The Mission Group Regulatory News (TMG)

12 Sep 2005 14:50

Thistle Mining Inc.12 September 2005 Thistle Mining Inc. Second quarter results for the period ended June 30, 2005 Toronto, September 12, 2005. Thistle Mining Inc. (TSX: THT and AIM: TMG) 2005 Second Quarter results Thistle Mining Inc. (the "Company") is pleased to announce that the SecondQuarter Report for the period ended June 30, 2005 was filed on SEDAR today. Acopy of the report can be obtained from the Company's website:www.thistlemining.com. The Company reported a loss of $6.7 million ($0.01 per share) for the secondquarter and net loss of $14.4 million ($0.03 per share) for the first six monthsof 2005. Earnings were negatively impacted by continued losses incurred by thePresident Steyn operation in South Africa ("President Steyn"). The Rand goldprice has remained relatively stable over the past 18 months with the strengthof the US $ gold price being offset by the strength of the Rand. In common withother South African producers Rand costs have increased following real increasesin the cost of labour and materials. President Steyn's realized gold price was $427 per ounce in the second quartercompared to a spot price of $427 per ounce. Gold sales totaled 42,376 ouncesduring the second quarter of 2005 and 85,285 ounces for the first six months ofthe year. The cash cost per ounce sold was $554 per ounce in the second quarterof 2005 and $563 per ounce for the six months. Total costs per ounce sold inthe second quarter were $577 per ounce of gold and for the first six months of2005, $583 per ounce of gold. Initiatives have been implemented that have helpedoffset continued cost pressures from labour and input commodity costs. Theseinclude the placing of numbers 7 and 9 shafts on care and maintenance.Furthermore production from high cost low margin working places is being phasedout. Management are also engaging with trade unions and the Company's workforcein respect of a section 189 notice under the Labour Relations Act that couldlead to a major restructuring of the workforce at President Steyn with a view torestoring its profitability. Corporate overheads will be reduced with the decision by the Company to shutdown the Toronto office. Executive management will be based in South Africa inorder to play a hands-on role in restoring President Steyn's profitability. Good progress continues to be made in advancing the Company's Masbate project inthe Philippines and the conclusion of the feasibility study. Exploration,drilling and feasibility study costs capitalized in the second quarter wereapproximately $1.0 million and for the first six months of 2005 amounted toapproximately $1.1 million. Exploration, drilling and feasibility costs for thesecond half of 2005 are budgeted to be approximately $1.47 million. The totalestimated cost for the remainder of 2005 is projected to be approximately $3.5million which also includes a provision to secure used processing plant and landacquisition costs. 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 Companies' Creditors Agreement Act ("CCAA"), which was completed on the close of business on June 30 2005, theissued and outstanding shares at March 15, 2005 were consolidated on a one newconsolidated share for 200 existing shares basis. This resulted in 2,307,603consolidated common shares. In addition, the majority of the convertible loanstogether with another long term loan were converted into 11,538,015 new shares.A portion of the demand loans were also converted under the restructuringprocess into 32,306,442 new shares. As a result of the foregoing, there were atotal of 46,152,060 common shares outstanding upon completion of therestructuring, which continues to be the number of outstanding common sharestoday. 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 todebtor-in-possession financing during the CCAA process. Upon the implementation of the restructuring plan this debt was restructuredwith approximately $60.0 million being converted into new consolidated commonshares of Thistle, leaving a net debt of approximately $45.1 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.Financing options are being reviewed for the Philippines operation and thistogether with the restructuring of President Steyn and management proposals toaccelerate the exploitation of the number 2 shaft pillar at President Steyn areplanned to help the Company to meet its objective of being self sufficient froma funding perspective for operations from early 2006 onwards. Casten Holdings Limited and MC Resources Limited have advanced a total of $3million for the period July 1, 2005 to August 31, 2005 to fund the Company'sSouth African and Philippines operations. Due to the restructuring of the Company under the CCAA, the Company was requiredto perform as at July 1, 2005, a comprehensive revaluation of its balance sheetreferred to as "fresh start accounting'', which included the followingsignificant adjustments: the Company adjusted the historical carrying value ofits assets and liabilities to fair value reflecting the allocation of theCompany's reorganization equity value of $6.6 million. In addition, under freshstart accounting the Company translated its reclamation provision using June 30,2005 rates and fair valued other accruals. 