Serabi Regulatory News (SRB)

13 Mar 2007 10:37

Serabi Mining plc13 March 2007 The following replaces RNS release 8027S, released at 07.00 this morning. Thetables have now been included. SERABI MINING plc ("Serabi" or "the Company")Adoption of IFRS and Restatement under IFRS An EU directive requires Serabi to adopt IFRS from 1 January 2006. Serabi hasvoluntarily chosen to adopt the provisions of the International FinancialReporting Standards. The adoption is with effect from 1 January 2006. As a result of this change the Company is required to restate previouslyreported results and the accompanying information sets out the revised IncomeStatement, Balance Sheet and Cash Flow Statement for the previous financialperiod (3 months ended 31 December 2005) together with the notes explaining theeffect of the transition. The Company had already adopted the provisions of IFRS 2 (Share-based Payments)for the purposes of its previously reported figures. The principal effect of theIFRS is therefore in respect of foreign exchange impacts, as a result of a needto vary the Company's previous UK GAAP compliant policy on translation of nonmonetary assets denominated in foreign currencies to comply with IFRS. Theoverall effect of the restatement under IFRS has been to increase EquityShareholder Funds by US$1.98 million as at 31 December 2005 to US$28.6 million.There has been no effect on the previously reported Income Statement. Enquiries Serabi Mining plcGraham Roberts Tel: 020 7220 9550Chairman Mobile: 07768 902475 Clive Line Tel: 020 7220 9553Finance Director Mobile: 07710 151 692 E-mail: contact@serabimining.comWebsite: www.serabimining.com SERABI MINING PLCPreviously published financial information restated under IFRS Consolidated Income Statement(restated under IFRS)(expressed in US$) 3 months to 31 December 2005Administration expenses (621,422)Option costs (422,298)Depreciation of plant and equipment (339,552)Loss before interest and taxation (1,383,272)Foreign exchange loss (35,703)Interest payable (69,929)Interest receivable 21,044Loss before taxation (1,467,860)Taxation -Loss after taxation (1,467,860)Earnings per share (basic and diluted) (1.42) Statement of Recognised Income and Expense(restated under IFRS)(expressed in US$) 3 months to 31 December 2005Loss for period (1,467,860)Exchange loss on foreign currency net investment (1,273,264)Total recognised loss for period (2,741,124) Consolidated Balance sheet(restated under IFRS)(expressed in US$) As at 1 October 2005 As at 31 December (date of transition) 2005Non-Current AssetsGoodwill 1,752,516 1,752,516Development and deferred exploration expenditure 17,017,111 17,420,146Property, plant and equipment 4,754,641 5,763,233Total Non-Current Assets 23,524,268 24,935,895Current AssetsInventories 902,123 1,825,479Trade and other receivables 789,541 1,738,474Prepayments and accrued income 372,730 1,080,077Cash at bank and in hand 7,557,138 2,152,452Total Current Assets 9,621,532 6,796,482 Current LiabilitiesTrade and other payables 2,002,507 2,320,105Accruals 50,000 131,432Total Current Liabilities 2,052,507 2,451,537Net current assets 7,569,025 4,344,945Total assets less current liabilities 31,093,293 29,280,840 Non-Current LiabilitiesOther payables - 244,724Provisions 451,528 428,944Total Non-Current Liabilities 451,528 673,668Net Assets 30,641,765 28,607,172 EquityCalled up share capital 17,974,336 17,974,336Share premium reserve 11,818,128 11,818,128Option reserve 1,983,521 2,690,052Translation reserve - (1,273,264)Profit and loss account (1,134,220) (2,602,080)Equity shareholders' funds 30,641,765 28,607,172 Consolidated statement of changes in shareholders equity(restated under IFRS)(expressed in US$) Share Profit Share Premium Option Translation and Loss Total Capital Reserve Reserve Reserve Account Equity Equity 17,974,336 11,818,128 1,983,521 - (1,134,220) 30,641,765shareholders' fundsat 1 October 2005 Foreign currency - - - (1,273,264) - (1,273,264)adjustments Loss for period - - - - (1,467,860) (1,467,860) Total recognised - - - (1,273,264) (1,467,860) (2,741,124)income and expensefor period Share option - - 706,531 - - 706,531expense Equity 17,974,336 11,818,128 2,690,052 (1,273,264) (2,602,080) 28,607,172shareholders' fundsat 31 December 2005 Consolidated cash flow statement(restated under IFRS)(expressed in US$) For the period from 1 October to 31 December 2005Net cash flow from operations (2,774,855)Investing activitiesPurchase of property, plant and equipment (1,627,113)Exploration and evaluation expenditure (967,746)Net cash outflow from investing activities (2,594,859)Effects of exchange on cash and cash equivalents (34,972)Decrease