ROSE.L Regulatory News (ROSE)

28 Sep 2007 07:04

Vane Minerals PLC28 September 2007 VANE Minerals Plc (AIM: VML) ("VANE" or "the Company") Interim Report - Six Months to 30th June 2007 Highlights • Continued production of gold and silver ore at the Diablito mine at 1,500 tonnes per month • Acquisition and commencement of construction of a mill at San Dieguito located 18 kms from the Diablito mine • £1m debt financing raised in the form of a convertible loan at 8% interest, converting at 29p per share • 9,000 tonnes of lower grade ore stockpiled ready for processing through VANE's own mill • Acquisition of uranium breccia pipe targets increased the total number to 34 • Drilling at the North Wash stratabound uranium prospect confirmed results obtained during the 1970s Post Period End Highlights • Mineralised breccia pipe discovered at Miller Southwest • Number of uranium breccia pipe targets increased to 38 - further acquisitions anticipated • Drilling commenced at North Alice Extension • San Dieguito Mill nearing completion with processing expected to commence in October 2007 • Ore mined in period to June 2007 now processed • Exploration underway at Bonanza Mine, State of Nayarit, Mexico Michael Spriggs, Chairman of VANE Minerals Plc, commented: "Progress made this period has been encouraging for the Company. We continue togenerate revenues via our production at Diablito; in the coming months this willbe accelerated by the expected completion of construction of the mill at SanDieguito. VANE continues to increase its breccia pipe targets, now owning atotal of 38. We anticipate to build on this further with the aid of thesuccessful £1m fund raising in February and with increased exposure to the northAmerican market through the appointment of Westwind Partners. The full Chairman's Statement and the financial statements follow and can alsobe found at: www.vaneminerals.com. Enquiries: VANE Minerals Plc Ambrian Partners Limited Parkgreen Communications Matthew Idiens Richard Brown Laura Llewelyn / Beth Harris +44 (0) 20 7667 6322 +44 (0) 20 7776 6417 +44 (0) 20 7851 7480 Chairman's and CEO's Statement Vane Minerals plc is pleased to announce its results for the six months ended 30June 2007. The period has seen further progress by your Company on a number of fronts.Production of silver-gold ore at the Diablito mine was accompanied bycommencement of construction of the VANE mill at San Dieguito. The Companycontinues to explore energetically in a number of geographical areas for avariety of geological targets, and has released a succession of encouragingassay results in this period. The basic philosophy of VANE continues; to explore and evaluate promisingprecious and base metal opportunities identified from the Freeport McMoRandatabase of mineral properties, under an arrangement with this company that hasbeen extended into 2009. This strategy has been strengthened in recent months bythe addition of a focused programme of exploration on a number ofhighly-prospective uranium properties in the southwestern US. Financing of these projects has been underpinned by the combination ofcontinuing revenue from the Company's Diablito gold-silver mine in Mexico andthe proceeds from a successful debt funding and convertible loan note concludedduring this period. Progress with individual projects is considered in turn below. Diablito Mineralization at Diablito occurs in two flat-lying veins that are closelyspaced and nearly parallel. The highest gold and silver values are typicallyfound in the lower of the two structures. For technical and safety reasons oremust first be extracted from the upper vein before higher grade material in thelower vein can be removed. For this reason mining during the first half of 2007was confined to the upper vein and although production was on target averaging1,500 tonnes per month, grade was averaging 3 g/T gold and 300 g/T silver at theCosala mill. Recently, we have commenced extraction on the higher grade lowervein and grades are expected to improve. Ore of a grade suitable for processing through our own 120 tpd mill now underconstruction at the San Dieguito mill site 18 km north of Diablito has beenstockpiled at the mine and now amounts to some 9,000 tonnes of materialaveraging 1.25 g/T gold and 150 g/T silver. This material will be processedalong with higher grade lower-vein material starting in mid October followingconstruction and startup at San Dieguito. The mining contract for the current year has been successfully negotiated withthe local firm in San Luis Potosi. Relations with these local contractors remainstrong and supportive. Improved results are expected during the second half as aresult of access to higher grade lower-vein ore and efficiency resulting fromutilization of our own custom mill. A drilling program is being scheduled forearly 2008 designed to elevate resources currently carried as "inferred" to "indicated/measured" status and to further expand the resource base. Guadalcazar Previous drilling at Guadalcazar has defined a very large gold-silver resourceamounting to 1.3 mm ounces of gold and 354 mm ounces of silver the grade ofwhich is too low to permit bulk mining. The extent and character of the mineralization suggest the existence of a stronggold system but widely spaced drilling has so far been unsuccessful in locatinga strongly mineralized centre. Additional work is needed to fully explore thetuff unit and underlying limestone. In Q1 VANE management made the decision toseek a farm out or joint venture partner to continue the exploration atGuadalcazar. Because of the consistently anomalous results from