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 Thistle's most recent Annual Information Form and otherpublicly 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. For further information, contact: Andy Graetz, Chief Financial Officer + 27 57 391 9026 or email toagraetz@disselgroup.com Paul Marchand, Company Secretary, +44 207 494-6060. Neil Murray-Lyon of Renmark +1 514-939-3989. Second Quarter Report June 30, 2005 Thistle Mining Inc. Second quarter results for the period ended June 30, 2005 Management's Discussion and Analysis September 8, 2005 For the six months ended June 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 six-month period ended June 30, 2005 including the notesthereto. Further details regarding the Company and its business and operationsmay be obtained from the Company's continuous disclosure documents filed fromtime to time with the Canadian securities regulatory authorities, including theCompany's annual information form (the "AIF"). These continuous disclosuredocuments are available through the SEDAR website maintained by the Canadiansecurities 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 $6.7 million ($0.01 per share) for thesecond quarter and net loss of $14.4 million ($0.03 per share) for the first sixmonths of 2005. Earnings were negatively impacted by continued losses incurredby the President Steyn operation in South Africa. Despite an increase inrecovered grade from 2004 levels, the cost of production has increased in realterms. President Steyn's realized gold price was $427 per ounce in the second quartercompared to a spot price of $427 per ounce. Gold sales totaled 42,376 ouncesduring the second quarter of 2005 and 85,285 ounces for the first six months ofthe year. Cash cost per ounce sold was $554(1) in the second quarter of 2005 and$563 for the six months. Initiatives have been implemented that have helpedoffset continued cost pressures from labour and input commodity costs. Theseinclude the placing of numbers 7 and 9 shafts on care and maintenance. Totalcost of sales per ounce in the second quarter was $577 and for the first sixmonths of 2005, $583. Management are also engaging with the labour in terms of asection 189 notice of the South African Labour Relations Act that could lead toa major restructuring of the workforce at President Steyn with a view torestoring the mine's profitability. Good progress continues to be made with advancing the Masbate project in thePhilippines to feasibility study. Exploration, drilling and feasibility studycosts capitalized in the second quarter were approximately $1.0 million and forthe first six months of 2005 amounted to approximately $1.1 million.Exploration, drilling and feasibility costs for the second half of 2005 arebudgeted to be approximately $1.47 million. The total estimated cost for theremainder of 2005 is projected to be approximately $3.5 million which alsoincludes a provision to secure used processing plant and land acquisition costs. 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. Although the implementation of the restructuring plan will significantly reducethe Company'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 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 Meridian, who has provided approximately $21.8million for the period January 7, 2005 to June 30, 2005. Meridian CapitalLimited assigned one-half of its interests in the financing to Casten HoldingsLimited ("Casten") and the other half to MC Resources Limited, a wholly-ownedsubsidiary of Meridian ("MC"). Although the Company believes that Casten and MCwill continue to support its financial needs through the balance of 2005 as itattempts to implement its revised business plan, there can be no assurances thatCasten and MC will provide such financing and that the Company will be able tocontinue as a going concern. The CCAA process was completed on June 30, 2005 following which Meridian and itsassociates will be the principal creditors of the Company and will owncollectively 70% of the equity. The balance of the equity will be owned as to25% by former creditors, including the secured loan note holders and as to 5% byformer equity shareholders. Capital Resources and Working Capital Requirements 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 Philippineoperations, service its debt obligations and fund its corporate expenses.Financing options are being reviewed for the Philippine operation and thistogether with the restructuring of President Steyn and management proposals toaccelerate the exploitation of the number 2 shaft pillar at President Steyn areplanned to help the Company to meet its objective of being self sufficient froma funding perspective for operations from early 2006 onwards. Casten and MC have advanced a total of $3.0 million for the period July 1, 2005to August 31, 2005 to fund the South African and Philippines operations. Postthe CCAA restructuring, the Company's cash needs continue to be funded by Castenand MC. 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. Financial HighlightsFinancial Highlights for the six months ending June 30, 2005 (in thousands of dollars)June 30 2005 2004Sales 37,498 33,277Gross loss (12,006) (3,109)Net loss (14,381) (9,335)Net loss per share - basic and diluted (0.03) (0.02)Cash used in operating activities (16,763) (23,964)Total assets 74,231 106,877 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 $12.0 million in the first six months of2005 compared to a gross loss of $3.1 million in the previous period in 2004.After accounting for general and administrative expenses and other operatingexpenses, for the first six months the Company reported an operating loss of$14.7 million compared to an operating loss of $9.0 million in 2004. The totalnet loss was $14.4 million, or 3 cents per share, compared to $9.3 million, or 2cents per share in 2004. Operations SOUTH AFRICA The principal operating companies in South Africa are President Steyn Gold Mines(Free