Eurasia Mining Regulatory News (EUA)

12 Jun 2006 07:00

Eurasia Mining PLC9 June 2006 Eurasia Mining Plc 9 June 2006 PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2005 Chairman's Statement It is a pleasure to report to you this year as our company embarks on the major voyage that it has been charting forover two years. The company has completed the acquisition of four important platinum projects that will see substantialinvestment this year at no cost to shareholders. We are managing these projects together with our partner Anglo PlatinumLimited and are starting new gold ventures, partly in alliance with AngloGold Ashanti Limited. In February 2006 we announced an agreement for the purchase of two Russian companies holding three exploration licencesin the Kola peninsula near Murmansk in northwest Russia. Here, early results lead us to believe that exploration workcould lead to the discovery of significant platinum mineralization. Anglo Platinum agrees with us and through our jointventure company we have commenced a work programme. This year we are undertaking a $2 million programme that will befunded by Anglo Platinum but as work progresses we expect this to accelerate in 2007. Anglo Platinum is funding thefirst $10 million of expenditure as part of our joint venture agreement, explained more fully in the Operations Report.We are very encouraged by the early results from these areas and look forward to reporting on our work as the fieldseason progresses. In the Urals, we were finally reissued with the exploration licence on the West Kytlim area for alluvial platinum andfieldwork began immediately. The first drill rig arrived on site in September and work continued into the winter. Wereported our first detailed results to you in April 2006 and this has confirmed our confidence in this project. Theexcellent results hold out promise for the first two target areas, one of which is a new discovery. If work progressesas planned this summer we hope to lodge an application for a mining licence for production in 2007. The aim of theprogramme is to design a project capable of producing 15,000 ounces of platinum per annum, beginning in 2007. Furtherexploration work will also be focused on other targets in the licence area, which could add to the potential. In Siberia, we have been working with AngloGold Ashanti Limited on a number of gold targets and exploration projects forwhich further information will be provided when final title has been established. Our efforts have been concentrated onareas where there has been historic alluvial production from placer mining for decades but where bedrock exploration isat an early stage. Our agreement provides for the first $2 million of expenditure to be provided by AngloGold Ashantibefore Eurasia begins to contribute an equal proportion of expenditure. In addition, the company has been assessing anumber of gold production opportunities in conjunction with a potential Russian partner. In summary, we believe that Eurasia's work over the past two years has now borne fruit and we look forward to developingthe company into a significant presence in Russia. This development is set against a background of a changed miningindustry, both in Russia and worldwide. The major rise in commodity prices over the last three years is the main drivingforce behind a dramatic increase in activity. The industry has become very competitive as a growing army of miningcompanies move to secure mineral assets. At the same time, the increased activity has led to a shortage in both manpowerand materials, increasing capital and operating costs. However, we have deliberately held back from moving too quicklyin the current market, combining our own independent work with partnerships that spread the risk and reduce overheads onhigher risk activities. The plan in the coming year is to build on this solid platform and use the imminent revenue fromproduction to strengthen and expand our portfolio. At the moment the company has a small and experienced board and management team that will be expanded as the companygrows. On a sad note, John Mitchell passed away during the year. John was a founder director and former chairman of thecompany and his advice and support will be missed. None of our success would have been possible without the dedication of our small but talented executive team based inLondon, together with our professional staff working in Russia. Many of our Russian staff have been with the company forsome time and have sustained our efforts when life was not easy. On behalf of you all I thank them and look forward tous all reaping the rewards in the coming years. Dr. Michael MartineauChairman OPERATIONS REPORT Over the past twelve months Eurasia has completed the acquisition of four projects on which it has been working forseveral years. This delay arose due to the formalities involved in completing both licence agreements as well as thecorporate transactions. In order to bring shareholders up to date with these projects this report summarises thetechnical background of these areas, the results obtained to date, their potential and the plans for the future. Theinformation includes results up to April 2006. Urals Alluvial Platinum Joint Venture The Urals Alluvial Platinum project is a 50:50 joint venture with Anglo Platinum Limited, the largest platinum metalproducer in the world. It is operated by Eurasia through jointly owned Urals Alluvial Platinum Limited, a Cyprusregistered company. The joint venture commenced work in 2000 and has worked on a number of licences, seekingeconomically viable alluvial platinum deposits in the Urals. This work is funded 100% by Anglo until a projectfeasibility study has been completed. This year most of the work has