Landore Regulatory News (LND)

25 Aug 2005 11:10

Landore Resources Limited25 August 2005 24 August 2005 Landore Resources Limited (the "Company") Interim Results for the Period from 16 February to 30 June 2005 General The following discussion of performance, financial condition and futureprospects should be read in conjunction with the interim consolidated financialstatements of the Company and notes thereto for the period from 16 February 2005to 30 June 2005. All amounts are stated in GB Sterling. Overview Landore Resources Limited is listed on the Alternative Investment Market ("AIM")and its subsidiary Landore Resources Canada Inc. is engaged in the explorationand development of a portfolio of precious and base metal properties in NorthAmerica. On 6 April 2005, the Company listed on AIM and completed the following: •Fund raising of £2 million at 7p per share by the issue of 28,571,429 Ordinary shares, full details are set out in a press release, which can be viewed on the company's website, www.landore.com •The court approved arrangement with Landore Resources Inc. Pursuant to the Arrangement a further 57,309,879 Ordinary shares were issued to shareholders of Landore Resources Inc. Full details of the arrangement were set out in a management information circular dated 21 February 2005. Results of Operations These financial statements for the period 16 February to 30 June 2005 are thefirst consolidated financial statements. The financial results show a loss of £3,878,153 for the period (7p loss pershare). This loss is after writing off goodwill of £3,386,878 which arose on theacquisition of Landore Resources Canada Inc. The directors consider that thistreatment is very prudent and at this stage do not want to attribute values toindividual exploration properties until significant resources have beenidentified.Exploration costs during the period amounted to £313,989. Administrative expenses during the period amounted to £198,442. Mineral Exploration Activities The Group's main operations consist of exploration programmes on the MiminiskaLake and Junior Lake - Lamaune Lake properties located 430 km northeast and250km north of Thunder Bay, Ontario, respectively. Miminiska Lake The recently completed drilling campaign has succeeded in providing the depthextension of the targeted mineralized zones to a vertical depth of up to 250metres with high grade gold being intersected in most holes. These resultscontinue to reveal an abundance of gold in the project area. Consequently adetailed review of all the drill hole data is being carried out and explorationwill continue. Junior Lake - Lamaune Lake A 3,500 metre diamond drilling programme has recently been completed, to testthe emerging mineral occurrences which had been identified in recent geologicalsurveys. All the samples are now with the assay laboratory and results are awaited forfull interpretation. A further report will be issued in due course when theseresults are available. West Graham Property On 3 August 2005 a press release was issued which gave details of an option /joint venture agreement with First Nickel Inc. whereby that company may acquirea 70% in this property in return for a cash payment of C$150,000 and explorationand development expenditure of C$6 million over a four year period. Critical Accounting Estimates Critical accounting estimates used in the preparation of the financialstatements include the Company's estimate of recoverable value on its mineralproperties as well as the value of stock-based compensation. Both of theseestimates involve considerable judgment and are, or could be, affected bysignificant factors that are out of the Company's control. The factors affecting stock-based compensation include estimates of when stockoptions might be exercised and the stock price volatility. The timing forexercise of options is out of the Company's control and will depend, among otherthings, upon a variety of factors including the market value of the Company'sshares and financial objective of the holders of the options. The Company hasused historical data to determine volatility in accordance with Black-Scholesmodelling, however the future volatility is inherently uncertain and the modelhas its limitations. While these estimates can have a material impact on thestock-based compensation and hence results of operations, there is no impact onthe Company's financial condition. Accounting Policies The Company has adopted accounting policies which are in line with InternationalFinancial Reporting Standards. A full set of these policies are included in thefinancial statements. Use of Financial Instruments The Company has not entered any specialised financial agreements to minimise itsinvestment risk, currency