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Ortac Resources Ltd (OTC)

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Thursday 19 July, 2012

Ortac Resources Ltd

Preliminary Results

RNS Number : 0495I
Ortac Resources Limited
19 July 2012
 



Ortac Resources Ltd / Epic: OTC / Market: AIM / Sector: Mining & Exploration

19 July 2012

Ortac Resources Ltd ('Ortac' or 'the Company')

Preliminary Results

 

Ortac Resources Ltd, the AIM listed exploration and development company focussed on natural resource projects in Europe, announces its preliminary results for the year ended 31 March 2012.

 

Financial Year Highlights

 

·    Completion of a Scoping Study at the Šturec gold and silver deposit has demonstrated highly attractive economic fundamentals;

·    Healthy cash position with approximately £7.2 million ($11.2 million) cash in bank to fund further exploration and development as well as providing the foundation to secure new opportunities without undue reliance on equity capital markets;

·    Evaluation of additional assets to expand the Company's natural resource portfolio;

·    Broadened corporate and operational presence in Slovakia with the appointment of Hugo Green as Chief Financial Officer and Owen Mihalop as Group Mining Engineer.

 

Post Year End Highlights

 

·    Upgraded the Šturec JORC Resource to 1.36Moz of gold equivalent up from 1.1Moz with over 1Moz in Measured and Indicated categories;

·    Management team strengthened by the appointment of Viktor Pomichal as Managing Director in Slovakia;

·    Financial position further cemented by £20 million ($31.2 million) equity financing facility ('EFF') with Darwin Strategic Limited.

 

Ortac CEO Vassilios Carellas said, "Ortac's most advanced asset, the Šturec deposit at its Slovak Precious Metals Project in Central Slovakia, has already demonstrated highly attractive economic fundamentals including a post tax Net Present Value of $309 million (post tax).  The Company is also well funded, with approximately £7.2 million in cash and investments and an additional £20 million equity financing facility available to us.  This is of vital importance during the current market uncertainty enabling Ortac to readily execute our development objectives.

 

"This is particularly important at present when the Board believes that the current share price and market capitalisation of £13 million does not reflect the true value of our mature assets, not withstanding the significant natural resource upside potential I am confident that we can deliver through further investment and development activity.  Taking this all into account, I believe that Ortac represents a compelling investment opportunity and I look forward to enhancing value across our project portfolio in the year to come."

 

Chairman's Statement

 

Ortac has made solid progress during the year, achieving numerous corporate and operational milestones, which has translated into enhanced value across its portfolio of assets in Slovakia.  Following the completion of key developmental landmarks, such as the Scoping Study at the Šturec Deposit of our Slovak Precious Metals Project, we are now well positioned to develop into a commercial producer.

 

The aforementioned Scoping Study, announced on 10 January 2012, yielded some highly encouraging results which underpinned the compelling economic fundamentals and value of this asset.  The study demonstrated a post-tax Net Present Value of US$309 million, based on a metal price of $1,586 per ounce of gold equivalent.  The Scoping Study projected a mine life of 11 years with targeted production of 86,000 ounces per annum.

 

Following the completion of the Scoping Study, the Company is now advancing the additional elements of its sustainable development plan, including the initiation of the Environmental and Social Impact Assessment ('ESIA') process at Šturec and the surrounding area.  The first step in this process is the collection of environmental and social baseline data and the submission of a Preliminary Environmental Report, which forms the basis of our mining permit application.  The ESIA is a crucial component in our development and strong progress is being made in this regard, as we look to build and maintain an open dialogue with all local stakeholders.

 

Core to this progress has been the valued and consistent input from the local community and authorities.  Understandably they do not wish to have any activities that will in any way damage the nearby town of Kremnica, the health of locals or the value of local property and insist on the conservation of the rich local patrimony and biodiversity.

 

To facilitate this open dialogue, Ortac has embarked on a programme of communication with community members to work together to find and action the sustainable "win-win" solutions that the Šturec deposit can create.  To implement this approach, Ortac continues to work with AstonEco management, with the intention of building its internal capacity to not only deliver an EU compliant, technical, economical and environmentally robust project in Slovakia but also partner with the community and local businesses in a way that addresses short, medium and long term sustainability needs.

 

Operations

The Slovak Precious Metals Project

The Company's most advanced asset is the Šturec Deposit, one of numerous targets located on its Slovak Precious Metals Project, located 17km west of central Slovakia's largest city, Banská Bystrica.  The project area is easily accessed from the international airports at Vienna and Bratislava by driving northeast along the newly constructed highway between Bratislava and Banská Bystrica.  The project comprises three licences: the 11.8km2 Kremnica Mining Licence, which hosts the Šturec Deposit; and the respective 63.2km2 and 36.9km2 Lutila and Vyhne Exploration Licences.

 

The Šturec Deposit has already demonstrated its potential to become an economic gold production asset following the completion of the Scoping Study in January 2012.  The Scoping Study examined the mining, processing and infrastructure requirements of Šturec with four scenarios examined in detail, with the optimal case calculated at a price of US$1,586 per ounce of gold equivalent. 

 

The gold-silver mineralisation at Šturec is part of a low-sulphidation quartz-sericite-adularia epithermal-hydrothermal system hosted in Tertiary andesite volcanic flows and tuffs and lesser diorites and rhyolite dikes.  It has been mined and explored since the 8th century with extensive modern exploration through drilling, adits and some open pit mining from the early 1960s.

 

The Šturec zone is continuously mineralised for 1,200m along strike, is typically 100 to 150m wide and extends to a known depth of at least 300m.  The main part of the Šturec zone is the Schramen Vein, which is up to 100m wide along a 500m strike section and accounts for some 90% of the gold contained in the present Measured and Indicated Mineral Resources.  It is a massive to sheeted quartz vein that strikes almost due north, generally dips steeply to the east, and thins to the north, south, and at depth.  Some additional exploration is required to clarify the extent and continuity of hanging wall and footwall mineralisation in the Šturec zone.

 

An infill diamond drilling campaign totalling over 2,700m was undertaken at the project during 2011, resulting in, post period end, the updating of the Mineral Resource estimate by Snowden Mining Industry Consultants ('Snowden') for Šturec, which provided a total JORC Code (2004) compliant Mineral Resource of 1.36 Moz of gold equivalent up from 1.1Moz of gold equivalent.  Significantly, the proportion of material classified in the Measured and Indicated categories increased by 75% to over 1.0Moz.  It is also encouraging to note that the grade of the Measured and Indicated Resource in the new model has not been unduly lowered despite reporting at a lower cut-off grade.

 

The Snowden grade-tonnage estimate uses data from the sampling of adits, surface and underground diamond drill core, surface reverse circulation drilling and trench samples.  The database was compiled and verified by Ortac.  Snowden's checks indicate that the data is of sufficient quality to support the resource classifications applied.  Multiple Indicator Kriging was used to estimate the gold and silver grades into a block model constrained by the Ortac geological interpretation.  This model reflects the interpreted structure and geology.  Search ellipses and ranges used in estimation reflect the spatial continuity and trends of the mineralisation in each of the mineralised domains.

 

Additional Assets

Ortac owns another nine exploration licences across Slovakia, two of which are adjacent and to the south of the Slovak Precious Metals Project, while the remaining seven are located in central and eastern Slovakia.

 

During the period, the Company commenced confirmatory drill programmes at two projects within our portfolio in Eastern Slovakia, Cejkov and Zlatá Bana.  These confirmatory drill programmes mark the initial assessment of the Company's prospective precious and base metals licences in this area of Eastern Slovakia, which cover a combined area of 200 sq km.   

 

Financials

 

In May 2012 we entered into a £20 million Equity Financing Facility ('EFF') with Darwin Strategic Limited ('Darwin'), a company majority owned by funds managed by the Henderson Volantis Capital Team ('Henderson Volantis'), a subsidiary of Henderson Global Investors ('HGI'), which holds a 11.06% interest in the Company.  This financing facility offers a useful and cost effective source of equity funding, which we will use judiciously to maximise the value of existing and new opportunities with minimal dilution for shareholders.

 

As we are still in the development stage, in line with management expectations, we are reporting a pre-tax loss of £1.9m.  We remain well funded, with a cash treasury of £7.2 million, in addition to a holding of 500,000 shares in Vatukoula Gold Mines Plc, which translates to a current market value of approximately £150,000.

 

Corporate

 

During the year the Company has further strengthened its senior management team with key appointments in Slovakia. 

