Last checked at 29 Jun 2009 13:34
Eurasia Mining plc
("Eurasia" or the "Company")
Final Results for the 12 months ended 31 December 2008.
Chairman's statement
Highlights
| * | At Monchetundra, the definition of three mineralised zones with open pit potential |
| * | At Volchetundra, the discovery of a new zone of platinum group metals (PGM) |
| * | Pre-feasibility Study and ore reserves approved for West Kytlim including recognition of new deposit discovery. |
| * | Six additional gold exploration licences applied for |
The year 2008 and the first half of 2009 have been difficult for Eurasia Mining PLC (the "Eurasia" or the "Company"), however, with prudent management of our cash resources we have been able to operate largely as normal in advancing our mineral interests. We have also recently announced on 10 June 2009 the intention, subject to shareholder approval, to vary terms of a number of existing convertible instruments and recapitalise the Company's share price. These matters are to be voted on by shareholders at General Meeting of the Company on 29 June 2009.
During the period under review, Eurasia survived the collapse of platinum group metal (PGM) prices in the last half of 2008, which saw both platinum and palladium prices falling by more than 50%. At the time of writing, in June 2009, prices have recovered from their lows although the major global producers still appear to be struggling for profitability. Our exploration partner Anglo Platinum, the world's largest platinum producer, has certainly not been immune to these price falls and has opted to fund our Kola and Urals work at reduced budgets for 2009, whilst remaining a 50% shareholder in the holding company Urals Alluvial Platinum Limited.
On a positive note, our 2008 drill programmes at Kola were completed. During 2008, our TEO (Russian pre-feasibility study) was approved for West Kytlim in the Urals. Ore reserves were calculated for the Bolshaya Sosnovka deposit on the West Kytlim licence area. This process culminated in the award of a "Discovery Certificate", recognising the deposit as economic. This award considerably galvanises our title on the project and is a key step in seeking a licence to mine the deposit.
In May 2008 the Russian Federal Government introduced a new strategic investment law limiting and restricting ownership rights within certain industries, including mining for platinum. Eurasia can still succeed in obtaining a mining licence but additional permitting steps will be required. Because of this it is unlikely that production will commence in 2009.
During the third quarter of 2008 Anglo Platinum, vested their 40% interest (Eurasia retaining 60%) in the Kola projects by completing their commitment of $10 million expenditure on exploration. Eurasia remains optimistic on Kola, based on the results achieved to date.
KOLA
Monchetundra
Since 2004 some 75 drill holes, totalling approximately 16,000 metres, have been completed at Monchetundra. Drilling has concentrated on testing a zone of PGM mineralization within the range of depths that could be economically accessed by open pit mining. This area, named Zone 3, hosts three lodes.
The mineralised envelope is 80-130 metres thick and elongated in a northwest-southeast direction. Its strike extent is approximately 1.3 kilometres dipping 70-90° to the southwest. The mineralization consists of disseminated low-sulphide (2-5%) stratiform PGM hosted in coarse-grained norites and pyroxenites, mainly associated with zones of metasomatic alteration. Typical intercepts are 5-8 metres thick grading 1.2-2.5 grams/tonne platinum and palladium, with a ratio of 1.5 to 3 respectively.
From a geological point of view, the deposit can be compared with other low sulphide reefs in Kola and Finland, and further afield in Stillwater, Montana, except that the platinum/palladium ratios in our projects are higher. From preliminary test work and by analogy with these other deposits, it is expected that metallurgical recoveries of platinum and palladium are expected to be in-excess of 80% using gravity and flotation. At present only Russian resource classification estimates have been made, which will require statutory approval before they can be announced.
Apart from these lodes, two other prospective areas need to be followed up. Drill hole MT-59 tested a geophysical anomaly, and at 30.6 - 54.6 metres of depth it intersected a mineralized zone of 17 m @ 1.31g/t primarily platinum and palladium. Geophysics indicates that this zone of mineralization may extend to both the north and south. The second area is to the east, where another block of potentially ore-hosting rocks has been mapped and identified as a layered sequence similar to other ore-hosting sequences at Monchetundra. Pre Joint Venture drilling in this area returned intersections with economic PGM levels.
