20 Jun 2008 07:00
20 June 2008 AIM: GMA
GMA Resources plc
("GMA" or "the Company")
Final results for the year ended 31 December 2007
Highlights:
o Delivery and installation of all mining equipment at Amesmessa completed
o Crushing operations commenced and ore stacked onto heap leach pads
o Extended exploration programme for the Tirek-Amesmessa concession approved to include 20,000 metres of RC drilling
o Successful fundraising of £4.1 million through issue of new shares and £5.7 million of loan stock to complete construction at Amesmessa
o Company awarded "Pioneering Award" at Mines and Money Conference in London
Post Year End Highlights:
o Completion of construction at Amesmessa
o First gold pour at Amesmessa in presence of Algerian Minister of Energy and Mines
o Production underway at Amesmessa making the project the first gold heap leach operation in Maghreb
o Extended exploration programme on the Tirek-Amesmessa concession underway
o David Netherway appointed as Chairman of the Company
o David Santley appointed as Chief Financial Officer and André Villeneuve as Vice President Algeria
Douglas Perkins, CEO of GMA, commented: "2007 was a significant year for the Company as construction was completed at Amesmessa and GMA Resources moved from being an exploration company to a gold producer, with production commencing in January 2008. Given the challenges that were overcome to reach it, this Company milestone is testament to the strength and capabilities of the team at GMA, and proves the viability of this highly prospective area. We now have a balanced portfolio of a producing gold mine and considerable exploration potential elsewhere on the concession as noted by some analysts during 2007. We are working hard to resolve recent production disappointments and getting back on track with our production target at Amesmessa whilst advancing the exploration programme currently underway on the wider concession. We look forward to reporting our progress in due course."
Enquiries:
| GMA Resources Plc | John East & Partners | Parkgreen Communications |
| Douglas Perkins Chief Executive Officer | Bidhi Bhoma / David Worlidge | Louise Goodeve / Justine Howarth |
| +44 (0) 20 7253 7670 +1 514 806 6788 | +44 (0) 20 7628 2200 | +44 (0) 20 7851 7480 |
Chairman's Statement
As the new Chairman of the Board, it is my pleasure to present to you the annual report of GMA Resources plc for the year ended 31 December 2007. It has been a year of substantial achievements for your Company as it transforms from a construction and development company into an emerging commercial gold producer and explorer. The major milestones and achievements of the Company during the year were:
Amesmessa Completion
In January 2008, the Company completed the construction of the Amesmessa project. Completion of such an ambitious construction project (the first of its kind in North Africa) in a remote and hostile physical environment represents a major achievement for the Company and its Algerian affiliate, ENOR spa. The staff of both GMA and ENOR are to be commended for this accomplishment. The Company was awarded the "Pioneering Award" at the Mines and Money Conference in November 2007 in recognition of its achievements at Amesmessa. On 26 January 2008, the first doré bar was poured at the official opening of the Amesmessa mine attended by the Algerian Minister of Energy and Mines.
Operations
In June 2007, the directors of both ENOR and GMA committed to a greatly expanded exploration programme which we expect will lead to the identification of significant new gold resources. This programme is already well underway in the highly prospective In Allerene and In Ouzzal areas of the concession.
In July 2007, the Company made the difficult decision to suspend production from the Tirek CIL plant. While adversely affecting gold production results for the year, this decision was necessary to enable the Company to focus its financial and management resources on completion of construction at Amesmessa. More details on the Company's operating activities are contained in the Chief Executive Officer's Report.
Financing
As reported in the Interim Report dated 30 June 2007, the Company completed the raising of £4,100,000 in equity and £5,700,000 in convertible debt during 2007. These funds were used for the completion of construction at Amesmessa and to advance funds to ENOR for foreign equipment purchases and expatriate employee costs.
GMA and its partner Sonatrach are currently discussing the possibility of making additional cash contributions to ENOR in order to increase ENOR's working capital and properly fund its on-going exploration and capital programmes. If the partners agree to make these additional contributions or if GMA identifies new business opportunities that it wishes to fund, GMA may find it necessary to conduct additional financings in 2008. The Company has received a number of strong expressions of interest from potential financing sources, but as is the case with other junior mining companies, GMA would be reliant on favourable market conditions to complete such a financing.
Board and Management Changes
In July 2007, François J. Gauthier was appointed to the Board of Directors of GMA Resources plc as a Non-Executive Director. Mr Gauthier is a geologist and holds a degree from McGill University in Montreal. Prior to his appointment, Mr Gauthier held the position of Vice President, Business Development and Resident General Manager for Anadarko Algeria Company ("Anadarko"), one of the biggest oil producers in Algeria. Mr Gauthier resided or worked in Algeria for approximately 17 years during which time he helped forge a strong partnership relationship between Anadarko and Sonatrach, the national oil company of Algeria and GMA's partner in the Amesmessa/Tirek project. The Company is fortunate to have a person with Mr Gauthier's wealth of experience in Algeria and strong business development background on its Board.
