Kemin Resources Regulatory News (KEM)

19 Jun 2006 18:57

GMA Resources PLC19 June 2006 19 June 2006 AIM: GMA GMA Resources Plc ("GMA" or "The Company") FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Highlights: Corporate • Successfully completed earn-in right to 52% interest in ENOR Spa • Appointment of new management: Douglas Perkins as CEO and David Netherway as a non exec director • Established a more robust shareholder register, with strong institutional support • Raised £8.5m at 7p a share in November 2005 Operations • Previous operating issues at the Tirek / Amessmessa projects are being resolved • Gold production at the Tirek mine site increased significantly, though further improvements in performance are now expected Post Year End Highlights • Raised a further £5.0m at 9p a share • A revised development plan was approved by ENOR shareholders in May 2006 • ENOR is now officially in construction mode Douglas Perkins, CEO of GMA, commented: "We believe that the many changesimplemented throughout the past financial year will be instrumental in terms ofrejuvenating GMA's fortunes going forward. The Company now intends to expandproduction at the Tirek gold mine, whilst pushing forward with the constructionof the high grade Amessmessa deposit. We believe that the outlook for the goldmarket is favourable and that GMA is well positioned to benefit from this marketin the near term, whilst offering shareholders a very low entry point to apotentially major gold player." Summary of Results 2005 2004Turnover £6,346,000 £4,333,000Loss on ordinary activities before taxation £2,892,000 £4,321,000 CHAIRMAN'S STATEMENT Dear Shareholder Once again it is my pleasure to present to you the annual report of GMAResources plc ("GMA" or "the Company"), for the year ended 31 December 2005.Since year end, there have been a number of positive changes for GMA as theCompany reaches the next stage in its development. These include a substantialchange in the shareholder base of the Company which is now made up of a muchmore balanced register of institutions who have a long term view on the futureof GMA Resources Plc. The Company is very pleased to have recruited a Board member of the calibre ofDavid Netherway. David has the experience to help take the Company to the nextlevel, with the completion of the development of the substantial TirekAmessmessa gold project and beyond. At the same time, we would like to thankColin Ikin, Shaun Bunn, Simon Farrell and Trevor Matthews for theircontributions in bringing the Company to the point where it is today. It has been a year of substantial achievements for your Company, as it continuesto build a solid foundation for growth into a major gold mining company. Theseachievements and their significance to the Company are: Ratification of Earn-in Agreement • The Company acquired an earn-in right to its 52% interest in ENOR Spaon 1 July 2003. Since then the Company has continued to comply with itsobligations, as defined under the Subscription Agreement, and has completed 100%of subscription payment obligations as of April 2006. This was ratified at therecent Annual Shareholders meeting of ENOR spa on 9 May 2006 and GMA has nowsuccessfully completed its earn-in. Board Changes • The Company appointed a new Chief Executive Officer and ExecutiveDirector, Douglas Perkins, effective 1 November 2005. The role of Mr Perkins isto complete the development of the Tirek Amessmessa project in Algeria in atimely and efficient manner and to grow GMA via acquisition of projects both inAlgeria and other countries. Financing • The Company completed a financing on 17 November 2005 that raised£8,576,701 (net after expenses) at 7p per share. This money was used to completethe earn-in of ENOR and to cover early construction costs for the AmessmessaDevelopment Plan. Subsequent to the year end, The Company raised a further£5,053,860 by way of a private placement to two new shareholders at 9p whichalso included issuance of half a warrant per share at 13p (total 28,077,000warrants issued) valid for two years. Development of Tirek / Amessmessa • In the first quarter of 2006 Douglas Perkins proposed the commencementof a new Feasibility Study to consider other options than those presented in thepreviously completed Bankable Feasibility Study. The Board approved a revisedplan that incorporated heap leaching combined with a 100% capacity increase tothe Tirek CIL operation. World