State) (Pty) Ltd. ("PSGM") and TMTI (Pty) Ltd., which operate the minesand the training college attached to the mine site, respectively. Health and Safety We regret to report the deaths of three employees in 2005, one in January in anaccident at number 2 shaft, one in June and one in July in accidents at Number1A vent shaft. The latter two accidents arose from falls of ground. The Company,together with the Department of Minerals and Energy, has carried out a detailedinvestigation into the first incident and where necessary has taken appropriateaction. The second and third accidents are currently being investigated. TheCompany wishes to express its regret and condolences to the families of MessrsMohohlo, Ntja and Selonyane. For the six month period to June 30, 2005, the Lost Time Injury and Reportablerate amounts to 14.69 and 8.7 per 1000 employees per annum. Although thesemetrics compare to averages being realised for the deep level South African goldmining industry, management consider the rates to be high. On June 11, 2005 number 3 Shaft achieved 1 million Fatality Free Shifts, anindication that the focus on improving safety is having some effect. This iseven more note-worthy; bearing in mind that number 3 shaft is now on continuousoperations ("conops") and has the largest labour complement of all of ourshafts. South African Operations 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 2004 2004 2004 2004 2005 2005Tonnes hoisted 340,533 314,018 273,215 223,475 249,844 264,379Hoisted grade g/ 4.00 4.44 4.58 5.23 5.28 5.01tonneTonnes milled 340,533 314,018 273,215 223,475 249,844 268,884Recovered grade g/ 4.00 4.44 4.58 5.23 5.28 4.93tonnePlant recovery % 95.5 95.7 95.7 95.7 95.5 95.4Ounces sold 41,646 41,268 43,799 38,564 42,909 42,376 Realised US$/oz 407 393 402 439 428 427Hedge book US$/oz 5 (15) (29) - - -Received US$/oz 412 378 373 439 428 427Cash costs US$/oz 541 570 499 668 570 554(2)Cash costs R/tonne 448 487 513 703 584 562milled Avg. gold price US 407 393 402 439 428 427$/ozAvg. exch. Rate ZAR6.76 ZAR6.59 ZAR6.34 ZAR5.95 ZAR5.97 ZAR6.42ZAR/US$Avg. gold price 2,740 2,586 2,545 2,611 2,554 2,743ZAR/oz Cost of sales US$/ 587 615 265 1,042 589 577ozAdjusted for:Depreciation, (40) (33) (42) (352) (17) (19)depletion,amortisation,impairmentHedge close out - - 275 - - -adjustmentsMovement in - (6) 7 (19) (1) (2)provisionsOther non (6) (6) (6) (3) (1) (2)operating costs Cash costs US$/oz 541 570 499 668 570 554 Although the Rand remained strong for most of the first quarter, there has beensome currency weakness in the second quarter due in part to the strength of theUS$ against most currencies. The Rand has been as high as 6.90 to the US$ inearly June and its level against the US$ remains a key factor in the minesprofitability. The Rand gold price has remained relatively stable over the past 15 months withthe strength of the US $ gold price being offset by the strength of the Rand. Incommon with other South African gold producers Rand costs have increasedfollowing real increases in the cost of labour and materials. Second quarter 2005 sales of gold were 42,376 ounces compared with 41,268 in thesame quarter last year and 42,909 ounces in the first quarter of 2005. Goldproduction was sustained 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 now number 9 shaftand the focusing on high grade areas. This exercise has led to an improvement inthe recovered grade from 4.00 g/t in the first quarter of 2004 to 5.28 g/t and4.93 g/t in the first and second quarters of 2005 respectively. The grade isplanned to increase further once meaningful production commences from theexploitation of the high grade number 2 shaft pillar scheduled for early 2006. During the second quarter of 2005, the South African operations recorded aneffective gold price of US$427 per ounce equivalent to the average market priceover the same period. Effective from August 10, 2004 when the Company's hedgebook was closed out, the Company is un-hedged from a cash flow point of view. Cash operating costs for the second quarter of 2005 were US$554 per ounce ofproduction, compared with US$570 for the first quarter of 2005, a decrease ofapproximately 3%. The decrease is due to the weakening Rand in spite of anincrease in the Rand cash cost per ounce of approximately 4%. Production A summary of production per shaft, comparing the first quarter of 2005 with thecorresponding period in 2004, is as follows: Quarter 2 2005 Quarter 2 2004Steyn 1 ShaftTonnes milled tonnes 87,721 78,424Recovered grade g/t 4.39 3.59Gold recovered Kg 384.818 281.615Gold recovered ounces 12,372 9,054 Steyn 2 ShaftTonnes milled tonnes 70,256 68,960Recovered grade g/t 5.63 5.06Gold recovered Kg 395.624 349.169Gold recovered ounces 12,720 11,226 Steyn 3 ShaftTonnes milled tonnes 106,402 99,463Recovered grade g/t 5.12 5.19Gold recovered Kg 544.67 516.493Gold recovered ounces 17,512 16,606 Steyn 7 Shaft (now suspended)Tonnes milled tonnes - 34,509Recovered grade g/t - 2.95Gold recovered Kg - 101.797Gold recovered ounces - 3,273 Steyn 9 Shaft (now suspended)Tonnes milled tonnes - 32,662Recovered grade g/t - 4.45Gold recovered Kg - 145.233Gold recovered ounces - 4,669 Summary of Results Quarter 2 2005 Quarter 2 2004TOTAL SHAFTSTonnes milled tonnes 264,379 314,018Recovered grade g/t 5.01 4.44Gold recovered Kg 1,325.112 1,394.307Gold recovered ounces 42,603 44,828 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 42,376 ounces. A total of 1,917 metres was developed during the first three months of 2005 and2,930 metres was developed during the three months ended June 30, 2005, comparedto an average of 2,751 metres per quarter in 