In February 2008, the Company announced a number of other Board and management changes. Richard Linnell stepped down as Chairman of the Company and moved to a new role as Deputy Chairman. At the same time, I moved from my former position as Non-Executive Director and was appointed Chairman of the Board. I am grateful to Richard Linnell for guiding the Company from its inception through to the point of commercial gold production and I look forward to his continued guidance in my new role. The Board also accepted with regret the resignation from the Board of Dr Robert Danchin who resigned from his role as Non-Executive Director for personal reasons.
Also in February 2008, the Company announced the appointment of David J. Santley as Chief Financial Officer of GMA Resources plc. Mr Santley joined the Company after a career with Anadarko Petroleum Corporation where he held a number of positions in international business development, operations, and corporate planning. Mr Santley has dual American and British citizenship and holds a BA in Mathematics and Economics and an MBA from the University of Virginia.
In April 2008, the Company hired Mr André Villeneuve as Vice President Algeria. Mr Villeneuve is a Canadian mining engineer and P.Eng. in British Columbia and has worked in the mining business in Canada and Latin America for over twenty years. He has extensive senior level management experience covering all aspects of mineral development from advanced exploration to mine construction and operations. Mr Villeneuve knows Algeria very well, having worked there in 2001 and 2002. He will reside in Algiers.
Looking forward, the Company faces continuing challenges in recruiting and retaining qualified expatriate personnel, improving its safety record and managing cost inflation for supplies and equipment. As your new Chairman, I look forward to working with CEO Douglas Perkins, and the newly configured Board and management team to address these challenges while continuing to grow the Company's gold production and resource base. Thank you for your support in these endeavours.
David Netherway Chairman 20 June 2008
Chief Executive Officer's Report
It is my pleasure to provide you with an update on the Company's operating and financial results for the year ended 31 December 2007.
Amesmessa Completion and Start-up
In January 2008, the Company completed the construction of the Amesmessa heap leach mining facility, a major milestone for the Company. Pre-production activities were underway throughout the second half of 2007 to prepare for commencement of commercial operations. By year-end, a stockpile of 176,000 tonnes of ore had been accumulated. In November 2007, crushing and stacking operations began and by year-end 97,000 tonnes of ore had been stacked on the heap leach pad with an average ore grade of 3.33 g/t. In January 2008, leaching and processing operations began, culminating in the pouring of the first doré bar on 26 January 2008.
Production at Amesmessa got off to a promising start. Gold production during the first quarter of 2008 totalled 5,906 ounces, well ahead of expectations. Unfortunately, during the months of April and May, production has dropped to levels substantially below previous expectations due a shortage of explosives that has prevented proper stripping of waste to access higher grade mineralization. The Company is working with the explosives supplier, transporters and the Algerian authorities to address this problem and regularly scheduled delivery quantities are resuming. Assuming explosives continue to be received as expected, the Company is confident that Amesmessa gold production will recover to feasibility study levels over the next few months. Nevertheless, the Company now expects revenues and earnings for 2008 to be significantly below initial expectations.
Final construction costs for the Amesmessa mine were US$66.4 million as compared with a feasibility study estimate of US$36.9 million. Industry-wide escalation in the cost of power generation and mining equipment was the most important driver of this cost increase. Also contributing to cost overrun was a significant increase in the scope and complexity of the project versus the feasibility study. Additionally, the Company incurred significant increases in owner's costs due to delays in the construction schedule. The Company believes the final construction cost, while higher than original estimates, is competitive on an international basis with other similar mines reaching completion in the current cost environment.
Mining Operations
During 2007, ore was mined primarily from Amesmessa veins 1, 4, 8, 9, and 10. Mined ore was segregated into three categories: high grade ore was processed at the Tirek CIL plant until July and thereafter was stockpiled, medium grade ore was stockpiled at Amesmessa awaiting the start up of heap leach operations, and marginal ore was stockpiled for possible future use. Results of mining operations for 2007 are laid out in the following table:
| Ore Category | Quantity Mined (tonnes) | Average Grade (g/t) |
| High Grade | 25,394 | 12.1 |
| Medium Grade (heap leach) | 143,084 | 2.99 |
| Marginal | 74,905 | 0.64 |
| Waste | 2,591,979 | |
| Strip Ratio (Waste/Ore) | 10.7 |
Tirek CIL Operations
In July 2007, the Company suspended processing operations at the Tirek CIL facility because gold production from this small facility was insufficient to cover its costs. Just as importantly, the Company determined that its limited financial and management resources needed to be fully dedicated to the completion of the Amesmessa project. The Tirek CIL facility can be restarted in the future if the amount of high grade ore mined justifies the refurbishment and operating costs of the plant. Prior to shutting down, Tirek produced 7,517 ounces of gold. The plant processed 23,962 tonnes of ore with an average ore grade of 12.1 g/t.
Health and Safety
The Company reported 18 lost time accidents (LTI) during 2007, representing a lost time frequency rate (LTI per thousand hours worked) of 17.8. The Company considers this accident frequency to be completely unacceptable by international mining industry standards and is taking positive steps to improve its safety programmes. Management has reaffirmed its commitment to establishing and maintaining safe work practices, with particular emphasis on training and orientation of new employees. The Company has initiated a search for an expatriate health and safety manager with a strong record in the mining industry.
