Metals Exploration Regulatory News (MTL)

28 Mar 2008 07:02

Metals Exploration PLC28 March 2008 28 March 2008 Metals Exploration PLC Final Results for the year ended 30 September 2007 Metals Exploration PLC (AIM: MTL) ('Metals Ex' or 'the Company'), the naturalresources exploration and development company with assets in the Pacific Rimregion, is pleased to report on its final results for the year ended 30September 2007. HIGHLIGHTS: For the year ended 30 September 2007: • October 2006: Raised £5m pre-expenses through a placing at 25p per share • May 2007: Appointed Jonathan Pearson as non-executive director. • July 2007: Raised £6.3m pre-expenses through a placing at 40p per share and a convertible loan note issue • August 2007: Acquired remaining rights to Runruno resulting in total rights of 100%. • August 2007: Acquired rights to a nickel laterite deposit on Waigeo Island, Indonesia and set up a subsidiary company PT Cupati. Events post 30 September 2007: • January 2008: Launch of scoping study on Runruno and appointment of Ian Holzberger as project director. • March 2008: Runruno resource upgraded to 2.1Moz of gold of which 775,000oz is in the indicated category. Jonathan Beardsworth, CEO, commented: "Metals Ex has made considerable progress towards development throughout theyear. We now have a greater understanding of the resource at Runruno and with775,000oz of gold in the indicated category. We look forward to even greatersuccess in 2008 as the Company completes the Scoping Study at Runruno andprogresses into the bankable feasibility stage." Group Report and Accounts A copy of the Group Report and Accounts will be sent to all shareholders shortlyand will also be available from the Company's registered office: 200 Strand,London WC2R 1DJ. The Group Report and Accounts will also be published on the Company's website;www.metalsexploration.com. For more information: Jonathan Beardsworth + 44 (0) 20 7927 6690CEO + 44 (0) 7747 101 552 Adrian Hadden + 44 (0) 20 7523 8350Collins Stewart Europe Limited Charles Vivian + 44 (0) 20 7743 6672Pelham PR Klara Kaczmarek + 44 (0) 20 3159 4395Pelham PR CHAIRMAN'S STATEMENT The inside cover of the Annual Report this year shows our Dr Ernesto Mendoza PhDand his wife, Dr Nanette Mendoza, being presented with the "Special Award" byformer MP Michael Portillo at the annual Mining Journal sponsored "OutstandingAchievements Awards". The Special Award is presented to "an individual in themining industry who has displayed outstanding bravery, long standing charitablework, or for championing the sector to the general public". Ernesto and Nanette won this award through their remarkable efforts in supportof our community at Runruno in the Philippines, at considerable risk to theirown lives, in the wake of the destruction wrought by super-typhoon Paeng inOctober 2007. We are extremely proud that their selfless efforts received suchrecognition across the global mining industry. This award celebrates the actions of Ernesto and Nanette. It is also indicativeof the seriousness with which all employees of the Company take ourresponsibilities to the community at Runruno, in particular through our supportto the Runruno Livelihood Foundation. This Annual Report is for the financial year ended 30 September 2007. At thestart of the financial year Jonathan Beardsworth had recently assumed the roleof Chief Executive Officer, and he describes the year in further detail in hisreview. In general terms the Company has made considerable progress during the year. • Throughout the year we progressively enhanced our understanding of the deposit at Runruno to a situation where now we have a resource of over 2 million ounces of gold, of which 775,000 ounces is in the Indicated category. • We took the opportunity to purchase an additional 15% interest in Runruno, resulting in total rights to the project of 100%, which simplified the ownership structure of the operating company. Importantly this frees us up to explore the rest of the volcanic complex at Runruno which we believe has the potential for further discoveries. In this regard we were pleased to host Dr Eric Jenson PhD on his visit to site, and to receive his most encouraging report confirming the similarity between Runruno and Cripple Creek. • In January 2008, we announced the decision to move the project at Runruno through feasibility towards production. The Scoping Study into the technical and economic aspects of the Runruno project is planned to report in the summer of 2008. • The Management of the Company has been strengthened with the appointment of Ian Holzberger as Project Director. Ian has more than 35 years experience in the base and precious metals mining industry and has extensive experience of feasibility studies, equity raising, government negotiations, and all aspects of developing mining projects in the region. • We continue to add to our portfolio, projects that have the potential to add to shareholder value. Most notably, we acquired rights to a nickel laterite project on Waigeo Island, Indonesia that has the potential to deliver near term cash flow to the Company by means of direct shipping ore. In common with others, the Company has been exposed to the recent turbulence inthe financial markets. However, Management is confident that the Company iswell positioned to deliver long term value to shareholders. I am delighted to welcome Jonathan Pearson, who was appointed to the Board as aNon-Executive Director on 1 May 2007. He has over 40 years' experience ininternational banking with a strong flavour in mining and South East Asia.Jonathan has managed a number of treasury and securities' trading businesses andwas CEO of Standard Chartered Merchant Bank Asia. His advice and guidance to theboard has already been evident and of benefit to the Company. On a personal note, I am proud to have been Chairman of the Company for the lastthree and a half years since listing on AIM in October 2004, and to have seen itgrow from an early stage exploration play to where it is now; an excitingproject with experienced Management and dedicated employees. In order for the Company to meet the challenges of the next stage of itsevolution I believe that a new Chairman is required, and ideally one with moreexperience of the mining industry. Consequently I have asked our Non-ExecutiveDirector, Jonathan Pearson, to chair an ad hoc Board Committee to identify andappoint a successor, and I intend to step aside once that process is complete. I am most grateful to all shareholders, employees and the Board of the Companyfor their support through my tenure. S M SmithNon-Executive Chairman CHIEF EXECUTIVE'S REVIEW I am pleased to present this Annual Report for the financial year ended 30September 2007. Firstly, it is appropriate to acknowledge Steven Smith's enormous contributionto the Company through his three and a half years as Chairman since listing onAIM in October 2004. The Company listed at a price of 3.0 pence per ordinaryshare and has traded as high as 46.5 pence per share. As at 29 February 2008,the price was 25.0 pence per ordinary share. This represents a substantialappreciation of shareholder value. Moreover, for the two years prior to myarrival in September 2006, Steven acted as de facto Chief Executive and ChiefFinancial Officer, in addition to his responsibilities as Chairman. Since I joined the Company I have been able to benefit from Steven's hugeexperience in corporate and financial matters and am deeply grateful for hissupport throughout. We hope that he will continue to