 

Hugo Green joined the senior management team of Ortac as our Chief Financial Officer in May 2011, leading the corporate team in our Bratislava office.  His extensive experience across Central and Eastern Europe at Deloitte and PWC has well equipped him for this position and he continues to play a key role in increasing our corporate presence in Slovakia. 

Owen Mihalop joined the Ortac team in June 2011 as the Company's Group Mining Engineer.  Owen, a Geologist and Chartered Engineer, has over 15 years broad based experience in the mining sector, most recently with Wardall Armstrong, and his extensive technical experience has proved invaluable in the completion of the Scoping Study and the onward development of our key assets.

 

More recently, in June 2012, Ortac appointed Viktor Pomichal as Managing Director in Slovakia.  Viktor, a native Slovak with extensive experience in investment and development within Eastern Europe, has a strong in country and European-wide network, and will be a key driving force behind achieving strong investment strategy and results for Ortac in Slovakia.

 

Outlook

 

Ortac, amongst its AIM mining junior peers, is in a strong position to deliver and build value for its shareholders due to its robust financing position and mature Šturec Deposit, which has already demonstrated its potential to become an economic gold production asset.  In addition to Šturec, the Company also has a significant investment potential across Slovakia through which there remains considerable upside.

 

This year is promising to be a transformational period for the Company, with in-depth engagement with the local community.  We look forward to co-designing the Šturec project with the local stakeholders, and will be focussing our efforts in ensuring a project design that leads to sustainable development for the region.

 

The completion of some of the key Šturec development milestones is scheduled for this year, including the Pre-Feasibility Study.  In tandem with this, work on the environmental studies and community engagement programmes, which are key aspects of the Bankable Feasibility Study, are progressing well and I look forward to providing further updates in this regard in due course.

 

In addition to our current portfolio, we also remain proactive in evaluating and appraising additional assets through which to add value.  We are actively evaluating potential natural resource investment targets in Europe generally and Slovakia specifically.  With a healthy cash treasury of approximately £7.2 million and a flexible £20 million equity financing facility, we are extremely well positioned to move quickly on exciting opportunities, with minimal dilution for shareholders.

 

I would like to take this opportunity to once again thank our valued shareholders for their continued support, and I look forward to providing further updates on Ortac's evolution into a gold production company in the near future.

 

Anthony Balme

Chairman

19 July 2012

 

For further information please visit www.ortacresources.com  or contact:

Vassilios Carellas

Ortac Resources Ltd

Tel: +44 (0) 20 7389 9050

Charles Wood

Ortac Resources Ltd

Tel: +44 (0) 20 7389 9050

Stewart Dickson

Seymour Pierce Limited

Tel: +44 (0) 20 7107 8000

Catherine Leftley

Seymour Pierce Limited

Tel: +44 (0) 20 7107 8000

Jacqui Briscoe

Seymour Pierce Limited

Tel: +44 (0) 20 7107 8000

Susie Geliher

St Brides Media & Finance Ltd

Tel: +44 (0) 20 7236 1177

Lottie Brocklehurst

St Brides Media & Finance Ltd

Tel: +44 (0) 20 7236 1177

 

FINANCIAL STATEMENTS

Group Statement of Comprehensive Income for the Year Ended 31 March 2012

 



Year to

Year to



31 March 2012

31 March 2011






Notes

£ 000's

£ 000's





Other Operating Income


16

-

Administrative expenses

3

(1,404)

(886)

Share-based payments

8,18

(49)

(1,161)





Group operating loss


(1,437)

(2,047)





Gain on sale of investments


-

566

Loss on available for sale investments

14

(82)

-

Impairment Provision

4,11

(596)

-

Interest received

10

128

15





Loss on ordinary activities before taxation


(1,987)

(1,466)





Taxation on loss on ordinary activities

6

-

-





Loss for the financial year  from continuing operations


(1,987)

(1,466)





Other comprehensive income








Currency translation differences


(521)

455

Loss on revaluation of available for sale investments

14

(284)

(82)

Other comprehensive income for the year


(805)

373





Total comprehensive income for the year


(2,792)

(1,093)





Attributable to:




Equity holders of the parent Company


(2,792)

(1,093)









Loss per share expressed in pence per share




- Basic & diluted

9

(0.09)

(0.10)

 

Company Statement of Comprehensive Income for the Year Ended 31 March 2012

 



Year to

Year to



31 March 2012

31 March 2011






Notes

£ 000's

£ 000's





Administrative expenses

3

(532)

(618)

Share-based payments

8, 18

(49)

(1,161)

Operating loss


(581)

(1,779)





Impairment provision

4,11

(596)

-

Loss on available for sale investments

14

(82)

-

Gain on sale of investments


-

565

Interest received

10

128

15

Loss before taxation


(1,131)

(1,199)





Income tax expense

6

-

-

Loss for the financial year


(1,131)

(1,199)





Other comprehensive income








(Loss) on revaluation of available for sale investments

14

(284)

(82)

Other comprehensive income for the year


(284)

(82)





Total comprehensive income for the year


(1,415)

(1,281)

 

Group Balance Sheets as at 31 March 2012

 



31 March 2012

31 March 2011






Note

£ 000's

£ 000's





ASSETS




Non-current assets




Intangible assets

11

10,024

9,700

Plant and equipment

12

321

258

Total non-current assets


10,345

9,958





Current assets




Inventories

15

7

8

Trade and other receivables

16

139

61

Available for sale investments

14

310

676

Cash & cash equivalents

20

7,678

10,586

Total current assets


8,134

11,331

TOTAL ASSETS


18,479

21,289





LIABILITIES




Current liabilities




Trade and Other payables

17

(184)

(266)

TOTAL LIABILITIES


(184)

(266)





NET ASSETS


18,295

21,023





SHAREHOLDERS' EQUITY




Share capital

18

-

-

Share premium


29,994

29,994

Share based payments reserve

18

1,857

1,888

Available for sale investment reserve


-

284

Foreign exchange reserve


(58)

463

Retained earnings


(13,498)

(11,606)

TOTAL EQUITY


18,295

21,023

 

Company Balance Sheet as at 31 March 2012

 



31 March 2012

31 March 2011






Notes

£ 000's

£ 000's





ASSETS




Non-current assets




Plant and Equipment


14

-

Investment in subsidiaries

13

7,485

7,486

Trade and other receivables

16

4,112

2,153

Total non-current assets


11,611

9,639





Current assets




Trade and other receivables

16

4

20

Available for sale investments

14

310

676

Cash and cash equivalents


7,581

10,574





Total Current Assets


7,895

11,270

TOTAL ASSETS


19,506

20,909





LIABILITIES




Current Liabilities




Trade and other payables

17

(35)

(72)

TOTAL LIABILITIES


(35)

(72)

NET ASSETS


19,471

20,837





EQUITY




Share capital

18

-

-

Share premium


29,994

29,994

Share based payments reserve

18

1,857

1,888

Available for sale investment reserve


-

284

Retained earnings


(12,380)

(11,329)

TOTAL EQUITY


19,471

20,837

 

 

Group Cash Flow Statement for the Year Ended 31 March 2012

 



Year to

Year to



31 March 2012

31 March 2011






Notes

£ 000's

£ 000's

Cash flows from operating activities




Operating Loss


(1,437)

(2,047)

Decrease/(increase) in inventories

15

1

(8)

(Increase)/decrease in trade and other receivables

16

(78)

14

(Decrease)/increase in trade and other payables

17

(82)

140

Share options expensed

8,9

49

1,161

Depreciation and amortisation

11,12

31

164

Net cash outflow from operating activities


(1,516)

(576)





Cash flows from investing activities




Interest received

10

128

15

Payments for exploration and evaluation of mineral resources

11

(1,359)

(317)

Impairment of Rio Paraniaba project

4,11


-

Payments to acquire tangible assets

12

(106)

(4)

Proceeds from sale of investments


-

961

Receipts on business combinations


-

52

Payments to acquire subsidiaries


-

(361)

Net cash (outflow)/inflow from investing activities


(1,337)

346





Cash flows from financing activities




Issue of ordinary share capital


-

11,771

Share issue costs


-

(936)

Net cash inflow from financing activities


-

10,835





Net increase/(decrease) in cash and cash equivalents


(2,853)

10,605

Foreign exchange differences on translation


(55)

(32)

Cash and cash equivalents at beginning of period


10,586

13

Cash and cash equivalents at end of period

20

7,678

10,586

 

Company Cash Flow Statements for the Year Ended 31 March 2012

 



Year to

Year to



31 March 2012

31 March 2011






 Notes

£ 000's

£ 000's





Cash flows from operating activities




Operating loss


(581)

(1,779)

Decrease in trade and other receivables

16

16

55

(Decrease) in trade and other payables

17

(37)

(54)

Share options expensed

8,9

49

1,161

Net cash outflow from operating activities


(553)

(617)





Cash flows from investing activities




Interest received

10

128

15

Payments to acquire tangible assets

12

(14)

-

Loans to subsidiaries


(2,554)

(633)

Proceeds from sale of investments


-

961

Net cash (outflow)/ inflow from investing activities


(2,440)

343





Cash flows from financing activities




Issue of ordinary share capital


-

11,771

Share issue costs


-

(936)

Net cash inflow from financing activities


-

10,835





Net (decrease)/increase in cash and cash equivalents


(2,993)

10,561

Cash and cash equivalents at beginning of period


10,574

13

Cash and cash equivalents at end of period

20

7,581

10,574

 

Included in the movement on loans to subsidiaries is a non cash item relating to the impairment of the Rio Paranaíba Iron Ore Project - see note 4 and 11 below.  