wide conditions relating to the gold miningindustry have changed so much in the last year that the CIL option at Amessmessawas no longer seen as the most efficient and timely, so a new plan was developedas allowed by the Subscription Agreement that incorporated heap leaching atAmessmessa. This was announced by GMA on 2 March 2006. The revised developmentplan was approved by shareholders at the ENOR AGM on 9 May 2006. ENOR is nowofficially in a construction mode with the acquisition of 23 pieces ofCaterpillar equipment and three Tamrock drills scheduled between now and the endof September 2006. It was also decided to use existing infrastructure at Tirekwith an upgrade to electrical facilities and the ball mill to more than doublecapacity. A ball mill has been acquired and delivery is expected in Q4 2006. • The Company based its current plans upon the JORC compliant resource statementfor Tirek/Amesmessa and has completed the in-house Feasibility Study using majorcomponents of the Bankable Study. The ability to develop the Amesmessa depositusing open cast mining techniques rather than underground mine development hasbeen a strategically important outcome due to the lower cost and risk of openpit mining. As part of the future Development plan of ENOR, we will beginexploration and development of the underground resources in 2008. • In early 2006 the largest Algerian partner in ENOR, Sonatrach SPP,consolidated all of the Algerian shareholders so that it owns 48% of the capitalof ENOR. This was viewed very favourably by GMA as it allows ENOR to advancequickly with just two shareholders financially committed to the DevelopmentProject in a rapid manner. • During the year, the Company continued to operate and optimise theexisting pilot plant operation at the Tirek mine site. The performanceimprovement measures introduced at ENOR has seen gold production in 2005increase significantly when compared with 2004. Unfortunately the overall resultwas below expectations and other factors combined to produce a situation whereENOR's financial performance for the year continued to be disappointing. TheCompany is continuing to work with ENOR management to improve overallperformance and we remain confident that the business can continue to improveits production and financial performance. • In light of all the changes within GMA and ENOR in the second half of2005, GMA brought a very experienced team of expatriates into ENOR starting onJanuary 2006. Expatriate staff also assumed the control of all technical andoperating departments of ENOR as of April 2006. It is the role of the currentexpatriate team to train local staff in modern mining techniques so that theywill be able to run the operations without expatriate intervention as soon aspossible. • The improvement in safety performance at the ENOR operations at Tirekhas been particularly good with a reduction in lost time due to injuries and areduction in injury rates. • An exploration budget of $1,000,000 USD was approved for theboundaries of the permit, starting with the recently completed AEROMAG survey, asoil sampling programme and a re-mapping of the whole permit led by Yves Buro,GMA's 43-101 compliant Head Geologist. ENOR intends to begin explorationdrilling in late 2006. Development of the Mining Industry in Algeria • This new mine construction project is the first modern mininginvestment in Algeria by a foreign public company. The Company continues to workhand in hand with the Ministry of Energy & Mines in Algeria which is committedto the development of a fully-fledged mining industry in the Country. This hasbeen achieved via trips to international mining shows and discussions and publicspeeches in Algeria. The Company believes that Algeria is the next frontier inmining and wants to maintain its position as a leader in the sector in thecountry. Algeria offers phenomenal opportunities and GMA would like to extendits thanks to the Ministry of Energy & Mines for its support and cooperation todate. At the Annual General Assembly of the Shareholders of ENOR Spa, held in Algierson 9 May 2006, the ENOR Board accepted the completion of the SubscriptionAgreement and approved officially the Amessmessa Phase II Development Plan thatincluded a heap leach operation based in Amessmessa and the doubling of capacityin the CIL plant at Tirek. The Company believes that we are in a bull market for gold and has comfort thatthe price of gold