Preliminary results
Vane Minerals PLC
08 April 2008
8 April 2008
VANE Minerals Plc (AIM:VML)
('VANE' or the 'Company')
Preliminary Results for the year ended 31 December 2007
Vane Minerals Plc (AIM:VML), today announces its preliminary results for the
year ended 31 December 2007:
Highlights
• The portfolio of uranium properties continues to grow, with the
acquisition of a number of new assets in Utah and Arizona.
• The Arizona breccia pipe and Utah uranium drilling programs returned
encouraging results - for Utah, a positive step towards the Company's aim of
producing a resource estimate during the first half of 2008.
• The Diablito mine in the State of Nayarit, Mexico continued to operate
smoothly.
• VANE's San Dieguito de Arriba mill was commissioned, resolving the
bottleneck associated with milling the Diablito ore. Full scale, 24/7,
operation of the 100-120 ton per day mill began on 14th January 2008.
• A new programme has commenced focused on porphyry copper targets in the
Southwestern USA and Northern Mexico and continues to develop and identify
attractive targets.
• Paraguay officials issued an Exploration Permit for the Itabo concession
that will allow VANE to proceed with our exploration programme, including
drilling.
• Two convertible loans for an aggregate of £1.5 million were raised at
attractive rates and more than £6 million was raised in a private placement
of equity.
• Year-end cash balance £5,813,353
Steve Van Nort, Chief Executive Officer, commented 'The past year has been one
of determined progress for the Company, with significant growth of our uranium
portfolio in the US through the acquisition of a number of new assets in Arizona
and Utah. We continue to lead the way with regards to uranium exploration in
highly prospective areas.'
Enquiries:
VANE Minerals Plc Thomas Weisel Partners Ambrian Partners Limited Parkgreen Communications
Matthew Idiens Paul Newman Richard Brown Justine Howarth
+44 (0) 20 7667 6322 +44 (0) 20 7290 9713 +44 (0) 20 7634 4709 +44 (0) 20 7851 7480
Chief Executive Officer's Report and Review of Operations
I am pleased to present a review of your company at the end of a defining year
for the business. Your company is well positioned to move ahead aggressively on
a number of promising exploration programmes.
Uranium Exploration in USA
The decision by your company in late 2004 to move into the uranium sector was
based on the assumption that in order to fulfil the energy requirements needed
to keep or raise the standard of living around the world and at the same time
reduce the apparent effects of the burning of fossil fuels on global warming,
there needed to be more emphasis on increasing nuclear power generation,
particularly in the USA. We believe a 'home-grown' source of uranium will be key
to the future of nuclear power; a significant source of energy in the US.
Uranium prices at that time were about US$19 per lb and they currently stand at
US$74 per lb (19th March source: UXC.com). Three years of productive acquisition
and exploration coupled with a four-fold increase in the price of uranium has
placed VANE in a very competitive position.
In the Northern Arizona Breccia Pipe District, drilling commenced in January
2007 and continues to date. That drilling has intersected uranium
mineralisation at depth in the Red Dike, Big Red, and Miller Pipes. An
additional pipe, Miller SW, was identified while drilling at Miller, and
drilling there has intersected breccia, alteration and uranium mineralisation.
These results have been published as part of various regulatory announcements
issued during the year. All properties so far drilled warrant continued
exploration, which is now in the planning stage. Drilling commenced on the
Eastern Star property in late 2007 with encouraging results warranting further
drilling. Identification and acquisition of new targets continued during the
year with the list of properties now numbering 30 on which 39 targets have been
identified. 20 are approved for drilling and applications for the remaining
targets have been submitted. A technical report evaluating VANE's Arizona
breccia pipe projects and conforming to Canadian National Instrument 43-101
standards was completed by SRK Consulting in October 2007.
In Utah we are evaluating a number of stratabound uranium targets. Drilling
commenced in January 2007 on the North Wash property followed later in the year
by drilling at Happy Jack and North Alice Extension. Drilling at North Wash
confirmed historic data on claims now controlled by VANE and provided
justification for continued exploration on that property. On the North Alice
Extension project formerly held by Homestake Mining Co., 17 drill holes were
completed that verified the limited historic data the Company holds as well as
verifying mineralisation in an area where delineation drilling was completed.
Drilling results have been published in press releases and the Company is in the
process of completing an NI 43-101-compliant report on the North Wash and North
Alice Extension projects. The Company plans to conduct a second round of
drilling on these projects as well as at Happy Jack during 2008. A drilling
permit on the North Alice Extension, for an additional 75 hole programme, has
been granted and drilling is expected to commence imminently, weather
permitting. An application is being processed on the North Wash and we
anticipate this being granted shortly with drilling expected to commence soon
after.
The Company added two geologists to its uranium team and continues to
aggressively pursue acquisition and business opportunities both in the breccia
pipe district and in the Utah/New Mexico/Colorado region.
The recent actions taken by environmentalist groups against the US authorities
concerning uranium mining in the western USA were anticipated by the Company.
The uranium industry has, for the most part, been dormant for two decades and
the restart of activities naturally raises interest. The company entered the
breccia pipe district of northern Arizona in 2004, confident that the proven,
sound methods used by the mining industry since 1980 would hold up as activity
resumed in the district. Many other companies are operating in the district,
some having a larger presence than VANE, and those companies entered the
district aware of impending opposition from the environmentalist lobby. VANE
enjoys close relations with those companies and, regarding this issue, VANE and
these companies are united in working to provide factual information to the
public and to legislators to address the concerns raised.
