Kemin Resources Regulatory News (KEM)

27 Jun 2007 07:00

GMA Resources PLC27 June 2007 27 June 2007 AIM: GMA GMA Resources Plc ("GMA" or "The Company") FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Highlights: • Advancement of construction and development of Amesmessa mine • All mining equipment at Amesmessa delivered to site and assembly of infrastructure and facilities well advanced • Heap leach pad completed • Assignment of all major contracts for assembly of process plant, crushing facility, assay lab and pipeline • First heap leach ore expected to be under leach by October 2007 • Completion of aeromagnetic ("AeroMag") survey and expansion of exploration programme to include drill programs • Developments in heap leach technology will allow the company to extract mineralization that was not previously considered to be economic upon the commencement of operations at the Amesmessa plant Post Year End Financial Highlights: • Successfully raised over £4.1m before expenses via a share placing with institutional investors, • Appointment of Hichens Harrison as Joint Broker • Raised £5,700,000 via unsecured convertible loan stock Douglas Perkins, CEO of GMA, commented: "We have made further good progressduring the course of this financial year and look forward to the coming year aswe bring our second mine, the Amesmessa deposit, into production. Concurrently,we are also pursuing further exploration opportunities in order to increase ourresources and subsequently our production targets and look forward to reportingon our progress in due course. We are confident that the outlook for goldremains robust and with our production and blue sky potential, we believe thatGMA is well positioned to capitalise on the strength of this market." The report and accounts of GMA for the year ended 31 December 2006 have beenposted to shareholders. NOTICE OF AGM & NOTICE OF EGM Notice is hereby given that an Annual General Meeting of the above named Companywill be held at the offices of Field Fisher Waterhouse LLP, 35 Vine Street,London EC3N 2AA on 20 July 2007 at 10.00 a.m. Full details of the Ordinary andSpecial Resolutions to be proposed at the AGM are available on the Company'swebsite. Notice is hereby given that an Extraordinary General Meeting of GMA Resourcesplc (the "Company") will be held at the offices of Field Fisher Waterhouse LLP,35 Vine Street, London EC3N 2AA at 10.15 a.m. on 20 July 2007 (or, if later,immediately following the annual general meeting convened on the same day). Fulldetails of the Special Resolutions to be proposed at the EGM and theaccompanying circular to shareholders are available on the Company's website. Enquiries: GMA Resources Plc Douglas Perkins - Chief Executive Officer Tel: +44 (0) 20 7253 7670 Mobile: +1 514 806 6788 Philip Secrett/Fiona Owen Grant Thornton Corporate Finance Tel: +44 (0) 20 7383 5100 Louise Goodeve / Samantha Dunning Parkgreen Communications Tel: +44 (0) 20 7851 7480 CHAIRMAN'S STATEMENT Dear Shareholder Once again it is my pleasure to present to you the annual report for GMAResources plc for the year ended 31 December 2006. Since the year end, therehave been a number of positive changes for GMA as the Company continues tooperate the producing Tirek gold mine, as well as moving forward with thedevelopment and construction of its second gold mine at Amesmessa. An update onthe construction programme at Amesmessa is provided below in the Operationsreport. Operations An expanded exploration plan was put in place on 31 May 2007. The team is beingstrengthened with equipment and personnel and ENOR will undertake a 20,000 metreRC drilling exploration program in late 2007. The goal is to confirm resourcesidentified by previous ORGM/Soviet work that is now economic due to the changeto heap leach technology. With the construction of Amesmessa project nearing completion, and nearingsubsequent start-up, your Board is looking to examine the potential fordiversification in production and exploration both in Algeria and elsewhere andwe will update the market on this further in due course. Since the year end, our Algerian partner, Sonatrach, elected to re-deploy theENOR Spa ("ENOR") General Manager, Mr Ali Nouioua to a new senior positionwithin Sonatrach. This appointment is in conformity with the Sonatrach Groupcareer development plans. They also appointed Mr M. Benzerga to the Board toreplace Mr Nouioua. The Board of ENOR decided to appoint Mr Benzerga to theposition of Directeur Generale of ENOR effective from 31 May 2007. Mr Benzergawas previously a senior advisor to the Minister of Energy and Mines in Algeriaand had been active in the mining sector internationally prior to returning toAlgeria. On a sad note, I acknowledge that during 2006, the other Sonatrachrepresentative on the ENOR Board died of a long illness. Mr. Ayeche isremembered fondly by all at ENOR and GMA. Sonatrach replaced Mr. Ayeche with MrSalah Mekmouche, a geologist and Director of Reservoirs within the Sonatrachgroup. The quality of people Sonatrach assigns to the ENOR Board shows thecontinuing commitment and support Sonatrach management has to the Amesmessaproject. Our relations with our partner Sonatrach go from strength to strengthwhere they continually demonstrate the full commitment of Algeria to the successof the project. Financing On 12 April 2006 the Company raised £5,053,860 by placing 56,154,000 shares at 9pence. In addition, the Company issued 28,077,000 warrants at 13 pence, whichwill be exercisable until 12 April 2008. On 31 January 2007 the Company raised£4,100,000 by placing 37,273,000 shares at 11 pence. On 24 May 2007 the Companyannounced that it has concluded the raising of £5,700,000 through the issue of a10 % unsecured convertible loan stock expiring in 2009. The conversion rate forthe issue will be 15 pence nominal of loan stock per Ordinary Share of 1 penceeach in the Company. ENOR Spa, the Algerian operating company for the Tirek /Amesmessa project, was able to arrange for capital lease financing of €7,200,000to cover a large portion of the CAT and Tamrock mobile fleet at site. This is aclassic four year capital lease. The current cash position of the Company is over £6,000,000, a substantial sumwhich will see the Company through to commercial production at Amesmessa. Management We would like to thank Mr Nouioua, the retiring Directeur Generale of ENOR forthe sustained devotion to the project over the years and we are sure he will bea success in the new role within Sonatrach. I am pleased to inform you that there have been no Board or senior managementchanges within GMA Resources plc during the past year as your company stabilisesthe transition from exploration to significant production. Richard LinnellChairman OPERATIONS REPORT Amesmessa Gold Project Development Plan Construction is moving forward at the Amesmessa project and ENOR Spa plans toincrease gold production to 100,000 ounces per year by November 2007 from thecurrent mineable resource which currently stands at 543,000 ounces. Economicevaluation of the project indicated the most favourable development scenario isa combined carbon-in-leach (CIL) process plant and heap leach operation. Thiswill be accomplished by selectively mining gold ("Au") bearing veins to supplyhigh grade ore to the Tirek CIL plant (at 95% gold extraction), and supply allremaining low grade gold bearing zones averaging 4.5 g/t Au to a heap leachoperation located at Amesmessa. Budgeted gold production for 2007 with the heapleach starting in late October 2007 and the existing ball mill is 26,163 ounces.At this time we are comparing the option of building a second heap leachfacility at Tirek to complement the existing CIL plant. Late in 2007 we willcompare the options of a second heap leach operation with existing CIL with newhigher capacity ball mill constructed at the same facility. Once this economicdecision is taken, mobilisation of the ball mill will be rapid as this isalready owned by the Company. Evaluation of the ore intercepts and resource modelling