Gold sales
Gold sales of 8,327 ounces were recorded during 2007. Gold sales revenues were equivalent to US$5,675,000 for an average realized price of US$682 per ounce. Approximately 72% of 2007 sales were made in Algeria and 28% in export markets. Gold prices in 2008 continue to be very strong and Amesmessa production is being sold at a very favourable time. The Company has no gold price hedges in place.
Exploration
As reported in the Interim Report dated 30 June 2007, the Board of ENOR approved a US$3,000,000 exploration programme to identify resources for future mine expansions and/or new construction. The first phase was an extensive sample trenching programme, begun in late 2007. At the end of the first quarter of 2008, the exploration team had completed 328 trenches in the In Allerene and In Ouzzal zones of the concession and had collected 8,753 samples for gold assaying. The next major phase will be a 20,000 metre reverse circulation (RC) drilling programme. This drilling phase, originally expected to begin in early 2008, has been delayed due to lack of equipment availability in Algeria. In 2007, GMA purchased an RC drill plus associated support equipment with a view to importing this equipment into Algeria. GMA has begun the process of forming a drilling company to own and operate this equipment, with ENOR being the principal client. Difficulty in recruiting and retaining expatriate exploration staff has slowed the progress of the exploration programme but the Company expects to be in a position to release preliminary results of its exploration programme in late 2008.
Financial Results
The Company reported a loss attributable to the GMA shareholders of £4,246,000 or 1.2p per share for 2007. This compares with a loss of £2,001,000 or 0.7p per share in 2006. Factors driving the higher losses included on-going overhead and administrative costs during an extended period of no gold sales and expenses relating to preparation for commercial production at Amesmessa. Suspension of production at Tirek had no material effect on the net loss of the Company because the plant had been operating at or about its break-even point.
Financings and Liquidity
In February 2007, the Company raised £4,100,000 in equity financing from the sale of 37,273,000 new Ordinary Shares. In May 2007, the Company raised a further £5,700,000 through the issue of 10% unsecured convertible loan stock expiring in 2009. The conversion rate for the issue is 15 pence nominal of loan stock per Ordinary Share of 1 pence each in the Company.
In April 2008, 28,077,000 warrants on the Company's shares expired unexercised. These warrants were issued in connection with the equity financing that the Company carried out in April 2006. The Company is evaluating potential alternative sources for the £3,650,000 of share capital that would have been available from the exercise of the warrants.
ENOR Spa, the Algerian operating company of the Tirek/Amesmessa concession, negotiated a package of loan agreements totalling 1,826,000,000 Dinars (equivalent to £13,200,000) from the Banque Extérieure d'Algérie (BEA). The loans are being used to finance inventory and equipment purchases associated with Amesmessa construction and start up. Securing local financing from BEA on favourable terms and without recourse to the parent company represents a major accomplishment for the Company.
Outlook
Obviously, GMA's priority over the coming months is to restore adequate explosives supply so that mining and gold production can return to expected levels. Beyond that, other important initiatives for 2008 include:
Implement improved safety programmes;
Recruit and retain qualified Algerian and expatriate staff;
Execute the exploration programme; and
Identify new growth opportunities for GMA.
GMA believes that these initiatives are key to maximising value for shareholders and we are committed to achieving this goal.
Additionally, GMA believes it is sowing the seeds for development of a strong mining industry in Algeria. The high level of interest being shown in new mining concessions offered by the Algerian Government is evidence that the global mining industry has taken note of the ground-breaking work GMA has done at Amesmessa/Tirek. We are committed to working with our partner Sonatrach and the Algerian Government to continue the development of the mining industry in Algeria.
