ROSE.L Regulatory News (ROSE)

3 May 2007 07:01

Vane Minerals PLC03 May 2007 3rd May 2007 VANE Minerals Plc (AIM: VML) ("VANE" or "the Company") Financial Results for Period Ending 31 December 2006 Highlights • Full year of production at Diablito silver/gold mine in Mexico • Mill construction underway, expected to be completed Q3 2007 - significant reduction in schedule bottlenecks and transportation costs • Acquisition of uranium pipe targets increased number of properties to 29 • Further drilling permits granted for the Big Red Pipe and the Rabbit target in the breccia pipe district • £750,000 raised through a convertible loan note agreement to accelerate uranium developments and finance mill construction Post Period • Drill programme completed at North Wash, confirming the mineralisation • 25-hole drilling programme began in early April 2007 at the Happy Jack property in south-eastern Utah • Number of uranium pipe targets increased to 32 - further acquisitions under consideration • Freeport Agreement extended for a further two years to 30 June 2009. • £1 million fixed-rate unsecured convertible loan note secured with Geiger Counter Limited Michael Spriggs, Chairman of VANE Minerals Plc, commented: "The past year was aformative one for VANE as we are generating ongoing revenues from the Diablitomine and have substantially developed our uranium portfolio in the US. Our shareprice performance is indicative of our progress and we are looking to continueto create and maximise value for shareholders going forward. We are now in astrong cash position from which we can explore and develop our projects acrossour portfolio and we look forward to further developments in the coming year." Enquiries: VANE Minerals Plc Ambrian Partners LimitedMatthew Idiens Richard Brown+44 (0) 20 7667 6322 +44 (0) 20 7776 6417 Parkgreen Communications Daniel Stewart & CoCathy Malins / Annabel Leather Katie Shelton+44 (0) 20 7851 7480 +44 (0)20 7776 6550 Chairman's and CEO's Statement We are pleased to present our report to shareholders for the year ended 31stDecember 2006. This has been a progressive period in which your Company hasreached important milestones at its Diablito mine in Mexico, furtheredexploration at our other properties in Mexico and Paraguay and continued toevaluate and add to the Company's significant uranium projects. More recently,we have gained additional external funding as we look to accelerate the valuecreation within the uranium portfolio in order to capitalise on the strongposition we have in this key commodity. The steady build-up in production during the second half of 2006 at the Diablitohigh-grade silver/gold mine in Mexico has allowed our 100% owned subsidiary,Minerales VANE SA de CV, to continue to generate stable revenues for theCompany. As a result we continue to be cash flow positive outside of ouraccelerated uranium acquisition and exploration and Diablito mill constructionprogrammes. This cash flow offers us the flexibility to pursue a range of opportunities,including accelerating drilling in our uranium portfolio, adding to our existingportfolio, realising the value of these assets through exploration ordevelopment towards production, sale to a third party, or potentially providingthe option for the creation of additional stand-alone companies. The main driving force for the company and a key reason behind our share priceperformance has been our strong uranium portfolio, to which we have diverted themajority of funding and time over the past twelve months. We are very excitedabout the continued strength of the uranium market and the potential valuecreation that our exploration portfolio offers. Diablito In 2006 the Company achieved the first full year of production from theunderground Diablito mine; a high-grade, narrow-vein silver/gold deposit,located in Nayarit State, west-central Mexico. Production during the yearaveraged 1,326 tonnes a month against our target figure of 1,500 tonnes. Theproduction shortfall was temporary and primarily caused by a change of themining contractor in May, which affected production for several months,hurricane rains in July to September and development work in the mineralisedvein leading to some dilution in grade. Since May 2006, the new operator,Contratista Minera Villagomez ("CoMinVi"), has gained a great deal of furtherknowledge of the deposit and during the first quarter of 2007, the mine produced1,793 tonnes per month on average. The average grades achieved in the firstquarter were 5.17g/t gold and 475g/t silver, with the gold element beingsignificantly higher than the 2006 average of 4.72 g/t gold and 602 g/t silver. Mine production for 2007 - continuing at the production rate of over 50 tonnes aday / 1,500 tonnes per month - is scheduled to amount to 2,700oz gold and348,000oz silver, generating stable gross margins of approximately £108,700(US$200,000) per month. This compares with production during 2006 of 308,116ozsilver and 2,415oz gold. A 19-hole drilling programme was completed in mid-2006 which increased themeasured, indicated and inferred resources at Diablito to approximately 142,000tonnes