Final Results for the year en

RNS Number : 5483Q

Aurum Mining PLC

05 August 2010

 



AURUM MINING PLC ("Aurum" or "the Company")

5 August 2010

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2010

Aurum Mining plc (AIM: AUR) is pleased to announce its final results for the year ended 31 March 2010.

Review of Activities

The last twelve months have been a period of significant consolidation and transformation for Aurum and the Company is now free and unencumbered to pursue its 'post Andash' strategy.

At the beginning of the period, the objectives of the Company were twofold - most importantly was the completion of the deal to dispose of the Group's Andash asset in the Kyrgyz Republic to Kentor Gold Limited ('Kentor') and secondly, following ratification of the Company's investing policy by Shareholders in November 2009, was the goal of finding a new and appropriate value adding project for the Company.

Andash disposal process

It was of immense credit to the Board and management of the Company that we were able to announce the completion of the disposal of the Andash asset in December 2009.  Gross proceeds for the disposal amounted to US$15m which included repayment of a US$13.5m loan. The Company also agreed to buy back a 10% stake in the Andash asset from its local partner in Kyrgyzstan, Investcenter Talas LLC ('ITL') for US$1.25m and this transaction was completed in January 2010.

In the Board's view, a further key step necessary to 'free up' the Company's balance sheet was to get a release from the warranties and indemnities that were given to Kentor under the terms of the  Andash sale agreement which completed in December 2009.  As long as these potential contingent liabilities remained, and regardless of how remote the risk of any claim actually was, it was always going to restrict the free cash position and hence the valuation of the company.

In March 2010, Aurum announced that it had agreed to sell its remaining 10% of Andash to Kentor, in a transaction that also released Aurum from the warranties and indemnities.  Unfortunately, in April 2010, the well publicised unrest in Kyrgyzstan in which the President was overthrown and parliament was dissolved, led to this agreement lapsing.

With the on-going unrest and instability within the country ever since, it was a considerable achievement for the company to enter into a new deal  with Kentor in June 2010 under which Aurum has been released by Kentor from all the warranties and indemnities that were given at the time of the Andash disposal. In consideration for a release from the potential liabilities, Aurum agreed to give Kentor an option to acquire the Group's 10% stake in the Andash project for US$1.8m.  So at a time of severe difficulties in Kyrgyzstan not only has the Company now got a release from potential liabilities which frees up the balance sheet but should Kentor exercise their option the Company will also make a gain of $550K on its 10% shareholding in Andash - a remarkable transaction considering the very difficult market conditions.

We continue to keep a very active eye on events unfolding in Kyrgyzstan, and view the recent referendum on a new constitution as a positive step; however with the tragic deaths in recent ethnic clashes, tension runs high and we need to see the results of the impending parliamentary elections in October  before full confidence can return.

Our thoughts and prayers go out to all those affected by the humanitarian crisis.

Investing policy

Following Shareholder approval of the Company's investing policy in November 2009 and post completion of the Andash disposal in December 2009, Aurum became an investing company.

This means that, under the AIM Rules, from December 2009, the Company has 12 months in which to make an acquisition or acquisitions which would constitute a reverse takeover.  The Company's investing policy is consistent with the vision that was set out in the Chief Executive's review in the Company's 2009 Annual Report.  In summary, the Board felt confident that the Company possessed unique strengths and skills to take advantage and exploit some of the mining opportunities available in the market and that it could establish avenues for enhancing stakeholder value through partnering on such projects.

Immediately following the completion of the Andash disposal and in accordance with the mandate given to the Company by Shareholders, the Board commenced a comprehensive exercise to find new projects for the Company and despite the relatively poor market conditions the Board was greatly encouraged by the types of deals and opportunities that were identified.  Indeed the Company examined over fifteen projects and reached advanced discussions on three separate opportunities and due diligence was undertaken on each of them. Whilst none of these projects completed, the Board felt extremely confident of finding a new project capable of delivering strong Shareholder returns.

Notwithstanding the approval by Shareholders of the Company's investing strategy in late 2009, a core group of the Company's major Shareholders have now come forward and made clear their  objective for Aurum is to take cash out of the Company.  While cognisant of Shareholder opinion, the Board unanimously feel that the demands of these Shareholders for immediate cash are not in the interests of all shareholders.

