ROSE.L Regulatory News (ROSE)

12 Sep 2006 07:02

Vane Minerals PLC12 September 2006 VANE Minerals Plc Interim Report - Six Months to 30th June 2006 Highlights • During the six months to 30th June 2006, VANE Minerals became cash flow positive as the production profile expanded at the Diablito silver/gold mine • Expansion of the uranium portfolio • Extension of Investigation Permits over 3,400 hectares were granted by the Paraguayan Government for further evaluation of gold / copper prospects in Paraguay • Cash balances of £0.703m at 30th June 2006, virtually unchanged from the 31st December 2005 position with all exploration expenses covered from income • EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) for the period was £69,000 Post Period End Highlights: • A surface drilling programme to further define and expand existing resources was completed at the Diablito mine in early July • Planning further exploration work on 25 promising US uranium prospects • Plans in place for the construction of the Company's own mill on site near to Diablito • Phase II drilling programme commenced in July at prospective Guadalcazar gold prospect in Mexico • Successful issue of £750,000 in Convertible Loan Notes attracting 8% coupon to fund the purchase of a Mill and Flotation plant at Diablito and to rapidly advance the uranium exploration programme Michael Spriggs, Chairman of VANE Minerals Plc, commented: "VANE Minerals'exploration and development strategy remains firmly on course, underpinned bythe expanding cash flow being generated from Diablito, and the successful issueof £750,000 of convertible loan notes. The focus remains the precious metalpotential of our Mexican properties and our uranium projects in the western US,but the Group remains sufficiently flexible to be able to evaluate rapidly andefficiently new opportunities as they are identified. The continuing buoyancyof precious metals and other commodity markets underlines the Group's confidencefor the future." The full Chairman's Statement and the financial statements follow and can alsobe found at: www.vaneminerals.com. ENDS VANE Minerals Plc Ambrian Partners LimitedMatthew Idiens Richard Brown+44 (0) 20 7667 6322 +44 (0) 20 7776 6417Parkgreen Communications Daniel Stewart & CoCathy Malins / Annabel Leather Dan Willmott+44 (0) 20 7493 3713 +44 (0)20 7776 6550 Chairman's Statement I am pleased to present this review of the Group's activities for the six monthsto 30th June 2006. In January, a further extension, for one year, of the agreement withFreeport-McMoRan Copper and Gold Company was negotiated. This gives VANEMinerals access to Freeport's global exploration database (excluding Indonesia),and continues to be one of the cornerstones of the Group exploration strategy.Nearly all of the Freeport files have now been examined and numerous potentialprospects identified. In addition, the Group maintained its efforts to generate and investigate otherprojects identified in its key areas of operation during the first half of 2006.Exploration and development continued on gold prospects in Mexico, and onuranium properties in south-western USA. The regional exploration programme inParaguay continues. Diablito Mine The successful development of the Diablito silver/gold mine in Nayarit, Mexico,continues to be the Group's main operating focus. An expanded productionschedule is being established and, in the six month period to June, Diablitogenerated revenues totalling US$1.85m. Going forward, net income from the ore milled and concentrates sold from thisoperation is estimated to average between US$420,000 and US$525,000 per month.This is based on forecast production averaging 1,500-2,000 tonnes per month ofore at grades 700-900 g/T silver and 3-5 g/T gold. The 20-hole surface drilling programme completed in early July had twoobjectives. It was designed to define more precisely the continuity of orebetween the widely spaced holes drilled in the initial evaluation of Diablito,and to explore extensions of the Diablito vein system down-dip as well as alongstrike. Meanwhile, production and development at Diablito continues via a seriesof ramps being driven in the gently dipping vein. VANE Minerals has established a small assay laboratory in the nearby town ofAcaponeta. This has proven very beneficial and has resulted in considerablesavings in the time and cost of ore analyses. The present production arrangements involve toll milling at the Cosala mill,located 350 km from the Diablito mine and sale of concentrates to an ore buyerin Torreon. Given the possibility of a mine life extension, the Group hasexamined other, more favourable potential treatment routes, including thefeasibility of establishing its own mill at a local site. As a result, part ofthe additional funds raised (as referred to in the Highlights and detailed inthe Notes to the Accounts) will be utilised for the purchase and construction ofa mill and flotation plant close to the mine site. The initial target capacityof the plant will be 100tpd, with the mine production rate currently at 50tpd,this gives the board capacity to double production. Guadalcazar The initial geological appraisal of the Guadalcazar prospect in San Luis Potosi,Mexico, was supported with a 12-hole diamond drilling programme which