2004. Eldorado Reef Project Emphasis continues in exploring, developing and exploiting the Eldorado Reefhorizon from number 3 shaft. The initial "Minkie" block is still in productioneven though it was expected to be depleted in the first quarter of 2005. Thefirst blast in the much larger, high-grade, "Big Bertha" block took place inearly May 2005. Access development and production planning for the "Big Bertha2 block" is progressing and it is intended that production will commence earlyin 2006. An exploration programme has been laid out but remains to beimplemented to explore the 6 km estimated strike length of the Eldorado Reefseries at a cost of approximately US $ 3.5 million. It is only once thisexploration programme has been completed that the full potential of the EldoradoReef massives can be reliably quantified. It is intended that the Eldoradoexploration project be implemented during 2006 if President Steyn is generatingpositive free cash flow from operations. Golden Triangle Project A pre-feasibility study for the Golden Triangle area is currently underway. TheGolden Triangle lies below current infrastructure of number 9 shaft and can beaccessed by deepening number 9 shaft or through declines. The pre-feasibilitystudy is planned to be followed by a feasibility study which is scheduled to becompleted in early 2006. Should this project prove viable, it will providerapid and capital efficient access to a mineral resource quantified at 4.9million tonnes containing an estimated 1.3 million oz of gold. 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 initiates a mandatory 60-dayconsultation process the purpose of which is to attempt to reach agreement withthe unions representing the President Steyn workforce on a broad range of labourissues including initiatives to mitigate job losses. The Company may not dismissany employees during the 60-day mandatory consultation period. Thereafter, theCompany may give notice to employees, taking into account any agreementsreached. A preliminary assessment would suggest that up to 2,000 jobs orapproximately 38% of the labour force at the President Steyn could be affected.Management also anticipate that given the climate of uncertainty during the 60day consultation process that production may be effected. The loss in productionis however difficult to quantify. Management have elected to defer wage negotiations until the Section 189 Aconsultation process has been completed. Wage settlements averaging 6 to 7% ofbasic wage plus agreement on other benefits such as living out allowances havebeen concluded between the Unions and other South African gold mining companies.The average wage increases granted exceed the current cost of inflation of 4 to5%. 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 President Steyn by 30April 2009 and a further 11% by 2014, with such transactions to be undertaken atfair market value. It is the Company's intention to introduce a scheme whichwill ensure compliance within the five-year time horizon for conversion asoutlined above. 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 Four drill rigs were utilized by United Philippines Drilling Co. during thequarter, and by the end of the period, 7613 meters of reverse circulation (R.C.)drilling, and 1310 meters of diamond core drilling had been completed. Theremaining meterage out of a total planned program of 10,000 meters of R.C. and2,000 meters of diamond core drilling are planned to be completed over the thirdquarter. Estimated costs for completion of the current drill program amount toUS $ 350,000. An additional program to confirm the grade of the existing "waste"dumps costing $ 142,000 is also planned. The waste dumps contain over 10million tonnes of material from pre - Second World War days where cut-offs weresubstantially higher. During the quarter, work was continued by Australian consultants Ausenco Ltd. onthe bankable feasibility study. Due to a late start by the drill company,coupled with some difficult ground conditions encountered during drilling, theresults and subsequent re-interpretation of the geological sections has havebeen delayed. It is now anticipated that the feasibility study will be completedlate in the fourth quarter. Metallurgical test-work at Metcon laboratories progressed as drill core and R.C.samples were made available, and to date, over four tonnes of material have beensent to Australia for testing. Test work includes leach and comminution tests.Initial results on optimum grind sizes indicate improved recoveries of oxidisedmaterial occurring at much coarser grind sizes. This may result in reduced powerrequirements and possibly smaller equipment. As well, site visits by sub- consultants Knight and Piesold and others continuedthrough the period. Geotechnical drilling to confirm open pit slopes plusdrilling in the vicinity of the major tailings embankment sites was completed.In addition, over 40 pits were dug to bedrock in the tailings deposition areaand the proposed plant site. Results are currently being analyzed in Australiafor inclusion in the study. Structural engineers from Ausenco also visited thesite and confirmed that some of the existing foundations at the old processplant were re-usable. This will allow significant savings to be made duringconstruction of a new plant. Due to re-organization within the Government mining and environmental sectionsduring the period, renewal of the Environmental Compliance Certificate,(E.C.C.), was delayed, however at the time of the publication of this quarterlyreport, this important document has now been officially signed. As well, theCompany has been