Douglas Perkins Chief Executive Officer 20 June 2008
Consolidated income statement
| | | | Year ended | | Year ended | |
| | | | 31 December | | 31 December | |
| | | | 2007 | | 2006 | |
| | Note | | £'000s | | £'000s | |
| Continuing operations | | | | | | |
| Revenue | | | 2,923 | | 3,943 | |
| Cost of sales | | | (6,193) | | (5,457) | |
| | | | | | | |
| Gross loss | | | (3,270) | | (1,514) | |
| | | | | | | |
| Administrative costs | | | (1,195) | | (1,288) | |
| | | | | | | |
| Operating loss | 2 | | (4,465) | | (2,802) | |
| Finance income | 3 | | 180 | | 195 | |
| Finance costs | 3 | | (1,703) | | (234) | |
| | | | | | | |
| Loss before tax | | | (5,988) | | (2,841) | |
| | | | | | | |
| Income tax expense | 4 | | - | | - | |
| Loss for the period | | | (5,988) | | (2,841) | |
| Attributable to: | | | | | | |
| Equity holders of the parent undertaking | | | (4,246) | | (2,001) | |
| Minority interest | 12 | | (1,742) | | (840) | |
| | | | | | | |
| | | | (5,988) | | (2,841) | |
| Loss per share: | | | | | | |
| Basic and diluted loss per share - total and continuing | 5 | | (1.2p) | | (0.7p) | |
| | | | | | | |
Consolidated balance sheet
| 31 December 2007 | 31 December 2006 | ||||
| Note | £'000s | £'000s | |||
| ASSETS | |||||
| Non-current assets | |||||
| Intangible assets | 29 | 26 | |||
| Property, plant and equipment | 6 | 34,115 | 17,838 | ||
| 34,144 | 17,864 | ||||
| Current assets | |||||
| Inventories | 7 | 5,423 | 1,792 | ||
| Trade and other receivables | 8 | 5,633 | 2,591 | ||
| Cash and cash equivalents | 5,381 | 7,477 | |||
| 16,437 | 11,860 | ||||
| Total assets | 50,581 | 29,724 | |||
| LIABILITIES | |||||
| Current liabilities | |||||
| Trade and other payables | 9 | 7,376 | 4,001 | ||
| Short-term borrowings | 10 | 851 | 1,615 | ||
| Short-term finance lease | 10 | 4,125 | 536 | ||
| Loan from minority shareholder | 10 | 9,381 | 2,850 | ||
| 21,733 | 9,002 | ||||
| Non-current liabilities | 10 | ||||
| Long-term borrowing | 4,204 | 16 | |||
| Long-term finance lease | 3,460 | 1,944 | |||
| Unsecured convertible loan stock | 5,353 | - | |||
| Loan from minority shareholder | 3,334 | 5,000 | |||
| Total non-current liabilities | 16,351 | 6,960 | |||
| Total liabilities | 38,084 | 15,962 | |||
| Net assets | 12,497 | 13,762 | |||
| EQUITY | |||||
| Equity attributable to equity holders of the parent undertaking | |||||
| Share capital | 3,544 | 3,171 | |||
| Share premium account | 23,810 | 20,469 | |||
| Other reserves - share based payments | 330 | 106 | |||
| Other reserves | 923 | - | |||
| Cumulative currency translation reserve | (914) | (710) | |||
| Retained earnings | (15,196) | (10,950) | |||
| 12,497 | 12,086 | ||||
| Minority interest | 12 | - | 1,676 | ||
| Total equity | 12,497 | 13,762 | |||
Consolidated statement of changes in equity
| Share capital | Share premium account | Share based payment | Other reserves | Cumulative currency translation reserve | Retained earnings | Total | Minority interest | Total equity | |
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| Balance at 1 January 2006 | 2,610 | 16,184 | - | - | - | (8,949) | 9,845 | 2,875 | 12,720 |
| ----------- | -------------- | -------------- | ------------- | ---------------- | -------------- | ------------ | -------------- | -------------- | |
| Changes in equity for 2006 | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | - | (710) | - | (710) | (359) | (1,069) |
| Net income recognised directly in equity | - | - | - | - | (710) | - | (710) | (359) | (1,069) |
| Loss for the period | - | - | - | - | - | (2,001) | (2,001) | (840) | (2,841) |
| ----------- | -------------- | -------------- | ------------- | ---------------- | -------------- | ------------ | -------------- | -------------- | |
| Total recognised income and expense for the period | - | - | - | - | (710) | (2,001) | (2,711) | (1,199) | (3,910) |
| Issue of share capital | 561 | 4,492 | - | - | - | - | 5,053 | - | 5,053 |
| Share issue costs | - | (207) | - | - | - | - | (207) | - | (207) |
| Share based payment charges | - | - | 106 | - | - | - | 106 | - | 106 |
| ----------- | -------------- | -------------- | ------------- | ---------------- | -------------- | ------------ | -------------- | -------------- | |
| Balance at 31 December 2006 | 3,171 | 20,469 | 106 | - | (710) | (10,950) | 12,086 | 1,676 | 13,762 |
| =========== | =========== | ========== | ========= | =========== | =========== | =========== | =========== | =========== |
| Share capital | Share premium account | Share based payment | Other reserves | Cumulative currency translation reserve | Retained earnings | Total | Minority interest | Total equity | |
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| Balance at 1 January 2007 | 3,171 | 20,469 | 106 | - | (710) | (10,950) | 12,086 | 1,676 | 13,762 |
| ----------- | -------------- | ------------- | ------------- | ---------------- | -------------- | ----------- | ------------- | ----------- | |
| Changes in equity for 2007 | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | - | (204) | - | (204) | 66 | (138) |
| Net income recognised directly in equity | - | - | - | - | (204) | - | (204) | 66 | (138) |
| Loss for the period | - | - | - | - | - | (4,246) | (4,246) | (1,742) | (5,988) |
| ----------- | -------------- | ------------- | ------------- | ---------------- | -------------- | ----------- | ------------- | ----------- | |
| Total recognised income and expense for the period | - | - | - | - | (204) | (4,246) | (4,450) | (1,676) | (6,126) |
| Issue of share capital | 373 | 3,727 | - | - | - | - | 4,100 | - | 4,100 |
| Share issue costs | - | (386) | - | - | - | - | (386) | - | (386) |
