Final Results

Brancote Holdings PLC 18 May 2000 Contacts Richard Prickett, Chairman Brancote Holdings PLC 020 7493 1002 David Bick Holborn Public Relations 020 7929 5599 david_bick@holbornpr.co.uk BRANCOTE HOLDINGS PLC ANNUAL REPORT PUBLISHED Highlights * The gold project in Argentina has surpassed all of the Company's original expectations * The Argentinian project is now midway through a Phase 2 drilling programme to prove up an estimated resource of approximately 2.5 million ounces of gold, the potential to expand from this level is substantial * Phase 3 drilling programme planned Commenting on the future, Richard Prickett, Chairman, said: 'This has been an excellent year for Brancote. At the beginning of 1999 we set out to refocus the Company, evaluate the potential of the gold project in Argentina and rationalise or dispose of our other investments and projects. I am very pleased to say that our strategy has now been largely implemented.' CHAIRMAN'S STATEMENT 1999 has been an excellent year for Brancote. At the beginning of 1999 we set out to refocus the Company, evaluate the potential of the gold project in Argentina and rationalise or dispose of our other investments and projects. I am very pleased to say that our strategy has now been largely implemented. * The evaluation of the gold project in Argentina has surpassed all of our original expectations and we are now midway through a Phase 2 drilling programme to prove up an estimated resource of approximately 2.5 million ounces of gold; the potential to expand from this level is substantial and it is fair to say that Brancote is now the 60 per cent. owner of a world class epithermal gold deposit. * The North American assets which amount to approximately 40 minority stakes in exploration projects are being reorganised and sold to Landore Resources,a Canadian listed company under separate management, in order that all of our resources can be focused on Argentina. * The Australian activities have been discontinued and the Mt. Cuthbert Copper Project has been transferred to the joint venture partner in exchange for a release of all liabilities, including contingent environmental liabilities. In addition we have granted a stock option over 400,000 of our shares at £1 per share to Murchison United and we will receive a 2 per cent. net smelter royalty on all future production. The financial loss of £1.99 million for the thirteen month period to 31 January 2000 relates largely to discontinued operations in Australia, investment write offs and administrative expenses and does not represent the main activity of the Company. The accounting period has been extended to 31 January this year, since the Mt. Cuthbert Copper Project was sold on 28 January and it was felt that it was important to show a balance sheet after the disposal of this project in order that investors can see a current representation of the Company's assets and liabilities. The Esquel Gold Project in Argentina is fully described in the Managing Director's report and in summary the exploration programme during 1999 and the early part of 2000 has been very successful. A resource estimate was completed earlier this year and produced approximately 1.4 million ounces of gold on a very small portion of the known mineralisation. The exploration activities since then, which had been originally based on five surface veins, have now identified a significant number of new veins, each with significant mineralisation. The Phase 2 drilling programme currently focusing on the Galadrial Sur and Julia veins is underway and is already demonstrating outstanding results and rapidly expanding the ability to increase resource estimates. The programme will be completed towards the end of May/early June 2000 and we anticipate that we will be able to increase our existing resource estimates to approximately 2.5 million ounces of gold. An independent analyst has recently commented that a reasonable valuation of this resource would be US$70 per ounce. The Phase 2 drilling programme covers less than half of the known mineralisation of the southern portion of the Esquel project and it is likely that a third phase drilling programme will significantly extend the resource estimate in this area. Investors should be aware that the drilling programmes have been hugely successful, given that the approximate cost of discovery per ounce is of the order of US$2.50. Great credit should be given to Bill Humphries, our Managing Director, and his excellent team of geologists and assistants in Esquel who have achieved this in only fifteen months. It is our intention to plan and budget a phase 3 drilling programme as soon as possible to follow the successes of our earlier exploration. We recently appointed two new advisers, namely Benfield Advisory as our financial advisor and KPMG Audit Plc as the Company's auditors and we are very pleased that they have accepted these appointments. Shareholders have been a great support this year with three successful fund-raisings being completed very smoothly. The share price has reacted to the success rate of the project and I am personally very pleased for long-standing shareholders whose patience has now been rewarded. We look forward to the remainder of this year with continuing confidence and enthusiasm and we will, as in the past, keep shareholders regularly informed of the progress of the project. Richard Prickett Chairman 18 May 2000 OPERATIONS REPORT EXECUTIVE SUMMARY In March 1999, Brancote Holdings, through it's subsidiary Minera El Desquite S.A., commenced an exploration and Drilling programme on the Esquel Gold Project located in the highly prospective Cordon de Esquel in northern Province of Chubut, Argentina. The objective of the company was to establish an inferred resource of some 400,000 ounces by drilling two of the prominent vein sets, which when added to the 206,000 ounces at La Joya Del Sol together with the prospectivity of the area would make the project attractive to medium to large mining companies on the acquisition trail. The programme, completed by October 1999 was an outstanding success defining 800,000 ounces of gold taking MED's resource on the Cordon de Esquel to in excess of 1 million ounces of which 75 per cent. is in the measured and indicated category. Drilling frequently encountered high grade gold with the Galadriel vein containing 514,000 ounces at 16.4 g/t gold over a known strike length of 1,100 metres. Galadriel remains open to the north, the south and at depth. Other favourable aspects of the resource established to date are: * Amenable to open pit mining - no deeper than 80 metres from surface. * Free leaching with preliminary metallurgical testing showing +92 per cent. recovery in less than 24 hours. The above, together the proximity of the town site of Esquel, providing excellent infrastructure, ensures that total production costs will be among the lowest of gold producers. Exploration recorded important discoveries with the known vein systems being increased from 5 at the beginning of the year to 15 by year-end, each with significant surface mineralisation. Perhaps the most outstanding discovery was Galadriel Sur on which mounting evidence suggests that it is a major epithermal high-grade system. The low discovery cost of less than $2.50 per ounce of gold, encouraged MED to carry out a second phase of drilling focusing on increasing the resources on the two main deposits Galadriel/Sur and Julia. Pincock Allen & Holt, mining consultants from Denver, Colorado, hired to carry out a project audit and resource estimate, were moved to state: 'There is a high probability that a significant increase in the resource can be defined by this additional drilling. The exploration in these areas is excellent.' With the drilling programme currently 50 per cent. complete, results are very encouraging ensuring a substantial increase when the resource estimate is upgraded in July. (The full operations report is enclosed in the Annual Report.) BRANCOTE HOLDINGS PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 JANUARY 2000 Interests Interests in in joint joint Group ventures Total Group venture Total 2000 2000 2000 1998 1998 1998 £ £ £ £ £ £ TURNOVER 36,745 2,070,704 2,107,449 57,225 2,231,868 2,289,093 Cost of sales (39,963) (1,903,181)(1,943,144) - (2,570,410)(2,570,410) ------- --------- --------- ------- --------- --------- GROSS PROFIT/(LOSS) (3,218) 167,523 164,305 57,225 (338,642) (281,317) Adminis- trative expenses (517,077) - (517,077)(323,054) - (323,054) Explora- tion costs (73,679) - (73,679) (71,787) - (71,787) ------- --------- --------- ------- --------- --------- OPERATING LOSS (593,974) 167,523 (426,451)(337,616) (338,542) (676,158) ======= ======== ======= ======= Share of operating profit/(loss) of joint venture 167,523 (338,542) ------- ------- TOTAL OPERATING LOSS (426,451) (676,158) Other income 24,428 14,626 Amounts written off invest- ments (1,671,363) (2,077,851) Interest receivable 34,113 18,702 Interest payable (405) (42,232) --------- --------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,039,678) (2,762,913) GROUP TAXATION - (16) --------- --------- LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,039,678) (2,762,929) Minority interest 40,698 - --------- --------- RETAINED LOSS FOR THE PERIOD (1,998,980) (2,762,929) ========= ========= LOSS PER SHARE (4.23p) (14.44p) ========= ========= DILUTED LOSS PER SHARE (3.90p) (10.13p) ========= ========= The interests in joint ventures are discontinued activities. BRANCOTE HOLDINGS PLC CONSOLIDATED BALANCE SHEET AT 31 JANUARY 2000 Interests in joint Group Group ventures Total 2000 1998 1998 1998 £ £ £ £ FIXED ASSETS Intangible assets - deferred exploration costs 3,306,337 862,376 - 862,376 - goodwill 2,477,754 - - - Tangible assets 60,515 1,212 220,913 222,125 Investments 703 142,953 - 142,953 Investments in joint ventures - 142,705 (142,705) - --------- --------- -------- --------- 5,845,309 1,149,246 1,227,454 CURRENT ASSETS Stock - - 441,826 441,826 Debtors 413,444 171,290 21,296 192,586 Cash at bank and in hand 1,474,912 125,028 5,205 130,233 --------- --------- -------- --------- 1,888,356 296,318 468,327 764,645 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (177,337) (642,024) (365,887)(1,007,911) --------- --------- -------- --------- NET CURRENT ASSETS/(LIABILITIES) 1,711,019 (345,706) 102,440 (1,007,911) --------- --------- -------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 7,556,328 803,540 984,188 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR - - (128,508) (128,508) --------- PROVISIONS FOR LIABILITIES AND CHARGES - - (52,140) (52,140) --------- --------- -------- --------- 