Last checked at 14 Jun 2007 07:00
Kryso Resources Plc Company Registration Number 05190505 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006
Kryso Resources Plc ("Kryso" or the "Company") is pleased to announce its final results for the year ended 31 December 2006. The results below are extracted from the Company's audited Report and Accounts.
CHAIRMAN'S STATEMENT
As Chairman of Kryso Resources plc (`Kryso' or `the Company'), I am pleased to report to shareholders that during the year the Company took significant steps towards production at the Pakrut gold deposit (`Pakrut') and was also able to commence exploration at the Hukas (`Hukas') nickel-copper prospect.
The three most significant developments for Kryso since my last Chairman's Statement have been the completion of an initial JORC-compliant resource estimate for part of the deposit at Pakrut in March 2007, the formation of a strategic alliance with Great Basin Gold (`Great Basin'), part of the highly successful Hunter Dickinson group of companies and the acquisition of the Hukas nickel-copper project.
The initial JORC-compliant resource estimate for Pakrut was compiled principally using data obtained from Kryso's first 8,000 metres of diamond drilling and was generated by Snowden Mining Industry Consultants (`Snowden'). The resource is estimated to contain approximately 596,500 ounces of gold at a 0.5g/t gold cut-off grade. This resource will form the basis of the feasibility study currently underway for a proposed open pit mining operation.
The bulk of the JORC-compliant resource is from the lower grade Ore Zone 2, which was targeted first due to its close proximity to the surface, facilitating the definition of an open pit. The mineralization is still open at depth, as well as to the east and to the north. The latest drilling at Pakrut, which is targeting areas below the adit level in Ore Zone 1, has indicated that both the width and grade of the ore body are increasing with depth. The results from these drill holes, once analysed at SGS Lakefield, the independent assay laboratory used by the Company, will be used to update the existing JORC resource. This could have a significant positive impact on the overall economics of the Pakrut project, especially once sufficient resources have been delineated to design the underground mine.
The strategic alliance with Great Basin Gold has been cemented through a non-brokered private placement with Great Basin Gold of Kryso shares worth ‚£ 31,000,000. This was the first financing carried out by Kryso since it's listing in 2004, when ‚£32,600,000 was raised. In addition, Ferdinand Dippenaar, currently President, Chief Executive Officer and Director of TSX-listed Great Basin, has been appointed to Kryso's Board as a Non-Executive Director.
In 2005, the potential for commercially significant nickel, copper, cobalt and PGM (platinum-group-element) mineralization in the Republic of Tajikistan was brought to Kryso's attention. The Company subsequently identified two areas with favourable geological settings that had been discovered during the Soviet era. Kryso has been granted an exploration licence for one area that encompasses the Hukas prospect, and has won the tender for the other.
At Hukas, a relatively small, exposed, partially oxidized body of sulphide mineralization was trenched by the Soviets, who also drilled several boreholes into its projected extension. Sampling from these trenches and drill cores returned encouraging average grades of 2.86% Ni, 1.26% Cu, 0.084% Co and 2.3g/t PGM. From these investigations, it appeared that the mineralization at Hukas was an isolated lens which had been separated from a potentially larger sulphide body. In addition to this showing on surface, blind mineralisation was also encountered by Soviet core drilling, which indicates a possibility to a layered nature to the nickel mineralisation within the intrusive.
In 2006, after establishing a tent camp at Hukas and rehabilitating the 12 kilometre access road, Kryso excavated three trenches across the outcrop of this lens. Analysis of the samples collected from these trenches returned encouraging assays of 1.03 to1.57% Ni and 0.62 to1.21% Cu.
Kryso has contracted Logantek to carry out a ground based electromagnetic geophysical survey (TEM) during June/July of this year over 8 square kilometres of the Hukas Licensed Area, which extends to 17 square kilometres in total. In addition to the geophysical survey, the Company plans to carry out a shallow diamond core drill programme around the blind mineralisation discovered by the Soviets later on this year.
The 2007 work programme at Hukas is intended to enable the Company to create a conceptual model to guide further evaluation of the license areas economic potential, while at Pakrut, Kryso remains focused on reaching production as soon as possible. To this end, the Pakrut feasibility study is proceeding well, and I expect the coming year to be even more momentous for Kryso than the preceding one.