drill core andthe widely-spaced nature of the drilling so far completed we are optimistic thata centre of strong mineralization may yet be discovered by additionalexploration. Other projects in Mexico The San Dieguito mill was designed with some excess capacity with the idea ofeventually increasing production at Diablito, and/or accepting ore for tollmilling or from another mine in the district where VANE is actively exploring.With this in mind, an option to purchase agreement has been signed to explorethe Bonanza mine, a former silver and gold producer, located approximately 25 kmsouth southeast of San Dieguito Paraguay The regional exploration programme in Paraguay continues with encouragingresults. As a result of stream sediment and soil sampling, the original LaPaloma Sur Investigation area of 124,000 Ha has been reduced to 22,600 Ha whichwill be designated the Itabo Exploration concession. VANE's title to theconcession has never been in doubt but progress has been very slow in obtainingfinal government approval for the concession due principally to complicationsarising as a result of implementation of the new mining law. At the moment,however, final approval is imminent. Pending final government approval of the concession, VANE geologists have beenactive in the field completing a program of closely-spaced soil sampling anddeep hand dug pits. Pitting has produced samples anomalous in gold and copper(up to 75 ppb gold and 364 ppm copper) and enabled selection of six drillingtargets which will be drill tested as soon as final approval is received anddrilling equipment arranged. Uranium exploration Highlights for Period Post PeriodBreccia pipe drilling underway with encouraging Mineralised breccia pipe discovered at Millermineralization encountered SouthwestAcquisition of uranium breccia pipe targets increased Number of uranium breccia pipe targets increased tothe total number to 34 38 - further acquisitions anticipated Drilling at the North Wash stratabound prospect Drilling Commenced at North Alice Extensionconfirmed results obtained during the 1970'sAcquisition of North Alice Extension and North La Salproperties The combination of buoyant markets and access to highly attractive prospects inkey districts in the southwestern US has spawned a number of explorationprograms and mine start-ups in areas adjacent to VANE's operations. During Q2the Company added two field geologists, one at the position of ExplorationManager to meet staffing needs arising as a result of the increased pace ofexploration activity. In the Northern Arizona Breccia Pipe District, VANE initiated its drillingprogram as planned and has drilled continuously, as conditions permitted, duringthe six-month period. Encouraging mineralization has been discovered on the RedDike, Big Red and Miller pipes, and the results are currently being evaluated.Five additional pipe targets have been identified and acquired, three which aresituated on the Eastern Star patented claim which, because it is privately ownedby VANE, is not subject to permitting requirements for exploration. In Utah, where VANE is evaluating a number of stratabound uranium targets, anaggressive exploration and drilling programme is underway. First round programswere completed on the North Wash project and at the Happy Jack Mine whichpreviously produced uranium. At the North Wash project, the drilling verifiedthe results obtained by Cotter Corporation in their project carried out duringthe 1970's thus setting the stage for additional drilling to expand theresource. Additionally, acquisitions of the North Alice Extension, formerlyowned by Homestake Mining, and the North La Sal property were finalized.Drilling permits were granted on the North Alice Extension property and a 25drill hole programme commenced on the 30th July. In order to underpin this campaign to develop this uranium potential, theCompany in April secured an unsecured loan note for £1,000,000 at 8% coupon andconvertible at 29p, which represented a 29% premium to the share price at thetime. Financial Results These interim financial statements are the first the Company has prepared underInternational Financial Reporting Standards ("IFRS") and include areconciliation to the previously reported figures prepared under UK GAAP. Thefigures reported for 31 December 2006 have been audited under UK GAAP but notunder IFRS. The major reconciling items between UK GAAP and IFRS are in respectof deferred taxation and currency exchange adjustments detailed in Note 6 tothese Interim Accounts. Revenues for the period were less than for the comparable period last year owingto the unavailability of milling facilities which resulted in a higher thannormal inventory level at the period-end. The whole of the mine production forthe period was milled after the end of the period. Intangible assets increased in the period owing to continued explorationactivities in Mexico, Paraguay and the USA. Tangible assets, beforedepreciation, increased in the period as a result of the acquisition andconstruction of the San Dieguito Mill. During the period the £750,000 convertible loan notes shown on the balance sheetat 31 December 2006 were converted at 12p per share, resulting in the issuing of6,250,000 ordinary shares. In addition, Geiger Counter Limited subscribed for1,000,000 shares at a price of 15p per share, and Mr Robert Jeffcock, adirector, exercised 1,000,000 fully vested share options at a price of 11p pershare. Outlook Your Company continues to examine a range of prospective targets in a wide rangeof geological environments. It has the depth of technical and regional expertiseto