Patagonia Gold Regulatory News (PGD)

27 Sep 2007 07:01

Patagonia Gold PLC27 September 2007 PATAGONIA GOLD PLC INTERIM RESULTS for the six months ended 30 June 2007 27 September 2007 Patagonia Gold plc announces its unaudited results for the six months ended 30June 2007 Chairman's Statement This is the Group's first interim financial report prepared under IFRS. A fullexplanation of the basis of accounting and the effects of the transition to IFRSare set out in the following statements and notes. The most significant changeis that exploration expenditure relating to a particular project will be writtenoff until such time as the Board has determined that the project is viable andwill be developed. As a result the acquisition cost of £2,484,388 for the Barrick properties inSanta Cruz have been expensed. This has increased the loss for the six monthperiod to £4,527,625 (2006: loss £1,276,395). The balance of £2,043,237reflected increased exploration expenditures and administrative expenses in thesix month period. In July 2007 we raised £2 million by placing new ordinary shares at 8.5p pershare. This fund raising was over 50 per cent. supported by the ArgentineanDirectors, their families and Bill Humphries. Therefore the Group is now fundedfor next season's corporate and exploration activities. OPERATIONS During the first six months of 2007 Patagonia Gold (PGD) carried out asubstantial exploration programme on the newly acquired 100 per cent. ownedSanta Cruz properties, details of which are set out below.The majority of our exploration efforts were concentrated on La Paloma, the mostadvanced property inthe portfolio. La Paloma Property The La Paloma property block, covering over 44 square kilometres, is locatedapproximately 40 kilometres to the south of the town of Perito Moreno in theSanta Cruz province of Argentina and contains the Lomada de Leiva Project andthe adjacent Breccia Sofia Prospect. Lomada de Leiva Project - A drilling campaign, consisting of 62 drill holes for8,862 metres has been completed on the Lomada de Leiva Project. The drilling wasdesigned to validate historical drill data and to infill and extend the existingresource for definition to Canadian National Instrument 43-101 standards. Theresource statement is currently being prepared for release later this year. The drilling campaign proved successful, consistently intersecting wide zones ofgold mineralisation including hole LLR-04 reporting 28 metres at 5.71 g/t goldand hole LPD-34 reporting 36 metres at 3.52 g/t gold. Breccia Sofia Prospect - Drilling on the adjacent Breccia Sofia prospect hasalso been completed. The results included a 1 metre section of 27.10 g/t gold and values generallyindicate that a broad zone of gold grades >1g/t gold exists on strike 500 metresfrom the Lomada de Leiva resource area. El Tranquilo Property The El Tranquilo property block, covering over 40 square kilometres, is locatedapproximately 120 kilometres to the south east of La Paloma in the Santa Cruzprovince and contains the Cap Oeste Prospect and Breccia Valentino Prospect.Property 29 'La Bajada' is contiguous with El Tranquilo and contains a number ofgold anomalous and geologically encouraging areas. Cap Oeste Prospect - Detailed mapping and trenching has exposed a breccia hostedin felsic volcanics over a strike of 900 metres. The breccia is open to thenorth where it is covered by Quaternary sedimentation and to the south where itis obscured by a resistant silica cap. The prospect has neverbeen drilled. PGD has undertaken an exploration programme in order to plan a drill campaign.Validation of historical data included detailed mapping, taking rock chipsamples and trenching for sawn channel sampling. Results from the trenchinginclude; 37.5 metres at 1.89g/t gold. The combination of ore grade to highly anomalous gold values from surface overwide zones throughout the Cap Oeste Prospect provides for a potentially bulkmineable gold resource style target that will be drill tested in the forthcomingdrill campaign. Breccia Valentina Prospect - The Breccia Valentina Prospect is located less than5 kilometres along strike from the highly prospective Cap Oeste Prospect. Breccia Valentina is interpreted as a structurally controlled phreatic brecciapipe characterised at surface by high level silica hosting highly anomalous goldin veins and breccias formed in association with an adjacent dome. Thiscompelling conceptual target, the model for which potentially hosts economicgold grades at depth, is typical of other Pacific Rim phreatic breccias hostingeconomic gold resources. The El Tranquilo property block also contains other highly prospective areaswhich require further exploration in order to define the potential for drilltargets. La Manchuria Property The La Manchuria property, covering 5,575 hectares, is located approximately150 kilometres to the south east of the La Paloma property in the Santa Cruzprovince of Argentina. The Manchuria 'Main zone' Prospect is within the sameregional corridor that contains the operational mines, Mina Martha to the southand Huevos Verdes to the north. PGD has undertaken a vigorous exploration and validation programme at LaManchuria in order to plan for a drilling campaign. Validation of historicaldata included; taking rock chip samples, cutting of new sawn channel samplesalong side of previous sawn channels and the re-sampling of drill cores. These above three prospects are all located within easy trucking distance ofeach other. Furthermore the La Manchuria property is located only 60 kilometres from an existing mine. Exploration programme for second half of 2007 Preparations are well advanced for a proposed 10,000 metre drill programme onthe above properties, scheduled to commence in October 2007, of which: 3,000metres is allocated for La Paloma to target potential resources adjacent toLomada del Leiva; 3,500 metres is allocated for La Manchuria to infill the MainZone in order to establish a NI43-101 compliant resource and 3,500 metres forBreccia Valentina and Cap Oeste on targets defined by this season's exploration. Environmental Impact Assessments for these programmes have been approved, anddrilling contracts awarded. Shareholders will be kept regularly informed by press releases over the next fewmonths with respect to the progress on the drilling and exploration programmes. Sir John CravenChairman 27 September 2007 Unaudited condensed consolidated interim income statementFOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months Six months Year to to to 30 June 30 June 31 December 2007 2006 2006 £ £ £Continuing operationsExploration costs (3,662,592) (1,131,983) (1,653,426)Administrative costs (837,005) (648,266) (1,145,564)Impairment of goodwill - (399,121) (15,054,025)Profit on disposal of HPD NewZealand Limited - 873,595 873,595Finance income 25,813 29,380 52,295Finance costs (53,841) - (75,629) ------------- ------------ --------------Loss for the period (4,527,625) (1,276,395) (17,002,754) ============= ============ ============== Earnings per share (pence)Basic earnings per share (1.35) (0.48) (6.30)Diluted earnings per share (1.35) (0.48) (6.30) Unaudited condensed consolidated interim balance sheetAT 30 JUNE 2007 30 June 30 June 31 December 2007 2006 2006 £ £ £ASSETSNon-current assetsProperty, plant and equipment 41,190 43,951 40,214Goodwill - 14,657,525 -Financial assets 150,980 85,210 85,210Other receivables 234,235 273,021 227,032 ---------- ------------ ------------ 426,405 15,059,707 352,456 ---------- ------------ ------------ Current assetsTrade and other receivables 205,227 179,309 202,682Financial assets - 923,599 -Cash at bank and in hand 426,511 1,157,431 966,143 ---------- ------------ ------------ 631,738 2,260,339 1,168,825 ---------- ------------ ------------ Total assets 1,058,143 17,320,046 1,521,281 ---------- ------------ ------------ LIABILITIESCurrent liabilitiesTrade and other payables (345,328) (800,754) (301,220) ---------- ------------ ------------ Total liabilities (345,328) (800,754) (301,220) ---------- ------------ ------------ Net assets 712,815 16,519,292 1,220,061 ========== ============ ============EQUITYEquity attributable to equity holders ofthe parentShare capital 3,343,935 2,679,065 2,731,065Share premium account 26,635,949 22,921,188 23,389,188Translation reserve 300,785 345,510 238,907Profit and loss account (29,567,854) (9,426,471) (25,139,099) ------------- ------------ ------------Total equity 712,815 16,519,292 1,220,061 ============= ============ ============ Unaudited condensed consolidated interim statement of changes in equityFOR THE SIX MONTHS ENDED 30 JUNE 2007 Share Share premium Translation Profit and Capital account reserve loss account Total £ £ £ £ £ Balance at 31 December 2005 2,522,814 20,577,439 - (8,150,076) 14,950,177 Changes in equity for first half of 2006Exchange differences on translation of foreign operations - - 345,510 - 345,510 Net income recognised directly in equityLoss for the period - - - (1,276,395) (1,276,395) Total recognised income and expense for the periodIssue of share capital 156,251 2,343,749 - - 2,500,000 ----------- ------------ ------------- -------------- -----------Balance at 30 June 2006 2,679,065 22,921,188 345,510 (9,426,471) 16,519,292 =========== ============ ============= ============== =========== Balance at 31 December 2005 2,522,814 20,577,439 - (8,150,076) 14,950,177 Changes in equity for 2006Exchange differences on translation of foreign operations - - 238,907 - 238,907 Net income recognised directly in equityLoss for the period - - - (17,002,754) (17,002,754)Share based payment - - - 13,731 13,731 Total recognised income and expense for the periodIssue of share capital 208,251 2,811,749 - - 3,020,000 ----------- ------------ ------------- -------------- -----------Balance at 31 December 2006 2,731,065 23,389,188 238,907 (25,139,099) 1,220,061 Changes in equity for first half of 2007Exchange differences on translation of foreign operations - - 61,878 - 