is sustainable at over the feasibility study price of $440 perounce for the 4.5 years of the feasibility study. The advanced stage of yourCompany's operations, with the first gold pour from the new heap leach projectexpected in Q1 2007, means that GMA shareholders are poised to benefit fromthese favourable market conditions in the near term. GMA has now turned an important corner and the Board looks forward to the nextfinancial year with enthusiasm. On behalf of the Board, I would like to thankour shareholders for their continued support throughout what has been aturbulent period. We believe that the future ahead for the Company is positiveand the time is now right for GMA to emerge as a great value gold play withexcellent growth potential. Richard LinnellChairman19 June 2006 OPERATIONS REVIEW Background The Company acquired its right to a 52% interest in ENOR on 1 July 2003. TheBoard's strategy was to complete a development plan for the substantial Tirekand Amesmessa gold deposits owned by ENOR with a view to significantly expandthe existing gold mining operation. To that end a major exploration drilling programme commenced during the Q3 2003and continued throughout 2004. In February 2004 the Company announced thecommencement of a Bankable Feasibility Study ("BFS") for the construction of anew 300,000 tonne per annum gold mining and mineral processing plant atAmesmessa, approximately 60 kilometres south of the existing processing plant atTirek. The BFS was awarded to GRD Minproc Pty Ltd in late May 2004 and wascompleted and presented to ENOR in Q4 2005. During 2005, the Company continued to operate and optimise the existing pilotplant operation at the Tirek mine site. Gold shipments for the twelve monthswere 20,602 ounces (2004 -19,197ounces) against a budget of 26,119 ounces.Despite the improvements achieved, gold production was lower than planned due tolimited plant and mine equipment availability. During 2005, there was a deficitof 31% in the planned stripping. Thus as we began in 2006, most of the existingpits being waste bound. This will be resolved with the arrival of the new fleetduring Q3 2006. The processing plant was down 2,085 hours during 2005. Health, Safety and Environmental Management Towards the end of 2003 ENOR embarked on a process to achieve internationalrecognition for its Health, Safety and Environmental Management programme ("HSE"). It was agreed that the National Occupational Safety Association "(NOSA")system for Open Cast Mines was the most appropriate system to demonstrate theCompany's commitment to continual improvement for the Tirek and Amesmessaoperations and a decision was made to achieve certification from NOSA in 2004. During January 2004 a HSE consultant was contracted in order to assist theCompany in achieving its HSE objectives and targets. In November 2004, the sitewas audited by a NOSA representative and subsequently awarded a NOSA 3 StarRating. Due to the bankruptcy of NOSA in May 2005, the Company could not berated for 2005. The Company is currently reviewing its options for HSE goingforward. 2005 HSE Performance Review Table 1 Key Performance Indicators Actual Target 2005 Actual 2004 Target 2004 2005 Fatal Injuries 0 0 0 0Lost Time Injuries 2 6 8 9Lost Time Injury Frequency Rate (LTIFR) 0.61 2 2.65 3.00Non Lost Time Injuries 19 60 26 90NOSA Certification (%) n/a n/a 68.6 >61.0 Production Overview Summary statistics for the ENOR gold operations at Tirek during year 2005 arepresented below, see Table 4. The lower than expected gold production was mainly due to the following reasons: • Shortfall in Mine ProductionBoth ore and waste mined during the year was less than planned. The main problemencountered during the year was the maintenance of the open pit mining fleet,particularly low availability of the Blast Hole Drill Rigs and Mining Excavator. • Lower Mill AvailabilityThe mill was not working for significant periods due to mechanical breakdownswith the plant equipment, in particular the power generation sets and the plantball mill. Time lost for repair was exacerbated by some delays in procurement. • Lower Mill ThroughputWhilst milling rates were generally above design, the forecast increase of 25%of the plant capacity, planned to start from July 2004, was not achieved due tolower throughput and the afore mentioned availability. Mining During the year 2005, mining was carried out at the Tirek, Amessmessa and Zitazones. As