in cash and cash equivalents (5,404,686) Reconciliation of Operating Loss to Net Cash flow from Operating Activities(restated under IFRS)(expressed in US$) For the period from 1 October to 31 December 2005Operating Loss (1,383,272)Depreciation 339,522Option Costs 422,298Interest received 21,044Interest paid (69,929)Foreign Exchange (55,679)Changes in working capital(Increase) in inventories (1,003,810)(Increase) in receivables, prepayments and accrued income (1,754,743)Increase in payables and accruals 709,714Net cash outflow from operations (2,774,855) Transition to IFRS Introduction The Group has adopted International Financial Reporting Standards as adopted foruse in the European Union (IFRS) with effect from 1 January 2006. n accordancewith IFRS 1, the group's transition date is 1 October 2005 being the start datefor which the Group will present full comparatives information in the 2006Annual Report and Accounts. An exercise to assess the full impact that the change to IFRS has had on theGroup's reported equity, reported losses and accounting polices, has beencompleted. This is explained in more detail below: Basis of transition The accounting policies set out below have been applied in preparing therestatement of the financial statements for the 3 month period ended 31 December2005 and in the preparation of an opening IFRS balance sheet at 1 October 2005(the Group's date of transition). In preparing its opening IFRS balance sheet, the Group has adjusted amountsreported previously in financial statements prepared in accordance with itsprevious basis of accounting (UK GAAP). An explanation of how the transitionfrom UK GAAP to IFRS has affected the Group's financial position, financialperformance and cash flows is set out in the following tables and the notes thataccompany the tables. IFRS 1 exemptions The Group has elected to apply the following exemptions from full retrospectiveapplication (a) Business combinations: The Group has chosen not to restate business combinations in accordance with IFRS 3 prior to 1 October 2005. (b) Fair value or revaluation at deemed cost: The group has not elected to restate items of property, plant and equipment to fair value at transition date. (c) Cumulative translation differences: The Group has elected to set the previously accumulated currency translation difference to zero at the date of transition. Effects of adopting IFRS on the Group's accounting policiesThe adoption of IAS 21, "The effects of changes in foreign exchange rates", has resulted in a change of accounting policy on the translation of non-monetary assets into the presentation currency of the group. Previously, non-monetary assets denominated in a foreign currency were recognised using the rate at the date of acquisition of the assets (the temporal method). Under IFRS, all such assets are required to be translated into the presentation currency using the exchange rate ruling at the balance sheet date (the closing rate method). Reconciliation of Equity1 October 2005 Effect of transition to(expressed in US$) Note UK GAAP IFRS IFRS Non-Current AssetsGoodwill 1,752,516 - 1,752,516Development and deferred exploration a 14,609,905 2,407,206 17,017,111expenditureProperty, plant and equipment a 4,088,030 666,611 4,754,641Total Non-Current Assets 20,450,451 3,073,817 23,524,268 Current AssetsInventories 902,123 - 902,123Trade and other receivables 789,541 - 789,541Prepayments and accrued income 372,730 - 372,730Cash and bank and in hand 7,557,138 - 7,557,138Total Current Assets 9,621,532 - 9,621,532 Current LiabilitiesTrade and other payables 2,002,507 - 2,002,507Accruals 50,000 - 50,000Total Current Liabilities 2,052,507 - 2,052,507Net current assets 7,569,025 - 7,569,025Total assets less current liabilities 28,019,476 3,073,817 31,093,293 Non-Current LiabilitiesOther payables - - -Provisions 451,528 - 451,528Total Non-Current Assets 451,528 - 451,528Net Assets 27,567,948 3,073,817 30,641,765 EquityCalled up share capital 17,974,336 - 17,974,336Share premium reserve 11,818,128 - 11,818,128Option reserve 1,983,521 - 1,983,521Profit and Loss account b (4,208,037) 3,073,817 (1,134,220)Equity shareholders' funds 27,567,948 3,073,817 30,641,765 Effect of31 December 2005 transition to(expressed in US$) Note UK GAAP IFRS IFRS Non-Current AssetsGoodwill 1,752,516 - 1,752,516Development and deferred exploration a 15,831,875 1,588,271 17,420,146expenditureProperty, plant and equipment a 5,375,621 387,612 5,763,233Total Non-Current Assets 22,960,012 1,975,883 24,935,895 Current AssetsInventories 1,825,479 - 1,825,479Trade and other receivables 1,738,474 - 1,738,474Prepayments and accrued income 