The Mission Group Regulatory News (TMG)

14 Nov 2005 14:30

Thistle Mining Inc.14 November 2005 THISTLE MINING INC. THIRD QUARTER RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 2005 Toronto, November 14, 2005. Thistle Mining Inc. (AIM: TMG) 2005 Third Quarter results Thistle Mining Inc. (the "Company") is pleased to announce that the ThirdQuarter Report for the period ended September 30, 2005 was filed on SEDAR today.A copy of the report can be obtained from the Company's website:www.thistlemining.com. The Company reported a loss of $9.9 million ($0.22 per share) for the thirdquarter of 2005. Included in this loss is a once off adjustment of $2.3 millionin the rehabilitation liability of President Steyn, a foreign currency loss of$2.1 million arising principally from the revaluation of the Canadian Dollardenominated debt and interest charges of $1.7 million. Earnings were negativelyimpacted by continued losses incurred by the President Steyn operation in SouthAfrica. President Steyn's realized gold price was $439 per ounce in the third quartercompared to a spot price of $439 per ounce. Gold sales totaled 49,260 ouncesduring the third quarter of 2005 compared to production of 42,376 for the secondquarter and 134,545 ounces for the first nine months of the year. Cash cost perounce sold was $468 (1) in the third quarter of 2005, $568 1 for the secondquarter of 2005 and $528 1 for the nine month period. The total cost of salesper ounce in the third quarter was $553 and for the first nine months of 2005amounted to $572. The cost of sales for the third quarter 2005 includes a onceoff adjustment of $2.3 million or $47 per ounce in the rehabilitation liabilityof President Steyn. This follows the implementation of new guidelines by theDepartment of Minerals and Energy of South Africa. Management believes that the improvement in production and reduction in the cashcost per ounce sold indicate that the initiatives implemented to restore themine to profitability are gaining traction. These initiatives include theplacing of numbers 7 and 9 shafts on care and maintenance, and more recentlyinclude the curtailment of production in working places that do not contributeto cash flow and implementation of grade control measures such as the reductionin mining width to reduce dilution. Further on October 19, 2005 an agreement wasentered into with the National Union of Mine Workers and Solidarity Union on thevoluntary and involuntary retrenchments of 52 and 1347 employees respectively,or 27% of the current workforce of President Steyn. Management expects that theSection 189A restructuring and implementation of sound mining practices willassist in restoring the profitability of President Steyn. On 24th October 2005, President Steyn Gold Mine purchased put options on USDgold for the period January 2006 to December 2007 on 2,000ozs per month at aflat forward price of $490/oz. The price paid for these options amounted to ZAR10 million. There is no margin provision on this purchase. The put optionswill be valued at fair value on balance sheet date with the movement in fairvalue for the period disclosed separately under cost of sales. Good progress continues to be made with advancing the Masbate project in thePhilippines to feasibility study which is currently expected to be completedduring the first quarter of 2006. Exploration, drilling and feasibility studycosts capitalized in the third quarter were approximately $1.1 million and forthe first nine months of 2005 amounted to approximately $1.9 million. The Company is anticipated to require additional financing through the remainderof 2005 in order to continue to fund its South African operations including therestructuring thereof, complete the feasibility study of its Philippinesoperations, service its debt obligations and fund its corporate expenses. Forthe three months ended September 30 2005, the Company's two significantshareholders advanced a total of $5 million to fund operations. Although theCompany believes that these shareholders will continue to support its financialneeds through the balance of 2005 as it attempts to implement its revisedbusiness plan, there can be no assurances that these shareholders will providesuch financing and that the Company will be able to continue as a going concern.If these shareholders do not provide such financing, the Company will need toseek additional sources of financing, which financing may include a privateplacement of common shares or other corporate financing on terms acceptable tothe Company's board of directors. Statements made in this news release that relate to future plans, events orperformances are forward-looking statements. Any statement containing wordssuch as "believes", "plans", "expects" or "intends" and other statements whichare not historical facts contained in this release are forward-looking and thesestatements are based on current expectations and involve risks and uncertaintiesthat are described in the Company's most recent Annual Information Form andother publicly available documents, which are accessible at www.sedar.com.Consequently, actual outcomes and results may differ materially from thoseexpressed in these forward-looking statements and readers are cautioned not toplace undue reliance on them. Statements speak as of the date on which they aremade and the Company undertakes no obligation to update them publicly. For further information, contact: Andy Graetz, Chief Financial Officer + 27 57 391 9026 or email to agraetz@disselgroup.com Paul Marchand, Company Secretary, +44 207 494-6060. Neil Murray-Lyon of Renmark +1 514-939-3989 (1) Cash cost per ounce sold is not a recognized measure under Canadian Generally accepted Accounting Principles. Third Quarter Report September 30, 2005 Thistle Mining Inc. third quarter results for the period ended September 30, 2005 Management's Discussion and Analysis November 11, 2005 For the nine months ended September 30, 2005 The following management's discussion and analysis ("MD&A") for the financialcondition and operating results of Thistle Mining Inc. (the "Company") should beread in conjunction with the Company's unaudited consolidated financialstatements for the nine-month period ended September 30, 2005 including thenotes thereto. Further details regarding the Company and its business andoperations may be obtained from the Company's continuous disclosure documentsfiled from time to time with the Canadian securities regulatory authorities,including the Company's annual information form (the "AIF"). These continuousdisclosure documents are available through the SEDAR website maintained by theCanadian securities regulators, which may be accessed at www.sedar.com or on theCompany's website, which may be accessed at www.thistlemining.com. All financialdata herein have been prepared in accordance with Canadian generally acceptedaccounting principles ("GAAP") and all dollar references are in thousands of USdollars unless otherwise indicated. Some of the statements contained in this MD&A, including those related tostrategies and other statements, are predictive in nature, and depend upon orrefer to future events or conditions or include words such as "expects","intends", "plans", "anticipates", "believes", "estimates" or similarexpressions that are forward-looking statements. Forward-looking statementsinclude, without limitation, the information concerning possible or assumedfurther results of operations as set forth herein. These statements are nothistorical facts but instead represent only expectations, estimates andprojections regarding future events and are qualified in their entirety by theinherent risks and uncertainties surrounding future expectations generally. The forward-looking statements contained in this MD&A are not guarantees offuture performance and involve certain risks and uncertainties that aredifficult to predict. The future results of the Company may differ materiallyfrom those expressed in the forward-looking statements contained in this MD&A,due to, among other factors, the risks and uncertainties inherent in thebusiness of the Company and the risk factors discussed in the AIF and in otherdocuments filed from time to time with the Canadian securities regulators. TheCompany does not undertake any obligation to update or release any revisions tothese forward-looking statements to reflect events or circumstances after thedate of this MD&A or to reflect the occurrence of unanticipated events. All numbers contained in this Management Discussion and Analysis unlessotherwise stated are on a historical basis. Overview of Significant Events Highlights Thistle Mining Inc. reported a loss of $9.9 million ($0.22 per share) for thethird quarter of 2005. Earnings were negatively impacted by continued lossesincurred by the President Steyn operation in South Africa. President Steyn's realized gold price was $439 per ounce in the third quartercompared to a spot price of $439 per ounce. Gold sales totaled 49,260 ouncesduring the third quarter of 2005 compared to production of 42,376 for the secondquarter and 134,545 ounces for the first nine months of the year. Cash cost perounce sold was $468(2) in the third quarter of 2005, $554 1 for the secondquarter of 2005 and $528 1 for the nine months. The total cost of sales perounce in the third quarter was $553 and for the first nine months of 2005amounted to $572. The cost of sales for the third quarter 2005 includes a onceoff adjustment of $2.3 million or $47 per ounce in the rehabilitation liabilityof President Steyn. This follows the implementation of new guidelines by theDepartment of Minerals and Energy of South Africa. Management believes that the improvement in production and reduction in the cashcost per ounce sold indicates that the initiatives implemented to restore themine to profitability are gaining traction. These initiatives include theplacing of numbers 7 and 9 shafts on care and maintenance, and more recentlyinclude the curtailment of production in working places that do not contributeto cash flow and implementation of grade control measures such as the reductionin mining width to reduce dilution. Further on October 19 2005, an agreement wasentered into with the National Union of Mine Workers and Solidarity Union on thevoluntary and involuntary retrenchments of 52 and 1347 employees respectively,or 27% of the current workforce of President Steyn. Management expects that theSection 189A restructuring and implementation of sound mining practices willassist in restoring the profitability of President Steyn's On October 24 2005, President Steyn Gold Mine purchased put options on USD goldfor the period January 2006 to December 2007 on 2,000ozs per month at a flatforward price of $490/oz. There is no margin provision on this purchase. Theput options will be valued at fair value on balance sheet date with the movementin fair value for the period disclosed separately under cost of sales. Good progress continues to be made with advancing the Masbate project in thePhilippines to feasibility study. Exploration, drilling and feasibility studycosts capitalized in the third quarter were approximately $1.1 million and forthe first nine months of 2005 amounted to approximately $1.9 million.Exploration, drilling and feasibility costs for the last quarter of 2005 arebudgeted to be approximately $0.6 million. Following delays in geological andmine modelling, the feasibility study is now expected to be completed during thefirst quarter of 2006. Financial Restructuring On October 28, 2004, in the absence of alternative financing, Standard Bankissued a written default notice on all its indebtedness. On November 4, 2004Standard Bank London and The Standard Bank of South Africa Limited agreed totransfer their interest in the Company's debts to Meridian Capital Limited ("Meridian"). The Notice of Default issued by Standard Bank was then withdrawn.The terms of the acquisition by Meridian were agreed by all parties on December20, 2004 and the employment of the Company's then Chief Executive Officer andPresident ceased on mutually agreed terms. Meridian and its associates proceeded to negotiate with relevant parties arestructuring of the Company. Following agreement by all relevant parties, therestructuring was implemented with the Company filing for protection in Canadaunder the Companies' Creditors Arrangement Act ("CCAA") in the Ontario SuperiorCourt of Justice (the "Court") on January 7, 2005. Details of the process andits effects are given in note 1 to the 2004 Annual Financial Statements. The CCAA process was completed on June 30, 2005 following which Casten HoldingsLimited ("Casten") and MC Resources Limited ("MC"), a wholly owned subsidiary ofMeridian, are the principal creditors of the Company and own collectively 70% ofthe equity. Meridian assigned one-half of its interests in the financing toCasten and the other half to MC. The balance of the equity is owned as to 25% byformer creditors, including the secured loan note holders and as to 5% by formerequity shareholders. Although implementation of the restructuring plan has significantly reduced theCompany's financial liabilities the Company required continued support fromCasten and MC and still requires significant additional financing to fund itsworking capital needs in South African operations and the Philippines and toservice its debt obligations and fund its corporate expenses. Casten and MC haveadvanced approximately $21.8 million in short term funding for the periodJanuary 7, 2005 to June 30, 2005 and have advanced a further $5 million to theCompany for the third quarter of 2005. The Company has not obtained (this) (any other?) additional financing as at thedate hereof, and does not have any additional sources of cash flow fromoperations. Until the Company is able to obtain additional financing, eitherthrough additional debt or equity, the Company will be dependent on thecontinued financial support of Casten and MC .Although the Company believes thatCasten and MC will continue to support its financial needs through the balanceof 2005 as it attempts to implement its revised business plan, there can be noassurances that Casten and MC will provide such financing and that the Companywill be able to continue as a going concern. Fresh Start Accounting Due to the realignment in equity interest and capital structure of ThistleMining Inc. under the restructuring plan, the Company was required to perform asat July 1, 2005, a comprehensive revaluation of its balance sheet referred to as"fresh start accounting,'' which included the following significant adjustments.The Company has adjusted the historical carrying value of its assets andliabilities to fair value reflecting the allocation of the Company'sreorganization equity value of $6.6 million. In addition, under fresh startaccounting the Company translated its reclamation provision using June 30, 2005rates and fair valued other accruals. Consequently transactions before and after the application of "fresh startaccounting" from 30 June 2005 are separately disclosed in the financialstatements. Financial HighlightsFinancial Highlights for the three months ended September 30, 2005 (in thousands of dollars)September 30 2005 2004 Fresh start Pre fresh startSales 22,274 25,943Gross loss (5,060) (56,343)Net loss (9,954) (55,806)Net loss per share - basic and diluted (note 4) (0.22) (28.43)Cash used in operating activities (1,577) (10,705)Total assets 75,986 91,462 The profitability of the Company and that of its competitors is subject to anumber of factors, including the Rand price of gold and the costs associatedwith various aspects of mining operations including acquisition, exploration anddevelopment of mining interests, mining and processing of gold and compliancewith various regulatory requirements. Not all of the factors are within thecontrol of management. The Company recorded a gross loss of $5.1 million in the third quarter of 2005compared to a gross loss of $56.3 million in the corresponding period in 2004.Included in the gross loss for 2004 is the close out of the hedge position of$47.2 million. After accounting for general and administrative expenses andother operating expenses, for the third quarter of 2005 the Company reported anoperating loss of $9.9 million compared to an operating loss of $56.5 million in2004. The total net loss was $9.9 million, or 22 cents per share, compared to$55.8 million, or 2,843 cents per share in 2004. Operations SOUTH AFRICA The principal operating companies in South Africa are President Steyn Gold Mines(Free State) (Pty) Ltd. ("PSGM") and TMTI (Pty) Ltd., which operate the minesand the training college attached to the mine site, respectively. Health and Safety We regret to report the deaths of three employees in 2005, one in January in anaccident at number 2 shaft, one in June and one in July in accidents at number1A vent shaft. The latter two accidents arose from falls of ground. PresidentSteyn, together with the Department of Minerals and Energy, has carried outdetailed investigations of all three incidents and where necessary management atthe mine has taken appropriate action. The formal reports from the Department ofMinerals and Energy have not yet been issued. PSGM is continuing with the focus on reducing accidents with monthly auditsfocusing on the employee's discipline towards safety and safe work principles. For the nine month period ended September 30, 2005, the Lost Time Injury andReportable rate amounts to 15.1 and 8.8 per 1 million man hours. Although thesemetrics compare to averages being realised for the deep level South African goldmining industry, management consider the rates to be high. The lost Time InjuryRate is based on incidents that result in lost shifts greater than one shift andless than fourteen shifts. The Reportable rate is based on incidents that resultin lost shifts that are greater than or equal to fourteen shifts. South African Operations 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 2004 2004 2004 2005 2005 2005 Tonnes milled 314,018 273,215 223,475 249,844 268,884 268,237Recovered grade g/tonne 4.44 4.58 5.23 5.28 4.93 5.86Plant recovery % 95.7 95.7 95.7 95.5 95.4 96.5Ounces sold 41,268 43,799 38,564 42,909 42,376 49,260 Realised US$/oz 393 402 439 428 427 439Hedge book US$/oz (15) (29) - - - -Received US$/oz 378 373 439 428 427 439Cash costs US$/oz(3) 570 499 668 570 554 468Cash costs R/tonne milled 487 513 703 584 562 563 Avg. gold price US $/oz 393 402 439 428 427 439Avg. exch. Rate ZAR/US$ ZAR6.59 ZAR6.34 ZAR5.95 ZAR5.97 ZAR6.42 ZAR6.43Avg. gold price ZAR/oz 2,586 2,545 2,611 2,554 2,743 2,824 Cost of sales US$/oz 615 265 1,042 589 577 553Adjusted for:Depreciation, depletion, (33) (42) (352) (17) (19) (31)amortisation, impairmentHedge close out - 275 - - - -Movement in provisions (6) 7 (19) (1) (2) (53)Other non operating costs (6) (6) (3) (1) (2) (1) Cash costs US$/oz 570 499 668 570 554 468 Although the Rand remained strong for the first quarter of 2005, there has beensome currency weakness in the second and third quarters due in part to thestrength of the US$ against most currencies. The Rand: US $ exchange rateremains a key factor in the mines profitability. The Rand gold price has remained relatively stable over the fifteen month periodcommencing January 1, 2004 with the strength of the US$ gold price being offsetby the strength of the Rand. The Rand gold price has increased in the second andthird