In March 2009, and following the return of circa £16m to Shareholders the Company was left with a compromised Andash asset and limited resources. Since then management has entirely turned around the fortunes of the Company and have realised value against what many Shareholders believed was an impossible backdrop.  With this value creation, the Board felt very confident of delivering much greater value for Shareholders through an acquisition strategy, than a return of cash would offer.

Despite efforts to dissuade this group of large Shareholders, the Board acknowledges the wishes of the majority of the Shareholders and, as announced in July 2010, processes are now being put in place to return a very substantial proportion of the Company's cash to Shareholders while preserving and protecting the Company's assets.

Return of cash

The Board is currently working on a structure that would result in a return of cash of 15 pence per share, or approximately £7.5m.

This cash will be returned by way of a capital reduction and the process followed will be consistent with that used by the Company to return cash to Shareholders in 2009.  The Board is still assessing the Company's potential UK tax liabilities for the financial year ending 31 March 2010, and while it is confident that no tax liabilities exist, the quantum of the potential cash return would need to be reduced by the quantum of any such liability.  The tax returns for this period are currently being finalised and will be submitted to HMRC shortly.

It is the current belief of the Board that the process will take 3-4 months to implement and the Board therefore expects the cash to be returned at some point during the fourth quarter of this calendar year.  The prime reasons for this lead time are the need for Shareholder approval and the necessity of a court process to approve the transaction.

A Circular outlining the Board's proposals for the return of cash will be sent to Shareholders shortly.

Future strategy

As outlined above, the Board's new strategy is twofold - on the one hand it will satisfy the demands of the major Shareholders by returning a significant proportion of cash while on the other hand it will be preserving the status of the Company so that value can be delivered from both the residual holding in the Andash asset and from the shell company that will remain once the cash is returned.

The Board is currently undertaking steps to reduce the cost base as far as is practicable, while retaining the skill base necessary to enable the Company to deliver on this strategy, and as part of this the number of Board members will be reducing from five to three as soon as the cash is returned to Shareholders.

The remaining three Directors will have their future terms and conditions revised to reflect the decreased operational activity of the Company.

Financials

For the year to 31 March 2010, the Group reported a loss of $1.0m compared to a loss of $10.1m in 2009.

Free cash at the end of July 2010 was circa £8.55m.

During this year of transition, cash management and cost control have remained key priorities for the Company.

People

We would like to thank our staff in both the UK and the Kyrgyzstan for their unwavering effort and determination during this difficult time.  We'd also like to thank the Company's advisers and consultants for their support.

Sean Finlay

Chairman

Mark Jones

Chief Executive Officer

4 August 2010

It is anticipated that the Company's Annual Report will be dispatched to shareholders later today.  The Accounts include notice of the Company's Annual General Meeting to be held at 12 noon on 13 September 2010 at 4 More London Riverside, London, SE1 2AU.  A hard copy of the Annual Report and the notice of the AGM are also available on the Company's website: http://www.aurummining.net.

For Further Information

Aurum Mining Plc                                          Tel: [phone]

Mark Jones, Chief Executive Officer

Chris Eadie, Chief Financial Officer

Arbuthnot Securities                                       Tel: [phone]

James Steel / Richard Johnson

Consolidated Income Statement

Year ended 31 March 2010

	2010	2009
	$'000	$'000
Administrative expenses	(2,428)	(2,111)
Operating loss	(2,428)	(2,111)
Finance income	739	1,706
Loss for the year before taxation	(1,689)	(405)
Taxation	-	-
Loss for the year from continuing operations	(1,689)	(405)
Profit /(loss) for the year from discontinued operations	726	(9,716)
Loss attributable to the equity shareholders of the parent company	(963)	(10,121)
Loss per share expressed in US cents per share
From continuing operations
Basic and Diluted	(3.51)c	(0.84)c
From discontinued operations
Basic and Diluted	1.51c	(20.16)c
Total operations
Basic and Diluted	(2.00)c	(21.00)c

Consolidated Statement of Comprehensive Income

Year ended 31 March 2010

	2010	2009
	$'000	$'000
Loss after taxation for the financial year	(963)	(10,121)
Other comprehensive income:
Exchange translation differences on consolidation of Group entities	(28)	(14,528)
Other comprehensive income	(28)	(14,528)
Total comprehensive expense attributable to the equity shareholders of the parent company	(991)	(24,649)