Diablito Mine and Milling operations in Mexico
Through your company's 100% owned subsidiary, Minerales VANE SA de CV (MV), the
Diablito mine continued to operate smoothly during the year, although dilution
by barren rock adjacent to the vein from which we are mining continues to be an
issue. 17,250 tonnes of 'direct milling ore', i.e. material containing more than
300g/T silver and 3 g/T gold, was mined during 2007, averaging 1,438 tonnes per
month, slightly below our target of 1,500 tonnes per month. Mine production of
direct milling ore during the final six months of 2007 amounted to 7,300 tonnes
which was stockpiled in anticipation of the start-up of our mill at San Dieguito
de Arriba (SDA). An additional 7,848 tonnes of lower grade material, having a
value in excess of $50/T at $625/oz and $14/oz gold and silver prices
respectively, was mined during 2007 and has been separately stockpiled near the
mine. Mining costs for this material have already been written off against
direct milling ore on a monthly basis. Both the stockpiled direct milling ore,
7,300 tonnes, and the lower grade material, which at year end amounted to 10,706
tonnes (including 2,858 tonnes stockpiled during 2006), will be milled on a
schedule determined by mill availability and metal prices. Direct milling ore
produced during the first 6 months of the year was processed at the custom mill
in Cosala. With commissioning of the SDA mill, transportation as well as milling
costs have decreased sharply and scheduling has been greatly simplified.
Testing and shakedown of the SDA mill, located 30 km north of the Diablito mine,
began in November 2007. The mill utilises the froth flotation process to treat
100-120 metric tonnes of ore per 24-hour day.
Full scale, 24/7, operation of the 100-120 ton per day mill began on 14 January,
2008. Mill feed is being supplied by daily mine production supplemented by
stockpiled direct milling ore. Once that stockpile has been depleted, processing
of stockpiled lower grade material averaging 1.4 g Au/T and 150 g Ag/T will be
used to augment mine production.
Plans for mining and treatment of Diablito ore during 2008 are summarised below:
• Mine production is expected at the rate of 50-75 tonnes per day.
Grades will vary but should be in a range of 200g to 400g silver/tonne and 2g to
4g gold/tonne.
• The mill will process 85-100 tonnes per day, assuming 85%
availability, utilising 2008 mine production of direct milling ore and
supplemented at the rate of 35-50 tonnes per day with direct milling ore
stockpiled during 2007. Once the stockpile of direct milling ore has been
exhausted, daily mine production will be supplemented from the lower grade
stockpile.
• Plans are underway to increase mine production in order to take
advantage of favourable metal prices.
New Southwestern USA Copper Exploration
A number of new porphyry copper targets in the Southwestern USA and Northern
Mexico are being evaluated and prepared for drilling. The porphyry copper
province of Southwestern Arizona is well known, with Arizona alone accounting
for approximately 60% of the total annual US copper production. Political
stability and relatively easy access combined with the high density of porphyry
occurrences makes the Southwestern copper province one of the world's most
prospective regions for the discovery of porphyry copper deposits.
Paraguay Gold Exploration
The issuance of an exploration permit covering the Itabo concession, 22,600
square kilometres in east-central Paraguay, enables us to proceed with drill
testing of a number of attractive gold and gold-copper targets during the first
half of 2008.
Guadalcazar Project, Mexico
Efforts to find a suitable joint venture partner to continue the exploration at
Guadalcazar have proven unsuccessful and the project has been terminated with no
further cost to VANE.
The Freeport-McMoRan Agreement
The Freeport-McMoRan Copper and Gold Agreement covering VANE's access to their
exploration database, excluding Indonesia, was extended for an additional two
years until 30 June 2009. This database, covering over 100 years of work, has
now been largely examined and although the review activity will continue until
the end of the current agreement, 30 June 2009, the directors have decided that
as it is unlikely that further targets will be located using these files they
have written the value down to zero at the end of 2007.
Principal Risks and Uncertainties
The directors believe that the principal matters which could affect the
performance of the Company in the future:-
• The Company currently generates its only income from the Diablito mine
and so in that respect it is dependent upon its smooth operation. We have an
excellent relationship with the mining contractor, we have now commissioned our
own mill and we have a well-defined resource which may well be extended after
our current round of drilling.
• The mill at San Dieguito de Arriba is operating smoothly with supplies
readily at hand and spare components, mainly pumps and motors, currently being
sourced.
• While drill rig availability is tight, VANE has secured rigs to cover
all of the ongoing exploration programmes in Mexico, Southwestern USA and
Colorado Plateau. We are in discussions with a drilling company in Bolivia
concerning our Paraguayan project.
• Additional drilling permits are under application and the timing on
the granting of these can vary to a large degree.
• Changes to the US Mining Law of 1872, in legislation currently before
the US Congress, may affect future operations in that royalties on minerals
obtained from Federal Lands (claims) may be instigated.
• Political risk appears low in all our areas of operation. As Paraguay
lacks a history of mining, matters related to property acquisition, permitting,
bonding, etc. tend to move very slowly but once in place have so far gone very
well. At this time we have no capital at risk and expect to complete the Stage I
exploration drilling of our Itabo mining concession during 2008.