indicates that astrategy of separately processing high and low grade ores would be an efficientmanner to manage the Amesmessa, Tirek and Zita ore resource together.Significant quantities of low grade ore is available for processing and the mostefficient manner to treat this ore is with a heap leach process with an averagerecovery of 72% and the potential for 80% recovery as indicated by column leachtesting completed in the 2nd quarter of 2006. Gold production will average 100,000 ounces per year with a split ofapproximately 25% produced at the CIL plant and 75% at the heap leach operation. Average ore grade sent to the heap leach operation will be 4.5 g/t and 14.0 g/t Au to the CIL plant, with an overall average ore grade of 6.03 g/t Au to bothCIL and heap leach. The following table is a summary of the key economic parameters of the AmesmessaGold Project. Parameter Value Capital Cost US$38.2 millionProduction per annum 100,000 oz/yrTotal Production 440,547 ozLife of Project 4.5 yearsCash Operating Cost $290/ozTotal Operating Cost including 4.2% royalty and 0.5% $376/ozenvironmental taxProject EconomicsNPV @ 10% discount rate $US11.0 millionIRR 20.1%Gold Price $440/oz The proposed development plan has been formulated with the following keyelements: • Use the existing Tirek CIL plant to maximise the recovery of gold from high grade ore which is mined from all veins. An investment in the Tirek CIL plant will be required • Use heap leach technology to maximise the extraction of gold resources by processing and extracting gold from low grade ore resources (< 5.0 g/t Au) in cost efficient manner • Fast-track development of the project by using existing infrastructure and procuring modular 'plug-and-play' process plant components to reduce engineering and construction costs so as to achieve the targeted gold production by November 2007 • Lease financing of a Caterpillar mining fleet and Tamrock blast hole drills including after-sales maintenance and operating service support agreements to optimise mine equipment reliability and productivity • Mobile crushing plant to permit construction of future heap leach pads at different locations throughout the mining concession so as to optimise transport costs of low grade ore from the mine to the heap leach facility and take advantage of new low grade gold resources discovered and developed • Ensure the development plan is flexible so that it does not preclude any opportunity to develop underground resources or expand the operation by increasing the CIL and/or heap leach process plant capacities This development plan will minimise the initial capital investment but at thesame time maximise shareholder value by emphasising positive cash-flow in theshortest timeframe possible. Furthermore it optimises the exploitation of themineral resource by processing high grade ore efficiently (95% recovery) as wellas maximising the extraction and processing of low grade ores which previouslywere not exploited nor processed by the CIL plant. This development strategywill optimise the extraction and recovery of gold from the Amesmessa, Tirek andZita resources. This ore processing strategy has been used successfully bymajor gold mining companies in Nevada such as Newmont Gold and Barrick GoldCorporation, the two largest gold producing companies in the world. Cost Update Capital costs are now estimated at $40.6 million with a total of $30.86 millioncommitted to date. Capital costs were increased for the mine as compared tothe 4th quarter estimate ($38.2 million), as a result of capitalising 6 monthsof lease payments (July 2007 to December 2007). This was done as the projectwill not reach commercial production before the 4th quarter of 2007 andtherefore all 2007 lease payments for mobile and fixed equipment are nowconsidered a capital cost. Costs for the process plant are now projected at $12.5 million versus a budgetof $8.79 million. The ball mill expansion project has been put on hold until areview of the project is completed by New Concept Projects ("NCP"). NCP isstudying the cost of expanding the Tirek CIL plant. The commitment to the ballmill may be reduced to zero if it is deemed the project should be presented as aseparate stand-alone capital project for expanding the Tirek plant to a processcapacity of 500 tpd ("tonnes per day"). Owner's Costs are showing an unfavourable variance of approximately $913,000 dueto increase in Amesmessa camp costs as compared to the budget. This costincludes a $1.1 million payment for customs and duties paid by ENOR forreleasing the camp buildings. Infrastructure costs are $2.4 million. This is over budget although most of thisis related to the much higher than budgeted electrical power generation anddistribution costs. Construction Update Concrete work at Amesmessa is complete in most areas and the remaining nearingcompletion. All mobile mine equipment and mine service equipment has beendelivered to the site as has the majority of the equipment required to completethe project including the tanks, crusher, assay laboratory, gold refinery, etc.Construction of the heap leach pads is now complete. The crusher is beingassembled and should be completed by the end of July 2007. The fuel and watertanks have been installed and construction of the water pipeline proceeds with21km out of the 42km completed. Summary of Tirek Operations for 2006 Key Performance Indicators Unit 2006 Actual 2006 Budget % Variance Total Gold production oz 12,188 21,700 -44%Ore Tonnes ex mine mt 38,914 67,841 -43%Waste Tonnes Mined mt 1,671,636 1,765,803 -5%Ore processed CIL Plant mt 43,268 67,836 -36%Ore Grade CIL Plant g/t Au 9.57 10.47 -9%Gold Recovery CIL % 93.1 95 -2%Sales GBP 3,943,000 5,633,330 -30%Operating Expenditures GBP 7,184,000 6,358,350 13%Number of Employees 312 269Lost Time Accidents 2 0 Gold production for 2006 was 44% below budget at 12,188 ounces compared to abudget of 21,700 ounces. Ore tonnes processed were also below budget at 43,268tonnes versus an initial budget of 67,836 tonnes, an unfavourable variance of36%. Most of this unfavourable variance was related to the late delivery of thenew mobile equipment to the fourth quarter when it was planned for delivery atthe beginning of the third quarter. Consumable supplies were also a problemduring this period. Gold production is expected to increase from a monthly average of 1,950 ouncesper month in the 3rd quarter after an average of 1,500 ounces per month in thefirst half of 2007. The Company will exit the year at approximately 8,000 ouncesper month. Total gold production for 2007 is projected at 26,163 ounces.Cash flow is projected to be positive by November when gold production from theheap leach pad is greater than 3,000 ounces per month. Exploration The results of the 2006 Aero Mag survey undertaken with Fugro were completed andanalysed by Southern Geoscience Consultants of Australia. A team of in housegeologists reviewed the data and spent a week at site reviewing all workcompleted in the last year. From this, a report was written and submitted to theENOR Board for exploration programmes on the concession for the medium term.This report was approved by ENOR Board on 31 May 2007. Part of this report wasto increase staffing in exploration and this is currently being actioned.Another aspect was to complete a program of 20,000 metres of exploration to testknown targets with a view to increasing resources in the short term by exploringtargets outside of the current zone of interest. The company is looking tosecure drills at present. Outlook The first heap leach ore is expected to be under leach by October 2007 based oncurrent schedule assumptions, and therefore the first production of gold fromloaded carbon is not expected to be available for gold refining prior to the endof November 2007. Gold production is expected to be 26,163 ounces for 2007 ascompared to a budget of 56,108 ounces as a result of the delay in the start-upof the heap leach project. The Company will end 2007 at a production rate ofapproximately 8,000 