Trevor DavenportNon-Executive Chairman13 June 2007REPORT OF THE DIRECTORS
The Directors present their report and the audited Financial Statements of the Group for the year ended 31 December 2006.
Principal Activity
The principal activity of the Company during the year was that of a holding company. The principal activity of the Group is that of mineral exploitation.
Business Review
Introduction
Kryso Resources (`Kryso') is an emerging mineral exploration Company that is principally focused on exploring for gold and other precious and base metal deposits previously discovered in Central Asia during the Soviet Union era and then, where appropriate, bringing them into production.
Kryso Resources, which has its head office in London, is a public company that was admitted to AIM in December 2004 in order to continue funding the development of the Pakrut Gold Deposit, further explore the Pakrut Licence Area and to obtain and acquire other gold and base metal deposits in Tajikistan and elsewhere in Central Asia. The Group's Executive Directors and senior management are normally based in Dushanbe.
The Company's Executive Directors have a proven track record of operating in Tajikistan and they believe that Kryso Resources is the first foreign company to obtain a 100% interest in a mining and exploration project in the country.
Strategy
Kryso's strategy is to maximise shareholder value through the development of the Group's exploration properties, through proving up additional resources, completing feasibility studies on the properties and, where and when appropriate, putting the projects into production.
The Group's long-term objective is to provide growth through exploration and to acquire advanced stage projects within the Commonwealth of Independent States (CIS), part of the Former Soviet Union (CIS).
Kryso believes it has high quality senior and local management who have the right technical skills and in-country experience to develop current and future projects into profitable mining projects.
Operating Review
Since listing on AIM in December 2004 the Company has:
¢â‚¬¢ Outlined an initial JORC resource of approximately 596,500 ounces at the Pakrut gold project (`Pakrut').
¢â‚¬¢ Commenced a bankable feasibility study on an open pit mining operation at Pakrut.
¢â‚¬¢ Acquired the exploration licence for the Hukas nickel-copper project (`Hukas').
¢â‚¬¢ Completed a surface trenching programme at Hukas and attained results which confirm the presence of nickel and copper mineralization at the project.
¢â‚¬¢ Formed a strategic alliance with Great Basin Gold (`Great Basin'), part of the Hunter Dickinson group of companies, and cemented this through a non-brokered private placement of Kryso shares worth ‚£31,000,000 to Great Basin. This was the first financing carried out by Kryso since its listing, when ‚£32,600,000 was raised.
¢â‚¬¢ Completed 62 drill holes at Pakrut, totalling over 10,000m of diamond core drilling. Holes 63 and 64 are currently being drilled.
¢â‚¬¢ Completed over 2,500 metres of surface trenching at Pakrut and Hukas.
¢â‚¬¢ Developed over 600 metres of underground adit at Pakrut.
¢â‚¬¢ Re-established access to over 4 kilometres of Soviet-developed underground adit at Pakrut.
¢â‚¬¢ Re-established approximately 25 kilometres of access and site roads up to and around Pakrut.
¢â‚¬¢ Acquired 3 diamond drill rigs, 4 bulldozers, numerous support vehicles, underground mining equipment and various workshop machinery and tools.
¢â‚¬¢ Built an 85-person camp at Pakrut, including workshops, fuel depot, storage facilities etc.
¢â‚¬¢ Established its own sample preparation and analytical laboratory in Tajikistan's capital city Dushanbe.
¢â‚¬¢ Prepared and assayed over 12,000 samples, of which 3,500 have been sent to South Africa to be fire assayed by SGS Lakefield.
¢â‚¬¢ Completed initial metallurgical testwork on Pakrut material in co-operation with SGS Lakefield.
¢â‚¬¢ Completed an environmental baseline study for Pakrut to World Bank Environmental Guidelines.
Pakrut Gold Deposit and Licence Area
In April 2004, LLC Pakrut, a wholly owned subsidiary of the Company, was granted a licence and geological lease to explore and exploit the Pakrut Licence Area which comprises the Pakrut gold deposit and the surrounding 6,300 hectare exploration area located in the metalliferous southern Tien-Shan Fold Belt. This belt is reputed to have the second largest known gold resource after the Witwatersrand in South Africa.
