ROSE.L Regulatory News (ROSE)

8 Apr 2008 11:37

Vane Minerals PLC08 April 2008 8 April 2008 VANE Minerals Plc (AIM:VML) ('VANE' or the 'Company') Preliminary Results for the year ended 31 December 2007 Vane Minerals Plc (AIM:VML), today announces its preliminary results for theyear ended 31 December 2007: Highlights • The portfolio of uranium properties continues to grow, with the acquisition of a number of new assets in Utah and Arizona. • The Arizona breccia pipe and Utah uranium drilling programs returned encouraging results - for Utah, a positive step towards the Company's aim of producing a resource estimate during the first half of 2008. • The Diablito mine in the State of Nayarit, Mexico continued to operate smoothly. • VANE's San Dieguito de Arriba mill was commissioned, resolving the bottleneck associated with milling the Diablito ore. Full scale, 24/7, operation of the 100-120 ton per day mill began on 14th January 2008. • A new programme has commenced focused on porphyry copper targets in the Southwestern USA and Northern Mexico and continues to develop and identify attractive targets. • Paraguay officials issued an Exploration Permit for the Itabo concession that will allow VANE to proceed with our exploration programme, including drilling. • Two convertible loans for an aggregate of £1.5 million were raised at attractive rates and more than £6 million was raised in a private placement of equity. • Year-end cash balance £5,813,353 Steve Van Nort, Chief Executive Officer, commented "The past year has been oneof determined progress for the Company, with significant growth of our uraniumportfolio in the US through the acquisition of a number of new assets in Arizonaand Utah. We continue to lead the way with regards to uranium exploration inhighly prospective areas." Enquiries: VANE Minerals Plc Thomas Weisel Partners Ambrian Partners Limited Parkgreen Communications Matthew Idiens Paul Newman Richard Brown Justine Howarth +44 (0) 20 7667 6322 +44 (0) 20 7290 9713 +44 (0) 20 7634 4709 +44 (0) 20 7851 7480 Chief Executive Officer's Report and Review of Operations I am pleased to present a review of your company at the end of a defining yearfor the business. Your company is well positioned to move ahead aggressively ona number of promising exploration programmes. Uranium Exploration in USA The decision by your company in late 2004 to move into the uranium sector wasbased on the assumption that in order to fulfil the energy requirements neededto keep or raise the standard of living around the world and at the same timereduce the apparent effects of the burning of fossil fuels on global warming,there needed to be more emphasis on increasing nuclear power generation,particularly in the USA. We believe a "home-grown" source of uranium will be keyto the future of nuclear power; a significant source of energy in the US.Uranium prices at that time were about US$19 per lb and they currently stand atUS$74 per lb (19th March source: UXC.com). Three years of productive acquisitionand exploration coupled with a four-fold increase in the price of uranium hasplaced VANE in a very competitive position. In the Northern Arizona Breccia Pipe District, drilling commenced in January2007 and continues to date. That drilling has intersected uraniummineralisation at depth in the Red Dike, Big Red, and Miller Pipes. Anadditional pipe, Miller SW, was identified while drilling at Miller, anddrilling there has intersected breccia, alteration and uranium mineralisation.These results have been published as part of various regulatory announcementsissued during the year. All properties so far drilled warrant continuedexploration, which is now in the planning stage. Drilling commenced on theEastern Star property in late 2007 with encouraging results warranting furtherdrilling. Identification and acquisition of new targets continued during theyear with the list of properties now numbering 30 on which 39 targets have beenidentified. 20 are approved for drilling and applications for the remainingtargets have been submitted. A technical report evaluating VANE's Arizonabreccia pipe projects and conforming to Canadian National Instrument 43-101standards was completed by SRK Consulting in October 2007. In Utah we are evaluating a number of stratabound uranium targets. Drillingcommenced in January 2007 on the North Wash property followed later in the yearby drilling at Happy Jack and North Alice Extension. Drilling at North Washconfirmed historic data on claims now controlled by VANE and providedjustification for continued exploration on that property. On the North AliceExtension project formerly held by Homestake Mining Co., 17 drill holes werecompleted that verified the limited historic data the Company holds as well asverifying mineralisation in an area where delineation drilling was completed.Drilling results have been published in press releases and the Company is in theprocess of completing an NI 43-101-compliant report on the North Wash and NorthAlice Extension projects. The Company plans to conduct a second round ofdrilling on these projects as well as at Happy Jack during 2008. A drillingpermit on the North Alice Extension, for an additional 75 hole programme, hasbeen granted and drilling is expected to commence imminently, weatherpermitting. An application is being processed on the North Wash and weanticipate this being granted shortly with drilling expected to commence soonafter. The Company added two geologists to its uranium team and continues toaggressively pursue acquisition and business opportunities both in the brecciapipe district and in the Utah/New Mexico/Colorado region. The recent actions taken by environmentalist groups against the US authoritiesconcerning uranium