quarters with this trend continuing into the fourth quarter of 2005 withthe price currently exceeding R3,000/oz. This trend has provided some relief tothe beleaguered South African gold producers. Rand costs have however alsoincreased following real increases in the cost of labour and materials. Third quarter 2005 sales of gold were 49,260 ounces compared with 43,799 in thesame quarter last year and 42,376 ounces in the second quarter of 2005. Goldproduction has increased despite the suspension of operations at two of fiveoperational shafts - number 7 shaft was placed on care and maintenance in 2004and number 9 shaft was put on care and maintenance during the first quarter of2005. The re-planning exercise carried out in 2004 focused on cutting out all lowgrade areas which included the closure of number 7 shaft and thereafter number 9shaft and the focusing on high grade areas has led to an improvement in therecovered grade from 4.00 g/t in the first quarter of 2004 to 5.28 g/t and 4.93g/t in the first and second quarters of 2005 respectively. The decision to closedown working places that are unprofitable and implement grade control measuressuch as reducing mining widths and hence dilution (refer to table below) andimprove productivities on payable faces have all had a positive impact with theaverage grade during the third quarter increasing to 5.86 g/t. The reduction inpercentage unpay in the table below illustrates the impact of closing downworking places that are unprofitable. The grade is planned to increase furtheras good mining practices gain traction and once meaningful production commencesfrom the exploitation of the high grade number 2 shaft pillar scheduled for mid2006. Month Face Advance (m) Face Length (m) Stope Width Percentage Tonnes Milled Monthly Gold (cm) Unpay Recovered (kg) Jan 05 6.2 2807 122 48 80,972 478.0Feb 05 6.7 2688 118 51 83,373 463.5Mar 05 7.1 2435 126 48 85,499 378.4Apr 05 7.7 2440 131 67 83,037 452.1May 05 7.7 2221 131 60 96,563 437.8Jun 05 7.9 2402 132 51 89,284 435.3Jul 05 7.7 2379 115 52 102,850 524.0Aug 05 7.6 2201 103 27 84,408 489.1Sep 05 8.4 2126 107 24 83,058 558.9 During the third quarter of 2005, the South African operations realised aneffective gold price of US$439 per ounce equivalent to the average market priceover the same period. Cash operating costs for the third quarter of 2005 were US$468 per ounce ofproduction, compared with US$554 for the second quarter of 2005, a decrease ofapproximately 16%. The decrease is due to the increase in ounces sold. Production A summary of production per shaft, comparing the third quarter of 2005 with thecorresponding period in 2004, is as follows: Quarter 3 2005 Quarter 3 2004 Steyn 1 ShaftTonnes milled tonnes 95,097 70,381Recovered grade g/t 4.93 3.32Gold recovered Kg 468.365 233.640Gold recovered ounces 14,995 7,512 Steyn 2 ShaftTonnes milled tonnes 66,695 57,336Recovered grade g/t 6.17 6.58Gold recovered Kg 411.797 377.080Gold recovered ounces 13,184 12,124 Steyn 3 ShaftTonnes milled tonnes 106,445 104,802Recovered grade g/t 6.50 4.69Gold recovered Kg 691.911 491.310Gold recovered ounces 22,152 15,796 Steyn 7 Shaft (now suspended)Tonnes milled tonnes - 4,150Recovered grade g/t - 1.86Gold recovered Kg - 7.720Gold recovered ounces - 248 Steyn 9 Shaft (now suspended)Tonnes milled tonnes - 36,546Recovered grade g/t - 3.86Gold recovered Kg - 141.070Gold recovered ounces - 4,536 Summary of Results Quarter 3 2005 Quarter 3 2004TOTAL SHAFTS Tonnes milled tonnes 268,237 273,215 Recovered grade g/t 5.86 4.69 Gold recovered Kg 1,572 1,251 Gold recovered ounces 50,330 40,216 It is the Company's policy to recognize sales when gold is delivered to theprecious metal refinery. Accordingly, delivery cut-off arising at the end of thequarter has resulted in lower ounces being recorded in the financial resultsthan were actually produced in the period. Gold sales for the quarter amountedto 49,260 ounces. A total of 1,917 and 2,930 and 2,492 metres were developed during the first,second and third quarter of 2005 respectively, compared to an average of 2,751metres per quarter in 2004. Eldorado Reef Project Emphasis continues in developing and exploiting the Eldorado Reef horizon fromnumber 3 shaft. The initial "Minkie" block is still in production even thoughit was expected to be depleted in the first quarter of 2005. The first blast inthe much larger, high-grade, "Big Bertha" block took place in early May 2005.Access development and production planning for the "Big Bertha 2 block" isprogressing and it is intended that production will commence early in 2006. Anexploration programme has been laid out but remains to be implemented to explorethe 6 km estimated strike length of the Eldorado Reef series at a cost ofapproximately US$ 3.5 million. It is only once this exploration programme hasbeen completed that the full potential of the Eldorado Reef massives can bereliably quantified. It is intended that exploration of the Eldorado Reefhorizon commence during 2006. Labour Relations On July 21, 2005 management presented a Section 189A notice to the NationalUnion of Mine Workers and Solidarity union in accordance with the provisions ofthe South African Labour Relations Act. This notice initiated a mandatoryminimum 60-day consultation process the purpose of which was to attempt to reachagreement with the unions representing the PSGM workforce on a broad range oflabour issues including initiatives to mitigate job losses. Following a period of mature consultations, agreement was reached with theNational Union of Mine Workers and Solidarity Union on October 19 2005 on thevoluntary and involuntary retrenchments of approximately 52 and 1347 employeesrespectively, or 27% of the current workforce of PSGM. This is less than the2,000 jobs that management initially believed might be affected. After givingeffect to the retrenchments, production staff has been reduced by approximately10% in aggregate while non-production staff has been reduced by approximately40% in aggregate. The total cost of retrenchment is estimated at approximately $4.5 million whichcost will be accounted for in the fourth quarter of 2005. No quantifiable lossin production occurred as a result of uncertainty during the consultationperiod. With the Section 189A consultation process now completed wage negotiations withthe Unions have commenced. Wage settlements averaging 6 to 7% of basic wage plusagreement on other benefits such as living out allowances have been concludedbetween the Unions and other South African gold mining companies. The averagewage increases granted exceed the current cost of inflation of 4 to 5%. Financial Instruments On October 24 2005, PSGM purchased put options on USD gold for the periodJanuary 2006 to December 2007 on 2,000ozs per month at a flat forward price of$490/oz. The 48,000 oz of gold puts purchased represents some 12.5% of PSGManticipated production over the 24 month period. The arrangement provides PSGMwith some level of price protection should the US $ gold price decline fromcurrent levels. The price paid for these put options amounts to ZAR 10 million.There is no margin provision on this purchase. The put options will be valuedat fair value on balance sheet date with the movement in fair value for theperiod disclosed separately under cost of sales. Mineral and Petroleum Resources Development Act, 2002, the Mining Charter andRoyalty Bill The Mineral and Petroleum Resources Development Act, 2002 ("MPRDA") contains thetransitional arrangements from the old mining law system which was contained inthe Minerals Act, 1991 to the new mining law system contained in the MPRDA.Security of tenure in respect of active mining operations is protected for aperiod not exceeding five years from 1 May 2004 during which period the holderof the old order mining right must lodge it for conversion to a new form ofmining right, failing which the old order mining right ceases to exist. In thelodgment for conversion the holder is required to commit to meeting certainBlack Economic Empowerment ("BEE") targets as defined in the Mining Charterwhich was developed in terms of the MPRDA by the Minister. The Mining Charter requires the sale of 15% of equity in PSGM by 30 April 2009and a further 11% by 2014, with such transactions to be undertaken at fairmarket value. It is the Company's intention to introduce a scheme which willensure compliance within the five-year time horizon for conversion as outlinedabove. At the same time, management is compiling BEE credentials of itssuppliers and is currently recruiting for a second intake in the Trainee Minerprogram. The South African government is also contemplating introducing for enactment aMineral and Petroleum Royalty Bill during the 2005 Parliamentary session whichis likely to see the implementation of a royalty on gross sales value witheffect from 1 May 2009. The royalty rate that was reflected on initial releasein March 2003 of the draft Bill was 3% but the 2004 Budget Review contemplatedrefinement of the royalty rate across mining sectors to take account of diverseeconomic impacts. PHILIPPINES Masbate Project Drilling on the planned program was completed by the end of the third quarter of2005. Providing infill geological information plus geotechnical andmetallurgical samples, the total program meterage completed was 9683 meters ofR.C. (Reverse Circulation Percussion) drilling plus 2068 meters of diamond coredrilling. As well, hydrological drilling (582 meters), to ascertain pit waterseepage rates, was also completed during the quarter. During the quarter, anadditional 1075 meters of RC drilling was carried out to confirm "waste dump"grades for possible inclusion in the Masbate resource and an additional 491meters of RC