RNS Number:5564M
Gold Mines Of Sardinia PLC
20 June 2003
GOLD MINES OF SARDINIA PLC
PRELIMINARY STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002
KEY POINTS
* Gold production at the Furtei mine increased to 20,302 oz (2001: 16,782
oz) despite operations being suspended in the fourth quarter.
* A joint venture and strategic alliance with Canley Developments Inc. of
Canada ("Canley") - recently announced - will underpin future operating
costs of the Furtei project up to Euro15 million in return for an option in
the Furtei mine of up to 45%.
* A large number of targets have been delineated at Furtei with drilling
expected to commence in July of this year
* Palaeozoic rock units also remain a prime target with the Monte Ollasteddu
project an immediate priority, subject to necessary approvals.
* Since the year end, Canley has subscribed #1m for 11.1 million ordinary
shares in the company.
* There was a loss for the year after taxation of #5,769,000 (2001: loss of
#2,694,000)
* Domicile relocation was completed from Australia to the UK - and the
company was admitted to AIM in November 2002.
Commenting on the preliminary statement, Jon Pither, chairman of Gold Mines of
Sardinia said,
"Exploration, and the continued delineation of gold prospects across Sardinia,
has been a highlight of the past year. .....We have discovered many
encouraging indicators which point to the island eventually becoming a
significant gold producer. It is now our task to convert the promise into
reality and we are actively seeking the partners we need to do so. ......The
commitment by Canley represents a direct injection of funds and an endorsement
of our confidence in the potential of Sardinia's untapped gold resources."
Press enquiries:
Gold Mines of Sardinia Telephone: 01372 470279 (Before noon)
Jon Pither, Chairman Telephone: 07949 209301
Martin Groak
Biddicks Telephone: 020 7448 1000
Zoe Biddick
CHAIRMAN'S STATEMENT
Higher gold prices, and continuing interest in Sardinia as a potential
world-class gold province, have helped your company manage its way through a
difficult time. Gold production increased during the year under review, but
mining operations at Furtei were suspended in the fourth quarter to facilitate a
thorough review of future activity and resources on the property.
Since our financial year end at 31 December 2002, we have taken steps to ensure
the long-term future of Furtei by entering into a joint venture and strategic
alliance with Canley Developments Inc. of Canada (Canley).
Under the Option Agreement, Canley has an option to earn a 45% interest in the
Furtei Project comprising the mine and its surrounding exploration tenements in
return for spending 100% of the exploration and mining expenditure required for
the Furtei project, to an amount of Euro15 million. The term of the option is
eight years. Canley can earn its interest in two stages of 22.5% for each Euro7.5
million spent, at a minimum rate of Euro1 million in the first year, and
Euro2 million in each successive year.
Canley also has a right, exercisable for six months, to nominate two areas of up
to 100 square kilometres other than the Monte Ollasteddu prospect. Canley will
then have the exclusive ability for 3 months to negotiate with GMS on the terms
of a possible joint venture for exploration and mining on the nominated areas.
At the completion of the arrangement, GMS will own 45% of Furtei, Canley 45% and
Progemisa, an arm of the regional government of Sardinia, the remaining 10%.
Canley has also subscribed for a #1 million placement of 11,111,111 GMS
shares at 9 pence each, with each new share having an attached warrant which
entitles the holder to one new share at a price of 11 pence for a period of two
years.
The Canley joint venture is an important development. It is a significant vote
of confidence in the work we have been doing in Sardinia. It also represents a
direct injection of funds into our company, and a commitment to invest in a
project in which we retain a significant interest. It highlights the point that
Sardinia remains a highly attractive and highly mineralised part of Europe, with
significant untapped potential.
Exploration, and the continued delineation of gold prospects across Sardinia,
has been a highlight of the past year. At Furtei, a large number of targets have
been delineated for future drilling, which will commence in July of this year.
We remain confident that the future of Furtei includes the development of a
major gold mining operation. This will most probably include an underground
element to access what we believe to be strongly mineralised systems located at
modest depth in the Furtei epithermal field.