be able to evaluate these opportunities rapidly and at low cost. The commencement of operations at the San Dieguito Mill will reduce productionand transport costs and smooth out cash flow as we will no longer have to awaitMill availability in order to process our ore. The current focus on uranium properties in areas of established production inArizona and Utah, at a time of sustained elevated uranium prices, will remain amajor exploration thrust, and we are confident that we will be able to announcefurther encouraging results as this programme continues. Michael Spriggs Steven Van Nort27 September 2007 Consolidated income statement Unaudited Unaudited 6 months ended year ended 30 June 31 December Notes 2007 2006 2006 £ £ £Continuing operationsRevenue 4 692,008 1,005,084 1,592,632 Cost of sales (960,183) (836,523) (957,740) Gross (loss)/profit (268,175) 168,561 634,892 Operating and administration expenses (669,790) (521,808) (1,500,558) Operating loss 4 (937,965) (353,247) (865,666) Investment income 11,897 8,618 19,381Finance costs (42,003) - (25,598) Loss before taxation (968,071) (344,629) (871,883) Taxation 103,462 105,420 105,679 Loss for the period attributable to equity holders (864,609) (239,209) (766,204) Loss per shareBasic & diluted 3 (0.58p) (0.16p) (0.52p) Consolidated balance sheet Unaudited Unaudited 30 June 31 December 2007 2006 2006 £ £ £Non-current assetsIntangible assets 8,184,539 7,989,690 7,828,224Property, plant and equipment 3,641,255 3,772,944 3,737,359Deferred tax asset 154,350 132,171 115,039 11,980,144 11,894,805 11,680,622 Current assetsInventories 446,805 175,105 579,668Trade and other receivables 174,854 163,917 228,990Cash and cash equivalents 942,939 703,170 624,374 1,564,598 1,042,192 1,433,032 Total assets 13,544,742 12,936,997 13,113,654 Current liabilitiesTrade and other payables (245,206) (198,864) (194,875)Taxation (4,550) (1,184) (4,107)Provision for other liabilities and charges - (11,406) - (249,756) (211,454) (198,982) Net current assets 1,314,842 830,738 1,234,050 Non-current liabilitiesConvertible loan notes (930,171) - (676,474)Deferred tax (2,836,171) (2,922,075) (2,900,112)Obligations under finance leases (9,248) - (7,454)Provisions (37,500) - - (3,813,090) (2,922,075) (3,584,040) Total liabilities (4,062,846) (3,133,529) (3,783,022) Net assets 9,481,896 9,803,468 9,330,632 EquityCalled up share capital 15,439,382 14,614,382 14,614,382Share premium account 55,500 - -Share option reserve 140,585 120,720 143,769Other reserves 209,219 - 79,628Accumulated deficit (6,087,554) (4,746,330) (5,273,325)Cumulative translation reserve (275,236) (185,304) (233,822) Equity shareholders' funds 9,481,896 9,803,468 9,330,632 Consolidated statement of changes in equity Share capital Share Share option Other Cumulative Accumulated Total premium reserve reserves translation deficit reserves £ £ £ £ £ £ £As at 1 January 14,614,382 - 95,100 - 43,957 (4,507,121) 10,246,3182006Loss for the period - - - - - (239,209) (239,209)Exchange - - - - (229,261) - (229,261)translationdifferences onforeign operations Total recognised - - - - (229,261) (239,209) (468,470)income and expense Share based payment - - 25,620 - - - 25,620 As at 30 June 2006 14,614,382 - 120,720 - (185,304) (4,746,330) 9,803,468 Consolidated statement of changes in equity Share capital Share Share option Other Cumulative Accumulated Total premium reserve reserves translation deficit reserves £ £ £ £ £ £ £As at 1 January 14,614,382 - 95,100 - 43,957 (4,507,121) 10,246,3182006Loss for the period - - - - - (766,204) (766,204)Exchange - - - - (277,779) - (277,779)translationdifferences onforeign operations Total recognised - - - - (277,779) (766,204) (1,043,983)income and expense Equity component of - - - 79,628 - - 79,628convertible loannoteShare based payment - - 48,669 - - - 48,669 As at 31 December 14,614,382 - 143,769 79,628 (233,822) (5,273,325) 9,330,6322006 Consolidated statement of changes in equity Share Share Share option Other Cumulative Accumulated Total capital premium reserve reserves translation deficit reserves £ £ £ £ £ £ £As at 1 January2007 14,614,382 - 143,769 79,628 (233,822) (5,273,325) 9,330,632Loss for the period - - - - - (864,609) (864,609)Exchangetranslationdifferences on - - - - (41,414) - (41,414)foreign operations Total recognisedincome and expense - - - - (41,414) (864,609) (906,023) Share based payment - - 47,196 - - - 47,196Issue of equityshares 100,000 50,000 - - - - 150,000Issue of equityshares onconversion of 625,000 - - 58,376 - - 683,376convertible loannoteIssue of equityshares on exercise 110,000of option 100,000 10,000 - - - -Transfer on shareoption exercise - - (50,380) - - 50,380 -Expenses of issueof equity shares - (4,500) - - - - (4,500)Equity component ofconvertible loannote - - - 71,215 - - 71,215 As at 30 June 2007 15,439,382 55,500 140,585 209,219 (275,236) (6,087,554) 9,481,896 Consolidated cash flow statement Unaudited Unaudited 30 June 31 December 2007 2006 2006 £ £ £Net cash (outflow)/inflow from operating aactivities (424,312) 214,964 (451,551) Net cash outflow from investing b (492,850) (222,465) (381,345)activities Net cash flow from financing activities c 1,253,953 - 750,000 Net increase/(decrease) in cash and cash 336,791 (7,501) (82,896)equivalents Effect of foreign exchange rate changes (18,226) (21,261) (24,662) Cash and cash equivalents at beginningof period 624,374 731,932 731,932 Cash and cash equivalents at end ofperiod 942,939 703,170 624,374 Appendices to the consolidated cash flow statement Unaudited Unaudited 30 June 31 December 2007 2006 2006 £ £ £a Cash flow from operating activities