mining in the western USA were anticipated by the Company.The uranium industry has, for the most part, been dormant for two decades andthe restart of activities naturally raises interest. The company entered thebreccia pipe district of northern Arizona in 2004, confident that the proven,sound methods used by the mining industry since 1980 would hold up as activityresumed in the district. Many other companies are operating in the district,some having a larger presence than VANE, and those companies entered thedistrict aware of impending opposition from the environmentalist lobby. VANEenjoys close relations with those companies and, regarding this issue, VANE andthese companies are united in working to provide factual information to thepublic and to legislators to address the concerns raised. Diablito Mine and Milling operations in Mexico Through your company's 100% owned subsidiary, Minerales VANE SA de CV (MV), theDiablito mine continued to operate smoothly during the year, although dilutionby barren rock adjacent to the vein from which we are mining continues to be anissue. 17,250 tonnes of "direct milling ore", i.e. material containing more than300g/T silver and 3 g/T gold, was mined during 2007, averaging 1,438 tonnes permonth, slightly below our target of 1,500 tonnes per month. Mine production ofdirect milling ore during the final six months of 2007 amounted to 7,300 tonneswhich was stockpiled in anticipation of the start-up of our mill at San Dieguitode Arriba (SDA). An additional 7,848 tonnes of lower grade material, having avalue in excess of $50/T at $625/oz and $14/oz gold and silver pricesrespectively, was mined during 2007 and has been separately stockpiled near themine. Mining costs for this material have already been written off againstdirect milling ore on a monthly basis. Both the stockpiled direct milling ore,7,300 tonnes, and the lower grade material, which at year end amounted to 10,706tonnes (including 2,858 tonnes stockpiled during 2006), will be milled on aschedule determined by mill availability and metal prices. Direct milling oreproduced during the first 6 months of the year was processed at the custom millin Cosala. With commissioning of the SDA mill, transportation as well as millingcosts have decreased sharply and scheduling has been greatly simplified. Testing and shakedown of the SDA mill, located 30 km north of the Diablito mine,began in November 2007. The mill utilises the froth flotation process to treat100-120 metric tonnes of ore per 24-hour day. Full scale, 24/7, operation of the 100-120 ton per day mill began on 14 January,2008. Mill feed is being supplied by daily mine production supplemented bystockpiled direct milling ore. Once that stockpile has been depleted, processingof stockpiled lower grade material averaging 1.4 g Au/T and 150 g Ag/T will beused to augment mine production. Plans for mining and treatment of Diablito ore during 2008 are summarised below: • Mine production is expected at the rate of 50-75 tonnes per day.Grades will vary but should be in a range of 200g to 400g silver/tonne and 2g to4g gold/tonne. • The mill will process 85-100 tonnes per day, assuming 85%availability, utilising 2008 mine production of direct milling ore andsupplemented at the rate of 35-50 tonnes per day with direct milling orestockpiled during 2007. Once the stockpile of direct milling ore has beenexhausted, daily mine production will be supplemented from the lower gradestockpile. • Plans are underway to increase mine production in order to takeadvantage of favourable metal prices. New Southwestern USA Copper Exploration A number of new porphyry copper targets in the Southwestern USA and NorthernMexico are being evaluated and prepared for drilling. The porphyry copperprovince of Southwestern Arizona is well known, with Arizona alone accountingfor approximately 60% of the total annual US copper production. Politicalstability and relatively easy access combined with the high density of porphyryoccurrences makes the Southwestern copper province one of the world's mostprospective regions for the discovery of porphyry copper deposits. Paraguay Gold Exploration The issuance of an exploration permit covering the Itabo concession, 22,600square kilometres in east-central Paraguay, enables us to proceed with drilltesting of a number of attractive gold and gold-copper targets during the firsthalf of 2008. Guadalcazar Project, Mexico Efforts to find a suitable joint venture partner to continue the exploration atGuadalcazar have proven unsuccessful and the project has been terminated with nofurther cost to VANE. The Freeport-McMoRan Agreement The Freeport-McMoRan Copper and Gold Agreement covering VANE's access to theirexploration database, excluding Indonesia, was extended for an additional twoyears until 30 June 2009. This database, covering over 100 years of work, hasnow been largely examined and although the review activity will continue untilthe end of the current agreement, 30 June 2009, the directors have decided thatas it is unlikely that further targets will be located using these files theyhave written the value down to zero at the end of 2007. Principal Risks and Uncertainties The directors believe that the principal matters which could affect theperformance of the Company in the future:- • The Company currently generates its only income from the Diablito mineand so in that respect it is dependent upon its smooth operation. We have anexcellent relationship with the mining contractor, we have now commissioned ourown mill and we have a well-defined resource which may well be extended afterour current round of drilling. • The mill at San Dieguito de Arriba is operating smoothly with suppliesreadily at hand and spare components, mainly pumps and motors, currently beingsourced. • While drill rig availability is tight, VANE has secured rigs to coverall of the ongoing exploration programmes in Mexico, Southwestern USA andColorado Plateau. We are in discussions with a drilling company in Boliviaconcerning our Paraguayan project. • Additional drilling permits are under application and the timing onthe granting of these can vary to a large degree. • Changes to the US Mining Law of 1872, in legislation currently beforethe US Congress, may affect future operations in that royalties on mineralsobtained from Federal Lands (claims) may be instigated. • Political risk appears low in all our areas of operation. As Paraguaylacks a history of mining, matters related to property acquisition, permitting,bonding, etc. tend to move very slowly but once in place have so far gone verywell. At this time we have no capital at risk and expect to complete the Stage Iexploration drilling of our Itabo mining concession during 2008. • The prices of gold and silver have risen over the last six months and,given the current economic climate, we do not anticipate a precipitous drop inthe near future. Uranium oxide prices have fallen from their high of $135 perpound in early 2007, but with world-wide demand for uranium on the increaseagain, we do not expect a dramatic price change in the near term. Other important factors that could affect any one of your company's manyoperations, including Diablito, are unanticipated mining, milling and otherprocessing problems, accidents that lead to personal injury or property damage,persistent commodity price reductions, changes in political, social or economiccircumstances, variance in ore grades, labour relations, adverse weatherconditions and other adverse financial market conditions. We continue to monitorall aspects of our programmes with a view to ensuring their continued success. Relationships The Company enjoys good relationships with all of its suppliers and professionaladvisers. The relationship with the Mexican mining contractor, COMINVI SA de CV,the principal drilling contractors in Mexico, Landdrill International Mexico SAde CV and the principal drilling contractors in the USA, Del Rio Drilling andPump, Bob Beeman Drilling and WDC Exploration & Wells Company, are key to ourongoing operations. FINANCIAL REVIEW Revenues Revenues from the Diablito mine during the year have been lower than expectedowing to the later than expected start of operations at the new SDA mill whichhas been constructed at San Dieguito de Arriba. Although the delay has beenfrustrating, the increase in commodity prices over the period has, so far,worked in our favour. Mine production has continued at approximately 1,500tonnes per month during the last six months of the year, resulting in astockpile of ore ready for processing. Processing and transport costs will bemuch reduced from those experienced during the last financial year, when thecompany had to ship its ore over 300 kilometres to a third-party mill which wasnot available at the convenience of VANE. Results for the Year Under its first full year of IFRS reporting, the Company reported a net lossafter tax of £7,056,889 or 4.58 pence per share in 2007 (compared with £893,587or 0.61 pence per share as reported under UK GAAP in 2006, which was revised to£766,204 or 0.52 pence per share following conversion to IFRS). Of the total netloss for the period, £5,685,314 was due to the impairment of exploration assetsnet of deferred tax write-back associated with the impairment giving anoperating loss of £1,371,575 or 0.89 pence per share. The net impairment of£5,685,314 is explained by the table below. Expenses Impairment Deferred Tax Total Written-Off Adjustment AdjustmentGuadalcazar Exploration 438,280 6,054,742 (1,695,328) 4,797,694Freeport Agreement 0 1,118,232 (313,105) 805,127Paraguay Exploration 82,493 0 0 82,493Total 520,773 7,172,974 (2,008,433) 5,685,314 In the above table: Column 1 represents expenses incurred and written off in subsidiary companies ondiscontinued projects. Column 2 represents the impairment of the asset recognised when VANE Mineralsplc acquired VANE Minerals Limited in December 2003. Column 3 represents the adjustment to deferred tax as a result of the impairmentin column 2. The project for converting to IFRS reporting was completed in time for theInterim Statements to June 2007 to be produced in IFRS format. The Report andAccounts for the period to December 2007 is the first full period for which theGroup has adopted IFRS. Further Explanation of Asset Impairment The majority of the loss reported for the year was due to the discontinuance ofoperations at Guadalcazar, and the relinquishing of the Company's option topurchase the property. Strenuous efforts were made to find a joint venturepartner who would be able to take on the exploration and development of theresource at Guadalcazar, but as these proved unsuccessful after more than 12months had passed, the Board decided to abandon these efforts in favour ofpursuing the uranium exploration programme described above. The decision toimpair the Guadalcazar carrying value down to zero in the balance sheet affectedthe balance sheet of the Mexican Subsidiary company Minerales VANE SV de CV by atotal of MXN 9,585,662 (£438,280). Changes in the structure of the Freeport-McMoran Copper and Gold Corporationhave also made it unlikely that the access currently enjoyed by VANE toFreeport's accumulated data of mineral prospects will continue beyond June 2009when the current agreement expires. This database, covering over 100 years ofwork, has now been largely examined and although the review activity willcontinue until the end of the current agreement, 30 June 2009, the directorshave decided that as it is unlikely that further targets will be located usingthese files they have written the value down to zero at the end of 2007. The combined impairment of both projects represents a loss on the consolidatedbalance sheet, net of the deferred tax adjustment, of £5,685,314. Employee recruitment and retention Although the company has no quantitative target for the number of employees itneeds or retains, this metric is closely monitored. The company has an excellentrecord of retaining key staff. During the year two new members have been added to the uranium team and no staffhave left. Significant Equity Events In February 2007, Geiger Counter Limited subscribed for 1,000,000 ordinaryshares at 15p per share, registered in the name of BNY (OCS) Nominees Limited. In April 2007, the company raised a five year convertible loan of £1,000,000from Geiger Counter Limited which attracts interest at 8% per annum, and isconvertible at 29p per share. In May 2007, Geiger Counter Limited and City Natural Resources High Yield Trustplc exercised their right to convert loan notes of £750,000 into shares at 12pper share, by the issuance of 6,250,000 shares. In June 2007, a director, Robert Jeffcock, exercised 1,000,000 share options ata price of 11p per share, save for which none of the directors acquired or soldany shares of the company during the year. In September 2007, the company arranged a further £500,000 five year convertibleloan agreement with City Natural Resources High Yield Trust plc which enabledthe Company to continue to pursue the uranium opportunities in the US detailedabove and to complete the construction of the SDA mill. This new loan carriesinterest at 8% and can be converted at a price of 22.75p per share. In November 2007, the company was successful in raising £6.25m by the sale of35,714,285 new ordinary shares at a price of 17.5p per share. The placing wasled by the company's new brokers Westwind Partners (now called Thomas WeiselPartners "TWP"). Net cash received after expenses was £5,841,104. The company'sjoint brokers, Ambrian (45,628) and TWP (668,657), now hold compensation optionsover a total of 714,285 shares at a price of 17.5p per share. Following the issue of shares detailed above, there were a total of 190,108,108ordinary shares in issue at the year end. Cash Position The Company had closing cash balances across the group at year end totalling£5,813,353. Key Performance Indicators There are a number of key performance indicators that are reviewed regularly bythe Board as set out below in respect of 2007:- Item Actual Target Comment Production monthly 1,438 1,500 The average monthly production for 2007 was just belowtonnage the target. Maintenance of 3.4g Au 4.00g Au Due to the narrow vein we continue to experienceMineral Grades significant dilution of the anticipated grades. 283g Ag 550g Ag Gross Margin per $121 $142 This figure is calculated over the six months of thetonne of year in which ore was shipped to the smelter. Shipmentsproduction were suspended, and ore stock piled, during the last six months of the year pending the commissioning of our own Mill facilities. The value is lower than planned owing to reduction in mineral grades. Cash balances £5.8 million £0.7 million The major fund-raising during the year has ensured sufficient cash to carry out the aggressive uranium drilling programme. Strong cash flows from Diablito are expected as the stockpiled ore is processed. Cash flows from the Diablito mine cover most of the expenses of the rest of the company outside of the uranium exploration activity and any extraordinary items such as fund-raising expenses. Outlook Despite the current selling off of equities world-wide, which the AIM market hasnot escaped and which is reflected in depressed share prices for a great manyjunior mining stocks, VANE is in a strong position with a robust portfolio ofproperties. We have built up and are continuing to build both the uranium andporphyry copper exploration portfolios. Our strong cash position, plus healthycash flow from Diablito will enable your company to ride through these difficultfinancial markets. During the last six months, gold and silver prices have beenstrong, driven by the weakness of the dollar and "recession protection" buying,if the prices remain high this will enable the stockpiled ore to be sold athigher prices than expected. Your Company, with its strong financial footing, continues to evaluate a rangeof prospective targets, primarily uranium in the Colorado Plateau UraniumDistrict, gold and silver in Mexico and Paraguay, and copper in Southwestern USA/Northern Mexico and Paraguay. As indicated above, drilling, which is the key todiscovery of mineral deposits, will be our first order of business going forwardin all our primary areas of interest. Your board would like to take this opportunity to thank our shareholders foryour continued support. Steven D Van Nort, CEO CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2007 Notes Unaudited Unaudited 2007 2006 £ £ Revenue 4 1,370,735 1,592,632 Cost of sales (1,570,849) (957,740) ------------------- -------------------Gross (loss) / profit (200,114) 634,892 Operating and administrative expenses (1,480,114) (1,183,733)Impairment of exploration costs (7,693,747) (316,825) ------------------- -------------------Operating loss (9,373,975) (865,666) Income from investments 40,367 19,381Finance costs (100,924) (25,598) ------------------- -------------------Loss before taxation (9,434,532) (871,883)Taxation 2,377,643 105,679 ------------------- -------------------Loss for the year 4 (7,056,889) (766,204) ------------------- ------------------- All the above group's results relate to continuingoperations. Loss per share Basic & Diluted 6 (4.58p) (0.52p) ------------------- ------------------- CONSOLIDATED BALANCE SHEET 31 December 2007 Unaudited Unaudited 2007 2006 £ £ Non current assetsInvestments 213,571 -Intangible assets 925,015 7,828,224Property, plant and equipment 3,644,707 3,737,359 ------------------ ------------------ 4,783,293 11,565,583 ------------------ ------------------Current assetsInventories 545,016 579,668Trade and other receivables 249,263 228,990Cash and cash equivalents 5,813,353 624,374 ------------------ ------------------ 6,607,632 1,433,032 ------------------ ------------------ Total assets 11,390,925 12,998,615 ------------------ ------------------ Current liabilitiesTrade and other payables (269,436) (194,875)Taxation (10,358) (4,107) ------------------ ------------------ (279,794) (198,982) ------------------ ------------------ Non current liabilitiesConvertible loan notes (1,386,129) (676,474)Obligations under finance leases (6,825) (7,454)Deferred tax (396,892) (2,785,073)Provisions (37,500) - ------------------ ------------------ (1,827,346) (3,469,001) ------------------ ------------------Total liabilities (2,107,140) (3,667,983) ------------------ ------------------ Net assets 9,283,785 9,330,632 ------------------ ------------------ Equity attributable to equity holders of the parentShare capital 19,010,811 14,614,382Share premium account 2,359,071 -Share option reserve 195,203 143,769Other reserves 261,220 79,628Cumulative translation reserve (262,686) (233,822)Retained loss (12,279,834) (5,273,325) ------------------ ------------------Equity 9,283,785 9,330,632 ------------------ ------------------ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)For the year ended 31 December 2007 Share capital Share Premium Share Option Other Cumulative Retained Total reserve reserves translation loss reserves £ £ £ £ £ £ £ Balance at 1 14,614,382 - 95,100 - 43,957 (4,507,121) 10,246,318January 2006 Changes in equityfor 2006 Exchange - - - - (277,779) - (277,779)differences arisingon translation offoreign operations Loss for the year - - - - - (766,204) (766,204) ------------ ------------ ------------ ------------ ------------ ------------ ------------Total recognisedincome and expensefor the year - - - - (277,779) (766,204) (1,043,983) ------------ ------------ ------------ ------------ ------------ ------------ ------------ Equity component of - - - 79,628 - - 79,628convertible loannote Equity share - - 48,669 - - - 48,669options issued ------------ ------------ ------------ ------------ ------------ ------------ ------------Balance at 31December 2006 14,614,382 - 143,769 79,628 (233,822) (5,273,325) 9,330,632 Changes in equityfor 2007 Exchange - - - - (28,864) - (28,864)differences arisingon translation offoreign operations Loss for the year - - - - - (7,056,889) (7,056,889) ------------ ------------ ------------ ------------ ------------ ------------ ------------Total recognisedincome and expensefor the year - - - - (28,864) (7,056,889) (7,085,753) ------------ ------------ ------------ ------------ ------------ ------------ ------------ Issue of share 4,396,429 2,359,071 - - - - 6,755,500capital Equity component of - - - 123,216 - - 123,216convertible loannote Share based payment - - 101,814 - - - 101,814 Gain on conversion - - - 58,376 - - 58,376of convertible loannote Transfer on share - - (50,380) - - 50,380 -option exercise ------------ ------------ ------------ ------------ ------------ ------------ ------------Balance at 31December 2007 19,010,811 2,359,071 195,203 261,220 (262,686) (12,279,834) 9,283,785 ------------ ------------ ------------ ------------ ------------ ------------ ------------ CONSOLIDATED CASH FLOW STATEMENTFor the year end 31 December 2007 Unaudited Unaudited 2007 2006 £ £ Cash flow from operating activities Loss before taxation (9,434,532) (871,883) Income from investments (40,367) (19,381)Finance costs 100,924 25,598 Adjustments for:Depreciation of property, plant and equipment 537,039 518,963Impairment of intangible assets 7,693,747 316,825Share based payments 101,814 48,669Effect of foreign exchange rate changes (320) (62,106) Operating cash outflow before movements in working capital (1,041,695) (43,315)Decrease / (increase) in inventories 34,652 (456,775)(Decrease) / increase in trade and other receivables (20,273) 33,518Increase in trade and other payables 69,999 41,392 Cash generated from operations (957,317) (425,180)Income tax recovered / (paid) 159 (6,875)Interest paid (89,123) (19,496) Net cash used in operating activities (1,046,281) (451,551) Cash flow from investing activitiesInterest received 40,367 19,381Purchase of property, plant and equipment (407,132) (148,206)Purchase of investments (213,571) -Purchases of intangible assets (804,957) (252,520) Net cash used in investment activities (1,385,293) (381,345) Cash flow from financing activitiesRepayment of obligations under finance leases (6,374) -Proceeds from the issue of share capital 6,510,000 -Issue costs paid (379,500) -Proceeds from the issue of convertible loan notes 1,500,000 750,000 Net cash from financing activities 7,624,126 750,000 Net increase / (decrease) in cash and cash equivalents 5,192,552 (82,896) Cash and cash equivalents at beginning of year 624,374 731,932 Effect of foreign exchange rate changes (3,573) (24,662) Cash and cash equivalents at end of year 5,813,353 624,374 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2007 1. BASIS OF PREPARATION The financial information for the year ended 31 December 2007 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 7 April 2008. The statutory financial statements for the year ended 31 December 2007 have notbeen filed with the Registrar of Companies nor reported on by the Company'sauditors. They will be circulated to shareholders in April 2008 and the AnnualGeneral Meeting is arranged to take place on 20 May 2007. The comparative results for the year ended 31 December 2006 are an abridgedversion of the UK GAAP audited financial statements which have been filed withthe UK Registrar of Companies and on which the auditors issued an unqualifiedaudit report, and but which have now been converted to IFRS as detailed in theprevious announcement of the interim results to June 2007. 2. PRESENTATION OF FINANCIAL STATEMENTS The financial statements have been prepared on a basis consistent withInternational Accounting and Financial Reporting Standards ("IFRS") as adoptedin the EU. The financial statements are presented in British pounds as this is the currencyin which the majority of the Group's transactions are denominated. The company is domiciled in the United Kingdom. The company is listed on theAlternative Investment Market stock exchange. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of certain financial instruments. The principal accountingpolicies adopted are set out below. ADOPTION OF NEW AND REVISED STANDARDS In the current year, the Group has adopted IFRS7 "Financial Instruments:Disclosures", which is effective for annual reporting periods beginning on orafter 1 January 2007, and the related amendment to IAS1 "Presentation ofFinancial Statements". The impact of the adoption of IFRS7 and the changes toIAS1 has been to expand the disclosures provided in these financial statementsregarding the Group's financial instruments and the management of capital. Fourinterpretations issued by the International Financial Reporting InterpretationsCommittee are effective for the current period. These are IFRIC7 "Applying theRestatement Approach under IAS 29", "Financial Reporting in HyperinflationaryEconomies"; IFRIC8 Scope of IFRS2; IFRIC9 "Reassessment of Embedded Derivatives"; and IFRIC10 "Interim Financial Reporting and Impairment". The adoption ofthese Interpretations has not led to any changes in the Group's accountingpolicies. At the date of authorisation of these financial statements, the followingStandards and Interpretations that have not been applied in these financialstatements were in issue but not yet effective or endorsed (unless otherwisestated): IFRS 2 Share based payment - Amendments relating to vesting conditions and cancellations IFRS 3 Business Combinations - Amendments IFRS 7 Financial Instruments: Disclosures - Consequential amendments arising from amendments to IAS32 IFRS 8 Operating Segments (endorsed) IAS 1 Presentation of Financial Statements - Revised IAS 1 Presentation of Financial Statements - Amendments relating to Puttable Financial Instruments and obligations arising on liquidation IAS 23 Borrowing Costs - Amendment IAS 27 Consolidated and separate Financial Statements - Consequential amendments arising from amendments from IFRS3 IAS 28 Investments in Associates - Consequential amendments arising from amendments to IFRS3 IAS 31 Interest in Joint Ventures - Consequential amendments arising from amendments to IFRS3 IAS 32 Financial Instruments: Presentation - Amendments relating to Puttable Financial Instruments and obligations arising on liquidation IAS 39 Financial Instruments: Recognition and Measurement - Consequential amendments arising from amendments to IAS 32 IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments - Consequential amendments arising from amendments to IAS 32 IFRIC 11 IFRS 2 - Group and Treasury Share Transactions (endorsed) IFRIC 12 Service Concession Arrangements IFRIC 13 Customer loyalty programmes IFRIC 14 IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction The Directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialstatements of the Group, except for additional segment disclosures when IFRS 8comes into effect for periods commencing on or after 1 January 2009. BASIS OF CONSOLIDATION The consolidated financial statements incorporate those of Vane Minerals Plc ("the Company") and all its subsidiary undertakings (together, "the Group"). Allfinancial statements are made up to 31 December 2007. Subsidiary undertakings are those entities controlled directly or indirectly bythe Company. Control is achieved where the Company has the power to govern thefinancial and operating policies of an investee enterprise so as to obtainbenefits from its activities. 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 byother members of the Group. All intercompany transactions and balances between group enterprises areeliminated on consolidation. INVESTMENTS Long term investments representing interests in subsidiary undertakings arestated at cost less any provision for impairment in the value of the non-currentinvestment. INTANGIBLE ASSETS The Group applies the full cost method of accounting for Exploration andEvaluation costs, having regard to the requirements of IFRS 6 Exploration forand 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 assets once it has been established that there areresources present that may be capable of recovery. Cost pools are established onthe basis of geographic area. When it is determined that such costs will berecouped through successful development and exploitation or alternatively bysale of the interest, expenditure will be transferred to property, plant andequipment and depreciated over the expected productive life of the asset.Whenever a project is considered no longer viable the associated explorationexpenditure is written off to the income statement. 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 property, plant and equipment at ratescalculated to write assets down to their estimated residual value evenly overtheir useful economic lives at the following rates: • Diablito mine over the life of the mine • Ore Processing Mill over 10 years • 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, direct 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. 