Palaeozoic rock units also remain a prime target of our company. The Monte
Ollasteddu project offers an immediate drilling priority, once we have received
all necessary Italian and regional government approvals. Support for our
proposed work in the area is strong and we remain confident that final approvals
will soon be received.
Permitting issues are also awaiting resolution at the Osilo project in the north
of Sardinia where we have found more than 20 separate vein sets, of which only
five have been drilled. These veins are wide and long with our objective being
to obtain the necessary approvals to undertake trial mining on the Bunnari vein.
During the year we completed our domicile relocation from Australia to the UK.
Gold Mines of Sardinia Ltd was de-listed from the Australian Stock Exchange and
the Alternative Investment Market of the London Stock Exchange, and Gold Mines
of Sardinia Plc was admitted to AIM on 20 November 2002.
Despite the difficulties we have encountered over the past year it is important
for shareholders to understand that the fundamental concepts behind our company
remain intact. Sardinia is a highly mineralised area of Europe. It has a long
history of base metal production. We have been operating the first gold mine of
the modern era, and we have discovered many encouraging indicators which point
to the island eventually becoming a significant gold producer.
But, to get to the point where we can say that we are within sight of delivering
on this vision will require more work, great patience, and the input of
financial and technical resources of our joint venture partners.
It will also require the ongoing dedication and commitment of our technical
staff, who have worked tirelessly during the past year, and to the members of
our executive management team, who continue to seek out ways to convert the
promise of gold mining in Sardinia into its richly-deserved reality.
Jon Pither, Chairman
REVIEW OF OPERATIONS
FURTEI - EXPLORATION
Exploration highlights during the year include a major review of the exploration
data at Furtei along with two geophysical surveys designed to locate new areas
for high grade gold mineralisation at depth within the Furtei mine corridor.
Results from this work have identified a number of very prospective targets that
will be drill tested in 2003.
A programme of RC drilling has been performed on the Su Masoni deposit to
confirm the presence of high-grade shoots and to test the metallurgical recovery
from flotation of the sulphide ore. A total of 9 RC holes were drilled for an
advance of 861 metres. Drilling intersected high grade shoots within broad
widths of lower grade mineralisation. All gold results have been received but
copper results are awaited from 8 drill holes. Best results include 48 m @5.13 g
/t Au, 13 m@ 7.02 g/t Au, 30m @ 3.54 g/tAu, 48m @ 2.12 g/t Au and 68m @ 1.62 g/t
Au. Drill cuttings have been despatched for flotation and gold recovery
testwork.
A new resource and open-cut reserve estimate is underway for Su Masoni in
preparation for possible renewed open-cut mining under the shallow (depleted)
oxide mine.
Recent negotiations to sell gold-pyrite concentrates to a local smelter have
resulted in a breakthrough for resource definition and mining at Furtei. More
than half of the existing gold resources at Furtei are hosted in "pyrite" ore
with much of this material having the potential of becoming reserve in the
future as a result of this breakthrough. This success opens the potential for
mining the higher-grade portions of this substantial resource type at Furtei.
Target selection and subsequent RC drilling to upgrade resources is underway.
The total resource (indicated, measured and inferred) of pyrite-gold ores at
Furtei is 6.9 Mt @1.63 g/t Au (i.e. approximately 360,000 oz.)
FURTEI - OPERATIONS
The Furtei operation commenced the year 2002 with significantly reduced cash
operating costs on 2001, and improved metallurgical recoveries as the mining and
treatment of the open pit enargite sulphide ores reached its full potential.
Several shipments of gold-rich copper concentrates were effected, and gold
production exceeded 20,000 oz, up more than 20% on 2001. Copper production was
up 50% on the previous year's achievement.
As the year continued the enargite sulphide material mineable by open pit means
became depleted, and cash operating costs again began to rise reflecting the
difficult and restricted working spaces as the pits neared their final depths.