ounces per month. High grade ore will continue to be fed to the Tirek CIL plant with a view toincreasing production to 1,950 ounces per month by the third quarter, 2007. Thisoperation will continue to function with existing equipment until the Companycan assess options for installation of the new ball mill. Many new initiatives are underway to transform the company including arecruitment program to train the workforce in modern efficient gold mining.Construction of necessary infrastructure to support the operation is on-goingwith a long-term outlook to increasing gold production. A new labour structurewith flexible work practices and improved pay scale were introduced in the 1stquarter of 2007. GMA is committed to work in coordination with our partner Sonatrach and theAlgerian Government to create a world class operation in southern Algeria. Douglas Perkins Chief Executive Officer DIRECTORS REPORT The directors present their report and financial statements for the year ended31 December 2006. Principal activity and business review The group's principal activity is that of gold mining, exploration and minedevelopment in Algeria. A review of the business is contained in the Chairman'sStatement and the Operations Review. Corporate structure GMA Resources plc is a company limited by shares that is incorporated anddomiciled in England and Wales. The company has the following subsidiaries: Gold Mines of Algeria Pty Ltd Australian owned 100% by GMA Resources plc ENOR spa Algerian owned 52% by Gold Mines of Algeria Pty Ltd Results The loss for the year was £2,440,000 (2005: £2,178,000). The directors cannotrecommend payment of a dividend. Directors The directors holding office throughout the year are set out below. Richard Linnell Douglas Perkins David Netherway Dr Robert Danchin Shaun Bunn resigned as a director on 1 February 2006 and Colin Ikin resigned on7 April 2006. Douglas Perkins and Robert Danchin retire by rotation and, being eligible, offerthemselves for re-election at the Annual General Meeting. The directors' interests in the shares of the company are shown in a table inthe Remuneration Report. Biographic details Richard Linnell, aged 62, Non-Executive Chairman Richard has been active in the resources and the metals field for nearly fortyyears and has significant global experience in the development and marketing ofresources and commodities. He then joined Middelburg Steel & Alloys as MarketingManager for the Stainless Steel division and was subsequently involved in theestablishment of the Columbus Stainless Steel Project. Richard then becameGeneral Manager of the Manganese Division of Samancor, a joint venture betweenthe then Billiton Plc and the Anglo American Corporation. Samancor had adominant position globally in manganese and chrome markets. He, then, wasresponsible for Billiton Plc's Exploration and Development activities withinAfrica, and has guided detailed discussions in Guinea, Mauritania, Sudan,Morocco, Democratic Republic of Congo and Zambia, as well as South Africa. Hewas the originator of the Bakubang Initiative, a Forum designed to revive the SAMining Industry which lead to the establishment of the New Africa Mining Fund.He has the following directorships: Executive Chairman - Falklands Gold &Minerals Ltd. Non Executive Chairman - GVM Metals Ltd and its subsidiaries/associates - GMA Resources Ltd - New Kush Exploration & Mining - ChromeCorporation. Richard Linnell is a South African citizen. Dr Robert Danchin, aged 64, Non-Executive Director Dr Robert Danchin is a geologist and chemist recently retired from AngloAmerican plc where he was Chief Executive Officer of the Exploration andAcquisitions Divisions and Group Deputy Technical Director (Geology). DrDanchin joined Anglo American in 1971 as a research geochemist rising to becomeHead of the Geology Laboratory in 1980. He then worked for an Australiansubsidiary of De Beers for 15 years as Chief Geologist and Exploration Manager.He returned to Anglo American in 1996 as Head of the Corporation's New MiningBusiness Division and was appointed Executive Director of the Anglo AmericanCorporation of South Africa in June 1997. Dr Danchin is a member of theAustralian CSIRO Mining Sector Advisory Committee, a member of the AMIRA Counciland a non-executive director of Cluff Gold plc and Gravity Diamonds Ltd. DrDanchin is an Australian citizen. Douglas G Perkins B.Comm (Accountancy) aged 54, Executive Director and ChiefExecutive Officer Mr. Perkins has many years experience in mining and mining finance. He qualifiedin accountancy at Concordia University, Montreal in 1978 and worked for a numberof years with mining companies operating in Guinea, Ghana, Cote d'Ivoire,Central America and Burkina Faso. In 2000 he set up his own company, PerkinsInternational, and worked on assignment in senior positions for a number ofmining and international companies including projects with The World Bank andMitsui. Most recently, he has acted as Vice President & Chief Financial Officerfor Orezone Resources Inc. (TSX: AMEX) from 2003 to October 2005. Mr Perkins isa Canadian Citizen. David Netherway B.E. (Mining Engineering) aged 54, Non-Executive Director Mr Netherway is a mining engineer with over 30 years of experience in the miningindustry. He is currently the CEO of Shield Mining Limited, an Australian listedcompany exploring for gold and base metals in Mauritania. From April 2002 untilthe completion of its takeover by Eldorado Gold Corporation in 2005, Mr.Netherway served as the president and chief executive officer of Toronto listedAfcan Mining Corporation, a China focused gold mining company. Mr. Netherway isa mine developer and operator who was involved in the construction anddevelopment of the Iduapriem, Siguiri and Kiniero gold mines in West Africa andhas mining experience in Australia, India, Nepal, Oman and Malaysia. Prior tojoining Afcan, Mr. Netherway held senior management positions in a number ofmining companies, including Golden Shamrock Mines, Ashanti Goldfields andSemafo. Mr. Netherway has received a B.E. in Mining Engineering from theUniversity of Melbourne in 1975 and a Certified Diploma in Accounting andFinance from the Chartered Association of Certified Accountants in the UnitedKingdom in 1985. Mr Netherway is an Australian Citizen. Substantial shareholdings At 31 May 2007, the following had notified the company of a disclosable interestof 3% or more of the nominal value of the company's shares: Shareholding Ordinary % Pictet & Cie 50,665,000 14.30Majedie Asset Management 23,893,000 6.74RAB Capital 19,018,428 5.37Teather & Greenwood 17,000,000 4.80Coghill Capital 11,550,070 3.26UBS 11,113,000 3.14 Employees The group supports the recruitment of disabled persons where possible. Priorityis given to those who become disabled during their employment. They all haveopportunities for training, career development and promotion in accordance withtheir skills and abilities. The group endeavours to keep all its employeesinformed on matters affecting them and takes into account the views of employeeswherever possible. Financial Risk Management Information relating to the group's financial risk management is set out in note15 of the financial statements. Charitable and political contributions There were no charitable or political contributions made in the year. Creditors' payment policy and practice The company's policy is to settle the terms of payment with suppliers whenagreeing the terms of the transaction, ensuring suppliers are made aware of theterms of payment and to abide by such terms of payment. The number of creditordays as at 31 December 2006 was 120 days (2005: 120 days). International Financial Reporting Standards ("IFRS") Reporting under IFRS will be mandatory for the Group for the year ending 31December 2007 onwards. A project team will be set up to manage the Group'stransition from UK GAAP to IFRS for the year ending 31 December 2007 and toensure successful implementation within the required timeframe. Statement of directors' responsibilities