1,080,077 - 1,080,077Cash and bank and in hand 2,152,452 - 2,152,452Total Current Assets 6,796,482 - 6,796,482 Current LiabilitiesTrade and other payables 2,320,105 - 2,320,105Accruals 131,432 - 131,432Total Current Liabilities 2,451,537 - 2,451,537Net current assets 4,344,945 - 4,344,945Total assets less current liabilities 27,304,957 1,975,883 29,280,840 Non-Current LiabilitiesOther payables 244,724 - 244,724Provisions 428,944 - 428,944Total Non-Current Assets 673,668 - 673,668Net Assets 26,631,289 1,975,883 28,607,172 EquityCalled up share capital 17,974,336 - 17,974,336Share premium reserve 11,818,128 - 11,818,128Option reserve 2,690,052 - 2,690,052Translation reserve c - (1,273,264) (1,273,264)Profit and Loss account c (5,851,227) 3,249,147 (2,602,080)Equity shareholders' funds 26,631,289 1,975,883 28,607,172 Notes to the reconciliation of equity (a) The adoption of IAS 21 has resulted in a change in the accounting policyfor the conversion of non- monetary assets being, Property plant and equipmentand Development and deferred exploration expenditure. Previously the Group had used the temporal method of conversion of these assets.Under IAS 21 the Closing rate method in translating these assets is used. (b) The effect of the adjustment on equity at 1 October 2005 isUS$3,073,817, and the amount has been taken to retained earnings. Thecumulative effect of adjustments on equity at 31 December 2005 is an increase of$1,975,883, of which an exchange translation loss of $1,097,934 during the threemonths ended 31 December 2005 has been taken to the translation reserve. (c) The effect of the adjustment on equity is as follows, and the amount hasbeen identified separately as a translation reserve. US$ 31 December 2005 Exchange gain arising on net equity at the date of transition 3,073,817 Exchange loss previously recognised transferred to TranslationReserve 175,330 Movement in retained earnings 3,249,147 Exchange loss arising in the period under IAS 21 (1,097,934) Exchange loss previously recognised transferred to TranslationReserve (175,330) Movement in Translation Reserve (1,273,264) Reconciliation of Loss Effect of transition toThree months to 31 December 2005 Note UK GAAP IFRS IFRS (expressed in US$)Administration expenses (621,422) - (621,422)Option costs (422,298) - (422,298)Depreciation of plant and equipment (339,552) - (339,552)Loss before interest and taxation (1,383,272) - (1,383,272)Foreign exchange loss (35,703) - (35,703)Interest payable (69,929) - (69,929)Interest receivable 21,044 - 21,044Loss before taxation (1,467,860) - (1,467,860)Taxation - -Loss after taxation (1,467,860) - (1,467,860)Earnings per share (basic and diluted) (1.42) - (1.42) Statement of Recognised Income and Expense(expressed in US$) Effect of transition to Note UK GAAP IFRS IFRS Loss for period (1,467,860) - (1,467,860)Exchange loss on foreign currency net investment c (175,330) (1,097,934) (1,273,264)Total recognised loss for period (1,643,190) (1,097,934) (2,741,124) Explanation of material adjustments to the cash flow statement Interest paid has been reclassified as part of net cash outflow from operatingactivities where under UK GAAP it formed part of the return on investments andservicing of finance. Interest received has been reclassified under net cash from operating activitieswhere under UK GAAP it formed part of the return on investments and servicing offinance. There are no other material differences between the cash flow statementpresented under IFRS and the cash flow statement presented under UK GAAP. Significant accounting policies under IFRS (a) Basis of preparationThe financial statements are presented in US dollars. They are prepared on thehistorical cost basis or the fair value basis where the fair valuing of relevantassets and liabilities has been applied. The accounting policies set out below have been applied consistently to allperiods presented in these consolidated financial statements and in preparing anopening IFRS balance sheet at 1 October 2005 for the purposes of the transitionto IFRS. (b) Basis of consolidation(i) SubsidiariesThe consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 December each year. Control is recognised where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. On acquisition, the assets, liabilities andcontingent liabilities of a subsidiary are measured at their fair value at thedate of acquisition. Any excess of the cost of the acquisition over the fairvalues of the identifiable net assets acquired is recognised as goodwill. If thecost of the acquisition is less than the fair value of net assets of thesubsidiary acquired, the difference is recognised directly in the incomestatement. 