• The prices of gold and silver have risen over the last six months and,
given the current economic climate, we do not anticipate a precipitous drop in
the near future. Uranium oxide prices have fallen from their high of $135 per
pound in early 2007, but with world-wide demand for uranium on the increase
again, we do not expect a dramatic price change in the near term.
Other important factors that could affect any one of your company's many
operations, including Diablito, are unanticipated mining, milling and other
processing problems, accidents that lead to personal injury or property damage,
persistent commodity price reductions, changes in political, social or economic
circumstances, variance in ore grades, labour relations, adverse weather
conditions and other adverse financial market conditions. We continue to monitor
all aspects of our programmes with a view to ensuring their continued success.
Relationships
The Company enjoys good relationships with all of its suppliers and professional
advisers. The relationship with the Mexican mining contractor, COMINVI SA de CV,
the principal drilling contractors in Mexico, Landdrill International Mexico SA
de CV and the principal drilling contractors in the USA, Del Rio Drilling and
Pump, Bob Beeman Drilling and WDC Exploration & Wells Company, are key to our
ongoing operations.
FINANCIAL REVIEW
Revenues
Revenues from the Diablito mine during the year have been lower than expected
owing to the later than expected start of operations at the new SDA mill which
has been constructed at San Dieguito de Arriba. Although the delay has been
frustrating, the increase in commodity prices over the period has, so far,
worked in our favour. Mine production has continued at approximately 1,500
tonnes per month during the last six months of the year, resulting in a
stockpile of ore ready for processing. Processing and transport costs will be
much reduced from those experienced during the last financial year, when the
company had to ship its ore over 300 kilometres to a third-party mill which was
not available at the convenience of VANE.
Results for the Year
Under its first full year of IFRS reporting, the Company reported a net loss
after tax of £7,056,889 or 4.58 pence per share in 2007 (compared with £893,587
or 0.61 pence per share as reported under UK GAAP in 2006, which was revised to
£766,204 or 0.52 pence per share following conversion to IFRS). Of the total net
loss for the period, £5,685,314 was due to the impairment of exploration assets
net of deferred tax write-back associated with the impairment giving an
operating loss of £1,371,575 or 0.89 pence per share. The net impairment of
£5,685,314 is explained by the table below.
Expenses Impairment Deferred Tax Total
Written-Off Adjustment Adjustment
Guadalcazar Exploration 438,280 6,054,742 (1,695,328) 4,797,694
Freeport Agreement 0 1,118,232 (313,105) 805,127
Paraguay Exploration 82,493 0 0 82,493
Total 520,773 7,172,974 (2,008,433) 5,685,314
In the above table:
Column 1 represents expenses incurred and written off in subsidiary companies on
discontinued projects.
Column 2 represents the impairment of the asset recognised when VANE Minerals
plc acquired VANE Minerals Limited in December 2003.
Column 3 represents the adjustment to deferred tax as a result of the impairment
in column 2.
The project for converting to IFRS reporting was completed in time for the
Interim Statements to June 2007 to be produced in IFRS format. The Report and
Accounts for the period to December 2007 is the first full period for which the
Group has adopted IFRS.
Further Explanation of Asset Impairment
The majority of the loss reported for the year was due to the discontinuance of
operations at Guadalcazar, and the relinquishing of the Company's option to
purchase the property. Strenuous efforts were made to find a joint venture
partner who would be able to take on the exploration and development of the
resource at Guadalcazar, but as these proved unsuccessful after more than 12
months had passed, the Board decided to abandon these efforts in favour of
pursuing the uranium exploration programme described above. The decision to
impair the Guadalcazar carrying value down to zero in the balance sheet affected
the balance sheet of the Mexican Subsidiary company Minerales VANE SV de CV by a
total of MXN 9,585,662 (£438,280).
Changes in the structure of the Freeport-McMoran Copper and Gold Corporation
have also made it unlikely that the access currently enjoyed by VANE to
Freeport's accumulated data of mineral prospects will continue beyond June 2009
when the current agreement expires. This database, covering over 100 years of
work, has now been largely examined and although the review activity will
continue until the end of the current agreement, 30 June 2009, the directors
have decided that as it is unlikely that further targets will be located using
these files they have written the value down to zero at the end of 2007.
The combined impairment of both projects represents a loss on the consolidated
balance sheet, net of the deferred tax adjustment, of £5,685,314.
Employee recruitment and retention
Although the company has no quantitative target for the number of employees it
needs or retains, this metric is closely monitored. The company has an excellent
record of retaining key staff.
During the year two new members have been added to the uranium team and no staff
have left.
Significant Equity Events
In February 2007, Geiger Counter Limited subscribed for 1,000,000 ordinary
shares at 15p per share, registered in the name of BNY (OCS) Nominees Limited.
In April 2007, the company raised a five year convertible loan of £1,000,000
from Geiger Counter Limited which attracts interest at 8% per annum, and is
convertible at 29p per share.
In May 2007, Geiger Counter Limited and City Natural Resources High Yield Trust
plc exercised their right to convert loan notes of £750,000 into shares at 12p
per share, by the issuance of 6,250,000 shares.
In June 2007, a director, Robert Jeffcock, exercised 1,000,000 share options at
a price of 11p per share, save for which none of the directors acquired or sold
any shares of the company during the year.
In September 2007, the company arranged a further £500,000 five year convertible
loan agreement with City Natural Resources High Yield Trust plc which enabled
the Company to continue to pursue the uranium opportunities in the US detailed
above and to complete the construction of the SDA mill. This new loan carries
interest at 8% and can be converted at a price of 22.75p per share.
In November 2007, the company was successful in raising £6.25m by the sale of
35,714,285 new ordinary shares at a price of 17.5p per share. The placing was
led by the company's new brokers Westwind Partners (now called Thomas Weisel
Partners 'TWP'). Net cash received after expenses was £5,841,104. The company's
joint brokers, Ambrian (45,628) and TWP (668,657), now hold compensation options
over a total of 714,285 shares at a price of 17.5p per share.
Following the issue of shares detailed above, there were a total of 190,108,108
ordinary shares in issue at the year end.
Cash Position
The Company had closing cash balances across the group at year end totalling
£5,813,353.
Key Performance Indicators
There are a number of key performance indicators that are reviewed regularly by
the Board as set out below in respect of 2007:-
Item Actual Target Comment
Production monthly 1,438 1,500 The average monthly production for 2007 was just below
tonnage the target.
Maintenance of 3.4g Au 4.00g Au Due to the narrow vein we continue to experience
Mineral Grades significant dilution of the anticipated grades.
283g Ag 550g Ag
Gross Margin per $121 $142 This figure is calculated over the six months of the
tonne of year in which ore was shipped to the smelter. Shipments
production were suspended, and ore stock piled, during the last
six months of the year pending the commissioning of our
own Mill facilities. The value is lower than planned
owing to reduction in mineral grades.
Cash balances £5.8 million £0.7 million The major fund-raising during the year has ensured
sufficient cash to carry out the aggressive uranium
drilling programme. Strong cash flows from Diablito are
expected as the stockpiled ore is processed. Cash flows
from the Diablito mine cover most of the expenses of
the rest of the company outside of the uranium
exploration activity and any extraordinary items such
as fund-raising expenses.
Outlook
Despite the current selling off of equities world-wide, which the AIM market has
not escaped and which is reflected in depressed share prices for a great many
junior mining stocks, VANE is in a strong position with a robust portfolio of
properties. We have built up and are continuing to build both the uranium and
porphyry copper exploration portfolios. Our strong cash position, plus healthy
cash flow from Diablito will enable your company to ride through these difficult
financial markets. During the last six months, gold and silver prices have been
strong, driven by the weakness of the dollar and 'recession protection' buying,
if the prices remain high this will enable the stockpiled ore to be sold at
higher prices than expected.
Your Company, with its strong financial footing, continues to evaluate a range
of prospective targets, primarily uranium in the Colorado Plateau Uranium
District, gold and silver in Mexico and Paraguay, and copper in Southwestern USA
/Northern Mexico and Paraguay. As indicated above, drilling, which is the key to
discovery of mineral deposits, will be our first order of business going forward
in all our primary areas of interest.
Your board would like to take this opportunity to thank our shareholders for
your continued support.
Steven D Van Nort, CEO
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
Notes Unaudited Unaudited
2007 2006
£ £
Revenue 4 1,370,735 1,592,632
Cost of sales (1,570,849) (957,740)
------------------- -------------------
Gross (loss) / profit (200,114) 634,892
Operating and administrative expenses (1,480,114) (1,183,733)
Impairment of exploration costs (7,693,747) (316,825)
------------------- -------------------
Operating loss (9,373,975) (865,666)
Income from investments 40,367 19,381
Finance costs (100,924) (25,598)
------------------- -------------------
Loss before taxation (9,434,532) (871,883)
Taxation 2,377,643 105,679
------------------- -------------------
Loss for the year 4 (7,056,889) (766,204)
------------------- -------------------
All the above group's results relate to continuing
operations.
Loss per share
Basic & Diluted 6 (4.58p) (0.52p)
------------------- -------------------
CONSOLIDATED BALANCE SHEET
31 December 2007
Unaudited Unaudited
2007 2006
£ £
Non current assets
Investments 213,571 -
Intangible assets 925,015 7,828,224
Property, plant and equipment 3,644,707 3,737,359
------------------ ------------------
4,783,293 11,565,583
------------------ ------------------
Current assets
Inventories 545,016 579,668
Trade and other receivables 249,263 228,990
Cash and cash equivalents 5,813,353 624,374
------------------ ------------------
6,607,632 1,433,032
------------------ ------------------
Total assets 11,390,925 12,998,615
------------------ ------------------
Current liabilities
Trade and other payables (269,436) (194,875)
Taxation (10,358) (4,107)
------------------ ------------------
(279,794) (198,982)
------------------ ------------------
Non current liabilities
Convertible loan notes (1,386,129) (676,474)
Obligations under finance leases (6,825) (7,454)
Deferred tax (396,892) (2,785,073)
Provisions (37,500) -
------------------ ------------------
(1,827,346) (3,469,001)
------------------ ------------------
Total liabilities (2,107,140) (3,667,983)
------------------ ------------------
Net assets 9,283,785 9,330,632
------------------ ------------------
Equity attributable to equity holders of the parent
Share capital 19,010,811 14,614,382
Share premium account 2,359,071 -
Share option reserve 195,203 143,769
Other reserves 261,220 79,628
Cumulative translation reserve (262,686) (233,822)
Retained loss (12,279,834) (5,273,325)
------------------ ------------------
Equity 9,283,785 9,330,632
------------------ ------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)
For the year ended 31 December 2007
Share capital Share Premium Share Option Other Cumulative Retained Total
reserve reserves translation loss
reserves
£ £ £ £ £ £ £
Balance at 1 14,614,382 - 95,100 - 43,957 (4,507,121) 10,246,318
January 2006
Changes in equity
for 2006
Exchange - - - - (277,779) - (277,779)
differences arising
on translation of
foreign operations
Loss for the year - - - - - (766,204) (766,204)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total recognised
income and expense
for the year - - - - (277,779) (766,204) (1,043,983)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Equity component of - - - 79,628 - - 79,628
convertible loan
note
Equity share - - 48,669 - - - 48,669
options issued
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at 31
December 2006
14,614,382 - 143,769 79,628 (233,822) (5,273,325) 9,330,632
Changes in equity
for 2007
Exchange - - - - (28,864) - (28,864)
differences arising
on translation of
foreign operations
Loss for the year - - - - - (7,056,889) (7,056,889)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total recognised
income and expense
for the year - - - - (28,864) (7,056,889) (7,085,753)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Issue of share 4,396,429 2,359,071 - - - - 6,755,500
capital
Equity component of - - - 123,216 - - 123,216
convertible loan
note
Share based payment - - 101,814 - - - 101,814
Gain on conversion - - - 58,376 - - 58,376
of convertible loan
note
Transfer on share - - (50,380) - - 50,380 -
option exercise
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at 31
December 2007
19,010,811 2,359,071 195,203 261,220 (262,686) (12,279,834) 9,283,785
------------ ------------ ------------ ------------ ------------ ------------ ------------
CONSOLIDATED CASH FLOW STATEMENT
For the year end 31 December 2007
Unaudited Unaudited
2007 2006
£ £
Cash flow from operating activities
Loss before taxation (9,434,532) (871,883)
Income from investments (40,367) (19,381)
Finance costs 100,924 25,598
Adjustments for:
Depreciation of property, plant and equipment 537,039 518,963
Impairment of intangible assets 7,693,747 316,825
Share based payments 101,814 48,669
Effect of foreign exchange rate changes (320) (62,106)
Operating cash outflow before movements in working capital (1,041,695) (43,315)
Decrease / (increase) in inventories 34,652 (456,775)
(Decrease) / increase in trade and other receivables (20,273) 33,518
Increase in trade and other payables 69,999 41,392
Cash generated from operations (957,317) (425,180)
Income tax recovered / (paid) 159 (6,875)
Interest paid (89,123) (19,496)
Net cash used in operating activities (1,046,281) (451,551)
Cash flow from investing activities
Interest received 40,367 19,381
Purchase of property, plant and equipment (407,132) (148,206)
Purchase of investments (213,571) -
Purchases of intangible assets (804,957) (252,520)
Net cash used in investment activities (1,385,293) (381,345)
Cash flow from financing activities
Repayment of obligations under finance leases (6,374) -
Proceeds from the issue of share capital 6,510,000 -
Issue costs paid (379,500) -
Proceeds from the issue of convertible loan notes 1,500,000 750,000
Net cash from financing activities 7,624,126 750,000
Net increase / (decrease) in cash and cash equivalents 5,192,552 (82,896)
Cash and cash equivalents at beginning of year 624,374 731,932
Effect of foreign exchange rate changes (3,573) (24,662)
Cash and cash equivalents at end of year 5,813,353 624,374
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2007
1. BASIS OF PREPARATION
The financial information for the year ended 31 December 2007 has not been
audited and does not constitute the Company's statutory financial statements
within the meaning of S240 of the Companies Act 1985. This preliminary
announcement was approved by the Board on 7 April 2008.
The statutory financial statements for the year ended 31 December 2007 have not
been filed with the Registrar of Companies nor reported on by the Company's
auditors. They will be circulated to shareholders in April 2008 and the Annual
General Meeting is arranged to take place on 20 May 2007.
The comparative results for the year ended 31 December 2006 are an abridged
version of the UK GAAP audited financial statements which have been filed with
the UK Registrar of Companies and on which the auditors issued an unqualified
audit report, and but which have now been converted to IFRS as detailed in the
previous announcement of the interim results to June 2007.
2. PRESENTATION OF FINANCIAL STATEMENTS
The financial statements have been prepared on a basis consistent with
International Accounting and Financial Reporting Standards ('IFRS') as adopted
in the EU.
The financial statements are presented in British pounds as this is the currency
in which the majority of the Group's transactions are denominated.
The company is domiciled in the United Kingdom. The company is listed on the
Alternative Investment Market stock exchange.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain financial instruments. The principal accounting
policies adopted are set out below.
ADOPTION OF NEW AND REVISED STANDARDS
In the current year, the Group has adopted IFRS7 'Financial Instruments:
Disclosures', which is effective for annual reporting periods beginning on or
after 1 January 2007, and the related amendment to IAS1 'Presentation of
Financial Statements'. The impact of the adoption of IFRS7 and the changes to
IAS1 has been to expand the disclosures provided in these financial statements
regarding the Group's financial instruments and the management of capital. Four
interpretations issued by the International Financial Reporting Interpretations
Committee are effective for the current period. These are IFRIC7 'Applying the
Restatement Approach under IAS 29', 'Financial Reporting in Hyperinflationary
Economies'; IFRIC8 Scope of IFRS2; IFRIC9 'Reassessment of Embedded Derivatives
'; and IFRIC10 'Interim Financial Reporting and Impairment'. The adoption of
these Interpretations has not led to any changes in the Group's accounting
policies.
At the date of authorisation of these financial statements, the following
Standards and Interpretations that have not been applied in these financial
statements were in issue but not yet effective or endorsed (unless otherwise
stated):
IFRS 2 Share based payment - Amendments relating to vesting conditions and cancellations
IFRS 3 Business Combinations - Amendments
IFRS 7 Financial Instruments: Disclosures - Consequential amendments arising from amendments to
IAS32
IFRS 8 Operating Segments (endorsed)
IAS 1 Presentation of Financial Statements - Revised
IAS 1 Presentation of Financial Statements - Amendments relating to Puttable Financial
Instruments and obligations arising on liquidation
IAS 23 Borrowing Costs - Amendment
IAS 27 Consolidated and separate Financial Statements - Consequential amendments arising from
amendments from IFRS3
IAS 28 Investments in Associates - Consequential amendments arising from amendments to IFRS3
IAS 31 Interest in Joint Ventures - Consequential amendments arising from amendments to IFRS3
IAS 32 Financial Instruments: Presentation - Amendments relating to Puttable Financial Instruments
and obligations arising on liquidation
IAS 39 Financial Instruments: Recognition and Measurement - Consequential amendments arising from
amendments to IAS 32
IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments - Consequential amendments
arising from amendments to IAS 32
IFRIC 11 IFRS 2 - Group and Treasury Share Transactions (endorsed)
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer loyalty programmes
IFRIC 14 IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their
interaction
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the Group, except for additional segment disclosures when IFRS 8
comes into effect for periods commencing on or after 1 January 2009.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate those of Vane Minerals Plc ('
the Company') and all its subsidiary undertakings (together, 'the Group'). All
financial statements are made up to 31 December 2007.
Subsidiary undertakings are those entities controlled directly or indirectly by
the Company. Control is achieved where the Company has the power to govern the
financial and operating policies of an investee enterprise so as to obtain
benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of the acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the income statement in the period of
acquisition.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
other members of the Group.
All intercompany transactions and balances between group enterprises are
eliminated on consolidation.
INVESTMENTS
Long term investments representing interests in subsidiary undertakings are
stated at cost less any provision for impairment in the value of the non-current
investment.
INTANGIBLE ASSETS
The Group applies the full cost method of accounting for Exploration and
Evaluation costs, having regard to the requirements of IFRS 6 Exploration for
and Evaluation of Mineral Resources.
Expenditure including related overheads on the acquisition, exploration and
evaluation of interests in licences not yet transferred to the cost pool is
capitalised under intangible assets once it has been established that there are
resources present that may be capable of recovery. Cost pools are established on
the basis of geographic area. When it is determined that such costs will be
recouped through successful development and exploitation or alternatively by
sale of the interest, expenditure will be transferred to property, plant and
equipment and depreciated over the expected productive life of the asset.
Whenever a project is considered no longer viable the associated exploration
expenditure is written off to the income statement.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation
and any accumulated impairment losses. The cost of an item of property, plant
and equipment comprises its purchase price and any costs directly attributable
to bringing the asset into use.
Depreciation is provided on all property, plant and equipment at rates
calculated to write assets down to their estimated residual value evenly over
their useful economic lives at the following rates:
• Diablito mine over the life of the mine
• Ore Processing Mill over 10 years
• Plant & machinery over 5 to 10 years
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
The assets residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. The gain or loss arising on the
disposal or retirement of an asset is determined as the difference between the
sale proceeds and the carrying amount of the asset and is recognised in the
income statement.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to their present
location and condition. Cost is calculated using the weighted average method.
Net realisable value represents the estimated selling price less all estimated
costs to completion and costs to be incurred in marketing, selling and
distribution.
REVENUE RECOGNITION
Revenue from the sale of minerals is recognised when persuasive evidence,
usually in the form of an executed sales agreement, of an arrangement exists
indicating that there has been a transfer of risks and rewards to the customer,
no further work or processing is required by the Group, the quantity and quality
of the goods has been determined with reasonable accuracy, the price is fixed or
determinable, and collectability is reasonably assured. This is generally when
title passes.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the interest rate applicable.
LEASING
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
FOREIGN CURRENCIES
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operated (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each group company are expressed in pound
sterling, which is the functional currency of the Company, and the presentation
currency for the consolidated financial statements.
Transactions in currencies other than the functional currency of each group
company ('foreign currencies') are recorded in the functional currency at the
rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated into the functional currency at the rates prevailing
on the balance sheet date. Non-monetary assets and liabilities carried at fair
value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not
retranslated.
Gains and losses arising on translation are included in net profit or loss for
that period, except for exchange differences arising on non-monetary assets and
liabilities where the changes in fair value are recognised directly in equity.
For the purpose of presenting consolidated financial statements, the income
statement and balance sheet of foreign operations and foreign entities are
translated into the functional currency (pound sterling) on consolidation at the
average rates for the period and the rates prevailing at the balance sheet dates
respectively. Exchange gains and losses arising on the translation of the
group's net investment in foreign operations and foreign entities, are
recognised as a separate component of shareholders' equity. On disposal of
foreign operations and foreign entities, the cumulative translation differences
are recycled to the income statement and recognised as part of the gain or loss
on disposal.
Fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the
closing rate. The Group has elected to treat fair value adjustments arising on
acquisitions before the date of transition to IFRS as pound sterling denominated
assets and liabilities.
The most important foreign currencies for the Group are the US dollar and the
Mexican peso. The relevant exchange rates for these currencies in sterling were:
31 December 2007 31 December 2007 closing 31 December 2006 31 December 2006
average average closing
US dollar 2.0015 1.9856 1.8426 1.9617
Mexican peso 21.8711 21.6783 20.0915 21.2893
RETIREMENT BENEFITS
The Group makes contributions to the personal pension schemes for some of its
employees and directors. Payments to these schemes are charged as an expense in
the income statement in respect of pension costs payable in the year. There
were no unpaid contributions at the period end.
TAXATION
The tax amount in the income statement represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on the taxable result for the period.
Taxable result differs from result as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are not taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities for financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which deductible temporary
differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference
arises from goodwill (or negative goodwill) or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction which affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
profits will be available to allow all or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based upon rates
enacted or substantially enacted at the balance sheet date. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS EXCLUDING
GOODWILL
At each balance sheet date, the Group reviews the carrying amounts of its
property, plant and equipment and intangible assets with finite lives to
determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the cash generating
unit to which the asset belongs.
Goodwill arising on acquisition is allocated to cash-generating units. The
recoverable amount of the cash-generating unit to which goodwill has been
allocated is tested for impairment annually, or on such other occasions that
events or changes in circumstance indicate that it might be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase. However, impairment losses relating to
goodwill may not be reversed.
FINANCIAL INSTRUMENTS
The following policies for financial instruments have been applied in the
preparation of the Group's financial statements. Financial assets and financial
liabilities are recognised on the Group's balance sheet when the Group becomes a
party to the contractual provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand and demand deposits, and
other short-term highly liquid investments that are readily convertible to a
known amount of cash with three months or less remaining to maturity and are
subject to an insignificant risk of changes in value.
Trade and other receivables
Trade and other receivables do not carry any interest and are initially stated
at their fair value and subsequently at amortised cost using the effective
interest rate method as reduced by appropriate allowances for estimated
irrecoverable amounts.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables, where
the carrying value is reduced through the use of an allowance account. When a
trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in the income statement. If in a subsequent
period the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed through the income
statement to the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed the amount the amortised cost would
have been had impairment not been recognised.
Trade payables
Trade payables are not interest bearing and are stated initially at their fair
value and are subsequently measured at amortised cost using the effective
interest rate method.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the group after
deducting all of its liabilities.
Equity instruments issued by the company are recorded at the proceeds received,
net of direct issue costs.
CONVERTIBLE LOAN NOTES
Convertible loan notes are regarded as compound financial instruments,
consisting of a liability component and an equity component. At the date of
issue, the fair value of the liability component is estimated using the
prevailing market interest rate for similar non-convertible debt. The difference
between the proceeds of issue of the convertible loan notes and the fair value
assigned to the liability component, representing the embedded option to convert
the liability into equity of the Group is included in equity.
Issue costs are apportioned between the liability and equity components of the
notes based on their relative carrying amounts at the date of issue. The portion
relating to the equity component is charged directly against equity.
The interest expense on the liability component is calculated by applying the
prevailing market interest rate for similar non-convertible debt to the
liability component of the instrument. The difference between this amount and
the interest paid is added to the carrying amount of the convertible loan note.
SHARE-BASED PAYMENTS
The Group operates an equity-settled share option plan. The fair value of the
employee service received in exchange for the grant of the options is recognised
as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted, excluding the
impact of any non-market vesting conditions. Non-market vesting conditions are
included in assumptions about the number of options that are expected to become
exercisable. At each balance sheet date the Group revises its estimates of the
number of options that are expected to become exercisable. It recognises the
impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
Fair value is measured by use of a Monte Carlo valuation model. The expected
life used in the model has been adjusted, based on management's best estimate,
for the effect of non-transferability, exercise restrictions and behavioural
considerations.
The proceeds received are credited to share capital (nominal value) and share
premium when the options are exercised. The costs of an equity transaction are
accounted for as a deduction from equity to the extent they are incremental
costs directly attributable to the equity transaction that would otherwise have
been avoided.
PROVISIONS
Provisions are recognised when the Group has a present obligation as a result of
a past event, and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
present value of the expenditure required to settle the obligation at the
balance sheet date.
DECOMMISSIONING
Provision for decommissioning is recognised in full when the related facilities
are installed. The decommissioning provision is calculated as the net present
value of the Group's share of the expenditure expected to be incurred at the end
of the producing life of the facility in the removal and decommissioning of the
production, storage and transportation facilities currently in place. The cost
of recognising the decommissioning provision is included as part of the cost of
the relevant asset and is thus charged to the income statement on a unit of
production basis in accordance with the Group's policy for depletion and
depreciation of property, plant and equipment. Period charges for changes in the
net present value of the decommissioning provision arising from discounting are
included in finance costs.
SEGMENTAL REPORTING
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and return that are different from those of segments operating
in other economic environments.
CRITICAL RISKS AND UNCERTAINTIES
The accounting policies have been prepared to consider all relevant matters
relating to the preparation of the financial statements of the group. The
directors have reviewed all available data and taken professional advice as
required to consider the current estimated life of the Diablito mine in Mexico.
From the information available their current estimate is 6 years.
4. SEGMENTAL INFORMATION
For management purposes, the Group is organised into four operating divisions:
UK, USA, Paraguay and Mexico. These divisions are the basis on which the Group
reports its primary segment information.
Segment information about these divisions is presented below. The tables show
the geographic segmentation of the Group. Activities in Mexico are currently
concerned with gold and silver mining and exploration. Activities in the USA are
split between research of the Freeport database and other sources for further
gold and silver properties, and research and evaluation of potential uranium
properties. Activities in Paraguay are concerned with gold and copper
exploration. Activities in the United Kingdom are concerned with administration
and management of the Group.
2007 2006
£ £
Revenue
UK - -
USA - -
Mexico 1,370,735 1,592,632
Paraguay - -
--------------- ---------------
1,370,735 1,592,632
--------------- ---------------
Segmental result
UK (612,125) (524,391)
USA (1,275,920) (61,177)
Mexico (7,335,757) (287,638)
Paraguay (210,730) 1,323
--------------- ---------------
(9,434,532) (871,883)
Current and deferred tax 2,377,643 105,679
Loss after taxation (7,056,889) (766,204)
--------------- ---------------
Depreciation
UK - -
USA 2,542 -
Mexico 534,497 518,963
Paraguay - -
--------------- ---------------
537,039 518,963
--------------- ---------------
The average number of employees for the year for each of the Group's principal
divisions was as follows:
2007 2006
Number Number
UK 2 2
USA 5 4
Mexico 24 11
Paraguay - -
--------------- ---------------
31 17
--------------- ---------------
2007 2006
£ £
Balance Sheet
Segment Assets
UK 18,797,372 11,738,441
USA 892,841 1,285,489
Mexico 4,393,017 11,151,008
Paraguay 156,991 125,247
Eliminated on consolidation (12,849,296) (11,301,570)
--------------- ---------------
Total Assets 11,390,925 12,998,615
--------------- ---------------
Segment Liabilities
UK 1,541,884 761,337
USA 41,152 28,918
Mexico 116,854 88,548
Paraguay - -
Eliminated on consolidation - -
--------------- ---------------
Segment Liabilities 1,699,890 878,803
Current and Deferred Tax 407,250 2,789,180
--------------- ---------------
Total liabilities 2,107,140 3,667,983
--------------- ---------------
Capital Additions
UK - -
USA 693,738 97,516
Mexico 380,179 186,349
Paraguay 148,480 125,247
--------------- ---------------
1,222,397 409,112
--------------- ---------------
Net Assets
UK 4,406,192 (319,998)
USA 851,689 1,252,102
Mexico 3,868,913 8,273,281
Paraguay 156,991 125,247
--------------- ---------------
9,283,785 9,330,632
--------------- ---------------
Impairment
UK - -
USA 1,118,232 -
Mexico 6,493,022 316,825
Paraguay 82,493 -
--------------- ---------------
7,693,747 316,825
--------------- ---------------
All the assets of the company relate to the mining operations in Mexico, USA and
Paraguay or for administration operations to support the mining.
The group carries on operations in only one business segment namely the
exploration and mining of minerals and so no secondary segment disclosures are
given. The business segmentation effectively follows the geographic segmentation
given above.
5. TAXATION
2007 2006
£ £
Current tax:
Foreign Tax 6,092 6,876
Total current tax 6,092 6,876
Deferred tax:
Origination and reversal of timing differences (375,302) (112,555)
Reversal from impairment review (2,008,433) -
(2,383,735) (112,555)
Tax on loss for the year (2,377,643) (105,679)
The charge for the year can be reconciled to the loss per the income statement as follows:
Loss before tax (9,434,532) (871,883)
Loss multiplied by the rate of corporation tax for
companies of 30% (2006: 30%)
(2,830,360) (261,565)
Effects of:
Expenses not deductible for tax purposes 63,044 84,924
Tax relief on share options exercised (38,250) -
Share based payments 30,544 -
Unrelieved tax losses carried forward 310,103 61,134
Other adjustments 76,913 2,952
Foreign Tax 10,363 6,876
Tax charge for year (2,377,643) (105,679)
Unrelieved UK tax losses of £2,363,373 (2006: £1,681,145) carried forward have
not been recognised as a deferred tax asset, as there is currently insufficient
evidence that the asset will be recoverable in the foreseeable future. The
losses must be utilised in relation to the same operations.
Tax for other jurisdictions is provided at rates prevailing in those countries.
6. LOSS PER ORDINARY SHARE
The calculation of basic and diluted loss per ordinary share is based on the
following loss and number of shares.
2007 2006
£ £
Earnings
Earnings for the purpose of basic loss per share (net loss (7,056,889) (766,204)
for the year)
Number of shares
Weighted average number of shares for the purposes of basic 154,084,234 146,143,823
loss per share
Share options in issue
Weighted average number of shares for the purposes of 156,419,217 146,143,823
diluted loss per share
As a result of the losses incurred, there is no dilutive effect from the
subsisting share options.
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