Volchetundra
In 2007 at Volchetundra, two areas of PGM mineralization were discovered in 2007, which were followed up during 2008. Although the Company continued to intersect PGM in drilling in these areas, they also identified a new zone of mineralisation of which the Company has received preliminary results. Unfortunately the wide high-grade results obtained in 2007 at Olche and Yukspor have not been repeated however, recent geophysical results suggest that these zones could be related to a cross-cutting trend which to date has not been adequately tested.
Since 2005, some 12,000 metres of drilling have been completed on this project. Most of this work has concentrated within the two specific areas. The prospective contact zone which hosts all the known mineralization at Volchetundra, extends over a length of 40km within the licence area. During the reporting period, the licence was extended an additional three years, which will allow exploration efforts to continue.
The rest of the licence area remains to be assessed, in conjunction with following up the zones already identified. While the project is not as advanced as Monchetundra, PGM drill intercepts confirm the region's potential.
URALS
In the Urals at West Kytlim, Eurasia has continued drilling several new areas with the potential to host alluvial platinum. To date this work continues to prove successful. In parallel, resource drilling at the Bolshaya Sosnovka area was completed and a Russian feasibility study submitted and approved by the authorities. In March 2009 a 'Discovery Certificate' was issued to the Company, an important step in the permitting procedure.
During 2008, the Company continued to advance the licencing process to allow mining to commence. However, recent changes to the mining law (referred to above) have introduced new procedures, some of which have not yet been formalised into structured regulatory steps. The Directors are hopeful that this process will be clarified in the near future, but until then, it is not possible to forecast when production may commence on the West Kytlim project.
The area of C2 reserves (Russian classification) approved for mining would form the start-up phase for a sustained period of alluvial mining within the West Kytlim area. The initial area of approved reserves at Bolshaya Sosnovka, has been expanded by ongoing drilling during 2008. In parallel, additional prospective areas have been also identified (as summarised on the map of the project). This work will form the basis for converting the entire licence into a mining permit.
At Baronskoe, the Company ceased exploration work on the palladium-gold projects due to the current low price of palladium, and termination of the licence.
While the Company has worked mainly on the Anglo Platinum funded joint venture projects during 2008, it has undertaken its own gold exploration work. The Company now has six gold projects at the application stage in the Russia's Far East.
In conclusion, I thank the staff once again for their continued hard work in often difficult conditions. I thank the Directors for their support in these difficult times, especially our new director Dmitry Suschov, who has been a great addition to the Board, providing both financial support and excellent practical advice. I look forward to improved conditions for metals and hopefully our first platinum production in 2010.
Dr. Michael Martineau
Chairman
The Company anticipates dispatching copies of the Report and Accounts to Shareholders on or around 30 June 2009. The Company will, at the same time, dispatch a notice to convene its Annual General Meeting at The East India Club, 16 St James's Square, London, SW1Y 4LH on 23 July 2009 at 11:00 am.
For more information please contact:
| Eurasia Mining | |
| Christian Schaffalitzky/ Michael de Villiers | Tel +44 (0) 207 932 0418 |
| W H Ireland Ltd | |
| Katy Mitchell | Tel +44 (0) 161 832 2174 |
| Tavistock Communications | |
| Allan Piper/ Nick Peters/ Paul Young | Tel +44 (0) 207 920 3150 |
Report of the Independent Auditor to the Members of Eurasia Mining Plc.
We have audited the group and parent company financial statements (the ''financial statements'') of Eurasia Mining Plc for the year ended 31 December 2008 which comprise the principal accounting policies, the group income statement, the group and parent company balance sheets, the group and parent company cash flow statements, the group and parent company statements of changes in members' equity, and notes 1 to 30. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report, Chairmen's Statements, the Directors' Remuneration Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Chairman's Statement, the Directors' Report and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Qualified opinion arising from disagreement about accounting treatment
Included in the intangible assets shown on the balance sheet is an amount of £1,272,982 in relation to Baronskoe. This represents the geological information and database generated from the discovery and exploration of a new type of palladium-gold mineralization. In the year the Group was informed by the regulatory authorities that further drilling was required to comply with licence requirements. Agreement, which was reached with the authorities, allowed for technological studies to be carried out prior to committing to further drilling. Subsequent to the year end the Group was unexpectedly informed that its licence had been relinquished. However, the Group intends to proceed with technological studies to prove the viability of mining such low grade ore using unconventional methods, including in-situ leaching. For this reason, the directors consider this notification to be a non-adjusting post balance sheet event and have concluded that no impairment is required at 31 December 2008. In our opinion this is an adjusting event and therefore full provision of £1,272,982 should have been made. Accordingly, intangible assets should be reduced by £1,272,982 and loss for the year and retained losses should be increased by £1,272,982.