informed that responses to specific queries from the othersignificant document, the Environmental Enhancement and Protection Program(E.P.E.P.) has been officially accepted. The official signing is expected withinthe third quarter. The macro political and regulatory climate is seen to befavourable for the development of mining projects within the Philippines. During the period, a significant amount of time has been spent on confirmationof titles for surface rights over the mining areas, including the tailingsdeposition zone. The actual costs incurred for the half year to June 30, 2005 and forecast tothe half year to December 31, 2005 are indicated below. Included in the forecastmiscellaneous cost is a deposit required to secure used processing plant.Feasibility study and other costs $000's H1/2005 H2/2005Exploration Drilling and Land Acquisition 653 736Feasibility Study Costs 396 908Masbate Site Cost 428 460Makati G & A 289 336Miscellaneous Costs 117 1056Total Forecast 1885 3496 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 turnkeyEPCM contract should be identified for the construction of the processing plant.Contingent on a successful feasibility study, construction of the processingplant could well commence during the third quarter of 2006. 2005 Second Quarter Financial Results South African Operations The South African sub-group cash EBITDA(3) in the first six months of 2005 wasan outflow of $10.6 million. After depreciation and amortization of $1.5 millionand foreign exchange gains on translation of $1.5 million, an operating loss of$5.0 million was recorded for the half year compared to a loss of $16.7 millionin the same period in 2004. As discussed elsewhere within this report, operations in South Africa in 2005have been significantly affected by the continued strengthening of the Randagainst the US dollar as well as by challenging operational conditions. Gross Loss For the six-month period ended June 30, 2005, the Company reported a gross lossof $12.0 million (for the same period in 2004 - loss of $3.1 million). Of thisamount, $5.6 million was incurred during the second quarter of 2005 compared toa gross profit of $6.8 million for the same period in 2004. The majority of theincreased loss is attributable to the President Steyn operations, more fullydiscussed in the South African Operations section of this report. Sales Sales for the first six months of 2005 increased to $37.5 million from $33.3million in the first six months of 2004. Sales for the three-month period endedJune 30, 2005 increased to $18.7 million compared to $15.8 million for the sameperiod in 2004. Total ounces sold for the South African operations in the firstsix months of 2005 amounted to 85,285 compared to 82,914 ounces sold in thefirst six months of 2004. 42,376 ounces were sold in the second quarter of 2005compared to 41,268 ounces sold in the second quarter of 2004. General and Administrative Expenses and Restructuring Charges The general and administration charges of $1.1 million for the first six monthsof 2005, $0.8 million of which was incurred in the second quarter, representsmainly the costs incurred by the head office in Toronto and mine closure costsof CIDEM, a French subsidiary. The decrease over the similar periods in 2004represents the decrease in costs due to the closure of the executive office inEdinburgh. In addition, stock option issue costs in 2004 amounted to $1.4million. The restructuring charges of $2.0 million include DIP financing fees, legal feesand charges by the CCAA monitor. Interest Interest of $1.0 million for the six month period to June 31,2005 representsmainly the interest on the servicing of debt from the Debtor in Possession ("DIP") financing. Foreign Currency Gain/Loss Foreign currency gain for the six months ended June 30, 2005 amounting to $1.5million represents the net translation gain on certain assets and liabilities inits South African operations. In the same period in 2004, the foreign currencyloss was $0.4 million. Total Assets The Company's total assets increased by $4.8 million from December 31, 2004mainly due to an increase in cash of $2.3 million and a net increase in SouthAfrican and Philippine assets of $3.0 million. During the six-month period ended June 30, 2005 $2.6 million was capitalizedprincipally on underground development in South Africa. Total expenditures in the Philippines during the first six months of 2005amounted to $1.9 million. This has been capitalized under "mining properties". The estimated cost of the Philippine operations for the remainder of 2005 isprojected to be approximately $3.5 million. This includes a provision to securethe purchase of used processing plant and the remaining costs for thefeasibility study, the drilling programme and land acquisition estimated to beapproximately $1.6 million. Cash Flows Cash used in operating activities in the first six months of 2005 (cashoperating loss, adjusted for movements in current assets and liabilities)amounted to $16.7 million against a cash outflow of $23.9 million for the sameperiod in 2004. $8.7 million of cash was used in operating activities for thethree-month period ended June 30, 2005 compared to $12.6 million for the sameperiod in 2004. The most significant financing activities during the first six-month period of2005 were the issue of net $22.8 million of DIP financing, $11.6 million ofwhich was issued in the second quarter of 2005. Liquidity and Capital Resources At June 30, 2005 the Company's net debt was $83.8 million, analyzed as follows: $ millionCash and cash equivalents 4.2Current liabilities (86.0) (83.8) 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 and 2004and the weakness of the Rand gold price have resulted in a situation where thereis strain on the Company's finances. The funding required each month to sustainoperations at the President Steyn Complex at its present level have been suchthat, although there are existing cash resources within the Company, they are,at present, insufficient to finance the operations beyond the very near term. Inthe absence of improved mining results and a weaker Rand relative to the USDollar, 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 Capital Limited. Meridian Capital Limited retains all the rights of alender under the senior finance documents. 