This fact, coupled with the results of a review into the future of open pit
mining at Furtei commenced in the second quarter, led to a decision to suspend
open pit mining early in the fourth quarter. The suspension resulted in mine
employees being placed into "Cassa Integrazione", enabling them to remain
employees of Sardinia Gold Mining S.p.A. but with a reduced salary paid by the
Italian Government, whilst the plant continued to treat stockpiled ore material
until the end of the year.
The future of the Furtei mine now lies at least partly underground, and the
above mentioned period of suspension has enabled continuation for the possible
commencement of underground mining in the future.
Concurrently with these preparations, investigations have been ongoing into
alternative opportunities for the Furtei gold operation. These investigations
were intensified as a result of the increasing gold price late in the year, and
resulted in the signing of a contract for the supply and sale of a 270t trial
parcel of Pyrite concentrate to the Glencore owned Zinc Smelter located on the
Island of Sardinia. The success of this trial parcel then led at the close of
the year to the signing of a contract for a further 1000t to be delivered in
early 2003. In addition, the year-end saw negotiations underway for the
potential sale of a lower grade copper concentrate to a third party for off site
smelting.
The above initiatives could possibly form the basis for a re-commencement of
open pit mining operations at Furtei to supplement the potential underground
mining activities.
Mining and Production Statistics for 2002 are provided in the attached table.
Furtei Mine Production
2002 2001
Mining Material Tonnes 599,950 1,237,575
Ore Moved Tonnes 151,790 187,195
Strip Ratio 2.9 5.6
Processing Dry Tonnes Milled Tonnes 212,399 236,605
Production Gold Production Oz 20,302 16,782
Copper Production Tonnes 1,247 827
Total Cost Per
Oz Gold Production $US $326 $307
OSILO PROJECT
Activities on the Osilo project in the north of the Island of Sardinia were
scaled back early in the year as the company awaited the outcome of two pending
legal disputes.
During the year the company received notice that the Council of State had upheld
the appeal of the Sassari Ministry of Environment and Cultural Heritage against
a previous ruling of the Sardinian Regional Administration Tribunal which
overturned the veto on the commencement of trial underground mining at Osilo.
The company has received Italian legal advice on this matter, and based upon
this advice, is confident that the matter should in due course be satisfactorily
resolved.
The presentation to the Court of the study prepared by the court appointed
expert in the San Martino case, which was set to occur in December 2001, was
eventually presented in October of this year. The next hearing in this case will
now occur in 2003.
PALEOZOIC GOLD
The Palaeozoic rocks of Sardinia are emerging as a potentially important new
gold district in Europe. The gold mineralisation is associated with deep-seated
structures and granite melts generated in the Hercynian deformation of
Permo-Carboniferous (300 Ma) age. This deformation resulted in the important
mineralising epoch which hosts the large gold deposits of northwest Spain,
Central Massif in France, Slovakia, Russia, Kazakstan and Uzbekistan.
The company has, in a short period of time, now defined a number of new gold
anomalous systems associated with this metallogenic event throughout the Island.
The more prospective areas include the Monte Ollasteddu, Torpe, San Vito,
Siurgus Donigala, Lula, Tertenia, Silius, Genna Ureu, Corti Rosas - Villasalto
and Escalaplano areas.
Monte Ollasteddu Project
Gold mineralisation is hosted in multiple quartz-sulphide vein structures in a
4km x 1km area, as defined by soil sampling and surface rock chip sampling.
Detailed mapping indicates that the high-grade zones are related to a series of
"en echelon" northeast trending vertical structures intersecting the regional
east-west trend.
Extensive rock chip and channel sampling has been carried out over the strike
length of the mineralisation. This work has demonstrated the continuity of grade
over 200m of vertical relief and continuity of grade in individual structural
zones of up to 800m along the strike. Soil sampling has been carried out on 50m
by 50m and 50m by 25m grid spacing. The average of the gold in soils within the
100ppb contour is 256ppb Au. The maximum gold in soil result is 16g/t Au.