drilling was carried out to sterilize proposed infrastructureconstruction sites. Screen sampling testwork of the waste dumps is also beingundertaken to determine whether the grade of the dump material can be upgradedby screening before it is milled. Geotechnical work by sub-consultants Knight and Piesold, Perth Australia, on thepit slopes, the tailings impoundment area and the site infrastructure andmetallurgical test work by Ausenco of Australia has been largely completed. Nogeotechnical problems have been identified and the optimum economic processingconditions to liberate the gold in the Masbate ore had been identified to be ata grind size of 80% passing 150 micron. During the third quarter geological modeling by sub-consultants InternationalMining Consultants, Brisbane Australia, commenced and the work is scheduled tobe completed in November 2005. This work will be followed by mine modeling workincluding the optimization of a mine schedule. Process engineering work isbeing finalized for the capital and operating cost estimates that are to becompleted during December. Consideration is also being made to minimizing theinitial capital outlay for the project by procuring used crushing, milling andancillary processing equipment. With this in mind vendors of used plant havebeen approached and a site a visit has been undertaken to a gold processingplant that is available for sale. Environmental considerations have been addressed by sub-consultants SinclairKnight Merz, Brisbane Australia, in conjunction with site management. Goodprogress is being made in securing the necessary environmental permits. Therequest for the extension of the Environmental Compliance Certificate wasapproved on 12 August 2005. This certificate is valid for one year and willexpire in June 2006. The Environmental Protection and Enhancement Program wassigned off by the Director of Mineral and Geosciences Bureau on 06 September2005. The macro political and regulatory climate is seen to be favorable for thedevelopment of mining projects within the Philippines. Preliminary evaluations indicate that the project economics will be sensitive tothe cost of bunker fuel and diesel. At current fuel prices, these commoditiesare expected to represent some 45% of the total cost of production of theproject. Electrical power suppliers have been requested to provide quotationsfor the provision of power to the project site on a contract basis. During theperiod, a significant amount of time has been spent on confirmation of titlesfor surface rights over the mining areas, including the tailings depositionzone. The feasibility study is expected to be completed during the first quarter of2006. The actual costs incurred for the year to September 30, 2005 and forecast to thequarter ending December 31, 2005 are shown below.Amounts in USD' Thousands 9 months to Sep Q4 Forecast 2005 30, 2005 Forecast Q3 Actual Feasibility Study 355 774 600 1,374Drilling Expenses (including assaying) 686 1,140 0 1,140Capital Expenditures (Land and Transfer Fees) 19 34 75 109Masbate Site Cost 298 773 208 981Makati General & Administration 53 156 73 229Miscellaneous (Other VAT, Taxes) 18 485 55 540Total 1,429 3,362 1,011 4,373 The forecast provides for the completion of feasibility study work by Ausencoand their sub consultants. The forecast excludes any estimate for securing usedprocessing plant and equipment. Project Financing Financing options for the Masbate project are being reviewed. One option underconsideration is that the project may be financed by way of non recourse projectfinancing combined with equity financing. It is also proposed that a turnkey EPCcontract be identified for the construction of the processing plant. Contingenton a successful feasibility study, construction of the processing plant couldwell commence during the third quarter of 2006. CORPORATE Toronto office Corporate overheads are anticipated to decline following the closure of theCompany's Toronto office. Executive management will be based in South Africa inorder to play a hands-on role in attempting to restore PSGM's profitability. 2005 Third Quarter Financial Results South African Operations The South African sub-group cash EBITDA(4) in the first nine months of 2005 wasan outflow of $14.3 million. After depreciation and amortization of $3 millionand foreign exchange gains on translation of $0.8 million, an operating loss of$16.5 million was recorded for the nine months compared to a loss of $23.2million in the same period in 2004. As discussed elsewhere within this report, operations in South Africa for thethree months ended September 30, 2005 have improved relative to previous periodsas grade control initiatives gain traction. Gross Loss For the three months ended 30 September 2005, the Company reported a gross lossof $5.1 million compared to $56.3 million over the same period in 2004. Thegross loss in 2004 includes the close out of the hedge position of $47.2million. The gross loss of $12 million for the first six months of 2005 (for thesame period in 2004 - gross loss of $3.1 million) was incorporated in the "freshstart accounting" adjustments at 1 July 2005. The majority of the decreased lossis attributable to the President Steyn operations, more fully discussed in theSouth African Operations section of this report. Sales Sales for the three months ended 30 September 2005 increased to $22.3 millionfrom $18.7 million in the three months ended 30 June 2005 due to an increase inproduction and increase in price realised. Sales for the three months ended 30September 2004 of $25.9 million includes a $12.1 million net gain on derivativefinancial instruments. Sales of $37.5 million for the first six months of 2005(for the same period in 2004 - sales of $33.3 million) were incorporated in the"fresh start accounting" adjustments at 1 July 2005. Total ounces sold for theSouth African operations in the first nine months of 2005 amounted to 134,545compared to 126,713 ounces sold in the first nine months of 2004. 49,260 ounceswere sold in the third quarter of 2005 compared to 43,799 ounces sold in thethird quarter of 2004. General and Administrative Expenses and Restructuring Charges The general and administration expenses of $1.1 million for the three monthsended 30 September 2005 and $1.1 million for the six months ended 30 June 2005represents mainly the costs incurred by the head office in Toronto and mineclosure costs of CIDEM, a French subsidiary. A total of $0.3 million of the costin the third quarter of 2005 relates to executive management in South Africa and$0.1 million closure costs for the Toronto office. The decrease over the similarperiods in 2004 represents the decrease in costs due to the closure of theexecutive office in Edinburgh. In addition, stock option issue costs in 2004amounted to $1.4 million. The restructuring charges of $2.0 million incurred in the first six months of2005 include DIP financing fees, legal fees and charges by the CCAA monitor. Thegeneral and administration expenses and restructuring charges for the first sixmonths of 2005 were incorporated in the "fresh start accounting" adjustments at1 July 2005. Interest Interest of $1.7 million for the three months ended 30 September 2005 and $1million for the six months ended 30 June 2005 represents mainly the interest onthe servicing of debt from Casten and MC. The interest for the first six monthsof 2005 was incorporated in the "fresh start accounting" adjustments at 1 July2005. Foreign Currency Gain/Loss The foreign currency loss for the three months ended 30 September 2005 of $2million represents the net translation loss on certain assets and liabilities ofthe South African operations as well as the loss on the revaluation of theCanadian Dollar denominated debt. The Canadian Dollar has strengthened fromCnd$1.23/US$ on 30 June 2005 to Cnd$1.16/US$ on 30 September 2005. In the sameperiod in 2004, the foreign currency gain was $0.1 million. Net loss per share The net loss per share before discounting operations (basic and diluted) and thenet loss per share (basic and diluted) for periods prior to 1 July 2005 havebeen adjusted for the effect of the consolidation of 200 shares for 1 under theCompanies' Creditors Arrangement Act ("CCAA") restructuring process. Furtherdetails are provided in note 4 of the financial statements. Total Assets The Company's total assets increased by $6.6 million from December 31, 2004mainly due to an increase in cash of $2.8 million and a net increase in SouthAfrican and Philippine assets of $4.6 million. During the three-month period ended September 30, 2005 $1.8 million wascapitalized principally on underground development in South Africa. Total expenditures in the Philippines during the three months ended 30 September2005 amounted to $1.4 million. This has been capitalized under "miningproperties". The estimated cost of the Philippine operations for the remainder of 2005 isprojected to be approximately $1.0 million and provides for the completion offeasibility study work undertaken by Ausenco and its sub consultants. Cash Flows Cash used in operating activities in the third quarter of 2005 (cash operatingloss, adjusted for movements in current assets and liabilities) amounted to $1.6million against a cash outflow of $10.7 million for the same period in 2004. Liquidity and Capital Resources At September 30, 2005 the Company's net debt was $32.2 million, analyzed asfollows: $ million Cash and cash equivalents 4.7Current liabilities (36.9) (32.2) In common with many mining companies, the Company raises capital for itsexploration and appraisal activities and capital projects as and when required. The continued under-performance of the South African operations in 2005 hasresulted in a situation