opposed to previous years, no major problems with the supply of explosiveswere experienced during 2004. The new explosives magazine was commissioned and asecond explosives supply truck was purchased. Budgeted mine production, however, was not achieved (refer to Table 4) mainlyfor the following reasons: • The planned deepening of the Tirek pits couldnot be achieved because of the lower availability of the mining fleet, inparticular the Mining Excavator (CAT365) and the Blast Hole Drill Rigs (AtlasCopco); • Frequent breakdowns to the Caterpillar 365 excavator were encountered: • There were frequent minor breakdowns of theMercedes haulage trucks, however the average availability for the year was 76%,which given the operating conditions is considered acceptable; • The Komatsu dozer was unavailable for 2 months, due to engine damage; • Of the three Atlas Copco Drill Rigs on site,only two were available during the year due to a lack of spares. The averageannual availability of the Drill Rigs was very low at 54%; • There was a shortage of skilled mine productionemployees, only 67 employees versus a budgeted total of 76. This resulted in apoor shift management and lower machine productivity. Processing The average mill processing rate was 8.2 tonnes per hour ("tph") (design is 8tph) and the average grade was 11.62 gms Au/tonne. The average gold recovery forthe year was 96.7%. Budgeted plant production was not achieved for the following reasons: • There was a total of 2,462 hours of downtime atthe mill and plant, equivalent to 30% of total available hours during 2004. • Main plant problems encountered during 2004 wereassociated with the plant power generation sets. The plant was down from 14April until 8 June. The plant was initially recommissioned using the campgenerating set (Cat 640KVA) and after hiring 4x250KVA generating sets. Delays indelivery of replacement generating sets meant that full power capability couldnot be reinstated until 12 November. • The plant productivity was reduced forsignificant periods from September to December. Plant availability was lowerthan planned due to the failure of the primary crusher drive motor. This wasrepaired in December. Mill throughput was also restricted at times due to wornmill liners. New liners were delivered to site in December and installed. Management Starting late 2003, and continuing throughout 2004, ENOR Management continued toimplement an "Operations Improvement Programme". Under this programme expatriatepersonnel were recruited in key areas in order to assist in overcoming problemswhich had been identified. Improvements have been achieved in areas such as safety and environmentalmanagement, geological modelling and grade control, mine planning, metallurgicalprocessing and human resources. Further improvement is required in the areas ofmaintenance management, planning, and supply. One of the key areas where improvements are being made is the recruitment andretention of skilled personnel at site. The increase in the workforce over thelast twelve months represents a significant investment in the training anddevelopment of local staff. It is envisaged that the number of expatriateemployees will reduce over the next twelve months as the skill and experience ofthe local personnel continues to develop. Exploration There was no new exploration undertaken during 2005 due to lack of funds andmanagement focus on the Amessmessa Feasibility Study. A $1,000,000 USD programincluding an Aeromag survey and drilling was approved for 2006. Mineral Resource Estimate for Combined Vein Domains 8, 9 and 9a Reporting cut-off is 1.5 g/t Au above 380mRL and 3.0 g/t Au below 380mRL Category Tonnes Grade (g/t Au) Ounces Measured 100,000 19.1 62,000Indicated 943,000 11.3 343,000Sub-total 1,043,000 12.1 405,000Inferred 811,000 8.0 209,000Total 1,854,000 10.3 614,000 All domains were estimated by Ordinary Kriging of the grade times horizontalwidth accumulation and of the horizontal width in 20 metres by 20 metres panelsin two-dimensional long section projection, followed by back-calculation of thepanel grade. Mineralisation volumes were reported as proportions inthree-dimensional blocks of 5 metres N-S by 1metrse E-W by 1mRLNo dilution wasapplied for the Mineral Resource. The Mineral Resource estimated by RSGG has been determined to an approximatedepth of 450 metres, whilst previous estimates reported by ORGM (using theclassification system