A total of 556 grab samples of the veins have been collected mostly in areas of
poor outcrop and the average grade of these is 8.47 g/t Au. The gold
arsenopyrite veins (1mm to 1m width) occur as parallel sheeted fracture fill and
veins hosted in meta-rhyolite. Gold is occasionally visible in high-grade veins
(50-204 g/t Au).
In excess of 1,850 rock chip channel samples, of 1m lengths, have been collected
from rock outcrops. Of this total 31% return values greater than 0.3 g/t Au and
the average grade is 2.47 g/t Au (top-cut 15 g/t Au). Previous rock chip channel
sample results have returned intervals of 24m @ 2.14g/t Au, 15m @ 2.16g/t Au,
12m @ 2.35g/t Au, 7m @ 6.99g/t Au and 11m @ 4.77g/t Au.
Preliminary metallurgical testwork, performed by Omac Laboratories, Ireland,
returned 86-90% gold recovery from 24-hour cyanide leach tests. Petrology
studies carried out by the University of Cagliari show that the gold is present
as free grains interstitial to the sulphides, supporting the high gold recovery
results. The mineralisation at Monte Ollasteddu represents a large bulk tonnage
target.
A first pass program of 9-diamond drill holes for a total of 2000m has been
designed to test the western plateau area, called Pranu Canceddas, and the
central Fraigada ridge. The drill holes are spaced 100-150m apart and will test
the mineralisation to 100-150m vertical depths. No drilling has been targeted
over the eastern plateau area in the first phase drill program.
The Monte Ollasteddu area lies at the south western edge of a large Italian
military range. The company is awaiting final approval from the military in
order to facilitate drilling access. A significant step forward in securing this
access has been made resulting in the base commander issuing the company with
the permission to construct access roads and drill pads. The Research Permit at
Monte Ollasteddu has been granted, but formal access to perform drilling is
still awaited from the Italian Ministry of Defence in Rome. Drilling will
commence upon receiving formal written approval from the ministry.
Torpe
Exploration within the Torpe area has defined three target zones to test with RC
drilling. Previous surface rock chip channel sampling of the Ianna Sa Rena veins
in the western part of the Torpe project area have returned very encouraging
results. Best intercepts include 1.6m @ 15.16g/t Au and 2.6m @ 14.56g/t Au.
The gold mineralisation is hosted in quartz-sulphide veins that strike east west
and dip steeply to the south. The Ianna Sa Rena Structure can be traced at
surface for a minimum of 1.5km.
A second parallel structure crops out 1km to the southeast, along the road cut
at Punta Gradazone. Previous best intercepts here included 0.3m @ 31.33g/t Au,
4.8m @ 3.0g/t Au and 4m @ 2.15g/t Au. The structure is open along strike. The
Ianna Sa Rena and Punta Gradazone veins occur within a 4km x 0.5km structural
zone.
A third area of mineralisation has been identified 8km to the east of Punta
Gradazone, to the south of Torpe village. Soil sampling has identified a
gold-anomalous zone measuring 3km east west and up to 300m wide, defining a
minimum value of 10 ppb Au. Best results from reconnaissance rock chip sampling
grade a maximum 1.14g/t Au.
The company is progressing the application for new Research Permits to allow
drill access. Fences of reverse circulation drill holes have been planned to
test these high-grade structures.
San Vito
Reconnaissance mapping and sampling continue to highlight multiple gold bearing
structural zones in the San Vito region (Johnson Matthey Mining Company
previously mined the area for lead and antimony in the 1850s). Multiple zones of
gold bearing veins are hosted in quartz-sulphide structures in a geological
setting similar to Monte Ollasteddu. At San Vito these quartz veins crosscut the
lead antimony lodes and trend in a number of directions. The vein zones can be
traced for up to 600m along the strike.
Previous rock chip sampling results included 35.59g/t Au, 33.87g/t Au and 24.08g
/t Au, 114.76g/t Au, 48.21g/t Au and 40.27g/t Au. Limited rock chip channel
sampling has been performed, best results include 21m @ 1.21g/t Au, 21m @ 1.07g/
t Au and 2m @ 3.74g/t Au.