of ore at an undiluted average grade of 684g/t silver and 6.07g/t gold.Maintaining a production rate of 1,500 tonnes a month, this increase in resourcehas extended the projected mine life to over seven years. The geology alsoreported the possibility of further extensions and the Company will considermore drilling as required. Operating costs have fluctuated over the past year due to the varying amounts ofdevelopment work necessary for the extraction of the ore. Production costs arecurrently running at approximately US$125 per tonne of ore. At present, broken ore from Diablito is transported for toll treatment to theCosala mill, 350km from the mine. Whilst this has served the Company well todate, in order to eliminate scheduling bottle necks and reduce overallproduction and transportation costs, VANE is constructing a 100tpd mill andtreatment plant at San Dieguito de Arriba, only 18km from the mine. The majorcomponents of the beneficiation equipment required for this have been purchasedand construction is currently expected to be completed during the third quarterof 2007. Uranium Projects During the past year, VANE's wholly owned US subsidiary, VANE Minerals (US) LLC,has continued to add to its impressive portfolio of properties in the majoruranium districts in south-western US, which have a renowned history of uraniumproduction. This growing momentum parallels the continuing surge of strength inthe international uranium market, which over the past year has seen the price ofuranium more than double. While negotiations to increase the number of exploration projects arecontinuing, systematic exploration programmes are underway on selected areas anddrilling programmes have commenced since the year end. The properties comprise atotal land package of almost 6,000 specifically selected acres extending overareas considered by your Board to be highly prospective. They are all 100% ownedand include projects offering production within 18 months along with strongexploration potential. VANE is fortunate to have assembled a highly experienceduranium exploration team to expedite these programmes. The focus of these programmes is on properties in the Colorado Plateau uraniumdistrict, which includes the stratabound uranium-vanadium deposits of SouthEastern Utah and South Western Colorado along with the Northern Arizona uraniumbreccia pipe district. In the Colorado Plateau, an area of major historic production, VANE has been oneof the first companies to initiate a recent exploration drilling programme. Atthe Company's North Wash uranium/vanadium property in south-eastern Utah, a5-hole drill programme initiated in January 2007, and now completed, confirmedthe tenor and distribution of the uranium and vanadium mineralisation. This hadbeen investigated previously in the 1970's by Cotter Corporation and whichyielded a limited, but indicated the potential for a much larger, ore resource.Additional drilling is now planned to expand this as yet unquantified resource,where the potential is considered to be 1 million lbs uranium (U3O8) and 7.5million lbs vanadium (V2O5). Following this, the Company will proceed with apre-feasibility study to define the economics of mining this deposit. A 25-hole drilling programme began in early April 2007 at the Happy Jack uraniummine project in south-eastern Utah. Although not mined since the 1980s, basicmine infrastructure is intact and this project is ideally situated with regardto production following successful future drilling. Happy Jack also offersconsiderable additional exploration potential. Pending state approvals, VANE also plans to undertake a 25-hole drillingcampaign at the North Alice Extension project in the Lisbon Valley UraniumDistrict of south-eastern Utah. Further acquisition opportunities are beingpursued on other prospective uranium properties in this area. Our interests in the uranium deposits in the northern Arizona breccia pipedistrict - an area which historically has produced over 20 million lbs of U3O8 -are economically attractive exploration targets as the deposits are typicallycompact and very high-grade. These mineralised breccia pipes have the resourcepotential of between 1 million and 6 million lbs U3O8, but their evaluationrequires deep drilling, typically to depths of 1,200-2,000ft. The Company has successfully developed surface exploration techniques by which alarge number of targets in this district have been identified. Of these, four(the Miller, Red Dike and Big Red Pipes, and the Rabbit target) have beenpermitted, and a drilling programme is currently underway. The results from these programmes will be published as soon as their evaluationis complete. Drilling permit applications on a number of additional targets havebeen submitted. During 2006, the Company continued an aggressive programme to identify andacquire additional pipe targets, raising its number of targets acquired to 29,an increase of 70%. Moving into 2007, this total has since increased to 32 andnegotiations and reconnaissance continue for additional pipe targets. Severalof these new targets exhibit strong surface indications consistent