Preliminary Profits
Golden Prospect Precious Metals Ltd
25 September 2007
GOLDEN PROSPECT PRECIOUS METALS LIMITED
Preliminary Profits Announcement
16 October 2006 to 30 June 2007
This is not the Company's statutory financial statements. All the figures are
based on the interim report and financial statements for the period from 16
October 2006 to 30 June 2007.
Investment Manager's Report
Golden Prospect Precious Metals Limited's (the 'Company') began investing in
precious metals equities following its admission onto AIM on 28 November 2006.
In the period between the Company's formation on 16 October 2006 and its AIM
admission, it was operationally dormant. Ambrian Capital plc, the parent
organisation of the Investment Manager, supported the Company at its launch by
transferring in £9.4 million of its precious metals equity portfolio in return
for an equivalent holding in the Company. At the same time, the Company raised a
further £3.5 million through a placing with financial institutions. For each
ordinary share, investors also received one warrant in the Company. The placing
price of each ordinary share and warrant was 100 pence.
From an investment perspective, the time since the Company's admission onto AIM
divides into two distinct periods. The first, until 30 June 2007 and the date of
these accounts, saw good investment progress and a healthy increase in the
Company's Net Asset Value ('NAV'). The second, the period since, was marked by a
sharp market correction following the US sub-prime mortgage crisis.
Period to 30 June 2007
Following set-up and issue costs of £490,824, the NAV of the Company immediately
after its AIM admission was 96.20 pence per share. It was therefore a good start
when, by 31 December 2006, the NAV had increased to 100.30 pence per share and
was above the issue price. This positive trend continued and by 30 June 2007,
the NAV had increased to 114.84 pence per share, representing an increase of
14.8% on the issue price of 100 pence and a performance gain of 19.4% on the
opening NAV of 96.20 pence per share.
During the period under review, the Company made a profit before tax of
£2,395,655 on income of £3,086,965.
Throughout the time between the Company's launch on AIM and 30 June 2007, equity
markets around the world enjoyed significant gains. The Dow Jones in the US and
the FTSE 100 in the UK each increased by around 10%. Elsewhere the gains were
even larger. The Nikkei in Japan put-on 14% while Germany's Dax increased by
over 27%. In the sectors in which the Company invests, prices of the underlying
precious metals improved for the most part. Gold, platinum and palladium all
increased: 1.4%, 9.1% and 12.2% respectively. Only the price of silver declined,
losing 7.5%, which was not too surprising or a cause for concern given that 2006
was the fifth year in a row that the average price had increased, having nearly
trebled during that time. The most dramatic change in the period related to the
price of uranium which more than doubled from $64 per ounce to $136 per ounce.
As at 30 June 2007, the portfolio comprised equity holdings in 37 companies,
option/warrant positions in five of those companies (of which three were quoted)
and one convertible loan note holding. The un-audited allocation by sector of
these holdings as at the end of the period is provided in the table below. While
the Company does not have an allocation target, it was always envisaged that
gold based equities would represent the most significant segment of the
portfolio.
Investment Manager's Report (continued)
Un-audited sector allocation of portfolio by holding value as at 30 June 2007
Sector Allocation
Gold 50%
Silver 14%
Platinum and Palladium 11%
Diamonds 4%
Uranium 17%
Cash 4%
Gearing
The Company stated at the time of its launch in November 2006 that it intended
to arrange a banking facility that would enable it to deploy financial gearing
of up to 20 percent of its Net Asset Value. On 20 March 2007, the Company
entered into a £3.0 million loan agreement with Allied Irish Banks plc and at
the same time drew down £2.4 million of this facility. This position remains
unchanged.
Period since 30 June 2007
In late July 2007, world markets began a sharp retreat fearing a global
tightening of credit following the US sub-prime mortgage crisis. Major indices
all fell, typically by around 10%, to levels previously seen six to nine months
earlier - though fortunately, they have been staging a recovery since the middle
of August 2007. The resulting blind sell-off in August particularly hit small
and medium capitalised companies as well as mining and commodity related
equities. The net result was that the Company's NAV declined 18.5% during this
period to 93.61 pence per share as at 31 August 2007, the last reported figure.
It is still too early to determine how long the credit crisis will last for or
how far reaching it will prove to be. Since the end of the August 2007, we have
seen the first high profile fallout in the UK in the form of Northern Rock,
which led to the British government being forced to shore-up confidence and
guarantee all savings at the bank. Most recently, the US Federal Reserve has
acted with a 0.5% cut in interest rates. While a reduction was expected, the
first in four years, it is larger than the 0.25% cut predicted.
Throughout this period the price of gold has behaved largely as expected. At the
time of writing it has passed its May 2006 high of $732 per ounce and is now
into territory not seen for over 27 years - the all time high of $850 per ounce
occurred in January 1980. Prices of other precious metals have also shown
strength since the middle of August 2007. This has now begun to feed through
into the share prices of the equities held by the Company.
Outlook
The Investment Manager remains confident that the underlying premise of the
Company's investment strategy remains sound. Namely, that ongoing global
economic development, in particular in the developing countries of India and
China, will feed through into an increase in demand for precious metals and
higher equity prices for mining companies operating in these sectors. The
Investment Manager is also confident that the Company holds a quality portfolio
of precious metals equities which will fulfil its investment objectives. Over
the coming months the Investment Manager intends to increase the Company's
weighting in gold related equities.
Investment Manager's Report (continued)
It is perhaps timely to remind ourselves of the observations of Jim Rogers,
commodities authority and one time investment partner of George Soros, who has
pointed out on a number of occasions that the shortest commodities 'bull' market
lasted 15 years and the longest 23 years. This most recent bull market only
began in 2001.
