ECR Minerals Regulatory News (ECR)

22 Nov 2007 15:49

Mercator Gold PLC22 November 2007 Mercator Gold plc PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 & ANNOUNCEMENT OF AGM ON 21 DECEMBER 2007 London: 22 November 2007 - Mercator Gold plc ("Mercator" or "the Company")announces its preliminary results for the year ended 30 June 2007. Highlights Commencement of production, post year-end, at the Meekatharra GoldProject with annualised target of 120,000 ounces of gold Successful commissioning of Bluebird processing plant New significant exploration target identified at Euro Project Substantial increase to reserves and resources Chairman's report It is with great pleasure I present the third Annual Report to Shareholders ofMercator Gold plc in what has been a truly landmark year for your Company. Firstly, and most importantly, I am pleased to report the numerous milestonesachieved during the 2006/7 financial year were free of lost time injuries andenvironmentally negative incidents. This highlights the commitment anddedication of all staff and employees of Mercator Gold in maintaining thehighest levels of safety and environmental practices and is something we willcontinue to strive for at all times. On completion of the acquisition of the Meekatharra assets in early 2006 yourCompany set itself the task of bringing the mines of Meekatharra back intoproduction on a profitable and sustainable basis. To achieve this objective the Company realised it needed to establish a reservebase sufficient to support production for at least four years at 120,000 ouncesper year. The Company's minimum requirement for the recommencement of productionwas therefore in the order of 500,000 ounces of reserves.The Company's successful exploration at Surprise and Bluebird at Yaloginda in2005 and 2006 formed the basis of a prolonged campaign of drilling, whilst therecognition of the potential of the Prohibition-Vivian-Consols area within thePaddy's Flat field became a focus of a second area of successful exploration.Our resources at the beginning of the year were 2,160,000 ounces of gold andhave now grown to a total of 2,443,000 ounces of gold.I am pleased to say the mining studies associated with reserve definition werecommenced and largely completed during the year under review and now stand at504,000 ounces of gold. Immediately following on from the reserve definition studies the Company movedon its commitment to recommence production at Meekatharra. With reservessufficient to sustain production for at least four years the Company undertook athorough refurbishment of the Bluebird mill at a cost of £3 million. First production is being sourced from the Surprise deposit, which is situatedapproximately 800 metres from the Bluebird Mill. Surprise contains a number ofhigh grade lenses within a porphyry of generally lower grades, and will be minedover a nine month period. Pre-stripping of the larger and somewhat deeperBluebird deposit - which lies approximately one kilometre from the Mill - willcommence shortly, with ore from Bluebird to be blended with Surprise in the NewYear. These deposits will supply approximately 200,000 ounces of production overa 20-22 month period. Coinciding with the production from the Surprise and Bluebird pits, the Companyintends to begin underground development of the highly regarded Paddy's Flatdeposits. These deposits will be the source of production for at least two yearsafter the depletion of the Surprise/Bluebird reserves and in our view, have thepotential to provide further reserves over many more years. This view is basedon the important fact that the Paddy's Flat deposits are open both along strikeand at depth. Our reserves represent only a small portion of the known mineralisation atPaddy's Flat, which has to date produced over 2 million ounces of gold to anaverage depth of less than 250 metres. The financial results for the year reflect the ongoing costs associated withputting in place the financing and resources that will allow your Company totake advantage of the current upswing in the international gold market. YourBoard remains cautiously optimistic that there is a longer term overallimprovement in the West Australian gold mining industry and Mercator has theappropriate asset base to take advantage of this. It is with this opportunity inmind a full listing of Mercator on the Australian Stock Exchange is beingconsidered. Our objectives are: 1. To maintain our exemplary record in the areas of safety and environmentalmanagement; 2. To engage with our employees and the local community to the benefit of allstakeholders; 3. To produce 120,000 ounces of gold in the first full year of production bySeptember 2008; 4. To grow our resources by a further