withore-bearing breccia pipes. As announced on the 12th April 2007, the company is undertaking a strategicreview of its options in order to maximise shareholder benefit from its uraniumportfolio. The Board recognises the rising interest, particularly in the US andCanada, of institutions and other parties in companies operating in the uraniumsector. This has led to substantial valuations and major fundraisingopportunities for some asset-rich uranium companies in those markets. There is no certainty as to the outcome of any such review but in the currentenvironment the Board considers that it has a duty in the best interests ofshareholders to explore what options may be available to extract optimum valuefrom its now sizeable uranium portfolio. Other Projects Guadalcazar Following the Company's 19-hole drilling programme undertaken during 2005 and2006, the Guadalcazar property in the state of San Luis Potosi, Mexico (from theFreeport-McMoRan Databank), was identified as being a major tonnage,hydrothermal gold-silver occurrence of very large areal extent. Results to datehave reported sub-economic grades although the property's geologiccharacteristics are considered sufficiently attractive to warrant furtherdrilling. Due to the size of this target, further drilling would requireconsiderable additional funding and VANE is currently looking for a jointventure partner with whom to initiate further exploratory work. A number ofpotentially interested parties have been approached. Paraguay The Company continued its regional scale gold-copper exploration programme in anunder-explored but highly prospective region of eastern Paraguay, the westernpart of the highly mineralised Pre-Cambrian shield. VANE holds InvestigationPermits on three exploration blocks over a total area of 3,445 km2. A largenumber of surface gold anomalies have been identified in this rapid, low-costprogramme, and individual targets are being selected for further exploration.Investigation Permits are being transferred into an Exploration Permit covering22,600 hectares (55,845 acres) which will allow us to drill identified targetsduring 2007. Freeport Agreement The Company's annual agreement with Freeport-McMoRan Copper and Gold Co.,provides continued access to the latter's international exploration database,excluding Indonesia, and this forms a valuable part of VANE's ongoingexploration strategy. A recently signed document has been agreed, extendingthis Agreement for a further two year period to 30 June 2009. Financial Revenues from the Diablito mine have placed the Company in a solid financialposition, providing a flow of cash resources to further exploration programmes.This revenue stream was complemented in 2006 with a convertible loan agreementwith City Natural Resources High Yield Trust Plc and Geiger Counter Limitedwhich enabled the Company to vigorously pursue the uranium opportunities in theUS detailed above and also to proceed towards the purchase of the mill site andmilling/concentrating equipment required to install the Company's own mill atDiablito. Reflecting the shift in emphasis in the nature of the Company's activities andthe structure of its balance sheet, the 2006 after tax net loss of £893,587 or0.61p per share (compared with £870,185 or 0.60p per share in 2005) is thereforesomewhat academic. The discontinuance of the Mina Charay project and resultingimpairment of the intangible asset by £317,000, plus the amortisation of thetangible asset representing the Diablito Mine of £516,000, contributedsubstantially to the reported loss. At the 31st December year-end, the Companyretained a cash balance of £0.62 million. In April 2007 the Company also announced the issue, subject to shareholderapproved at an EGM to be held on the 8th May, 2007, of a second fixed-rateunsecured convertible loan note, again with Geiger Counter Limited, for £1million with an 8% coupon, convertible at £0.29 per share. These further fundswill enable the Company to accelerate the uranium exploration and drillingprogrammes, in particular the investigation of the Northern Arizona breccia pipetargets. If the new loan note is approved then the existing £750,000 loan noteswill be converted into ordinary shares at the agreed price of £0.12 per share. Key Performance Indicators There are a number of key performance indicators that are reviewed regularly bythe Board as set out below in respect of 2006:- Item Target Actual CommentProduction monthly tonnage 1,500 1,326 The average monthly production for 2006 was just short of the target owing to a change of contractor mid-year. Current production is running at 1,793 tons per month, ahead of target. Maintenance of Mineral Grades 4.00 Au 4.72 Au The contractor is currently achieving 550 Ag 602 Ag grades averaging 5.17 Au and 475 Ag Monthly Gross Margin £108.7k ($200k) £53.2k ($97.9k) Gross margin achieved over the year was lower than target owing to disruption in milling process which resulted in large inventories at the year-end £0.579m ($1.066m). Cash balances £0.731m £0.624m The company's objective was to end the year with no less cash than at the beginning of