CRC.L Regulatory News (CRC)

28 Sep 2005 14:30

28th September 2005COPPER RESOURCES CORPORATION("Copper Resources" or the "Company")INTERIM REPORT FOR SIX MONTHSEnded June 30, 2005Copper Resources Corporation (AIM: CRC), the minerals exploration and miningcompany, today released its interim report for the 6 months ended June 30, 2005Financial highlights * Cash of $16.44 million * Zero debt Business highlights through September 30, 2005 * Acquisition of Haib Copper Project in the politically stable country of Namibia to complement CRC's existing substantial interest in the Hinoba copper project in the Philippines. * Total copper resource base now at 3.2 billion pounds (7.2 billion pounds after acquisition of Congolese company (see below). * Admission onto London Stock Exchange (AIM section) 21st April 2005 * Appointment of Sir Sam Jonah as non-executive Chairman * Granting of Mineral Production Sharing Agreement ("MPSA") which allows commencement of opera-tions in the Philippines * Entering into Memorandum of Understanding with the Forrest Group to acquire 75% of Miniƒ¨re Musoshi et Kinsenda, which enables the Company to become a producer in the near term from high-grade 5.3% Kinsenda deposit along Zambian border in Katanga Province, Democratic Republic of Congo. Sir Sam Jonah, Chairman, commented,"2005 promises to be an eventful year for CRC with significant developments ona number of fronts, including: * Advancing the Hinoba copper project toward completion of a bankable feasibility study, after having been granted the MPSA in August 2005; * Evaluating the optimal metallurgical process recovery route for the Haib copper project to render a determination of its long-term economic viability; and * The planned acquisition of a 75% interest in MMK, will enhance the Company's ability to become a copper producer earlier than originally anticipated For further information:Mitchell Alland Executive Vice Chairman - CRC +44 (0)787 569 5563 John Robertson Nabarro Wells & Co. +44 (0)20 7710 7405 Bill Staple / Westhouse Securities +44 (0)20 7601 6100 Cailey Barker Toby Hall/Jade gth media relations +44 (0)20 7153 8039/8035 Mamarbachi Dear Shareholders,The first six months of 2005 was a pivotal period for Copper ResourcesCorporation ("CRC" or the "Company"), culminating in an April 2005 listing ofthe Company's shares on the Alternative Investment Market ("AIM") of the LondonStock Exchange and a ‚£4 million fund raising. The successful IPO, coupled withthe previous pre-IPO financing of US$11.1 million, has provided CRC thefinancial strength to accelerate its Bankable Feasibility Study ("BFS") on thePhilippines-based Hinoba copper project; acquire an additional copper projectin Namibia which has increased CRC's total copper resource base to 3.2 billionpounds; and in early September enter into an MOU to acquire a 75% interest inMMK in Katanga Province of Congo whose assets include world class copperdeposits and infrastructure. The MMK acquisition enables CRC to become aproducer in the near term from the high-grade 5.3% Kinsenda deposit, bringingthe Company's resource base up to 7.2 billion pounds of copper.LONDON AIM ADMISSION AND FINANCINGFavourable market conditions and the requirement for additional capital, led tothe decision in early 2005 to list CRC's shares on the London AIM market. Thismarked a major milestone for the Company after the acquisition of Hinoba-anwhich has had three years as a private company funded by its management and asmall group of private investors.CRC successfully raised US$11.1 million in a pre-IPO financing followed by a ‚£4million (before issue costs) IPO placement to institutional investors at ‚£1.00per share. CRC's shares were admitted to trading on AIM on 21 April 2005. TheAIM listing has ex-panded the Company's institutional shareholder base andraised its profile in the mining industry. With the funds raised from the IPO,the Company is well positioned to accelerate its ongoing exploration andfeasibility study programs on the Hinoba-an copper project and the recentacquisition in Namibia, as well as to proceed with the MMK acquisition inCongo. As of June 30, 2005, the Company had cash on hand of US$16.44 millionand had no debt.HINOBA COPPER PROJECT (PHILIPPINES)Copper Resources is the ultimate holding company of a group of mineralexploration, development and operating companies. The Group effectively has a92.5 per cent economic interest in the