be closely associated withthe Company for many years to come. Runruno We currently have a deposit at Runruno with over two million ounces of goldalready defined. This is a substantial deposit by world standards. Of those twomillion ounces, 775,000 ounces are already in the Indicated category (under theAustralasian Code for Reporting of Exploration Results, Mineral Resources andOre Reserves, 2004 (the "JORC" Code)). In January 2008 we announced the launchof a Scoping Study into the technical and economic aspects of the Runrunoproject with the intention of providing a basis for a bankable feasibility studyto commence in the second half of the year. In January 2007 the preliminary results of metallurgical testwork wereannounced, which demonstrated that a combination of gravity concentrationfollowed by flotation yielded encouraging gold recoveries of 92% into aflotation concentrate. Subsequently, in July 2007 we announced that furthermetallurgical tests had demonstrated that gold recoveries of 94.7% had beenachieved from a combination of gravity concentration, flotation, pressureoxidation of the sulphide mineralization, followed by cyanidation of theoxidised concentrate. We continue to work on maximising molybdenum recoveries. In August 2007 we acquired, for a consideration of £3.87 million, 15% interestof the Runruno project. As a result we now have rights to 100% of Runruno. Thisallows us to explore for additional orebodies in the rest of the volcaniccomplex outside the orebody we have already defined. We have previously drawncomparisons between Runruno and Cripple Creek in Colorado and were pleased tohave this endorsed recently by Dr Eric Jenson, a renowned expert on CrippleCreek style orebodies. Consequently we are optimistic of achieving additionalexploration success. The Exploration Permit at Runruno was renewed for the statutory period of twoyears in August 2007. Other Projects We continue to progress our Exploration Permit Applications in respect of ourprojects at Puray and Worldwide. In March 2007 we lodged Exploration Permit Applications over three properties inNorthern Luzon, namely Dupax, Sulong and Capas, all of which comprise of gold,copper and zinc mineralization identified by previous explorers and which in theopinion of the Company offer the potential for the delineation of economicallyviable deposits of gold and/or base metals. In January 2007 we received notice from Medusa Mining Limited of their intentionto withdraw from the Masapelid Joint Venture. After reviewing the results oftheir exploration programme, and given our focus on Runruno and other projectsin northern Luzon, we in turn released our rights to Masapelid. In August 2007 we announced that we had acquired rights to various nickellaterite properties on Waigeo Island, Indonesia, that the Company believes havethe potential to support commercial direct shipping ore operations with thepossibility of providing near term cash flow. The acquisition considerationwasUS$100,000, and the rights are subject to a royalty of 10% of gross revenues inthe event that commercial shipping operations commence. Funding In November 2006 we successfully raised £5 million at a price of 25 pence perordinary share in a market where many other companies were finding fundraisingdifficult to secure. We were delighted with continued support amongst existingand new shareholders. In July 2007 we raised a further £6.3 million by way of a £4.3 million placingof shares at 40 pence per ordinary share, a premium of 60% to the 25 pence perordinary share fundraising completed nine months earlier, and a £2 millionconvertible note with a coupon of 9% per annum and a conversion price of 52pence per ordinary share. Management I am proud of our Management team who have successfully identified anddelineated a major project at Runruno. The award deservedly received by ErnestoMendoza referenced in the Chairman's Report is indicative of the commitment,professionalism and compassion throughout the Company. As the Company makes the transition from explorer to developer I am delighted towelcome Ian Holzberger who brings more than 35 years experience in the miningindustry to bear in his role as Project Director. Summary The situation we have at present is one in which: • We have a substantial 2.1 Moz gold deposit, which is in the top quartile of gold deposits worldwide. • 775,000 ozs of that deposit are in the Indicated category. • We have embarked on a detailed Scoping Study of the project with a view to initiating a full feasibility study later this year. • We have introduced the Management skill-set required to bring the project to fruition. • There is potential uplift if the results of the metallurgical testwork currently under way on the molybdenum is successful. • There is potential to discover new resources in the rest of the volcanic complex at Runruno that were so positively reported by Dr Eric Jensen PhD. • There is potential to direct ship nickel ore from our nickel project on Waigeo Island, Indonesia. • There is the potential of our other Exploration Permit Applications in the Philippines. I look forward to an exciting year ahead. J BeardsworthChief Executive Glossary of Terms Inferred Mineral Resource is that part of a Mineral Resource for which tonnage,grade and mineral content can be estimated with a low level of confidence. It isinferred from geological evidence and assumed but not verified geological and/orgrade continuity. It is based on information gathered through appropriatetechniques from locations such as outcrops, trenches, pits, workings and drillholes which may be limited or of uncertain quality and reliability. Indicated Mineral Resource is that part of a Mineral Resource for which tonnage,densities, shape, physical characteristics, grade and mineral content can beestimated with a reasonable level of confidence. It is based on exploration,sampling and testing information gathered through appropriate techniques fromlocations such as outcrops, trenches, pits, workings and drill holes. Thelocations are too widely or inappropriately spaced to confirm geological and/orgrade continuity but are spaced closely enough for continuity to be assumed. CORPORATE GOVERNANCE STATEMENT In July 2005, the Quoted Companies Alliance (QCA) published Corporate GovernanceGuidelines for AIM Companies. The Company's Board apply these guidelines underwhich it has been in full compliance throughout the year except as stated below. Directors There is a board of directors, which is set up to control the Company and Groupand at 30 September 2007 this consisted of two executive and two non-executivedirectors. Steven Smith is Non-Executive Chairman of the Board. The Board meetson a regular basis, to discuss a range of significant matters includingstrategic decisions and performance. Produced at each relevant Board meeting isthe latest financial information available. The Executive Directors give acurrent operational appraisal at informal monthly board meetings. Each member of the Board is subject to the re-election provisions of theArticles of Association, which requires them to offer themselves for re-electionat least once every three years. In the event of a proposal to appoint a newdirector, this would be discussed at a full Board meeting, with each memberbeing given the opportunity to meet the individual concerned prior to any formaldecision being taken. Due to the size of the Group, no Nomination Committee hasbeen established. The Directors have delegated certain of their responsibilities to variouscommittees, which