concentrated on detailed appraisal of the WestKytlim area. Historical production of platinum from alluvials in the Urals region over the past 150 years totals some 500 tonnes (16million ounces), and small scale production continues today. The joint venture has identified small platinum resourcesover the last 5 years but to date most of these have been too small to be viable for the joint venture. The joint venture continues to assess new areas for their platinum potential. Currently the West Kytlim licence is theonly area held but it is expected that new areas will be applied for in the near future. For a number of years the joint venture has been seeking to acquire an interesting area in the central Urals where itseemed that significant untested potential for large alluvial platinum concentrations remained. In March 2005 anexploration licence was granted for the West Kytlim area but work commenced only in September as a number of detailedadministrative issues had first to be clarified. West Kytlim Located approximately 350 km north of Ekaterinburg, the Kytlim district itself has produced approximately 50 tonnes (1.6million ounces) of alluvial platinum to date. The joint venture holds a 75% interest in the West Kytlim project, withthe remaining interest held by Production Artel Yuzhno-Zaozersky Priisk, a successful local alluvial platinum and goldmining company. The exploration licence covers an area of 171km2 over a drainage system which was partially worked for alluvial platinumin the past by dredging and manual methods. The joint venture is targeting previously unworked and untested terracegravels, as well as the tailings from past production which can be reworked to recover residual platinum using modernprocessing technologies. In April the first drill hole results were announced that have allowed a preliminary assessment of the resourcepotential of two targets in the licence area. The two targets tested are terraces to the south of the Tylai River and asmaller area on the Bolshoya Sosnovka river, a tributary of the Tylai. Drill results from the first traverse across the Tylai terraces average 335 milligrams per cubic metre (mg/m3 - thestandard method of reporting drill results for alluvial deposits) over a surface width of 320 metres (m) and an averagethickness of 3.2m. Details of the results are provided on the company's web site www.eurasiamining.co.uk. The deposit lies under 1 - 8m of barren river sediment which hitherto has concealed the deposit from previous miningactivity. The results are consistent with Eurasia's exploration model, which has identified this target as beingapproximately 5 km long on the south side of this river with an estimated total potential volume of 5.1 million m3. Asecond as yet untested target remains to be explored on the north side of the Tylai river. In addition to this virgin discovery and located near the headwaters of the Tylai river, a second drill traverse atBolshoya Sosnovka has identified material comprising both tailings from an earlier dredging operation and blocks ofremnant un-mined material that average 320 mg/m3 from surface, over thicknesses of 3.6 to15.3m. Eurasia's work indicatesa potential volume of 3.7 million m3 over a surface width of some 200m and a potential length of 2 km. A number of smallproducers in the Urals are economically extracting platinum at grades of 100 to 150 mg/m3. An intensive drilling programme continues with the aim of delineating blocks of mineralisation to be test-mined andprocessed during this (2006) summer using a plant that has been constructed by Eurasia. Additional target areas withinthe licence area have yet to be assessed by drilling. Following test mining and the definition of mineable reserves, a mining permit will be applied for. Processing ofalluvial sediment is simple in principle, with excavation and washing of the platinum bearing sediments carried out sothat a heavy minerals concentrate is produced. This concentrate consists of platinum rich particles as well as otherheavy minerals such as chromite and magnetite. This concentrate is further processed to leave the platinum concentrate,which consists primarily of a mineral alloy called isoferroplatinum. The platinum concentration of this alloy rangesfrom 78% to 89% with iron and copper comprising most of the remainder, with trace gold, silver and other platinum groupmetals. This material is sold directly to refineries, with payment based on the recovered metal. As this material ishigh grade the refining costs are minimal compared to the sulphide rich materials forming the bulk of the world'splatinum production. Resource estimates for alluvial projects are constructed differently from those calculated on hard rock mineraldeposits. The grades are reported as the recovered weight of platinum concentrate measured against the volume ofsediments sampled or extracted. Drilling of samples proceeds on a grid which is designed for approval of reserves by theRussian authorities - an essential step for obtaining a mining permit. At West Kytlim, two drillhole profiles, one oneach target area, provide an early indication of the grade of platinum, the distribution of metal in the sediments andthe thickness and extent of the mineralised layers. So far two potential areas of production have been identified. As the capital costs for mining these projects aremodest, helped by using equipment owned by our local partner, Eurasia expects to see cash flow in 2007 if a miningpermit is obtained in time for the summer season. Other Urals Areas A licence held 75% by Eurasia's subsidiary Eurasia PGM Limited has recently been renewed at Baronskoye. Here Eurasiadiscovered palladium-gold mineralisation in 2001 and outlined an area which may have potential