Hinoba-an Porphyry Copper Project,subject to a 3 per cent net benefits royalty payable to the original claimowners. The Project is located on the island of Negros in the Philippines,approximately 700 km south of Manila.The Group's interest in the project is held under an Integrated Mining andOperating Agreement with Colet Mining and Development Corporation ("Colet"),which holds mining leases over 90 hectares and approximately 2,900 hectares ofmineral claims (collectively, the "Colet Claims"). The Colet Claims cover twoknown porphyry copper deposits, the Don Jose deposit and the A1 deposit, whichcomprise the Hinoba-an property.Over the years, a significant amount of exploration and metallurgical testworkhas been performed on the Hinoba-an property with its previous owners havingspent approximately C$14.7 million. The Hinoba-an property has been subject toapproximately 48,000 metres of diamond drilling and 11,000 metres of reversecirculation drilling, totalling 59,000 metres of drilling.A scoping study undertaken in 1998 envisioned a 15-year mine life for the ColetClaims based on a geological resource of 254 million tonnes at 0.46% Cu at a0.30% Cu cut-off. The study showed that the deposits could be profitably minedby open pit method with the ore processed in a conventional flotation millingoperation to produce approximately 2 billion pounds of recoverable copper andother by-products. Annual production was estimated at 56,000 tonnes ofrecoverable copper with an average cash cost (including smelting, refining andby-product credits) of US$0.48/lb of copper.CRC will complete additional infill core drilling on the property and afeasibility study within the next 18 months. Upon completion of the feasibilitystudy, and assuming favourable economics, the Group plans to develop apotential 15 million tonnes per annum open pit copper mine on the Hinoba-anproperty. The development of the project will be dependent on obtaining futurefinancing.In August 2005 the MPSA application was granted and registered to Colet by theSec-retary of Environment and Mines of the Philippines, and, in line withexisting agreements between CRC and Colet, is in the process of being assignedto CRC. This is a significant milestone as CRC can now proceed with itsBankable Feasibility Study, which includes an infill drilling program andmetallurgical testwork.HAIB COPPER PROJECT (NAMIBIA)In May 2005, the Company acquired an option on the Haib Project a substantiallow grade sulphide copper porphyry deposit, located in southern Namibia 8 kmfrom the Orange River and the South African border. The property is held byDeep South Mining Company (Pty) Ltd. under Exclusive Prospecting License (EPL)3140. The licence area is 74,563 hectares and incorporates all of themineralization within the Haib deposit and a substantial area around thedeposit. The EPL renewal date is 21 April 2007. Renewal of the licence isassured under the Minerals Act of 1992 providing all conditions of the EPL havebeen satisfied and a reasonable work program is submitted in support of therenewal application.Under the terms of the Option Agreement, CRC can earn a 60% interest in theHaib Project by incurring initial expenditures of US$1.2 million and throughthe issuance of 120,000 CRC shares. With further expenditures of US$1.0 millionand the issuance of a further 150,000 CRC shares, CRC can earn up to a 90%interest in the Haib Project.With 52,000 meters of drilling, the Haib Project is a well-defined deposit thatwas placed on care and maintenance in the late 1990s owing to low copperprices. Previous work has been carried out by Falconbridge (Pty) Ltd.(1963-1964), King Resources of South Africa (1968-1969), Rio Tinto ZincCorporation (1972-1975), Rand Merchant Bank Ltd. (1992-1993), and most recentlyby Great Fitzroy Mines NL (GFM) of Australia (1995-1998). The most recentfeasibility study work, undertaken in 1995-1997, focused on producing cathodecopper utilizing a roast-leach-electro-winning process plant. In 1996, BehreDolbear estimated the Haib Project resource at 244 million tonnes, grading0.37% Cu, using a cut-off grade of 0.3% Cu. This equates to 2 billion pounds ofcontained copper (net 1.2 billion pounds Cu to CRC based on 60% ownership).Namibia is a politically stable country in which mining is the majorcontributor to GDP. The Namibian Government has indicated its strong support toadvance the Haib Project to a point where a production decision