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 the implementation of the Plan will significantly reduce 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 Philippines 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 Meridian, who has 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 CastenHoldings Limited ("Casten") and the other half to MC Resources Limited, awholly-owned indirect subsidiary of Meridian ("MC"). Although the Companybelieves that Casten and MC will continue to support it through the balance of2005 as it attempts to implement its revised business plan, there can be noassurances that Meridian will provide additional financing and that the Companywill be able to continue as a going concern. Plant Property and Equipment(Prior to impact of fresh start accounting) (in thousands of US dollars) Philippine Corporate South African Total assets assets assetsNet book value at December 31, 357 10 15,997 16,3642004Additions 58 - 2,642 2,700Depreciation (15) (7) (1,091) (1,113)Net book value at June 30, 2005 400 3 17,548 17,951 Mining Properties(Prior to impact of fresh start accounting) (in thousands of US dollars) Philippines South African Total Resource resource properties propertiesAssets at December 31, 2004 17,950 25,002 42,952Additions 1,875 - 1,875Depletion - (424) (424)Assets at June 30, 2005 19,825 24,578 44,403 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 of debt as at June 30, 2005.This debt is analyzed as follows: Restructured debt outstanding as at Currency Interest Current Portion Long term portion June 30, 2005 rateMC Resources Limited Cdn $ 10% 327,500 1,637,500Casten Holdings Limited Cdn $ 10% 327,500 1,637,500Total Cdn $ 10% 655,000 3,275,000 MC Resources Limited Cdn $ 12% 2,250,000 11,250,000Casten Holdings Limited Cdn $ 12% 2,250,000 11,250,000Total Cdn $ 12% 4,500,000 22,500,000 MC Resources Limited US $ 10% 1,666,667 8,333,333Casten Holdings Limited US $ 10% 1,666,667 8,333,333Total US $ 10% 3,333,333 16,666,667 Environmental Liability At June 30, 2005 the Company has a provision of approximately $3.0 millionrecorded for environmental liabilities in South Africa based on a historicaltranslation basis. South African mining operations are required by law tocontribute to dedicated environmental trust funds to provide financing forclosure and rehabilitation costs. Estimated long-term environmental obligationscomprising pollution control, rehabilitation and mine closure are based on theCompany's environmental management plans in compliance with currenttechnological, environmental and regulatory requirements. During theoperational life of the mine, operations must determine and provide for the costof mine closure, post-closure rehabilitation and monitoring once mine operationscease. The present value amount required for closure and the amount contributedto President Steyn's Environmental Trust Fund amounts to R29.6 million ($ 4.3million) and R6.7 million ( $1.0 million), respectively. The latter amount isincluded in "other assets". As at June 30, 2005, these monies were invested inthe money market. A committee comprising of financial and technical staffgoverns the trust fund. Under fresh start accounting, the environmental liability has been translatedusing the June 30, 2005 Rand to US$ exchange rate. This liability under freshstart accounting is estimated at $4.3 million. 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 sixmonths of 2005 were ($115, 000) (for the same period in 2004 - $86,000). Thefollowing is a schedule of future minimum rental and lease payments required: (in $000's) 2005 852006 1022007 16Total 203 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 a significant adjustment to thehistorical carrying value of its assets and liabilities to fair value reflectingthe allocation of the Company's reorganization equity value of $6.6 million. Inaddition, under fresh start accounting the Company translated its reclamationprovision using June 30, 2005 rates and eliminated some previous provisionswhich are no longer necessary. Summary of Quarterly Results Q2/2005 Q1/2005 Q4/2004 Q3/2004 Q2/2004 Q1/2004 Q4/2003 Q3/2003Total Revenue US $ $18,710 $18,788 $16,008 $16,664 $15,847 $17,430 $25,552 $20,845Income (loss) before (6,713) (7,667) (38,260) (14,605) 4,621 (13,087) 6,970 (31,297)discontinuedoperations US$Income (loss) before (0.01) (0.02) (0.09) (0.04) 0.01 (0.04) 0.03 (0.13)discontinuedoperations per share(basic and diluted)Net income (loss) US (6,713) (7,667) (38,260) (8,878) 4,002 (13,337) 7,220 (31,129)$Income (loss) per (0.01) (0.02) (0.09) (0.02) 0.01 (0.04) 0.03 (0.13)share(basic and diluted)ZAR / US$ exchange 6.42 5.97 5.95 6.34 6.59 6.76 6.75 7.41rateAverage gold price 427 428 439 402 393 407 393 363US$ per ounce Net earnings are generally affected by the high cost of production of the SouthAfrican operations. The costs associated with the South African operation are inturn adversely affected by the strength of the South