Except for the financial effect of not making the provision referred to in the preceding paragraph, in our opinion the financial statements:
give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 31 December 2008 and of its loss for the year then ended; and
have been properly prepared in accordance with the Companies Act 1985.
In our opinion the information given in the Directors' Report is consistent with the financial statements.
Emphasis of matter - Going concern
In forming our opinion, which is not qualified in this respect, we have considered the adequacy of the disclosure made in note 2.2 to the financial statements concerning the company's ability to continue as a going concern.
As explained in note 2.2, the Directors' are seeking to raise additional finance to provide working capital for the development of the group.
These conditions, along with the other matters explained in note 2.2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
London29 June 2009
Consolidated income statement
for the year ended 31 December 2008
| Year to 31 December 2008 | Year to 31 December 2007 | |
| £ | £ | |
| Administrative costs | (569,158) | (727,077) |
| Result from equity accounted investments | (737,826) | (32,894) |
| Finance income | 13,038 | 24,926 |
| Finance costs | (209,386) | (78, 637) |
| Other financial result | 669,404 | (71,266) |
| Loss before tax | (833,928) | (884,948) |
| Income tax expense | - | - |
| Loss for the period | (833,928) | (884,948) |
| Profit for the period attributable to: | ||
| Equity holders of the parent | (900,114) | (879,442) |
| Minority interest | 66,186 | (5,506) |
| (833,928) | (884,948) | |
| Loss per share | ||
| Basic and diluted loss (pence per share) | (0.64) | (0.62) |
Consolidated balance sheet
as at 31 December 2008
| 31 December 2008 | 31 December 2007 | |
| £ | £ | |
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 29,269 | 28,128 |
| Intangible assets | 1,272,982 | 863,348 |
| Investments in equity accounted investees | 50,498 | 1,257,297 |
| Other financial assets | 135,396 | 125 |
| Total non-current assets | 1,488,145 | 2,148,898 |
| Current assets | ||
| Inventories | 1,369 | - |
| Trade and other receivables | 25,296 | 193,426 |
| Cash and cash equivalents | 594,321 | 106,729 |
| Total current assets | 620,986 | 300,155 |
|
|
| |
| Total assets | 2,109,131 | 2,449,053 |
| EQUITY | ||
| Issued capital | 7,068,860 | 7,053,819 |
| Share premium | 7,020,549 | 7,020,549 |
| Reserves | 3,267,032 | 3,696,209 |
| Accumulated losses | (16,872,373) | (16,021,426) |
| Equity attributable to equity holders of the parent | 484,068 | 1,749,151 |
| Minority interest | 2,855 | (59,401) |
|
|
| |
| Total equity | 486,923 | 1, 689,750 |
| LIABILITIES | ||
| Non-current liabilities | ||
| Borrowings | 322,609 | 80,341 |
| Total non-current liabilities | 322,609 | 80,341 |
| Current liabilities | ||
| Trade and other payables | 576,893 | 210,358 |
| Borrowings | 712,706 | 468,604 |
| Total current liabilities | 1,289,599 | 678,962 |
|
|
| |
| Total liabilities | 1,622,208 | 759,303 |
|
|
| |
| Total equity and liability | 2,109,131 | 2,449, 053 |
These financial statements were approved by the board on 29 June 2009 and were signed on its behalf by:
C. Schaffalitzky
Managing Director
Company balance sheet
as at 31 December 2008
| 31 December 2008 | 31 December 2007 | |
| £ | £ | |
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 2,529 | 2,149 |
| Investments | 324,744 | 324,744 |
| Other financial assets | 2,403,890 | 2,206,856 |
| Total non-current assets | 2,731,163 | 2,533,749 |
| Current assets | ||
| Trade and other receivables | 50,095 | 148,165 |
| Cash and cash equivalents | 591,801 | 96,483 |
| Total current assets | 641,896 | 244,648 |
|
|
| |
| Total assets | 3,373,059 | 2,778,397 |
| EQUITY | ||
| Issued capital | 7,068,860 | 7,053,819 |
| Share premium | 7,020,549 | 7,020,549 |
| Reserves | 4,010,174 | 3,624,721 |
| Accumulated losses | (16,403,447) | (15,703,498) |
| Total equity | 1,696,136 | 1,995,591 |
|
|
| |
| LIABILITIES | ||
| Non-current liabilities | ||
| Borrowings | 211,790 | - |