Operating loss from continuing operations (937,965) (353,247) (865,666) Depreciation and amortisation 267,448 422,721 518,963 Impairment of intangible fixed assets - - 316,825 Share based payments 47,196 25,620 48,669 Effect of foreign exchange rate changes 1,440 - (62,106) Operating cash (outflow)/inflow before movements in (621,881) 95,094 (43,315) working capital Decrease/(increase) in inventories 132,863 (52,212) (456,775) Decrease in trade and other receivables 54,118 117,286 33,518 Increase in trade and other payables 27,665 54,796 41,392 Cash generated by operations (407,235) 214,964 (425,180) Taxes paid (1,652) - (6,875) Interest paid (15,425) - (19,496) Net cash (outflow)/inflow from continuing operations (424,312) 214,964 (451,551) b Cash flow from investing activities Interest received 11,897 8,618 19,381 Purchase of property, plant and equipment (135,921) (24,368) (148,206) Purchase of intangible assets (368,826) (206,715) (252,520) Net cash outflow from investing activities (492,850) (222,465) (381,345) c Cash flow from financing activities Repayment of obligations under finance leases (1,547) - - Proceeds from the issue of share capital 260,000 - - Issue costs paid (4,500) - - Proceeds from the issue of convertible loan notes 1,000,000 - 750,000 Net cash generated from financing activities 1,253,953 - 750,000 Notes to the consolidated financial statements 1. Accounting Policies Basis of preparation This Report was approved by the directors on 27 September 2007. From January 1 2007, the Group has adopted International Financial ReportingStandards ("IFRS") and the International Financial Reporting InterpretationsCommittee ("IFRIC") interpretations in the preparation of its consolidatedfinancial statements. The financial statements have been prepared under thehistorical cost basis. Information on the impact on accounting policies andfinancial results resulting from the conversion from UK Generally AcceptedAccounting Practice ("UK GAAP") to IFRS is provided later in this report. Prior to 2007, the Group prepared its audited financial statements and unauditedinterim financial statements under UK GAAP. From 1 January 2007, the Group isrequired to prepare annual consolidated financial statements in accordance withIFRS as adopted in the EU. As the 2007 annual financial statements will includecomparatives for 2006, the Group's date of transition to IFRS is 1 January 2006with the 2006 comparatives restated to IFRS. Accordingly the financialinformation for the six months to 30 June 2006 has been restated to present thecomparative information in accordance with IFRS based on the transition date of1 January 2006. The accounting policies applied in these unaudited interim financial statementsare those that the group expects to apply in its annual financial statements forthe year ending 31 December 2007, which will be prepared in accordance withIFRS, and those parts of the Companies Act 1985 that remain applicable tocompanies reporting under IFRS. This half-year report does not constitute statutory accounts of the Group withinthe meaning of section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 December 2006, which were prepared under UK GAAP, have been filedwith the Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain any statement under section 237 (2) or (3) ofthe Companies Act 1985. The audited results for the year ended 31 December 2006disclosed in this report are an abridged version of the company's Annual Reportand Accounts adjusted for the transition to IFRS. It does not constitute theFinancial Statements for that period. At the date of authorisation of this report the following Standards andInterpretations, which have not been applied in these financial statements, werein issue but not yet effective: IFRS 8 Operating SegmentsIFRIC 8 Scope of IFRS 2IFRIC 9 Reassessment of Embedded DerivativesIFRIC10 Interim Financial Reporting and ImpairmentsIFRIC 11 Group and Treasury Share TransactionsIFRIC 12 Service Concession ArrangementsIFRIC 13 Customer loyalty programmesIFRIC 14 IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction Amendments of IAS1 and IAS 23 The directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialstatements of the Group when the relevant standards come into effect for periodscommencing on or after 1 January 2008. Principal accounting policies of the Group This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 30 June2007 or are expected to be endorsed and effective (or available for earlyadoption) at 31 December 2007, the Group's first annual reporting under IFRS.Based on these adopted and unadopted IFRS, the directors have made assumptionsabout the accounting policies expected to be applied, which are as set outbelow, when the first annual IFRS financial statements are prepared for the yearending 31 December 2007. The adopted IFRS that will be effective (or available for early adoption) in theannual financial statements for the year ending 31 December 2007 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for the annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 31 December 2007. Transitional arrangements The Group has taken the following optional exemptions contained in IFRS 1 'First-time Adoption of International Financial Reporting Standards' in preparingthe Group's balance sheet on transition to IFRS at 1 January 2006: • Business combinations - the Group has elected not to apply IFRS 3Business Combinations retrospectively to past business combinations (businesscombinations that occurred before the date of transition to IFRS). A UK GAAP to IFRS reconciliation for the comparative periods is included in thisinterim statement in note 6. Basis of consolidation The consolidated financial statements incorporate the financial statements ofVane Minerals plc ("the Company") and all of its subsidiary undertakings(together, "the Group"). Subsidiary undertakings are those entities controlled directly or indirectly bythe Company. Control arises when the Company has the ability to direct thefinancial and operating policies of an entity so as to obtain benefits from itsactivities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of the acquisition over the fair values of the identifiablenet assets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to the income statement in the period ofacquisition. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income, expenses and unrealised gains ontransactions between group companies are eliminated on consolidation. Intangible assets The Group applies the full cost method of accounting for Exploration andEvaluation ("E&E") costs, having regard to the requirements of IFRS 6Exploration for and Evaluation of Mineral Resources. Expenditure including related overheads on the acquisition, exploration andevaluation of interests in licences not yet transferred to the cost pool iscapitalised under intangible fixed assets once it has been established thatthere are resources present that may be capable of recovery. Cost pools areestablished on the basis of geographic area. When it is determined that suchcosts will be recouped through successful development and exploitation oralternatively by sale of the interest, expenditure will be transferred totangible fixed assets and depreciated over the expected productive life of theasset. Whenever a project is considered no longer viable the associatedexploration expenditure is written off to the profit and loss account. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand any accumulated impairment losses. The cost of an item of property, plantand equipment comprises its purchase price and any costs directly attributableto bringing the asset into use. Depreciation is provided on all tangible fixed assets at rates calculated towrite assets down to their estimated residual value evenly over their usefuleconomic lives at the following rates: - Diablito project over the life of the mine - Plant & machinery over 5 to 10 years Assets held under finance leases are depreciated over their expected usefullives on the same basis as owned assets or, where shorter, over the term of therelevant lease. The assets residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. The gain or loss arising on thedisposal or retirement of an asset is determined as the difference between thesale proceeds and the carrying amount of the asset and is recognised in theincome statement. Inventories Inventories are stated at the lower of cost and net realisable value. Costcomprises direct materials and, where applicable, directs labour costs and thoseoverheads that have been incurred in bringing the inventories to their presentlocation and condition. Cost is calculated using the weighted average method.Net realisable value represents the estimated selling price less all estimatedcosts to completion and costs to be incurred in marketing, selling anddistribution. Leases Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. The Group as lessee Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of thelease obligation so as to achieve a constant rate of interest on the remainingbalance of the liability. Finance charges are charged directly against income,unless they are directly attributable to qualifying assets, in which case theyare capitalised in accordance with the Group's general policy on borrowingcosts. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Retirement benefit costs The Group makes contributions to the personal pension schemes of its employeesand directors. The amount charged to the income statement in respect of pensioncosts is the contributions payable in the year. There were no unpaidcontributions at the period end. Investments in subsidiaries Investments in subsidiaries in the company's balance sheet are held at cost lessany provision for impairment in the value of the investment. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. Financial instruments The following policies for financial instruments have been applied in thepreparation of the Group's interim financial statements. Financial assets andfinancial liabilities are recognised on the Group's balance sheet when the Groupbecomes a party to the contractual provisions of the instrument. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and othershort-term highly liquid investments that are readily convertible to a knownamount of cash with three months or less remaining to maturity and are subjectto an insignificant risk of changes in value. Trade and other receivables Trade and other receivables do not carry any interest and are stated at theirfair value as reduced by appropriate allowances for estimated irrecoverableamounts. Trade payables Trade payables are not interest bearing and are stated at their fair value. Financial liabilities and equity instruments Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the group afterdeducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received,net of direct issue costs. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the directors' best estimate of thepresent value of the expenditure required to settle the obligation at thebalance sheet date. Decommissioning Provision for decommissioning is recognised in full when the related facilitiesare installed. The decommissioning provision is calculated as the net presentvalue of the Group's share of the expenditure expected to be incurred at the endof the producing life of the facility in the removal and decommissioning of theproduction, storage and transportation facilities currently in place. The costof recognising the decommissioning provision is included as part of the cost ofthe relevant asset and is thus charged to the income statement on a unit ofproduction basis in accordance with the Group's policy for depletion anddepreciation of property, plant and equipment. Period charges for changes in thenet present value of the decommissioning provision arising from discounting areincluded in finance costs. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on the taxable profit for the period.Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible inother years and it further excludes items that are never taxable or deductible.The Group's liability for current tax is calculated using tax rates that havebeen enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities for financial statementsand the corresponding tax bases used in the computation of taxable profit, andis accounted for using the balance sheet liability method. Deferred taxliabilities are generally recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable that futuretaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficientprofits will be available to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority. Foreign currencies The individual financial statements of each group company are presented in thecurrency of the primary economic environment in which it operated (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each group company are expressed in poundsterling, which is the functional currency of the Company, and the presentationcurrency for the consolidated financial statements. Transactions in currencies other than the functional currency of each groupcompany ("foreign currencies") are recorded in the functional currency at therates of exchange prevailing on the dates of the transactions. At each balancesheet date, monetary assets and liabilities that are denominated in foreigncurrencies are retranslated into the functional currency at the rates prevailingon the balance sheet date. Non-monetary assets and liabilities carried at fairvalue that are denominated in foreign currencies are translated at the ratesprevailing at the date when the fair value was determined. Non-monetary itemsthat are measured in terms of historical cost in a foreign currency are notretranslated. Gains and losses arising on retranslation are included in net profit or loss forthat period, except for exchange differences arising on non-monetary assets andliabilities where the changes in fair value are recognised directly in equity. For the purpose of presenting consolidated financial statements, the incomestatement and balance sheet of foreign operations and foreign entities aretranslated into the functional currency (pound sterling) on consolidation at theaverage rates for the period and the rates prevailing at the balance sheet datesrespectively. Exchange gains and losses arising on the translation of thegroup's net investment in foreign operations and foreign entities, arerecognised as a separate component of shareholders' equity. On disposal offoreign operations and foreign entities, the cumulative translation differencesare recycled to the income statement and recognised as part of the gain or losson disposal. Fair value adjustments arising on the acquisition of a foreign entity aretreated as assets and liabilities of the foreign entity and translated at theclosing rate. The Group has elected to treat fair value adjustments arising onacquisitions before the date of transition to IFRS as sterling denominatedassets and liabilities. The most important foreign currencies for the Group are the US dollar and theMexican peso. The relevant exchange rates for these currencies in sterling were: 30 June 30 June 2007 30 June 2006 30 June 31 December 2006 31 December 2006 2007 average closing average 2006 closing average closingUS dollar 1.9684 2.0044 1.8485 1.8485 1.8426 1.9617Mexican peso 21.5526 21.6808 20.8657 20.8657 20.0915 21.2893 Revenue Recognition Revenue from the sale of minerals is recognised when persuasive evidence,usually in the form of an executed sales agreement, of an arrangement existsindicating that there has been a transfer of risks and rewards to the customer,no further work or processing is required by the Group, the quantity and qualityof the goods has been determined with reasonable accuracy, the price is fixed ordeterminable, and collectability is reasonably assured. This is generally whentitle passes. Share-based payments The Group operates an equity-settled, share-based compensation plan. The fairvalue of the employee service received in exchange for the grant of the optionsis recognised as an expense. The total amount to be expensed over the vestingperiod is determined by reference to the fair value of the options granted,excluding the impact of any non-market vesting conditions. Non-market vestingconditions are included in assumptions about the number of options that areexpected to become exercisable. At each balance sheet date the Group revisesits estimates of the number of options that are expected to become exercisable.It recognises the impact of the revision to original estimates, if any, in theprofit and loss account, with a corresponding adjustment to equity. Fair value is measured by use of a Monte Carlo valuation model. The expectedlife used in