one million ounces; 5. To grow our reserves by a minimum of 220,000 ounces. In conclusion, I would like to extend a special thanks to our operational stafffor the way they have carried out their tasks during the year - bringing a mineinto production is never easy. In particular I would like to thank DenisGeldard, Alan Coles, Laurie Mann and Clarrie Lauritsen for their tirelesspursuit of the Company's objectives. Julian and Sue Vearncombe left the Company as full-time consultants during thecourse of the year. I thank them for their efforts and wish them well. Finally, I would like to thank you, our shareholders, for your continuingsupport in what promises to be another active and exciting year ahead. Terry StrappChairman For further information please contact: Mercator Gold plcTerry StrappChairman Tel: +61 (0) 412 228 422 Patrick HarfordManaging DirectorTel: +44 (0) 20 7929 1010Mob: +44 (0) 7786 486 645 Email: info@mercatorgold.comWebsite: www.mercatorgold.com Bankside Consultants Ltd Simon RothschildKeith IronsOliver WintersTel: +44 (0) 20 7367 8888 Consolidated Profit and Loss AccountFor the year ended 30 June 2007 2007 2006 £ £Administrative expenses (3,344,664) (2,127,615)Other income 179,530 233,469Operating loss (3,165,134) (1,894,146)Interest payable and similar items (199,747) (94,682)Interest receivable and similar items 549,112 152,203Loss on ordinary activities before taxation (2,815,769) (1,836,62)Taxation (60,116) -Loss on ordinary activities after taxation (2,875,885) (1,836,625)Basic and diluted loss per share (5.18)p (7.47)pAll amounts relate to continuing activities Consolidated Statement of Total Recognised Gains and LossesFor the year ended 30 June 2007 2007 2006 £ £Loss for the financial year (2,875,885) (1,836,625)Exchange adjustments on foreign currency net 1,270,907 (929,394)investmentsTotal recognised gains and losses for the (1,604,978) (2,766,019)financial year Consolidated Balance SheetAt 30 June 2007 2007 2006 £ £Fixed assetsIntangible 16,016,099 10,529,014Tangible 6,798,177 2,859,412Total fixed assets 22,814,276 13,388,426Current assetsStocks 163,766 91,687Debtors 437,237 403,524Cash at bank and in hand 6,647,665 13,297,216Total current assets 7,248,668 13,792,427Creditors - amounts falling due within one (1,242,737) (1,140,995)yearNet current assets 6,005,931 12,651,432Total assets less current liabilities 28,820,207 26,039,858Creditors - amounts falling due after more - (854,784)than one yearProvisions for liabilities (1,270,380) (1,205,594)Net assets 27,549,827 23,979,480 Capital and reservesCalled -up share capital 6,224,491 5,355,215Share premium account 26,963,483 22,528,660Merger reserve (399,831) (399,831)Other reserves - 128,774Profit and loss account (5,238,316) (3,633,338)Equity shareholders' funds 27,549,827 23,979,480 Consolidated Shareholders' FundsFor the year ended 30 June 2007 2007 2006 £ £Loss for the financial year (2,875,885) (1,836,625)Exchange adjustments on foreign currency net 1,270,907 (929,394)investmentsEquity reserve (transferred)/ arising on conversion/ (128,774) 128,774issue of convertible loan notesNew share capital issued 5,304,099 24,520,078Net addition to shareholders' funds 3,570,347 21,882,833Opening shareholders' funds 23,979,480 2,096,647Closing shareholders' funds 27,549,827 23,979,480 Consolidated Cash Flow statementFor the year ended 30 June 2007 2007 2006 £ £Net cash outflow from operating activities (3,024,909) (376,588)Returns on investments and servicing of finance 507,690 138,752Capital expenditure and financial investment (8,916,356) (11,988,877)Net cash outflow before management of liquid (11,433,575) (12,226,713)resources and financing:Management of liquid resources 7,007,533 (12,939,994)Financing 4,162,217 25,426,774(Decrease)/increase in cash in the period (263,825) 260,067 Reconciliation of net cash flow to movement in netfunds(Decrease)/increase in cash in the period (263,825) 260,067Movement in short term deposits (7,007,533) 12,939,994Exchange differences 621,807 (857,312)(Decrease)/Increase in cash and short term deposits (6,649,551) 12,342,749Decrease/(Increase) in debt due after more than one 854,784 (854,784)yearMovement in net funds in the period (5,794,767) 11,487,965Net funds at 30 June 2006 12,442,432 954,467Net funds at 30 June 2007 6,647,665 12,442,432 Reconciliation of Operating Loss to Operating CashFlowsOperating loss (3,165,134) (1,894,146)Depreciation and amortisation charges 202,434 48,187Increase in debtors (33,713) (208,552)Increase in inventories (72,079) (91,687)Increase in creditors 41,625 1,769,610Loss on disposal of fixed assets 1,958 -Net cash outflow from operating activities (3,024,909) (376,588) Notes: 1 The financial information set out above does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated profit and loss account, consolidated statement of total recognised gains and losses, consolidated balance sheet, reconciliation of shareholders' funds and consolidated cash flow statement have been extracted from the Group's 2007 statutory financial statements upon which the auditors' opinion is unqualified and contained no statements under s237 of the Companies Act 1985. 