The Company is currently conducting a feasibility study on the Pakrut gold deposit to put the deposit into production and also intends to explore identified mineralization in the Pakrut Licence Area.
The Hukas Ni-Cu-Co-PGM Project
In June 2006 the Company was awarded an Exploration Licence for the Hukas Nickel-Copper deposit. During 2007 the Company will carry out an Electro Magnetic geophysical survey which will be followed up by diamond drilling of any potential targets.
Financial Review
The results for the year ended 31 December 2006 and the year ended 31 December2005 were as follows: 2006 2005 US$000 US$000Turnover - -Exploration costs capitalised as intangible assets 1,754 1,019Administrative expenses 1,093 1,031Total costs 2,847 2,050% Administrative expenses 38.4% 50.3%Operating loss 936 1,336Less: interest received 95 218Loss on ordinary activities before taxation 841 1,118Loss per share (cents) 1.47 1.99
The main financial Key Performance Indicator (`KPI') for the Company is administration costs, as a percentage of total costs. This KPI allows the Company to monitor costs. This KPI was high in 2005 as the drilling and exploration only began in the middle of the year and has now reduced to 38.4% in 2006, our first full year of operation, and a further reduction is expected in 2007.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2006 2006 2005 Note US$000 US$000Turnover 1 - -Cost of sales - -Gross Profit - -Administrative expenses (1,093) (1,031)Exceptional loss on foreign exchange 2 157 (305)Operating Loss 3 (936) (1,336)Interest receivable 95 218Loss on Ordinary Activities before Taxation (841) ( 1,118)Tax on loss on ordinary activities 6 - -Loss on Ordinary Activities after Taxation (841) (1,118)Basic and Diluted Loss per Share 8 $(0.0147) $(0.0199)
All of the activities of the Group are classed as continuing.
The Company has taken advantage of section 230 of the Companies Act 1985 not to publish its own Profit and Loss Account.
The Group has no recognised gains or losses other than the results for the year, as set out above and therefore no separate statement of total recognised gains or losses has been presented.
CONSOLIDATED BALANCE SHEETAs at 31 Deccember 2006 2006 2005 Note US$000 US$000Fixed AssetsIntangible assets 9 6,431 5,181Tangible assets 10 601 970 7,032 6,151Current AssetsStocks 12 224 215Debtors 13 236 122Cash at bank 2,493 2,465 2,953 2,802
Creditors: amounts falling due within one year 14 (119) (151)
Net Current Assets 2,834 2,651Net Assets 9,866 8,802Capital and ReservesCalled-up share capital 17 1,227 1,035Share premium account 18 10,554 8,865Profit and loss account 18 (1,915) (1,098)Shareholders' Funds 19 9,866 8,802BALANCE SHEETAs at 31 December 2006 2006 2005 Note US$000 US$000Fixed AssetsInvestments 11 9,718 8,564Current AssetsDebtors 13 28 14Cash at bank 2,287 1,339 2,315 1,353Creditors:Amounts falling due within one year 14 (131) (20)Net current assets 2,184 1,333Net assets 11,902 9,897Capital and ReservesCalled-up share capital 17 1,227 1,035Share premium account 18 10,554 8,865Profit and loss account 18 121 (3)Shareholders' Funds 19 11,902 9,897
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2006 2006 2005 US$000 US$000Net Cash Outflow from Operating Activities (535) (871)
Returns on Investments and Servicing of Finance
Interest received 95 218Net Cash Inflow from Returns on Investments andServicing of Finance 95 218Taxation - -
Capital Expenditure and Financial Investment
Payments to acquire intangible fixed assets (1,375) (827)Payments to acquire tangible fixed assets (38) (1,112)Net Cash Outflow for Capital Expenditure andFinancial Investment (1,413) (1,939)Cash Outflow before Financing (1,853) (2,592)
Financing
Issue of equity share capital (net of issue costs) 1,881 119Net Cash Inflow from Financing 1,881 119Increase/(Decrease) in Cash 28 (2,473)
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2006 2006 2005 US$000 US$000Reconciliation of Operating Loss to Net Cash Outflowfrom Operating ActivitiesOperating loss (936) (1,336)Amortisation 504 504Depreciation 27 25Share based payments 25 -Increase in stocks (9) (197)(Increase)/decrease in debtors (114) 105(Decrease)/increase in creditors (32) 28Net Cash Outflow from Operating Activities (535) (871)
Analysis of Changes in Net Funds
At 1 At 31 January December 2006 Cash flows 2006 US$000 US$000 US$000Cash at bank 2,465 28 2,493
Reconciliation of Net Cash Flow to Movement in Net Funds
2006 2005 US$000 US$000Change in net funds 28 (2,473)Net funds at 1 January 2,465 4,938Net funds at 31 December 2,493 2,465
NOTES TO THE FINANCIAL STATEMENTS
1. Turnover
The group did not trade in the year.