where there is strain on the Company's finances. In theabsence of improved mining results and a weaker Rand relative to the US Dollar,external funding will be required to sustain the operations. As announced on October 28, 2004, the Company received written notification ofdefault from Standard Bank on its credit facilities. On November 4, 2004, The Company announced that Standard Bank London and TheStandard Bank of South Africa Limited signed an agreement subject to thesatisfaction of a number of conditions precedent to transfer their interest incertain senior finance documents (including a senior credit agreement) toMeridian. Meridian retained all the rights of a lender under the senior financedocuments. On November 8, 2004, the Company announced the completion of the above notedtransaction. The notice of default was then withdrawn. On January 7, 2005 (the filing date), the Company obtained protection under theCompanies' Creditors Arrangement Act ("CCAA") in the Ontario Superior Court ofJustice (the "Court"). The Court subsequently granted extensions of the CCAAprotection until June 30, 2005, which allowed the Company to continue operatingits business as it negotiated a restructuring plan ("the Plan") with itsshareholders by staying substantially all secured, unsecured and under-securedclaims at the filing date. Although implementation of the restructuring plan has significantly reduced theCompany's financial liabilities the Company will still require significantadditional financing through the remainder of 2005 to continue funding its SouthAfrican operations, complete the feasibility study of its Philippine operations,service its debt obligations and fund its corporate expenses. The Company has not obtained this additional financing as at the date hereof,and does not have any additional sources of cash flow from operations. Untilthe Company is able to obtain additional financing, either through additionaldebt or equity, the Company will be dependent on the continued financial supportof Casten and MC , who together with Meridian have provided approximately $21.8million in short term funding for the period January 7, 2005 to June 30, 2005.Meridian has assigned one-half of its interests in the financing to Casten andthe other half to MC a wholly-owned indirect subsidiary of Meridian. Casten andMC have continued to fund the working capital needs of the company and for thethird quarter of 2005 have advanced a further $5 million to the Company. Although the Company believes that Casten and MC will continue to support itthrough the balance of 2005 there can be no assurances that Casten and MC willprovide this additional financing and that the Company will be able to continueas a going concern. If Casten and MC do not provide such financing, the Companywill need to seek additional sources of financing in the interim in order tofund the operations, which funding may include a private placement of commonshares or other corporate financing on terms acceptable to the Company's boardof directors. The CCAA process was completed on June 30, 2005 following which Casten and MCare the principal creditors of the Company and own collectively 70% of theequity. The balance of the equity is owned as to 25% by former creditors,including the secured loan note holders and as to 5% by former equityshareholders. Plant Property and Equipment(in thousands of US dollars) Philippine Corporate South African Total assets assets assets Net book value at December 31, 2004 357 10 15,997 16,364Additions 58 - 2,642 2,700Depreciation (15) (7) (1,091) (1,113)Net book value at June 30, 2005 400 3 17,548 17,951 Fresh start net book value at July 1, 2005 400 3 17,548 17,951Additions 28 - 1,738 1,766Depreciation (8) (3) (1,238) (1,249)Net book value at September 30, 2005 420 - 18,048 18,468 Mining Properties(in thousands of US dollars) Philippines South African Total resource resource properties properties Balance at December 31, 2004 17,950 25,002 42,952Additions 1,875 - 1,875Depletion - (424) (424)Balance at June 30, 2005 19,825 24,578 44,403 Balance at July 1, 2005 19,825 24,578 44,403Additions 1,401 - 1,401Depreciation - (376) (376)Balance at September 30, 2005 21,226 24,202 45,428 Debt As at December 31, 2004 the Company's consolidated debt was $82.3 million.During the six-month period ended June 30, 2005, this debt increased byapproximately $22.8 million to $105.1 million primarily due to DIP financingduring the CCAA process. Upon implementation of the Plan, this debt was restructured with approximately$60.0 million being converted into new consolidated common shares of Thistle,leaving a net debt of approximately $45.1 million as at June 30, 2005. This debtis analyzed as follows: Restructured debt outstanding as at Currency Interest Current Portion Long term portion June 30, 2005 rate (1) (1) MC Cdn $ 10% 491,250 1,473,750Casten Cdn $ 10% 491,250 1,473,750Total Cdn $ 10% 982,500 2,947,500 MC Cdn $ 12% 3,375,000 10,125,000Casten Cdn $ 12% 3,375,000 10,125,000Total Cdn $ 12% 6,750,000 20,250,000 MC US $ 10% 2,500,000 7,500,000Casten US $ 10% 2,500,000 7,500,000Total US $ 10% 5,000,000 15,000,000 (1) As at September 30, 2005 Interest is payable quarterly on the last day of March, June, September andDecember. The Company has an obligation to withhold and pay when due allwithholding taxes and other similar taxes payable in respect of interest andfees or other amounts paid. Subsequent to the end of CCAA process additional debt of $5million was advancedfrom MC and Casten analysed as follows: Debt incurred subsequent to CCAA as Currency Interest Current Portion Long term portionat September 30, 2005 rate MC US $ 12% 2,500,000 -Casten US $ 12% 2,500,000 -Total US $ 12% 5,000,000 - Interest is calculated and payable monthly, not in advance, on the last day ofeach month in each year commencing 31 December 2005. In addition the Companyhas an obligation to pay MC and Casten a loan advance fee in an amountequivalent to three per cent (3%) of the principal amount loaned. The Companyalso has an obligation to withhold and pay when due all withholding taxes andother similar taxes payable in respect of interest and fees or other amountspaid. Reclamation provision At September 30, 2005 the Company has a provision of approximately $6.6 millionrecorded for environmental liabilities in South Africa based on a historicaltranslation basis after the adjustments made in terms of "fresh start accounting". The increase in the provision from $3 million at 31 December 2004 is due toa $1.3 million "fresh start accounting" adjustment and a $2.3 million increasein the present value amount for closure. Under fresh start accounting, theenvironmental liability has been translated using the Rand to US$ exchange rateat 30 June 2005. The increase in the present value amount is due to changes inthe guidelines issued by the Department of Minerals and Energy of South Africaregarding the calculation of closure and rehabilitation costs. South African mining operations are required by law to contribute to dedicatedenvironmental trust funds to provide financing for closure and rehabilitationcosts. Estimated long-term environmental obligations comprising pollutioncontrol, rehabilitation and mine closure are based on the Company'senvironmental management plans in compliance with current technological,environmental and regulatory requirements. During the operational life of themine, operations must determine and provide for the cost of mine closure,post-closure rehabilitation and monitoring once mine operations cease. The present value amount required for closure and the amount contributed toPresident Steyn's Environmental Trust Fund amounts to R45 million ($6.6 million)and R6.8 million ($1.1 million), respectively. The latter amount is included in"other assets". As at September 30, 2005, these monies were invested in themoney market. A committee comprising of financial and technical staff governsthe trust fund. Income Tax Payable Income tax payables represent the taxes payable in respect of the South Africansubsidiaries on the foreign exchange gains in the shareholders loans and thegain on the close out of the hedge position in 2003. Contractual obligations The Company rents premises and leases equipment under operating leases thatexpire over the next three years. Operating lease expenses in the first ninemonths of 2005 were ($244,000) (for the same period in 2004 - $89,000). Thefollowing is a schedule of future minimum rental and lease payments required: (in $000's) 2005 34 2006 108 2007 16 Total 158 Summary of Quarterly Results Restated Restated Restated Restated (note 1) (note 1) (note 1) (note 1) Q3/2005 Q2/2005 Q1/2005 Q4/2004 Q3/2004 Q2/2004 Q1/2004 Q4/2003 Total Revenue US $ 22,274 18,710 18,788 18,917 25,943 15,847 17,430 25,552Income (loss) before (9,986) (6,714) (7,667) 3,042 (55,908) 4,371 (13,087) 6,970discontinuedoperations US$Income (loss) before (0.22) (2.91) (3.32) 1.32 (28.49) 2.23 (7.39) 5.75discontinuedoperations per share(basic and diluted)(note 4)Net income (loss) US$ (9,986) (6,714) (7,667) 8,668 (55,806) 4,002 (13,337) 7,220Income (loss) per (2.91) (3.32) 3.76 (28.43) 2.04 (7.53) 5.96share(basic and diluted)(note 4) (0.22)ZAR / US$ exchange 6.43 6.42 5.97 5.95 6.34 6.59 6.76 6.75rateAverage gold price 439 427 428 439 402 393 407 393realized US$ perounce Net earnings are generally affected by the performance of the South Africanoperations. The costs associated with the South African operation are greatlyaffected by the South African Rand: US exchange rate. Total revenues aregenerally affected by the average price of gold as well as by gold productionlevels. South African production in the fourth quarter of 2003 was adversely impacted byan underground