| Total non-current liabilities | 211,790 | - |
| Current liabilities | ||
| Trade and other payables | 742,432 | 314,202 |
| Borrowings | 722,701 | 468,604 |
| Total current liabilities | 1,465,133 | 782,806 |
|
|
| |
| Total liabilities | 1,676,923 | 782,806 |
|
|
| |
| Total equity and liability | 3,373,059 | 2,778,397 |
These financial statements were approved by the board on 29 June 2009 and were signed on its behalf by:
C. Schaffalitzky
Managing Director
Consolidated statement of changes in equity
as at 31 December 2008
| Share capital | Share premium | Capital redemption and other reserves | Foreign currency translation reserve | Accumulated losses | Attributable to equity holders of the parent | Minority interest | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| Balance at 1 January 2007 | 7,042,805 | 7,020,549 | 3,589,073 | (49,872) | (15,141,984) | 2,460,571 | (54,933) | 2,405,638 |
| Issue of share capital | 11,014 | - | - | - | - | 11,014 | - | 11,014 |
| Recognition of share-based payments | - | - | 36,648 | - | - | 36,648 | - | 36,648 |
| Transactions with equity holders | 11,014 | - | 36,648 | - | - | 46,662 | - | 46,662 |
| Loss for the period | - | - | - | - | (879,442) | (879,442) | (5,506) | (884,948) |
| Exchange differences on translation of foreign operations | - | - | - | 121,360 | - | 121,360 | 1,038 | 122,398 |
| Total recognised income and expense for the period | - | - | - | 121,360 | (879,442) | (758,082) | (4,468) | (762,550) |
| Balance at 31 December 2007 | 7,053,819 | 7,020,549 | 3,624,721 | 71,488 | (16,021,426) | 1,794,151 | (59,401) | 1,689,750 |
| Issue of share capital | 15,041 | - | - | - | - | 15,041 | - | 15,041 |
| Recognition of warrants issued in the period | - | - | 290,951 | - | - | 290,951 | - | 290,951 |
| Reversal of un-utilised equity component of convertible loan notes | - | - | (49,167) | - | 49,167 | - | - | - |
| Recognition of equity component of convertible loan notes | - | - | 143,669 | - | - | 143,669 | - | 143,669 |
| Transactions with equity holders | 15,041 | - | 385,453 | 49,167 | 449,661 | 449,661 | ||
| Loss for the period | - | - | - | - | (900,114) | (900,114) | 66,186 | (833,928) |
| Exchange differences on translation of foreign operations | - | - | - | (814,630) | - | (814,630) | (3,930) | (818,560) |
| Total recognised income and expense for the period | - | - | - | (814,630) | (900,114) | (1,714,744) | (62,256) | (1,652,488) |
| Balance at 31 December 2008 | 7,068,860 | 7,020,549 | 4,010,174 | (743,142) | (16,872,37) | 484,068 | 2,855 | 486,923 |
Company statement of changes in equity
as at 31 December 2008
| Share capital | Share premium | Other reserves | Retained loss | Total | |
| £ | £ | £ | £ | £ | |
| Balance at 1 January 2007 | 7,042,805 | 7,020,549 | 3,589,073 | (15,131,384) | 2,521,043 |
| Issue of share capital | 11,014 | - | - | - | 11,014 |
| Recognition of share-based payments | - | - | 35,648 | - | 35,648 |
| Transactions with equity holders | 11,014 | - | 35,648 | - | 46,662 |
| Loss for the period | - | - | - | (572,114) | (572,114) |
| Balance at 31 December 2007 | 7,053,819 | 7,020,549 | 3,624,721 | (15,703,498) | 1,995,591 |
| Issue of share capital | 15,041 | - | 15,041 | ||
| Recognition of warrants issued in the period | - | - | 290,951 | 290,951 | |
| Reversal of un-utilised equity component of convertible loan notes | - | - | (49,167) | 49,167 | - |
| Recognition of equity component of convertible loan notes | - | - | 143,669 | - | 143,669 |
| Transactions with equity holders | 15,041 | 385,453 | 49,167 | 449,661 | |
| Loss for the period | - | - | - | (749,116) | (749,116) |
| Balance at 31 December 2008 | 7,068,860 | 7,020,549 | 4,010,174 | (16,403,447) | 1,696,136 |
Consolidated cash flow statement
for the year ended 31 December 2008
| Year to 31 December 2008 | Year to 31 December 2007 | |
| £ | £ | |
| Cash flows from operating activities | ||
| Loss for the period | (833,928) | (884, 948) |
| Adjustments for: | ||
| Depreciation of non-current assets | 1,907 | 3,120 |
| Impairment of non-current assets | - | |
| Loss on disposal of non-current assets | - | 3,742 |