Group Statement of Changes in Equity for the Year Ended 31 March 2012

 


Attributable to the owners of the parent


Called up share capital

Share premium reserve

Available for sale investment reserve

Foreign exchange reserve

Share based payment reserve

Retained earnings

Total equity


£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

As at 31 March 2010

-

10,901

366

-

846

(10,355)

1,758









Loss for the year

-

-

-

-

-

(1,466)

(1,466)

Loss on market value of available for sale investments

-

-

(82)

-

-

-

(82)

Currency translation differences

-

-

-

463

-

(8)

455

Total comprehensive income

-

-

(82)

463

-

(1,474)

(1,093)

Share capital issued

-

20,133

-

-

-

-

20,133

Cost of share issue

-

(936)

-

-

-

-

(936)

Cost of share issue - issue of warrants

-

(104)

-

-

104

-

-

Reserves transfer on exercise of options

-

-

-

-

(223)

223

-

Share based payments

-

-

-

-

1,161

-

1,161

As at 31 March 2011

-

29,994

284

463

1,888

(11,606)

21,023









Loss for the year

-

-

-

-

-

(1,987)

(1,987)

Loss on market value of available for sale investments

-

-

(284)

-

-

-

(284)

Currency translation differences

-

-

-

(521)

-

-

(521)

Total comprehensive income

-

-

(284)

(521)

-

(1,987)

(2,792)

Currency translation on opening balance

-

-

-

-

-

15

15

Reserves transfer on cancellation of options

-

-

-

-

(80)

80

-

Share based payments

-

-

-

-

49

-

49

As at 31 March 2012

-

29,994

-

(58)

1,857

(13,498)

18,295

 

Company Statement of Changes in Equity for the Year Ended 31 March 2012

 


Called up share capital

Share premium reserve

Available for sale investment reserve

Share based payment reserve

Retained earnings

Total equity


£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

As at 31 March 2010

-

10,901

366

846

(10,353)

1,760








Loss for the period

-

-

-

-

(1,199)

(1,199)

Loss on market value of available for sale investments

-

-

(82)

-

-

(82)

Total comprehensive income

-

-

(82)

-

(1,199)

(1,281)

Share capital issued

-

20,133

-

-

-

20,133

Cost of share issue

-

(936)

-

-

-

(936)

Cost of share issue - issue of warrants

-

(104)

-

104

-

-

Reserves transfer on exercise of options

-

-

-

(223)

223

-

Share based payments

-

-

-

1,161

-

1,161

As at 31 March 2011

-

29,994

284

1,888

(11,329)

20,837








Loss for the period

-

-

-

-

(1,131)

(1,131)

Loss on market value of available for sale investments

-

-

(284)

-

-

(284)

Total comprehensive income

-

-

(284)

-

(1,131)

(1,415)

Reserves transfer on cancellation of options

-

-

-

(80)

80

-

Share based payments

-

-

-

49

-

49

As at 31 March 2012

-

29,994

-

1,857

(12,380)

19,471

 

NOTES TO THE FINANCIAL INFORMATION

1.  Summary of Significant Accounting Policies

a.        General Information and Authorisation of Financial Statements

The Company is registered in the British Virgin Islands under the BVI Business Companies Act 2004 with registered number 1396532.  The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange.  The Group financial statements of Ortac Resources Ltd for the year ended 31 March 2012 were authorised for issue by the Board on 19 July 2012 and the Balance Sheets signed on the Board's behalf by Mr. Anthony Balme and Mr. Charles Wood.

b.        Statement of Compliance with IFRS

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. 

In preparing these financial statements, certain Standards and Interpretations that are mandatory for the first time for the financial year beginning 1 April 2011 are not currently relevant to the Group, and hence have not been applied.   

·     An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" relieves first-time adopters of IFRS's from providing the additional disclosures introduced in March 2009 by "Improving Disclosures about Financial Instruments" (Amendments to IFRS 7).  This amendment was effective for periods beginning on or after 1 July 2010. 

·     IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" clarifies the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially.  This interpretation was effective for periods beginning on or after 1 July 2010.

·     A revised version of IAS 24 "Related Party Disclosures" simplifies the disclosure requirements for government-related entities and clarified the definition of a related party.  This revision was effective for periods beginning on or after 1 January 2011.

·     An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction", on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements.  The amendment permitted such an entity to treat the benefit of such an early payment as an asset.  This amendment was effective for periods beginning on or after 1 January 2011. 

·     Amendments to IFRS 7 "Financial Instruments: Disclosures" are designed to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position.  These amendments were effective for periods beginning on or after 1 January 2011 but are still subject to EU endorsement. 

The Group has also not early adopted certain new standards/amendments that were not effective at the commencement of the present reporting period.  The Directors' interpretation thereof and their effective dates are summarised below:

·     Amendments to IAS 1 "Presentation of Financial Statements" require items that may be reclassified to the profit or loss section of the Income Statement to be grouped together within other comprehensive income (OCI).  The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements.  These amendments are effective for periods beginning on or after 1 July 2012.

·     Amendments to IAS 19 "Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the "corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.  These amendments are effective for periods beginning on or after 1 January 2013.

·     IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial Statements" as a result of the issue of IFRS 10 (see below).  This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IAS 28 "Investments in Associates and Joint Ventures" replaces the current version of IAS 28 "Investments in Associates" as a result of the issue of IFRS 11 (see above).  This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     Amendments to IAS 32 "Financial Instruments: Presentation" add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities.  This includes clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement.  These amendments are effective for periods beginning on or after 1 January 2014, subject to EU endorsement. 

·     Amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards" replace references to a fixed date of 1 January 2004 with "the date of transition to IFRSs", thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs, and provide guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. These amendments are effective for periods beginning on or after 1 July 2011, subject to EU endorsement.

·     Amendments to IFRS 7 "Financial Instruments: Disclosures" require disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position.  These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IFRS 9 "Financial Instruments" specifies how an entity should classify and measure financial assets, including some hybrid contracts, with the aim of improving and simplifying the approach to classification and measurement compared with IAS 39.  This standard is effective for periods beginning on or after 1 January 2015, subject to EU endorsement.

·     Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" require entities to apply IFRS 9 for annual periods beginning on or after 1 January 2015 instead of on or after 1 January 2013.  Early application continues to be permitted.  The amendments also require additional disclosures on transition from IAS 39 "Financial Instruments: Recognition and Measurement" to IFRS 9.  This is subject to EU endorsement.

·     Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests in Other Entities" clarify the IASB's intention when first issuing the transition guidance in IFRS 10, provide similar relief in IFRS 11 and IFRS 12 from the presentation or adjustment of comparative information for periods prior to the immediately preceding period, and provide additional transition relief by eliminating the requirement to present comparatives for the disclosures relating to unconsolidated structured entities for any period before the first annual period for which IFRS 12 is applied.  These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·     IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor as to whether an entity should be included within the consolidated financial statements of the parent company.  The standard provides additional guidance to assist in the determination of control where this is difficult to assess.  This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case).  The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities.  This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IFRS 12 "Disclosure of Interests in Other Entities" is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.  This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS's.  It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards.  This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. 

·     IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods.  This applies to annual periods beginning on or after 1 January 2013, subject to EU endorsement.