The directors are responsible for preparing the Annual Report and financialstatements in accordance with applicable law and United Kingdom generallyaccepted accounting practice. Company law requires the directors to prepare financial statements for eachfinancial year. Under that law the directors have elected to prepare financialstatements in accordance with United Kingdom Accounting Standards (UnitedKingdom Generally Accepted Accounting Practice). The financial statements arerequired by law to give a true and fair view of the state of affairs of theGroup and Company and of the profit or loss of the Group for that year. Inpreparing these financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently - make judgements and estimates that are reasonable and prudent - state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. The directors are responsible for keeping proper accounting records, forsafeguarding the assets of the Group and for taking reasonable steps for theprevention and detection of fraud and other irregularities. The directors are responsible for ensuring that the directors report and otherinformation included in the annual report is prepared in accordance with UnitedKingdom company law. In so far as the directors are aware: - there is no relevant audit information of which the company's auditors are unaware; and - the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors' are responsible for the maintenance and integrity of thecorporate and financial information included on the company's website.Legislation in the United Kingdom governing the preparation and dissemination offinancial statements may differ from legislation in other jurisdictions. Auditor Grant Thornton UK LLP offer themselves for reappointment as auditor inaccordance with section 385 of the Companies Act 1985 and, a resolution tore-appoint Grant Thornton UK LLP as auditors will be put to the Annual GeneralMeeting. BY ORDER OF THE BOARD Secretary 14 June 2007 Directors' emoluments Details of directors' emoluments for the group for the year are as follows: 2006 2006 2006 2006 2005 Fees Salaries Compensation for Total Total loss of office £ £ £ £ £ R J Linnell* 28,750 - - 28,750 25,000D G Perkins 125,000 - - 125,000 20,000D G Netherway* 25,000 - - 25,000 1,250C R Ikin** - - - - 120,000S Bunn** - 20,000 64,500 84,500 100,000S J Farrell* - - - - 12,500Dr R Danchin* 15,300 - - 15,300 10,000 194,050 20,000 64,500 278,550 288,750* Non-Executive** Non Executive as of 17 October 2005 Service contracts The executive director has a contract with a rolling 12 month notice period oneither side. The non-executive directors have contracts with a rolling 3 monthnotice period on either side. Remuneration policy for executive directors The company's policy on executive director remuneration is to attract and retainhigh quality executives by paying competitive remuneration packages relevant toeach director's role and experience and the external market. The packagesinclude employment related benefits. Directors' interests The interests of the directors (and their families) holding office at the yearend in the ordinary 1p shares of the company at 1 January 2006 and at 31December 2006, is as shown below: Ordinary Shares Share options 2006 2005 2006 2005 Granted date Share price Number Number Number Number RJ Linnell 1,902,000 1,902,000 300,000 - 04/04/06 10p 300,000 04/04/06 15p D G Perkins 350,000 300,000 600,000 600,000 01/11/05 7p 600,000 600,000 01/11/05 10.5p 600,000 04/04/06 10p 600,000 04/04/06 15p D G Netherway 145,000 80,000 300,000 - 04/04/06 10p 300,000 04/04/06 15p Dr R Danchin - - 300,000 - 04/04/06 10p 300,000 04/04/06 15p The options are exercisable in the 5 years from grant date. One third 6 monthsfrom date of grant, one third 12 months from the date of grant and one third 18months from the date of grant. R J Linnell's shares are held by Terra Africa Investments Limited, of which heis the sole beneficiary. The market price of the ordinary shares at 31 December 2006 was 12.38p and therange during the year was 7.88p to 15.5p. D Perkins 14 June 2007 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF GMA RESOURCES PLC We have audited the Group and parent Company financial statements (the''financial statements'') of GMA Resources plc for the year ended 31 December2006 which comprise the principal accounting policies, the consolidated profitand loss account, the consolidated and company balance sheets, the consolidatedcash flow statement, the consolidated statement of total recognised gains andlosses and notes 1 to 25. These financial statements have been prepared underthe accounting policies set out therein. This report is made solely to the company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the company's members those matters we are required tostate to them in an auditor's report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother 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 and thefinancial statements in accordance with United Kingdom law and AccountingStandards (United Kingdom Generally Accepted Accounting Practice) are set out inthe Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with the Companies Act1985. We also report to you whether in our opinion the information given in theDirectors' Report is consistent with the financial statements. In addition we report to you if, in our opinion, the company has not kept properaccounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regardingdirectors' remuneration and other transactions is not disclosed. We read other information contained in the Annual Report, and consider whetherit is consistent with the audited financial statements. This other informationcomprises only the Directors' Report, the Chairman's Statement, the OperationsReview and the Remuneration Report. We consider the implications for our reportif we become aware of any apparent misstatements or material inconsistencieswith the financial statements. Our responsibilities do not extend to any otherinformation. 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 includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgments made by the directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the group's and company's circumstances, consistently applied and adequatelydisclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion: • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the group's and the parent company's affairs as at 31 December 2006 and of the Group's loss for the year then ended; • the financial statements have been properly prepared in accordance with the Companies Act 1985; and • the information in the Report of the Directors is consistent with the financial statements. GRANT THORNTON UK LLPREGISTERED AUDITORSCHARTERED ACCOUNTANTS Gatwick 14 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Turnover 1 3,943 6,346 Cost of sales (5,457) (8,189) Gross loss (1,514) (1,843) Administrative expenses (1,727) (912) Operating loss 2 (3,241) (2,755) Net interest 4 (39) (137) Loss on ordinary activities before 1 (3,280) (2,892)taxation Tax on loss on ordinary activities 5 - - Loss on ordinary activities after (3,280) (2,892)taxation Minority interest 16 840 714 Net loss attributable to shareholders 19,20 (2,440) (2,178) Basic and diluted loss per ordinary 7 (0.81p) (1.48p)share All operations are continuing. BALANCE SHEETS As at 31 December 2006 Group Group Company Company Note 2006 2005 2006 2005 £'000 £'000 £'000 £'000Fixed assets Intangible assets 8 648 1,103 - -Tangible assets 9 17,838 6,797 - 5Investments 10 - - 525 525 18,486 7,900 525 530Current assets Stocks 11 1,792 2,622 - -Debtors: due within one year 12 2,591 613 506 597Debtors: due after one year 12 - - 19,392 7,454Cash at bank and in hand 7,477 8,608 1,032 8,608 11,860 11,843 20,930 16,659Creditors: amounts falling due within one 13 (6,152) (5,725) (48) (95)year Net current assets 5,708 6,118 20,882 16,564 Total assets less current liabilities 24,194 14,018 21,407 17,094 Creditors: amounts falling due after