| (Profit)/loss on disposal of investments | (26,427) | 4,338 |
| Share of loss of joint venture | 603,341 | 30,025 |
| Share of loss of associates | 134,485 | 2,869 |
| Net foreign exchange loss | (642,977) | 63,186 |
| Investment income | (13,038) | (24,926) |
| Finance costs | 209,386 | 78,637 |
| Share-based payments | - | 35,648 |
| (567,251) | (688,309) | |
| Movement in working capital | ||
| Increase in inventories | (1,369) | - |
| Decrease in trade and other receivables | 102,212 | 24,232 |
| Increase/(decrease) in trade payables | 362,532 | (336,357) |
| Cash outflow from operations | (103,876) | (1,000,434) |
| Interest paid | (32,088) | (26,586) |
| Net cash flow from operating activities | (135,964) | (1,027,020) |
| Cash flows from investing activities | ||
| Proceeds from sale of investment securities | 92,379 | - |
| Advanced to joint venture | (135,223) | - |
| Purchase of property, plant and equipment | (2,708) | (2,825) |
| Proceeds from disposal of property, plant and equipment | 370 | 829 |
| Payments for intangible assets | (82,122) | (20,176) |
| Interest received | 8,766 | 24,926 |
| Net cash generated/(used) in investing activities | (118,538) | 2,754 |
| Cash flows from financing activities | ||
| Net proceeds from issue of convertible loan notes | 738,250 | - |
| Net cash proceeds from financing activities | 738,250 | - |
| Effects of exchange rate changes on the balance of cash held in foreign currencies | 3,844 | 14 |
| Net increase/(decrease) in cash and cash equivalents | 487,592 | (1,024,252) |
| Cash and cash equivalents at beginning of period | 106,729 | 1,130,981 |
| Cash and cash equivalents at end of period | 594,321 | 106,729 |
|
|
|
Company cash flow statement
for the year ended 31 December 2008
| Year to 31 December 2008 | Year to 31 December 2007 | |
| £ | £ | |
| Cash flows from operating activities | ||
| Loss for the period | (749,116) | (572,114) |
| Adjustments for: | ||
| Depreciation of non-current assets | 1,457 | 1,644 |
| Gain on sale of investments | (26,427) | - |
| Impairment loss / (reversal) on investments | - | (212,110) |
| Net foreign exchange loss | 30,938 | 7,354 |
| Investment income | (13,038) | (24,926) |
| Finance costs | 209,386 | 78,637 |
| Share-based payments | - | 35,648 |
| (546,755) | (685,867) | |
| Movement in working capital | ||
| Decrease in trade and other receivables | 32,118 | 28,771 |
| Increase/(decrease) in trade payables | 328,254 | (324,536) |
| Cash outflow from operations | (186,383) | (981,632) |
| Interest paid | (32,088) | (26,586) |
| Net cash flow from operating activities | (218,471) | (1,008,218) |
| Cash flows from investing activities | ||
| Purchase of property, plant and equipment | (2,207) | (1,901) |
| Proceeds from disposal of property, plant and equipment | 370 | - |
| Amounts advanced to related party | (197,034) | (25,380) |
| Proceeds from sale of investment securities | 92,379 | - |
| Interest received | 13,038 | 24,926 |
| Net cash used in investing activities | (93,454) | (2,335) |
| Cash flows from financing activities | ||
| Proceeds from issue of share capital | - | - |
| Net proceeds from issue of convertible loan notes | 738,250 | - |
| Net cash proceeds from financing activities | 738,250 | - |
| Effects of exchange rate changes on the balance of cash held in foreign currencies | (68,993) | (22,637) |
| Net increase in cash and cash equivalents | 495,318 | 1,033,246 |
| Cash and cash equivalents at beginning of period | 96,483 | 1,129,693 |
| Cash and cash equivalents at end of period | 591,801 | 96,483 |
|
|
|
1 General information
Eurasia Mining Plc (the "Company") is a public limited company incorporated and domiciled in Great Britain with its registered office and principal place of business at Suite 139, Grosvenor Gardens House, 35-37 Grosvenor Gardens, London SW1W 0BS. The Company's shares are listed on the Alternative Investment Market of the London stock Exchange. The principal activities of the Company and its subsidiaries (the "Group") are related to the exploration for and development of platinum group metals, gold and other minerals in Russia.