Website
The Company recently launched its website. The address is www.gppm.co.uk. It is
hoped that investors and those interested in the Company will find the
information on the website about the Company and the sectors in which it
operates to be useful. All news items, announcements and documents will be
available on the website as soon as practically possible after their public
release. There is also an online contact facility on the website which can be
used to provide feedback and comments for those wishing to do so in this way.
Finally, the Directors and Investment Manager would like to thank investors for
their support during the Company's launch and through the recent financial
market turmoil. We believe that the Company's portfolio is well positioned and
that events will bear this out in the near future.
Ambrian Asset Management Limited
September 2007
The Preliminary Profits Announcement was approved by the Board of Directors on
21 September 2007.
Contact at Ambrian Asset Management Limited: Robert Rasbach
Tel: +44 (0)20 7776 6450
Fax: +44 (0)20 7776 6420
robert.rasbach@ambrian.com
Income Statement
For the period from 16 October 2006 to 30 June 2007
Revenue Capital Total
£ £ £
Income
Investment income 13,362 - 13,362
Bank interest income 39,200 - 39,200
--------- --------- ---------
52,562 - 52,562
Net gains on financial assets at fair value
through profit or loss - 3,030,700 3,030,700
Gains on foreign exchange - 3,703 3,703
--------- --------- ---------
Total income 52,562 3,034,403 3,086,965
--------- --------- ---------
Expenses
Performance fees (341,904) - (341,904)
Investment Management fees (128,858) - (128,858)
Administration fees (36,457) - (36,457)
Custodian fees (4,029) - (4,029)
Directors' fees (35,220) - (35,220)
Audit fees (5,000) - (5,000)
Transaction costs (25,164) - (25,164)
Brokerage fees (26,568) - (26,568)
Other expenses (44,589) - (44,589)
--------- --------- ---------
Total operating expenses (647,789) - (647,789)
--------- --------- ---------
(Loss)/profit before finance costs and tax (595,227) 3,034,403 2,439,176
Loan interest (42,789) - (42,789)
Loan commitment fee (732) - (732)
--------- --------- ---------
Total (loss)/profit for the period before tax (638,748) 3,034,403 2,395,655
Witholding tax (2,870) - (2,870)
--------- --------- ---------
(Loss)/profit for the period (£641,618) £3,034,403 £2,392,785
========= ========= =========
Basic (loss)/earnings per Ordinary Share (pence) (4.96p) 23.47p 18.51p
========= ========= =========
Diluted earnings per Ordinary Share (pence) 9.26p
=========
The 'Total' column of this statement represents the Company's Income Statement,
prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital'
columns are both prepared for information purposes only.
All the items in the above statement derive from continuing operations.
Statement of Changes in Equity
For the period from 16 October 2006 to 30 June 2007
Realised Unrealised Other
Share Share Capital Capital Revenue Distributable
Capital Premium Reserve Reserve Reserve Reserve Total
£ £ £ £ £ £ £
Balance as at
16 October 2006 - - - - - - -
Gain on Investments - - 810,137 2,220,563 - - 3,030,700
Gain on Foreign Exchange - - 3,275 428 - - 3,703
Revenue loss for the period - - - - (641,618) - (641,618)
Issue of Ordinary Shares 12,927 12,913,779 - - - - 12,926,706
Issue costs relating
to the issue of
Ordinary Shares - (490,824) - - - - (490,824)
Transfer to Other
Distributable Reserve -(12,422,955) - - - 12,422,955 -
------- --------- -------- -------- -------- --------- ---------
Balance as at
30 June 2007 £12,927 £- £813,412 £2,220,991 (£641,618) £12,422,955 £14,828,667
======= ========== ======== ======== ======== ======= =========
Statement of Assets and Liabilities
As at 30 June 2007
£ £
Non-current Assets
Financial assets at fair value through profit or loss 17,183,111
Current Assets
Cash and cash equivalents 465,030
Receivables 10,573
---------
475,603
---------
Current Liabilities
Payables and accruals (430,047)
Loan payable (2,400,000)
---------
(2,830,047)
---------
Net Current Liabilities (2,354,444)
---------
Total Assets less Current Liabilities £14,828,667
=========
Equity
Ordinary Share Capital 12,927
Share Premium -
Distributable Reserve 12,422,955
Other Capital Reserves 2,392,785
----------
Total Equity £14,828,667
==========
Number of Ordinary Shares in issue 12,926,706
==========
Net Assets Value per Ordinary
Share (pence) 114.71 p
==========
Cash Flow Statement
For the period from 16 October 2006 to 30 June 2007
£
Cash flows from operating activities
Profit for the period 2,392,785
Adjustment for:
Gains on financial assets at fair
value through profit or loss (3,030,700)
Transaction costs 25,164
Exchange gain (3,703)
Witholding tax 2,870
---------
Operating cash flows before movements
in working capital (613,584)
Increase in other receivables (10,573)
Increase in payables 430,047
---------
Net cash used in operating activities (194,110)
---------
Cash flows from investing activities
Purchase of financial assets at fair value (16,271,288)
Transaction costs (25,164)
Sale of financial assets at fair value 2,118,877
Witholding tax (2,870)
----------
Net cash used in investing activities (14,180,445)
----------
Cash flows from financing activities
Proceeds from issue of Ordinary Shares 12,926,706
Issue costs relating to issue of Ordinary Shares (490,824)
Loan advanced 2,400,000
----------
Net cash generated from financing activities 14,835,882
----------
Net increase in cash and cash equivalents 461,327
Net cash and cash equivalents at beginning of period -
Exchange gain on cash and cash equivalents 3,703
----------
Cash and cash equivalents at end of period £465,030
==========
It is expected that the full Interim Statement will be mailed to shareholders
shortly and a copy will be available on the Company's website www.gppm.co.uk.
This information is provided by RNS
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