| Share based payment charges | - | - | 224 | - | - | - | 224 | - | 224 |
| Equity element of unsecured convertible loan stock | - | - | - | 923 | - | - | 923 | - | 923 |
| ----------- | -------------- | ------------- | ------------- | ---------------- | -------------- | ----------- | ------------- | ----------- | |
| Balance at 31 December 2007 | 3,544 | 23,810 | 330 | 923 | (914) | (15,196) | 12,497 | - | 12,497 |
| =========== | =========== | ========== | ========= | =========== | =========== | =========== | =========== | =========== |
Consolidated cash flow statement
|
| Year ended | Year ended | |||||
|
| 31 December | 31 December | |||||
|
| 2007 | 2006 | |||||
|
| £'000s
| £'000s
| |||||
| Cash flows from operating activities | |||||||
| Loss after taxation | (5,988) | (2,841) | |||||
| Adjustments for: | |||||||
| Depreciation, amortisation and amounts written off property, plant and equipment | 3,916 | 1,124 | |||||
| Foreign exchange (gain)/loss | (758) | 105 | |||||
| Share based payments | 224 | 106 | |||||
| Investment income | (180) | (195) | |||||
| Interest expense | 1,703 | 234 | |||||
| Increase in trade and other receivables | (3,042) | (1,978) | |||||
| (Increase)/decrease in inventories | (3,631) | 830 | |||||
| Increase in trade and other payables | 3,375 | 380 | |||||
| Cash generated from operations | (4,381) | (2,235) | |||||
| Interest paid | (268) | (234) | |||||
| Net cash from operating activities | (4,649) | (2,469) | |||||
| Cash flows from investing activities | |||||||
| Purchase of property, plant and equipment | (15,478) | (10,110) | |||||
| Purchase of intangible asset | (11) | - | |||||
| Interest received | 180 | 195 | |||||
| Write off of intangible asset | - | 19 | |||||
| Net cash used in investing activities | (15,309) | (9,896) | |||||
| Cash flows from financing activities | |||||||
| Proceeds from issue of share capital | 3,714 | 4,846 | |||||
| Repayment of bank borrowings | (135) | (70) | |||||
| Payment of finance lease liabilities | (51) | (752) | |||||
| Proceeds from issue of unsecured convertible loan stock | 5,700 | - | |||||
| Loan from minority shareholder | 4,865 | 7,850 | |||||
| Proceeds from bank borrowings | 3,592 | - | |||||
| Net cash from financing activities | 17,685 | 11,874 | |||||
| Net decrease in cash and cash equivalents | (2,273) | (491) | |||||
| Foreign exchange movements | 210 | - | |||||
| Cash and cash equivalents at beginning of period | 7,444 | 7,935 | |||||
| Cash and cash equivalents at end of period | 5,381 | 7,444 | |||||
Notes to the consolidated financial statements
1 Publication of non statutory accounts
As required by the AIM regulations, the consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU for the first time this year.
GMA Resources plc is the Group's ultimate parent company. It is incorporated in England and has its registered office at One America Square, Crosswall, London EC3N 2SG and its business address at 30, Princess Elizabeth Street, Ta'Xbiex, XBX 1104, Malta. The financial statements for the year ended 31 December 2007 (including the comparatives for the year ended 31 December 2006) were approved by the Board of Directors on 20 June 2008.
The announcement set out above does not constitute a full financial statement of the group's affairs for the year ended 31 December 2007. The full accounts have yet to be delivered to the Registrar of Companies. The annual report and accounts will be posted to all shareholders and be available at the Company's website.
The consolidated balance sheet at 31 December 2007 and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2007 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985.
2 Operating loss
Operating loss is stated after charging:
| 2007 | 2006 | |||
| £'000 | £'000 | |||
| Amortisation | 9 | 16 | ||
| Depreciation of property, plant and equipment - owned assets | 1,080 | 873 | ||
| Depreciation of property, plant and equipment - assets held under finance leases | 1,777 | 235 | ||
| Operating lease payments | 92 | 58 | ||
| Foreign exchange losses | 365 | 36 | ||
| Services provided by the Group's auditor and network firms | ||||
| Fees payable to the Company's auditors for the audit of the parent company accounts | 65 | 91 | ||
| Non-audit fees - IFRS and other attestation fees | 6 | - | ||
| Non-audit fees - taxation services | 25 | 23 | ||
| Nominated adviser fees | 30 | 39 | ||
3 Finance income and finance costs
| 2007 | 2006 | |||
| £'000 | £'000 | |||
| Finance income | ||||
| Interest receivable on cash deposits | (180) | (195) | ||
| Finance costs | ||||
| Finance charges on finance lease agreements | 859 | 75 | ||
| Interest on bank loans and overdrafts | 268 | 159 | ||
| Interest on unsecured convertible loan stock | 576 | - | ||
| 1,703 | 234 | |||
4 Tax on loss on ordinary activities
There is no tax charge in the year due to losses incurred by the Group, which are not currently being recognised as an asset due to uncertainty over the recoverability of such losses in the foreseeable future.
| 2007 | 2006 | ||
| £'000 | £'000 | ||
| Loss before tax | (5,988) | (2,841) | |
| Loss before tax multiplied by the standard rate of corporation tax in the UK of 30% | (1,796) | (852) | |
| Effect of: | |||
| Expenses not deductible for tax | 43 | 20 | |
| Overseas losses outside the scope of tax | 1,753 | 525 | |
| Increase in tax losses | - | 307 | |
| Total tax charge for year | - | - | |
The Group had unrelieved UK tax losses of £3,100,000 at 31 December 2006 which were extinguished on its migration to Malta for tax purposes. The main trading subsidiary ENOR spa, based in Algeria is exempt from corporation tax until 1 July 2011 and so any profits or losses are non-taxable.