fire which broke out on June 24, 2003 at No. 1 shaft. As aconsequence, areas which the Company had planned to mine were unavailable andwhilst half of the workforce in the section built fire walls between stops tostarve the fire of oxygen, the other half were creating new working places inother areas of the mine, which were not as high grade as those originallyplanned. The fire was finally brought under control by the end of August and byFebruary 2004 mining had returned to normal in all the affected areas. The extent of losses has been curtailed by continuing to reducing mining ofworkplaces that do not contribute to direct operating costs and reducingoverheads wherever possible. A real increase in the cost of labour andconsumables continue to place pressure on operating margins. Outstanding Share Data On June 30, 2005, the Company had 461,520,685 common shares issued andoutstanding. In addition, the 31,880,000 directors and employees stock optionsoutstanding as at December 31, 2004 were cancelled effective February 16, 2005.The share purchase warrants outstanding as at December 31, 2004 totalling87,452,913 were also cancelled effective February 16, 2005. As part of the restructuring under the "CCAA", which was completed on the closeof business on June 30 2005, the issued and outstanding shares at March 15, 2005were consolidated on a one new consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. In addition, the majorityof the convertible loans together with another long term loan were convertedinto 11,538,015 new shares. A portion of the demand loans were also convertedunder the restructuring process into 32,306,442 new shares. As a result of theforegoing, there were a total of 46,152,060 common shares outstanding uponcompletion of the restructuring, which continues to be the number of outstandingcommon shares today. Critical Accounting Estimates The preparation of the Company's consolidated financial statements requires theuse of estimates and assumptions that affect the reported amounts of assets andliabilities as well as revenue and expenses. Estimates are based on historicaland anticipated results and trends and other assumptions made by management. Bytheir nature, estimates are subject to an inherent degree of uncertainty.Actual results could differ from those estimates. The Company's accounting policies relating to valuation of mining properties,in-process gold inventory valuation, depreciation and depletion of miningproperty, plant and equipment, and site reclamation and closure accruals areaccounting policies that are subject to estimates and assumptions regardingreserves, recoveries, future gold prices and future mining activities. The Company's mining operations are subject to reclamation and closurerequirements. Minimum standards for mine reclamation have been established byvarious governmental agencies, which affect certain operations of the Company. Areserve for mine reclamation costs is established for restoring certainabandoned and currently disturbed mining areas based upon estimates of costs tocomply with existing reclamation standards. The Company's estimate of itsultimate accrual for reclamation costs may change due to changes in laws andregulations and interpretations thereof and changes in cost estimates. Corporate Information Head Office President Steyn Gold Mines Alexey Kruzhkov Company Secretary Nominated advisorsPrivate Bag X10206 London, United Kingdom Paul MarchandWelkom, 9459 London, United Kingdom Grant Thornton Corporate FinanceRepublic of South Africa Barry Goldberg London, United KingdomTel: +27 57 391 9114 Toronto, Ontario ListingFax: +27 57 391 9118 Bankers Jeffery Barnes Toronto Stock ExchangeCorporate Structure and Toronto, Ontario Symbol THT (Suspended) Royal Bank of CanadaManagement Alternative Investment Toronto, Ontario Market Askar Alshinbayev London, Symbol TMGDirectors London, United Kingdom Standard Bank LimitedChairman of the Board Registrar & Transfer Agent Johannesburg, South AfricaThe Right HonourableLord Lang of Monkton Officers CIBC Mellon Trust Company Legal CouncilAyrshire, Scotland Chief Executive Officer Toronto, Ontario Gerrit Kennedy London, United Kingdom Fraser Milner Casgrain LLPAskar Dostiyarov Johannesburg, South Toronto, Ontario AfricaAlmaty, Kazakhstan Auditors Chief Financial Officer WerksmansYuri Shafranik Andreas Graetz KPMG Inc. Johannesburg, South AfricaMoscow, Russia Johannesburg, South Johannesburg, South Africa Africa Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsand Management's Discussion and Analysis for the nine months ended September 30,2005. All figures are in US$ unless otherwise noted. The statements arepresented in accordance with Canadian GAAP. For further information, please contact: Andreas Graetz, Chief Financial OfficerPresident Steyn Gold MinesPrivate Bag X 10206, Welkom, 9460,Free State, South Africa Tel: +27 57 391 9114Fax: +27 57 391 9118agraetz@disselgroup.com Cautionary Note Some of the statements contained in this Quarterly Report are forward-lookingstatements, such as estimates that describe the Company's future plans,objectives or goals, including words to the effect that the Company ormanagement expects a stated condition or result to occur. Since forward-lookingstatements address future events and conditions, by their very nature theyinvolve inherent risks and uncertainties. Actual results relating to, amongother things, reserves, resources, results of exploration, capital costs andmine production costs could differ materially from those currently anticipatedin such statements by reason of factors such as the productivity of theCompany's mining properties, changes in general economic conditions in thefinancial markets, changes in demand and prices for the minerals the Companyproduces, litigation, legislative, environmental and other judicial, regulatory,political and competitive developments in domestic and foreign areas in whichthe Company operates, technological and operational difficulties encountered inconnection with the Company's mining activities, labour relations matters andcosts, and matters discussed under "Management's Discussion and Analysis". These unaudited Consolidated Financial Statements of Thistle Mining Inc. havenot been reviewed by the auditors of the Company. This notice is being providedin accordance with section 4.3(3) (a) of National Instrument 51-102 - ContinuousDisclosure Obligations. Consolidated Balance Sheet (in thousands of US dollars, unaudited) 30 September 2005 31 December 2004 Fresh start Pre fresh start ASSETSCurrent assetsCash and cash equivalents 4,695 1,844Accounts receivable 1,182 1,654Investments 707 1,130Inventories 4,270 3,700Other assets 1,236 1,729 12,090 10,057Property, plant and equipment 18,468 16,365Mining properties 45,428 42,953 75,986 69,375 LIABILITIES AND SHAREHOLDERS' DEFICIENCYCurrent LiabilitiesAccounts payable and accrued liabilities 18,567 18,795Current debt 16,660 82,334Income taxes payable 1,682 3,989Total current liabilities 36,909 105,118 Long term debt 34,978 -Reclamation provision 6,653 3,000Future income tax liabilities 773 49 79,313 108,167 Shareholders' Deficiency Common shares (note 4) 6,627 108,883Contributed surplus - 2,735Warrants - 14,578Deficit (9,954) (162,327)Equity adjustment from foreign currency translation - (2,661)Total shareholders' deficiency (3,327) (38,792) 75,986 69,375 Going concern (note 2) Subsequent events (note 2) See accompanying notes. Consolidated Statements of Operations Three months ended Six months ended Nine months ended 30 September 30 June 30 September(in thousands of US dollars, unaudited) 2005 2004 2005 2004 2004 Fresh start (restated - Pre Fresh (restated - (restated - note 1) start note 1) note 1) Pre fresh Pre fresh Pre fresh start start start Sales 22,274 25,943 37,498 33,277 59,220Cost of sales (25,735) (79,995) (47,973) (32,481) (112,476)Depletion and depreciation, and impairment (1,599) (2,291) (1,531) (3,905) (6,196Gross loss (5,060) (56,343) (12,006) (3,109) (59,452) Costs and ExpensesGeneral and administrative expenses (1,122) (1,011) (1,107) (4,136) (5,147)Restructuring charges - - (2,043) - -Depreciation (1) (11) (6) (22) (33)Amortization of deferred charges - (117) - (236) (353)Interest (1,743) (775) (977) (1,594) (2,369)Foreign currency gain / (loss) (2,059) 180 1,502 (442) (262)Other gains and (losses) 89 1,259 (42) 580 1,839Minority interest in net earnings - 262 - - 262Loss before income taxes and discontinuedoperations (9,896) (56,556) (14,679) (8,959) (65,515)Discontinued operations - 102 - (619) (517)Income tax expense (58) 648 298 243 891Net loss for the period (9,954) (55,806) (14,381) (9,335) (65,141) Net loss per share before discontinued (0.22) (28.49) (6.23) (4.70) (36.61)operations - basic and diluted (note 4) Net loss per share - basic and diluted (0.22) (28.43) (6.23) (5.04) (36.90)(note 4) See accompanying notes. Statement of Deficit Three months ended Six months ended Nine months ended 30 September 30 June 30 September(in thousands of US dollars, unaudited) 2005 2004 2005 2004 2004 Fresh start (restated - Pre fresh note 1) start (restated - (restated - note note 1) 1) Pre Fresh Pre fresh Pre fresh start start startDeficitBalance, beginning of the period - (115,189) (162,327) (105,854) (105,854) Net loss for the period (9,954) (55,806) (14,381) (9,335) (65,141) Balance, end of the period (9,954) (170,995) (176,708) (115,189) (170,995) See accompanying notes. Statement of Cash Flows Three months ended Six months ended Nine months ended 30 September 30 June 30 September(in thousands of US dollars, unaudited) 2005 2004 2005 2004 2004 Pre fresh (restated start (restated - (restated - note 1) note 1) note 1) Pre fresh Pre fresh Pre fresh start start