can be made.The extensive drilling and metallurgical database available for the HaibProject is already almost at the standard necessary for a bankable feasibilitystudy. The acquisition of the Haib Project represents a low cost entryopportunity for CRC into a second major copper project. CRC intends to use theextensive geological and metallurgical database available on the Haib Projectto evaluate the optimal process recovery method for project development.ACQUISITION OF 75% OF MINIERE MUSOSHI ET KINSENDA ("MMK")On the 7th September 2004 CRC entered into a Memorandum of Understanding toacquire 75% of MMK which holds three deposits in the south of Katanga Provinceof the DRC, located near the Zambian border as follows:The Kinsenda and Musoshi properties were mined in 1972-1983 by a Japanesemining consortium and by Canadian management on behalf of the Zairiangovernment from 1983 - 1987 and subsequently by Gecamines, a Congolese statemining company; and are now owned by MMK, which is held 20% by SODIMICO, aGovernment company, and 80% by the Forrest Group, the largest private businessin Katanga and one of the largest in Congo, with extensive diversifiedoperations including mining, engineering, construction, cement. Having operatedsuccessfully in Congo since 1922, the Forrest Group has extensive operationaland management experience in the country that will support and facilitate CRC'seffort in successfully developing the properties.The area has extensive infrastructure including roads, water, staffaccommodation and power. The power infrastructure includes a 220/110Kva line toboth Kinsenda and Musoshi. There is also a substation at Musoshi withgenerators for back up if required. At Musoshi there is a 2,500 tpd oredressing plant which will need to be refurbished prior to commencing operationsThe programme would be to start production at Kinsenda within 6-9 months afterthe de-watering of the mine, which should take 6 months. Initial indicationsare that it will cost in the order of US$5 million to complete the de-wateringof the mine and US$30 million to refurbish and regenerate the underground mineand Musoshi concentrator.EXPANSION OF THE BOARDIn May, the Board was pleased to welcome Sir Sam Jonah as non-executiveChairman. Sir Sam Jonah is president of AngloGold Ashanti Limited, a NYSElisted company, which is one of the world's largest gold producers with amarket capitalization of more than US$8.5 billion. Previously, he was chiefexecutive officer of Ashanti Goldfields Company Limited since 1986, and oversawits growth and listing as the first Sub-Saharan African company on the NYSE. Hebecame president of AngloGold Ashanti in May 2004, when Ashanti was acquired byAngloGold Limited. He is a member of numerous advisory committees includingPresident Thabo Mbeki's International Investment Advisory Council of SouthAfrica, President Kufuor's Ghana Investors' Advisory Council, and the UnitedNations Secretary General's Global Compact Advisory Council. His skills,knowledge and contacts complement the Board's existing operational andfinancial expertise.STRATEGY AND OUTLOOK2005 promises to be an eventful year for CRC with significant developments on anumber of fronts, including: * Advancing the Hinoba copper project toward completion of a feasibility study; * Evaluating the optimal metallurgical process recovery route for the Haib copper project to render a determination of its long-term economic viability; * Refurbishing the Kinsenda Mine and reconditioning the existing Musoshi plant and infrastructure, to start production in the near term, producing 40,000t of copper per annum. By focusing on the development of CRC's assets in the Philippines, Namibia andCongo, CRC hopes to enhance shareholder value.We would like to express our appreciation to the management and ourshareholders for their continued support.Sincerely,Sir Sam Jonah Mitchell AllandChairman Executive Vice Chairman CONSOLIDATED FINANCIAL STATEMENTS OF COPPER RESOURCES CORPORATION PERIOD ENDED JUNE 30, 2005 (Expressed in U.S. Dollars) Consolidated Balance Sheets (Expressed in U.S. Dollars) As at As at Year ended June 30, June 30, December 31, 2005 2004 2004 $ $ $ [unaudited] [unaudited] [audited] Non - current assets Plant and equipment 5,980 1,293 1,688 Intangible assets - mineral exploration 2,543,851 209,009 212,573costs Investment in associate [note 4] - 78,009 78,009 Investment in other companies [note 4] 200,000 - - 