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 into line with those used by theGroup. All intra-group transactions, balances, income and expenses are eliminated on consolidation. (ii) Transactions eliminated on consolidationIntra-group balances and any unrealised gains and losses or income and expensesarising from intra-group transactions, are eliminated in preparing theconsolidated financial statements. (c) Foreign currencyThe Group's presentation currency is US dollars, and has been selected based onthe currency of the primary economic environment in which the Group as a wholeoperates. Transactions in currencies other than the functional currency of a company arerecorded at a rate of exchange approximating to that prevailing at the date ofthe transaction. At each balance sheet date, monetary assets and liabilitiesthat are denominated in currencies other than the functional are translated atthe amounts prevailing at the balance sheet date and any gains or losses arisingare recognised in the income statement. On consolidation, the assets and liabilities of the Group's overseas operationsthat do not have a US dollar functional currency are translated at exchangerates prevailing at the balance sheet date. Income and expense items aretranslated at the average exchange rate for the period. Exchange differencesarising are recognised in the income statement. (d) Property, plant and equipment(i) Owned assetsItems of property, plant and equipment are stated at cost less accumulateddepreciation (note d(iv)) and impairment losses (note (h)). Upon demonstration of the feasibility of commercial production, any pastdeferred exploration, evaluation and development costs related to that operationwill be reclassified as Mining Properties. They will be stated at cost lessamortisation charges and any provision for impairment. Amortisation will becalculated on the Unit of Production basis (ii) Leased assetsAssets held under leases, which result in the Group bearing risk and receivingbenefit of ownership (finance leases), are capitalised as property, plant andequipment at the estimated present value of underlying lease payments. The corresponding finance lease obligation is included within borrowings. Theinterest element is allocated to accounting periods during the lease term toreflect a constant rate of interest on the remaining balance of the obligationfor each accounting period. At the date of transition the Group had no leased assets. (iii) Subsequent costsThe Group recognises in the carrying amount of an item of property, plant andequipment the cost of replacing part of such an item when that cost is incurredif it is probable that the future economic benefits embodied with the item willflow to the Group and the cost of the item can be measured reliably. All othercosts are recognised in the income statement as an expense as incurred. (iv) DepreciationDepreciation is charged to the income statement on a straight-line basis overthe estimated useful lives of each part of an item of property, plant andequipment. Land is not depreciated. The estimated useful lives are as follows: Mining AssetsProcessing plant three - seven yearsOther plant and assay equipment two - ten yearsHeavy vehicles eight yearsLight vehicles three yearsLand and Buildings ten - twenty yearsMining Properties unit of production Other AssetsFurniture and fittings five yearsOffice Equipment four yearsCommunication installations five yearsComputers three years The residual value, if not insignificant, is reassessed annually. Gains andlosses on disposal are determined by comparing proceeds with carrying amount andare included in the income statement. (e) Deferred exploration and evaluation costs All costs related to the exploration of mineral properties are capitalised anddeferred until either the properties are demonstrated to be commerciallyfeasible (see note d (i)) or until the properties are sold, allowed to lapse orabandoned, at which time any capitalised costs written off to the incomestatement. All costs incurred prior to obtaining the legal right to undertake explorationand evaluation activities on a project are written-off as incurred. Exploration and evaluation costs arising following the acquisition of anexploration licence are capitalised on a project-by-project basis, pendingdetermination of the technical feasibility and commercial viability of theproject. Costs incurred include appropriate technical and administrativeoverheads but not general overheads. Deferred exploration costs are carried athistorical cost less any impairment losses recognised. Property, plant and equipment