more 14 (9,810) (237) - -than one year Minority interest 16 (1,676) (2,875) - - Net assets 12,708 10,906 21,407 17,094 Capital and reservesCalled up share capital 17 3,171 2,610 3,171 2,610Share premium account 19 20,469 16,184 20,469 16,184Other reserve-Share based payments 18 106 - 106 -Profit and loss account 19 (11,038) (7,888) (2,339) (1,700) Shareholders' funds 20 12,708 10,906 21,407 17,094 The financial statements were approved by the Board of Directors on 14 June 2007 Douglas Perkins CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Net cash outflow from operating activities 21 (2,214) (1,015) Returns on investment and servicing of finance 4Interest received 195 59Interest paid (234) (196) (39) (137) Capital expenditurePayments to acquire tangible fixed assets (10,110) (1,282)Payments to acquire intangible fixed assets (2) (52) (10,112) (1,334) Net cash outflow before financing (12,365) (2,486) FinancingIssue of ordinary share capital 5,053 8,908Expenses in connection with share issue (207) (267)Capital element of finance leases repaid (752) -Loan from minority shareholder 7,850 -Loan repayments 22 (70) (59)Net cash inflow from financing 11,874 8,582 (Decrease) / Increase in cash 23 (491) 6,096 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2006 2006 2005 £'000 £'000 Loss for the financial year (2,440) (2,178) Exchange (loss)/gain on foreign currency (710) 457net investment Total recognised gains and losses for the (3,150) (1,721)financial year PRINCIPAL ACCOUNTING POLICIES For the year ended 31 December 2006 Basis of preparation The financial information is prepared under the historical cost convention andin accordance with applicable United Kingdom Generally accepted accountingpractice (UK GAAP). The principal accounting policies of the group are set outbelow. With effect from 1 January 2006 the group has adopted FRS 20. Theimpact of the adoption of FRS20 is set out in note 18. The accounting policiesare consistent with the Statement of Recommended Practice 'Accounting for Oiland Gas Exploration, Development, Production and Decommissioning Activities' tothe extent it is relevant to the group. Group financial statements The group financial statements consolidate those of the company and itssubsidiary undertakings drawn up to 31 December 2006. All intra-grouptransactions are eliminated on consolidation. Acquisitions of subsidiaries aredealt with by the acquisition method of accounting. Goodwill Goodwill arising on consolidation, representing the excess of the fair value ofthe consideration given over the fair value of the identifiable net assetsacquired, is capitalised and is amortised on a straight line basis over itsexpected useful economic life of five years, which is the period that thedirectors estimate that the values of the underlying businesses acquired areexpected to exceed the value of the underlying assets. Turnover Turnover is the total amount receivable in the ordinary course of business fromoutside customers for goods supplied as a principal and for services provided,excluding VAT and local equivalents. Turnover is recognised on despatch ofgoods to third parties. Revenue is recognised to the extent that it is probablethat the economic benefits will flow to the entity and the revenue can bereliably measured. The following specific recognition criteria must also be metbefore revenue is recognised. Sale of gold Revenue from production of gold is recognised when the risks and rewards ofownership have passed to the buyer. This will be when all of the followingrecognition criteria have been met: - the product is in a form suitable for delivery and no further processing is required by or on behalf of the group; - the quantity and quality of the product can be determined with reasonable accuracy; - the selling price can be determined with reasonable accuracy; and - the product has been despatched to a refiner and is no longer under the physical control of the group. Stocks Mine stores and finished goods are valued at the lower of cost and netrealisable value less provision for obsolescence. Cost includes all expenditureincurred in bringing the product to its present location and condition andcomprises the aggregate cost of direct consumables, direct labour and theattributable proportion of direct production overheads. Work in progressconsists of ore in stockpiles that are valued at the lower of cost and netrealisable value. Net realisable value is based on normal estimated sellingprices less further costs expected to be incurred to completion and disposal. Impairment of fixed assets Impairment reviews are undertaken based on the value in use of the relevantasset using a discount rate of 20%. Financial instruments Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. A financial liability exists where that is a contractual obligation to delivercash or another financial asset to another entity, or to exchange financialassets or financial liabilities under potentially unfavourable conditions. Inaddition, contracts which result in the entity delivering a variable number ofits own equity instruments are financial liabilities. Shares containing suchobligations are classified as financial liabilities. Finance costs and gains or losses relating to financial liabilities are includedin the profit and loss account. The carrying amount of the liability isincreased by the finance cost and reduced by payments made in respect of thatliability. Finance costs are calculated so as to produce a constant rate ofcharge on the outstanding liability. An equity instrument is any contract that evidences a residual interest in theassets of the group/company after deducting all of its liabilities. Dividendsand distributions relating to equity instruments are debited directly toreserves. Fixed assets Deferred exploration costs When it has been established that a mineral deposit has development potential,all directly attributable costs (direct and overhead) incurred in connectionwith the exploration and development of the mineral deposits are capitaliseduntil either production commences or the project is not considered economicallyviable. In the event of production commencing, the capitalised costs areamortised over the expected life of the ore reserves on a unit of productionbasis. Other pre-trading expenses are written off as incurred. Where a projectis abandoned or is considered to be of no further interest the related costs arewritten off. Tangible assets Tangible fixed assets are stated at cost, net of depreciation and any provisionfor impairment. Depreciation is calculated to write down the cost less residualvalue of all fixed assets other than land by equal annual instalments over theirestimated useful economic lives. The periods generally applicable are: Mining property and buildings life of the mine Production machinery and equipment 3 to 10 years Other equipment 5 years Investments Investments are included at cost less amounts written off. Foreign currency transactions Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction or at the contracted rate if the transaction is covered by aforward exchange contract. Monetary assets and liabilities denominated inforeign currencies are retranslated at the rate of exchange ruling at thebalance sheet date or if appropriate at the forward contract rate. The accountsof overseas subsidiary undertakings are translated at the rate of exchangeruling at the balance sheet date. The exchange difference arising on theretranslation of opening net assets is taken directly to reserves. All othertranslation differences are taken to the profit and loss account. Provision for decommissioning and site rehabilitation costs Provision is made for decommissioning and site rehabilitation costs in theaccounting period when the related environmental impact occurs, based on the netpresent value of estimated future costs. When an obligation is incurred in thecourse of acquiring or constructing tangible fixed assets, the discounted amountof provision is capitalised and depreciated