indicatedpersistently anomalous gold values over a wide area. The Group was sufficientlyencouraged by these results to schedule a further 7-hole drilling programmewhich was completed in late July and assay results are expected to be availablein September 2006.. Minas Charay The geological evaluation of the Minas Charay gold-silver property in Sinaloa,Mexico, was completed during the period under review. The Group had optioned this property originally on the basis that it offered thepotential for a large, low-grade, leachable gold target, and possibly alocalised high- grade precious metal vein system. A 26-hole drilling programme carried out failed to confirm the large low-gradetarget and was only successful in delineating a narrow high-grade precious metalvein system. The Group determined that the economics of hauling this ore to a mill appearedmarginal, whereas an on-site leaching ore could be profitable but would requireconsiderable time and effort to obtain the necessary permits and to securepermission to use cyanide. As understanding of this deposit developed, it became apparent that Minas Charayis very different in character from Diablito. Accordingly, this project has beenassigned lower priority with all financial obligations being terminated pendingrenegotiation with the local owner of the mineral rights to this property. Theproject has always been seen by the board as a replacement for the Diablitoproject should it have not been successful in providing the required cash flow.However, as Diablito has been such a success for VANE, the Board feels that theMina Charay project's failings will not have a material effect on the company. Paraguay The Group successfully applied for extensions to January 2007 on the threeInvestigation Permits. Geochemical and rock sampling results obtained to datehave provided ample grounds for warranting further work. The regionalexploration programme is now mostly focused on an area centred about 10 to 14kilometres south of the large agricultural town of Katuete. Geochemical analysesof the lateritic, in-place soils, combined with careful examination of pannedconcentrates of both soils and stream sediments, now indicate that some of therolling hilly land around Itapo Creek is clearly anomalous in gold. The samplinggrid is now being reduced to better define specific targets for near-futuredrilling. This regional exploration programme, backed by selective follow-upwork, is proving an extremely effective and low cost method of rapidly coveringlarge areas. Uranium Programme VANE Minerals' programme of uranium exploration was initiated on the basis ofthe renewed strength of the uranium market and growing predictions of long-termsupply shortages. These observations are reflected in the continuing strength ofuranium oxide price, which has risen to its present level of US$52/lb, levelsnot seen since the previous record price of $43.60/lb in the 1970s. VANE Minerals is now devoting considerable effort towards the exploration anddevelopment of its uranium properties in the Colorado Plateau Uranium Districtin south-western US, where the Group has identified and acquired a number oftargets. The Group has now assembled sufficient data to warrant the definitionof drill programmes on a number of properties. In the breccia pipe district of northern Arizona, 22 target areas have beenacquired including a number of properties on which previous drilling hasproduced results that are encouraging to VANE Minerals. Breccia pipe depositsare typically compact deposits containing economic grades of around 1% uraniumoxide (U3O8), each occurrence having the potential for between 1m and 6m lbsU3O8, (based on Historical data reported by Energy Fuels Nuclear Inc).Reconnaissance exploration has been completed and permits for drilling are beingobtained. The Company continues to identify favourable pipe targets andanticipates acquisition of additional property. This campaign is supported bytechnical programmes utilising satellite imagery to define targets in areas notpreviously recognised as conducive to the existence of pipe structures, anddeveloping suitable geochemical techniques to recognise mineralised brecciapipes. In November 2005, the Group acquired the North Wash uranium property insouth-eastern Utah. Based on drill information obtained in the late 1970s byCotter Corporation, this project contains an inferred geological resource(non-JORC) of 170,000 lbs of U3O8 and up to 750,000 lbs vanadium, the Boardbelieves the project has considerable additional potential and drilling isplanned on the project in Q1 2007, following the recent successful applicationfor permits. VANE Minerals (US) has entered into an agreement with a private company, HappyJack Minerals covering the Happy Jack Mine and surrounding claims located in SanJuan County of south-eastern Utah in the Colorado Plateau Uranium District.Between 1949 and 1982, the Happy Jack Mine, previously operated by AtlasMinerals, produced 3.1 million lbs. U3O8 until along with most of the mines onthe Colorado Plateau it ceased production as a result of low uranium prices. Based on historic drilling data, VANE (US) geologists have identified a resource(non-JORC) of approximately 155,000 lbs U3O8 in several pods, some of which areaccessible via existing mine workings