·     "Annual Improvements 2009 - 2011 Cycle" sets out amendments to various IFRSs and provides a vehicle for making non-urgent but necessary amendments to IFRSs:

An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" clarifies whether an entity may apply IFRS 1:

(a) if the entity meets the criteria for applying IFRS 1 and has applied IFRS 1 in a previous reporting period; or

(b) if the entity meets the criteria for applying IFRS 1 and has applied IFRSs in a previous reporting period when IFRS 1 did not exist.

The amendment also addresses the transitional provisions for borrowing costs relating to qualifying assets for which the commencement date for capitalisation was before the date of transition to IFRSs.

An amendment to IAS 1 "Presentation of Financial Statements" clarifies the requirements for providing comparative information:

(a) for the opening statement of financial position when an entity changes accounting policies, or makes retrospective restatements or reclassifications; and

(b) when an entity provides financial statements beyond the minimum comparative information requirements.

An amendment to IAS 16 "Property, Plant and Equipment" addresses a perceived inconsistency in the classification requirements for servicing equipment.

An amendment to IAS 32 "Financial Instruments: Presentation" addresses perceived inconsistencies between IAS 12 "Income Taxes" and IAS 32 with regard to recognising the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction.

An amendment to IAS 34 "Interim Financial Reporting" clarifies the requirements on segment information for total assets and liabilities for each reportable segment.

These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

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 or Company, except for additional disclosures when the relevant Standards come into effect. 

Subject to the above, the principal accounting policies adopted by the Group and Company are set out below. 

c.         Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis, except for the measurement to available-for-sale financial assets at fair value as described in the accounting policies below, and on a going concern basis. 

The financial information is presented in Pounds Sterling (£) and all values are rounded to the nearest thousand Pounds Sterling (£ 000's) unless otherwise stated. 

d.        Basis of Consolidation

The consolidated financial information incorporates the results of the Company and its subsidiaries (the "Group") using the acquisition method.  Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.  In the consolidated Balance Sheet, the acquiree's identifiable assets and liabilities are initially recognised at their fair values at the acquisition date.  The results of acquired or disposed operations are included in the consolidated Statement of Comprehensive Income from the date on which control is obtained, or up to the date of disposal.  Inter-company transactions and balances between Group companies are eliminated in full. 

e.        Business combinations

The acquisition of subsidiaries in a business combination is accounted for using the purchase method.  The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.  The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 "Non Current Assets Held for Sale and Discontinued Operations", which are recognised and measured at fair value less costs to sell. 

Where there is a difference between the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities and the cost of the business combination, any excess cost is recognised in the Balance Sheet as goodwill and any excess net fair value is recognised immediately in the Income Statement as negative goodwill on acquisition of subsidiary. 

The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

f.         Contingent consideration

Contingent consideration is charged to the profit and loss in the period in which it is recognised as payable.  See note 22 below.

g.        Revenue

The Group had no revenue during the periods.

h.        Foreign currencies

The Group's functional currency is Pounds Sterling.  Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.  As at the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of Ortac Resources Limited, which is Pounds Sterling, at the rate of exchange ruling at the reporting date and their Income Statements are translated at the average exchange rate for the year.  The exchange differences arising on the translation are taken directly to a separate component of equity. 

All other exchange differences are taken to the profit or loss with the exception of differences on foreign currency borrowings, which, to the extent that they are used to finance or provide a hedge against foreign equity investments, are taken directly to reserves to the extent of the exchange difference arising on the net investment in these enterprises. 

i.         Exploration and Development Costs

Exploration and development costs are carried forward in respect of areas of interest where the consolidated entity's rights to tenure are current and where these costs are expected to be recouped through successful development and exploration, or by sale.  Alternatively, these costs are carried forward while active and significant operations are continuing in relation to the areas of interest and it is too early to make reasonable assessment of the existence or otherwise of economically recoverable reserves. When the area of interest is abandoned, exploration and evaluation costs previously capitalised are written off to the profit or loss . 

In accordance with the full cost method, costs incurred by the Company on behalf of its subsidiaries and associated with mining development and investment are capitalised on a project-by-project basis pending determination of the feasibility of the project.  Costs incurred include appropriate technical and administrative expenses but not general overheads.  If a mining development project is successful, the related expenditures will be written-off over the estimated life of the commercial ore reserves on a unit of production basis.  Impairment reviews will be carried out regularly by the Directors of the Company.  Where a project is abandoned, or is considered to be of no further commercial value, the related costs will be written off. 

The recoverability of deferred mining costs and mining interests is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition of recoverable reserves. 

j.         Significant Accounting Judgements, Estimates and Assumptions

Critical Accounting Estimates and Judgements

The preparation of financial statements using accounting policies consistent with IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of income and expenses.  The preparation of financial statements also requires the Directors to exercise judgment in the process of applying the accounting policies.  Changes in estimates, assumptions and judgements can have a significant impact on the financial statements.

Critical accounting estimates

Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognized prospectively from the period in which the estimates are revised.  The following are the key estimate and assumption uncertainties that have a significant risk of resulting in a material adjustment within the next financial year:

i) Impairment of non-financial assets

Exploration and evaluation costs have a carrying value at 31 March 2012 of £10,024,000 (2011: £ 9,700,000).  Management tests annually whether exploration projects have future economic value in accordance with the accounting policy stated in note t below).  Each exploration project is subject to an annual review.  When there are indications that an asset may be impaired, the Group is required to estimate the asset's recoverable amount.  Recoverable amount is the greater of value in use and fair value less costs to sell.

Determining the value in use requires the Group to estimate expected future cash flows associated with the assets and a suitable discount rate in order to calculate present value. 

Further information as to the impairment review carried out by the Directors can be found in notes 4 and 11.

If this proves to be incorrect and the projects do not have any value the exploration and evaluation costs will be written off.

ii) Stock-based compensation

The Directors are required to make certain estimates when determining the fair value of share options awards, and the number of awards that are expected to vest.  These estimates affect the amount recognized as stock based compensation in the profit or loss in respect of share based payments. The assumptions made have been described in more detail in note v below.

Were the actual number of options that vest to differ by 10% from management's estimates the overall option charge would increase/decrease by £ 5,000.

iii) Contingent consideration

As referred to in note 22, the contingent consideration arrangement requires Ortac Resources PLC to pay vendor royalties of up to US$3,750,000 (£2,345,612 at 31 March 2012) in either shares or cash-being $15 per ounce on the first 250,000 ounces of gold equivalent (gold plus silver) resource defined as proven and probable reserve in the bankable feasibility study. This will become payable within 60 days of all required permits being obtained to allow commercial production at the Kremnica property.

The fair value of this potential consideration has been determined on the basis that the Directors are confident that the resource threshold referred to above will be exceeded, and in which case the carrying value is the maximum vendor royalties payable, as translated at year end US$/UK Sterling exchange rates. 

The Directors estimate that the carrying value of contingent consideration would be £71,131 lower or £71,131 higher if US$ exchange rates were to change by 5% from their year end rates. 

k.        Finance Revenue

Finance revenue consists of Bank interest which is recognised as accruing on a straight line basis, over the period of the deposit.  

l.         Cash and Cash Equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. 

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, 

m.       Trade and Other Receivables

Trade receivables, which generally have 15-day terms, are recognised and carried at original value.  The Directors are of the view that such items are collectible and no provisions are required. 

n.        Investments

Investments in subsidiary undertakings are stated at cost less any provision for impairment in value, prior to their elimination on consolidation. 

o.        Financial Instruments

The Group's financial instruments are classified as loans and receivables and available for sale.  The classification depends on the purpose for which the financial assets were acquired.  Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and comprise trade and other receivables and cash and cash equivalents (see separate accounting policies for these items).

Available-for-sale financial assets are non-derivatives that are not included in any other category, and comprise current asset investments.  They are initially recognised at fair value plus transaction costs, and are subsequently carried at fair value with changes in fair value being recognised in other comprehensive income.

The Group has overseas subsidiaries in the Slovak Republic whose expenses are denominated in Euros.  Market price risk is inherent in the Group's activities and is accepted as such. 

There is no material difference between the book value and fair value of the Company's financial instruments. 

p.        Available for sale investment reserve.

This reserve is used to record the fair value movements in available for sale investments. 

q.        Share-based payments reserve

This reserve is used to record the value of share-based payments provided to employees and Directors as part of their remuneration and provided to consultants and advisors hired by the Group from time to time as part of the consideration paid. 

r.         Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and the retranslation of monetary items forming part of the net investment in those subsidiaries. 

s.         Property, Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. 

Depreciation is provided on all tangible assets to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

·     Property- 20% or straight line over the period of the lease- which ever is the lesser;

·     Plant and Equipment - between 5% and 25%

All assets are subject to annual impairment reviews. 

t.         Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired.  If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. 