over the life of that asset. Therelease of the discount applied in establishing the net present value of futurecosts is charged to the profit and loss account in each accounting period and isdisclosed as a financing cost. Deferred tax Deferred tax is recognised on all timing differences where the transactions orevents that give the group an obligation to pay more tax in the future, or aright to pay less tax in the future, have occurred by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that theywill be recovered. Deferred tax is measured using rates of tax that have beenenacted or substantively enacted by the balance sheet date. Share based payments The Group has adopted FRS20 with effect from 1 January 2006. FRS20 requires therecognition of a charge to the profit and loss account for all applicable sharebased payments including share options. The Group has equity-settled share based payments but no cash-settled sharebased payments. All share based payment awards granted after 7 November 2002which had not vested prior to 1 January 2006 are recognised in the financialstatements at their fair value at the date of grant. All goods and services received in exchange for the grant of any share-basedpayment are measured at their fair values. Where employees are rewarded usingshare-based payments, the fair values of employees' services are determinedindirectly by reference to the fair value of the instruments granted to theemployee. This fair value is appraised at the grant date and excludes theimpact of non-market vesting conditions (for example, profitability and salesgrowth targets). All equity-settled share based payments are ultimately recognised as an expensein the profit and loss account with a corresponding credit to 'other reserves'.The impact of FRS20 on prior periods is not material. If vesting periods or non-market based vesting conditions apply, the expense isallocated over the vesting period, based on the best available estimate of shareoptions expected to vest. Estimates are revised subsequently if there is anyindication that the number of share options expected to vest differs fromprevious estimates. Any cumulative adjustment prior to vesting is recognised inthe current period. Any adjustment for options which lapse prior to vesting isrecognised in the current period. Finance lease and hire purchase agreements Where the group enters into a lease that transfers substantially all the risksand rewards of ownership of an asset to the lessee, the lease is treated as afinance lease. The asset is recorded in the balance sheet as a tangible fixedasset at the present value of the minimum lease payments and is depreciated overthe shorter of the lease term and the asset's useful economic life. Futureinstalments under such leases, net of finance charges, are included increditors. Rentals payable are apportioned between the finance element, whichis charged to the profit and loss account at a constant rate of charge on thebalance of capital repayments outstanding, and the capital element, whichreduces the outstanding obligation. Operating lease agreements Leases where substantially all of the risks and rewards of ownership are nottransferred to the group are treated as operating leases. Rentals underoperating leases are charged against profits on a straight-line basis over theperiod of the lease. notes to the financial statements For the year ended 31 December 2006 1 TURNOVER AND LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION The turnover and loss on ordinary activities before taxation are attributable tothe principal activity of the group, that of the acquisition, exploration anddevelopment of gold deposits in Algeria. All operating losses and net assetsoriginated and arose in Algeria. Turnover by destination was as follows: 2006 2005 £'000 £'000 Algeria 2,099 6,346United Kingdom 1,844 - 3,943 6,346 2 OPERATING LOSS Operating loss is stated after charging: 2006 2005 £'000 £'000 Amortisation 457 453Depreciation - deferred exploration costs - 73Depreciation - other 1,108 1,294Exchange losses 36 168Auditors' remuneration- audit fees; group audit 91 66- nominated adviser fees 39 -- tax compliance and advisory 23 5 3 STAFF NUMBERS AND COSTS The average monthly number of persons (including directors) employed by thegroup during the year was: 2006 2005By activity Number Number Production 316 247Administration 56 43 372 290 2006 2005Staff costs £'000 £'000 Wages and salaries 1,691 1,868Social security costs 108 168 1,799 2,036 The total directors' emoluments for the year were £278,550 and that of thehighest paid director was £125,000. 4 NET INTEREST 2006 2005 £'000 £'000 Interest receivable (195) (59)Finance charges on finance lease agreements 75 -Interest on bank loans and overdrafts 159 196 39 137 5 TAX ON LOSS ON ORDINARY ACTIVITIES There is no tax charge in the year due to losses incurred by the group, whichare not currently being recognised as an asset due to uncertainty over therecoverability of such losses in the foreseeable future. 2006 2005 £'000 £'000 Loss on ordinary activities before tax (3,280) (2,892) Loss on ordinary activities multiplied by the standard rate of (984) (868)corporation tax in the UK of 30% Effect of:Expenses not deductible for tax 152 10Overseas losses outside the scope of tax 525 717Increase in tax losses 307 141Current tax charge for year - - The group has unrelieved tax losses of £3,100,000 (2005: £2,100,000) to carryforward which may be recoverable against future income depending on its natureor type. ENOR is exempt from corporation tax until 1 July 2011 and so anyprofits or losses are non-taxable. 6 LOSS FOR THE FINANCIAL year The company has taken advantage of section 230 of the Companies Act 1985 and hasnot included its own profit and loss account in these financial statements. Theparent company's loss after tax for the year was £639,000 (2005: £335,000). 7 BASIC AND DILUTED LOSS PER ORDINARY SHARE 2006 2006 Number 2006 2005 2005 Number 2005 of shares of shares Loss for Loss per Loss for Loss per the period share the period share £'000 '000 p £'000 '000 p Loss for the year (2,440) (2,178) Weighted average number of shares 301,607 147,335 Basic loss per share (0.81p) (1.48p) Due to losses, there is no dilutive effect of options to subscribe for ordinaryshares. 8 INTANGIBLE FIXED ASSETS Group - Goodwill on consolidation Goodwill on Other Total consolidation £'000 £'000 £'000CostAt 1 January 2006 2,198 52 2,250Additions - 2 2At 31 December 2006 2,198 54 2,252 AmortisationAt 1 January 2006 1,137 10 1,147Provided in the year 440 17 457At 31 December 2006 1,577 27 1,604 Net book amount at 31 December 2006 621 27 648 Net book amount at 31 December 2005 1,061 42 1,103 9 TANGIBLE FIXED ASSETS Group Land, mining Asset under Production Other Total property and machinery equipment buildings construction and equipment £'000 £'000 £'000 £'000 £'000CostAt 1 January 2006 4,006 464 4,798 566 9,834Additions 44 9,143 3,984 171 13,342Written off - - - (20) (20)Exchange difference (416) - (1,329) (7) (1,752)At 31 December 2006 3,634 9,607 7,453 710 21,404 DepreciationAt 1 January 2006 972 - 1,893 172 3,037Charge for the year 188 - 867 53 1,108Written off - - - (1) (1)Exchange difference (122) - (497) 41 (578)At 31 December 2006 1,038 - 2,263 265 3,566 Net book amount at 31 December 2006 2,596 9,607 5,190 445 17,838 Net book amount at 31 December 2005 3,034 464 2,905 394 6,797 Included within the net book value of £17,838,000 is £2,996,000 (2005 - nil)relating to assets held under finance leases and hire purchase agreements. Thedepreciation charged to the financial statements in the year in respect of suchassets amounted to £235,000 (2005 - nil). Company Other equipment £'000Cost 1 January 2006 6 Disposals (6) At 31 December 2006 - Depreciation At 1 January 2006 1 Disposals (1) At 31 December 2006 - Net book amount at 31 December 2006 - Net book amount at 31 December 2005 5 10 FIXED ASSET INVESTMENTS Company Subsidiary undertakings £'000Cost At 1 January 2006 and at 31 December 2006 525 Company principal subsidiariesSubsidiary undertaking Country of Class of Proportion Proportion Nature of business incorporation share capital owned by owned by held group parent undertaking ENOR spa Algeria ordinary 52% 0% Gold mining and processing Gold Mines of Algeria Pty Ltd Australia ordinary 100% 100% Investment company 11 STOCK Group 2006 2005 £'000 £'000 Raw materials and consumables 1,490 2,277Finished goods for resale 302 345 1,792 2,622 12 DEBTORS 2006 2005 2006 2005 Group Group Company Company £'000 £'000 £'000 £'000 Due from subsidiary undertakings - - 19,392 7,454Bonds 72 76 - 2Prepayments 841 122 - -Other debtors 1,678 415 506 595 2,591 613 19,898 8,051 The balance due from the subsidiary undertaking will be repaid as and when thesubsidiary undertaking is profitable and will be repaid after more than oneyear. 