2. Exceptional Item
The exceptional item in both years arises as a result of translating the Group's bank balances at the year end.
3. Operating Loss
Operating loss is stated after charging:
2006 2005 US$000 US$000Amortisation 504 504Depreciation 431 217less transfer to exploration costs (404) (192)Auditors' remuneration- as auditors 22 13- taxation services 2 2Operating lease rentals 20 104. Particulars of EmployeesThe average number of staff employed by the Group during the financial yearamounted to: 2006 2005 No. No.Administrative and management 27 22Mining 143 63 170 84
The aggregate payroll costs of the above were:
2006 2005 US$000 US$000Wages and salaries 740 543Social security costs 92 46Share based payments 24 - 856 5895. Directors' Emoluments
The Directors' aggregate emoluments in respect of qualifying services were:
2006 2005 US$000 US$000Emoluments receivable - from the company 44 40- from group companies 339 335 383 375
During the year no Director (2005 - no Director) participated in a money purchase pension scheme. During the year, no Director (2005 - five Directors) exercised share options.
The highest paid director received emoluments as follows:
2006 2005 US$000 US$000Emoluments receivable 110 110
6. Taxation on Ordinary Activities
(a) Analysis of Charge in the Year
Current tax: 2006 2005 US$000 US$000UK Corporation tax based on the results for the year at 30% - -Overseas tax credits - -Total current tax - -
Kryso Resources Limited is registered as an exempted company for British Virgin Islands income tax purposes and the subsidiary undertakings have recorded no assessable profit for Tajikstan profits tax purposes and accordingly, no provision for British Virgin Islands income tax or Tajikstan profits tax has been made.
No provision for deferred taxation on accelerated capital allowances has been made on the grounds that it is immaterial.
6. Taxation on Ordinary Activities (continued)
(b) Factors Affecting Current Tax Charge
The tax assessed on the loss on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 30% (2005 - 30%).
2006 2005 US$000 US$000Loss on ordinary activities before taxation (841) (1,118)
Loss on ordinary activities by rate of tax at 30% (252) (335)
Disallowed expenditure (159) (185)Non taxable items 352 368Overseas losses 59 152Total current tax - (note 6(a)) - -
Deferred tax assets have not been recognised in the Financial Statements as the Directors are uncertain as to when they will be utilised.
7. Profit Attributable to Members of the Parent Company
The profit dealt with in the Financial Statements of the parent company was US$99,955 (2005 - loss US$165,548).
8. Loss per Share 2006 2005 US$ US$Basic and diluted loss per ordinary share (0.0147) (0.0199)
The basic loss per share is calculated by dividing the loss on ordinary activities after tax of US$841,000 (2005 - loss US$1,118,000) by the weighted average number shares in issue and carrying the right to receive dividend. For the year ended 31 December 2006 this was 57,333,333 (2005 - 56,020,833) shares.