of the Russian State Committee for Ore Reserves) extendedto approximately 537 metres. The majority (75%) of the infill drilling performedby the Company was confined to the top 60 metres of the orebody. Previousdrilling by ORGM extended well below this, and in fact borehole S233, one of thedeepest drilled by ORGM at Amesmessa vein 9, intersected the reef zone at adepth of approximately 420 metres below surface with a value of 34.7g/t Au over1.13 metres. Whilst the main objective of the Company's drilling programme atAmesmessa was to prove up sufficient open cast mine reserves to support thefirst few years of gold production for the new Amesmessa plant, the Companyconsiders vein 8 and 9 to have potential to be a significant underground mineand believes there is excellent exploration potential at depth. Based on the recent resource modelling work on Amesmessa veins 8 and 9, theCompany has concluded that the majority of the explored area within this depositcan be mined using conventional open cast techniques. This development isstrategically important in that it allows the Company to achieve its desiredexpanded production capacity at a lower capital investment cost and with asignificantly reduced mining risk than if the Company had continued to developthis deposit as an underground mine only. ORGM have previously published a resource estimate, calculated in 1993, for 16of the veins at Amesmessa, inclusive of veins 8 and 9. ORGM resources arecategorised according to the classification system of the Russian Committee forOre Reserves and are presented below for comparison. ORGM Resource Estimate for Amesmessa Reporting cut-off is 2.0 g/t Au Category Tonnes Grade Ounces Veins 8 & 9C1 909,800 18.9 553,137C2 580,400 17.4 325,069Sub-Total 1,490,200 18.3 878,206 Veins 1,3,4,7,10 to 13,15 to 18,33 and 36C1 483,100 18.1 280,525C2 445,300 16.8 239,916Sub-Total 928,400 17.4 520,441 Total 2,418,600 18.0 1,398,647 As with Amesmessa, ORGM have previously published a resource estimate for Tirek,calculated in 1993. Up to then ORGM's drilling programme at Tirek had onlyextended over 14 of the main vein swarms. Again it should be noted that ORGMresources are categorised according to the classification system of the RussianCommittee for Ore Reserves. ORGM Resource Estimate for Tirek Reporting cut-off is 2.0 g/t Au Category Tonnes Grade Ounces C1 512,313 23.3 384,578C2 543,053 11.0 191,647Total 1,055,366 17.0 576,225 ENOR has been producing gold from its mining and processing operations at Tireksince 2001, developing open cut mines on 20 of the 70 quartz veins identifiedpreviously by ORGM. The Company has completed an extensive drilling programme on13 of the major vein swarms at Tirek and achieved reef intercepts of greaterthan 15 g/t Au in 40 out of the 179 holes drilled. At Amesmessa, whilst GMA's drilling campaign focused on infill drilling at veins8 and 9, an extra 19 exploratory holes were drilled to allow geologicalinterpretation and modelling on a further 3 vein swarms. Of the total of 88holes drilled within the Amesmessa zone, 11 holes achieved reef intercepts ofgreater than 15g/t Au. Key Statistics Table 4Key Performance Units Actual Budget VarianceIndicators 2005 Mine PerformanceOre Mined Tonnes 65,718 72,753 -10%Grade Au g/t 11.35 12.62 -10%Waste Mined Tonnes 1,096,783 1,587,640 -31%Strip Ratio Waste: 17 22 -30% OrePlant PerformanceOre Milled Tonnes 54,047 67,831 -20%Grade Au g/t 12.19 12.56 -3%Gold Poured Oz 20,602 26,119 -21%Gold Recovery % 96.53 96.0 - GMA RESOURCE PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2005 Note 2005 2004 £'000 £'000 Turnover 1 6,346 4,333 Cost of sales (8,189) (7,552) Gross loss (1,843) (3,219) Administrative expenses (912) (1,030) Operating loss 2 (2,755) (4,249) Net interest 4 (137) (72) Loss on ordinary activities before 1 (2,892) (4,321)taxation Tax on loss on ordinary activities 5 - - Loss on ordinary activities after (2,892) (4,321)taxation Minority interest 16 714 1,855 Net loss attributable to shareholders 18,19 (2,178) (2,466) Basic and diluted loss per ordinary 7 (1.48p) (1.90p)share All operations are continuing. GMA RESOURCES PLC BALANCE SHEETS AT 31 DECEMBER 2005 Group Group Company Company Note 2005 2004 2005 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 8 1,103 1,504 - -Tangible assets 9 6,797 6,081 5 5Investments 10 - - 525 525 7,900 7,585 530 530Current assetsStocks 11 2,622 2,124 - -Debtors: Due within one