13 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2006 2005 2006 2005 Group Group Company Company £'000 £'000 £'000 £'000 Bank overdraft 33 673 - -Bank loan 1,582 1,431 - -Trade creditors 2,617 2,321 - 27Finance leases 536 - - -Other taxation and social security 737 874 - -Other creditors and accruals 647 426 48 68 6,152 5,725 48 95 The bank loans and overdraft are secured by fixed and floating charges over allthe assets of a subsidiary and interest is payable at a variable rate of base +2% and fixed rates of between 6% and 6.75% per annum. The loans are repayablein instalments. The finance leases are secured on the relevant assets. 14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Group 2006 2005 £'000 £'000Bank loan - one to two years 16 218- two to five years - 19 Finance leases - one to two years 628 -- two to five years 1,316 - Loan from subsidiary company's minority 7,850 -shareholder 9,810 237 Included in the loan from the subsidiary company's minority shareholder;"Sonatrach" (the Algerian state oil company), of £7.85 million is a £5.0 millionloan which is unsecured and bears interest at 4.62% per annum commencing inJanuary 2008. It is interest free until then. The £5.0 million is repayable in6 bi-annual instalments commencing in January 2008. The balance of £2.85 millionhas no formal repayment terms and is presently interest free. It will not bepaid until the £5.0 million is repaid however. 15 FINANCIAL RISK MANAGEMENT The group financial liabilities analysis is as follows: 2006 2005 £'000 £'000In less than one year or on demand Bank loans and overdrafts 1,615 2,104 Finance leases 536 -In more than one year but less than twoyears Bank loans 16 218 Finance leases 628 - Loan from minority shareholder 1,667 - In more than two years but less than fiveyears Bank loans - 19 Finance leases 1,316 - Loan from minority shareholder 3,333 - In more than five years Loan from minority shareholder 2,850 - 11,961 2,341 The group uses financial instruments, comprising cash balances, bank loans,bills of exchange, trade debtors and trade creditors that arise directly fromits operation. The main purpose of these financial instruments is to raisefinance for the group's operations. The interest rates on the group borrowings at 31 December 2006 were: 2006 2006 2005 2005 £'000 Rate £'000 Rate Variable rate bank borrowings 1,424 Base+2% 1,706 Base+2%Fixed rate bank borrowings 58 6% 124 6%Fixed rate bank borrowings 149 6.75% 511 6.75%Fixed rate shareholder loan 5,000 4.62% - -Interest free shareholder loan 2,850 0% - - Finance leases 2,480 8% - - The weighted average period for which rates are fixed is 4.5 years (2005: 1.5years). The fair value of these liabilities is not significantly different to the above. Short term debtors and creditors have been excluded except for the currency riskdisclosures below. The group operates in overseas markets and is subject to currency exposures ontransactions undertaken during the period. The group does not hedge anytransactions, and foreign exchange differences on retranslation of foreignassets and liabilities are taken to the profit and loss accounts of the groupcompanies and the group. The amounts below show the extent to which group companies have monetary assetsand liabilities in currencies other than Sterling. 2006 2005 £'000 £'000 Foreign currency monetary assets - Algerian Dinars 6,445 140Foreign currency monetary liabilities - Algerian Dinars (1,482) (2,003)Foreign currency monetary assets - Australian dollars - 2Foreign currency monetary liabilities - US dollars (149) (511) 4,814 (2,372) The group had no undrawn committed borrowing facilities. The company seeks to ensure that liquidity is sufficient to meet funding needsas they arise. The directors monitor cash flow on a daily basis and at boardmeetings. Credit risk is minimal, gold is sold at auction and cash received before thegold is released. If external capital is required, the current policy is to obtain equity or debtfunding as considered appropriate. In deciding on the nature of the funding thecompany will consider the existing debt profile. The company does not currentlyuse currency hedges maintaining funds in Sterling or Algerian Dinar as necessaryto meet expenses in those countries. Significant funds were held in AlgerianDinar at 31 December 2006 as a result of funds transferred to ENOR for thedevelopment of Ammesmessa. 16 MINORITY INTEREST / RELATED PARTY TRANSACTIONS The minority interest represents a holding of 48% of the shares in thesubsidiary company, ENOR spa, by Sonatrach. 2006 2005 £'000 £'000 Minority interest at 1 January 2006 2,875 3,144Exchange differences (359) 445Minority interest in net loss of subsidiary undertaking (840) (714)At 31 December 2006 1,676 2,875 17 SHARE CAPITAL 2006 2006 2005 2005 Number £'000 Number £'000AuthorisedOrdinary shares of 1pence each 1,000,000,000 10,000 1,000,000,000 10,000 Allotted, called up and fully paidOrdinary shares of 1pence each 317,145,493 3,171 260,991,493 2,610 Allotments during the year On 12 April, 2006 the company allotted 56,154,000 ordinary shares of 1pence eachfor a consideration of 9 pence per ordinary share. The total considerationbefore expenses was £5,053,860 and aggregate nominal value was £561,540. Thepremium on the shares of £4,492,320 has been credited to the share premiumaccount. 18 SHARE BASED PAYMENTS The group recognised a charge of £106,000 (2005: nil) in the profit and lossaccount in respect of its share-based payment plans. The charge for 2005 wasnot material and has been included in 2006. The charge is based on the requirements of FRS 20 on share-based payments. Forthis purpose, the weighted average estimated fair value for the share optiongranted was calculated using Black-Scholes option pricing model in respect ofoptions. The volatility measured at the standard deviation of expected shareprice return is based on statistical analysis of the share price over the 12months period to 31 December 2006 and this has been calculated at 22%. The riskfree rate has been taken as 4.75%. The estimated fair values and other detailswhich have been processed into model are as follows: The company has granted options to certain directors and employees as follows: Dated Option price Fair value At 1 January Granted number Lapsed number At 31 Decembergranted 2006 2006 31/10/05 7-10.5p 0.9-2.0p 1,200,000 - - 1,200,00002/01/06 8-12p 1.0-2.3p - 600,000 - 600,00011/02/06 8-12p 1.0-2.3p - 300,000 - 300,00001/03/06 8.5-12.3p 0.9-2.1p - 300,000 - 300,00003/04/06 10-15p 1.3-3.0p - 300,000 (300,000) -04/04/06 10-15p 1.3-3.0p - 3,000,000 - 3,000,00017/04/06 11-16.5p 2.0-4.2p - 300,000 - 300,00006/05/06 15.5-23.3p 2.1-4.7p - 300,000 - 300,00006/08/06 11-16.5p 1.5-3.4p - 600,000 - 600,00027/08/06 11-16.5p 1.5-3.3p - 300,000 - 300,00020/09/06 10-15p 1.3-3.0p - 300,000 - 300,00001/11/06 8.8-13.1p 1.2-2.7p - 300,000 - 300,000 1,200,000 6,600,000 (300,000) 7,500,000 The company has a share option scheme for all employees (including directors).Options are exercisable at a price equal to the average market price of thecompany's shares on the date of grant. The vesting period is usually 6 to 18months in equal tranches of one third. The options are