RNS Number:0170M
African Copper PLC
14 November 2006
www.africancopper.com
AIM and TSX: ACU
BSE: African Copper
14th November 2006
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the Three and Nine Months Ended 30 September 2006
The following management discussion and analysis ("MD&A") of the operating
results and financial position of African Copper Plc ("African Copper" or the
"Company") and its subsidiaries is for the three and nine months ended 30
September 2006 compared with the three and nine months ended 30 September 2005.
The MD&A should be read in conjunction with the Company's interim consolidated
financial information for the three and nine months ended 30 September 2006 (the
"Interim Financial Information"), the audited consolidated financial statements
for the year ended 31 December 2005 (the "Audited Financial Statements") and the
related notes thereto, and the report entitled "Technical Report on the Dukwe
Copper Project and Matsitama Prospecting Licences Botswana, Africa" prepared by
A.C.A. Howe International Limited ("Howe") dated 30 March, 2006 (the "Technical
Report"). The Interim Financial Information has been prepared under the
historical cost convention and in accordance with United Kingdom generally
accepted accounting principles ("UK GAAP"). These principles differ in certain
material respects from accounting principles generally accepted in Canada ("CDN
GAAP"). Significant differences between UK GAAP and CDN GAAP applicable to the
Company are described in Note 12 to the Interim Financial Information. All
amounts herein are expressed in Sterling unless otherwise indicated and the
information is current to 13 November 2006.
For further information contact:
African Copper Plc Numis Securities Limited (NOMAD) Parkgreen Communications
David Jones / Joseph Hamilton John Harrison / Nick Westlake Justine Howarth / Ana Ribeiro
+44 (0)20 7529 7500 +44 (0)20 7776 1590 +44 (0)20 7493 3713
Additional information relating to the Company, including its public filings,
its most recent Annual Information Form and Technical Report, is available at
www.africancopper.com or via the SEDAR website at www.sedar.com.
Mr. Joseph Hamilton, P.Geo., the Company's Chief Operating Officer and a
"qualified person" as defined by Canadian National Instrument 43-101, has
reviewed and approved the technical material contained herein.
Forward-Looking Statements
Except for historical information contained in this MD&A relating to African
Copper, certain disclosure statements and information contained herein
constitute forward-looking statements. Forward-looking statements include, but
are not limited to, statements concerning the future price of copper, timing of
the development of the Company's projects in Botswana, success of exploration
activities, permitting time lines, requirements for additional capital, and the
timing and possible outcome of pending and future regulatory applications and
other statements which are not historical facts. When used in this document,
the words such as "could," "plan," "estimate," "expect," "intend," "may,"
"potential," "should," and similar expressions are forward-looking statements.
Although the Company believes that its expectations reflected in these
forward-looking statements are reasonable, such statements involve risks and
uncertainties and no assurance can be given that actual results will be
consistent with these forward-looking statements. Important factors that could
cause actual results to differ from these forward-looking statements include
risks related to conclusions of economic evaluations; changes in project
parameters as plans continue to be refined; future prices of copper; possible
variations in mineral resources or reserves; delays in entering into contract
mining agreements; and delays in obtaining governmental consents, permits and
registrations or financing outcomes. Although the Company has attempted to
identify important factors that could cause actual actions, events or results to
differ materially from those described in forward looking statements, there may
be other factors that cause actions, events or results not to be as anticipated,
estimated or intended. Any forward-looking statement speaks only as of the date
on which it is made and, except as may be required by applicable law, African
Copper disclaims any intent or obligation to update or revise any
forward-looking statement, whether as a result of new information, future events
or results or otherwise.
There can be no assurance that forward looking statements will prove to be
accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. For further expansion of certain risks
and uncertainties that could contribute to a difference in results, please refer
to those risks listed under the heading "Risks" in this MD&A.
Business Overview
The Company operates in the resource industry in southern Africa. The principal
business of the Company is the exploration and development of copper deposits in
the Republic of Botswana. The Company has two principal project assets, both
located in Botswana: the Dukwe Project and the Matsitama Project. Reference is
made to the Technical Report, a copy of which has been filed on SEDAR and the
Company's website.
The Company is incorporated in England and Wales with a listing on AIM and
additional listings on the Toronto Stock Exchange ("TSX") and the Botswana Stock
Exchange ("BSX"). The ordinary shares of African Copper trade on AIM and the
TSX under the symbol ACU and on the BSX under the symbol "African Copper".