year 12 613 578 597 206Debtors: Due after one year 12 - - 7,454 6,913Cash at bank and in hand 8,608 1,839 8,608 1,252 11,843 4,541 16,659 8,371Creditors: amounts falling due within one 13 (5,725) (4,544) (95) (113)year Net current assets/(liabilities) 6,118 (3) 16,564 8,258 Total assets less current liabilities 14,018 7,582 17,094 8,788 Creditors: amounts falling due after more 14 (237) (452) - -than one year Minority interest 16 (2,875) (3,144) - - Net assets 10,906 3,986 17,094 8,788 Capital and reservesCalled up share capital 17 2,610 1,337 2,610 1,337Share premium account 18 16,184 8,816 16,184 8,816Profit and loss account 18 (7,888) (6,167) (1,700) (1,365) Shareholders' funds 19 10,906 3,986 17,094 8,788 GMA RESOURCES PLC CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2005 Note 2005 2004 £'000 £'000 Net cash outflow from operating activities 20 (1,015) (2,449) Returns on investment and servicing of finance 4Interest received 59 64Interest paid (196) (136) (137) (72) Capital expenditurePayments to acquire tangible fixed assets (1,282) (2,869)Payments to acquire intangible fixed assets (52) - (1,334) (2,869) Net cash outflow before financing (2,486) (5,390) FinancingIssue of ordinary share capital 8,908 1,967Expenses in connection with share issue (267) -Loan advances - 1,069Loan repayments 22 (59) (476)Net cash inflow from financing 8,582 2,560 Increase/(decrease) in cash 21 6,096 (2,830) GMA RESOURCES PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2005 2005 2004 £'000 £'000 Loss sustained for the financial year (2,178) (2,466) Exchange gain/(loss) on foreign currency 457 (780)net investment Total recognised gains and losses for the (1,721) (3,246)financial year NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2005 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 turnover originated and arose inAlgeria. 2 OPERATING LOSS Operating loss is stated after charging: 2005 2004 £'000 £'000 Amortisation of goodwill 453 437Depreciation - deferred exploration costs 73 811Depreciation - other 1,294 1,055Auditors' remuneration- audit fees 66 60- tax compliance 5 3 3 STAFF NUMBERS AND COSTS The average monthly number of persons (including directors) employed by thegroup during the year was: 2005 2004By activity Number Number Production 247 212Administration 43 46 290 258 2005 2004Staff costs £'000 £'000 Wages and salaries 1,868 1,778Social security costs 168 52 2,036 1,830 Details of emoluments paid to directors are contained in the Remuneration Reporton page 14, headed 'audited information' and this information forms part of thefinancial statements. The total directors emoluments for the year were £288,750and that of the highest paid director were £120,000. 4 NET INTEREST 2005 2004 £'000 £'000 Interest receivable (59) (64)Bank loans and overdrafts 196 136 137 72 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. 2005 2004 £'000 £'000 Loss on ordinary activities before tax (2,892) (4,321) Loss on ordinary activities multiplied by the standard rate of (868) (1,296)corporation tax in the UK of 30% Effect of:Expenses not deductible for tax 10 256Overseas losses outside the scope of tax 717 917Increase in tax losses 141 123Current tax charge for year - - The group has unrelieved tax losses of £2,100,000 (2004: £1,625,000) 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 £335,000 (2004: £181,000). 7 BASIC AND DILUTED LOSS PER ORDINARY SHARE 2005 2005 2005 2004 2004 2004 Loss for Number Loss per Loss for Number Loss per the period of shares share the period of shares share £'000 '000 p £'000 '000 p Loss for the year (2,178) (2,466)Weighted average number of shares 147,335 129,488Basic loss per share (1.48p) (1.90p) Due to losses, there is no dilutive effect of options to subscribe for ordinaryshares. 