the model has been adjusted, based on management's best estimate,for the effect of non-transferability, exercise restrictions and behaviouralconsiderations. The proceeds received are credited to share capital (nominal value) and sharepremium when the options are exercised. The costs of an equity transaction areaccounted for as a deduction from equity to the extent they are incrementalcosts directly attributable to the equity transaction that would otherwise havebeen avoided. Convertible Loan Notes Convertible loan notes are regarded as compound financial instruments,consisting of a liability component and an equity component. At the date ofissue, the fair value of the liability component is estimated using theprevailing market interest rate for similar non-convertible debt. The differencebetween the proceeds of issue of the convertible loan notes and the fair valueassigned to the liability component, representing the embedded option to convertthe liability into equity of the Group is included in equity. Issue costs are apportioned between the liability and equity components of thenotes based on their relative carrying amounts at the date of issue. The portionrelating to the equity component is charged directly against equity. The interest expense on the liability component is calculated by applying theprevailing market interest rate for similar non-convertible debt to theliability component of the instrument. The difference between this amount andthe interest paid is added to the carrying amount of the convertible loan note. Segmental reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that aresubject to risks and return that are different from those of segments operatingin other economic environments. 2. Dividends The directors do not recommend the payment of a dividend for the period. 3. Loss per ordinary share The calculation of basic and diluted loss per ordinary share is based on theloss on ordinary activities after taxation and on the following weighted averagenumber of shares in issue. Shares in Issue 30 June 2007 30 June 2006 31 December 2006 Weighted average number of shares 148,317,856 146,143,823 146,143,823 As a result of the loss incurred in the periods ended 30 June 2007, 30 June 2006and 31 December 2006 there is no dilutive effect from the subsisting shareoptions. 4. Segmental analysis The Group's principal geographic segments are: 6 months to 6 months to 12 Months to Geographical Location 30 June 2007 30 June 2006 31 December 2006 £ £ £RevenueUK - - -USA - - -Mexico 692,008 1,005,084 1,592,632Paraguay - 692,008 1,005,084 1,592,632 Loss after taxationUK (336,816) (159,305) (445,976)USA (204,334) (233,976) (528,532)Mexico (323,459) 154,072 208,304Paraguay - - - (864,609) (239,209) (766,204) Net AssetsUK (3,224,077) (2,754,845) (3,220,110)USA 1,618,189 1,142,223 1,252,102Mexico 10,911,159 11,416,090 11,173,393Paraguay 176,625 - 125,247 9,481,896 9,803,468 9,330,632 Activities in Mexico are currently concerned with gold and silver mining andexploration. Activities in the USA are split between research of the Freeportdatabase and other sources for further gold and silver properties, and researchand evaluation of potential uranium properties. Activities in Paraguay areconcerned with gold and copper exploration. Activities in the United Kingdom areconcerned with administration and management of the Group. 5. Explanation of transition to IFRS As required by IFRS 1, the impact of the transition from UK GAAP to IFRS isexplained below. The accounting policies set out above have been applied consistently to allperiods presented in this interim financial information and in preparing anopening IFRS balance sheet at 1 January 2006 for the purposes of the transitionto IFRS. IAS 1 - Presentation of Financial Statements. The form and presentation of theUK GAAP financial statements has been changed to be in compliance with IAS 1. IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS7, presents cash flows in three categories; cash flows from operatingactivities, cash flows from investing activities and cash flows from financingactivities. Other than the reclassification of cash flow into the new disclosurecategories, there are no significant differences between the Group's Cash FlowStatement under UK GAAP and IFRS. Consequently, no cash flow reconciliations areprovided. 6. Reconciliation of UK GAAP to IFRS Six months ended 30 June 2006 Income Statement IFRS adjustments UK GAAP Restated £ £ £Revenue 1,005,084 - 1,005,084 Cost of sales (836,523) - (836,523) Gross profit 168,561 - 168,561 Operating and administration expenses (521,808) - (521,808) Operating loss (353,247) - (353,247) Investment Revenue 8,618 - 8,618 Loss on ordinary activities before taxation (344,629) - (344,629) Taxation (B) - 105,420 105,420 Loss on ordinary activities after taxation (344,629) 105,420 (239,209) Loss per shareBasic & diluted (0.24p) (0.16p) 6. Reconciliation of UK GAAP to IFRS (continued) Six months ended 30 June 2006 Balance Sheet IFRS adjustments UK GAAP Restated £ £ £Non-current assetsIntangible assets 7,989,690 - 7,989,690Property, plant and equipment 3,772,944 - 3,772,944Deferred tax asset 132,171 - 132,171 11,894,805 - 11,894,805 Current assetsInventories 175,105 - 175,105Trade and other receivables 163,917 - 163,917Cash and cash equivalents 703,170 - 703,170 1,042,192 - 1,042,192 Total assets 12,936,997 - 12,936,997 Current liabilitiesTrade and other payables (198,864) - (198,864)Taxation (1,184) - (1,184)Provision for other liabilities and charges (11,406) - (11,406) (211,454) - (211,454) Net current assets 830,738 - 830,738 Non-current