The Company's most advanced project is the Dukwe Project. Past work has
included extensive drilling, sampling and subsequent engineering and
metallurgical test work to delineate a substantial copper oxide resource
(reference is made to the Technical Report).
The Company also owns the 4,000 km2 Matsitama Project, which lies adjacent to
and south east of the Dukwe project that offers 10 drill-ready and highly
prospective targets, including the Thakadu-Makala deposits. An additional eight
high-priority targets are ready for drilling with extensive surface geochemical
copper anomalies. Thirty-five second-priority targets and an extensive
geochemical and geophysical database will be systematically assessed over the
next three years.
Copper Market
The majority of demand for copper comes from the US, Europe and Asia. Growth in
copper demand has been enhanced recently by the industrialization of emerging
economies in Asia and, in particular, China. China's share of world copper
demand has risen from approximately 3% in 1970 to approximately 26% in 2005 .
Asia now accounts for almost half of the world's copper consumption. Other
factors contributing to recent growth include worldwide demand for consumer
products, strong housing markets and the expansion and maintenance of electrical
infrastructure.
Copper prices have been cyclical historically. Since 2003, growing demand for
copper, combined with the inability of copper producers to increase supply, has
substantially depleted copper inventories and increased prices. During 2005,
there were a number of supply disruptions, caused by smelter shortfalls and mine
strikes, which, when coupled with continuing strong demand, caused global
inventories of refined copper stocks to be drawn down and copper prices to
increase to historic highs. The price of copper has been volatile historically,
trading within a range of US$0.60/lb to US$1.54/lb from 1990 to 2004 and
recently trading in excess of US$ 3.00 /lb.
Strategy and Outlook
Dukwe Project
The Company's goal is to develop the Dukwe Project as its first mine in the
Matsitama Belt of Botswana.
During the first quarter of 2006, the Technical Report was issued on the Dukwe
and Matsitama Projects. To execute on the Technical Report recommendations,
which included the building of a production scale flotation process plant, the
Company on 5 June 2006 completed a public offering of 75 million ordinary
shares, raising #52.9 million net of expenses.
On 18 October 2006, the Company released the results of parallel resource
estimates on the Dukwe Project. For further information on these resource
estimates, please refer to the information listed under the heading "Indicated
and Inferred Resources" in this MD&A. These results, completed individually by
two independent consulting companies, showed that a sufficient amount of
material existed as indicated resources within proximity of surface that an
open-pit mining option could be considered. Since initial metallurgical studies
showed that the top oxide portions of the deposit would not produce a marketable
concentrate, open pit mining was not considered a viable option with the
concentrator processing alternative.
In the third quarter of 2006, further oxide flotation optimization tests
confirmed that a marketable concentrate could be produced from the oxide
portions of the deposit. In addition, results of a twin-hole drilling programme
targeting the oxide and supergene mineralization indicated that historical
drilling had possibly underestimated the grade of at least some of the
open-pittable material. This distribution of copper, coupled with the
optimization of the oxide flotation circuit allowed the Company to start
examining and optimizing an open pit design for initial mining. Optimization
studies are scheduled for completion in the fourth quarter in 2006.
Coincidentally with embarking on an open pit optimization study, the Company
invited tenders for contract mining since open pit mining equipment is difficult
to obtain in today's market. Three bids conformed to the tender, and the
Company expects to have a contract mining agreement in place to allow a fleet to
mobilize in the first half of 2007.
The Company completed testing on its water bore field to the north of the Dukwe
Project. Testing indicated that sufficient water is available to support the
process plant at the Dukwe Project, and applications were made to obtain
abstraction permits. The Company has been advised that these permits will be
granted in conjunction with a mining licence, expected before the end of 2006
(the "Mining Licence").
The Company finalized the flow sheet and process plant design for the Dukwe
Project in the third quarter of 2006 and the Board approved the commencement of
construction of the Dukwe process plant. A construction camp has been erected
at the Dukwe site and surface earthworks have commenced. The Company is
concentrating on surface water control structures, plant terracing, placing a
power line to the bore field and commencing pipeline construction to the plant
area.
During the third quarter of 2006, the Company hired the required key technical
and engineering staff to support the construction of the Dukwe processing plant.
Management believes that the Company is now sufficiently staffed to commence
construction and will be adding to the technical capability of the Company as
the Dukwe Project progresses.
The Company is currently finalizing the details of the Engineering, Procurement
and Construction Management ("EPCM") contracts for the construction of the Dukwe
Project. These contracts are expected to be in place by the end of November
2006. Assuming the Company receives the Mining Licence by 31 December 2006,
management expects the project should take approximately twelve months to
construct, projecting the first concentrate production in the first half of
2008.
The Board believes that future cash flow from operations coupled with available
working capital, should be sufficient to permit the Company to finance its
business internally and to obtain debt financing when, and if, necessary and
appropriate.
Permitting
In order to proceed with the Company's plan to commence mining at the Dukwe
Project, a mining licence, a surface rights permit for the plant and a water
abstraction permit have to be obtained, and an environmental impact assessment
has to be updated and approved.
The Final Draft Environmental Impact Assessment Report on the Company's proposed
mining operation (the "EIA"), prepared by Water Surveys (Botswana) (Pty) Ltd.,
was submitted to the Department of Mines in November 2005 and the Ministry's
comments were received by the Company in early 2006. In response to these
comments, the EIA was modified and re-submitted to the Department of Mines in Q2
of 2006. Before obtaining approval of the EIA, the Company was requested to
provide an Environmental Management Plan (the "EMP") which outlines the policies
and procedures that will be adopted at the Dukwe Project. The Company delivered
this document in July 2006. In response to comments received from various
government departments the Company addressed the changes as required. A final
submission was made near the end of Q3 2006. The Department of the Environment
has indicated that the EIA is in order, and that no further modifications are
requested. The Department of Mines has indicated that the application for a
Mining Licence is in order. The EMP remains outstanding and the Company is
currently addressing the final requests from the Department of the Environment.
The Company expects to receive all approvals for the EIA and EMP during Q4 of
2006.
Application to the Lands Board, Bamangwato Tribal Administration has been made
for surface rights for the proposed plant site. The application has been
processed and the issuance of the surface rights permit has been provisionally
granted pending government approval of the EIA.
The required archaeological impact study has been approved by the National
Museum of Botswana, and a conditional permit has been issued.
Once the EIA and EMP are approved, the surface rights and water abstraction
permit are expected to be granted in conjunction with the Mining Licence. The
Department of Mines has given the Company permission to commence surface works
and to erect a construction camp prior to obtaining the Mining Licence. The
Company does not foresee a delay in its current construction schedule at this
point in time and believes its plans are still on-track to establish first
concentrate production in the first half of 2008.
Indicated and Inferred Resources
During the third quarter of 2006, the Company commissioned and received two
comprehensive mineral resource estimates for the Dukwe Project (see Company's
Press Release dated 18 October 2006, a copy of which can be obtained from the
SEDAR website at www.sedar.com) completed by independent consultants RSG Global
Consulting ("RSG") and Caracle Creek International Consulting ("CCIC"). The two
consulting groups used identical databases and geological interpretations as a
starting point, but used differing methodologies to arrive at their final
estimates. The use of two globally recognized independent consultants with
differing methodologies has added confidence in allowing the Company to finalize
the resource base available to support an extended mine life at Dukwe. The
technical reports prepared in conjunction with the resource estimates will be
available shortly on the SEDAR website at www.sedar.com.
The RSG estimate utilized 5 metre composite samples to assign grades to 10m x
30m x 30m block sizes. Ordinary kriging was applied to determine a global
estimate, and uniform conditioning was applied to the resultant block model to
assign values to the geological wireframes. Subcells to a minimum of 5m x 10m x
10m were used. RSG utilized soft boundaries between "oxide", "supergene" and "
sulphide" mineralization styles which produced a continuous estimate across the
three types.
The CCIC estimate utilized 1 metre composite samples to assign grades to 10 m x
30m x 15 m block sizes. Ordinary kriging was applied individually to each
mineralized domain as well as the surrounding poorly mineralized breccia.
Mineralized domains define zones of improved mineralization, based on a 0.25%
copper cut-off as a guideline. In order to improve on local tonnage estimates
CCIC used subcells to a minimum of 1m x 5m x 5m. CCIC utilized hard boundaries
between geological wireframes and between "oxide", "supergene" and "sulphide"
mineralization styles. A comparison of the two estimates is shown in the
following table.
CCIC Estimate RSG Estimate
1 m composite, 10m x 30m x 15m block size 5 m composite, 10 m x 30m x 30m block
with subcells to 1 m x 5m x 5m, ordinary size with subcells to 5m x 10m x 10m,
kriging, 0.25% cut-off mineralized Uniform Conditioning of Ordinary Kriging,
envelope; 0.8% cut-off;
effective date of estimate:30 Sept 2006 effective date of estimate:9 Oct 2006
Indicated resources tonnes % Cu Contained Cu (t) tonnes % Cu Contained Cu
(t)
Oxide 1,380,613 1.66 2,840,000
22,899 1.77 50,268
Supergene 4,456,594 2.11 5,770,000
93,949 1.89 109,053
Sulphide 34,913,804 1.31 24,240,000
456,111 1.53 370,872
Total Indicated 40,751,010 1.41 32,850,000
572,960 1.61 530,193
Inferred resources tonnes % Cu Contained Cu (t) tonnes % Cu Contained Cu
(t)
Oxide 715,129 1.44 20,000
10,274 1.16 232
Supergene 260,956 1.78 270,000
4,632 1.29 3,483
Sulphide 8,507,751 1.33 14,100,000
113,390 1.38 194,580
Total Inferred 9,483,836 1.35 14,390,000
128,297 1.38 198,295
The RSG estimate was prepared under the supervision of Ken Lomberg, B.Sc.(Hons)
B.Com. Pr.Sci.Nat, an employee of RSG and a "Qualified Person" for the purposes
of National Instrument 43-101 in Canada. The CCIC estimate was prepared under
the supervision of Desmond Subramani, Bsc.(Hons), Pr. Sci. Nat., an employee of
CCIC and a "Qualified Person" for the purposes of National Instrument 43-101 in
Canada. Both estimates have been completed to SAMREC, JORC and National
Instrument 43-101 definitions and standards.
Matsitama Project
The Matsitama Prospecting Licences cover a very large area, some 4,000 km2 of
highly prospective mineral holdings. These licences are contiguous with the
Dukwe Project discussed above. The Company is currently undertaking an advanced
exploration programme at the Thakadu-Makala deposit.
The Matsitama Project has a wealth of systematic multidisciplinary exploration
data that indicate substantial areas of highly prospective terrain especially
for sediment-hosted copper and zinc deposits. Recent work by the Company has
identified several prospects outside of the Dukwe and Thakadu-Makala as
locations deserving exploration efforts.
These areas include:
* Thakadu-Makala-Dihudi-Mutsuku
* Tholo-Lepashe-Tau
* Naklakwana
* along strike extensions of the Dukwe Project
The Company released the first drill intersections from the Thakadu-Makala
drilling in early November 2006. The results to date are sufficiently
encouraging that the Company has started a metallurgical testing programme and
intends to complete open pit studies early in 2007.
Results of Operations
Explanation of Financial Results
The Company recorded a loss of #679,851, or 0.53p per ordinary share, in
the third quarter of 2006 versus a loss of #214,329, or 0.41p per
ordinary share, for the comparable period in 2005. The increased loss of
#465,522 reflects higher stock based compensation costs and foreign
exchange losses. These increases were partially offset by higher interest
income earned during the three months ended 30 September 2006 due to higher
average cash balances during the period compared to the prior year. For the
nine months ended 30 September 2006, the Company recorded a loss of #579,168,
or 0.69p per ordinary share, compared to a loss of #644,845, or
#1.26p per ordinary share, in the year-earlier nine month period. The
deceased loss was the result of higher interest income earned partially offset
by higher share based compensation costs and foreign exchange losses.
The Company expects to incur losses until commercial production commences and
revenues are generated.
Bank Interest Receivable
Interest earned in the third quarter of 2006 increased to #660,398, compared to
#154,409 during the year-earlier quarter, while interest income for the nine
month period ended 30 September 2006 increased to #992,325 compared to #418,551
for the nine month period ended 30 September 2005. The increases in interest
income during 2006 relate to higher average cash balances during the periods due
to the #52.9 million, net of expenses, raised in the public offering that closed
in early June 2006. The Company expects future quarterly interest income to
start to decline later in the fiscal year as cash is invested into the
development of the Dukwe mine and the Matsitama exploration.
Foreign Exchange
A foreign exchange loss of #579,036 was recorded in the third quarter of
2006 compared to nil during the year-earlier quarter. Approximately #397K of
this loss resulted from exchange rate movements between the Canadian
dollar and the British Pound Sterling. Of the 75.0 million ordinary shares
issued in the public offering that was completed in June 2006, a total of 40.625
million ordinary shares were priced in Canadian dollars (at C$1.60 per ordinary
share) and 34.375 million were priced in British Pounds (at 77.5p per ordinary
share). As a result of the offering, the Company held Canadian denominated
investments of C$49.8 million at 30 September 2006. The Company also recorded
losses as a result of exchange rate fluctuations on its $US and South African
Rand denominated holdings.
A foreign exchange loss of #296,876 was recorded for the nine months
ended 30 September 2006 compared to nil during the comparable period in 2005.
The #397K loss recognized on $CAD holdings during the third quarter of
2006 was partially offset by a #260K gain on $CAD holding during the
second quarter of 2006. Gains were also recognized on $US and ZAR holdings
during the second quarter of 2006 thereby partially offsetting the losses
incurred on the translation of these currencies during the third quarter of
2006.
The Company continues to review its foreign exchange strategy and requirements
with special regard to the capital cost commitments in different currencies for
the development of the Dukwe Project. The Company expects to continue to see
foreign currency gains and losses, as it will hold a number of foreign
currencies.
Expenses
The financial information within this MD&A is taken from the Interim Financial
Statements. The following table provides a comparison of expenditures incurred
during the periods:
Three Months Ended Nine Months Ended
30 September 30 September
2006 2005 2006 2005
# # # #
General administration and office costs 100,358 58,016 191,238 124,595
Botswana office administration - 29,010 - 88,205
Consultant, salary and director fees 93,737 99,671 261,800 303,219
Insurance 9,660 9,660 42,670 28,665
Listing on Toronto and Botswana Stock Exchanges - 51,876 - 110,372
Shareholder communication and public reporting 21,451 22,592 93,735 68,013
Travel, accommodation and conferences 44,012 36,382 89,807 140,478
Professional fees 39,290 25,149 138,565 91,352
308,508 332,356 817,815 954,899
Share based compensation 452,705 36,382 456,803 108,497
761,213 368,738 1,274,618 1,063,396
Administrative Expenses
During the third quarter of fiscal 2006, the Company incurred a total of
#308,508 in corporate, general and administrative costs ("G&A Costs")
compared to #332,356 in the year-earlier quarter. For the nine months
ended 30 September 2006, G&A Costs totalled #817,815 compared to
#954,899 in the same period in 2005.
General administration, and professional fee costs were higher in both the third
quarter and nine month period ended 30 September 2006 compared to the same
periods in 2005 as a result of additional reporting and administration costs.
During the three and nine months ended 30 September 2005 a portion of the
Botswana administration costs were expensed. During the comparable periods in
2006 these expenses were capitalized to deferred exploration as they related to
the development and exploration of the Company's mineral properties.
Consultant costs were lower in both the third quarter and nine-month period
ended 30 September 2006 as a result of a higher allocation of certain consulting
fees to deferred exploration rather than expense depending on the nature of the
consultants' work. The Company capitalizes all consultants' costs to deferred
exploration incurred in Botswana related to the Dukwe and Matsitama Projects and
certain head office consulting fees deemed to be directly related to property
activities. For the three months ended 30 September 2006 a total of #40,953 of
consultant fees were capitalized to deferred exploration compared to #nil in the
comparable period of 2005 and #123,129 was capitalized during the nine months
ended 30 September 2006 compared to #nil in the comparable period of 2005.
Travel and accommodation costs were lower during the nine months ended 30
September 2006 due to the reclassification of a portion of travel costs. A
total of #61,246 of direct travel costs incurred by the Company and its
underwriters in completing the public offering that closed in June 2006 were
re-allocated to the share premium as a cost of completing the offering.
Share Based Compensation
Under the Company's policy for share based compensation the fair value of
options are either expensed to the profit and loss account or capitalized as a
deferred exploration cost depending on the nature of the grant.
Share based compensation costs expensed for the third quarter of 2006 increased
to #452,705 compared to #36,382 during the year-earlier period, while share
based compensation capitalized to deferred exploration for the third quarter of
2006 increased to #317,894 compared to the third quarter of 2005 of #83,802.
Share based compensation costs expensed for the nine months ended 30 September
2006 increased to #456,803 compared to #108,497 during the year-earlier period,
while share based compensation capitalized to deferred exploration for the nine
months ended 30 September 2006 increased to #434,102 compared to the same period
in 2005 of #300,146.
The higher stock based compensation expenses incurred during the third quarter
and the nine-month period ended 30 September 2006 reflects the vested portion of
the fair value calculated under the Black-Scholes method of 7,710,000 options
that were issued during the third quarter of 2006. A total of 2.8 million of
these options vested immediately upon grant. In comparison, during the
nine-months ended 30 September 2005, a total 2.02 million options were granted
with only 750,000 vesting up to 30 September 2005.
