SRX.L Regulatory News (SRX)

Notes

2007

2006

ASSETS 

USD'000

USD'000

Non-current assets

Property, plant and equipment

5

142,348 

92,665 

Intangible assets

6

13,150 

13,115 

Non-current receivables

9

753 

753 

Deferred tax assets

10 (a)

86,879 

86,373 

243,130 

192,906 

Current assets

Inventories

11

14,890 

15,054 

Trade and other receivables

12

21,562 

14,275 

Current tax assets

18 (d)

211 

- 

Cash and cash equivalents

28( c)

25,731 

52,393 

62,394 

81,722 

Total assets

305,524 

274,628 

EQUITY AND LIABILITIES

Capital and reserves

Share capital 

13

237,041 

198,160 

Revenue reserve

4,154 

20,869 

Equity holders' interest

241,195 

219,029 

LIABILITIES

Non-current liabilities

Borrowings

15

44,119 

36,856 

Provisions for liabilities and charges

16

2,833 

2,150 

46,952 

39,006 

Current liabilities

Trade and other payables

17

17,233 

16,464 

Current tax liabilities

18 (d)

- 

85 

Borrowings

15

144 

44 

17,377 

16,593 

Total liabilities

64,329 

55,599 

Total equity and liabilities

305,524 

274,628 

These financial statements have been approved for issue by the Board of Directors on :-

)

)

DIRECTORS

)

The notes form an integral part of these financial statements.

Notes

2007

2006

USD'000

USD'000

Sales

2 (o)

67,849 

51,304 

Cost of sales

20

(72,261)

(44,621)

Gross (loss)/profit

(4,412)

6,683 

Other income

22

2,618 

2,812 

Administrative and marketing expenses

20

(6,281)

(7,078)

(8,075)

2,417 

Exceptional item

23

(2,445)

(2,200)

Finance costs

24

(6,497)

(1,694)

Loss before taxation

19

(17,017)

(1,477)

Taxation

18 (a)

302 

35,923 

(Loss)/profit for the year attributable 

to equity holders of the group

(16,715)

34,446 

(Loss)/earnings per share (USD)

- basic

26 (a)

(0.07)

0.16 

- diluted

26 (b)

(0.07)

0.15 

The notes form an integral part of these financial statements.

Revenue

Share

reserve/

capital

(deficit)

Total

USD'000

USD'000

USD'000

Balance at January 1, 2007

198,160 

20,869 

219,029 

Issue of share capital

34,658 

-

34,658 

Employee share options:

 - value of employee services

3,984 

-

3,984 

 - shares issued on exercise of options

239 

-

239 

Loss for the year

-

(16,715)

(16,715)

At December 31, 2007

237,041 

4,154 

241,195 

Balance at January 1, 2006

194,951 

(13,577)

181,374 

Employee share options:

 - value of employee services

3,209 

-

3,209 

Profit for the year

-

34,446 

34,446 

At December 31, 2006

198,160 

20,869 

219,029 

The notes form an integral part of these financial statements.

Notes

2007

2006

USD'000

USD'000

Cash flows from operating activities

Cash (absorbed in)/ generated from operations

28(a)

(5,913)

7,308 

Interest received

2,182 

2,542 

Interest paid

(81)

(60)

Tax paid

(500)

(71)

Net cash (used in)/generated from operating activities

(4,312)

9,719 

Cash flows from investing activities

Purchase of property, plant and equipment

(57,399)

(37,215)

Purchase of intangible assets

(78)

(167)

Proceeds from disposal of plant

14 

-

Loans and advance granted

-

(26)

Investments in financial assets

-

(2,200)

Net cash used in investing activities

(57,463)

(39,608)

Cash flows from financing activities

Issue of ordinary shares

34,658 

-

Proceeds from exercise of options

355 

-

Proceeds from long term borrowings

-

2,556 

Net cash from financing activities

35,013 

2,556 

Net decrease in cash and cash equivalents

(26,762)

(27,333)

Movement in cash and cash equivalents

At January 1,

52,349 

79,682 

Decrease

(26,762)

(27,333)

At December 31,

28(c)

25,587 

52,349 

The notes form an integral part of these financial statements.

1.

GENERAL INFORMATION

Titanium Resources Group Ltd is a public limited liability company incorporated and domiciled in the 

British Virgin Islands. The address of its registered office is at P.O.Box 4301, Trinity Chambers, Road Town,

Tortola, British Virgin Islands.

These financial statements will be submitted for consideration and approval at the forthcoming Annual

Meeting of shareholders of the group.

2.

SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

(a)

Basis of preparation

The financial statements of Titanium Resources Group Ltd have been prepared in accordance with 

International Financial Reporting Standards (IFRS). Where necessary, comparative figures have been 

amended to conform with change in presentation in the current year. The financial statements are prepared 

under the historical cost convention, except that available-for-sale investments are stated at their fair value.

Amendments to published standards, Standards and Interpretations issued but not yet effective.