7,556,328 803,540 580,540 CAPITAL AND RESERVES ========= ========= ========= Called up share capital 2,974,740 1,018,156 Share premium account 10,673,327 5,250,432 Special reserve 720,000 720,000 Profit and loss account (7,869,844)(6,185.048) --------- --------- Equity Shareholders funds 6,498,223 803,540 --------- MINORITY INTEREST 1,058,105 - CAPITAL EMPLOYED 7,556,328 803,540 ========= ========= BRANCOTE HOLDINGS PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 JANUARY 2000 2000 1998 £ £ NET CASH OUTFLOW FROM OPERATING ACTIVITIES (900,943) (359,988) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 32,208 (8,904) TAXATION - (16) CAPITAL EXPENDITURE (1,556,250) (200,961) ACQUISITIONS AND DISPOSALS (3,095,938) - --------- -------- NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (5,520,923) (569,869) MANAGEMENT OF LIQUID RESOURCES (1,000,000) - FINANCING: Issue of shares 7,867,250 344,024 Expenses paid in connection with share issue (487,232) - Decrease in debt (509,211) (252,720) --------- -------- NET CASH INFLOW FROM FINANCING 6,870,807 91,304 --------- -------- INCREASE/(DECREASE) IN CASH IN THE PERIOD 349,884 (478,565) ========= ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase in cash during period 349,884 (478,565) Cash outflow from decrease in debt 509,211 252,720 Cash inflow from increase in liquid resources 1,000,000 - Exchange differences (36,000) - --------- -------- Movement in net debt 1,823,095 (225,845) Net debt at 31 December 1998 (348,183) (158,333) --------- -------- Net funds at 31 January 2000 1,474,912 (384,183) ========= ======== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE PERIOD ENDED 31 JANUARY 2000 2000 1999 £ £ Loss attributable to shareholders of Brancote Holdings PLC (1,998,980) (2,762,929) Unrealised exchange rate movements on foreign currency net investments 314,184 (865,456) --------- --------- TOTAL RECOGNISED LOSSES RELATING TO THE PERIOD (1,684,796) (3,628,385) ========= ========= BRANCOTE HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. BASIS OF PREPARATION The financial statements have been prepared in accordance with applicable UK Accounting Standards and the Companies Act 1985 and under the historical cost convention. The following principal accounting policies have been applied consistently in dealing with items which are considered material in relation to the group's financial statements. 2. SEGMENTAL ANALYSIS Turnover Profit/(loss) Net assets/ before taxation (liabilities) 2000 1998 2000 1998 2000 1998 £ £ £ £ £ £ Argentina - acquisition - - (101,744) - 1,796,443 - USA 25,306 25,141 (56,534) (30,116) 534,858 734,085 Australia - - - (102,484) - (437,798) UK - - (1,567,977) (232,111) 5,093,427 225,627 Ireland - 7,955 - (86) - 24,620 Canada 11,439 24,129 6,372 18,277 131,600 114,301 --------- --------- --------- ---------- --------- -------- 36,745 57,225 (346,520) 7,556,328 660,835 Joint venture - Australia - discontinued 2,070,704 2,231,868 (319,795) (2,416,393) - 142,705 --------- --------- --------- ---------- --------- -------- 2,107,449 2,289,093 (2,039,678) (2,762,913) 7,556,328 803,540 ========= ========= ========= ========== ========= ======== 3. TAXATION The tax charge for the year was nil. (1998: £16 represented overseas tax.) No further liability to either UK corporation tax or overseas tax is expected to arise on the results for the year (1998: nil). At 31 January 2000 losses of approximately £2,100,000 were available to set off against future profits. 4. LOSS PER SHARE The calculation of basic loss per share is based on losses for the period of (£1,998,980) (1998: £2,762,929) and on the weighted average of 47,187,290 (1998: 19,139,305) shares ranking for dividend in respect of the period. The calculation of diluted loss per share is based on losses for the period of (£1,998,980) (1998: £2,762,929) and on the weighted average of 51,279,290 (1998: 22,579,504) shares ranking for dividend in respect of the period. 5. NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2000 1998 £ £ Operating loss (593,974) (675,158) Share of profit of joint ventures 167,523 338,542 Depreciation 14,160 1,528 Profit on disposal of investments - Increase in debtors (242,153) (38,812) (Decrease)/increase in creditors (246,499) 14,912 Net cash outflow from operating ------- ------- activities (900,943) (359,988) ======= ======= 6. ANALYSIS OF NET DEBT At At 1 January 31 January 1999 Cash flow 2000 £ £ £ Cash at bank 125,028 349,884 474,912 Debt due within one year (509,211) 509,211 - Current asset investment - 1,000,000 1,000,000 -------- --------- --------- Total (384,183) 1,859,095 1,474,912 ======== ========= ========= 7. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information act out in this preliminary announcement does not constitute accounts as defined in section 240 of the Companies Act 1985. The summarised balance sheet at 31 January 2000 and the summarised profit and loss account, summarised cash flow statement and associated notes for the period then ended have been extracted from the Group's 2000 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. 8. The Annual General Meeting of the Company will be held on 12 June 2000 at 11.30am at The Serpentine Room, Hilton Hotel, Park Lane, London W1Y 4BE.

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