for the development of asmall open pit project. Work this year is looking at metallurgical options which will determine the economics for such aproject. Kola Peninsula In February 2006 Eurasia agreed to acquire two companies which hold three exploration licences in Murmansk Oblast(region) in northwest Russia. This followed a long period of negotiation with the vendors while early exploration workwas underway. The three areas were acquired because of their good potential for bedrock platinum mineralisation. WhileEurasia had been seeking to acquire these projects for two years, the company was joined in late 2005 by its partner inthe Urals project, Anglo Platinum Limited. The agreement to acquire a 100% interest in three large exploration areas on the Kola Peninsula in Murmansk Oblast,Russia was met by paying $1.5 million and issuing 10 million new Ordinary Shares in Eurasia. The three licence areas areVolchetundra, held by ZAO Yuksporskaya Mining Company, and Monchetundra and West Imandra, held by Joint Stock CompanyTerskaya Mining Company. Simultaneously, Eurasia agreed with Rustenburg Platinum Mines Limited (Cyprus) (RPM), a whollyowned subsidiary of Anglo Platinum Limited, to include these projects in their existing joint venture, by Eurasiaselling an 80% interest in the Russian companies into the 50:50 joint venture company, Urals Alluvial Platinum Limited.RPM will acquire their interest by providing $1 million as part of the total consideration. On completion, Eurasia willhold a 60% interest in the Kola projects. Under the agreement, RPM will fund the first $10 million of Kola expenditure before both parties fund in proportion totheir equity interest. On completion of a bankable feasibility study or the completion of the $10 million expenditure,whichever is the sooner, RPM have 90 days to purchase the 20% held by Eurasia for $6 million or $5 per ounce of platinumgroup metals in Russian C1 and C2 categories, whichever is the lesser. Should RPM exercise this option, Eurasia wouldhold 40% of the projects through UAP. RPM can also opt to require UAP to purchase this interest under the sameconditions. Exploration expenditure totalling approximately $589,000 incurred during 2004 and 2005 has also beenrefunded to the vendors, of which Eurasia's liability represented $246,000. The licences are located within 30 kilometres of the town of Monchegorsk in the centre of the Murmansk region. The townhas been a centre of mining and metal refining since the 1930s, principally of nickel and copper with PGM as by-product.Iron mining is also an important industry located to the north of Monchegorsk. Consequently, good rail, road and powerinfrastructure is in place in what would otherwise be a remote area north of the Arctic Circle. PGM mineralization wasdiscovered in 1996, associated with ultramafic and mafic intrusive complexes that extend over several hundredkilometers. Exploration has only been carried out in recent years but with increasingly favourable results. Two otherwestern companies have been working on PGM exploration for a number of years, namely Barrick Gold and Consolidated Puma,a company controlled by Bema Gold. West Imandra This exploration licence comprises a large area of 229 square kilometres and is granted for five years up to 30thJanuary 2009. Only early stage exploration for PGM has been undertaken with some trenching and drilling carried outpreviously for chromite. The main targets for exploration are several prospective horizons in a large intrusion hostingimportant layered units of chromitite towards the base and magnetite with anorthosite towards the top, both oftenassociated with PGM mineralisation. A sample from outcrop of a chromitite unit has assayed platinum at 1g/t. A recenttrench on anorthosite below the magnetite layers gave 2.94g/t of PGMs over a 1 metre-thick zone. The work programme for2006 involves till geochemistry, geophysics and diamond drilling. Volchetundra This licence area, totalling 210 square kilometres, is situated some 20km northeast of the town of Monchegorsk. Thelicence was granted for a period of five years that expires on the 15th July 2008. The target geological feature in this area is a north-south, 40km long, 2-4 km wide early Proterozoic mafic intrusivecomprising mainly gabbros and anorthosites with ultramafic rocks at their base. These were intruded into Archaeangneisses and developed a dioritic contact zone on the eastern basal contact of the intrusion. The western contactappears to be tectonic. Early stage exploration work has identified sulphide rich zones near the base of the intrusion. The northern half of thearea has been surveyed by till sampling and geochemistry with several anomalies defined for drill testing. Early stagemapping, rock sampling and trenching have identified several bedrock targets for PGM. At the southern end of thelicence, weak nickel-cobalt mineralization is known from exploration work in the 1960s but has never been tested forPGM. Results of bedrock sampling in trench and outcrop have yielded a number of targets with anomalous PGM. Two zones are ofparticular interest: one with grades of 0.7 g/t of platinum group metals over a thickness of 10 metres, and a second,4.7 g/t of platinum, 4.6 g/t of palladium and 2 g/t of gold over a thickness of 2.6 metres. The drill programme for 2006 will test the geochemical anomalies and also some of the early rock outcrop targets.Further rock sampling, mapping and trenching will be carried out on the former base metal target areas. Monchetundra The Monchetundra exploration licence is granted for five years expiring on the 30th August 2009. The area is smaller,approximately 36 square kilometres but is centred on four PGM rich horizons identified from previous