Certain standards, amendments to published standards and interpretations have been issued that are

mandatory for accounting periods beginning on or after 1 January 2008 or later periods but which the

Group has not early adopted.

Except for IFRS 8, 'Operating segments', the revised IAS 1, 'Presentation of Financial Statements' and

the amendment to IAS 23 'Borrowing costs' (effective for periods on or after 1 January 2009) , these 

standards, amendments and interpretations are not relevant to the Group's operations.

IFRS 8 and the revised IAS 1 are disclosure requirements only and will not when adopted, affect the results

of the Group. The amendment to IAS 23 eliminates the alternative treatment of expensing borrowing costs on

qualifying assets. The revised IAS 1 affects the presentation of owner changes in equity and of comprehensive

income.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting 

estimates. It also requires management to exercise its judgement in the process of applying the group's 

accounting policies. The areas involving a higher degree of judgement or complexity, or areas where 

assumptions and estimates are significant to the financial statements, are disclosed in Note 4.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(b)

Investment in subsidiaries

Consolidated financial statements

The consolidated financial statements incorporate the financial statements of the company and enterprises 

controlled by the company (its subsidiaries) made up to December 31, each year. Control is achieved where the 

company has the power to govern the financial and operating policies of an investee enterprise so as to obtain 

benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in 

the consolidated income statement from the date of their acquisition or up to the date of their disposal. 

The consolidated financial statements have been prepared in accordance with the purchase method. The excess 

of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is 

recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary 

acquired, the difference is recognised directly in the income statement in the year of acquisition. The results of 

subsidiaries which are not consolidated are brought into the financial statements to the extent of dividends 

received.

All significant intercompany transactions, balances and unrealised gains on transactions between group 

companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of

an impairment of the asset transferred.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting

policies used in line with those adopted by the Group.

(c)

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation. The cost of self-

constructed assets includes the cost of materials, direct labour and an appropriate proportion of production 

overheads. Cost also includes environmental decommissioning costs that are recognised as a liability.

Depreciation is provided on a straight-line basis over the estimated useful lives of the assets.

Where an item of property, plant and equipment comprises major components with different useful lives, the 

components are accounted for as separate items of property, plant and equipment.

Subsequent expenditure relating to an item of property, plant or equipment is capitalised when it is probable 

that the future economic benefits from the use of the asset will increase by more than the expenditure incurred.

All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(c)

Property, plant and equipment (cont'd)

Deposit, exploration, evaluation, mine development expenditure and deferred project expenditure

In respect of deposit, minerals, exploration, evaluation, and deferred project, expenditure is charged to the 

income statement as incurred except where:

-

it is expected that the expenditure will be recouped by future exploitation or sale; or

- 

substantial exploration and evaluation activities have identified a mineral resource but these activities 

have not reached a stage which permits a reasonable assessment of the existence of commercially 

recoverable reserves in which case the expenditure is capitalised.

Expenditure relating to both deposit and dam development and mine development are accumulated separately 

for each identifiable area of interest. Such expenditure comprises net direct costs and an appropriate portion 

of related overhead expenditure.

Expenditure is carried forward when incurred in areas where economic mineralisation is indicated, but activities 

have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable 

reserves, and active and significant operations in relation to the area are continuing. Each such project is 

regularly reviewed. If the project is abandoned or it is considered unlikely that the project will proceed to 

development, accumulated costs to that point are written off immediately. 

Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting 

a mining operation. Projects are advanced to development status when it is expected that accumulated and 

future expenditure can be recouped through project development or sale.

Expenditure relating to other expenses consists primarily of costs which provides benefit to the development 

of the Mine in general and is not specifically identifiable to a particular project. 

Mining leases

The Group's mining leases are of sufficient duration (or convey a legal right to renew for sufficient duration) to

enable all reserves on the leased properties to be mined in accordance with current production schedules.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(d)

Amortisation and depreciation

Amortisation of deferred project expenditure is based on the estimated useful life of the asset to which the

expenditure relates.

Depreciation is provided at rates calculated to write off the cost of fixed assets to their residual value

value over their estimated useful lives as follows:

Building

- 4%

Infrastructure

- 5%

Plant, machinery & equipment

- 5% to 20%

Vehicles

- 3 to 5 years

Mineral rights

- Based on the estimated life of reserves

Exploration, evaluation and mine development 

- Based on the estimated life on proven and

expenditure, and expenditure on mineral rights

probable reserves

Changes in estimates are accounted for over the estimated remaining economic life of the remaining 

commercial reserves of each project as applicable. 