An old diamond drill hole from the 1970s was located near the lead-antimony
workings and the drill core retrieved and sampled for gold. Weak development of
quartz and sulphide veining is present in the core with the best sample interval
returning 6m @ 1.06 g/t Au.
A research permit is in application to allow drilling access.
OTHER PROSPECTS
Mapping and sampling around the Siurgus Donigala area, approximately 4km to the
south of the Genna Urea gold prospect has extended the gold mineralisation to
occur over a 2km north-south trending structural zone. The gold is hosted in
quartz-sulphide veins in meta-rhyolite and meta-siltstones, similar to that at
Monte Ollasteddu and San Vito. Best rock chip samples include 5.72g/t Au, 4.23g/
t Au and 3.63g/t Au. This structure represents the regional continuity of the
Monte Ollasteddu structure through the Escalaplano and San Giorgio prospects, a
strike distance of some 40km.
Stream sediment results from the regional stream sediment survey in the Monte
Perdedu-Monte Orguda structural corridor, about 50km to the north of Monte
Ollasteddu have been received. A number of highly anomalous results include
45ppb Au, 42ppb Au and 30ppb Au from streams draining meta-rhyolite,
micro-granites of Hercynian age and late Permian sub-intrusive complexes.
Follow-up soils are planned to test the gold in stream anomalies.
GOLD SALES
A total of 20,581 ounces of gold was sold during the reporting period; 9,416
ounces of gold in bullion and 11,165 ounces of gold in concentrate (2001:
10,053oz in bullion and 6,153 oz in concentrate).
The average realised gold price for gold in bullion and gold in concentrate for
the 12 months to 31 December 2002 was US$303 (2001: US$274). All silver sales
were at the spot price on the day of delivery.
12 months to 12 months to
31 December 2002 31 December 2001
(i) BULLION SALES
Gold Oz 9,416 10,053
Silver Oz 3,800 12,542
Gold Equivalent Factor 57 61
Gold Equivalent Oz 9,473 10,261
(ii) CONCENTRATE SALES
Gold Oz 11,165 6,153
Copper Tonnes 1,269 788
(iii) AVERAGE REALISED PRICE
Gold US$/oz 303 274
Silver US$/oz 4.55 4.37
(iv) TOTAL SALES REVENUE
Gold US$ 2,860,809 2,712,819
Silver US$ 17,297 55,574
Net Concentrate Revenue US$ 1,976,670 1,247,138
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
#000 #000
TURNOVER 4,379 5,789
Change in stocks of gold in circuit, refined gold and
concentrate (181) (412)
Raw materials and consumables (1,351) (1,508)
Other external charges (1,602) (3,286)
Staff costs (1,556) (1,487)
Depreciation and other amounts written off, tangible
and intangible (5,166) (1,654)
OPERATING LOSS (5,477) (2,558)
Exceptional item - Scheme of Arrangement costs (201) -
Interest payable (91) (136)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (5,769) (2,694)
Tax on loss on ordinary activities - -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (5,769) (2,694)
Minority interests
Equity 25 130
RETAINED LOSS ATTRIBUTABLE TO SHAREHOLDERS (5,744) (2,564)
Loss per share - basic (2.2)p (1.0)p
Loss per share - fully diluted (2.2)p (1.0)p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Loss for the financial year attributable to members (5,744) (2,564)
Exchange differences on re-translation of net assets of
subsidiary undertaking (169) 603
Total recognised gains and losses relating to the year (5,913) (1,961)
BALANCE SHEETS AS AT 31 DECEMBER 2002
Group Group Company
2002 2001 2002
#000 #000 #000
FIXED ASSETS
Intangible assets 7,480 9,508 -
Tangible assets 2,570 4,295 -
Investments - 456 13,162
10,050 14,259 13,162
CURRENT ASSETS
Stocks 424 666 -
Debtors: amounts falling due within one year 1,273 947 55
Debtors: amounts falling due after one year 42 46 -
Cash at bank and in hand 1,232 306 -
2,971 1,965 55
Creditors: amounts falling due within one year (1,532) (2,303) (254)
NET CURRENT ASSETS/(LIABILITIES) 1,439 (338) (199)
TOTAL ASSETS LESS CURRENT LIABILITIES 11,489 13,921 12,963
Creditors: amounts falling due after more than
one year (3,433) (3,205) -
PROVISIONS FOR LIABILITIES AND