startOperating activitiesNet loss for the year from continuing (9,954) (56,220) (14,381) (8,405) (64,625)operationsAdd (deduct) items not affecting cashfrom operating activitiesDepletion and depreciation, and 1,621 2,268 1,537 3,927 6,195impairmentFuture income and mining tax provisions (240) (1,231) - (704) (1,935)Foreign exchange 1,813 631 - (635) (4)Unrealized (gain) loss on derivative - 3,332 - (15,518) (12,186)instrumentsGains/(losses) on investments - (2,086) - 414 (1,672)Stock options issued - - - 1,347 1,347Realisation of hedge close out - 47,218 - - 47,218Other non-cash items 1,353 385 1,008 (32) 353 (5,407) (5,703) (11,836) (19,606) (25,309) Changes in non-cash working capital balancesAccounts receivable 445 1,536 27 (5,400) (3,864) Inventories (405) 994 (165) (3,085) (2,091) Other assets (23) (3,687) 352 2,015 (1,672) Accounts payable and accrued liabilities 3,477 (2,811) (1,799) 3,637 826 Income and mining taxes recoverable and 336 (1,034) (2,430) (1,525) (2,559)payable 3,830 (5,002) (4,015) (4,358) (9,360) Cash flows provided by (used in) (1,577) (10,705) (15,851) (23,964) (34,669)operating activities Net change in discontinued operations - (32) - (45) (77) Investing activitiesAdditions to mining properties (1,401) 1,881 (1,875) (830) 1,051 Purchase of property, plant and (1,762) 337 (2,700) (3,837) (3,500)equipment Sale (purchase) of investments 252 (388) 7 326 (62) Cash flows provided by (used in) (2,911) 1,830 (4,568) (4,341) (2,511)investing activitiesFinancing activitiesCommon shares issued - - - 32,590 32,590Warrants issued - - - - -Net proceeds from borrowings 5,000 3,855 22,758 20 3,875Cash flows provided by (used in) 5,000 3,855 22,758 32,610 36,465financing activities Net increase in cash and cash 512 (5,052) 2,339 4,260 (792)equivalentsCash and cash equivalents, beginning of 4,183 6,059 1,844 1,799 1,799periodCash and cash equivalents, end of period 4,695 1,007 4,183 6,059 1,007 See accompanying notes. Notes (forming part of the financial statements; unaudited) (tabular amounts in thousands of US dollars unless specified) 1. Significant accounting policies The Company prepares its financial statements in accordance with Canadiangenerally accepted accounting principles ("Canadian GAAP") and under historicalcost accounting rules. These unaudited interim consolidated financial statements ("the statements")include the financial statements of the Company and its subsidiary undertakings.These statements do not include all disclosures required for annual financialstatements, and accordingly, should be read in conjunction with the Company'smost recent annual consolidated financial statements. In 2004 the Company filedits third quarter financial statements in accordance with United Kingdomgenerally accepted accounting principles ("UK GAAP"). The third quarter 2004 UKGAAP statements were restated in accordance with Canadian GAAP. 2. Financial reorganization and going concern The accompanying consolidated financial statements have been prepared on a"going concern" basis in accordance with Canadian generally accepted accountingprinciples (''GAAP''). The going concern basis of presentation assumes that theCompany will continue in operation for the foreseeable future and will be ableto realize its assets and discharge its liabilities and commitments in thenormal course of business. There is substantial doubt about the appropriatenessof the use of the going concern assumption because of the Companies' CreditorsArrangement Act ("CCAA") reorganization proceedings (discussed below) andcircumstances relating to this event, including the Company's debt structure,recent losses and cash flow. As such, realization of the Company's assets anddischarge of its liabilities are subject to significant uncertainty. The consolidated financial statements do not reflect adjustments that would benecessary if the going concern basis was not appropriate. If the going concernbasis was not appropriate for these consolidated financial statements, thensignificant adjustments would be necessary in the carrying value of assets andliabilities, the reported revenues and expenses, and the balance sheetclassifications used. The appropriateness of the going concern basis isdependent upon, among other things, future profitable operations, and theability to generate sufficient cash from operations and financing arrangementsto meet obligations. Additionally, following implementation of the Company's business plan underCCAA, the Company adopted "fresh start" accounting effective from 30 June 2005.This accounting required that assets and liabilities be recorded at their fairvalues at this. The "fresh start" accounting is discussed further in note 3. On January 7, 2005 (the "Filing Date"), the Company obtained protection underthe CCAA from the Ontario Superior Court of Justice (the "Court"). The Courtsubsequently granted extensions of the CCAA protection to June 30, 2005. Thisallowed the Company to continue operating its business while it negotiated arestructuring plan with its creditors. On May 3, 2005 the Company's affected creditors approved the Company's plan ofcompromise and reorganization pursuant to the CCAA ("Plan") and the Plan wasapproved by the Court on May 10, 2005. The Company subsequently emerged fromCCAA protection and the Plan was implemented on the close of business on June30, 2005. The Plan provided, inter alia, for the following: 1. Two classes of creditors: • Class One, consisting of Meridian Creditors, the holders of claims in respect of the Company's senior secured indebtedness; and • Class Two, consisting of the Noteholder Creditors, the holders of claims relating to notes issued by the Company; 2. The sale by Meridian Creditors to the Company, or its security agent, of: • Debt owing to Meridian Creditors by subsidiaries of the Company, guaranteed by the Company, and secured, totaling approximately $54.2 million together with interest thereon; and • Debt owing to Meridian Creditors by a subsidiary of the Company totaling approximately Cdn $3.93 million together with interest thereon; 3. In consideration for such sale, the Meridian Creditors received from the Company, in aggregate: • Secured notes evidencing indebtedness of $20 million; • Secured notes evidencing indebtedness of Cdn $3.93 million; and • 70% of the post-implementation equity in the Company; 4. The release of all claims of Noteholder Creditors, totaling principalof $24.85 million plus interest thereon, in consideration for which NoteholderCreditors received 25% of the post-implementation equity in the Company; 5. The consolidation of existing common shares of the Company so thatexisting shareholders retained 5% of the post-implementation equity in theCompany; 6. Payment in full by the Company of all proven claims of the Company'screditors as at the Filing Date (other than claims of Meridian Creditors andNoteholder Creditors); and 7. The delivery by the Company to the Meridian Creditors of secured notesevidencing the amount of the Company's outstanding debtor-in-possessionfinancing owing to them as at the Plan implementation date. Although the implementation of the Plan has significantly reduced the Company'sfinancial liabilities the Company will still require additional financingthrough the remainder of 2005 to continue funding its South African operations,complete the feasibility study of its Philippine operations, service its debtobligations and fund its corporate expenses. The Company has not obtained this additional financing as at the date of thesefinancial statements, and does not have any additional sources of cash flow fromoperations. Until the Company is able to obtain additional financing, eitherthrough additional debt or equity, the Company will be dependent on thecontinued financial support of Casten Holdings Limited ("Casten") and MCResources Limited ("MC") who, together with Meridian Capital Limited ("Meridian") have provided approximately $21.8 million in short term funding forthe period January 7, 2005 to June 30, 2005. Meridian has assigned one-half ofits interests in the financing to Casten and one-half of its interests in thefinancing to MC, a wholly-owned indirect subsidiary of Meridian Capital Limited.Casten and MC have continued to fund the working capital needs of the companyand for the third quarter of 2005 have advanced a further $ 5 million to theCompany. Although the Company believes that Casten and MC will continue to support itthrough the balance of 2005 as it attempts to implement its revised businessplan, there can be no assurances that Casten and MC will provide additionalfinancing and that the Company will be able to continue as a going concern. 3. Fresh Start Accounting Due to the realignment in equity interest and capital structure of ThistleMining Inc. under the Restructuring Plan, the Company was required to perform asat June 30, 2005, a comprehensive revaluation of its balance sheet referred toas "fresh start accounting", which included the following significantadjustments. The Company has adjusted the historical carrying value of itsassets and liabilities to fair value reflecting the allocation of the Company'sreorganization equity value of $6.6 million. In addition, under "fresh startaccounting" the Company translated its reclamation provision and future taxliabilities using June 30, 2005 rates and eliminated some previous provisionswhich were no longer necessary. The following table summarizes the impact of adjustments made to implement thePlan and to reflect the adoption of fresh start accounting.