2,749,831 288,311 292,270 Current assets Trade and other receivables 196,105 7,954 8,500 Advances to associate - 449,851 448,476 Cash and Cash equivalents 16,440,513 117,420 1,348,286 16,636,618 575,225 1,805,262 Current liabilities Trade and other payables (96,387) (31,708) (70,054) Deferred purchase consideration (75,000) - - Net current assets 16,465,231 543,517 1,735,208 Total assets less current liabilities 19,215,062 831,828 2,027,478 Non-current liabilities Deferred purchase consideration (625,000) - - Deferred income tax liabilities (492,988) - - 18,097,074 831,828 2,027,478 Shareholders' equity Capital stock [note 5] 16,503,895 5,000 10,000 Contributed surplus [note 5] 2,817,400 1,252,400 2,817,400 Other reserves [note 5] 1,628,728 33,000 107,250 Deficit (2,866,571) (458,572) (907,172) 18,083,452 831,828 2,027,478 Minority interest 13,622 - - Total equity 18,097,074 831,828 2,027,478 Consolidated income Statements (Expressed in U.S. Dollars) 6-months 6-months 12-months ended ended ended June 30, 2005 June 30, 2004 December 31, 2004 $ $ $ [unaudited] [unaudited] [audited] Revenue Interest and other income 137,186 379 1,603 Expenses General and administrative expenses (543,153) (365,283) (743,055) Share option expenses (1,169,402) - (74,250) Amortization (327) - (506) Foreign exchange losses (383,703) (3,700) (996) (2,096,585) (368,983) (818,807) Net loss for the period before (1,959,399) (368,604) (817,204)taxation Income tax expense - - - Net loss for the period (1,959,399) (368,604) (817,204) Basic and diluted loss per share (0.10) (0.07) (0.10) ` Consolidated Statements of cash flows (Expressed in U.S. Dollars) 6-months 6-months 12-months ended ended ended June 30, 2005 June 30, December 31, 2004 2004 $ $ $ [unaudited] [unaudited] [audited] Cash flows from operating activities Net loss for the period (1,959,399) (368,604) (817,204) Add items not affecting cash Amortization 327 - 506 Foreign exchange (3,770) 3,507 4,883 Stock-based compensation expense 1,169,402 - 452,250 (793,440) (365,097) (359,565) Net changes in non-cash working capital Trade and other receivables (169,039) (7,210) (7,756) Trade and other payables 93,960 (7,243) 31,103 (75,079) (14,453) 23,347 Net cash from operating activities (868,519) (379,550) (336,218) Cash flows from investing activities Investment in associate - (60,000) (60,000) Acquisition of tangible assets (4,619) - (901) Investment in subsidiary company - (6,000) (6,000) Investment in mineral exploration (599,407) - (3,565)costs Investment in Afric-Can Marine (200,000) - -Minerals Corporation Cash acquired in acquisition of 101 888 888subsidiary companies Net cash used in investing (803,925) (65,112) (69,578)activities Cash flows from financing activities Net proceeds from issuance of common 16,764,671 - -shares Contributions by a shareholder - 400,000 1,592,000 Net cash generated from financing 16,764,671 400,000 1,592,000activities Net change in cash and cash 15,092,227 (44,662) 1,186,204equivalents during the period Cash and cash equivalents at 1,348,286 162,082 162,082beginning of period Cash and cash equivalents at end of 16,440,513 117,420 1,348,286period CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(Expressed in U.S. Dollars) Capital Contributed Other Retained Shareholders' Stock surplus reserves deficit equity $ $ $ $ $ Balance at December 5,000 814,900 - (89,968) 729,93231, 2003 Additional - 437,500 33,000 - 470,500contributions of capital Net loss for the - - - (368,604) (368,604)period Balance at June 30, 5,000 1,252,400 33,000 (458,572) 831,8282004 Additional 5,000 1,565,000 74,250 - 1,644,250contributions of capital Net loss for the - - - (448,600) (448,600)period Balance at December 10,000 2,817,400 107,250 (907,172) 2,027,47831, 2004 Additional 16,427,895 - - - 16,427,895contributions of capital Share option charge - - 1,587,478 - 1,587,478 Share options 66,000 - (66,000) - -exercised Net loss for the (1,959,399) (1,959,399)period Balance at June 30, 16,503,895 2,817,400 1,628,728 (2,866,571) 18,083,4522005 Notes to Consolidated Financial Statements [All amounts and information as at June 30, 2005 and for the six-month periodsended June 30, 2005 and 2004 are unaudited]1. Nature of operation Copper Resources Corporation ["the Company or CRC"] was incorporated on November 25, 2004, in the British Virgin Islands under the International Business Companies Act 2000. On January 11, 2005, the Company entered