Consolidated and Company Statement of Financial Position

As at 31 March 2010

	Group		Company
	2010	2009	2010	2009
	$'000	$'000	$'000	$'000
Assets
Non-current assets
Available for sale financial asset	1,250	-	-	-
Property, plant and equipment	11	13,974	11	15
Investment in subsidiaries	-	-	-	4,603
Amounts owed by subsidiaries	-	-	1,242	9,419
Total non-current assets	1,261	13,974	1,253	14,037
Current assets
Inventories	-	40	-	-
Receivables	280	962	279	727
Cash and cash equivalents	14,584	25,680	14,579	25,620
Total current assets	14,864	26,682	14,858	26,347
Total assets	16,125	40,656	16,111	40,384
Liabilities
Current liabilities
Trade and other payables	503	406	491	212
Total current liabilities	503	406	491	212
Total liabilities	503	406	491	212
Net  assets	15,622	40,250	15,620	40,172
Capital and reserves attributable to the equity holders of the company
Share capital	921	921	921	921
Share premium account	40,609	64,295	40,609	64,295
Merger reserve	5,816	5,816	5,816	5,816
Presentational currency translation reserve	(13,495)	(13,467)	(13,493)	(15,545)
Warrant reserve	350	350	350	350
Retained earnings	(18,579)	(17,665)	(18,583)	(15,665)
Total Equity	15,622	40,250	15,620	40,172

Consolidated Statement of Changes in Equity

Year ended 31 March 2010

	Share capital	Share premium	Merger reserve	Presentational currency translation reserve	Warrant reserve	Retained earnings	Total Equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
At 1 April 2008	921	64,295	5,816	1,061	350	(7,180)	65,263
Total comprehensive expense for the year	-		-	(14,528)	-	(10,121)	(24,649)
Share based payments	-	-	-	-	-	(364)	(364)
At 31 March 2009	921	64,295	5,816	(13,467)	350	(17,665)	40,250
Total comprehensive expense for the year	-	-	-	(28)	-	(963)	(991)
Issue of B shares (see note 18)	23,686	(23,686)	-	-	-	-	-
Capital repayments to shareholders (see note 18)	(23,686)	-	-	-	-	-	(23,686)
Share based payments	-	-	-	-	-	49	49
At 31 March 2010	921	40,609	5,816	(13,495)	350	(18,579)	15,622

Company Statement of Changes in Equity

Year ended 31 March 2010

	Share capital	Share premium	Merger reserve	Presentational currency translation reserve	Warrant reserve	Retained earnings	Total Equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
At 1 April 2008	921	64,295	5,816	1,284	350	(4,762)	67,904
Total comprehensive expense for the year	-	-	-	(16,829)	-	(10,539)	(27,368)
Share based payments	-	-	-	-	-	(364)	(364)
At 31 March 2009	921	64,295	5,816	(15,545)	350	(15,665)	40,172
Total comprehensive expense for the year	-	-	-	2,052	-	(2,967)	(915)
Issue of B shares (see note 18)	23,686	(23,686)	-	-	-	-	-
Capital repayments to shareholders (see note 18)	(23,686)	-	-	-	-	-	(23,686)
Share based payments	-	-	-	-	-	49	49
At 31 March 2010	921	40,609	5,816	(13,493)	350	(18,583)	15,620

The following describes the nature and purpose of each reserve within owners' equity.

Reserve	Description and purpose
Share premium	Amounts subscribed for share capital in excess of nominal value.
Merger reserve	Merger relief reserve for amount in excess of nominal value on issue of shares in relation to business combinations.
Warrant reserve	Fair value of the warrants issued as part of compound financial instruments.
Presentational currency translation reserve	Gains/losses arising on retranslating the net assets of Group operations into US Dollars.
Retained earnings	Cumulative net gains and losses recognised in the income statement less distributions made.

The Company has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to publish its individual income statement, statement of comprehensive income and related notes. The Company's loss for the year was $2,967k (2009: loss of $10,539k).

Consolidated and Company Cash Flow Statements

Year ended 31 March 2010

	Group		Company
	2010	2009	2010	2009
	$'000	$'000	$'000	$'000
Cash flows from operating activities
Loss for the year before tax	(963)	(10,121)	(2,967)	(10,539)
Adjustments for:
Depreciation of property, plant and equipment	10	1,648	10	12
Finance income	(739)	(1,706)	(739)	(1,720)
Finance expense	-	-	-	-
(Profit)/loss on sale of discontinued operations	(1,489)	-	1,255	-
Loss on disposal of property, plant and equipment	-	323	-	-
Impairment losses	-	5,468	48	10,158
Share based payments	49	(364)	49	(364)
Foreign exchange differences	-	371	-	385
Cash flow from operating activities before changes in working capital	(3,132)	(4,381)	(2,344)	(2,068)
Decrease/(increase) in inventories	-	422	-	-
Decrease/(increase) in trade and other receivables	671	(129)	516	(568)
Increase/(decrease) in trade and other payables	101	(1,225)	281	(477)
Taxation	-	-	-	-
Net cash flow used in operating activities	(2,360)	(5,313)	(1,547)	(3,113)
Investing activities
Purchase of property, plant and equipment	(26)	(1,265)	(4)	-
Disposal of discontinued operations, net of cash disposed of	1,473	-	1,473	-
Proceeds from the sale of property, plant and equipment	-	344	-	-
Purchase of available for sale financial asset	(1,250)	-	-	-
Interest income	5	1,335	5	1,335
Net cash flow from investing activities	202	414	1,474	1,335
Financing activities
Capital repayments to shareholders	(23,686)	-	(23,686)	-
Increase in loans to subsidiaries	-	-	(1,993)	(2,954)
Repayment of loan	13,500	-	13,500	-
Net cash flow used in financing activities	(10,186)	-	(12,179)	(2,954)
Net decrease in cash and cash equivalents	(12,344)	(4,899)	(12,252)	(4,732)
Cash and cash equivalents at the beginning of the year	25,680	41,730	25,620	41,720
Effect of exchange rate changes on cash and cash equivalents	1,248	(11,151)	1,211	(11,368)
Cash and cash equivalents at the end of the year	14,584	25,680	14,579	25,620

Principal activity

Following the completion of the disposal of the Andash asset in December 2009, the Company became an 'investing company' pursuant to Rule 15 of the AIM Rules for Companies.

The Company's investment strategy is to acquire mining assets either by taking outright control or through partnering arrangements.

Prior to the disposal of the Andash asset the Group operated mining assets in Kyrgyzstan.

Dividends

The Directors do not recommend payment of a dividend for the year (2009: £nil). 

Principal risks and uncertainties

At the present time, there is strong competition within the mining industry for the identification and acquisition of appropriate assets. The Company competes with other exploration and production companies for these assets, some of which have greater financial resources than the Company, for the acquisition of properties, leases and other interests. The challenge for management is to secure appropriate assets without having to overpay for them.

Key performance indicators (KPIs)

The Company is currently an investing company, with an intention of becoming a resource development or exploration entity in due course. Consequently, the key performance indicators for the Company will be linked to the specific projects acquired and the increase in overall enterprise value of the Company.

The key performance indicators of the Group are as follows:

	2010	2009
Loss per share	$(2.00)c	$(21.00)c
Share price at 31 March	13.9p	37.0p
Cash at bank	$14.6m	$25.7m
Cash returned to shareholders	$23.7m	-

Notes

1.       Basis of Preparation

The financial information set out above, which was approved by the Board on 4 August 2010, has been compiled in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), but does not contain sufficient information to comply with IFRS. The Company expects to distribute its full financial statements that comply with IFRS shortly. The financial statements have been prepared on the historic cost basis.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2010 but is extracted from those accounts. The Company's statutory accounts for the year ended 31 March 2010 will be filed with the Registrar of Companies following the Company's annual general meeting. The independent auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis without qualifying those accounts and did not contain any statement under section 498(2) or (3) of the Companies Act 2006. The Company's statutory accounts for the year ended 31 March 2009 have been filed with the Registrar of Companies. The independent auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis without qualifying those accounts and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985.

The financial statements have been prepared on a going concern basis. The Board feel the Group has sufficient cash resources to enable it to pursue its strategy and continue as a going concern.

2.       Segmental Information

The group has two reportable segments:

Corporate - The Head Office activities of the Group and all non-current assets allocated to corporate activities in the United Kingdom.

Mining - The mining, production and exploration of gold and other precious metals and all non-current assets allocated to mining activities in the Kyrgyz Republic.

The operating results of these segments are regularly reviewed by the Group's chief operating decision makers in order to make decisions about the allocation of resources and assess their performance.

The accounting policies of these segments are in line with those described in the full Annual Report.

The segment results as follows:

Year ended 31 March 2010	Corporate $'000	Mining $'000	Group $'000
Profit on sale of discontinued operations	-	1,489	1,489
Operating expenses	(2,428)	(763)	(3,191)
Segment result	(2,428)	726	(1,702)
Finance income			739
Finance expenses			-
Loss before taxation			(963)
Taxation			-
Loss for the year			(963)

Year ended 31 March 2009	Corporate $'000	Mining $'000	Group $'000
Operating expenses	(2,101)	(9,726)	(11,827)
Segment result	(2,101)	(9,726)	(11,827)
Finance income			1,706
Finance expenses			-
Loss before taxation			(10,121)
Taxation			-
Loss for the year			(10,121)

3.       Discontinued Activities

On 22 December 2009 the Group completed the disposal of Kaldora Company Limited and the Andash Mining Company, which operated in the Kyrgyz Republic. The Group owned 100% of the Andash Mining Company until 22 October 2009, when it disposed of 20% of the Company to local interests as part of settlement of the Bishkek court case and to secure its mining rights. Gross proceeds for the disposal amounted to $15m which included the repayment of a $13.5m intercompany loan by Andash Mining Company.

Further details on these transactions can be found in the Review of Activities in the full Annual Report.

Financial information relating to the discontinued operations for the period to the date of disposal is set out below.

Group

Consideration received:	2010 $'000
Consideration Cash	1,501
Consideration Option fee (cash)	250
Legal costs directly attributable to sale of Kaldora and Andash	(278)
Net consideration	1,473
Net assets disposed:
Non-current assets	14,051
Inventories	29
Trade and other receivables	79
Trade and other payables	(2)
Repayment of intercompany loan	(13,500)
Total net assets disposed of	657
Recycling of cumulative translation reserve (Kaldora + Andash)	(673)
Total disposed of	(16)
Gain on disposal of discontinued operations	1,489
Results of discontinued operations:	2010 $'000	2009 $'000
Operating expenses	(763)	(9,716)
Gain from selling operations after tax	1,489	-
Profit/ (loss) from discontinued operations	726	(9,716)
The cash flow statements includes the following amounts relating to discontinued operations:
Cash flow used in operating activities	(763)	(9,716)
Cash flow from investing activities	1,473	(921)
Cash flow from financing activities	13,500	-
Total cash flows from discontinued operations	14,210	(10,637)

4.       Taxation

No current or deferred tax charge has arisen in the current year. 

The Company and the Group have incurred tax losses for the year and a corporation tax charge is not anticipated. At 31 March 2010, the Group had tax losses of $6.1m (2009: $14.2m) carried forward which can be used against future profits. The majority of these losses arose in a jurisdiction with a lower tax rate than in the UK. However, these losses are only recoverable against future profits, the timing of which is uncertain and as a result no deferred tax asset is being recognized in relation to these losses.

The total of potential deferred tax assets relating to tax losses which have not been recognised for in the financial statements amount to $1.7m (2009: $2.3m).

The Directors believe that there have been no breaches of foreign tax regulations and that all necessary provisions have been made in these accounts. 

Current taxation

The tax assessed for the year is different from the standard rate of Corporation Tax in the UK.  The differences are explained below:

	2010	2009
	$'000	$'000
Loss before taxation	(963)	(10,121)
Loss at the standard rate of  Corporation tax in the UK of 28% (2009: 28%)	(270)	(2,834)
Effects of:
Expenses not deductible for tax purposes	(24)	1,972
Unutilised tax losses carried forward	294	862
Current tax charge	-	-

The Group did not recognise any deferred tax assets or liabilities at 31 March 2010 or 2009.

5.       Loss Per Share

Basic loss per share is calculated by dividing the loss attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted loss per share, the weighted average number of shares in issue is adjusted to assume conversion of all the dilutive potential ordinary shares.

In 2010 and 2009 the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated.

At the balance sheet date there were 3,805,000 (2009: 4,305,000) potentially dilutive ordinary shares. Dilutive potential ordinary shares include share options and warrants.

	2010	2009
	$'000	$'000
Net loss attributable to equity holders of the parent:
From continuing operations	(1,689)	(405)
From discontinued operations	726	(9,716)
From total operations	(963)	(10,121)

	2010	2009
	Number	Number
Weighted average number of shares:
Basic Loss per share	48,188,275	48,188,275
Effect of dilutive share options and warrants	-	-
Diluted loss per share	48,188,275	48,188,275

 

END

 

 

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