and could therefore be put into productionwith minimal development work. The property agreement carries a productionroyalty of 5% on minerals mined from within the original areas held by theowner, and a production royalty of 2.5% on minerals mined from the additionalareas subsequently claimed. A review of previous drilling results has revealed nine additional explorationtargets at Happy Jack, on which previous drilling intersected ore-grademineralisation that was never fully delineated by additional drilling orsampling.. Negotiations continue to acquire additional attractive uraniumproperties in southern Utah. The Group recognises that the successful development of these uranium prospectswill depend on securing appropriate milling contracts for the treatment of minedore. Negotiations are therefore already in progress with the mills servingthese former producing areas which are currently in the process of beingreturned to active status. Outlook In the six months to 30th June 2006 VANE Minerals reported a net loss of£0.345m, from revenue of £1.005m. At the end of the period, the Group's cashresources stood at £0.703m. Our exploration spend is currently running atapproximately £91,000 per month, and we expect this rate to continue in thecurrent half year. VANE Minerals' exploration strategy remains firmly on course, underpinned by theexpanding cash flow being generated from Diablito, and the successful issue of£750,000 of convertible loan notes (detailed in the Notes to the Accounts). Thefocus of this programme remains the precious metal potential of our propertiesin Mexico and our uranium projects in the western US, and in both areas we arefortunate to have excellent field teams on the ground. At the same time, theGroup remains sufficiently flexible to be able rapidly and efficiently toevaluate new opportunities as they are identified. The continuing buoyancy ofprecious metals and other commodity markets underlines this confidence. We remain a well-funded exploration and development company, and we anticipatefurther vigorous activity in the current half. Michael SpriggsChairman11th September 2005 Clark Arnold, Ph.D Geology, who is Director of Geology for VANE Minerals andKristopher K. Hefton, Chief Operating Officer VANE Minerals (US) LLC, BScGeology, who each meet the criteria of a qualified person under the AIM ruleguidance for mining, oil and gas companies, has reviewed and approved thetechnical information contained within this statement. VANE Minerals PlcInterim Results for the Six Months to 30 June 2006 Consolidated Profit and Loss Account£'000's Notes Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Turnover 1,005 - 286Cost of Sales (837) - (392)Gross Profit /(Loss) 168 - (106)Administrative Expenses (522) (346) (962)Operating Loss 2 (354) (346) (1,068) Interest receivable and similar 9 80 83income Interest payable and similar - (1) -chargesLoss on ordinary activities before (345) (267) (985)taxation Taxation - - 115Loss on ordinary activities after (345) (267) (870)taxationLoss per share Basic and Diluted 3 (0.24) (0.18p) (0.60) Statement of Total Recognised Gains and Losses£'000's Notes Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Loss for the Financial Period (345) (267) (870)Currency translation differences on (229) 114 188foreign subsidiariesTotal recognised gains and losses (574) (153) (682)relating to the periodPrior Year Adjustment (95)Total Recognised gains and losses (669)since last annual report VANE Minerals PlcInterim Results for the Six Months to 30 June 2006 Consolidated Balance Sheet£'000's Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Fixed Assets Intangible fixed assets 7,990 12,036 7,991 Tangible fixed assets 3,773 - 4,171 11,763 12,036 12,162Current Assets Stocks 175 - 123 Debtors 296 308 413 Cash at bank 703 1,532 732 1,174 1,840 1,268Creditors: amounts falling due within (212) (100) (157)1 yearNet Current Assets 962 1,740 1,111Total assets less current liabilities 12,725 13,776 13,273Capital and Reserves Called up share capital 14,614 14,614 14,614 Share option reserve 121 69 95 Profit and Loss Account (2,010) (907) (1,436)Equity Shareholders' funds 12,725 13,776 13,273 VANE Minerals PlcInterim Results for the Six Months to 30 June 2006 Consolidated Cash Flow Statement£'000's Notes Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Net cash inflow / (outflow) from 5 215 (472) (1,054)operating activitiesReturns on investment andservicing of finance Interest received 9 80 83 Interest or similar charges - (1) -paidNet cash flow from returns on 9 79 83investment and servicing offinanceCapital expenditure and financialinvestment Capital expenditure on (208) (533) (815)intangible Fixed Assets Capital expenditure on tangible (24) - (14)Fixed AssetsNet cash flow from capital (232) (533) (829)expenditure and financialinvestmentManagement of Liquid ResourcesCash withdrawn from deposit - 896 1,734Net cashflow from management of - 896 1,734liquid resources Decrease in cash for the period (8) (30) (66)Reconciliation of net cash flowto movement in net funds Increase / (Decrease) in cash (8) (30) (66)in period Management of Liquid Resources - (896) (1,734) Change in net funds resulting (8) (926) (1,800)from cash flow Translation Difference (21) 114 188 Movement in net funds in