into an agreement to acquire the entire issued share capital of Hinoba Holdings Limited ["HHL"] by way of a share for share exchange. The acquisition of HHL was accounted for as a reverse take over (see note 3). Under reverse take over accounting, HHL was identified as the acquirer and for accounting purposes the consolidated entity is considered to be a continuation of HHL with CRC consolidated from the date of acquisition. The pre-transaction financial position, results of operations and cash flows of the consolidated entity presented are those of HHL. Following the acquisition of HHL, the Company has, through a subsidiary, acquired the operating rights to the Hinoba-an Porphyry Copper Project on Negros Island in the Republic of the Philippines. On January 28, 2005, the Company became the registered holder of the entire issued share capital of Copper Spur Mining Corporation ["Copper Spur"] that was previously held by HHL. On May 25, 2005, the Company acquired a wholly owned subsidiary, African Millennium Corporation, through which it acquired option rights to the Haib Copper project in southern Namibia. The Principal activity of the Company is as a holding company for the Group, to pursue exploration and development of minerals. 2. Significant accounting policies These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), including International Accounting Standards ("IAS") and Interpretations issued by the International Accounting Standards Board. The principal accounting policies adopted in the preparation of the consolidated financial information are set out below: (a)Basis of Presentation These consolidated interim financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. (b)Basis of Consolidation The consolidated financial statements include the accounts of CRC, Copper Spur Mining, African Millennium Corporation ["AMC"] and Hinoba Holdings Limited and its subsidiaries. On acquisition and when control is achieved, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition or at the date control is achieved. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. The result of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries in order to bring the accounting policies in line with those adopted by the Group. All significant intra-group transactions and balances between the Group's companies are eliminated on consolidation. (c)Segment Reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. (d)Mineral Exploration Costs Expenditures for mineral exploration work prior to and subsequent to drilling are deferred as incurred. These will be written off if the results of the exploration work are unsuccessful. If the results are successful, the deferred expenditures and the subsequent development cost will be capitalized and amortized from the start of commercial operations. (e)Foreign currency translation Group companies The consolidated financial information is presented in US Dollars, which is considered by management to be the most appropriate presentation currency for its consolidated financial information. All assets and liabilities are translated at the closing rate existing at the balance sheet date. Income and expense items are translated at an average rate for the period. Equity items other than the net profit or loss for the period that is included in the balance of accumulated profit or loss are translated at the closing rate existing at the balance sheet date. All translation differences are recognized as a separate component of equity. Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate Transactions and balances Transactions in currencies other than US Dollars are recorded at the rates of exchange prevailing on the dates of the transactions or translated at the average exchange rates for the period. Exchange differences resulting from the settlement of transactions denominated in foreign currency are included in the statement of income using the exchange rate ruling on that date. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Foreign currency gains and losses arising from the translation of assets and liabilities are reflected in the profit and loss account as foreign exchange translation gains less losses. (f)Equipment Costs Equipment is carried at cost less accumulated amortization and any impairment in value. Amortization is computed using the straight- line method over the estimated useful lives of the equipment ranging from three to five years. (g)Income Taxes The British Virgin Islands under the IBC imposes no corporate taxes or capital gains. However, the Company as a group may be liable for taxes in the jurisdictions where it is developing mining properties. Deferred income tax is provided in full, using the liability method, on taxable temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the financial statements. (h)Stock based compensation The Company follows the Black-Scholes option pricing model. Under this model, share-based payments are measured at the fair market at the date of grant. The fair value determined at the grant date is expensed to when options vest. Options vest immediately. (i)Cash and Cash Equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and other unrestricted short-term deposits with original maturities of three months orless. (j)Long -Term Investment Investments in companies over which the Company has significant influence are accounted for using the equity method. (k)Financial Instruments The carrying value of accounts receivable and accounts payable and accrued liabilities approximates to their fair values at the date of the transaction due to the relatively short term maturity of these instruments. Fair value represents the amount that would be exchanged in an arm's length transaction between willing parties and is best evidenced by a quoted market price. (l) Comparative information The comparative information for the year ended 31 December 2004 relates to HHL and has been extracted from the AIM Admission Document dated 14 April 2005. HHL prepared its financial information for that year under IFRS. The accounting policies adopted in the six months to 30 June 2005 are the same, in all material respects, as those adopted by HHL in the financial information for the year ended 31 December 2004 as set out in the Aim Admission Document. 3. Reverse Take Over On January 11, 2005, HHL entered into a reverse take over agreement with CRC. Under the terms of the agreement, CRC issued 10,756,600 common shares for all the issued and outstanding shares of HHL. This resulted in the former shareholders of HHL obtaining 99.99% of the outstanding shares of CRC. The acquisition was accounted for as a reverse take over. For the purposes of accounting for this transaction, HHL is treated as the acquirer and CRC the acquiree. The net assets of CRC at the date of acquisition consisted of share capital of $1 and a deficit of $4,872 relating to administrative expenses which have been charged to the consolidated income statement. 4. Acquisitions Selenga Mining Corporation The 40% investment in Selenga Mining Corporation ["SMC"] was recorded on an equity basis during 2004. Hinoba Holdings (Philippines), Inc. ["HHPI"], a subsidiary of HHL, paid $60,000 on January 13, 2004 and a further $15,000 on January 15, 2005 when it exercised the assignable option dated January 13, 2004 allowing it the option to acquire the remaining 59.6% of the shares outstanding in SMC for a purchase price of $150,000. HHPI assigned its interest in SMC to its subsidiary, Hinoba-an & Sipalay Holdings Inc ["HSHI"], on January 15, 2005. As a result of the above assignment HSHI owns 92.5% of SMC. This transaction has been accounted for by the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the acquisition are as follows: Net assets acquired - at fair value Advances from Colet Mining $ 18,566 Mineral exploration costs 622,682 Accounts payable and accrued liabilities (7,371) Payable to HHPI (452,246) Minority interest (13,622) $ 168,009 Consideration given - at fair value Cash $ 93,009 Deferred consideration 75,000 $ 168,009 African Millennium Corporation On May 25, 2005, CRC acquired 100 common shares of AMC, representing 100% of the outstanding shares. This transaction has been accounted for by the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the acquisition are as follows: Net assets acquired - at fair value Cash $ 100 Exploration option rights 1,408,538 Deferred income tax liabilities (492,988) $ 915,650 Consideration given - at fair value Cash $ 250,000 Common shares in the Company 40,650 Deferred consideration 625,000 $ 915,650 $250,000 of the deferred consideration is contingent upon the successful completion of a bankable feasibility study of the project and $375,000 is contingent upon the commencement of commercial production at the Haib project. CRC through its acquisition of AMC holds option