Eurasia Mining Plc's consolidated financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company.
2 Summary of significant accounting policies
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as endorsed by EU.
These financial statements have been prepared under the historical cost convention. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements.
2.2 Going concern
The current economic conditions provide challenges to the board and it is their prime responsibility to ensure the Company remains a going concern.
The directors are aware that the Group will need to raise additional working capital during 2009 to support corporate exploration programmes and overheads, and to maintain the Company as a going concern. Following economic crisis the Company's share price fell below its nominal value of 5pence, which is the minimum price at which the Company is permitted by the Companies Act to raise new equity capital.
To rectify the situation the Company has called a General Meeting on 29 June 2009 to approve a restructuring of its share capital whereby nominal value to be reduced from 5pence per share to 0.1pence per share. This step has been done to (i) to enable the Company to raise equity capital and (ii) to enable and encourage creditors to convert loan notes into the Company's share.
If the restructuring is approved at the General Meeting, warrants are in place which if exercised can provide finance for the Company through the coming 12 months. A private placing with two institutional investors is also under consideration.
The Company is also considering other options, including the sale of assets to raise finance. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. However, the directors have a reasonable expectation that they will secure additional funding when required to continue operating for the foreseeable future. Based on a review of the Group's budgets, restructuring plans, cash flow forecasts and the ability to flex there forecasts to suit prevailing circumstances, the directors continue to believe that the Group is a going concern for a period of at least 12 months from the date of signing the financial statements.
2.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of 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 to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination.
Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.
2.4 Change in accounting policies
The Group has elected to adopt early IAS 1 Presentation of Financial Statements (Revised 2007) in its consolidated financial statements. This standard has been applied retrospectively. The adoption of the standard does not affect the financial position or profits of the Group, but gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however some items that were recognised directly in equity are now recognised in other comprehensive income.
IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income.
Early adoption of IFRS 8
The Group has elected to adopt early IFRS 8 Operating Segments replacing the segmental reporting requirements of IAS 14 Segment Reporting The key change was to align the determination of segments in the financial statements with that used by management in their resource allocation decisions. This standard did not have significant impact on existing disclosure.
2.5 Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.
The Group reports its interests in jointly controlled entities using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Under the equity method, investments in joint venture are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment in the value of individual investments. Losses of a joint venture in excess of the Group's interest in that joint venture are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture recognised at the date of acquisition is recognised as goodwill.
The goodwill, if any is included within the carrying amount of the investment and is assessed annually for impairment as part of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group's interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
2.6 Interests in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill.
The goodwill, if any, is included within the carrying amount of the investment and is assessed annually for impairment as part of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate.
2.7 Foreign currencies
Functional and presentation currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in GBP, which is the functional and the presentation currency of the Company.
Transaction and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
2.8 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.9 Share-based payments
Equity-settled share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
All equity-settled share-based payments are ultimately recognised as an expense in the income statement with a corresponding credit to " Share-based payments reserve ".
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting or if the share options vest but are not exercised.
Cash-settled share-based payments
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance sheet date.
2.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill, initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
2.11 Property, plant and equipment
Freehold properties held for administrative purposes, are stated in the balance sheet at cost.
Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Useful lives used in the calculation of depreciation range from three to five years
2.12 Intangible assets
Exploration, evaluation and development of mineral resources
Exploration and evaluation expenditure comprises costs that are directly attributable to:
- researching and analysing existing exploration data;
- conducting geological studies, exploratory drilling and sampling;
- examining and testing extraction and treatment methods; and/or
- compiling prefeasibility and feasibility studies.