An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use.  This is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, and the asset's value in use cannot be estimated to be close to its fair value.  In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs.  When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is considered impaired and is written down to its recoverable amount. 

In assessing value in use, 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.  Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset, unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). 

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised.  If that is the case, the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.  After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 

u.        Trade and Other Payables

Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. 

v.        Share-based payment transactions

The Group provides benefits to senior personnel, consultants and advisors of the Group in the form of share-based payments, whereby such parties render services in exchange for shares or rights over shares (equity-settled transactions). 

The cost of these equity-settled transactions with such parties is measured by reference to the fair value of the equity instruments at the date at which they are granted.  The fair value is determined by using a Black-Scholes model. 

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Ortac Resources Limited (market conditions) if applicable. 

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party become fully entitled to the award (the vesting period). 

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i)           the extent to which the vesting period has expired and

(ii)          the Group's best estimate of the number of equity instruments that will ultimately vest. 

No adjustment is made for the likelihood of market performance conditions being met, as the effect of these conditions is included in the determination of fair value at grant date.  The charge to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. 

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 9).

w.       Operating leases

Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases.  Operating lease payments are charged to profit on loss on a straight-line basis over the period of the respective leases. 

x.        Earnings per share

Basic earnings per share is calculated as total comprehensive income for the period attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. 

Diluted earnings per share are calculated as total comprehensive income for the period attributable to members of the parent, adjusted for:

·     Costs of servicing equity (other than dividends) and preference share dividends;

·     The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

·     Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 

2.  Revenue and Segmental Analysis

Segment information has been determined based on the information reviewed by the Board, being the Group's chief operating decision-maker, for the purposes of allocating resources and assessing performance.  No revenue is currently being generated.

Head office activities are mainly administrative in nature and are located in the UK/BVI whilst the activities in Slovakia relate to exploration and evaluation work. 

The Group also previously had exploration and evaluation work in Brazil but this has been discontinued and as reported in the Group's Interim Financial Statements for the six month period to 30th September 2011, and  also referred to in Note 4 below, a full impairment provision was raised against this project.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 

By geographical area





31 March 2012

UK/BVI

Slovakia

Brazil

Total


£ 000's

£ 000's

£ 000's

£ 000's

Result





Operating loss

(991)

(416)

(30)

(1,437)

Impairment Provision

-

-

(596)

(596)

Investment revenue

128

-

-

128

Loss on available for sale investments

(82)

-

-

(82)

Loss before & after taxation

(945)

(416)

(626)

(1,987)






Other information





Depreciation

(15)

(15)

-

(30)

Capital additions

73

1,392

-

1,465






Assets





Fixed assets

73

10,272

-

10,345

Non cash current assets

349

107

-

456

Cash and short term investments

7,602

76

-

7,678

Consolidated total assets

8,024

10,455

-

18,479

Liabilities





Long term liabilities

-

-

-

-

Current liabilities

(144)

(40)

-

(184)

Consolidated total liabilities

(144)

(40)

-

(184)

 

By geographical area





31 March 2011

UK/BVI

Slovakia

Brazil

Total


£ 000's

£ 000's

£ 000's

£ 000's

Result





Operating loss

(1,819)

(78)

(150)

(2,047)

Gain on sale of investments

566

-

-

566

Investment revenue

15

-

-

15

Loss before & after taxation

(1,238)

(78)

(150)

(1,466)




-


Other information





Depreciation and impairment

-

(14)

(150)

(164)

Capital additions

-

249

72

321






Assets





Fixed assets

-

9,393

565

9,958

Non cash current assets

732

13

-

745

Cash and short term investments

10,580

6

-

10,586

Consolidated total assets

11,312

9,412

565

21,289

Liabilities





Long term liabilities

-

-

-

-

Current liabilities

(223)

(43)

-

(266)

Consolidated total liabilities

(223)

(43)

-

(266)

 

3.  Expenses by nature


Group

Company

Group

Company


2012

2012

2011

2011

Operating Loss is arrived at after charging/(crediting):

£ 000's

£ 000's

£ 000's

£ 000's

Directors' fees

274

160

181

125

Wages and salaries

202

84

150

-

Establishment expenses

146

19

43

43

Loss/(gain) on foreign exchange

-

-

(15)

1

Travel and subsistence expenses

86

21

5

5

Professional fee's- legal, consulting,exploration

421

33

258

258

AIM related costs including Public Relations

188

188

157

157

Auditor's remuneration - audit

23

20

23

15

Depreciation and amortisation

30

-

14

-

Other expenses

34

7

70

14

Total operating expenses

1,404

532

886

618

Auditor's remuneration for audit services above includes £3,000 (2011: £7,500) relating to the audit of the subsidiary companies. 

4.  Impairment

As previously reported, Ortac retains a 77% interest in the Rio Paranaíba Iron Ore Project in Brazil, through its subsidiary company, Paranaíba Minerals Ltd and the intention was to seek further external funding to develop and derisk the asset. 

As reported in the Group's Unaudited Interim Financial Statements for the six months to 30 September 2011, having exhaustively pursued available avenues to implement the above strategy, the Directors concluded that given market conditions and redefined focus it was not appropriate to invest more funds in this venture, and that it was prudent to impair this asset by £596,000.  Paranaíba Minerals Ltd is now in the process of being dissolved.  See Note 11 below. 

 

5.  Employee Information

Employee information




2012

2011

Staff Costs comprised:

£ 000's

£ 000's

Wages and salaries

342

200

Less: capitalised exploration expenditure

(140)

(50)

Charge to the profit or loss

202

150

The average number of persons employed in the Group, including executive Directors, was:


2012

2011


Number

Number

Operations

11

6

Administration

2

1


13

7

6.  Taxation

The taxation charge on the Group's loss before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to the losses of the consolidated entities as follows:


2012

2011


£000's

£000's

Loss on ordinary activities before tax

(1,987)

(1,466)




Current tax at 11% (2011: 11%)

(219)

(161)




effects of:



permanent difference

84

2

fixed asset timing differences

(10)

(4)

unutilised losses

145

163

Total tax

0

(0)

No taxation has been provided due to losses in the year. 

The weighted average applicable tax rate of 11% used is a combination of the 26% standard rate of corporation tax in the UK, 19% Slovak corporation tax and 0% BVI corporation tax. 

There are tax losses in the group of £3.2m (2011: £2.6m) which are carried forward for relief in future periods.  The deferred tax asset of £668k (2011: £529k) has not been provided in respect of these losses as there is presently insufficient evidence of the timing of suitable future profits against which they can be recovered.

Factors that may affect future tax charges:

A gradual reduction in the UK rate from 28% to 24% was announced in June 2010.  The Finance (No. 2) Act 2010 enacted on 27 July 2010 included legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. A further 1% reduction was announced in the 2011 Budget with the effect that the corporation tax rate will decrease to 26% from 1 April 2011 and to 25% from 1 April 2012.  This was included in the Finance Act 2011 which received Royal Assent on 19 July 2011. 

Subsequently in 2012, the UK government announced a further reduction in the corporation tax rate to 24% from 1 April 2012 and further annual reductions of 1% reducing the rate to 22% as from 1 April 2014.  The decrease to 24% was substantively enacted on 26 March 2012 under Provisional Collection of Taxes Act 1968) and has therefore been reflected in the unrecognised deferred tax asset of £1.3m.  The directors estimate the further reduction would reduce the unrecognised deferred tax asset by £27K once the 22% rate is enacted.

No changes are foreseen to the future tax rates in the Slovak Republic or BVI.

7.  Dividends

No dividends were paid or are proposed. 

8.  Directors' Remuneration




2012

2011




£ 000's

£ 000's

Directors' remuneration



300

979

 

2012

Directors Fees

Consultancy Fees

Shares/
Options

Total


£ 000's

£ 000's

£ 000's

£ 000's

Executive Directors





Anthony Balme

42

-

7

49

Charles Wood

85

-

7

92

Vassilios Carellas

121

-

8

129






Non-Executive Directors





Dorian Nicol

11

-

-

11

David Paxton

15

-

4

19


274

-

26

300

 

2011

Directors Fees

Consultancy Fees

Shares/
Options

Total


£ 000's

£ 000's

£ 000's

£ 000's

Executive Directors





David Lenigas

3

11

-

14

Anthony Balme

23

-

149

172

Charles Wood

6

48

226

280

Vassilios Carellas

53

-

223

276






Non-Executive Directors





Alastair Clayton

11

12

40

63

Dorian Nicol

8

-

80

88

David Paxton

6

-

80

86


110

71

798

979

No pension benefits are provided for any Director. 