settled in equity onceexercised. If the options remain unexercised after a period of 5 years from the date ofgrant, the options expire. Options are forfeited if the employee leaves thecompany before the options vest. Details of the number of share options and the weighted average exercise price(WAEP) outstanding during the year are as follows: 2006 2005 WAEP WAEP No p No p Outstanding at the beginning of the year 1,200,000 8.75 - - Granted during the year 6,600,000 12.53 1,200,000 8.75 Forfeited during the year (300,000) 12.50 - - Outstanding at the end of the year 7,500,000 11.93 1,200,000 8.75 Exercisable at the year end 2,500,000 11.24 - - The share options outstanding at the end of the year have a weighted averageremaining contractual life of 3 years (2005 - 4 years) and have the followingexpiry dates: Expiry date 2006 2005 No No October 2010 1,200,000 1,200,000January 2011 600,000 -February 2011 600,000 -April 2011 3,300,000 -May 2011 300,000 -August 2011 900,000 -September 2011 300,000 -October 2011 300,000 - ------------------------------------ ------------------------------------ 7,500,000 1,200,000 ==================================== ==================================== The fair values were calculated using the Black-Scholes Pricing Model. Theinputs into the model were as follows: Date of issue Number Weighted Weighted Expected Expected Risk Expected Fair value granted average average volatility life free dividend at grant share price exercise rate yield date price No. p p % Years % % £ Oct 2005 1,200,000 6.88 8.75 22% 5 4.75% 0 17,397Jan 2006 600,000 8 10 22% 5 4.75% 0 10,077Feb 2006 600,000 8 10.19 22% 5 4.75% 0 9,663April 2006 3,300,000 10 12.5 22% 5 4.75% 0 73,071May 2006 300,000 15.5 19.38 22% 5 4.75% 0 10,192Aug 2006 900,000 11 13.75 22% 5 4.75% 0 21,679Sep 2006 300,000 10 12.5 22% 5 4.75% 0 6,565Oct 2006 300,000 8.75 19.94 22% 5 4.75% 0 5,726 ============ ============ ============ ============ ============ ====== ============ ============ ============ ============ ============ ============ ============ ====== ============ ============ ============ ============ ============ ============ ============ ====== ============ ============ Expected volatility was determined by calculating the historical volatility ofthe company's share price over the previous 12 months. The expected life used inthe model has been adjusted, based on the management's best estimate, for theeffects of non-transferability, exercise restrictions and behaviouralconsiderations. The company recognised total expenses of £106,000 (2005 - £Nil) related toequity-settled share-based payment transactions during the year. 19 RESERVES Group and Group and Group Company company company Other Share premium Profit and Profit and reserve-Share account loss account loss account based payment £'000 £'000 £'000 £'000 At 1 January 2006 - 16,184 (7,888) (1,700)Premium on shares issued in year - 4,492 - -Share issue costs - (207) - -Loss for the financial year - - (2,440) (639)Share based payment charge 106 - - -Exchange differences - - (710) -At 31 December 2006 106 20,469 (11,038) (2,339) 20 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2006 2005 £'000 £'000 Shareholders' funds at 1 January 10,906 3,986Loss for the financial year (2,440) (2,178)Exchange differences (710) 457Share-based payment 106 -Receipts from issue of shares 4,846 8,641Shareholders' funds at 31 December 12,708 10,906 21 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2006 2005 £'000 £'000 Operating loss (3,241) (2,755)Share-based payment charge 106 -Depreciation, amortisation and loss of disposal of assets 1,584 1,820Exchange differences 105 101(Decrease)/Increase in stocks 830 (498)Increase in debtors (1,978) (35)Increase in creditors 380 352Net cash outflow from operating activities (2,214) (1,015) 22 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £'000 £'000 (Decrease)/Increase in cash (491) 6,096Capital repayment of finance leases 752 -New finance leases (3,232) -Loan from minority shareholders (7,850) -Loans repaid 70 421 (10,751) 6,517Exchange differences - (362)Change in net funds in the year (10,751) 6,155Net funds at 1 January 2006 6,267 112Net (debt)/funds at 31 December 2006 (4,484) 6,267 23 ANALYSIS OF MOVEMENT IN NET (DEBT)/FUNDS At 1 January Cash flow Non-cash Exchange At 31 December 2006 items differences 2006 £'000 £'000 £'000 £'000 £'000 Cash in hand and at bank 8,608 (1,131) - - 7,477Bank overdraft (673) 640 - - (33) 7,935 (491) - - 7,444Debt due within one year (1,431) 70 (221) - (1,582)Debt due after one year (237) - 221 - (16)Finance leases - 752 (3,232) - (2,480)Loan from minority shareholders - (7,850) - - (7,850) 6,267 (7,519) (3,232) - (4,484) 24 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES The group has entered into commitments in respect of finance leases commencingafter the balance sheet date amounting to £3,277,000 (2005: Nil). The group has a contingent liability for Algerian VAT of approximately £300,000(2005: Nil) in respect of export sales where the company believes that VATshould not have been charged and was not charged. The company is in discussionswith the Algerian authorities. If crystallised it will not result in a cashpayment but will reduce the VAT recoverable amount in debtors. 25 POST BALANCE SHEET EVENTS On 31 January 2007, GMA Resources Plc announced that it has raised £4,100,000before expenses by way of a placing of 37,273,000 new ordinary shares of £0.01each at 11 pence per share. On 24 May 2007, GMA Resources Plc announced that it concluded the raising of£5,700,000 through the issue of £5,700,000 nominal of 10 % unsecured convertibleloan stock 2009 (the "Loan Stock"). The conversion rate for the issue will be 15 pence nominal of loan stock perOrdinary Share of 1 pence each in the Company subject to the conditions set outbelow. The option to convert shall be conditional on the passing of special resolutionsat the Company's 2007 AGM (or an extraordinary general meeting convenedimmediately thereafter) (the "Meeting"), authorizing the allotment of OrdinaryShares pursuant to the conversion rights for the purposes of sections 80 and 95of the Companies Act 1985 (as amended). Should such resolutions not be approvedthen the rate of interest of the loan stock shall be increased from the date ofthe Company's 2007 AGM to 20% per annum. The right to convert Loan Stock into Ordinary Shares may be exercised by theholders of Loan Stock from the date of the Meeting until 30 June 2009 whereuponany outstanding Loan Stock will be redeemed in the principal amount thereoftogether with all accrued unpaid interest. At any point following 24 May 2008 and if; a) the mid market price of Ordinary Shares in the Company has been above 30 pence for 30 consecutive business days; and b) for as long as the mid market price of Ordinary Shares in the Company continues to exceed 30 pence, the Company shall have the right to convert, on the basis of 21 days notice tooutstanding loan stock holders, all or part of the outstanding loan stock fromthis issue. This option is also conditional on the resolutions mentioned above. At any point, should over 75% of the initial loan stock have been converted, theCompany shall have the right to convert, on the basis of not less than 40 andnot more than 60 days' notice to outstanding loan stock holders, all the outstanding loan stock from this issue. This option is also conditional on theresolutions mentioned above. Interest on the loan stock shall be paid on a six-monthly basis in arrears, withthe first payment to be made on 31 December 2007. The proceeds of the convertible loan will be used to complete the constructionof the current Tirek / Amesmessa capital projects in southern Algeria, fundfurther exploration expenditures and to provide the Company with additionalworking capital. -------------------------- The accompanying accounting policies and notes form an integral part of thesefinancial statements. This information is provided by RNS The company news service from the London Stock Exchange