5 Loss per share
Year ended 31 December 2007
| Loss | Weighted average number of shares | Per share amount | |
| £'000 | '000 | Pence | |
| Loss for the year attributable to the equity holders of the parent entity | (4,246) | ||
| -------------------- | |||
| Weighted average number of shares | 351,312 | ||
| ------------------------------- | |||
| Basic and diluted loss per share | (1.21p) | ||
| ============== |
Year ended 31 December 2006
| Loss | Weighted average number of shares | Per share amount | |
| £'000 | '000 | Pence | |
| Loss for the year attributable to the equity holders of the parent entity | (2,001) | ||
| -------------------- | |||
| Weighted average number of shares | 301,607 | ||
| -------------------------------- | |||
| Basic and diluted loss per share | (0.66p) | ||
| ============= | |||
The share options are anti-dilutive for both years due to the losses incurred so there is no dilution of the loss per share.
6 Property, plant and equipment
| Land, mining property and buildings | Asset under construction | Production machinery and equipment | Other equipment | Total | ||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| Cost | ||||||||||
| At 1 January 2006 | 4,006 | 3,898 | 3,932 | 566 | 12,402 | |||||
| Additions | 44 | 9,143 | 3,984 | 171 | 13,342 | |||||
| Transfer | - | (101) | 101 | - | - | |||||
| Amounts written off | - | (2,568) | - | (20) | (2,588) | |||||
| Exchange difference | (416) | (765) | (564) | (7) | (1,752) | |||||
| At 1 January 2007 | 3,634 | 9,607 | 7,453 | 710 | 21,404 | |||||
| Additions | - | 13,945 | 5,599 | 21 | 19,565 | |||||
| Amounts written off | - | (1,050) | - | - | (1,050) | |||||
| Exchange difference | 144 | 486 | 115 | 28 | 773 | |||||
| At 31 December 2007 | 3,778 | 22,988 | 13,167 | 759 | 40,692 | |||||
| Depreciation | ||||||||||
| At 1 January 2006 | 972 | 2,013 | 2,448 | 172 | 5,605 | |||||
| Charge for the year | 188 | 392 | 475 | 53 | 1,108 | |||||
| Amounts written off | - | (2,204) | (364) | (1) | (2,569) | |||||
| Exchange difference | (122) | (201) | (296) | 41 | (578) | |||||
| At 1 January 2007 | 1,038 | - | 2,263 | 265 | 3,566 | |||||
| Charge for the year | 179 | - | 2,590 | 88 | 2,857 | |||||
| Exchange difference | 41 | - | 101 | 12 | 154 | |||||
| At 31 December 2007 | 1,258 | - | 4,954 | 365 | 6,577 | |||||
| Net book amount at 31 December 2007 | 2,520 | 22,988 | 8,213 | 394 | 34,115 | |||||
| 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 | 1,885 | 1,484 | 394 | 6,797 | |||||
Included in production machinery and equipment are assets held under a finance lease arrangement. The net carrying amount of the assets held under the lease is £5,426,000 (2006: £2,996,000, 2005: nil) and the assets are pledged as security. Future minimum finance lease payments at the end of each reporting period under review are set out in Note 10.
7 Inventories
| 2007 | 2006 | |||||
| £'000 | £'000 | |||||
| Raw materials and consumables | 4,084 | 1,490 | ||||
| Work in progress | 1,339 | - | ||||
| Finished goods for resale | - | 302 | ||||
| 5,423 | 1,792 | |||||
In 2007, a total of £1,345,000 of inventories was included in profit and loss as an expense (2006: £981,000). This includes an amount of £320,000 resulting from write down of inventories (2006: £nil). In determining net selling prices of inventories, management takes into account the most reliable evidence available at the times the estimates are made.