9.  Loss per Share

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of share in issue during the year. 


2012

2011


£ 000's

£ 000's

Net loss after taxation

(1,987)

(1,466)




Weighted average number of ordinary shares used in calculating basic loss per share (millions)

2,315.7

1,413.5




Basic loss per share (expressed in pence)

(0.09)

(0.10)

As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive. As such, diluted and basic loss per share are the same.   

10.  Finance Revenue


2012

2011


£ 000's

£ 000's

Bank interest receivable

128

15

 

11.  Intangible Assets



Exploration



Expenditure

Group


£ 000's

At 1 April 2010


643

Additions from business combinations


8,467

Development expenditure


317

Currency  translation adjustments


424

Amortisation/Impairment


(151)

Net book value as at 31 March 2011


9,700




At 1 April 2011


9,700

Additions from business combinations


-

Development expenditure


1,359

Currency  translation adjustments


(469)

Amortisation



Impairment


(566)

Net book value as at 31 March 2012


10,024

 


2012

2011

The net book value is analysed as follows;

£ 000's

£ 000's




Deferred exploration expenditure - Brazil

-

565

Deferred exploration expenditure - Slovakia

9,754

8,865

Goodwill - Slovakia

270

270


10,024

9,700

 

As referred to in Note 4 above, an impairment provision of £596,000 was made against the Rio Paranaíba Iron Ore Project, Brazil being the carrying value of the asset as at 31 March 2011, plus additional expenses incurred in connection with this asset during the six months to 30 September 2011. 

At 31 March 2012, the Directors have carried out a further impairment review and concluded that no further impairment is currently required. 

Exploration projects carried out by the subsidiaries are at an early stage of development and can be split into two categories:

1.    Based upon existing resource estimates:- an SRK Consulting scoping study confirmed the economic feasibility of the Šturec project; which based upon a metals price of US$1,200 per ounce and a discount rate of 8% gave an NPV of nearly US$ 140 million.  Gold prices at present are approximately US$ 1,600 per ounce and the view of the Directors is that they are unlikely to materially change in the near future (indeed, there is a body of market commentators who see the present price as being low). At current metals price, the project has an NPV in excess of US$ 300 million (post tax).  Key assumptions used in calculation, are pit size, gold prices and discount rate, with sensitivity analysis indicating a viable project to a discount rate of 17%, or a gold price of US$ 900 per ounce. 

Since the above was announced a recently updated Snowdens resource study was released which reports a nearly 24% increase in the Total Mineral Resource, classified in accordance with the JORC Code (2004), from 1.1Moz Au Eq to 1.36Moz Au Eq.

As regards the status of the mining license -which is held by Kremnica Gold Mining- it expires on 30 June 2014.  This date can however, be further extended by beginning a mining operation before that date.  An application for trial surface mining that would satisfy these requirements and allows for additional metallurgical test work, has already been lodged with the Slovak Authorities.  The Directors are also advised that a trial underground operation would equally satisfy the terms of the license extension. 

2.    For other projects, no JORC or non-JORC compliant resource estimates are available to enable value in use calculations to be prepared and given that these projects are at an early stage, the Directors have decided to expense the exploration costs incurred during the year in connection with these projects.

Following their assessment the Directors concluded that no further impairment of exploration and evaluation assets was necessary during the year ended 31 March 2012.

12.  Tangible Assets



Group


Company

Property, Plant and Equipment


£ 000's


£ 000's

Cost





Opening Cost at 1 April 2010


-


-

Additions from business combinations


262


-

Additions


4


-

Currency translation adjustment


5


-

Closing cost at 31 March 2011


271


-






At 1 April 2011


271


-

Additions from business combinations


-


-

Additions


106


14

Currency translation adjustment


(25)


-

Closing cost at 31 March 2012


352


14






Depreciation





Opening Balance at 1 April 2010


-


-

Charge for the period


(13)


-

Currency translation adjustment


-


-

Closing balance at 31 March 2011


(13)


-






At 1 April 2011


(13)


-

Charge for the period


(30)


-

Currency translation adjustment


12


-

Closing balance at 31 March 2012


(31)


-






Net book value





At 1 April 2010


-


-

At 31 March 2011


258


-

At 31 March 2012


321


14

Depreciation charges for the year ended 31 March 2012 of £30,000 (2011: £13,000) have been charged to "administrative expenses".

13.  Investment in Subsidiaries

Shares in group undertakings


£ 000's

Cost



As at 1 April 2010


2

Impairment


(1)

Additions


7,485

As at 31 March 2011


7,486




As at 1 April 2011


7,486

Impairment


(1)

Additions


-

As at 31 March 2012


7,485

During the year an impairment was made in respect of the Group's holding in Paranaíba Minerals Ltd, which company is now in the process of being dissolved. 

At 31 March 2012, the Company held 100% of the share capital of the following wholly owned subsidiary companies:

Company

Country of Registration

Proportion held

Nature of business

Paranaíba Minerals Ltd**

BVI

100%

Ortac Resources plc

England and Wales

100%

Bellmin s.r.o.*

Slovak Republic

100%

G.B.E. s.r.o.*

Slovak Republic

100%

St. Stephans Gold s.r.o.*

Slovak Republic

100%

Kremnica Gold s.r.o.*

Slovak Republic

100%

Kremnica Gold Mining s.r.o.*

Slovak Republic

100%

Mineral Exploration

* Wholly owned subsidiary of Ortac Resources plc

** In the process of being dissolved.

14.  Available for Sale Investments


2012

2011

Group and Company

£ 000's

£ 000's

At beginning of the period

676

1,153

Sales during the period

-

(395)

Loss in market value of investments

(366)

(82)

As at end of the period

310

676

Available for sale investments comprise the United Kingdom listed equity securities in Vatukoula Gold Mines plc. 

15.  Inventories


Group

Company

Group

Company


2012

2012

2011

2011

Inventories

£ 000's

£ 000's

£ 000's

£ 000's

Stocks and consumables

7

-

8

-

Total

7

-

8

-

16.  Trade and Other Receivables


2012

2012

2011

2011

Current trade and other receivables

£ 000's

£ 000's

£ 000's

£ 000's

Other debtors

85

-

18

-

Prepayments

54

4

43

20

Total

139

4

61

20











Company


2012


2011

Non current trade and other receivables


£ 000's


£ 000's

Loans due from subsidiaries


4,112


2,153

Current trade and other receivables are all due within one year. The fair value of receivables is the same as their carrying values as stated above.

Loans due from subsidiaries are interest free and have no fixed repayment date. 

The carrying amounts of the Group and Company's current and non current trade and other receivables are denominated in the following currencies:


Group

Company

Group

Company


2012

2012

2011

2011

Current trade and other receivables

£ 000's

£ 000's

£ 000's

£ 000's

UK Pounds

103

4

55

20

Euros

36

-

6

-

Total

139

4

61

20







Group

Company

Group

Company


2012

2012

2011

2011

Non current trade and other receivables

£ 000's

£ 000's

£ 000's

£ 000's

UK Pounds

-

-

-

-

Euros

-

4,112

-

2,153

Total

-

4,112

-

2,153

 

Other receivables do not contain any impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

17.  Trade and Other Payables


Group

Company

Group

Company


2012

2012

2011

2011

Current trade and other payables

£ 000's

£ 000's

£ 000's

£ 000's

Trade payables

26

3

183

42

Other payables

47

9

33

-

Accruals

111

23

50

30

Total

184

35

266

72

The carrying values are considered to be a reasonable approximation of the fair value and are considered by the Directors as payable within one year.

18.  Share Capital

Authorised


£ 000's

Unlimited Ordinary  shares of no par value


-




Called up, allotted, issued and fully paid

Number of shares

Nominal value

As at 1 April 2011

2,315,679,020

-




As at 31 March 2012

2,315,679,020

-

Total share options in issue

During the year ended 31 March 2012, the Company granted 60,000,000 options over ordinary shares (2011: 130,000,000).