(e)

Intangible assets

(i)

Goodwill

Goodwill represents the excess of cost of acquisition over the Group's interest in the fair value 

of the net identifiable assets of the acquired subsidiaries at the date of acquisition.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Any net excess of the 

Group's interest in the net fair value of acquiree's net identifiable assets over cost is recognised 

in the income statement.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination 

of the gains and losses on disposal.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii)

Computer software

Acquired computer software licences are capitalised on the basis of costs incurred to acquire 

and bring to use the specific software and are amortised over their estimated useful lives estimated 

to be 5 years.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(f)

Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances 

indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by 

which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher 

of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are 

grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(g)

Foreign currencies

(i)

Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using 

United States Dollars, the currency of the primary economic environment in which the entity operates 

("functional currency"). The consolidated financial statements are presented in United States Dollars, 

which is the group's functional and presentation currency.

(ii)

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates 

prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the 

settlement of such transactions and from the translation at year-end exchange rates of monetary assets 

and liabilities denominated in foreign currencies are recognised in the income statement except when 

deferred in equity as qualifying cashflow hedges and qualifying net investment hedges.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the 

exchange rate at the date of the transaction.

Non-monetary items that are measured at fair value in a foreign currency are translated using the 

exchange rates at the date the fair value was determined.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)

Financial instruments

(i)

Financial assets

Categories of financial assets

The group classifies its financial assets as available-for-sale financial assets.

The classification depends on the purpose for which the investments were acquired. Management

determines the classification of its financial assets at initial recognition.

(a)

Available-for-sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category 

or not classified in any of the other categories. They are included in non-current assets unless 

management intends to dispose of the investment within twelve months of the balance sheet date.

Initial measurement

Purchases and sales of financial assets are recognised on trade date, the date on which the 

company commits to purchase or sell the asset. Investments are initially measured at fair value 

plus transaction costs for all financial assets except those that are carried at fair value through 

profit or loss.

Subsequent measurement

Available-for-sale financial assets are subsequently carried at their fair values.

Investments in equity instruments that do not have a quoted market price in an active market

and whose fair value cannot be reliably measured are measured at cost.

Unrealised gains and losses arising from changes in the fair value of financial assets classified 

as available-for-sale are recognised in equity. When financial assets classified as available-for-

sale are sold or impaired, the accumulated fair value adjustments are included in the income 

statement as gains and losses on financial assets.

The fair values of quoted investments are based on current bid prices. If the market for a 

financial asset is not active, the Group establishes fair value by using valuation techniques.

These include the use of recent arm's length transactions and reference to other instruments 

that are substantially the same.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)

Financial instruments (cont'd)

(a)

Available-for-sale financial assets (cont'd)

Impairment of financial assets

The group assesses at each balance sheet date whether there is objective evidence that a

financial asset or a group of financial assets is impaired. In the case of financial assets classified 

as available-for-sale, a significant or prolonged decline in the fair value of the security below 

its cost is considered in determining whether the securities are impaired. If any such evidence 

exists for available-for-sale financial assets, the cumulative loss - measured as the difference 

between acquisition cost and the current fair value, less any impairment loss on that financial 

asset previously recognised in equity - is removed from equity and recognised in the income

statement.

If the fair value of a previously impaired debt security increases and the increase can be 

objectively related to an event occuring after the impairment loss was recognised, the impairment 

loss is reversed and the reversal recognised in the income statement. Impairment losses for

an investment in an equity instrument are not reversed through the income statement.

(ii)

Long term receivables

Long term receivables with fixed maturity terms are measured at amortised cost using the effective

interest rate method, less provision for impairment. The carrying amount of the asset is reduced 

by the difference between the asset's carrying amount and the present value of estimated cash flows 

discounted using the effective interest rate. The amount of loss is recognised in the income 

statement. Long term receivables without fixed maturity terms are measured at cost. If there is objective 

evidence that an impairment loss has been incurred, the amount of impairment loss is measured as the 

difference between the carrying amount of the asset and the present value (PV) of estimated cash flows 

discounted at the current market rate of return of similar financial assets. 

(iii)

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using 

the effective interest method, less provision for impairment. A provision for impairment of trade receivables 

is established when there is objective evidence that the Group will not be able to collect all amounts 

due according to the original terms of receivables. The amount of the provision is the difference between 

the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective 

interest rate. The amount of provision is recognised in the income statement.

2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

(h)

Financial instruments (cont'd)

(iv)

Trade payables

Trade payables are stated at fair value and subsequently measured at amortised cost using the effective

interest method.

(v)

Borrowings

Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs incurred. 

Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction 

costs) and the redemption value is recognised in the income statement over the period of the borrowings using 

the effective interest method.

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The 

dividends on these preference shares are recognised in the income statement as interest expense.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement 

of the liability for at least twelve months after balance sheet date.

(vi)

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly

liquid investments with original maturities of 3 months or less, and bank overdrafts. Bank overdrafts are 

shown within borrowings in current liabilities on the balance sheet.

(vii)

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares

or options are shown in equity as deduction, net of tax, from proceeds.

(i)

Inventories

Inventories are stated at the lower of cost or net realisable value where cost is defined as follows:

Titanium bearing minerals

- Production cost and attributable overheads

Concentrates

- Production cost

Washed bauxite

- Production cost and attributable overheads

Stockpiles

- Production cost