the year. With the shortfall in production, the decision to build our own mill, and the accelerated uranium programme this was only possible with the convertible loan note raised in August 2006. Employee recruitment and Although the company has no quantitativeretention target for the number of employees it needs or retains, this metric is closely monitored. The company has an excellent record of retaining key staff, and recruiting new members to the team as required. Outlook At this time last year, mining markets were entering a period of considerablevolatility, reflecting uncertainties about the duration and strength of thedemand-led boom in the current commodity cycle. The mining sector of the AIMmarket suffered a sharp correction in May / June last year, but has made acontinued recovery, bolstered by strong metals markets and long term demand /supply fundamentals. While the future course of the gold price is impossible to predict, it issignificant that its recent price history shows a closer correlation with therise in base metal commodities than at any time over the past 25 years. The economics of the uranium market are more transparent, and the relentlessrise in the U3O8 price reflects the widening gap between committed world demandand potential supply - this was in part exaggerated by major production setbacksat the Cigar Lake property and flooding in Australia due to heavy rain. Therecent run-up in the price shows no sign of abating, even though these levelsare now causing some concern for those nuclear utilities (particularly in theUS) that do not have long term contracts with producers. During the year the Group created a project team to look at the impact ofimplementing IFRS on both the reporting function and the financial statements in2007. The project is still ongoing and initial results indicate the key areasthat may affect the financial statements are intangibles and share basedpayments. Further areas are currently being reviewed and the Group is confidentthat it will be well positioned for the transition. Overall, we believe the coming year will see continuing resilience in base metalcommodity markets, and that this momentum will provide a solid support for VANEMinerals. Your Company anticipates a further year of vigorous exploration anddevelopment activity, built around its strong portfolio of high quality projectsand a strong management team. It has been gratifying to witness the growing strength of our share price, andwe offer our sincere thanks to our fellow Directors and staff who continue towork tirelessly towards fulfilling our strategy. MJ Spriggs Chairman SD Van Nort Chief Executive Officer CONSOLIDATED PROFIT AND LOSS ACCOUNT Notes Restated 2006 2005 £ £ TURNOVER 2 1,592,632 286,075 Cost of sales (957,740) (391,612) Gross profit 634,892 (105,537) Operating expenses (including exceptional impairment of (1,500,558) (963,283)intangible fixed assets of £316,825) OPERATING LOSS (865,666) (1,068,820) Interest receivable 19,381 83,302Interest payable and similar charges (25,598) - LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (871,883) (985,518) Taxation (21,704) 115,333 LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (893,587) (870,185) LOSS PER SHARE Basic and diluted 3 (0.61p) (0.60p) The operating loss for the year arises from the Group's continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Restated 2006 2005 £ £ Loss for financial period (893,587) (870,185) Currency translation (losses) / profits on foreign currency net (277,779) 188,437investments Total recognised gains and losses for the year (1,171,366) (681,748) Prior year adjustment in respect of share option charge (95,100) Total recognised gains and losses since last annual report (1,266,466) CONSOLIDATED BALANCE SHEET Notes Restated 2006 2005 £ £ FIXED ASSETSIntangible assets 7,828,224 7,990,975Tangible assets 3,737,359 4,171,297 11,565,583 12,162,272 CURRENT ASSETSStocks 579,668 122,893Debtors 344,029 413,374Cash at bank and in hand 624,374 731,932 1,548,071 1,268,199 CREDITORS: Amounts falling due within one year (198,982) (156,658) NET CURRENT ASSETS 1,349,089 1,111,541 TOTAL ASSETS LESS CURRENT LIABILITIES 12,914,672 13,273,813 CREDITORS: Amounts falling due after one year (683,928) - NET ASSETS 12,230,744 13,273,813 CAPITAL AND RESERVESCalled up share capital 14,614,382 14,614,382Share option reserve 143,769 95,100Other reserves 79,628 -Profit and loss account (2,607,035) (1,435,669) EQUITY SHAREHOLDERS' FUNDS 4 12,230,744 13,273,813 CONSOLIDATED CASH FLOW STATEMENT Notes 2006 2005 £ £ Cash flow from operating activities 5a (425,180) (1,054,002) Returns on investments and servicing of finance 5b (115) 83,302 Taxation (6,875) - Capital expenditure and financial investment 5b (400,726) (830,058) CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (832,896) (1,800,758) Management of liquid resources 5b 158,927 1,734,398 Financing 5b 750,000 - INCREASE/(DECREASE) IN CASH IN THE PERIOD 76,031 (66,360) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £ £ Increase/(decrease) in cash in the period 76,031 (66,360) Cash inflow from change in liquid