CHARGES (889) (784) -
ACCRUALS AND DEFERRED INCOME (1,421) (1,786) (56)
5,746 8,146 12,907
CAPITAL AND RESERVES
Called up share capital 13,162 13,162 13,162
Merger reserve 16,712 16,712 -
Other reserves (280) (3,818) -
Profit and loss account (23,848) (17,935) (255)
Total Shareholders' Funds 5,746 8,121 12,907
Minority interests (all equity) - 25 -
Total capital employed 5,746 8,146 12,907
The company balance sheet at 31 December 2001 comprised debtors, being unpaid
share capital, and called up share capital of #2 each.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
#000 #000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1,690) (643)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (91) (136)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (48) (1,686)
Sale of investments 95 2,676
Exploration, evaluation and development expenditure (393) (1,285)
Exceptional item - Scheme of Arrangement costs (201) -
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (547) (295)
FINANCING
Issue of ordinary share capital by GMS Pty Ltd 3,398 73
Expenses paid in connection with share issues (25) -
Receipts from borrowings - 312
Repayment of borrowings (109) (998)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 3,264 (613)
INCREASE/(DECREASE) IN CASH 936 (1,687)
NOTES
1. This statement has been prepared using accounting policies and presentation consistent with those applied in
the preparation of the statutory accounts of the Company.
2. Gold Mines of Sardinia plc (the company) was incorporated on 5 July 2000. On 20 November 2002 the company
acquired 100% of the issued share capital of Gold Mines of Sardinia Pty Ltd (GMS Pty Ltd) following
implementation of a Scheme of Arrangement (under Australian law). The Scheme of Arrangement involved the issue
of 1 ordinary share by the company for every 1 ordinary share held by the shareholders of GMS Pty Ltd.
The Scheme of Arrangement has been accounted for using merger accounting principles, as in the opinion of the
directors it satisfies all the conditions required. The Company is entitled to the merger relief offered by
Section 131 of the Companies Act 1985 in respect of the consideration received in excess of the nominal value
of the equity shares issued in connection with the Scheme of Arrangement.
The consolidated financial information above is presented as if the Scheme of Arrangement had been effective
on 1 January 2001. The consolidated profit and loss account combines the results of GMS Pty Ltd for the year
ended 31 December 2002 with those of the company for the year. The comparative figures relate to GMS Pty Ltd
as restated for the effect of the Scheme of Arrangement. Further detail relating to the Scheme of Arrangement
can be found on the company's website www.gmslimited.co.uk.
3. The summary accounts set out above do not constitute statutory accounts as defined by Section 240 of the UK
Companies Act 1985. The summarised balance sheets at 31 December 2002, the summarised consolidated profit and
loss account, the summarised consolidated cash flow statement and the summarised statement of total recognised
gains and losses for the year then ended have been extracted from the Group's 2002 statutory financial
statements upon which the auditors' opinion is unqualified. The statutory financial statements for the year
ended 31 December 2002 were approved by the directors on 10 June 2003, but have not yet been delivered to the
Registrar of Companies.
4. The annual report and accounts for 2002 will be sent by post to all registered shareholders shortly.
Additional copies are available from the Company's registered office, The Little House, Quenington,
Cirencester, Gloucestershire, GL7 5BW, UK.
5. The loss per share has been calculated on the basis of the net loss after taxation of #5,769,000 (2001:
#2,694,000) and the weighted average number of shares in issue in the year ended 31 December 2002 of
263,239,444 (2001: 263,239,444)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFEFWUSDSEEM