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. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the interest rate applicable. LEASING 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. 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 translation 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 pound 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: 31 December 2007 31 December 2007 closing 31 December 2006 31 December 2006 average average closing US dollar 2.0015 1.9856 1.8426 1.9617Mexican peso 21.8711 21.6783 20.0915 21.2893 RETIREMENT BENEFITS The Group makes contributions to the personal pension schemes for some of itsemployees and directors. Payments to these schemes are charged as an expense inthe income statement in respect of pension costs payable in the year. Therewere no unpaid contributions at the period end. TAXATION The tax amount in the income statement represents the sum of the tax currentlypayable and deferred tax. The tax currently payable is based on the taxable result for the period.Taxable result differs from result as reported in the income statement becauseit excludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are not taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on temporarydifferences between the carrying amounts of assets and liabilities for financialstatements and the corresponding tax bases used in the computation of taxableprofit and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thatfuture taxable profits will be available against which deductible temporarydifferences can be utilised. Such assets and liabilities are not recognised if the temporary differencearises from goodwill (or negative goodwill) or from the initial recognition(other than in a business combination) of other assets and liabilities in atransaction which affects neither the taxable profit nor the accounting profit. 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 based upon ratesenacted or substantially enacted at the balance sheet date. 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. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS EXCLUDINGGOODWILL At each balance sheet date, the Group reviews the carrying amounts of itsproperty, plant and equipment and intangible assets with finite lives todetermine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss (ifany). Where the asset does not generate cash flows that are independent fromother assets, the Group estimates the recoverable amount of the cash generatingunit to which the asset belongs. Goodwill arising on acquisition is allocated to cash-generating units. Therecoverable amount of the cash-generating unit to which goodwill has beenallocated is tested for impairment annually, or on such other occasions thatevents or changes in circumstance indicate that it might be impaired. 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. However, impairment losses relating togoodwill may not be reversed. FINANCIAL INSTRUMENTS The following policies for financial instruments have been applied in thepreparation of the Group's financial statements. Financial assets and financialliabilities are recognised on the Group's balance sheet when the Group becomes aparty to the contractual provisions of the instrument. Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and demand deposits, andother short-term highly liquid investments that are readily convertible to aknown amount of cash with three months or less remaining to maturity and aresubject to an insignificant risk of changes in value. Trade and other receivables Trade and other receivables do not carry any interest and are initially statedat their fair value and subsequently at amortised cost using the effectiveinterest rate method as reduced by appropriate allowances for estimatedirrecoverable amounts. The carrying amount of the financial asset is reduced by the impairment lossdirectly for all financial assets with the exception of trade receivables, wherethe carrying value is reduced through the use of an allowance account. When atrade receivable is considered uncollectible, it is written off against theallowance account. Subsequent recoveries of amounts previously written off arecredited against the allowance account. Changes in the carrying amount of theallowance account are recognised in the income statement. If in a subsequentperiod the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognised,the previously recognised impairment loss is reversed through the incomestatement to the extent that the carrying amount of the investment at the datethe impairment is reversed does not exceed the amount the amortised cost wouldhave been had impairment not been recognised. Trade payables Trade payables are not interest bearing and are stated initially at their fairvalue and are subsequently measured at amortised cost using the effectiveinterest rate method. 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. 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. SHARE-BASED PAYMENTS The Group operates an equity-settled share option plan. The fair value of theemployee service received in exchange for the grant of the options is recognisedas an expense. The total amount to be expensed over the vesting period isdetermined by reference to the fair value of the options granted, excluding theimpact of any non-market vesting conditions. Non-market vesting conditions areincluded in assumptions about the number of options that are expected to becomeexercisable. At each balance sheet date the Group revises its estimates of thenumber of options that are expected to become exercisable. It recognises theimpact of the revision to original estimates, if any, in the income statement,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. 