resources (158,927) (1,734,398)Cash inflow from increase in debt (676,474) - Change in net funds resulting from cash flows (759,370) (1,800,758) New finance lease (8,386) - Effect of foreign exchange rate changes (24,662) 188,437 Movement in net funds in the period (792,418) (1,612,321) NET FUNDS AT 31 DECEMBER 2005 731,932 2,344,253 NET (DEBT)/FUNDS AT 31 DECEMBER 2006 5c (60,486) 731,932 NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2006 1 BASIS OF PREPARATION The financial information for the year ended 31 December 2006 has not beenaudited and does not constitute the Company's statutory financial statementswithin the meaning of S240 of the Companies Act 1985. This preliminaryannouncement was approved by the Board on xx April 2007. The statutory financial statements for the year ended 31 December 2006 have notbeen filed with the Registrar of Companies nor reported on by the Company'sauditors. They will be circulated to shareholders in May 2007 and the AnnualGeneral Meeting is arranged to take place on 14 June 2007. The comparative results for the year ended 31 December 2005 are an abridgedversion of the audited financial statements which have been filed with the UKRegistrar of Companies and on which the auditors issued an unqualified auditreport with the exception of the prior year adjustment noted below. PRIOR YEAR ADJUSTMENT The adoption of FRS20 Share Based Payments required a prior year adjustment tobe made with the comparative figures being restated. This has created a shareoption reserve at 31 December 2005 of £95,100 and reduced the retained profitsat that date by £95,100; of this amount, £57,411 was charged to the profit andloss account for the period ended 31 December 2005. 2 SEGMENTAL INFORMATION Net Assets Turnover Losses Restated 2006 2005 2006 2005 2006 2005 £ £ £ £ £ £ UK (319,998) 563,216 - - (573,359) (530,161) USA 1,252,102 1,092,646 - - (528,532) (545,657) Mexico 11,173,393 11,617,951 1,592,632 286,075 208,304 205,633 Paraguay 125,247 - - - - - Total 12,230,744 13,273,813 1,592,632 286,075 (893,587) (870,185) The above table shows the geographic segmentation of the Group. Activities inMexico are currently concerned with gold and silver mining and exploration.Activities in the USA are split between research of the Freeport database andother sources for further gold and silver properties, and research andevaluation of potential uranium properties. Activities in Paraguay are concernedwith gold and copper exploration. Activities in the United Kingdom are concernedwith administration and management of the Group. 3 LOSS PER ORDINARY SHARE The calculation of basic and diluted loss per ordinary share is based on thefollowing loss and number of shares. Restated 2006 2005 £ £ Loss for the financial period (893,587) (870,185) 2006 2005 No. of shares No. of shares Weighted average number of shares 146,143,823 146,143,823 Due to the loss incurred in the year, there is no dilutive effect from thesubsisting share options. 4 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Restated 2006 2005 £ £ Loss for the financial period (893,587) (870,185) Share option reserve movement 48,669 57,411 Equity element of convertible loan note 79,628 - Exchange rate adjustments (277,779) 188,437 Net reduction in shareholders' funds (1,043,069) (624,337) Opening shareholders' funds 13,273,813 13,898,150 Closing shareholders' funds 12,230,744 13,273,813 5 CASH FLOWS Restated 2006 2005 £ £ a Reconciliation of operating loss to net cash outflow from operating activities Operating loss (865,666) (1,068,820) Decrease/(increase) in debtors 33,518 (181,948) Increase in creditors 41,392 90,580 Increase in stock (456,775) (122,893) Depreciation 518,963 154,564 Impairment of intangible fixed asset 316,825 17,104 Share based payments 48,669 57,411 Effect of foreign exchange rate changes (62,106) - Net cash outflow from operating activities (425,180) (1,054,002) b Analysis of cash flows for headings netted in the cash flow 2006 2005 £ £ Returns on investments and servicing of finance Interest received 19,381 83,302 Interest paid (19,496) - Net cash (outflow)/ inflow from returns on investments and servicing of finance (115) 83,302 Capital expenditure and financial investment Purchase of intangible fixed assets (252,520) (815,152) Purchase of tangible fixed assets (148,206) (14,906) Net cash outflow from capital expenditure and financial (400,726) (830,058) investment Management of liquid resources Cash withdrawn from 7 day deposit 158,927 1,734,398 Net cash inflow from management of liquid resources 158,927 1,734,398 Financing Proceeds from issue of convertible loan notes 750,000 - Net cash inflow from financing 750,000 - At 31 At 31 December Cash- Non cash Exchange Decemberc Analysis of net funds 2005 flow Changes Movement 2006 £ £ £ £ £ Cash at bank and in hand 180,539 76,031 - (24,631) 231,939 Cash on deposit 551,393 (158,927) - (31) 392,435 Finance lease - - (8,386) - (8,386) Convertible loan note - (676,474) - - (676,474) 731,932 (759,370) (8,386) (24,662) (60,486) This information is provided by RNS The company news service from the London Stock Exchange