As the Group has incurred a loss for the year, no option or warrant ispotentially dilutive, and hence the basic and diluted loss per share are thesame.9. Intangible Fixed AssetsGroupExploration Costs Goodwill Total US$000 US$000 US$000CostAt 1 January 2006 1,019 4,743 5,762Acquired in year 1,754 - 1,754At 31 December 2006 2,773 4,743 7,516AmortisationAt 1 January 2006 - 581 581Charge for the year - 504 504At 31 December 2006 - 1,085 1,085Net book valueAt 31 December 2006 2,773 3,658 6,431At 31 December 2005 1,019 4,162 5,18110. Tangible Fixed AssetsGroup Office furniture Motor Plant and and equipment vehicles machinery Total US$000 US$000 US$000 US$000CostAt 1 January 2006 82 158 957 1,197Acquired in year 7 6 25 38At 31 December 2006 89 164 982 1,235DepreciationAt 1 January 2006 31 22 174 227Charge for the year 27 55 325 407At 31 December 2006 58 77 499 634Net book valueAt 31 December 2006 31 87 483 601At 31 December 2005 51 136 783 97011. InvestmentsCompany Shares in Loans to Group Group Undertaking Undertakings Total US$000 US$000 US$000CostAt 1 January 2006 5,440 3,124 8,564New loan in the year - 1,154 1,154At 31 December 2006 5,440 4,278 9,718Subsidiary Undertakings Proportion Country of of votingName of company Holding incorporation rights held Nature of businessDirectly heldKryso Resources Limited Ordinary British 100% Holding Company Shares Virgin IslandsIndirectly heldLimited Liability Company Ordinary Tajikistan 100% Mineral ExploitationPakrut SharesLimited Liability Company Ordinary Tajikistan 100% Mineral ExploitationKuhi Zarin SharesInternational Mining Suppliesand Services Limited Ordinary UK 100% Service Company SharesLimited Liability Company Ordinary Tajikistan *100% Mineral ExploitationGumas SharesLimited Liability Company Ordinary Tajikistan 100% Mineral ExploitationOil and Gas Shares*In accordance with Tajik law, the external shareholder has to pay for theshare capital within 12 months of the shares being issued. If no payment ismade, these shares are cancelled. No payment was received within 12 months ofthese shares being issued so as at 14 April 2006, Limited Liability CompanyGumas was 100% owned by the Company. No minority interests are thereforedisclosed.12. Stocks Group Company Group Company 2006 2006 2005 2005 US$000 US$000 US$000 US$000Consumables 224 - 215 -13. Debtors Group Company Group Company 2006 2006 2005 2005 US$000 US$000 US$000 US$000Other debtors 176 18 74 7Prepayments 60 10 48 7 236 28 122 14
14. Creditors: amounts falling due within one year
Group Company Group Company 2006 2006 2005 2005 US$000 US$000 US$000 US$000Amount due to related undertaking - 63 - 17Other creditors 90 42 130 3Accruals and deferred income 29 26 21 - 119 131 151 20
15. Treasury Policy and Financial Instruments
The Group operates informal treasury policies which include ongoing assessments of interest rate management and borrowing policy. The Board approves all decisions on treasury policy.
Facilities are arranged, based on criteria determined by the Board, as required to finance the long term requirements of the Group. The Group has financed its activities by the raising of funds through the placing of shares.
At 31 December 2006 there were no net monetary assets denominated in currencies other than the functional currencies of the operations.
There are no material differences between the book value and fair value of the financial assets at the year-end.
16. Related Party Transactions
The Company is exempt from the requirement to disclose related party transactions with other group companies under the provisions of Financial Reporting Standard No. 8. All group transactions are eliminated on consolidation.
At the year-end, $9,796 (2005 - Nil) was due to Trevor Davenport, a Director of the Company, for Directors fees incurred during the year. At the year-end, $17,422 (2005 - $64,177) was due to Craig Brown, a Director of the Company, as reimbursement for expenses incurred during the year. At the year-end, $3,482 was due to Vassilios Carellas, a Director of the Company, as reimbursement for expenses incurred during the year. As at 31 December 2005, Vassilios Carellas owed $7,942 as an advance for expenses. At the year-end, $18,397 was owed by Abuali Ismatov, a Director of the Company, as an advance for expenses. As at 31 December 2005, the Company owed Abuali Ismatov $30,667 as reimbursement for expenses.
17. Share CapitalGroup and CompanyAuthorised Share Capital 2006 2005 US$000 US$000100,000,000 (2005 - 100,000,000)Ordinary shares of ‚£30.01 each 2,000 2,000
Allotted, Called up and Fully Paid
At 1 January 1,035 1,02710,000,000 ordinary ‚£30.01 shares allotted during the period 192 -500,000 ordinary ‚£30.01 shares allotted during the period - 8
At 31 December, 66,500,000 (56,500,000) Ordinary shares of ‚£0.01 each
1,227 1,035
During the year 10,000,000 ordinary shares of ‚£30.01 were allotted for a consideration of $1,914,000.