Exploration expenditure relates to the initial search for deposits with economic potential. Evaluation expenditure arises from a detailed assessment of deposits that have been identified as having economic potential. Expenditure on exploration activity is not capitalised. Capitalisation of evaluation expenditure commences when there is a high degree of confidence in the project's viability and hence it is probable that future economic benefits will flow to the Group.
Such capitalised evaluation expenditure is reviewed for impairment at each balance sheet date. The review is based on a status report regarding the Group's intentions for development of the undeveloped property. Subsequent recovery of the resulting carrying value depends on successful development of the area of interest or sale of the project.
If a project does not prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off.
2.13 Impairment testing of goodwill, other intangible assets and property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of the assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying value of goodwill
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss of the assets other than goodwill is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
2.14 Financial instruments
Financial assets and liabilities are recognised on the group's balance sheet when the group has become a party to the contractual provisions of the instrument.
Financial assets
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on deposit with banks.
Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of available-for-sale financial assets, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement.
Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual liabilities of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities, and are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any features meeting the definition of a financial liability then such capital is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
Compound financial instruments (see also note 4.2.2)
Compound financial instruments comprise both liability and equity components. At issue date, the fair value of the liability component is estimated by discounting its future cash flows at an interest rate that would have been payable on a similar debt instrument without any equity conversion option. The liability component is accounted for as a financial liability.
The difference between the net issue proceeds and the liability component, at the time of issue, is the residual or equity component, which is accounted for as an equity instrument.
Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of the proceeds. Transaction costs comprise transaction and professional fees and warrants (if any) attached to the instrument and valued using Black-Scholes valuation model.
The interest expense on the liability component is calculated by applying the effective interest rate for the liability component of the instrument. The difference between any repayments and the interest expense is deducted from the carrying amount of the liability.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
3 New IFRS accounting standards and interpretations not yet adopted
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group
Management anticipates that all of the pronouncements will be adopted in the Group's accounting policy for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.
IAS 23 Borrowing Costs (Revised) (effective from 1 January 2009)
The revised standard requires the capitalisation of borrowing costs, to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use or sale.
IFRS 3 Business Combinations (Revised 2008) (effective from 1 July 2009)
The standard is applicable for business combinations occurring in reporting periods beginning on or after 1 July 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, but still requires use of the purchase method, and will have a significant effect on business combinations occurring in reporting periods beginning on or after 1 July 2009.
IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective from 1 July 2009)
The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group's interest in subsidiaries. Management does not expect the standard to have a material effect on the Group's financial statements.
Amendments to IFRS 2 Share-based Payment (effective from 1 January 2009)
The IASB has issued an amendment to IFRS 2 regarding vesting conditions and cancellations. None of the Group's current share-based payment schemes is affected by the amendments. Management does not consider the amendments to have an impact on the Group's accounting policies.
Annual Improvements 2008
The IASB has issued Improvements for International Financial Reporting Standards 2008. Most of these amendments become effective in annual periods beginning on or after 1 January 2009.
Based on the Group's current business model and accounting policies it is felt that the other standards, amendments and/or interpretations are unlikely to have a material impact on the Group's earnings or shareholders' funds.
IAS 1(Amended) Presentation of financial statements(effective from 1January 2009)
The revised standard will prohibit the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The group will apply IAS 1 (Revised) from 1 January 2009. It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.
4 Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
4.1 Investments in associates
The company has a combined interest in Russian registered Terskaya Mining Company and Yuksporskaya Mining Company of 60%. 20% in each of them is held directly by the Company and the remaining 80% is held by joint venture Urals Alluvial Platinum Limited (the "UAP") where the company has a 50% interest. By arrangements with the UAP the Company's ownership does not constitute control even though more than half of the potential voting power is owned by the Company and therefore the direct 20% interest has being accounted as interest in associates.
4.2 Key sources of estimation uncertainty
The following are the key assumptions / uncertainties at the balance sheet date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
4.2.1 Share-based payments
The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. The model used by the Group is the Black-Scholes valuation model.
4.2.2 Recoverability of exploration and development costs
All costs associated with mineral exploration and investments are capitalised on a project-by-project basis, pending determination of the feasibility of the project. 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.