operate within specific terms of reference and authoritylimits. The Directors meet on a regular basis and deal with any number ofdecisions that do not require full Board approval. Audit and Remuneration Committees The Audit Committee, which consists of Steven Smith and Jonathan Pearson, isresponsible for the relationship with the Group's auditors, the in-depth reviewof the Group's financial reports, internal controls and any other reports thatthe Group may circularise. The terms of reference include a review of the costeffectiveness of the audit and non-audit services provided to the Group. TheCommittee meet twice a year, prior to the announcement of interim and annualresults and, should it be necessary, would convene at other times. The Remuneration Committee, which consists of Steven Smith and Jonathan Pearson,meets and considers, within existing terms of reference, the remuneration policyand makes recommendations to the Board for each Executive Director and othersenior officers. The Executive Directors' and other senior officers remunerationconsists of a package of basic salary, bonuses and share options, which arelinked to corporate and individual performance achievements and the levels ofeach will be determined by the Remuneration Committee. The Audit and Remuneration Committees consists solely of Non-ExecutiveDirectors. Steven Smith is not judged to be an independent director by virtue ofhis position, however, Jonathan Pearson meets the independent criteria set outin the combined code. Communication with shareholders The annual report and accounts and the interim statement at each half-year arethe primary vehicles for communication with shareholders. These documents arealso distributed to other parties who have expressed an interest in the Group'sperformance. Company results can be viewed on the website(www.metalsexploration.com). Shareholders who have any queries relating to their shareholdings or to theaffairs of the Company generally are invited to contact the Company at itsregistered address. Internal financial control The Group operates an appropriate system of internal financial control, which isdesigned to ensure that the possibility of misstatement or loss is kept to aminimum. There is a system in place for financial reporting and the Boardreceives reports to enable it to carry out these functions in the most efficientmanner. Going concern The Directors can report that based on the Group's budgets and financialprojections, they have satisfied themselves that the business is a goingconcern. The Board has a reasonable expectation that the Company and Group haveadequate resources and facilities to continue in operational existence for theforeseeable future and therefore the accounts are prepared on a going concernbasis. By order of the Board S M SmithNon-Executive Chairman DIRECTORS' REPORT The Directors present their annual report on the affairs of the Group, togetherwith the accounts and auditors' report for the year ended 30 September 2007. PRINCIPAL ACTIVITIES The principal activity of Metals Exploration plc ("Metals Ex" or the "Company")is to identify and acquire mining companies, businesses or projects withparticular emphasis on precious and base metals mining opportunitiespredominantly in the Western Pacific Rim region. Since the Company's admission to AIM in October 2004, Metals Ex has focusedefforts on the acquisition of significant interests in exploration properties inSouth East Asia in which the Company considers to have substantial explorationopportunities. BUSINESS REVIEW A full review of the business is included within the Chief Executive's Review. RISKS AND UNCERTAINTIES A number of risks and uncertainties exist which could adversely impact theGroup's businesses and which also apply to other companies in the exploration ormining industry. These include: Requirement for Additional Funding Further funds will be required to develop the Group's projects. Failure toobtain sufficient financing for the Group's projects and any future projects mayresult in a delay or indefinite postponement of exploration, development orproduction on the Group properties or even a loss of a property interest.Additional financing may not be available when needed or, if available, theterms of such financing might not be favourable to the Company and might involvesubstantial dilution to Shareholders. During the year, the Company successfully raised £11.3 million. Requirements forfunding are identified in advance allowing for sufficient time for cash to beraised. Volatility of Commodity Prices The activities of the Group and the viability of its projects will be subject tofluctuations in demand and prices for minerals generally. A significantreduction in global demand for the minerals to be sold by the Group, leading toa fall in prices, could lead to a delay in exploration and production or evenabandonment of one or more of the Group's projects should they proveuneconomical to develop. There is also uncertainty as to the possibility of increases in world productionboth from existing mines and as a result of mines currently closed beingreopened in the future if price increases make such projects economic.Consequently, price forecasting can be difficult to predict or imprecise. The Company regularly tracks both precious and base metal forecasts to assessfuture financial viability of its projects. Political and Other Country Risks The Group's operations are based in the Philippines and Indonesia. As a result,there are important political and economic factors which could affect aninvestment in the Company. While the Philippines's recent growth rates areencouraging and the currency has appreciated, there may be uncertainty about thepattern of growth and its sustainability. However, in the Philippines in 2004, the 1995 Mining Act became constitutionalwhich allows foreign controlled companies up to 100% ownership of operations andstreamlined the permitting and approval process. Also, Executive Order 270 waspassed which promotes mineral exploration in order to enhance sustainableeconomic growth in the country. Resources Risk The figures for potential resources are estimates and no assurance can be giventhat the anticipated tonnage and grades will be achieved. The exploration ofmineral rights is speculative in nature. Therefore, the Company may not defineresources that can be economically exploited. However, drilling, surveying and analysis is performed by qualified personnel.Drill samples are sent to certified independent laboratories for analyses. TheDirectors are committed to complying with and reporting under the JORC Code bycompetent persons as defined by the JORC Code. Exploration Risk Mineral exploration is speculative in nature and it involves many risks. Therecan be no assurance that any discovered mineralisation will result in anincrease in the reserves or resources of the Group. If reserves are developed,it can take a number of years from the initial phases of drilling andidentification of mineralisation until production is possible, during which timethe economic feasibility of production may change. Substantial expenditures arerequired to establish reserves through drilling, to determine processes toextract minerals and, in the cases of new properties, to construct mining andprocessing facilities. The Company employs a range of modern exploration methods in order to assignavailable drilling resources efficiently. Development Projects Development projects have no operating history upon which to base estimates offuture cash