Share Option Scheme
The Company has adopted an unapproved employee share option scheme (for the purposes of this paragraph referred to as the "Scheme"). Under the Scheme the Directors have the discretion to grant options to subscribe for Ordinary Shares up to a maximum of 5 per cent of the Company's issued share capital with a maximum of one per cent to any one individual. Options can be granted to any employee of the Group. The option price is not to be less than the Placing Price. The options cannot be exercised for a period of one year from the date of grant. In event of any employee to whom options have been granted ceasing to be an employee of the Group he or she will have a set period in which to exercise those options (depending on the reasons for leaving) failing which the options will lapse.
The Company has granted 400,000 options to Ruegg & Co and 300,000 options to Hichens, Harrison & Co to acquire ordinary shares of 1p at 10p each at any time up to 2 December 2009.
The Company, at the end of the year, had 375,000 options outstanding to employees to acquire ordinary shares of 1p each at 10p each.
At the end of the year 2,675,000 options were exercisable with a weighted average exercise price of 12p.
The Group is now required to recognise an expense for all share based payments made after 7 November 2002 which had not yet fully vested at the relevant effective date of 1 January 2006 together with options and warrants granted after 1 January 2006. Exercise of an option is subject to continued employment. Options were valued using the Black-Scholes option-pricing model. The assumptions used to value the options are set out below:
Option 24 November 24 November 24 November 24 November 13 May 15 Novembergranted on 2004 2004 2004 2004 2005 2005Shares under option 200,000 200,000 200,000 200,000 375,000 400,000Exercise price (A3) 0.15 0.10 0.15 0.10 0.10 0.135Exercisable from(years) 2 2 3 3 1 1Option life (years) 5 5 5 5 4 4Risk free rate 4.41% 4.41% 4.41% 4.41% 4.41% 4.41%Expected volatility 33% 33% 33% 33% 33% 33%Expected dividendyield 0% 0% 0% 0% 0% 0%Forfeiture rate 33% 33% 33% 33% 33% 33%Price (A3) 0.01 0.02 0.01 0.02 0.02 0.03Bid price discount 5% 5% 5% 5% 5% 5%Fair value of optionsgranted (A3) 1,345 2,680 1,340 2,680 5,025 8,040
The expected volatility is based on historical volatility over the last two years.
The total fair value has been spread over the relevant vesting periods and hasresulted in a charge to the profit and loss account for the year ended 31December 2006 of US$24,979.18. ReservesGroup Profit Share premium and loss account account US$000 US$000At 1 January 2006 8,865 (1,098)Share based payment - 24Premium arising on shares issued 1,689 -Loss for the year - (841)At 31 December 2006 10,554 (1,915)CompanyAt 1 January 2006 8,865 (3)Share based payment - 24Premium arising on shares issued 1,689 -Profit for the year - 100At 31 December 2006 10,554 121
19. Reconciliation of Movements in Shareholders' Funds
GroupShareholders' Funds 2006 2005 US$000 US$000Loss for the year (841) (1,118)New equity share capital subscribed 1,881 87Adjustment to prior year share issue costs - 32Share based payment 24 -Net increase/(decrease) to funds 1,064 (999)Opening shareholders' funds 8,802 9,801Closing shareholders' funds 9,866 8,802CompanyShareholders' FundsProfit/(Loss) for the year 100 (166)New equity share capital subscribed 1,881 87Adjustment to prior year share issue costs - 32Share based payment 24 -Net addition/(reduction) to funds 2,005 (47)Opening shareholders' funds 9,897 9,944Closing shareholders' funds 11,902 9,89720. Controlling Party
There is no controlling party.
For further information, please contact:
Vassilios Carellas/Craig Brown, Kryso Resources plc.Tel: 020 7371 0600Brett Miller, Ruegg & Co Ltd.Tel: 020 7584 3663Richard Hail, Fox-Davies Capital Limited.Tel: 020 7936 5200
Stephen Clayson/Ron Marshman/John Greenhalgh, City of London PR Limited. Tel: 020 7628 5518
KRYSO RESOURCES PLC