African Rand. Totalrevenues are generally affected by the average price of gold as well as by goldproduction levels. South African production in 2003 was adversely impacted by an underground firewhich broke out on June 24, 2003 at No. 1 shaft. As a consequence, areas whichthe Company had planned to mine were unavailable and whilst half of theworkforce in the section built fire walls between stops to starve the fire ofoxygen, the other half were creating new working places in other areas of themine, which were not as high grade as those originally planned. The fire wasfinally brought under control by the end of August and by February 2004 mininghad 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 As at 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 Companies' Creditors Agreement Act ("CCAA"), which was completed on the close of business on June 30 2005, the issued andoutstanding shares at March 15, 2005 were consolidated on a one new consolidatedshare for 200 existing shares basis. This resulted in 2,307,603 consolidatedcommon shares. In addition, the majority of the convertible loans together withanother long term loan were converted into 11,538,015 new shares. A portion ofthe demand loans were also converted under the restructuring process into32,306,442 new shares. As a result of the foregoing, there were a total of46,152,060 common shares outstanding upon completion of the restructuring, whichcontinues to be the number of outstanding common 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. Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsand Management's Discussion and Analysis for the six months ended June 30, 2005.All figures are in US$ unless otherwise noted. The statements are presented in accordance with Canadian GAAP.For further information, please contact:Andreas Graetz, Chief Financial OfficerPresident Steyn Gold MinesP Bag X 10206, Welkom,9460, Free State, South Africa Tel 27 57 391 9026Fax 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) June 30 June 30 December 31 2005 2005 2004 fresh startAssetsCurrent AssetsCash and cash equivalents 4,183 4,183 1,844Accounts receivable 1,627 1,627 1,654Investments 959 1,011 1,130Inventories 3,865 3,865 3,700Other assets 1,202 1,191 1,729 11,836 11,877 10,057Property, plant and equipment 17,951 17,951 16,365Mining properties 44,403 44,403 42,953 74,190 74,231 69,375 Liabilities and Shareholders' DeficiencyCurrent LiabilitiesAccounts payable and accrued liabilities 15,884 16,996 18,795Current debt 7,482 67,462 82,334Income taxes payable 1,559 1,559 3,989Total current liabilities 24,925 86,017 105,118 Long term debt 37,630 37,630 -Reclamation provision 4,296 3,000 3,000Future income tax liabilities 712 755 49 67,563 127,402 108,167 Shareholders' Deficiency Common shares (note 3) 6,627 123,461 108,883Contributed surplus - 2,735 2,735Warrants - - 14,578Deficit - (176,708) (162,327)Equity adjustment from foreign currency translation - (2,659) (2,661)Total shareholders' deficiency 6,627 (53,171) (38,792) 74,190 74,231 69,375 Going concern (note 2) Subsequent events (note 2) See accompanying notes. Consolidated Statements of Operations Three months ended Six months ended 30 June 30 June(in thousands of US dollars, unaudited) 2005 2004 2005 2004 (restated - (restated - note 1) note 1)Sales 18,710 15,847 37,498 33,277Cost of sales (23,506) (7,011) (47,973) (32,481)Depletion and depreciation, and impairment (809) (2,075) (1,531) (3,905)Gross loss (5,605) 6,761 (12,006) (3,109) Costs and ExpensesGeneral and administrative expenses (761) (966) (1,107) (4,136)Restructuring charges (526) - (2,043) -Depreciation (3) 96 (6) (22)Amortization of deferred charges - (225) - (236)Interest (649) (867) (977) (1,594)Foreign currency gain / (loss) 828 84 1,502 (442)Other gains and (losses) (106) 219 (42) 580Minority interest in net earnings - (106) - -Loss before income taxes and discontinued (6,822) 4,996 (14,679) (8,959)operationsDiscontinued operations - (369) - (619)Income tax recovery 108 (625) 298 243Net loss for the period (6,714) 4,002 (14,381) (9,335) Net loss per share before discontinued (0.01) (0.04) (0.03) (0.02)operations - basic and dilutedNet loss per share - basic and diluted (0.01) (0.04) (0.03) (0.02) See accompanying notes. Statement of Deficit Three months ended Six months ended 30 June 30 June(in thousands of US dollars, unaudited) 2005 2004 2005 2004DeficitBalance, beginning of the period (169,994) (105,854) (162,327) (105,854)Net loss for the period (6,714) 4,002 (14,381) (9,335) Balance, end of the period (176,708) (101,852) (176,708) (115,189) See accompanying notes. Statement of Cash Flows Three months ended Six months ended 30 June 30 June(in thousands of US dollars, unaudited) 2005 2004 2005 2004 (restated (restated note 1) note 1)Operating activitiesNet loss for the year from continuing operations (6,702) 4,648 (14,369) (8,405) Add (deduct) items not affecting cash from operating activitiesDepletion and depreciation, and impairment 812 1,979 1,537 3,927Future income and mining tax provisions - (338) - (704)Foreign exchange - (1,277) - (635)Unrealized (gain) loss on derivative instruments - (15,992) - (15,518)Gains/(losses) on investments - 109 - 414Stock options issued - - - 1,347Other non-cash items 163 65 84 (32) (5,727) (10,806) (12,748) (19,606) Changes in non-cash working capital balancesAccounts receivable 7 (489) 27 (5,400)Inventories (523) (1,128) (165) (3,085)Other assets 35 141 352 2,015Accounts payable and accrued liabilities (576) 854 (1,799) 3,637Income and mining taxes recoverable and payable (1,960) (1,133) (2,430) (1,525) (3,017) (1,755) (4,015) (4,358) Cash