As at 31 March 2011, the unexercised options in issue were:

Exercise Price

Vesting Date

Expiry Date

Options in Issue

Options in Issue




31 March 2012

31 March 2011

5p

04-May-07

04-May-12

10,000,000

10,000,000

1p (2010: 1.7p)

22-Apr-09

22-Apr-19

6,800,000

6,800,000

1p (2010: 2.35p)

08-Jun-09

08-Jun-19

5,600,000

5,600,000

1p (2010: 1.7p)

22-Apr-10

22-Apr-19

16,800,000

16,800,000

1p (2010: 2.35p)

08-Jun-10

08-Jun-19

5,600,000

5,600,000

1p

15-Sep-10

31-Dec-20

95,000,000

95,000,000

1p

08-Oct-10

31-Dec-20

5,000,000

5,000,000

1p

19-Oct-10

31-Dec-20

10,000,000

10,000,000

1p

13-Dec-10

31-Dec-20

5,000,000

10,000,000

1.1p

30-Jun-12

30-Jun-17

30,000,000

-

1.4p

31-Dec-12

30-Jun-17

15,000,000

-

1.8p

31-Dec-13

30-Jun-17

15,000,000

-




219,800,000

164,800,000

No options were exercised during the year (2011: 20,000,000 including 10,000,000 issued during that year).  5,000,000 options were cancelled during the year (2011: Nil).

60,000,000 share options were issued on 7th March 2012 in three tranches of 30,000,000, 15,000,000 and 15,000,000 with exercise prices of 1.1p 1.4p and 1.8p respectively.

No options were repriced during the year (2011: 33,600,000 share options issued on 22 April 2009 with an exercise price of 1.7p and 11,200,000 share options issued on 8 June 2009 with an exercise price of 2.35p were repriced on the 28 July 2010with an exercise price of 1p.)

As at 31 March 2012 219,800,000 options were exercisable (2011 164,800,000).

Total share warrants in issue

No share warrants over ordinary shares were granted during the year ended 31 March 2012, (2011: 16,500,000).

As at 31 March 2012, the unexercised warrants in issue were:

Exercise Price

Vesting Date

Expiry Date

Warrants in Issue

Warrants in Issue




31 March 2012

31 March 2011

1p

15-Sep-10

31-Dec-15

16,500,000

16,500,000

Share Based Payments

Under IFRS 2 "Share-based Payments", the Company determines the fair value of options issued to Directors, Employees and other parties as remuneration and recognises the amount as an expense in the Income Statement with a corresponding increase in equity.  

Name

Date Granted

Date Vested

Expiry Date

Exercise Price (pence)

Number
31- Mar-11

Granted in Year

Exercised
in Year

Cancelled in Year

Number
31-Mar-12

David Lenigas

04-May-07

04-May-07

04-May-12

5.0

2,000,000




2,000,000

Former directors

04-May-07

04-May-07

04-May-12

5.0

8,000,000




8,000,000

Alastair Clayton

22-Apr-09

22-Apr-09

22-Apr-19

1.0*

5,600,000




5,600,000

Alastair Clayton

22-Apr-09

22-Apr-10

22-Apr-19

1.0*

5,600,000




5,600,000

Charles Wood

22-Apr-09

22-Apr-09

22-Apr-19

1.0*

5,600,000




5,600,000

Charles Wood

22-Apr-09

22-Apr-10

22-Apr-19

1.0*

5,600,000




5,600,000

Consultants

22-Apr-09

22-Apr-10

22-Apr-19

1.0*

1,200,000




1,200,000

Consultants

08-Jun-09

08-Jun-09

08-Jun-19

1.0*

5,600,000




5,600,000

Consultants

08-Jun-09

08-Jun-10

08-Jun-19

1.0*

5,600,000




5,600,000

Charles Wood

28-Jul-10

15-Sep-10

31-Dec-20

1.0

30,000,000




30,000,000

Vassilios Carellas

28-Jul-10

15-Sep-10

31-Dec-20

1.0

30,000,000




30,000,000

Anthony Balme

28-Jul-10

15-Sep-10

31-Dec-20

1.0

20,000,000




20,000,000

Alastair Clayton

28-Jul-10

15-Sep-10

31-Dec-20

1.0

5,000,000




5,000,000

Consultants

28-Jul-10

15-Sep-10

31-Dec-20

1.0

10,000,000




10,000,000

Consultants

08-Oct-10

08-Oct-10

31-Dec-20

1.0

5,000,000




5,000,000

Employees

19-Oct-10

19-Oct-10

31-Dec-20

1.0

10,000,000




10,000,000

Dorian Nicol

13-Dec-10

13-Dec-10

31-Dec-20

1.0

5,000,000



(5,000,000)

-

David Paxton

13-Dec-10

13-Dec-10

31-Dec-20

1.0

5,000,000




5,000,000

Employees

07-Mar-12

30-Jun-12

30-Jun-17

1.1


14,500,000



14,500,000

Charles Wood

07-Mar-12

30-Jun-12

30-Jun-17

1.1


4,000,000



4,000,000

Anthony Balme

07-Mar-12

30-Jun-12

30-Jun-17

1.1


4,000,000



4,000,000

Vassilios Carellas

07-Mar-12

30-Jun-12

30-Jun-17

1.1


5,000,000



5,000,000

David Paxton

07-Mar-12

30-Jun-12

30-Jun-17

1.1


2,500,000



2,500,000

Employees

07-Mar-12

31-Dec-12

30-Jun-17

1.4


7,250,000



7,250,000

Charles Wood

07-Mar-12

31-Dec-12

30-Jun-17

1.4


2,000,000



2,000,000

Anthony Balme

07-Mar-12

31-Dec-12

30-Jun-17

1.4


2,000,000



2,000,000

Vassilios Carellas

07-Mar-12

31-Dec-12

30-Jun-17

1.4


2,500,000



2,500,000

David Paxton

07-Mar-12

31-Dec-12

30-Jun-17

1.4


1,250,000



1,250,000

Employees

07-Mar-12

31-Dec-13

30-Jun-17

1.8


7,250,000



7,250,000

Charles Wood

07-Mar-12

31-Dec-13

30-Jun-17

1.8


2,000,000



2,000,000

Anthony Balme

07-Mar-12

31-Dec-13

30-Jun-17

1.8


2,000,000



2,000,000

Vassilios Carellas

07-Mar-12

31-Dec-13

30-Jun-17

1.8


2,500,000



2,500,000

David Paxton

07-Mar-12

31-Dec-13

30-Jun-17

1.8


1,250,000



1,250,000










-

Totals





164,800,000

60,000,000

-

(5,000,000)

219,800,000

The fair value of the options at grant date has been calculated as follows:

·     Options granted 7 March 2012, Three tranches of 1.1, 1.4 and 1.8 pence per share

The fair value of the options granted during the year ended 31 March 2012 amounted to £49,434 (2011: £1,149,460) and the total charge to the Income Statement for the year was £49,434 (2011: £1,161,254).

A transfer of £nil (2011: 222,920) was made between the share-based payments reserve and retained earnings in associated with the exercise of options during the year. 

The assessed fair value at grant date is determined using the Black-Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the price volatility of the underlying share , the expected dividend yield and the risk-free interest rate for the term of the option.

The following table lists the inputs into the model for the valuation of share options issued during the year:

Issue Date

7 March 2012 issue- 3 tranches

Vest Date

31 Dec 2013

31 Dec 2012

30 June 2012

Dividend Yield (%)

-

-

-

Volatility (%)

102.00%

102.00%

102.00%

Risk-free interest rate (%)

1.10%

1.30%

1.50%

Share price at grant date (pence)

0.84

0.84

0.84

Volatility was calculated on the basis of an historic analysis of daily price movement in the Company's share price over the last 5 years (since 11 May 2007). 

The total number of options in issue during the year has given rise to a charge to profit or loss for the year ended 31 March 2012 of Nil (2011: Nil) based on the fair values at the time the options were granted.

19.  Analysis of Changes in Net Funds


2012

2011

Group

£ 000's

£ 000's

Balance at beginning of period

10,586

13

Change during the period

(2,908)

10,573

Balance at the end of the period

7,678

10,586

20.  Financial Instruments and Capital Risk Management

The Group holds cash as a liquid resource to fund the obligations of the Group.  The Group's cash balances are held in Sterling and Euros.  The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure.  This is achieved by regular monitoring of interest rates and monthly review of expenditure forecasts. 

The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however, it does review its currency exposures on an ad hoc basis.  Currency exposures relating to monetary assets held by foreign operations are included within the foreign exchange reserve in the Group Balance Sheet. 

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. 

To date the Group has relied upon equity funding to finance operations.  The Directors are confident that adequate cash resources exist to finance operations to commercial exploitation but controls over expenditure are carefully managed. The currency and interest rate profile of the cash and short term deposits is as follows: 


2012

2011

Cash and short term deposits

£ 000's

£ 000's




Sterling

7,587

10,580

Euros

91

6

At end of period

7,678

10,586

On the assumption that all other variables were held constant, the potential impact of a 5% increase/decrease in the UK Sterling/ Euro Foreign exchange rate on the Group's loss for the year and on equity as at 31 March 2012 is £ 4,550 (2011: £ 361).  