61,878 Net income recognised directly in equityLoss for the period - - - (4,527,625) (4,527,625)Share based payment - - - 98,870 98,870 Total recognised income and expense for the periodIssue of share capital 612,870 3,246,761 - - 3,859,631 ----------- ------------ ------------- -------------- -----------Balance at 30 June 2007 3,343,935 26,635,949 300,785 (29,567,854) 712,815 =========== ============ ============= ============== =========== Unaudited condensed consolidated interim cash flow statementFOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 £ £ £Cash flow from operating activitiesLoss after taxation (4,527,625) (1,276,395) (17,002,754)Adjustment for:Interest income (25,813) (29,380) (52,295)Depreciation and impairment 12,487 9,209 15,072,099Profit on disposal of HPD New Zealand Limited - (873,595) (873,595)(Increase)/decrease in trade and other receivables (9,748) (22,616) (158,802)Increase/(decrease) in trade payables 44,108 207,336 (629,641)Settlement of convertible debt for equity - 520,000 520,000Share based payments 98,870 - 13,731 -------------- --------------- -------------Net cash used in from operating activities (4,407,721) (1,465,441) (3,111,257) -------------- --------------- -------------Cash flows from investing activitiesInterest received 25,813 29,380 52,295Proceeds on disposal of Glass Earth shares - 893,994 893,994Purchase of property, plant and equipment (9,880) - 22,050Proceeds on disposal of HPD New Zealand Limited - (25,093) (25,093) -------------- --------------- -------------Net cash from investing activities 15,933 898,281 943,246 -------------- --------------- ------------- Cash flows from financing activitiesProceeds from issue of share capital 3,859,630 2,500,000 3,020,000 -------------- --------------- -------------Net cash from financing activities 3,859,630 2,500,000 3,020,000 -------------- --------------- -------------Net (decrease)/increase in cash and cash equivalents (532,158) 1,932,840 851,989 -------------- --------------- -------------Cash and cash equivalents at beginning of period 966,143 147,965 147,965 Effects of foreign exchange movements (7,474) 225 (33,811)Cash and cash equivalents at end of period 426,511 2,081,030 966,143 ============== =============== ============= NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2007 1. Basis of preparation These condensed consolidated interim financial statements are for the six monthsended 30 June 2007 and are prepared under the recognition and measurement rulesof IFRS 1. They have been prepared in accordance with the requirements of IFRS 1"First-time Adoption of International Financial Reporting Standards" relevant tointerim reports, because they are part of the period covered by the Group'sfirst IFRS financial statements for the year ended 31 December 2007. They do notinclude all of the information required for full annual financial statements,and should be read in conjunction with the consolidated financial statements ofthe Group for the year ended 31 December 2006. These condensed consolidated interim financial statements (the interim financialstatements) have been prepared in accordance with the accounting policies setout below which are based on the recognition and measurement principles of IFRS1 in issue as adopted by the European Union (EU) and are effective at31 December 2007, our first annual reporting date at which we are required touse IFRS accounting standards adopted by the EU. Patagonia Gold Plc's consolidated financial statements were prepared inaccordance with United Kingdom Accounting Standards (United Kingdom GenerallyAccepted Accounting Practice) until 31 December 2006. The date of transition toIFRS was 1 January 2006. The comparative figures in respect of 2006 havebeen restated to reflect changes in accounting policies as a result of adoptionof IFRS. The changes are listed below. The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 31 December 2006,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain a statement under Section 237(2) of the Companies Act 1985. Going concern These interim condensed consolidated financial statements are prepared on agoing concern basis which the Directors believe to be appropriate for thefollowing reasons: In common with many exploration companies, the Company raises finance for itsexploration and appraisal activities in discrete tranches to finance itsactivities for limited periods only. Further funding is raised as and whenrequired. The Directors have prepared cash flow information for the period ending 12months from the date of approval of these financial statements. On the basis ofthe cash flow information the Directors are of the opinion that the Company willrequire additional financial resources to enable the Group to undertakean optimal programme of exploration appraisal activity over the next twelvemonths, and to meet its commitments. On 19 July 2007 the Company placed shares to a value of £2 million to fund thenext 12 months' operations. The financial statements do not include anyadjustments, particularly in respect of tangible fixed assets, investments,loans and provisions for winding up which would be necessary if the Company andGroup ceased to be a going concern. 