8 INTANGIBLE FIXED ASSETS Group - Goodwill on consolidation Goodwill on consolidation Other Total £'000 £'000 £'000CostAt 1 January 2005 2,198 - 2,198Additions - 52 52At 31 December 2005 2,198 52 2,250 DepreciationAt 1 January 2005 694 - 694Provided in the year 443 10 453At 31 December 2005 1,137 10 1,147 Net book amount at 31 December 2005 1,061 42 1,103 Net book amount at 31 December 2004 1,504 - 1,504 9 TANGIBLE FIXED ASSETS Group Land, mining Deferred Production Other Total property and exploration machinery equipment costs and buildings equipment £'000 £'000 £'000 £'000 £'000CostAt 1 January 2005 3,443 2,222 2,800 468 8,933Additions - - 1,281 1 1,282Written off - (1,716) - - (1,716)Exchange difference 563 (42) 717 97 1,335At 31 December 2005 4,006 464 4,798 566 9,834 DepreciationAt 1 January 2005 632 1,643 490 87 2,852Charge for the year 232 73 999 63 1,367Written off - (1,716) - - (1,716)Exchange difference 108 - 404 22 534At 31 December 2005 972 - 1,893 172 3,037 Net book amount at 31 December 2005 3,034 464 2,905 394 6,797 Net book amount at 31 December 2004 2,811 579 2,310 381 6,081 The deferred exploration costs were written off having been fully depreciated inthe period. Company Other equipment £'000CostAt 1 January 2005 5Additions 1At 31 December 2005 6 DepreciationAt 1 January 2005 -Charge for the year 1At 31 December 2005 1 Net book amount at 31 December 2005 5 Net book amount at 31 December 2004 5 10 FIXED ASSET INVESTMENTS Company Subsidiary undertakings £'000CostAt 1 January 2005 and at 31 December 2005 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 processingGold Mines of Algeria Pty Ltd Australia ordinary 100% 100% Investment company 11 STOCK Group 2005 2004 £'000 £'000 Raw materials and consumables 2,277 1,351Work in progress - 31Finished goods for resale 345 742 2,622 2,124 12 DEBTORS 2005 2004 2005 2004 Group Group Company Company £'000 £'000 £'000 £'000 Due from subsidiary undertakings - - 7,454 6,913Bonds 76 75 2 2Prepayments 122 54 - -Other debtors 415 449 595 204 613 578 8,051 7,119 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 2005 2004 2005 2004 Group Group Company Company £'000 £'000 £'000 £'000 Bank overdraft 673 - - -Bank loan 1,431 1,275 - -Trade creditors 2,321 2,084 27 40Other taxation and social security 874 757 - -Other creditors and accruals 426 428 68 73 5,725 4,544 95 113 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 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 2005 were: 2005 2005 2004 2004 £'000 Rate £'000 Rate Variable rate bank borrowings 1,033 Base+2% 905 Base+2%Fixed rate bank borrowings 124 6% 168 6%Fixed rate bank borrowings 511 6.75% 654 6.75% The weighted average period for which rates are fixed is 1.5 years (2004: 2.5years). 14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Group 2005 2004 £'000 £'000Bank loan- one to two years 218 370- two to five years 19 82 237 452 15 FINANCIAL RISK MANAGEMENT The group financial liabilities analysis is as follows: 2005 2004 £'000 £'000In less than one year or on demand Bank loans and overdrafts 2,104 1,275In more than one year but less than twoyears Bank loans 218 370 In more than two years but less than fiveyears Bank loans 19 82 2,341 1,727 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 2005 were: 2005 2005 2004 2004 £'000 Rate £'000 Rate Variable rate bank borrowings 1,706 Base+2% 905 Base+2%Fixed rate bank borrowings 124 6% 168 6%Fixed rate bank borrowings 511 6.75% 654 6.75% The weighted average period for which rates are fixed is 1.5 years (2004: 2.5years). 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. 2005 2004 £'000 £'000 Foreign currency monetary assets - Algerian Dinars 140 162Foreign currency monetary liabilities - Algerian Dinars (2,003) (1,280)Foreign currency monetary assets - Australian dollars 2 9Foreign currency monetary liabilities - US dollars (511) (654) (2,372) (1,763) 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 funding.In deciding on the nature of the funding the company will consider the existingdebt profile. The company does not currently use currency hedges maintainingthe majority of its funds in Sterling with sufficient funds in Australiandollars or Algerian Dinar to meet expenses in those countries. 16 MINORITY INTEREST The minority interest represents a holding of 48% of the shares in thesubsidiary company, ENOR spa. The holders of those shares have no rightsagainst any other group company. 2005 2004 £'000 £'000 Minority interest at 1 January 2005 3,144 4,999Exchange differences 445 (387)Minority interest in net loss of subsidiary undertaking (714) (1,468)At 31 December 2005 2,875 3,144 17 SHARE CAPITAL 2005 2005 2004 2004 Number £'000 Number £'000AuthorisedOrdinary shares of 1p each 1,000,000,000 10,000 1,000,000,000 10,000 Allotted, called up and fully paidOrdinary shares of 1p each 260,991,493 2,610 133,738,522 1,337 Allotments during the year On 23 November 2005 the company allotted 127,252,971 ordinary shares of 1p eachfor a consideration of 7p per ordinary share. The total consideration beforeexpenses was £8,908,000 and aggregate nominal value was £1,273,000. The premiumon the shares of £7,635,000 has been credited to the share premium account. Contingent rights to the allotment of shares The company has granted options to certain directors and employees as follows: Date granted At 1 January 2005 Granted Lapsed Exercised At 31 number number number December 2005 31 October 2005 - 1,200,000 - - 1,200,000 18 RESERVES Group and company Group Company Share premium Profit and Profit and account loss account loss account £'000 £'000 £'000 At 1 January 2005 8,816 (6,167) (1,365)Premium on shares issued in year 7,635 - -Share issue costs (267) - -Loss sustained for the year - (2,178) (335)Exchange differences - 457 -At 31 December 2005 16,184 (7,888) (1,700) 19 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2005 2004 £'000 £'000 Shareholders' funds at 1 January 3,986 5,265Loss for the financial year (2,178) (2,466)Exchange differences 457 (780)Receipts from issue of shares 8,641 1,967Shareholders' funds at 31 December 10,906 3,986 Company 2005 2004 £'000 £'000 Shareholders' funds at 1 January 8,788 7,002Loss for the financial year (335) (181)Receipts from issue of shares 8,641 1,967Shareholders' funds at 31 December 17,094 8,788 20 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2005 2004 £'000 £'000 Operating loss (2,755) (4,249)Depreciation and amortisation 1,820 2,303Exchange differences 101 (371)Increase in stocks (498) (817)Increase in debtors (35) (196)Increase in creditors 352 881Net cash outflow from operating activities (1,015) (2,449) 21 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2005 2004 £'000 £'000 Increase/(decrease) in cash 6,096 (2,830)Loan stock converted to ordinary shares - 2New loans - (1,069)Loans repaid 421 386 6,517 (3,511)Exchange differences (362) 88Change in net funds in the year 6,155 (3,423)Net funds at 1 January 2005 112 3,535Net funds at 31 December 2005 6,267 112 22 ANALYSIS OF MOVEMENT IN NET funds At 1 January Cash flow Non-cash Exchange At 31 December 2005 items differences 2005 £'000 £'000 £'000 £'000 £'000 Cash in hand and at bank 1,839 6,769 - - 8,608Bank overdraft - (673) - - (673) 1,839 6,096 - - 7,935Debt due within one year (1,275) 421 (215) (362) (1,431)Debt due after one year (452) - 215 - (237) 112 6,517 - (362) 6,267 23 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES Under the terms of the acquisition agreement with its subsidiary ENOR, thecompany has undertaken to subscribe for shares in ENOR. At the 31 December 2005,the company was committed to paying the balance of the purchase considerationamounting to £2,586,000 (2004: £2,770,000). This balance was paid in May 2006.The payment has been made to ENOR and the cash will be retained within the Groupand used by ENOR to fund development expenditure. There were no other capitalcommitments or contingent liabilities at 31 December 2005 or 31 December 2004. It would appear that a former Director of Gold Mines of Algeria Pty Ltd, mayhave entered into an arrangement with an individual from Perth designed toenable monies to be paid from Gold Mines of Algeria Pty Ltd to this individual,for consultancy services. The consultancy fee was in the order of $10,621.00 AUDper month plus GST and seems to have been paid for approximately two yearsbefore control of the Company was ceded to current Management. This individualhas subsequently invoiced fees totalling AUD $ 116,831.00 as unpaid invoices forthe period from July 2004 to May 2006, an amount which the Company has declinedto pay. This individual has instructed his lawyers to serve a creditor'sstatutory demand for payment. The Company has engaged counsel in Australia tocontest this claim. The Company is not in a position to assess whether the claimwill have to be paid and has not provided a provision in the 2005 accounts. 24 POST BALANCE SHEET EVENT On 12 April 2006, GMA Resources Plc announced that it has raised approximately£5,053,860 before expenses by way of a placing of 56,154,000 new ordinary sharesof £0.01 each at 9 pence per share ("Placing") which were placed withinstitutional shareholders through Mirabaud Securities. The new ordinary sharesrepresent 17.71% of the enlarged share capital of the Company. In addition,28,077,000 warrants have been granted over ordinary shares, exercisable until 12April 2008 at 13 pence per share. This information is provided by RNS The company news service from the London Stock Exchange