operating costs. For development projects, estimates of proven andprobable reserves and cash operating costs are, to a large extent, based uponthe interpretation of geological data obtained from drill holes and othersampling techniques and feasibility studies which derive estimates of cashoperating costs based upon anticipated recoveries to be mined and processed, theconfiguration of the mineral body, expected recovery rates, comparable facilityand equipment operating costs, anticipated climatic conditions and otherfactors. As a result, it is possible that actual cash operating costs andeconomic returns may differ from those currently estimated. The Scoping Study is underway which will assess the Runruno project's economicsincluding its range of assumptions. Management of Risks Measures taken by the Board to manage these risks include: • Frequent review of the Group's current actual and future forecasted cash positions to identify when additional funding would be required to reduce liquidity risk • Review of budgeted and actual expenditure to manage cash resources effectively • A diversified portfolio of projects covering a number of commodities including gold and nickel to reduce commodity and business risk • The Runruno Livelihood Foundation which look after the interests of the local community and the environment • Regular communication within the Group on developments in the business, industry and country including board and operational meetings to identify risks as they become apparent and take steps to mitigate them • Skilled and experienced Management team including geologists who qualify as Competent Persons under the JORC code • Drilling results independently analysed KEY PERFORMANCE INDICATORS The Company's key performance indicators ('KPIs') used by the Board inmonitoring performance are; • Resource measurement and compliance with JORC standards: As at 4 March 2008, the Company has a resource of 2.1Moz of gold of which 775k Oz are in the indicated category and 36.6Mlb of molybdenum of which 18.6Mlb is also in the indicated category. • Scoping study progression: Adherence to internally agreed milestones and the management of external contractors to ensure timely completion of the study. • Share price and market capitalisation: As at 29 February 2008, the Company's market capitalisation was £22.9 million. This is compared with the companies within our peer group. • Peer group comparisons: Routine monitoring of an externally selected peer group through comparison of dollar per ounce values, rebased share price movement and resource composition to assess relative performance within that peer group. • Commodity prices: The Company tracks both precious and base metal forecasts to assess financial viability of its projects. • Value of projects: Estimations are prepared using established dollar per ounce values, input from peer group analysis based on composition of the resource. In addition to these financial KPIs, the Board also considers non-financialfactors such as the Group's compliance with Corporate Governance Standards andenvironmental considerations relevant to some of the Group's mining interests.These factors cannot be measured so do not form part of the Group's KPIs. FINANCIAL RISK MANAGEMENT The Group's main financial risk relates to foreign exchange risk, and inparticular the exposure to the US dollar, with payments made for costs ofexploration in this currency. The Company does not have a formal policy in placeto manage this currency risk, but the Directors monitor the Company's exposureon a regular basis. The remaining other assets and liabilities of the Group arein Sterling. RESULTS AND DIVIDENDS The Group recorded a loss of £2,603,736 (2006: loss of £2,554,098) for the year.The Directors do not recommend payment of a dividend (2006: nil). POST BALANCE SHEET EVENTS Details of post balance sheet events are given in note 23 to the accounts. POLICY AND PRACTICE OF PAYMENT OF SUPPLIERS The Group's policy on payment of suppliers is to settle the amounts due on atimely basis taking into account the credit period given. At 30 September 2007,the Group had an average of 19 days (2006: 43 days) purchases outstanding. DIRECTORS The directors of the Company at the year-end were: S M Smith (Non-Executive Chairman)J Beardsworth (Chief Executive)G R Powell (Executive Director)J M K Pearson (Non-Executive Director) J M K Pearson was appointed as Non-Executive Director on 1 May 2007. K D Mahoneyresigned as Non-Executive Director on 6 November 2006. CHARITABLE DONATIONS The Company made charitable donations of £5,000 mainly through the RunrunoLivelihood Foundation based in the Philippines during the period (2006: £4,000). DIRECTORS' AUDIT RESPONSIBILITY Each director of the Company has confirmed that in fulfilling their duties as adirector, they have: • Taken all the necessary steps to make themselves aware of any information relevant to the audit and to establish that the auditors are aware of that information; and • So far as they are aware, there is no relevant audit information of which the auditors have not been made aware AUDITORS A resolution to reappoint Nexia Smith & Williamson will be proposed at theforthcoming Annual General Meeting on 28 April 2008. Approved by the board of directors and signed on behalf of the board. S M SmithNon-Executive Chairman STATEMENT OF DIRECTORS' RESPONSIBILITIES Company law requires the Directors to prepare financial statements for eachfinancial year which give a true and fair view of the state of affairs of theCompany and the Group as at the end of the financial year and of the profit orloss of the Group for that period. In preparing those financial statements, theDirectors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theCompany and the Group and to enable them to ensure that the financial statementscomply with the Companies Act 1985. They are also responsible for safeguardingthe assets of the Group and hence for taking reasonable steps for the preventionand detection of fraud and other irregularities. Nexia Smith & Williamson Independent auditors' report to the shareholders of Metals Exploration plc We have audited the Group and parent Company accounts ('the accounts') of MetalsExploration plc for the year ended 30 September 2007, which comprise theConsolidated Profit and Loss Account, the Consolidated and Company BalanceSheets, the Consolidated Cash Flow Statement and the related notes 1 to 24.These accounts have been prepared under the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the Company's members those matters we are required tostate to them in an auditors' report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the Company and the Company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report and the accountsin accordance with applicable law and United Kingdom Accounting Standards(United Kingdom Generally Accepted Accounting Practice) are set out in theStatement of Directors' Responsibilities. Our responsibility is to audit the accounts in accordance with relevant legaland regulatory requirements and International Standards on Auditing (UK andIreland). We report to you our opinion as to whether the accounts give a true and fairview and are properly prepared in accordance with the Companies Act 1985. Wereport to you whether in our opinion the information given in the Directors'Report is consistent with the accounts. The information given in the Director'sReport includes the specific information presented in the Chief Executive'sReview that is cross referenced from