flows provided by (used in) operating activities (8,744) (12,561) (16,763) (23,964) Net change in discontinued operations - (426) - (45) Investing activitiesAdditions to mining properties (1,195) (471) (1,875) (830)Purchase of property, plant and equipment (1,338) (2,267) (2,700) (3,837)Sale (purchase) of investments 7 59 7 326Cash flows provided by (used in) investing activities (2,526) (2,679) (4,568) (4,341) Financing activitiesCommon shares issued 912 12,001 912 32,590Warrants issued - (12,001) - -Net proceeds from borrowings 11,611 51 22,758 20Cash flows provided by (used in) financing activities 12,523 51 23,670 32,610 Net increase in cash and cash equivalents 1,253 (15,615) 2,339 4,260Cash and cash equivalents, beginning of period 2,930 21,674 1,844 1,799Cash and cash equivalents, end of period 4,183 6,059 4,183 6,059 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 first quarter financial statements in accordance with United Kingdomgenerally accepted accounting principles ("UK GAAP"). The second 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 will be required to adopt "fresh start" accounting. Thisaccounting will require that assets and liabilities be recorded at their fairvalues at the date of emergence from the Company's reorganization proceedings.As a result, the reported amounts in the consolidated financial statements couldmaterially change, because they do not give effect to the adjustments to thecarrying value of assets and liabilities that may ultimately result from theadoption of "fresh start" accounting. 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 principal of $24.85 million plus interest thereon, in consideration for which Noteholder Creditors received 25% of the post-implementation equity in the Company; 5. The consolidation of existing common shares of the Company so that existing shareholders retained 5% of the post-implementation equity in the Company; 6. Payment in full by the Company of all proven claims of the Company's creditors as at the Filing Date (other than claims of Meridian Creditors and Noteholder Creditors); and 7. The delivery by the Company to the Meridian Creditors of secured notes evidencing the amount of the Company's outstanding debtor-in-possession financing owing to them as at the Plan implementation date. Although the implementation of the Plan will significantly reduce 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 Meridian, who has 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 CastenHoldings Limited ("Casten") and one-half of its interests in the financing to MCResources Limited, a wholly-owned indirect subsidiary of Meridian CapitalLimited. Although the Company believes that Casten and MC Resources Limited willcontinue to support it through the balance of 2005 as it attempts to implementits revised business plan, there can be no assurances that Meridian will provideadditional financing and that the Company will be able to continue as a goingconcern. 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 are no longer necessary. The following table summarizes the impact of adjustments required to implementthe Plan 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 ImplementationAssetsCurrent 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 (2,659) 2,659 -translationTotal 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 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)June 30, 2005 Post CCAA 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 Companies' Creditors Agreement Act ("CCAA"), which was completed on the close of business on June 30 2005, the issued andoutstanding shares at March 15, 2005 were consolidated on a one new consolidatedshare for 200 existing shares basis. This resulted in 2,307,603 consolidatedcommon shares. In addition, the majority of the convertible loans together withanother long term loan were converted into 11,538,015 new shares. A portion ofthe demand loans were also converted under the restructuring process into32,306,442 new shares. As a result of the foregoing, there were a total of46,152,060 common shares outstanding upon completion of the restructuring, whichcontinues to be the number of outstanding common shares today. 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: Six months ended June 30 2005 2004 Net loss based on Canadian GAAP 14,380 9,335Impact on net earnings of US GAAP adjustments:Exploration costs 1,875 831 Net loss based on US GAAP 16,255 10,166Basic and diluted loss per share before discontinued operations based on (0.04) (0.03)US GAAPBasic and diluted loss per share based on U. S. GAAP (0.04) (0.03) For the period ended June 30 2005 2004 Shareholders equity / (deficiency) based on Canadian GAAP 6,809 (36,898)Impact on shareholder's equity of US GAAP adjustments:Exploration costs (1,875) (831)Gain / (loss) on mark to market of investments (18) 484 Shareholder's deficiency based on US GAAP 4,916 (37,245) 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 for the periods ended June 30, 2005 and2004 would be presented as follows on a US GAAP basis: For the period ended June 30 2005 2004 Net loss based on US GAAP 16,255 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 The accumulated other comprehensive loss balances for the period ended June 30,2005 and the year ended December 31, 2004 would be presented as follows on a USGAAP basis:Balance, December 31, 2003 2,217Movements 496Balance, December 31, 2004 2,713Movements 16Balance, June 30, 2005 2,729 -------------------------- (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. (3) 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