Financial Risk Management

Financial Risk Factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

a) Market Risk

                i) Foreign Exchange Risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the UK pound sterling and Euro.  Foreign exchange risk arises from recognised monetary assets and liabilities.  The exposure to this risk is not considered material to the Group's operations and thus the Directors consider that, for the time being, no hedging or other arrangements are necessary to mitigate this risk.

ii) Price Risk

The Group is exposed to equity securities price risk because of investments held and classified in the Balance Sheet as available-for-sale.  To manage its price risk arising from investments in equity securities, the Group could diversify its portfolio. However, given the size of the Group's operations, the costs of managing exposure to securities price risk exceed any potential benefits.  The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.  The Group has exposure to commodity price risk as a result of changes in the price of gold, which impact on the valuation of the Groups mineral assets.

The Group's investment in equity of Vatukoula Gold Mines plc is publicly traded and is listed on the London Stock Exchange AIM Market.  A disposal of the shares held by the by the Group, could have an impact on the realisable value of the remaining shares.

The table below summarises the potential impact of increases/decreases in the AIM quoted market price on the Group's loss for the year and on equity.  The analysis is based on the assumption that the share prices have increased/decreased by 5% with all other variables held constant and all the Group's equity instruments moved according to the historical correlation with the market:


Loss for the year

Other components of equity

Potential impact on:

2012

2011

2012

2011


£ 000's

£ 000's

£ 000's

£ 000's

Available-for-sale financial assets

(16)

-

-

(34)

Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as available for sale.

b) Credit Risk

Credit risk arises from cash and cash equivalents.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. The Group will only keep its holdings of cash and cash equivalents with institutions which have a minimum credit rating of 'A'.

The Group considers that it is not exposed to major concentrations of credit risk.

c) Liquidity Risk

To date the Group has relied upon equity funding to finance operations. The Directors are confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

The Group ensures that its liquidity is maintained by entering into financial instruments to support operational and other funding requirements.  The liquidity and funding management process includes projecting cash flows and considering the level of liquid assets in relation thereto, monitoring Balance Sheet liquidity and maintaining funding sources and back-up facilities.

Fair Value Estimation

Fair value measurements are disclosed according to the following fair value measurement hierarchy:

•      quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

•      inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);

•      inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group's assets and liabilities that are measured at fair value at 31 March 2012.

Items at fair value as at 31 March 2012

Level 1

Level 2

Level 3

Total

Assets

£ 000's

£ 000's

£ 000's

£ 000's

Available-for-sale financial assets

-

-

-

-

-Equity securities

310

-

-

310

Total Assets

310

-

-

310

The following table presents the Group's assets and liabilities that are measured at fair value at 31 March 2011.

Items at fair value as at 31 March 2011

Level 1

Level 2

Level 3

Total

Assets

£ 000's

£ 000's

£ 000's

£ 000's

Available-for-sale financial assets

-

-

-

-

-Equity securities

676

-

-

676

Total Assets

676

-

-

676

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.  A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.  The quoted market price used for financial assets held by the Group is the current bid price.  These instruments are included in Level 1. 

Instruments included in Level 1 comprise AIM quoted equity investments classified as available-for-sale. 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.  These valuation techniques maximise the use of observable market data where it is available, and rely as little possible on entity-specific estimates.  If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Specific valuation techniques used to value financial instruments include:

·     quoted market prices or dealer quotes for similar instruments;

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to continue its exploration and evaluation activities. The Group has no debt at 31 March 2012 and defines capital based on the total equity of the Group being £18,295,000. The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time.

21.  Commitments

Operating leases


Group

Company

Group

Company


2012

2012

2011

2011

Minimum lease payments under non-cancellable operating leases

£ 000's

 £ 000's

£ 000's

£ 000's

Not later than one year

36

-

-

-

Later than one year but not later than five years

51

-

-

-

Total lease commitment

87

-

-

-

As at 31 March 2012, the Group has entered into only one material commitment, as follows:

·     On 16 August 2011, Ortac Resources plc entered into a 5-year lease agreement to rent space located at 96-97 Jermyn Street, at a rent payable of 38,500 per year, payable in 4 equal instalments on a quarterly basis.  The lease is terminable after 3 years, subject to six months notice. 

Except for the disclosure above, no provision has been made in the Group accounts for such commitments as they are expected to be met in the course of normal operations as and when they arise. 

Exploration commitments

Ongoing exploration expenditure is required to maintain title to the Group's mineral exploration permits.  No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group. 

22.  Business Combinations and Contingent Liability

As previously reported, on 15 September 2010 the Company completed the acquisition of Ortac Resources plc.  The companies acquired as part of the Ortac Resources plc group were as follows:

Company

Country of Registration

Proportion held

Nature of business

Ortac Resources plc

England and Wales

100%

Holding Company

Anglo- Slovak Minerals Limited

England and Wales

100%

Mineral Exploration

Bellmin s.r.o.

Slovak Republic

100%

Mineral Exploration

G.B.E. s.r.o.

Slovak Republic

100%

Mineral Exploration

St. Stephans Gold s.r.o.

Slovak Republic

100%

Mineral Exploration

Kremnica Gold s.r.o.

Slovak Republic

100%

Mineral Exploration

Kremnica Gold Mining s.r.o.

Slovak Republic

100%

Mineral Exploration

Consideration for the acquisition of the Ortac Resources plc group was satisfied by the issue of 748,498,981 shares valued at 1 pence per share. 


Book Value

Fair Value Adjustment

Fair Value on Acquisition


£ 000's

£ 000's

£ 000's

Non-current assets




Property, plant and equipment

255

-

255

Goodwill

522

(522)

-

Exploration and evaluation

8,197

270

8,467





Current assets




Inventories

6

-

6

Trade and other receivables

267

-

267

Cash and cash equivalents

52

-

52





Current liabilities




Trade and other payables

(1,562)

-

(1,562)


7,737

(252)

7,485





Consideration



7,485





Goodwill arising



-

In addition, on 15 September 2010, to settle Ortac Resources plc's deferred purchase consideration for its purchase of Kremnica Gold s.r.o. and Kremnica Gold Mining s.r.o. as completed by Ortac Resources plc on 31 March 2010, Ortac Resources Ltd issued a further 87,688,530 shares valued at 1 pence each, and made a cash payment of US$550,000 to settle the newly acquired subsidiaries consideration commitments. 

Contingent liability

As part of its acquisition of Kremnica Gold s.r.o. and Kremnica Gold Mining s.r.o. Ortac Resources plc agreed to pay vendor royalties of up to US$3,750,000 in either shares or cash- being $15 per ounce on the first 250,000 ounces of gold equivalent (gold plus silver) resource defined as proven and probable reserve in the bankable feasible study.  This will become payable within 60 days of all required permits being obtained to allow commercial production at the Kremnica property. 

One the basis of the recently updated Snowdens resource study, the Directors are confident that proven and probable reserves in the bankable feasible study will significantly exceed 250,000 ounces of gold equivalent (gold plus silver) resource.  Notwithstanding this, until such time as it is clear that all the required permits to achieve commercial production will be secured, no provision for such amounts can be determined.

The maximum contingent liability as at 31 March 2012 is £2,345,612 (2011- £2,338,780) in each case being the pounds sterling equivalent of US$3,750,000 at rates of exchange prevailing at the respective year ends.  

Contingent consideration has a carrying value of £nil as at 31 March 2012 (2011: £nil). 

23.  Related Party Transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.   

The following transactions took place with subsidiaries in the year:

Amounts totalling £2,523,000 (2011: £1,587,000 ) were lent by the Company to Ortac Resources plc, which in turn, and acting as an intermediary holding company for the Group's subsidiaries in Slovakia, provided funding to those companies. 

Balances outstanding to the Company from Ortac Resources plc as at 31 March 2012 were £ 4,111,503 (2011 £ 1,587,687). 

Remuneration of Key Management Personnel

The remuneration of the Directors, and other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures:


2012

2011


£ 000's

£ 000's

Short-term employee benefits

274

181

Share-based payments

26

798


300

979

24.  Ultimate controlling party

The Directors believe there to be no ultimate controlling party.

25.  Post Balance Sheet Events

There are no post balance sheet events to disclose. 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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