2 The loss per share is calculated by reference to the loss for the year of £2,875,885 (2006: £1,836,625) and the weighted average number of Shares in issue during the year of 55,547,888 (2006: 24,583,888. There is no dilutive effect of share options or warrants. 3 No dividend is proposed in respect of the period. 4 Selected accounting policies Basis of preparation of financial statements The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. Application of going concern basis and availability of finance These financial statements are prepared on a going concern basis, notwithstanding the loss for the period to 30 June 2007 of £2,875,885 (2006: £1,836,625), which the Directors believe to be appropriate for the following reasons: In common with many mining and exploration companies, the Company has raised finance for its exploration and development activities in discrete tranches to finance its activities for limited periods only and further funding has been raised as and when required. Since the year end the Company has raised £2.5m by issue of a convertible loan note and has arranged a bank loan facility for A$12m (£5m). The Directors are of the opinion that the Company will be able to reach profitable production of gold with these facilities and It is their expectation that such future needs will be met from the profitable mining of gold. The Company commenced gold production in September 2007. Accordingly, the financial statements do not include any adjustments, particularly in respect of fixed assets, investments, loans and provisions for winding up which would be necessary if the Company and Group ceased to be a going concern. Basis of consolidation The Group accounts consolidate the accounts of Mercator Gold plc and its subsidiary undertaking. The acquisition by the Company of Mercator Gold Australia Pty Ltd in August 2004 was accounted for in accordance with the principles of Merger accounting set out in Financial Reporting Standards 6 on "acquisitions and mergers". Accordingly, the consolidated financial statements are presented as if Mercator Gold Australia Pty Ltd has been controlled by the Company throughout the period from its incorporation on 19 January 2004. Deferred exploration and evaluation costs All costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a project are written off as incurred. Subsequent to obtaining the legal rights, all costs associated with mineral exploration and investments are capitalised on a project-by-project basis, pending determination of the feasibility of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads. If an exploration project is successful, the related expenditures will be transferred to mining assets and amortised over the estimated life of the commercial ore reserves on a unit of production basis. Where a licence is relinquished or a project abandoned, the related costs are written off. Where the Group maintains an interest in a project, but the value of the project is considered to be impaired, a provision against the relevant capitalised costs will be raised. The recoverability of all exploration and development costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition thereof. Mine development costs Exploration costs are capitalised as intangible fixed assets until a decision is made to proceed to development. Related costs are then transferred to mining assets. Before reclassification, exploration costs are assessed for impairment and any impairment loss recognised in the profit and loss account. Subsequent development costs are capitalised under mining assets, together with any amounts transferred from intangible exploration assets. Mining assets are amortised over the estimated life of the commercial ore reserves on a unit of production basis. 5 Copies of the Annual Report and Accounts for the year ended 30 June 2007 will be posted to shareholders by 28 November 2007 and will be available, free of charge, from the Company's registered office at Peek House, 3rd Floor, 20 Eastcheap, London, EC3M 1EB, for a period of 14 days from the date of their posting. The financial statements will be delivered to the Registrar of Companies following the conclusion of the annual general meeting. This information is provided by RNS The company news service from the London Stock Exchange