risk or commodity risk. There are no off-balance sheetarrangements. The principal financial instruments affecting the Company'sfinancial condition and results of operations is currently its cash andshort-term money market investments. Forward Looking Statements The above contains forward looking statements that are subject to a number ofknown and unknown risks, uncertainties and other factors that may cause actualresults to differ materially from those anticipated in our forward lookingstatements. Factors that could cause such differences include: changes in worldgold markets, equity markets, costs and supply of material relevant to themining industry, change in government and changes to regulations affecting themining industry. Although we believe the expectations reflected in our forwardlooking statements are reasonable, results may vary, and we cannot guaranteefuture results, levels of activity, performance or achievements. UNAUDITED CONSOLIDATED INCOME STATEMENTFOR THE PERIOD 16 FEBRUARY TO 30 JUNE 2005 Period ended 30 June 2005 Notes £ Exploration costs 2 313,989Administrative expenses 198,442Impairment of goodwill 4 3,386,878 --------Operating loss 3,899,309Finance income (21,156) --------Loss before income tax 3,878,153 Income tax expense 1 - --------Loss for the period 3,878,153 ========Attributable to:Equity holders of the Company 3,878,153 ======== Earnings per share for profit attributable to theequity holders of the Company during the year - basic 3 (£0.07) --------- diluted 3 (£0.07) ======== The Group's operating loss relates to continuing operations. UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD 16 FEBRUARY TO 30 JUNE 2005 Period ended 30 June 2005 £ Loss for the financial year (3,878,153)Translation adjustment on consolidation 16,072 --------Net loss recognised directly in equity (3,862,081)Issue of ordinary share capital 858,813Share premium arising on issue of ordinary share capital 5,152,877Issue costs (418,041) --------Net increase in shareholders' funds 1,731,568Opening shareholders' funds - --------Closing shareholders' funds 1,731,568 -------- UNAUDITED CONSOLIDATED BALANCE SHEET30 JUNE 2005 Group Notes As at 30 June 2005 £AssetsNon current assetsProperty, plant and equipment 41,804Goodwill 4 - -------- 41,804 --------Current assetsTrade and other receivables 25,145Cash and cash equivalents 1,958,398 -------- 1,983,543 --------Total assets 2,025,347 -------- EquityCapital and reserves attributable theCompany's equity holdersShare capital 5 858,813Share premium 6 4,734,836Retained earnings 6 (3,878,153)Cumulative translation adjustment 16,072 --------Total equity 1,731,568 --------LiabilitiesCurrent liabilitiesTrade and other payables 293,779 -------- 293,779 --------Total liabilities 293,779 --------Total equity and liabilities 2,025,347 ======== UNAUDITED CONSOLIDATED CASH FLOW STATEMENTFOR THE PERIOD 16 FEBRUARY TO 30 JUNE 2005 Period ended 30 June 2005 Notes £ Cash flows from operating activitiesCash generated from operations 7 (307,292) Cash flows from investing activitiesAcquisition of subsidiary, net of cash acquired 693,642Purchases of property, plant and equipment (25,818) -------- 667,824Cash flows from financing activitiesIssue of ordinary share capital 2,000,000Issue costs (418,043) -------- 1,581,957Net increase in cash and cash equivalentsCash and cash equivalents at beginning of period -Exchange gains on cash and cash equivalents 15,909 --------Cash and cash equivalents at end of period 1,958,398 ======== ACCOUNTING POLICIESFOR THE PERIOD ENDED 30 JUNE 2005 Basis of accountingThe financial statements have been prepared in accordance with thoseInternational Financial Reporting Standards ("IFRS") standards and InternationalFinancial Reporting Interpretations Committee ("IFRIC") interpretations issuedand effective or issued and early adopted as at the time of preparing thesefinancial statements (July 2005). The financial statements have not been audited and have been prepared on thehistorical cost basis. The principal accounting policies adopted are set outbelow. Interim financial statementsThe company has chosen to adopt International Accounting Standard 34, InterimFinancial Reporting, in preparing these interim financial statements. The IFRSstandards and IFRIC interpretations that will be applicable at 31 December 2005,including those that will be applicable on an optional basis, are not known withcertainty at the time of preparing these interim financial statements. Basis of consolidationThe consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to30 June 2005. Control is achieved where the Company has the power to govern thefinancial and operating policies of an investee entity so as to obtain benefitsfrom