liabilitiesDeferred tax (B) - (2,922,075) (2,922,075) Total liabilities (211,454) (2,922,075) (3,133,529) Net assets 12,725,543 (2,922,075) 9,803,468 EquityCalled up share capital 14,614,382 - 14,614,382Share option reserve 120,720 - 120,720Accumulated deficit (A) (B) (2,009,559) (2,736,771) (4,746,330)Cumulative translation reserve (A) - (185,304) (185,304) Equity shareholders' funds 12,725,543 (2,922,075) 9,803,468 6. Reconciliation of UK GAAP to IFRS (continued) Year ended 31 December 2006 Income Statement IFRS adjustments UK GAAP Restated £ £ £Revenue 1,592,632 - 1,592,632 Cost of sales (957,740) - (957,740) Gross profit 634,892 - 634,892 Operating and administration expenses (1,500,558) - (1,500,558) Operating loss (865,666) - (865,666) Investment Revenue 19,381 - 19,381Finance costs (25,598) - (25,598) Loss on ordinary activities before taxation (871,883) - (871,883) Taxation (B) (21,704) 127,383 105,679 Loss on ordinary activities after taxation (893,587) 127,383 (766,204) Loss per shareBasic & diluted (0.61p) (0.52p) 6. Reconciliation of UK GAAP to IFRS (continued) 31 December 2006 Balance Sheet IFRS adjustments UK GAAP Restated £ £ £Non-current assetsIntangible assets 7,828,224 - 7,828,224Property, plant and equipment 3,737,359 - 3,737,359Deferred tax asset 115,039 - 115,039 11,680,622 - 11,680,622 Current assetsInventories 579,668 - 579,668 Trade and other receivables 228,990 - 228,990Cash and cash equivalents 624,374 - 624,374 1,433,032 - 1,433,032 Total assets 13,113,654 - 13,113,654 Current liabilitiesTrade and other payables (194,875) - (194,875)Taxation (4,107) - (4,107) (198,982) - (198,982) Net current assets 1,234,050 - 1,234,050 Non-current liabilitiesConvertible loan notes (676,474) - (676,474)Deferred tax (B) - (2,900,112) (2,900,112)Obligations under finance leases (7,454) - (7,454) (683,928) (2,900,112) (3,584,040) Total liabilities (882,910) (2,900,112) (3,783,022) Net assets 12,230,744 (2,900,112) 9,330,632 EquityCalled up share capital 14,614,382 - 14,614,382Share option reserve 143,769 - 143,769Other reserves 79,628 - 79,628Accumulated deficit (A) +(B) (2,607,035) (2,666,290) (5,273,325)Cumulative translation reserve (A) - (233,822) (233,822) Equity shareholders' funds 12,230,744 (2,900,112) 9,330,632 (A) Cumulative translation reserve The translation reserve results from exchange gains and losses arising on thetranslation of the Group's net investment in its overseas operatingsubsidiaries. These exchange differences were previously taken to the profitand loss reserve but have been shown as a separate translation reserve for IFRSreporting purposes. The foreign exchange impact of translating foreignoperations since 1 January 2006 is as follows: £229,261 for the six month periodto 30 June 2006 and £277,779 for the year ended 31 December 2006. 6. Reconciliation of UK GAAP to IFRS (continued) (B) Deferred tax Provision has been made for a deferred tax liability in relation to fair valueadjustments made on business combinations which took place prior to 1 January2006. Provision is required in accordance with IAS 12 and a correspondingadjustment has been made to retained earnings. The impact of this provisionsince 1 January 2006 is as follows: £105,420 deferred tax credit in the incomestatement for the six month period to 30 June 2006 and £127,383 credit for theyear ended 31 December 2006. 1 January 2006 Consolidated Balance Sheet IFRS adjustments UK GAAP Restated £ £ £Non-current assetsIntangible assets 7,990,975 - 7,990,975Property, plant and equipment 4,171,297 - 4,171,297Deferred tax asset 150,866 - 150,866 12,313,138 - 12,313,138 Current assetsInventories 122,893 - 122,893Trade and other receivables 262,508 - 262,508Cash and cash equivalents 731,932 - 731,932 1,117,333 - 1,117,333 Total assets 13,430,471 - 13,430,471 Current liabilities Trade and other payables (150,170) - (150,170)Taxation (6,488) - (6,488)Provision for other liabilities and charges - - - (156,658) - (156,658) Net current assets 960,675 - 960,675 Non-current liabilitiesDeferred tax - (3,027,495) (3,027,495) Total liabilities (156,658) (3,027,495) (3,184,153) Net assets 13,273,813 (3,027,495) 10,246,318 EquityCalled up share capital 14,614,382 - 14,614,382Share option reserve 95,100 - 95,100Accumulated deficit (1,435,669) (3,071,452) (4,507,121)Cumulative translation reserves - 43,957 43,957 Equity shareholders' funds 13,273,813 (3,027,495) 10,246,318 7. Capital and reserves Shares issued During the period ended 30 June 2007 1 million new ordinary shares were issuedfor a cash consideration of £145,500 net of expenses. Share option rights were exercised during the period ended 30 June 2007resulting in the issue of a further 1 million new ordinary shares for a cashconsideration of £110,000. In addition Geiger Counter Limited and City Natural Resources High Yield Trustplc exercised their conversion rights on a convertible loan note, resulting inthe issue of a further 6,250,000 shares. Share option reserve The share option reserve includes an expense based on the fair value of shareoptions issued since 7 November 2002. Other reserve The other reserve represents recognition of the equity component of theconvertible loan notes. Cumulative translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of operations that do not have asterling functional currency. Exchange differences are classified as equity andtransferred to the Group's translation reserve. Such translation differences arerecognised in the income statement in the period in which the operation isdisposed of. This information is provided by RNS The company news service from the London Stock Exchange