rights to certain mineral properties located in southern Namibia close to the South Africa border, referred to as the Haib Copper Project. ["Haib Project"]. On May 25, 2005, the Company entered into an agreement with Afri-Can Marine Minerals Corporation ["AFA"] and Deep-South Mining Company (Pty) Limited ["Deep-South"] to explore and develop the Haib Project. Under the terms of the agreement, the Company has paid $162,000 to AFA, subscribed for US$200,000 in AFA's shares and issued 60,000 common shares of the Company to Deep-South and has a further commitment to fund US$1,200,000 in expenditures on the project within 40 months. The Company shall be entitled to a 60% interest in a new company which will be formed to hold the Haib Project at the time the Company has fulfilled its funding obligations. Hinoba Holdings (Australia) Pty Ltd. On April 28, 2005, HHPI, a subsidiary of HHL incorporated a wholly owned subsidiary, Hinoba Holdings (Australia) Pty Ltd. The results of operations have been included in the financial statements from the date of incorporation. As HHPI was the founding shareholders there was no acquisition of net assets. 5. Capital stock (a) Authorized The Copper Resources Corporation ["the Company/CRC"] was incorporated with an authorized share capital of 50,000 common shares of $ 1 each. On April 1, 2005, the authorized share capital of the Company was amended so that the Company was authorized to issue up to 500,000,000 shares of one class and one series of no par value. (b) Issued and outstanding common shares Shares Amount # $ Balance - January 1, 2005 and issued shares before reverse take over (i) 1 10,000 Shares issued on reverse take over [note3] 10,756,600 Balance after reverse over take over 10,756,601 10,000 Shares issued after reverse take over: Founder shares (ii) 1,300,000 13,000 Exercise of stock options (ii) 600,000 216,000 Private placement (iiii) 11,100,000 10,516,081 Initial public offering (iv) 4,000,000 7,615,600 Initial public offering costs (1,948,086) Common shares issued to acquire 100% interest in African Millennium Corporation (v) 60,000 40,650 Common shares issued for earn-in interest in Haib project (v) 60,000 40,650 Outstanding as at June 30, 2005 27,876,601 16,503,895 (i) Under reverse take over accounting, the share capital is presented as if the consolidated financial statements are a continuation of the legal subsidiary, HHL. Therefore, the opening balance of $10,000 represents the book value of the share capital of HHL on 1 January 2005. The numbers of shares in issue, however, reflect that of the legal parent company. (ii) On April 1, 2005, the Company issued 1,300,000 common shares to founders at a price of $0.01 each for cash and 600,000 common shares pursuant to the exercise of share options at an exercise price of $0.25 each for cash consideration of $150,000. (iii) Pursuant to a private placement carried out by the Company, the Company issued 11,100,000 common shares at a price of $1.00 on April 1, 2005 for cash with financing costs of $583,919. (iv) Following the Company's admission to AIM, the Company issued 4,000,000 shares at a price of 1 British pound (US$1.9039) on April 21, 2005 for cash. (v) On May25, 2005,in consideration for the acquisition of African Millennium Corporation (note 4), the Company issued 60,000 shares to the vendors and 60,000 shares to a joint venture partner for an earn-in interest in the Haib project (note 4). The market price of these shares at the time of issue was 37 British pence (US$0.68) per share. The value of the shares, in the amount of $40,650 has been included as an investment in a subsidiary and $40,650 as exploration option rights. (c) Option Plan The Company has established a share option scheme whereby the Directors may from time to time at their discretion grant to the Directors, employees and consultants of the Group Options to subscribe for Common Shares. Under the plan, the exercise price of each option shall be the average of the middle market quotation for the thirty dealing days preceding the grant and the number of options that may be granted is limited to 10 per cent of the total Common shares issued. An Option is exercisable on the date it is granted and expires on the fifth anniversary of the grant date. The details of the changes in the number of stock options outstanding as at June 30, 2005 are as follows: OptionsAmount #$Balance - January 1, 2005 (i) 