used in the Group's exploration activities areseparately reported. (f) Trade and other receivablesTrade receivables are not interest bearing and are stated at fair value at thebalance sheet date. Other receivables are not interest bearing and are stated at amortised cost at the balance sheet date. Receivables in respect of sale of gold/copper concentrate are revalued usingmetal prices ruling at the balance sheet date. Increments and decrements infinal measured metal content of the concentrate delivered to the customer areadjusted upon presentation of the final invoice. (g) Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call withbanks, other short-term highly liquid investments with original maturities ofthree months or less, and bank overdrafts. Bank overdrafts are shown withinborrowings in current liabilities on the balance sheet. (h) ImpairmentWhenever events or changes in circumstance indicate that the carrying amount ofan asset may not be recoverable an asset is reviewed for impairment. An asset'scarrying value is written down to its estimated recoverable amount (being thehigher of the fair value less costs to sell and value in use) if that is lessthan the asset's carrying amount. Impairment reviews for deferred exploration and evaluation costs are carried outon a project by project basis, with each project representing a single cashgenerating unit. An impairment review is undertaken when indicators ofimpairment arise but typically when one of the following circumstances apply: (i) unexpected geological occurrences that render the resource uneconomic (ii) title to the asset is compromised (iii) variations in metal prices that render the project uneconomic (iv) variations in the currency of operation (i) Share capitalThe Company's ordinary shares are classified as equity. Called up share capital is recorded at par value of 10p per share. Monies raised from the issue of shares in excess of par value have been recordedas Share Premium. Costs associated with the raising of capital have been nettedoff of this amount. (j) BorrowingsBorrowings and interest bearing borrowings are initially recognised at fairvalue, net of transaction costs incurred. Borrowings are subsequently stated atamortised cost with any difference between the proceeds (net of transactioncosts) and the redemption value recognised in the income statement over theperiod of the borrowings using the effective interest rate method. (k) Employee benefits(i) Share based payment transactionsThe Group issues share based payments to certain employees, which are measuredat fair value at date of grant. The fair value determined at the grant date isexpensed on a straight line basis over the vesting period, based on the Group'sestimate of shares that will eventually vest. (ii) Share Options In accordance with IFRS 2 the entity measures the goods or services received bymeasurement of the fair value of the share options. This cost is charged to theprofit and loss account. The Black - Scholes method has been used to calculatethis fair value. The expected life of the instrument used in the model isadjusted, based on management's best estimate, for the effects ofnon-transferability, exercise restrictions and behavioural considerations. The entity measures the fair value of the services received by reference to thefair value of the equity instruments granted, because typically it is notpossible to estimate reliably the fair value of the services received. The fairvalue is measured at the date of grant. Where the equity instruments granted donot vest immediately but after a specified number of years, the fair value isaccounted for over the vesting period. (iii) Pension costsThe group does not operate any pension plan for its employees although it doesmake contributions to employee pension plans in accordance with instructionsfrom those employees. The company has no contractual commitment as to theability of those funds to provide any minimum level of future benefit to theindividual and is contracted only to make the contributions. Companycontributions to such schemes are charged against profits as they full due. (l) ProvisionsProvisions are recognised when:(i) the Group has a present legal or constructive obligation as a result of past events;(ii) it is more likely than not that an outflow of resources will be required to settle the obligation; and(iii) the amount can be reliably estimated. (m) Trade and other payablesTrade and other payables are not interest bearing and are stated at cost. (n) Inventories Inventories are stated at the lower of cost and net realisable value. Materials held for consumption within operations are valued