the Business Review section of theDirector's Report. We also report to you if, in our opinion, the Company has notkept proper accounting records, if we have not received all the information andexplanations we require for our audit, or if the information specified by lawregarding directors' remuneration and transactions with the Company is notdisclosed. We read other information contained in the Annual Report and consider whether itis consistent with the audited accounts. This other information comprises onlythe Directors' Report, the Chairman's Statement, the Chief Executive's Reviewand the Corporate Governance Statement. We consider the implications for ourreport if we become aware of any apparent misstatements or materialinconsistencies with the accounts. Our responsibilities do not extend to anyother information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the accounts. It also includes an assessment of the significantestimates and judgements made by the directors in the preparation of theaccounts, and of whether the accounting policies are appropriate to theCompany's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the accounts are free frommaterial misstatement, whether caused by fraud or other irregularity or error.In forming our opinion we also evaluated the overall adequacy of thepresentation of information in the accounts. Opinion In our opinion: • the accounts give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Group's and parent Company's affairs as at 30 September 2007 and of the Group's loss for the year then ended; • the accounts have been properly prepared in accordance with the Companies Act 1985; and • the information given in the Directors' Report is consistent with the accounts. Nexia Smith & Williamson 25 MoorgateChartered Accountants LondonRegistered Auditors EC2R 6AY The maintenance and integrity of the Metals Exploration plc website is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the accounts since theywere initially presented on the web site. Legislation in the United Kingdom governing the preparation and dissemination ofaccounts may differ from legislation in other jurisdictions. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 SEPTEMBER 2007 (Restated) 2007 2006 Notes £ £Turnover - -Administrative expenses (2,754,740) (2,588,059) ----- -----Operating loss (2,754,740) (2,588,059)Interest receivable 178,898 30,875Interest payable 4 (33,260) (478) ----- -----Loss on ordinary activities before taxation 5 (2,609,102) (2,557,662)Tax on loss on ordinary activities 7 - - ----- -----Loss after tax (2,609,102) (2,557,662)Minority interest 5,366 3,564 ----- -----Loss for the year 17 (2,603,736) (2,554,098) ----- -----Basic and diluted loss per share 8 3.34p) (5.01p) ----- ----- The Company has taken advantage of Section 230 of the Companies Act 1985 not topublish its own profit and loss account CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the year ended 30 SEPTEMBER 2007 (Restated) 2007 2006 £ £Loss for the period (2,603,736) (2,554,098)Currency translation difference (9,900) - ----- -----Total recognised losses relating to the year (2,613,636) (2,554,098)Prior year adjustment as explained in note 1 (1,432,448) - ----- -----Total losses recognised since last annual report (4,046,084) - ----- ----- CONSOLIDATED BALANCE SHEET as at 30 SEPTEMBER 2007 (Restated) 2007 2006 Notes £ £Fixed assetsIntangible assets 9 6,709,269 2,011,023Tangible assets 11 219,640 95,524Quoted investment 12 281,114 - ----- ----- 7,210,023 2,106,547Current assetsDebtors 13 506,075 107,776Cash at bank 3,934,511 371,501 ----- ----- 4,440,586 479,277Creditors: amounts falling due within one year 14 (458,449) (234,554) ----- -----Net current assets 3,982,137 244,723Creditors: amounts falling due after one year 14 (2,030,082) - ----- -----Net assets 9,162,078 2,351,270 ----- -----Capital and reservesCalled up share capital 15 913,738 556,953Share premium account 17 11,851,563 2,696,623Shares to be issued 17 1,737,575 1,524,448Profit and loss account 17 (5,344,648) (2,731,012) ----- -----Shareholders funds 9,158,229 2,047,012Minority interests 3,849 304,258 ----- -----Total capital employed 9,162,078 2,351,270 ----- ----- The accounts were approved by the Board of Directors on 26 March 2008 and weresigned on its behalf by: S M SmithNon-Executive Chairman CONSOLIDATED BALANCE SHEET as at 30 SEPTEMBER 2007 (Restated) 2007 2006 Notes £ £Fixed assetsIntangible assets 9 74,593 692,572Tangible assets 11 2,305 -Quoted investment 12 1,957,984 549,132 ----- ----- 2,034,882 1,241,704Current assetsDebtors 13 7,228,281 1,074,359Cash at bank 3,551,555 337,259 ----- ----- 10,779,836 1,411,618Creditors: amounts falling due within one year 14 (170,314) (158,823) ----- -----Net current assets 10,609,522 1,252,795Creditors: amounts falling due after one year 14 (2,030,082) - ----- -----Net assets 10,614,322 2,494,499 ----- -----Capital and reservesCalled up share capital 15 913,738 556,953Share premium account 17 11,851,563 2,696,623Shares to be issued 17 1,737,575 1,524,448Profit and loss account 17 (3,888,554) (2,283,526) ----- ----- 10,614,322 2,494,499 ----- ----- The accounts were approved by the Board of Directors on 26 March 2008 and weresigned on its behalf by: S M Smith Non-Executive Chairman CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 SEPTEMBER 2007 (Restated) 2007 2006 Notes £ £Net cash outflow from operating activities 19 (2,239,610) (862,400)Returns on investments and servicing of financeInterest received 178,898 30,875Interest paid (3,178) (478) ----- -----Net cash inflow from returns on investments and servicing of finance 175,720 30,397Capital expenditurePayments to acquire shares in quoted company (532,159) -Payments to acquire intangible fixed assets (1,299,130) (755,928)Payments to acquire tangible fixed assets (167,420) (110,878) ----- -----Net cash outflow from capital expenditure (1,998,709) (866,805)AcquisitionsPayment to acquire 15% in FCF (3,817,114) -FinancingIssue of convertible loan note 2,000,000 -Issue of ordinary share capital (net of expenses) 9,442,723 891,622 ----- -----Increase/(decrease) in cash in the year 20 3,563,010 (807,186) ----- ----- NOTES TO THE ACCOUNTS for the year ended 30 SEPTEMBER 2007 1 Accounting policies The accounts have been prepared in accordance with United Kingdom GenerallyAccepted Accounting Practice. A summary of the more important accountingpolicies adopted are described below. Basis of accounting The accounts have been prepared under the historical cost convention. Basis of consolidation The Group accounts consolidate those of the Company and its subsidiaryundertakings using the acquisition method of accounting. Share Based Payments The Company issues equity-settled share-based payments to certain employees andconsultants. Equity- settled share-based payments are measured at fair value(excluding the effect of non market-based vesting conditions) at the date ofgrant. 