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. 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. CRITICAL RISKS AND UNCERTAINTIES The accounting policies have been prepared to consider all relevant mattersrelating to the preparation of the financial statements of the group. Thedirectors have reviewed all available data and taken professional advice asrequired to consider the current estimated life of the Diablito mine in Mexico.From the information available their current estimate is 6 years. 4. SEGMENTAL INFORMATION For management purposes, the Group is organised into four operating divisions:UK, USA, Paraguay and Mexico. These divisions are the basis on which the Groupreports its primary segment information. Segment information about these divisions is presented below. The tables showthe geographic segmentation of the Group. Activities in Mexico are currentlyconcerned with gold and silver mining and exploration. Activities in the USA aresplit between research of the Freeport database and other sources for furthergold and silver properties, and research and evaluation of potential uraniumproperties. Activities in Paraguay are concerned with gold and copperexploration. Activities in the United Kingdom are concerned with administrationand management of the Group. 2007 2006 £ £Revenue UK - - USA - - Mexico 1,370,735 1,592,632 Paraguay - - --------------- --------------- 1,370,735 1,592,632 --------------- ---------------Segmental result UK (612,125) (524,391) USA (1,275,920) (61,177) Mexico (7,335,757) (287,638) Paraguay (210,730) 1,323 --------------- --------------- (9,434,532) (871,883) Current and deferred tax 2,377,643 105,679 Loss after taxation (7,056,889) (766,204) --------------- --------------- Depreciation UK - - USA 2,542 - Mexico 534,497 518,963 Paraguay - - --------------- --------------- 537,039 518,963 --------------- --------------- The average number of employees for the year for each of the Group's principaldivisions was as follows: 2007 2006 Number Number UK 2 2 USA 5 4 Mexico 24 11 Paraguay - - --------------- --------------- 31 17 --------------- --------------- 2007 2006 £ £Balance Sheet Segment Assets UK 18,797,372 11,738,441 USA 892,841 1,285,489 Mexico 4,393,017 11,151,008 Paraguay 156,991 125,247 Eliminated on consolidation (12,849,296) (11,301,570) --------------- --------------- Total Assets 11,390,925 12,998,615 --------------- ---------------Segment Liabilities UK 1,541,884 761,337 USA 41,152 28,918 Mexico 116,854 88,548 Paraguay - - Eliminated on consolidation - - --------------- --------------- Segment Liabilities 1,699,890 878,803 Current and Deferred Tax 407,250 2,789,180 --------------- --------------- Total liabilities 2,107,140 3,667,983 --------------- ---------------Capital Additions UK - - USA 693,738 97,516 Mexico 380,179 186,349 Paraguay 148,480 125,247 --------------- --------------- 1,222,397 409,112 --------------- --------------- Net Assets UK 4,406,192 (319,998) USA 851,689 1,252,102 Mexico 3,868,913 8,273,281 Paraguay 156,991 125,247 --------------- --------------- 9,283,785 9,330,632 --------------- ---------------Impairment UK - - USA 1,118,232 - Mexico 6,493,022 316,825 Paraguay 82,493 - --------------- --------------- 7,693,747 316,825 --------------- --------------- All the assets of the company relate to the mining operations in Mexico, USA andParaguay or for administration operations to support the mining. The group carries on operations in only one business segment namely theexploration and mining of minerals and so no secondary segment disclosures aregiven. The business segmentation effectively follows the geographic segmentationgiven above. 5. TAXATION 2007 2006 £ £ Current tax: Foreign Tax 6,092 6,876 Total current tax 6,092 6,876 Deferred tax: Origination and reversal of timing differences (375,302) (112,555) Reversal from impairment review (2,008,433) - (2,383,735) (112,555) Tax on loss for the year (2,377,643) (105,679) The charge for the year can be reconciled to the loss per the income statement as follows: Loss before tax (9,434,532) (871,883) Loss multiplied by the rate of corporation tax forcompanies of 30% (2006: 30%) (2,830,360) (261,565) Effects of: Expenses not deductible for tax purposes 63,044 84,924 Tax relief on share options exercised (38,250) - Share based payments 30,544 - Unrelieved tax losses carried forward 310,103 61,134 Other adjustments 76,913 2,952 Foreign Tax 10,363 6,876 Tax charge for year (2,377,643) (105,679) Unrelieved UK tax losses of £2,363,373 (2006: £1,681,145) carried forward havenot been recognised as a deferred tax asset, as there is currently insufficientevidence that the asset will be recoverable in the foreseeable future. Thelosses must be utilised in relation to the same operations. Tax for other jurisdictions is provided at rates prevailing in those countries. 6. LOSS PER ORDINARY SHARE The calculation of basic and diluted loss per ordinary share is based on thefollowing loss and number of shares. 2007 2006 £ £Earnings Earnings for the purpose of basic loss per share (net loss (7,056,889) (766,204)for the year) Number of sharesWeighted average number of shares for the purposes of basic 154,084,234 146,143,823loss per share Share options in issueWeighted average number of shares for the purposes of 156,419,217 146,143,823diluted loss per share As a result of the losses incurred, there is no dilutive effect from thesubsisting share options. This information is provided by RNS The company news service from the London Stock Exchange