sampling anddrilling. The target horizons are located near the base of an ultramafic-mafic intrusive complex, with a complex geologicalhistory. Later structures have disrupted the central part of the area but despite this the four target horizons can beseen and correlated over several kilometres. The platinum bearing horizons show different characteristics. Two arepalladium rich while the other two carry higher platinum grades. High grade results include intersections of 3.58 to38.78 grams per tonne (g/t) of combined platinum and palladium over intervals of 0.4 to 2.8 metres. Lower gradeintersections at some points overlap and extend beyond them - for example 35.9 metres and 13.4 metres of 1.94 g/t and2.2 g/t of combined platinum and palladium, respectively. The work completed to date allows Eurasia to plan a detaileddrilling programme for 2006 to assess continuity along strike and down dip. There is good evidence that the zones arecontinuous, except in an area where faulting has disrupted the geology. The 2006 work programme will concentrate on detailing the structure of the zones identified, in particular those withpotential for a near surface open pit type of mine development. The drill programme will commence in July and cancontinue all year round, due to its proximity to Monchegorsk city and ease of access. AngloGold Ashanti Exploration Alliance In 2005 Eurasia established an exploration alliance with AngloGold Ashanti Limited, the world's number two goldproducer, covering gold and related mineral exploration and possible development projects in eastern Siberia. Thealliance combines our country experience and exploration management skills in the region with AngloGold Ashanti'stechnical and financial resources. The Eastern Siberian geological environment represents one of the best endowed, yet least systematically exploredregions of the world for hard rock gold deposits. Historic production in the region was dominated by placer mining ofalluvial gold. Since the mid 20th Century a number of large hard rock deposits have been explored and developed. Totalresources in these deposits, including previous production and known reserves, stands well in excess of 65 millionounces, or 2,000 tonnes of gold. The agreement gives AngloGold Ashanti the exclusive right to participate in projects proposed by Eurasia, which hasbeen appraising potential prospects in the region. AngloGold Ashanti is funding the first $2 million of explorationspending in recognition of Eurasia's work to date. Subsequent spending will be shared equally. Our objective is to participate in the rapid advancement of a number of projects towards feasibility study. Theexploration alliance extends the range and type of projects in which Eurasia can participate within this highlyprospective but increasingly more competitive environment for gold project development. The alliance has already lodgedapplications for licences to explore in five areas and is optimistic of being able to commence work on several of themduring the 2006 field season. The company also continues independently to seek projects that will add value to our portfolio by reviewing andpotentially bidding for both prospective mineral ground as well as advanced stage projects elsewhere in the country. Inthis regard the company is working with a potential Russian partner to jointly acquire advanced gold development andexploration properties. C SchaffalitzkyManaging Director Consolidated Profit and Loss AccountFor the year ended 31 December 2005 Total Total Continuing Discontinued operations operations 2005 2004 2004 2004 £ £ £ £ Impairment of assets (156,925) (1,461,377) (1,008,003) (453,374)Other administrative expenses (933,374) (726,811) (726,811) -------------------------------------------------------------------------------------------------------------------Administrative expenses and operating loss (1,090,299) (2,188,188) (1,734,814) (453,374)Share of operating loss in joint venture (477,602) - - -------------------------------------------------------------------------------------------------------------------Total operating loss: group and share of joint ventures (1,567,901) (2,188,188) (1,734,814) (453,374)Gain on disposal of subsidiaries - 769,619 569,627 199,992------------------------------------------------------------------------------------------------------------------Loss after disposal of subsidiary (1,567,901) (1,418,569) (1,165,187) (253,382)Net interest payable / receivable & similar items 127,849 (69,239)------------------------------------------------------------------------------------------------------------------Loss on ordinary activities before taxation (1,440,052) (1,487,808)Taxation - -------------------------------------------------------------------------------------------------------------------Loss on ordinary activities after taxation (1,440,052) (1,487,808)Minority interest (1,693) 16,018------------------------------------------------------------------------------------------------------------------Loss for the financial year (1,441,745) (1,471,790)Loss per share (1.43)p (1.74)p------------------------------------------------------------------------------------------------------------------All the operations of the group are classed as continuing. Consolidated Balance Sheet At 31 December 2005 2005 2004 £ £Fixed assetsIntangible - exploration, development and production interests 1,280,810 1,316,485Tangible 41,172 40,160InvestmentsInterest in joint venture +------------------------+ Share of gross assets | 502,855 735,326 | Share of gross liabilities | (305,445) (107,046)| +------------------------+ 197,410 628,280Other investments 146 154,018---------------------------------------------------------------------------------------Total