8 Trade and other receivables
| 2007 | 2006 | ||
| £'000 | £'000 | ||
| VAT recoverable | 2,743 | 922 | |
| Prepayments | 2,305 | 841 | |
| Other receivables | 585 | 828 | |
| 5,633 | 2,591 | ||
9 Trade and other payables
| 2007 | 2006 | ||
| £'000 | £'000 | ||
| Trade payables | 2,880 | 2,617 | |
| Other taxation and social security | 3,316 | 737 | |
| Other creditors and accruals | 1,180 | 647 | |
| 7,376 | 4,001 | ||
10 Interest bearing loans and borrowings
| Interest | 2007 | 2006 | |||||
| Rate % | Maturity | £'000 | £'000 | ||||
| Current | |||||||
| Fixed rate bank loans - inventory loan | 8.5% | Revolving | 723 | - | |||
| Fixed rate bank loans | 5.25% | 2008 | 128 | - | |||
| Fixed rate bank loans | 6-6.75% | Repaid 2007 | - | 191 | |||
| Variable rate bank loans | Base+2% | Repaid 2007 | - | 1,424 | |||
| Finance leases | 15.7% | 2008 | 4,125 | 536 | |||
| Loans from minority shareholder | 4.62% | 2008 | 1,666 | - | |||
| Loans from minority shareholder | 0% | no fixed maturity | 7,715 | 2,850 | |||
| 14,357 | 5,001 | ||||||
| Non-current | |||||||
| Fixed rate bank loans | 5.25% | 2009-2011 | 4,204 | -- | |||
| Fixed rate bank loans | 6-6.75% | Repaid 2007 | -- | 16 | |||
| Finance leases | 15.7% | 2009-2011 | 3,460 | 1,944 | |||
| Unsecured convertible loan stock | 10% | June 2009 | 5,353 | -- | |||
| Loan from minority shareholder | 4.62% | 2009-10 | 3,334 | 5,000 | |||
| 16,351 | 6,960 | ||||||
The bank loans are secured by the fixed assets and inventory of ENOR and interest is payable at fixed rates of between 5.25% and 8.5% per annum. As of 31 December 2007, there was undrawn but committed borrowing capacity under the bank loans of £2,125,000 (2006: £nil).
The unsecured convertible loan stock together with accrued interest is repayable in full on 30 June 2009 if it has not been converted. Conversion is at the option of the holder at any time prior to 30 June 2009 at a rate of 15p nominal value of loan stock per ordinary share of 1p each.
Included in the loan from minority shareholder of £12,715,000 (2006: £7,850,000) is a £5,000,000 loan which is unsecured and bears interest at 4.62% per annum commencing in January 2008. The £5,000,000 is repayable in 6 bi-annual instalments commencing in January 2008. The balance of £7,715,000 (2006: £2,850,000) has no formal repayment terms and is presently interest free. While accounting standards require that the portion of shareholder loans with no formal repayment terms be classified as a current liability, it is the shareholder's clear intention in this case to provide long term debt financing. Discussions are underway with the shareholder to document and formalise the debt agreements in a manner more reflective of the business purpose.
The finance leases cover mining and power generation equipment in use at the Amesmessa mine and are secured on the relevant assets. Future minimum lease payments under the finance leases and the present value of such lease payments are as follows:
| 2007 | 2007 | 2006 | 2006 | ||
| Minimum payments | Present value of payments | Minimum payments | Present value of payments | ||
| £'000 | £'000 | £'000 | £'000 | ||
| Within one year | 4,793 | 4,125 | 833 | 536 | |
| After one year but not more than five years | 3,986 | 3,460 | 2,287 | 1,944 | |
| Total minimum lease payments | 8,779 | 7,585 | 3,120 | 2,480 | |
| Less amounts representing finance charges | (1,194) | - | (640) | - | |
| Present value of minimum lease payments | 7,585 | 7,585 | 2,480 | 2,480 |
11 Non-Sterling monetary assets and liabilities
The amounts below show the extent to which Group companies have monetary assets and liabilities in currencies other than Sterling.
| | | 2007 | 2006 | ||
| | | £'000 | £'000 | ||
| | | | | | |
| Foreign currency monetary assets - Algerian Dinars | | 1,999 | 6,445 | ||
| Foreign currency monetary liabilities - Algerian Dinars | | (5,055) | (1,482) | ||
| Finance lease liabilities - Algerian Dinars | | (7,585) | (2,480) | ||
| Loan from minority shareholder - Algerian Dinars | | (12,715) | (7,850) | ||
| Foreign currency monetary liabilities - US Dollars | | - | (149) | ||
| | | (23,356) | (5,516) | ||
12 Minority interest / Related party transactions
The minority interest represents a holding of 48% of the shares in the subsidiary company, ENOR spa, by "Sonatrach", the Algerian state oil company.
| | | 2007 | 2006 | ||
| | | £'000 | £'000 | ||
| | | | | | |
| Minority interest at 1 January 2007 | | 1,676 | 2,875 | ||
| Exchange differences | | 66 | (359) | ||
| Minority interest in net loss of subsidiary undertaking | | (1,742) | (840) | ||
| At 31 December 2007 | | - | 1,676 | ||
13 Explanation of transition to IFRS
As stated in the Basis of Preparation, these are the Group's first IFRS annual consolidated financial statements prepared in accordance with IFRS.
An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, financial performance and cash flows is set out below.