based on purchaseprice or when manufactured internally at cost. Costs are allocated on anaverage basis and include direct material, labour, related transportation costsand an appropriate allocation of overhead costs. Gold bullion and concentrate and any other production inventories are valued atthe lower of cost or net realizable value. Cost will reflect appropriatemining, processing, transport and labour costs as well as an allocation of mineservices overheads. Net realisable value is the estimated selling price in the ordinary course ofbusiness, after deducting the costs of marketing, selling and distribution tocustomers. (o) Revenue Turnover represents amounts receivable in respect of sales of gold and byproducts. Turnover represents only sales for which contracts have been agreedand for which the product has been delivered to the purchaser in the manner setout in the contract. Turnover is stated net of any applicable sales taxes Revenue from the sale of goods is recognised when the significant risks andrewards of ownership have been transferred to the buyer. Revenues arerecognised in full using prices ruling at the date of sale with adjustment madefor gold prices ruling at the balance sheet for any sales in which final pricinghas not been agreed. Further adjustments in respect of final sales prices arerecognised in the month that such adjustment is agreed. Any unsold productionand in particular concentrate is held as inventory and valued at production costuntil sold. No revenue is recognised if there are significant uncertainties regardingrecovery of the consideration due. All sales revenue from incidental production arising during the exploration,evaluation and development of a mineral resource prior to commercial productionare taken as a contribution towards previously incurred costs and offset againstthe related asset accordingly. Interest income is recognised on a time-proportion basis using the effective interest rate method. (p) Expenses(i) Operating lease paymentsPayments made under operating leases are recognised in the income statement on astraight-line basis over the term of the lease. (ii) Finance lease paymentsLease payments are apportioned between the finance charge and the reduction ofthe outstanding liability. The finance charge is allocated to each period duringthe lease term so as to produce a constant periodic rate of interest on theremaining balance of the liability. (iii) Net financing costsNet financing costs comprise interest payable on borrowings calculated using theeffective interest rate method and interest receivable on funds invested.Interest income is recognised in the income statement as it accrues, using theeffective interest method. (q) TaxationThe charge for taxation is based on the result for the year and takes intoaccount deferred tax. Deferred tax is the tax expected to be payable orrecoverable on differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used inthe computation of taxable profit, and is accounted for using the balance sheetmethod. Deferred tax assets are only recognised to the extent that it is probable thatfuture taxable profit will be available against which the temporary differencescan be utilised. (r) Segment reportingA segment is a distinguishable component of the Group that is engaged either inproviding products or services (business segment), or in providing products orservices within a particular economic environment (geographical segment), whichis subject to risks and rewards that are different from those of other segments. The Group has only one business segment, namely gold mining and exploration.This is considered to be the primary reporting segment for the Group. The Group operates in three geographic segments, namely, Brazil, United Kingdomand Australia. This is considered to be the secondary reporting segment for theGroup. (s) Goodwill Goodwill on acquisition is initially measured at cost being the excess of thecost of the business combination over the acquirer's interest in the net fairvalue of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulatedimpairment losses. Goodwill is not amortised. Goodwill is reviewed for impairment, annually or morefrequently if events or changes in circumstances indicate that the carryingvalue may be impaired. As at the acquisition date, any goodwill acquired is allocated to the group'scash-generating units. Impairment is determined by assessing the recoverable amount of thecash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than thecarrying amount, an impairment loss is recognised. This information is provided by RNS The company news service from the London Stock Exchange