company will continue exploration on theproject. However, based on the results at the conclusion of each phase of anexploration program, properties that are not suitable as prospects arere-evaluated to determine if future exploration is warranted and that carryingvalues are appropriate. The ultimate recovery of these costs depends on the discovery and development ofeconomic ore reserves or the sale of the properties or the mineral rights. Theamounts shown for non-producing resource properties do not necessarily reflectpresent or future values. Strategic Alliances The Company has entered into various agreements under which the participantsearn a right to participate in the mineral property by incurring explorationexpenditures in accordance with the conditions of the agreements. Uponsatisfaction of the conditions of any agreement a joint venture may be formedwith customary joint venture terms and provisions and then accounted for on aproportionate consolidation basis. Until a joint venture is formed onlyexpenditures on the properties incurred by the Company are reflected in thesefinancial statements. Foreign Currency Translation Balances of the Company denominated in foreign currencies and the accounts ofits foreign subsidiaries are translated into Canadian dollars as follows: (i) monetary assets and liabilities at period end rates;(ii) all other assets and liabilities at historical rates; and(iii) revenue and expense transactions at the average rate of exchangeprevailing during the period. Exchange gains or losses arising on these translations are reflected in incomein the period incurred. Gains and losses arising on translation of long termforeign currency denominated liabilities at each year end are reflected inincome.Asset Retirement Obligation Effective January 1, 2004 the Company adopted the Canadian Institute ofChartered Accountants Standard 3110, "Asset Retirement Obligations" Thisstandard requires that a liability for retirement obligations to be settled as aresult of an existing law, regulation or contract be recognized. Income Taxes The Company accounts for income taxes using the asset and liability method.Under the asset and liability method, future tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases. Future tax assets and liabilities are measured usingenacted or substantively enacted tax rates expected to apply when the asset isrealized or the liability settled. The effect on future tax assets andliabilities of a change in tax rates is recognized in income in the period thatsubstantive enactment or enactment occurs. Caledonia Mining Corporation Notes to the Consolidated Financial Statements(Unaudited) For the three months ended March 31, 2006 1. Share Capital Authorised: An unlimited number of common sharesAn unlimited number of preference shares a Issued - Common Shares Number of Shares Amount (000's) -------------------------- ----------- -----------Balance, December 31, 2005 370,715,136 $180,053-------------------------- ----------- -----------Issued pursuant to private placement 15,437,626 1,621-------------------------- ----------- -----------Balance, March 31, 2006 386,152,762 $181,674-------------------------- ----------- ----------- Issued - Preference Shares Nil Stock Option Plans The Company has established incentive stock option plans for employees,officers, directors, consultants and other service providers. As at March 31,2006, the Company has 16,898,000 common share options exercisable at an averageprice of $0.21 maturing at various dates until February 1, 2015 Share Purchase Warrants The Company has 33,287,626 share purchase warrants outstanding exercisable at anaverage price of $0.20 maturing at various dates until February 3, 2008 2. Net (Loss) Per Share The net (loss) per share figures have been calculated using the weighted averagenumber of common shares outstanding during the first quarter which amounted to380,714,447. Under the treasury method of calculating fully diluted income pershare, exercise of the outstanding stock options and warrants would beanti-dilutive in 2006 3. Other Expense (Income) Included in other expense (income) are unrealized exchange translation gains of$102,000 (2005 -gain of $134,000, 2004 - loss of $234,000) and an amortizationcharge of $180,751 (2005 - $158,000, 2004 - $ nil). The amortization chargerelates mainly to Barbrook, where increasing production levels lead toincreasing amortization charges in terms of the accounting policies detailedunder "Mineral Properties" on page 12 above. 4. Supplemental Cash Flow Information Items not involving cash are as follows: 2006 2005 2004Accretion asset retirement obligation $12 $0 $4Non-controlling interest - - (13) ---------- ---------- ---------Amortization 181 158 -Other 20 34 99 ---------- ---------- --------- $213 $192 $90 ---------- ---------- --------- The net changes in non-cash working capital balances for continuing operationsare as follows: 2006 2005 2004Accounts payable $667 ($155) ($229)Accounts receivable 353 68 31Inventories (272) 29 86Prepaid expenses (2) (85) 124 ---------- ---------- --------- $746 $(143) $12 ---------- ---------- --------- This information is provided by RNS The company news service from the London Stock Exchange