975,000107,250Granted February 14, 2005 (ii) 1,325,000 742,663 April 4, 2005 (iii) 320,000337,343 April 21, 2005 (iv) 400,000241,755 April 21, 2005 (v) 208,175176,321 May 24, 2005 (vi) 150,00089,396 Exercised (600,000) (66,000)Outstanding, June 30, 2005 2,778,175 1,628,728 (i) Pursuant to the reverse take over agreement, the company granted 975,000 stock options to the existing option holders of HHL. at an exercise price of $0.25 expiring on January 19, 2010, in substitution for their existing options in HHL. (ii) Options having an exercise price of $1 expiring February 13, 2010 (iii) Options having an exercise price of 1 British pound expiring April 4, 2010 (iv) Options having an exercise price of 1 British pound expiring October 21, 2006 (v) Options having an exercise price of 1 British pound expiring on April 21, 2008 (vi) Options having an exercise price of 58 British pence expiring on May 23, 2010 The following table summarizes information about stock options outstanding as at June 30, 2005: Weighted averageExercise priceNumber outstanding Remaining contractual life $ # Years $0.25 375,000 4.56 $1.00 1,325,000 4.63 $1.06 150,000 4.90 $1.87 320,000 4.76 $1.91 608,175 2.06 2,778,175 4.18 The fair value of stock options granted during the period ended June 30, 2005 has been estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate between 3.03% to 3.7%, expected dividend yield of nil, expected volatility of 63%, expected option life between 1.5 to 5 years. The cost of share options granted during the period amounted to $1,587,478 of which $1,169,402 has been included within administrative expenses in the consolidated income statement and $418,076 has been charged to capital stock as part of the costs of the initial public offering. . 6. Segmented informationThe Company operates principally in one reportable business segment, thedevelopment and exploration of mineral properties. Information relating togeographical segments is set out below: a. Revenue b. June 30, June 30, December 31, 2005 2004 2004 British Virgin Islands 126,702 - - Bahamas 10,484 379 1,603 137,186 379 1,603 . b. Profit (loss) for the period c. June 30, June 30, December 31, 2005 2004 2004 British Virgin Islands (1,807,857) - - Bahamas 4,811 (339,172) 731,542 United States (3,628) - (1,902) Philippines (152,725) (29,432) (83,761) (1,959,399) (368,604) (817,204) The losses of CRC, SMC ,AMC and Copper Spur from their respective dates ofacquisition to the period ended June 30, 2005 were $1,804,445.Assuming the date of acquisition for all business combinations effective duringthe period had been the beginning of the period, the total revenue of thecombined entity would have been $137,186 and the combined losses would havebeen $1,959,399. c. Intangible assets -mineral exploration costs June 30, June 30, December 31, 2005 2004 2004 United States 79,957 75,612 79,177 Philippines 842,460 133,397 133,397 Namibia 1,611,189 - - 2,533,606 209,009 212,5737. Loss per share The basic loss per common share has been calculated based on the weighted average number of shares outstanding for the period ended June 30, 2005 of 18,886,103 (June 30, 2004 - 5,378,300, December 31, 2004 - 8,008,671) Under reverse take over accounting, the weighted average number of shares is affected by the number of shares issued to complete the reverse take over. In 2005 and 2004, all stock options were excluded from the loss per share calculation as their effect was anti-dilutive. 8. Subsequent events Subsequent to the period ended June 30, 2005, the company has entered into a Protocole d'Accord ("Memorandum of Understanding") with George Forrest International Afrique SPRL ("Forrest Group") dated September 7, 2005. CRC made a Stock Exchange announcement on the September 8, 2005 outlining the terms of the agreement. In essence CRC will acquire 75% of Minere Musoshi Kinsenda ("MMK") and will issue to the Forrest Group 40% of the post acquisition equity of CRC. CRC will immediately embark on a US$5.0 million dewatering program of the Kinsenda Mine. The US$5.0 million funds to be provided by CRC will be recorded in the form of a loan which will be capitalized upon closing of the transaction. No other matters or circumstances have arisen since the end of the period which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years. 9. These interim accounts were approved by the Board of Directors on September 27th 2005 COPPER RESOURCES CORPORATION