the (29) (812) (1,612)period Opening net funds 732 2,344 2,344 Closing net funds 703 1,532 732 VANE Minerals PlcInterim Results for the Six Months to 30 June 2006 Notes to the Accounts 1. The financial information contained in this interim report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Subject to the FRS20 adjustment described below the figuresrelating to the year ended 31 December 2005 have been extracted from theaudited accounts which have been filed with the Registrar of Companies andreceived an unqualified audit report which did not contain a statement undersection 237(2) or (3) Companies Act 1985. The consolidated financial statements incorporate those of VANE Minerals Plcand its subsidiary undertakings for the period. The current and the comparative half year to June are Unaudited and have beenprepared using accounting policies and practices consistent with those adoptedin the accounts for the year ended 31 December 2005, with the exception of theapplication of FRS 20 (see below), and are also consistent with those which willbe adopted in the 2006 Annual Report and Accounts. FRS 20 The adoption of FRS 20 - Share Based Payments requires a prior period adjustmentto be made. This has created a share option reserve at 31 December 2005 of£95,100 and reduced the retained profits by £95,100; of this amount, £57,411 isattributable to the year ended 31 December 2005 and £31,277 to the six monthperiod ended 30 June 2006. The figures for the year ended 31 December 2005 reflect a re-categorisation of£155,000 of costs from administrative expenses to cost of sales as theseexpenses are more appropriately shown there. The interim accounts were approved by the Directors on 11 September 2006. 2. The Group's operating loss is derived from its continuing operationswhere the principal activity is the evaluation, acquisition and development ofmineral exploration targets, principally gold, copper, uranium and silvertargets abroad, from its base in the United Kingdom. 3. The calculation of the basic and diluted loss per ordinary share isbased on the loss after taxation of £345,000 (30 June 2005: £267,000, 31December 2005: £870,000) and on the weighted average number of ordinary sharesin issue during the period of 146,143,823 (30 June 2005: 146,143,823, 31December 2005: 146,143,823). 4. Reconciliation of Movement in Equity Shareholders' Funds £'000's Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Loss for Period (345) (267) (870)Effect of currency exchange movements (229) 114 188Share option charge 26 31 57Net decrease in shareholders' funds (548) (122) (625)Opening Shareholders' Funds 13,273 13,898 13,898Closing Shareholders' Funds 12,725 13,776 13,273 5. Reconciliation of operating loss to operating cash flow £'000's Unaudited Re-stated Re-stated Unaudited Audited 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05Operating loss (354) (346) (1,068)Decrease / (Increase) in debtors 117 (192) (182)Increase in creditors 55 35 90Increase in stock (52) - (123)Depreciation 423 - 155Share option charge 26 31 57Impairment of intangible fixed asset - - 17Operating cash flow 215 (472) (1,054) 6. Segmentation Information £'000's Turnover Loss Before Tax Unaudited Re-stated Re-stated Unaudited Re-stated Re-stated Unaudited Audited Unaudited Audited 6 months 6 months 12 months ended 6 months ended 6 months ended 12 months ended ended ended 31-Dec-05 30-Jun-06 30-Jun-05 31-Dec-05 30-Jun-06 30-Jun-05UK - - - (265) (236) (529)US - - - (234) (235) (546)Mexico 1,005 - 286 154 204 90Total 1,005 - 286 (345) (267) (985) 7. Convertible Loan On 31 August 2006 the company entered into a convertible loan agreement for£750,000 with City Natural Resources High Yield Trust Plc and Geiger CounterLtd, who have loaned £450,000 and £300,000 respectively. The funds raised willbe used to accelerate the exploration and development programme for the Group'sportfolio of uranium properties in Northern Arizona and South-eastern Utah, andto finance the construction of a mill at the Group's producing Diablitogold-silver mine, in Nayarit State, Mexico. The principal terms of the loan note are: • The loan note is unsecured and has a maturity date of 30 August 2010 • The note attracts interest at 8% per annum, paid quarterly • The loan note is convertible at the option of the holder at any time prior to the maturity date at a price of £0.12 per share, a premium of 33% to the present share price of 9p • After the initial 24-month period, if the 20-day average closing price of the Company's shares at any time attains £0.18 or more, the Company may call the convertible loan note for conversion at the conversion price • The number of ordinary 10p shares to be issued upon conversion of the note are subject to proportional adjustment to reflect stock dividends, share splits, reverse share splits and other anti-dilutive events • Upon a change of control involving the acquisition of voting control or direction over 50% or more of the ordinary shares of the Company, City Natural Resource High Yield Trust Plc / Geiger Counter Ltd has the right to require the Company to repurchase their loan note, in whole or in part, at a price equal to 101% of the principal amount, plus accrued and unpaid interest thereon. 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