(in thousands of US dollars, unaudited) June 30, 2005 Fresh start June 30, 2005 Balance prior to accounting Balance after Plan Plan implementation Implementation AssetsCurrent AssetsCash and cash equivalents 4,183 - 4,183Accounts receivable 1,627 - 1,627Investments 1,011 (52) 959Inventories 3,865 - 3,865Other assets 1,191 11 1,202 11,877 (41) 11,836Property, plant and equipment 17,951 - 17,951Mining properties 44,403 - 44,403 74,231 (41) 74,190 Liabilities and Shareholders' DeficiencyCurrent LiabilitiesAccounts payable and accrued liabilities 16,996 (1,112) 15,884Current debt 67,462 (59,980) 7,482Income taxes payable 1,559 - 1,559Total current liabilities 86,017 (61,092) 24,925 Long term debt 37,630 - 37,630Reclamation provision 3,000 1,296 4,296Future income tax liabilities 755 (43) 712 127,402 (59,839) 67,563 Shareholders' Deficiency Common shares (note 3) 123,461 (116,834) 6,627Contributed surplus 2,735 (2,735) -Warrants - - -Deficit (176,708) 176,708 -Equity adjustment from foreign currency translation (2,659) 2,659 -Total shareholders' deficiency (53,171) 59,798 6,627 74,231 (41) 74,190 4. Share capital On January 7, 2005 the Company commenced restructuring under CCAA. Under therestructuring, all of the Company's existing common shares were consolidated ona one share for 200 existing shares basis and additional common shares wereissued to creditors affected by the Plan, such that the Meridian Creditors holdapproximately 70% of the existing company shares, holders of secured andunsecured convertible loan notes approximately 25% of the outstanding shareswith the balance being held by previous existing shareholders. As a result ofthis, all outstanding warrants have been cancelled effectively on February 16,2005. a) Authorized Unlimited common shares without par value. Unlimited Class "A" preferenceshares. b) Issued Common shares Number Amount of shares $000 January 1, 2004 242,241,357 85,133Private placements 218,110,246 23,528Exercise of warrants 500,000 94Conversion of loans 669,082 128December 31, 2004 461,520,685 108,883Cancellation of warrants - 14,578June 30, 2005 Pre CCAA 461,520,685 123,461Conversion of existing shares on a 200 for one basis as of June 30,2005 2,307,603 123,461Conversion of various loans per Plan of arrangement 43,844,457 59,980Other fresh start accounting adjustments - (176,814)Balance at 30 June Post CCAA, 30 September 2005 46,152,060 6,627 On June 30, 2005, the Company had 461,520,685 common shares issued andoutstanding. In addition, the 31,880,000 directors and employees stock optionsoutstanding as at December 31, 2004 were cancelled effective February 16, 2005.The share purchase warrants outstanding as at December 31, 2004 totalling87,452,913 were also cancelled effective February 16, 2005. As part of the restructuring under the CCAA, which was completed on the close ofbusiness on June 30 2005, the issued and outstanding shares at March 15, 2005were consolidated on a one new consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. In addition, the majorityof the convertible loans together with another long term loan were convertedinto 11,538,015 new shares. A portion of the demand loans were also convertedunder the restructuring process into 32,306,442 new shares. As a result of theforegoing, there were a total of 46,152,060 common shares outstanding uponcompletion of the restructuring, which continues to be the number of outstandingcommon shares today. The net loss per share before discounting operations (basic and diluted) and thenet loss per share (basic and diluted) for periods prior to 1 July 2005 havebeen adjusted for the effect of the consolidation of 200 shares for 1 under theCompanies' Creditors Arrangement Act ("CCAA") restructuring process detailedabove. 5. Reconciliation to United States GAAP Canadian GAAP varies in certain significant respects from the principles andpractices generally accepted in the United States ("US GAAP"). The Companyprepares its financial statements in accordance with Canadian GAAP. The effectof these principal differences on the Company's consolidated financialstatements is quantified below and described as follows: Under Canadian GAAP, all costs related to the acquisition, exploration anddevelopment of non-producing mineral properties are capitalized. Under US GAAP,mining properties are permitted to capitalize acquisition, exploration anddevelopment costs only upon the determination of a commercially mineabledeposit. Effective December 31, 2001 the Board reviewed the status of itsPhilippines project at Masbate. They decided that with the gold price at $255per ounce and the then indicated cash cost of production at $190, the Masbateproject was projected to produce an inadequate return on investment and downgraded the then reserve to the resource category. As a result, under US GAAP thecosts incurred in the Philippines subsequent to December 31, 2001 is an expense. The application of U.S. GAAP would have impacted the Company's reported resultsfor 2005 and 2004 as follows: 2005 2004 Six months ended June 30 Pre Fresh Pre Fresh Start Start Net loss based on Canadian GAAP 14,381 9,335Impact on net earnings of US GAAP adjustments:Exploration costs 1,875 831 Net loss based on US GAAP 16,256 10,166Basic and diluted loss per share before discontinued operations based on US (7.04) (5.15)GAAPBasic and diluted loss per share based on U. S. GAAP (7.04) (5.48) 2005 2004 Three months ended September 30 Fresh Start Pre Fresh Start Net loss based on Canadian GAAP 9,954 55,806Impact on net earnings of US GAAP adjustments:Exploration costs 1,401 370 Net loss based on US GAAP 11,355 56,176Basic and diluted loss per share before discontinued operations based on US (28.68)GAAP (0.25)Basic and diluted loss per share based on U. S. GAAP (28.62) (0.25) 2005 2004 For the period ended September 30 Fresh Start Pre Fresh Start Shareholders deficiency based on Canadian GAAP (3,327) (92,704)Impact on shareholder's equity of US GAAP adjustments:Exploration costs (6,796) (3,018)Gain / (loss) on mark to market of investments 10 (47) Shareholder's deficiency based on US GAAP (10,113) (95,769) 5. Reconciliation to United States GAAP cont'd Comprehensive income Statement of Financial Accounting Standards No. 130 ("FAS 130") establishesstandards under US GAAP for reporting and displaying comprehensive income andits components (revenues, expenses, gains and losses) in a full set ofgeneral-purpose financial statements. FAS 130 requires that all items that arerequired to be recognized under accounting standards as components ofcomprehensive income be reported in a financial statement that is displayed withthe same prominence as other financial statements. FAS 130 requires companies to (i) classify items of other comprehensive incomeby their nature in a financial statement, and (ii) display the accumulatedbalance of other comprehensive income separately from capital stock, contributedsurplus and retained earnings in the shareholders' equity section of the balancesheet. Statement of Financial Accounting Standards No. 115 ("FAS 115") addresses theaccounting and reporting for investments in equity securities that have readilydeterminable fair values and for all investments in debt securities. FAS 115, asamended by FAS 130, requires investments which are classified asavailable-for-sale securities to be reported at fair value, with unrealizedgains and losses excluded from earnings and reported in other comprehensiveincome. The statements of comprehensive loss would be presented as follows on a US GAAPbasis: 2005 2004 For the six months ended June 30 Pre Fresh Start Pre Fresh Start Net loss based on US GAAP 16,256 10,166Other comprehensive loss net of income taxes:Loss on mark to market of investments 18 484Foreign currency translation (gain)/loss (2) -Comprehensive loss based on US GAAP 16,271 10,650 2005 2004 For the three months ended September 30 Fresh Start Pre Fresh Start Net loss based on US GAAP 11,355 56,176Other comprehensive loss net of income taxes:Loss on mark to market of investments 44 5Foreign currency translation (gain)/loss - -Comprehensive loss based on US GAAP 11,399 56,181 The accumulated other comprehensive loss balances for the period ended September30, 2005 and the year ended December 31, 2004 would be presented as follows on aUS GAAP basis:Balance, December 31, 2003 2,217Movements 496Balance, December 31, 2004 2,713Movements 16Balance, June 30, 2005 2,729Movements subsequent to fresh start accounting 44Balance, September 30, 2005 2,773 -------------------------- (1) Cash cost per ounce sold is not a recognized measure under Canadian GAAP. Areconciliation to the cost of sales per ounce is included under South AfricanOperations. (2) Cash cost per ounce sold is not a recognized measure under Canadian GAAP. Areconciliation to the cost of sales per ounce is included under South AfricanOperations. (3) Cash cost per ounce sold is not a recognized measure under Canadian GAAP. (4) EBITDA is derived based on earnings before interest, taxes, depreciation andamortization and foreign exchange losses on translation. EBITDA is not arecognized measure under Canadian GAAP. Management believes that, in additionto net income (loss), EBITDA is a useful supplemental measure as it providesinvestors with an indication of cash available for distribution prior to debtservice, capital expenditures and income taxes. Investors should be cautioned,however, that EBITDA should not be construed as an alternative to net income(loss) determined in accordance with GAAP as an indicator of the Company'sperformance or to cash flows from operating, investing and financing activitiesas a measure of liquidity and cash flows. The Company's method of calculatingEBITDA may differ from other companies and, accordingly, EBITDA may not becomparable to measures used by other companies. This information is provided by RNS The company news service from the London Stock Exchange