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 Company's estimate of shares that will eventually vest andadjusted for the effect of non market-based vesting conditions. The year ended 30 September 2006 figures have been restated to comply with theprovisions of Financial Reporting Standard 20 to recognise the expense, measuredat fair value, in respect of share based payments made by the Company. Thecalculation of the fair value of employee share options and warrants hasresulted in the prior year loss increasing by £1,432,448. Intangible fixed assets - goodwill Goodwill arising on the acquisition of subsidiary undertakings representing anyexcess of the fair value of the consideration given over the fair value of theidentifiable assets and liabilities acquired, is capitalised and written off ona straight line basis over it's useful economic life, which is 20 years.Provision is made for any impairment in value. Exploration and development costs Costs relating to the acquisition, exploration and development of mineralproperties are capitalised until such time as an economic reserve is defined andmining commences or the mining property is abandoned. Once mining commences the asset is amortised on a depletion percentage basis.Provision is made for impairments to the extent that the asset's carrying valueexceeds its net recoverable amount. Tangible fixed assets Depreciation is provided to write off the cost, less estimated residual value,of each asset on a straight line basis over its expected useful life, asfollows: Leasehold improvements - 5 yearsMotor vehicles - 5 yearsFixtures, fittings & equipment - 3 years Investments Investments held as fixed assets are stated at cost less provision for anyimpairment. Deferred taxation Deferred tax is provided for on a full provision basis on all timingdifferences, which have arisen but not reversed at the balance sheet date. Adeferred tax asset is not recognised to the extent that the transfer of economicbenefit in the future is uncertain. Any assets and liabilities recognised havenot been discounted. Foreign currencies Transactions denominated in a foreign currency are translated into sterling atthe rate of exchange ruling at the date of the transaction. At the balance sheetdate, monetary assets and liabilities denominated in foreign currency aretranslated at the rate ruling at that date. All exchange differences are dealtwith in the profit and loss account. Exchange differences arising from thetranslation of the net investment in a subsidiary Company at the rate ofexchange ruling at the balance sheet date and that subsidiary's profit and lossaccount at an average rate for the year, are recorded as movements on reserves. Leases Assets held under finance leases and related lease obligations are recorded inthe balance sheet at the fair value of the leased asset at the inception of thelease. The amounts by which the lease payments exceed the recorded leaseobligations are treated as finance charges, which are amortised over each leaseterm to give a constant rate of charge on the remaining balance of theobligation. 2. Segmental reporting The Group's operating loss is derived from the Company's principal activitiesbased in the Philippines, with a Head Office function based in the UK. Operating loss by geographical location (Restated) 2007 2006 £ £United Kingdom 1,605,028 2,110,178Philippines 698,982 447,484Indonesia 305,092 - ----- -----Operating loss before tax 2,609,102 2,557,662 ----- ----- Net assets by geographical location (Restated) 2007 2006 £ £United Kingdom 3,187,841 947,199Philippines 5,759,369 1,404,071Indonesia 214,867 - ----- -----Net assets 9,162,077 2,351,270 ----- ----- 3. Directors'emoluments and employee information 2007 2006 £ £Directors' emolumentsS M Smith* 80,000 60,000P C Barnett* (resigned 25 April 2006) - 18,000K D Mahoney* (resigned 6 November 2006) 1,000 8,000G R Powell 126,382 56,790J M K Pearson* (appointed 1 May 2007) 12,500 -J Beardsworth (appointed 4 September 2006) 194,500 8,000 -------- -------- 414,382 150,790 -------- -------- * - Non-executive directors No directors accrued retirement benefits under a money purchase pension scheme. Warrants to directors The warrants held by directors are as follows: Number Exercise of shares Exercise period (from UnderWarrant holder Date price date of grant) WarrantG R Powell 3 November 2005 12p Up to 7 years 1,000,000 3 November 2005 40p Up to 7 years 500,000Reef Securities Limited* 30 September 2005 3.25p Up to 7 years 1,000,000 3 November 2005 20p Up to 7 years 500,000P C Barnett 3 November 2005 20p Up to 7 years 500,000 3 November 2005 40p Up to 7 years 500,000J Beardsworth 30 April 2007 26.25p Up to 1 year 1,000,000 30 April 2007 39.375p Up to 2 years 1,000,000 30 April 2007 52.5p Up to 3 years 500,000 * Reef Securities Limited is a company controlled by S M Smith. Employee Information 2007 2006 £ £Wages and salaries (including directors) 880,311 281,553Social security costs 43,980 7,356 -------- -------- 924,291 288,909 -------- -------- The average number of persons employed by the Group was as follows: 2007 2006 Number NumberHead office (including directors) 43 19Exploration 199 117 -------- -------- 242 136 -------- -------- 4. Interest payable 2007 2006 £ £Convertible loan and overdrafts 33,260 478 -------- -------- 5. Loss on ordinary activities before taxation is stated after charging: 2007 2006 £ £Impairment of fixed asset investment 251,045 332,897Depreciation 43,304 15,354Amortisation of goodwill 70,568 -Auditors' remuneration (see note 6) 25,003 49,238Foreign exchange translation 53,855 1,974 -------- -------- 6. Auditor's remuneration: 2007 2006 £ £Fees payable to the auditors for the audit of the annual accounts: 20,003 30,000Fees payable to the company's auditors and its associates for other services:Other services relating to taxation 5,000 19,238 --------- --------- 25,003 49,238 --------- --------- 7. Tax on loss on ordinary activities 2007 2006 £ £(a) UK corporation tax at 30% - - ---------- ----------(b) Factors affecting tax charge for period £ £ Loss on ordinary activities before tax (2,603,736) (1,121,650) ---------- ---------- Loss on ordinary activities multiplied by standard rate of corporation tax in the UK at 30% (781,121) (336,495) Effects of: Income not taxable (54,809) (96,957) Expenses not deductible for tax purposes 532,658 - Short term timing differences (532,494) - Tax losses carried forward 835,765 433,452 ---------- ---------- Current tax charge for year - - ---------- ---------- A deferred tax asset of £1,143,651 (2006: £486,046) due to on-going tax losseshas not been recognised due to uncertainty over its future reversal. 8. Loss per share Basic loss per share has been calculated on the basis of loss after taxation of£2,603,736 (2006: £2,554,098) divided by the weighted average number of sharesin the year of 77,872,958 (2006: 50,970,424). The diluted loss per share calculation is identical to that used for basic lossper share as the exercise of warrants and share options would have the effect ofreducing the loss per share and therefore is not dilutive under the terms ofFinancial Reporting Standard 22: "Earnings per Share". 9. Intangible fixed assets - Group Cost of Exploration Licences Goodwill Total £ £ £ £CostAt 30 September 2006 1,556,686 74,593 712,641 2,343,920Additions 1,299,130 - - 1,299,130On acquisition of 15% of FCF - 2,756,099 1,057,167 3,813,266Disposals (332,897) - - (332,897)Foreign exchange adjustment 11,019 - - 11,019Deferred consideration no longer due * - - (54,192) (54,192)Misallocation of goodwill ** - - (300,409) (300,409) ----- ----- ----- -----At 30 September 2007 2,533,938 2,830,692 1,415,207 6,779,837Amortisation and impairmentAt 30 September 2006 332,897 - - 332,897Charge for the year - - 70,568 70,568Disposals (332,897) - - (332,897) ----- ----- ----- -----At 30 September 2007 - - 70,568 70,568Net Book Value30 September 2007 2,533,938 2,830,692 1,344,639 6,709,269 ----- ----- ----- -----30 September 2006 1,223,789 74,593 712,641 2,011,023 ----- ----- ----- ----- * As at 30 September 2005, the consideration on the initial acquisition of 70%in FCF included deferred consideration which was no longer due as at 30September 2007 as a result of the additional 15% acquisition in FCF in the year ** In the year ended 30 September 2005, goodwill and minority interest on theinitial acquisition of 70% in FCF was misallocated. Intangible fixed assets - Company Cost of Exploration Licences Total £ £ £Net Book ValueAt 30 September 2006 617,979 74,593 692,572Reclassified to intercompany (617,979) - (617,979) ----- ----- -----At 30 September 2007 - 74,593 74,593 ----- ----- ----- In the year ended 30 September 2007, intangible fixed assets in the Company werereclassified to a subsidiary company as the assets were initially purchased bythe Company on behalf of the subsidiary company. 