Reconciliation of equity at 1 January 2006
| UK GAAP | a | IFRS | |
| £000's | £000,s | £000,s | |
| Non-current assets | |||
| Property, plant and equipment | 6,797 | - | 6,797 |
| Goodwill | 1,061 | (1,061) | |
| Other intangible assets | 42 | - | 42 |
| Current assets | |||
| Inventories | 2,622 | - | 2,622 |
| Trade and other receivables | 613 | - | 613 |
| Cash and cash equivalents | 8,608 | - | 8,608 |
| Current liabilities | |||
| Trade and other payables | 3,621 | - | 3,621 |
| Short-term borrowings | 2,104 | - | 2,104 |
| Non-current liabilities | |||
| Long-term borrowings | 237 | - | 237 |
| ---------------- | ---------------- | ---------------- | |
| Net assets | 13,781 | (1,061) | 12,720 |
| ============= | ============= | ============ | |
| Equity | |||
| Share capital | 2,610 | - | 2,610 |
| Share premium account | 16,184 | - | 16,184 |
| Retained earnings | (7,888) | (1,061) | (8,949) |
| Minority interest | 2,875 | - | 2,875 |
| ---------------- | ---------------- | ---------------- | |
| Total equity | 13,781 | (1,061) | 12,720 |
| ============ | =========== | ========== |
Reconciliation of equity at 31 December 2006
| UK GAAP | a | b | IFRS | |
| £'000s | £'000s | £'000s | £'000s | |
| Non-current assets | ||||
| Property, plant and equipment | 17,838 | - | - | 17,838 |
| Goodwill | 622 | (622) | - | - |
| Other intangible assets | 26 | - | - | 26 |
| Current assets | ||||
| Inventories | 1,792 | - | - | 1,792 |
| Trade and other receivables | 2,591 | - | - | 2,591 |
| Cash and cash equivalents | 7,477 | - | - | 7,477 |
| Current liabilities | ||||
| Trade and other payables | 4,001 | - | - | 4,001 |
| Short-term borrowings | 1,615 | - | - | 1,615 |
| Finance lease | 536 | - | - | 536 |
| Non-current liabilities | ||||
| Long-term borrowings | 16 | - | - | 16 |
| Finance lease | 1,944 | - | - | 1,944 |
| Loan from minority shareholder | 7,850 | - | - | 7,850 |
| --------------- | --------------- | --------------- | ------------------ | |
| Net assets | 14,384 | (622) | - | 13,762 |
| =========== | ========== | =========== | ============= | |
| Equity | ||||
| Share capital | 3,171 | - | - | 3,171 |
| Share premium account | 20,469 | - | - | 20,469 |
| Other reserves - share options | 106 | - | - | 106 |
| Currency translation reserve | - | (710) | (710) | |
| Retained earnings | (11,038) | (622) | 710 | (10,950) |
| Minority interest | 1,676 | - | - | 1,676 |
| ---------------- | ---------------- | ---------------- | ------------------- | |
| Total equity | 14,384 | (622) | - | 13,762 |
| ============ | ============ | =========== | ============= |
Reconciliation of loss for the year to 31 December 2006
| UK GAAP | a | IFRS | |
| £000's | £000's | £000's | |
| Continuing operations | |||
| Revenue | 3,943 | - | 3,943 |
| Cost of sales | (5,457) | - | (5,457) |
| ---------------- | ---------------- | ---------------- | |
| Gross loss | (1,514) | - | (1,514) |
| Other income | 195 | - | 195 |
| Administrative costs | (1,727) | 439 | (1,288) |
| Finance costs | (234) | - | (234) |
| ---------------- | ---------------- | ---------------- | |
| Loss before tax | (3,280) | 439 | (2,841) |
| Income tax expense | |||
| ---------------- | ---------------- | ---------------- | |
| Loss before tax | (3,280) | 439 | (2,841) |
| ============ | =========== | ============ |
Notes to the reconciliations
a) GMA Resources plc performed an impairment review of goodwill at the date of transition to IFRS. As a result of this review a £1,061,000 (31 December 2006: £622,000) loss has been recognised in retained earnings at the date of transition. Goodwill recognised by the Group on acquisition of ENOR spa in 2003 under UK GAAP was being amortised over a period of 5 years. Under IFRS goodwill is not amortised, but tested annually for impairment. The Group has taken advantage of the exemption under IFRS1 and not restated this business combination in accordance with IFRS3. The goodwill amortisation charge recognised in accordance with UK GAAP in 2006 was written back. The result of these adjustments is to decrease the amortisation charge in the income statement by £439,000 for the year ending 31 December 2006.
b) This relates to the reclassification of cumulative currency differences to a separate reserve.
Explanation of material adjustments to the cash flow statement
Application of IFRS has resulted in reclassification of certain items in the cash flow statement as under UK GAAP, payments to acquire property, plant and equipment were classified as part of 'Capital expenditure and financial investment'. Under IFRS, payments to acquire property, plant and equipment have been classified as part of 'Investing activities'.
There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP.
14 Dividends
The Directors are not proposing the payment of a dividend in respect of the year ended 31 December 2007.
15 Copies of the Annual Report and Accounts
Copies of accounts have been posted to shareholders and will also be available at the offices of Sprecher Grier Halberstam LLP, 5th Floor, One America Square, Crosswall, London EC3N 2SG and on the Company's website www.gmaresources.plc.uk.
The accounts contain notice of the Company's annual general meeting ("AGM"), which will be held at the above address on Friday 25th July 2008 at 11am. Full details of the resolutions to be proposed at the AGM are contained in the notice and are available on the Company's website.