its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to the income statement in the period ofacquisition. The results of subsidiaries acquired or disposed of during the period areincluded in the consolidated income statement from the effective date ofacquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. GoodwillGoodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in the income statement andis not subsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. Deferred exploration expenditureWhen the group has incurred expenditure on mining properties that have notreached the stage of commercial production the costs of acquiring the rights tosuch properties, and related exploration and development costs, are deferredwhere the expected recovery of costs is considered probable by the successfulexploitation or sale of the asset. Full provision is made in respect of deferredcosts on properties in the case that insufficient exploration has taken place toascertain future recoverability. Where mining properties are abandoned, thedeferred expenditure is written off in full. Foreign currenciesTransactions in currencies other than pounds sterling are recorded at the ratesof exchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Non-monetaryassets and liabilities carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fairvalue was determined. Gains and losses arising on retranslation are included theincome statement for the period, except for exchange differences arising onnon-monetary assets and liabilities where the changes in fair value arerecognised directly in equity. On consolidation, the assets and liabilities of the Group's overseas operationsare translated at exchange rates prevailing on the balance sheet date. Incomeand expense items are translated at the average exchange rates for the periodunless exchange rates fluctuate significantly. Exchange differences arising, ifany, are classified as equity and transferred to the Group's translationreserve. Such translation differences are recognised as income or as expenses inthe period in which the operation is disposed of. Profit/loss from operationsLoss from operations is stated before investment income and finance costs. Property, plant and equipmentProperty, plant and equipment are stated at cost less provision fordepreciation. Depreciation is provided on all property, plant and equipment atrates calculated to write off the cost of each asset less its estimated residualvalue evenly over its estimated useful life, as follows: Computer hardware - 30% on costComputer software - 100% on costOffice equipment - 20% on costAutomotive equipment - 30% on costMachinery and equipment - 20% on cost Non-current investmentsNon-current investments relate to the company's investments in subsidiaries andare stated at cost less provision for any diminution in value. At 30 June 2005the company owned the entire share capital of Landore Resources Canada Inc., acompany incorporated in Canada and Landore Resources (UK) Limited, a companyincorporated in Great Britain. TaxationThe tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period.Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible inother periods and it further excludes items that are never taxable ordeductible. The Group's liability for current tax is calculated using tax ratesthat have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Critical accounting estimates and judgementsManagement makes various estimates and assumptions in determining the reportedamounts of assets and liabilities and the disclosure of contingent assets andliabilities at the date of the interim financial statements and the reportedamounts of revenue and expenditure in the period. Changes in estimates andassumptions may occur based on additional information and the occurrence offuture events. Actual results could differ from those estimates. Share-based paymentsThe Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2005. The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a binomial model. The expected life used in themodel has been adjusted, based on management's best estimate, for the effects ofnon-transferability, exercise restrictions, and behavioural considerations. A liability equal to the portion of the goods or services received is recognisedat the current fair value determined at each balance sheet date for cash-settledshare-based payments. Financial instrumentsFinancial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Cash and cash equivalentsThe fair value of cash and cash equivalents is considered to be their carryingamount due to their short term maturity. Financial liability and equityFinancial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the group afterdeducting all of its liabilities. Bank borrowingsInterest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the income statement using effective interest method and areadded to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise. Trade payablesTrade payables are not interest bearing and are stated at their nominal value. Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. NOTES TO THE UNAUDITED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 2005 1. Income tax expense Landore Resources Limited is a Guernsey registered company and is eligible forexemption from income tax in Guernsey under the Income Tax (Exempt Bodies)(Guernsey) Ordinance, 1989 as amended. An annual fee of £600 is paid in thisrespect. The Company's subsidiary, Landore Resources Canada Inc., is subject to Canadianfederal tax. No tax has been provided in these interim accounts due to lossesincurred by that company to date. 2. Exploration expenditure and mineral properties Accumulated 1 April Expenditure expenditure 2005 in period 30 June 2005 £ £ £ Miminiska Lake 1,117,599 12,537 1,130,137Junior Lake 474,582 68,064 542,646Frond Lake 33,917 - 33,917Wottam 60,128 - 60,128Auden 70,102 - 70,102Lamaune 68,953 165,776 234,729Seeley Lake - 68,583 68,583Other 11,260 (971) 10,288 -------- -------- -------- 1,836,541 313,989 2,150,530 ======== ======== ======== Mineral properties at 1 April 2005 represent accumulated costs to date incurredby Landore Resources Canada Inc., a subsidiary of Landore Resources Limited. Onacquisition of Landore Resources Canada Inc. on 5 April 2005 the fair value ofthose costs incurred to date was considered to be £Nil (see note 8). Allsubsequent expenditure in the period has been charged to the income statement inaccordance with the group accounting policy. 3. Loss per share The loss per share is based on the loss for the period and the weighted numberof ordinary shares in issue. 30 June 2005 £Loss for period 3,878,153 --------- Weighted average number of shares 54,476,950 --------- In calculating diluted earnings per share, share options and warrants have beenconsidered to be non-dilutive. 4. Goodwill Goodwill of £3,386,878 arose on the acquisition of Landore Resources Canada Inc.as detailed in note 8. The directors consider that a full provision against thecarrying value of the goodwill is necessary as it is not yet known withcertainty whether the underlying assets to which the goodwill relates, being theinvestment in Landore Resources Canada Inc., will generate future cash flows.This is dependent upon the discovery and successful commercial exploitation ofmineral properties in North America. 5. Share capital Company 2005 £Authorised:250,000,000 deferred shares of 1pence each 2,500,000 ======== Ordinary shares Total 2005 2005 £ £At 16 February 20052 ordinary shares of 1 pence each - -Issue of 85,881,310 ordinary shares of 1 pence each 858,813 858,813 -------- --------At 30 June 2005 858,813 858,813 ======== ======== 6. Reserves Share Profit premium and loss £ £GroupAt 16 February 2005 - -Premium on shares issued in the year 5,152,877 -Cost of issue (418,041) -Loss for the year - (3,878,153) -------- --------At 30 June 2005 4,734,836 (3,878,153) ======== ======== 7. Cash generated from operations 30 June 2005 £Operating loss (3,878,153)Impairment of goodwill 3,386,878Depreciation of property, plant and equipment 5,091Decrease in receivables 5,684Increase in payables 173,208 --------Net cash outflow from operating activities (307,292) -------- 8. Fair value of subsidiary company acquired Fair value of net Net assets Fair value assets acquired adjustments acquired £ £ £ Cash and cash equivalents 693,642 - 693,642Receivables 22,315 - 22,315Mineral properties 1,836,541 (1,836,541) -Property, plant and equipment 21,810 - 21,810 -------- -------- -------- 2,574,308 (1,836,541) 737,767Liabilities (112,953) - (112,953) -------- -------- --------Net assets 2,461,355 (1,836,541) 624,814 ======== ======== ======== Consideration paid: Securities issued on a one for oneexchange of existing securities of LandoreResources Canada In 4,011,692 --------Goodwill on acquisition 3,386,878 ======== 9. Foreign exchange The directors consider the functional currency of Landore Resources Limited tobe GB Sterling and the functional currency of the main trading subsidiary,Landore Resources Canada Inc., to be Canadian Dollars. The directors haveadopted a presentational currency of GBSterling for the accounts and the resultsof Landore Resources Canada Inc. have been translated into GB Sterling using thefollowing exchange rates: 31 March 2005 2.286 C$/£ 30 June 2005 2.195 C$/£ Average rate 2.241 C$/£ This information is provided by RNS The company news service from the London Stock Exchange