10. Analysis of 15% acquisition in FCF On 10 August 2007, the Company acquired 15% of FCF Mining Corporation ("FCF")for a cash consideration of £3,817,114. The book value and fair value of the net assets acquired were as follows: £Cash consideration paid 3,817,114Licence acquired (2,756,099)Net assets acquired (3,849) -----Goodwill on acquisition 1,057,167 ----- 11 Tangible fixed assets - Group Fixtures, Leasehold Motor fittings & Improvements vehicles equipment Total £ £ £ £Cost1 October 2006 20,106 25,768 65,004 110,878Additions 15,696 93,601 58,123 167,420 ----- ----- ----- -----30 September 2007 35,802 119,369 123,127 278,298Depreciation1 October 2006 1,745 4,877 8,732 15,354Charge for the year 5,381 11,610 26,313 43,304 ----- ----- ----- -----30 September 2007 7,126 16,487 35,045 58,658Net book value30 September 2007 28,676 102,882 88,082 219,640 ----- ----- ----- -----30 September 2006 18,361 20,891 56,272 95,524 ----- ----- ----- ----- 11. Tangible fixed assets - Company Fixtures, fittings & equipment Total £ £Cost1 October 2006 - -Additions 3,429 3,429 ----- -----30 September 2007 3,429 3,429Depreciation1 October 2006 - -Charge for the year 1,124 1,124 ----- -----30 September 2007 1,124 1,124Net book value30 September 2007 2,305 2,305 ---- ----30 September 2006 - - ---- ---- 12. Investments - Group Investment in quoted company Total £ £CostAt 30 September 2006 - -Additions 532,159 532,159 ----- -----At 30 September 2007 532,159 532,159 ----- -----Provision for impairmentAt 30 September 2006 - -Charge for the year 251,045 251,045 ----- -----At 30 September 2007 251,045 251,045 ----- -----Net book value30 September 2007 281,114 281,114 ----- -----30 September 2006 - - ----- ----- 12. Investments - Company Investment Investments in subsidiary in quoted companies company Total £ £ £CostAt 30 September 2006 882,029 - 882,029Additions 1,127,738 532,159 1,659,897 ----- ----- -----At 30 September 2007 2,009,767 532,159 2,541,926 ----- ----- -----Provision for impairmentAt 30 September 2006 332,897 - 332,897Charge for the year - 251,045 251,045 ----- ----- -----At 30 September 2007 332,897 251,045 583,942 ----- ----- -----Net book value30 September 2007 1,676,870 281,114 1,957,984 ----- ----- -----30 September 2006 549,132 - 549,132 ----- ----- ----- The investments in subsidiary companies are as follows: Country ofCompany registration % holding Nature of business FCF Mining Corporation Philippines 85% Holder of mining rightsPT Cupati Indonesia 96% Holder of mining rightsMTL Philippines Philippines 100% Trading Mining Operation The accounting reference dates of the Company's subsidiaries MTL Philippines, PTCupati and FCF Mining Corporation which are included in the Group accounts are31 December. This does not coincide with the end of the financial year for theparent Company and as such, the accounts have been prepared using the accountsof the subsidiary undertakings for their financial year ending before and themanagement accounts up to the parent's financial year-end. PT Cupati and FCFMining Corporation are subsidiary undertakings, which hold mining rights onlyand as such, there is no significant trading activity during the period underreview that would impact the consolidation. The Company intends to reviewalignment of the financial year-end's of all the Group's companies in the nearfuture in particular to align MTL Philippines with the parent. FCF Mining Corporation At the beginning of the year, the Company had an interest of 70% in FCF MiningCorporation ("FCF"). On 10 August 2007, the Company entered into a contract with Filminera ResourcesCorp ("FRC") by which it acquired all the remaining shares in FCF owned by FRCcomprising 15% of FCF's total issued share capital. Consequently, the Companynow owns 85% of the shares in FCF and also has an interest in the remaining 15%of the FCF shares, by virtue of the exclusive option to acquire these shareswhich it was granted under an agreement with Christian Mining Inc in November2005. PT Cupati In July 2007, the Company set up a mining company in Indonesia named PT Cupatiand acquired 96% of its shares at a price of £119,429. The remaining 4%shareholder is Peter Draper who is a director of MTL Philippines. Also in July2007, the Company acquired mining rights from PT Batan Pelei Mining ("BPM") at acost of US$100,000. Investment in Quoted Company As at the balance sheet date, the investment has been impaired due to a fall inthe market value of the shares in the quoted company. 13. Debtors Group Company 2007 2006 2007 2006 £ £ £ £Other debtors 417,379 26,210 15,554 -Amounts due from group undertakings - - 7,155,604 993,166Prepayments 88,696 81,566 57,123 81,193 ----- ----- ----- ----- 506,075 107,776 7,228,281 1,074,359 ----- ----- ----- ----- 14. Creditors: amounts falling due within one year Group Company 2007 2006 2007 2006 £ £ £ £Other creditors 71,296 - 71,296 -Taxation and Social Security 39,708 5,769 28,602 -Finance leases 14,458 5,079 - -Accruals 332,987 223,706 70,416 158,823 ----- ----- ----- ----- 458,449 234,554 170,314 158,823 ----- ----- ----- ----- Creditors: amounts falling due after more than one year Group Company 2007 2006 2007 2006 £ £ £ £Convertible Loan Note 2,030,082 - 2,030,082 - ----- ----- ----- ----- 2,030,082 - 2,030,082 - ----- ----- ----- ----- The £2,030,082 convertible loan note, unless previously repaid or converted, isdue to be redeemed at par on 1 August 2011. Interest is payable at £180,493 perannum. The note may be converted at any time in multiples of £50,000 intoordinary shares and the rate of conversion will be 1p nominal amount of ordinaryshares for every 52p nominal of the notes converted. Conversion is at the optionof the Note holder. 15. Called up share capital 2007 2006 £ £Authorised250,000,000 (2006: 150,000,000) ordinary shares of 1p each 2,500,000 1,500,000 ----- -----Allotted, called up and fully paid91,373,795 (2006: 55,695,248) ordinary shares of 1p each 913,738 556,953 ----- ----- In the year, the Company increased the authorised share capital to 250,000,000ordinary shares of 1p each. During the year the Company issued the following ordinary 1p shares: 1,000,000 ordinary shares at a price of 3.25p per share, realising £32,500. 400,000 ordinary shares at a price of 11.5p per share in consideration forreceipt of a 70% stake in FCF Mining Corporation. 300,000 ordinary shares at a price of 12p per share, realising £36,000. 3,216,047 ordinary shares at a price of 20p per share, realising £643,209. 20,000,000 ordinary shares at a price of 25p per share, realising £5,000,000. 10,762,500 ordinary shares at a price of 40p per share, realising £4,305,000. 