2. Summary of significant accounting policies The following accounting policies have been applied consistently in respect ofitems which are considered material in relation to the Group's financialstatements. 2. Summary of significant accounting policies (continued) Share based payments The share option programme allows Directors and employees to acquire shares ofthe Company. IFRS 2 has been applied in the preparation of these accounts. Thefair value is measured at the grant date and spread over the period during whichthe employees become unconditionally entitled to the options. The fair value ofthe options granted is measured using an option pricing model, taking intoaccount the terms and conditions upon which the options were granted. The amountrecognised as an expense is adjusted to reflect the actual number of shareoptions that vest except where variations are due only to share prices notachieving the threshold for vesting. Basis of consolidation The Group accounts include the Company and its subsidiary undertakings made upto each period end. Unless otherwise stated, the acquisition method ofaccounting has been adopted. Under this method, the results of subsidiaryundertakings acquired or disposed of in the year are included in theconsolidated profit and loss account from the date of acquisition or up to thedate of disposal. Under Section 230(4) of the Companies Act 1985 the Company is exempt from therequirement to present its own profit and loss account. Exploration expenditure When 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. Exploration costs on properties whereinsufficient exploration has taken place to ascertain future recoverability areexpensed. Where mining properties are abandoned, the deferred expenditure iswritten-off in full. Goodwill Goodwill which represents the excess of the cost of acquisition over the fairvalue of the Group's share of the identifiable net assets acquired iscapitalised and reviewed annually for impairment. Goodwill is carried at costless accumulated impairment losses. Negative goodwill is recognised immediatelyafter acquisition in the income statement. Goodwill written-off to reservesprior to the date of transition to IFRS remains in reserves. There is noreinstatement of goodwill that was amortised prior to the transition to IFRS.Goodwill previously written-off to reserves is not written back to the incomestatement on subsequent disposal. Business combinations The Group has taken advantage of the business combinations exemption whichallows the Group not to restate business combinations prior to January 2006.Instead, the existing goodwill has been frozen at that date, tested forimpairment and not subsequently amortised. Impairment Whenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable an asset is reviewed for impairment. An asset'scarrying value is written down to its estimated recoverable amount if thatamount is less than the asset's carrying amount. The recoverable amount is thehigher of fair value less costs to sell and value in use. 2. Summary of significant accounting policies (continued) Foreign currency The Group's functional currency is United States dollars being the currency bywhich the Group is mainly influenced with regard to labour, material and othercosts whilst operating in Argentina. For reporting purposes, the Group'spresentational currency is British pounds sterling (GBP). Foreign currencytransactions by Group companies are recorded in their functional currencies atthe exchange rate ruling at the date of the transaction. Monetary assets andliabilities have been translated at rates in effect at the balance sheet date.Any realised or unrealised exchange adjustments have been charged or credited toincome. On consolidation the accounts of overseas subsidiary undertakings aretranslated into the presentational currency of the Group at the rate of exchangeruling at the balance sheet date and income and expenditure account items aretranslated at the average rate for the period. The exchange difference arisingon the retranslation of opening net assets is classified within equity and istaken directly to the translation reserve. All other translation differences aretaken to the income and expenditure statement. Financial assets and liabilities Financial assets and liabilities are recognised on the Group's balance sheetwhen the Group becomes a party to the contractual provisions of the instrumentand are generally derecognised when the contract that gives rise to it issettled, sold, cancelled or expires. When shares are issued, any component that creates a financial liability of theGroup is presented as a liability in the balance sheet; measured initially atfair value net of transaction costs and thereafter at amortised cost untilextinguished on conversion or redemption. The remainder of the proceeds on issueis allocated to the equity component and included in shareholders' funds, net oftransaction costs. The carrying amount of the equity component is not remeasuredin subsequent years. Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost, using the effective interest rate method, lessappropriate allowances for estimated irrecoverable amounts. Trade payables arerecognised initially at fair value and subsequently measured at amortised costusing the effective interest rate method. 3. Share issue During the period to 30 June 2007 1,920,506 shares were issued to satisfy shareoptions previously granted under Patagonia Gold's employee share option scheme.Shares issued and authorised for the period to 30 June 2007 may be summarised asfollows: 6 months to 30 June 2007 - unaudited Authorised 500,000,000 ordinary shares of 1 pence each £ At 1 January 2007 273,106,435 ordinary shares of 1 pence each 2,731,065Issue of shares 61,287,066 ordinary shares of 1 pence each 612,870At 30 June 2007 334,393,501 ordinary shares of 1 pence each 3,343,935 6 months to 30 June 2006 - unaudited Authorised 350,000,000 ordinary shares of 1 pence each £At 1 January 2006 252,281,435 ordinary shares of 1 pence each 2,522,814Issue of shares 15,625,025 ordinary shares of 1 pence each 156,251At 30 June 2006 267,906,460 ordinary shares of 1 pence each 2,679,065 Year to 31 December 2006 - unaudited Authorised 350,000,000 ordinary shares of 1 pence each £At 1 January 2006 252,281,435 ordinary shares of 1 pence each 2,522,814Issue of shares 20,825,025 ordinary shares of 1 pence each 208,250At 31 December 2006 273,106,435 ordinary shares of 1 pence each 2,731,065 The share issues yielded £3,859,630 in cash and the weighted average share pricewas 6.30p. 4. Earnings per share The potential ordinary shares which arise as a result of the options in issueare not dilutive under the terms of IAS 33 because they would not increase theloss per share. Accordingly there is no difference between the basic anddilutive loss per share. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: 6 months to 6 months to Year to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (unaudited) Loss after tax(£) (4,527,625) (1,276,395) (17,002,754)Weighted average number of shares 153,097,421 131,376,334 269,548,193Basic and diluted earnings per share (pence) (1.35) (0.48) (6.30) 5. Explanation of transition to IFRS As stated in the Basis of Preparation, these are the Group's first condensedconsolidated interim financial statements for part of the period covered by thefirst IFRS annual consolidated financial statements prepared in accordance withIFRS. IFRS 1 permits companies adopting IFRS for the first time to take certainexemptions from the full requirements of IFRS in the transition period. Theseinterim financial statements have been prepared on the basis of taking thefollowing exemptions: • Cumulative translation differences on foreign operations are deemed to be £nil at 1 January 2006. Any gains and losses recognised in the consolidated income statement on subsequent disposal of foreign operations will exclude translation differences arising prior to the transition date. • The entity has elected not to apply IAS 21 "The Effects of Changes in Foreign Exchange Rates" retrospectively to goodwill and fair value adjustments arising on business combinations before the Group's date of transition to IFRS. Such goodwill and fair value adjustments are not treated as foreign currency assets and so are not retranslated at each reporting date. • IFRS 3 "Business Combinations" is applied from 1 January 2006 and not retrospectively to earlier business combinations. 6. Effect of IFRS application The valuation of the investments has not been restated as at 30 June and31 December 2006 as recalculated values are not materially different from thebook value at those dates. 7. Acquisition of Barrick's property portfolio in Santa Cruz Argentina A further cash payment of US$1.5 million will become payable to Barrick upon thedelineation of 200,000 oz or greater of gold or gold equivalent on the La PalomaProperty group. In addition Patagonia Gold S.A. (PGSA) has granted Barrick anoption to buy back up to a 70 per cent. interest in any particular Propertygroup upon the delineation of the greater of 2 million oz of gold or goldequivalent on that Property group. Under the terms of the acquisition agreement, PGSA has committed to complete aminimum level of expenditure of US$10 million on the Properties over a five yearperiod. This will include a commitment of US$1.5 million in the first 18 months. Copies of this Interim Statement will be posted to shareholders shortly.Additional copies will be available from the Company's registered office at15 Upper Grosvenor Street, London W1K 7PJ and may also be downloaded from theCompany's website at "www.patagoniagold.com". This information is provided by RNS The company news service from the London Stock Exchange