fixed assets 1,519,538 2,138,943---------------------------------------------------------------------------------------Current assetsDebtors 202,410 247,074Cash at bank 198,201 83,162--------------------------------------------------------------------------------------Total current assets 400,611 330,236Creditors - amounts falling due within one year (213,019) (237,442)--------------------------------------------------------------------------------------Net current assets 187,592 92,794--------------------------------------------------------------------------------------Total assets less current liabilities 1,707,130 2,231,737--------------------------------------------------------------------------------------Creditors - amounts falling due after more than one year (93,251) (83,290)--------------------------------------------------------------------------------------Net assets 1,613,879 2,148,447--------------------------------------------------------------------------------------Capital and reservesCalled-up share capital 5,188,086 4,250,586Share premium account 7,034,374 7,100,374Capital redemption reserve 3,539,906 3,539,906Profit and loss account (14,114,787) (12,710,717)--------------------------------------------------------------------------------------Equity shareholders' funds 1,647,579 2,180,149Minority interest (33,700) (31,702)-------------------------------------------------------------------------------------- 1,613,879 2,148,447-------------------------------------------------------------------------------------- Consolidated Cash Flow Statement For the year ended 31 December 2005 2005 2004 £ £Net cash outflow from operating activities (902,244) (697,149)Returns on investments and servicing of finance 6,257 12,763Capital expenditure and financial investment 132,901 (443,584)Acquisitions and disposals - 157,500--------------------------------------------------------------------------------------Net cash outflow before financing (763,086) (970,470)Financing:Issue of ordinary shares 871,500 48,000--------------------------------------------------------------------------------------Increase/(decrease) in cash in the period 108,414 (922,470)-------------------------------------------------------------------------------------- Reconciliation of net cash flow to movement in net fundsIncrease/(decrease) in cash in the period 108,414 (922,470)Translation difference 6,625 -Movement in net funds in the period 115,039 (922,470)Net funds at 1 January 83,162 1,005,632--------------------------------------------------------------------------------------Net funds at 31 December 198,201 83,162-------------------------------------------------------------------------------------- Reconciliation of Operating Loss to Operating Cash FlowsOperating loss (1,567,901) (2,188,188)Depreciation charges 5,413 46,139Loss on sale of marketable securities 5,476 -Impairment charge 156,925 1,461,377Loss attributable to joint venture 477,602 -(Increase) / decrease in debtors 44,664 (27,960)Increase / decrease in creditors (24,423) 11,483--------------------------------------------------------------------------------------Net cash outflow from operating activities (902,244) (697,149)-------------------------------------------------------------------------------------- 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, balance sheet and cash flow statement have been extracted from the Group's 2005 statutory financial statements upon which the auditors' opinion is unqualified.2 The loss per share is calculated by reference to the loss for the year of £1,441,745 (2004: £1,471,790) and the weighted average number of Shares in issue during the year of 100,644,594 (2004: 84,388,766). There is no dilutive effect of share options or warrants.3 The financial information has been prepared under the historical cost convention and in accordance with applicable accounting standards. In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches to finance its activities for limited periods only. Further funding is raised as and when required. The Directors are of the opinion that the Company will require to raise additional financial resources to enable the group to undertake an optimal programme of exploration and appraisal activity over the next twelve months. Accordingly, the Directors intend either to raise further funds or to engage an additional funding partner as appropriate during the course of the next twelve months. Whilst the Directors are confident that the Group will be able to secure additional funding to enable it to continue to meet its debts as they fall due and to undertake the programme described above for at least the next twelve months from the date of approval of these financial statements, there can be no guarantee that this will be the case. In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches to finance its activities for limited periods only. Further funding is raised as and when required. 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.4 Copies of the Annual Report and Accounts for the year ended 31 December 2005 will be posted to shareholders by 30 June 2006 and will be available, free of charge, from the Company's registered office at 1 Hay Hill, London, W1J 6DH, for a period of 14 days from the date of their posting. For further information contact: Michael Martineau / Christian Schaffalitzky, Eurasia Mining Plc +44 (0) 20 7495 4877 Michael De Villiers, Eurasia Mining plc: +44 (0) 7899 917 096 Laurie Beevers, W H Ireland: +44 (0) 161 819 8724 Allan Piper, First City Financial Public Relations +44 (0) 20 7436 7486; +44 (0) 7736 064 982 This information is provided by RNS The company news service from the London Stock Exchange