16. Share based payments Share options The Company operates one share option scheme named the Unapproved Share OptionScheme 2006 ("Share Option Plan") adopted on 29 March 2006. Fair value of the Share Option Plan is measured by use of the Black Scholesmodel. The expected life used in the model has been adjusted, based onManagement's best estimate, for the effects of non-transferability and exerciserestrictions. Under the Company's Share Option Plan, options are exercisable after 3 yearsfrom the issue date at a price equal to the quoted market price of the Company'sshares on the date of grant. Options are forfeited if the employee leaves theGroup before the options vest. Details of the total share options outstanding during the period are as follows: 30 September 2007 30 September 2006 Weighted Weighted average average No of share exercise No of share exercise Options price options price (p) (p)Outstanding at beginning of period 1,200,000 1.65 - -Granted during period 2,000,000 11.00 1,200,000 1.65 ----- ----- ----- -----Outstanding at end of period 3,200,000 12.65 1,200,000 1.65 ----- ----- ----- -----Exercisable at end of the period - - - - ----- ----- ----- ----- No share options were exercised in the period. The exercise price of the share options outstanding at 30 September 2007 rangedfrom 12p to 26.25p, with a weighted average contractual life of 3 years. The aggregate of the estimated fair value of the options at 30 September 2007 is£227,898 (30 September 2006: £42,822). The inputs into the Black Scholes model for the Share Option Plan which was usedto value options are as follows: 30 September 30 September 2007 2006Weighted average share price 34p 31pWeighted average exercise price 26p 12pExpected volatility 59.8% 102.2%Expected life 7 7Risk free rate 6.3% 3.5%Expected dividend yield Nil Nil Warrants At 30 September 2007, there were 15.5 million warrants in issue that had not yetbeen exercised, which are exercisable at any time up to and including the 3November 2012 with prices ranging from 3.25 pence up to 52 pence. The aggregate of the estimated fair value of the warrants at 30 September 2007is £1,486,678 (30 September 2006: £1,389,626). The inputs into the Black Scholes model which was used to value warrants are asfollows: 30 September 30 September 2007 2006Weighted average share price 34p 23pWeighted average exercise price 37p 24pExpected volatility 59.8% 85.1-103.9%Expected life 7 7Risk free rate 6.3% 3.5%Expected dividend yield Nil Nil 17. Reserves - Group Shares to be Share Profit & Loss issued Premium Account Total £ £ £ £At 30 September 2006 92,000 2,696,623 (1,298,564) 1,490,059Prior year adjustment 1,432,448 - (1,432,448) - ----- ----- ----- -----At 30 September 2006 (Restated) 1,524,448 2,696,623 (2,731,012) 1,490,059Loss for the year - - (2,603,736) (2,603,736)Exchange movement - - (9,900) (9,900)Share issue (46,000) 9,705,925 - 9,659,925Cancellation of shares to be issued (23,000) - - (23,000)Movement in share options 282,127 - - 282,127Issue expenses - (550,985) - (550,985) ----- ----- ----- -----At 30 September 2007 1,737,575 11,851,563 (5,344,648) 8,244,490 ---- ---- ---- ----Reserves - CompanyAt 30 September 2006 92,000 2,696,623 (851,077) 1,937,546Prior year adjustment 1,432,448 - (1,432,448) - ----- ----- ----- -----At 30 September 2006 (Restated) 1,524,448 2,696,623 (2,283,526) 1,937,546Loss for the year - - (1,605,028) (1,605,028)Share issue (46,000) 9,705,925 - 9,659,925Cancellation of shares to be issued (23,000) - (23,000)Movement on share options 282,127 - - 282,127Issue expenses - (550,985) - (550,985) ----- ----- ----- -----At 30 September 2007 1,737,575 11,851,563 (3,888,554) 9,700,585 ----- ----- ----- ----- 18. Reconciliation of movements in Shareholders' funds - Group (Restated) 2007 2006 £ £Loss for the year (2,603,736) (2,554,098)Issue of share capital 9,465,726 1,038,622Movement on share options 282,127 1,432,448Cancellation of shares to be issued (23,000) (147,000)Exchange movement (9,900) - ----- -----Net change in the year 7,111,217 (230,028)Opening shareholders' funds 2,047,012 2,277,040 ----- -----Closing shareholders' funds 9,158,229 2,047,012 ----- ----- 19. Reconciliation of operating loss to net cash outflow from operating activities (Restated) 2007 2006 £ £Operating loss (2,754,740) (2,588,059)Depreciation 43,304 15,354Amortisation of goodwill 70,568 -Share based payments 282,128 1,432,448Increase in debtors (398,299) (96,572)Increase in creditors 287,302 41,533Impairment of fixed asset investments 251,045 332,897Foreign exchange movement (20,918) - ----- -----Net cash outflow from operating activities (2,239,610) (862,400) ----- ----- 20. Reconciliation of net cash flow to movement in net funds 2007 2006 £ £Increase/(decrease) in cash in the period 3,563,010 (807,186)Issue of convertible loan note (2,000,000) -Net funds at 1 October 2006 371,501 1,178,687 ----- -----Net funds at 30 September 2007 1,934,511 371,501 ----- ----- 21. Analysis of funds 1 October 30 September 2006 Cash flow 2007 £ £ £Cash in hand, at bank 371,501 3,563,010 3,934,511Convertible loan note - (2,000,000) (2,000,000) ----- ----- -----Total 371,501 1,563,010 1,934,511 ----- ----- ----- 22. Related party transactions The Group paid £12,280 (2006: £13,055) to Amity Events Limited, a Company ofwhich S M Smith is a director. Amity Events are a corporate entertainmentCompany specialising in organising events at exclusive venues such as RoyalAscot. The Company uses their services for organising events on its behalf toassist the Company's active on going marketing and fundraising campaigns byhosting events for its potential shareholders and investors. 23. Post balance sheet events On 22 October 2007, the Company issued 2,025,000 unapproved share options tovarious employees at a price of 40 pence per share, which can be exercised aftertwo years from the grant date. On 22 October 2007, the Company issued 200,000 warrants to Fitel NomineesLimited at 8 pence per share. On 12 December 2007, the Company made a cash payment of US$65,000 to ChristianMining Inc in respect of the Company's obligation to pay an annual fee for theoption to purchase the remaining 15% of FCF Mining Corporation under theagreement entered into on 14 November 2005. On 22 January 2008, the Company made a cash payment of US$20,000 and on 5February 2008, the Company issued 200,000 ordinary shares to Christian MiningInc as the final deferred consideration for purchasing the initial holding of70% of FCF Mining Corporation under the agreement entered into 1 February 2005. 24. Financial instruments The Company's financial instruments comprise a convertible loan note, cash atbank and various items such as other debtors and creditors that arise directlyfrom its operations and are therefore excluded from the disclosures. The mainpurpose of these instruments is to provide finance for operations. The Companydoes not trade financial instruments as a matter of policy. Interest rate risk profile on financial assets The only financial assets (other than the costs of exploration and short termdebtors) are cash at bank which comprised an average interest rate in the yearof 4.9%. The Directors believe the fair value of the financial instruments isnot materially different to the book value. Currency exposure At the year-end, the Company's currency exposure is predominantly to the USdollar, with payments made for costs of exploration in this currency. TheCompany does not have a formal policy in place to manage this currency risk, butthe Directors monitor the Company's exposure on a regular basis. The remainingother assets and liabilities of the Group are in Sterling. This information is provided by RNS The company news service from the London Stock Exchange