Investment in Deferred Exploration and Development
The Company capitalizes all costs incurred in Botswana related to the Dukwe and
Matsitama Projects and certain head office consulting fees directly related to
property activities. Cumulative expenditures on deferred exploration increased
during the third quarter of 2006 to #2.57 million compared to #1.77 million
during the year-earlier quarter. For the nine month period ended 30 September
2006, cumulative expenditures on deferred exploration increased to #4.87
million compared to a #2.75 million in the year-earlier comparable
period.
The most significant ongoing investment activities for the Company are for the
development of the Dukwe and Matsitama Projects. Most of the expenditures to
date have been to identify and define the Dukwe Project resource, for
engineering to design the size and scope of the Dukwe Project, for environmental
assessment and permitting as well as for Matsitama Project exploration efforts.
Management has conducted a review of its deferred exploration accounts and has
determined that the current carrying values are appropriate based on its
assessment of realizable value. As at 30 September 2006 the Company's Dukwe
Project is carried at #10.64 million and its Matsitama Project is
carried at #1.39 million. A table outlining the additions to the
Deferred Exploration Costs is presented below:
Dukwe Project - Expenditures
Three Months Three Months Nine Months Ended Nine Months
Ended Ended 30 September 2006 Ended
30 September 30 September 30 September
2006 2005 # 2005
# # #
Opening Balance 8,956,594 3,168,266 6,878,279 2,186,000
Exploration:
Drilling 678,273 1,081,796 2,052,756 1,400,022
Assay - - 30,607 -
Geophysical 147,014 - 150,280 -
Mineral resource estimate - 37,151 - 72,252
9,781,881 4,287,213 9,111,922 3,658,274
Mine Development:
Detailed engineering 449,556 372,097 1,270,224 716,940
Government permitting - - 32,490 -
Administration 244,183 186,188 454,488 253,940
Depreciation capitalized 34,891 - 56,549 -
Road upgrade 62,503 - 276,886 -
Infrastructure 29,127 - 72,649 -
Plant and equipment 27,626 - 74,430 -
Foreign Exchange (386,024) - (1,147,745) -
Share Based Compensation 392,252 83,802 434,102 300,146
Ending balance, 30 September 2006 10,635,995 4,929,300 10,635,995 4,929,300
Matsitama Project - Expenditures
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
30 September 30 September 2005 30 September 30 September
2006 2006 2005
# # # #
Beginning Balance 506,051 144,128 280,035 144,128
Drilling 438,126 - 555,243 -
Site management and logging core 24,577 - 79,923 -
Assay - - 558 -
Administration 323,763 8,416 402,235 8,416
Government Permitting - - 3,772 -
Field equipment 2,477 - 25,506 -
Geophysical 121,385 121,385
Foreign Exchange (19,530) - (71,358)) -
Ending balance, 30 September 2006 1,397,299 152,544 1,397,299 152,544
Summary of Quarterly Results
The Company was incorporated on 11 February 2004. The Company's reporting
currency is Sterling. The Company's subsidiary measurement currencies include:
Mortbury (Sterling), Messina Copper (Botswana) (Proprietary) Limited (Botswana
Pula), Matsitama Minerals (Proprietary) Limited (Botswana Pula).
The following table sets out selected financial data on the Company for the most
recently completed eight quarters, which data has been prepared in accordance
with applicable United Kingdom Accounting Standards. Significant differences
between UK GAAP and CDN GAAP applicable to the Company are described in Note 12
to the Interim Financial Information:
30 September 2006 30 June 31 March 31 Dec.
2006 2006 2005
(*as restated)
Interest revenues #660,398 #239,461 #92,466 #111,072
Exchange gain/(loss) # (579,036) #282,160 - -
Administrative and other expenses # (761,213) # (267,098) #(246,306) #(78,433)
Net gain/(loss) after tax # (679,851) #254,523 #(153,840) #32,639
Basic gain/(loss) per ordinary share (0.53)p 0.36p (0.30)p 0.06p
Diluted gain/(loss)per ordinary share (0.53)p 0.33p (0.30)p 0.06p
30 September 2005 30 June 31 March 31 Dec.
(*as restated) 2005 2005 2004
(*as (*as
restated) restated)
Interest revenues #154,409 #136,649 #127,493 #70,997
Administrative and other expenses # (368,738) #(366,523) #(328,134) #(597,047)
Net loss after tax # (214,329) #(229,874) #(200,641) #(526,050)
Basic gain/(loss) per ordinary share (0.41)p (0.44)p (0.40)p 2.48p
Diluted gain per ordinary share (0.41)p (0.44)p (0.40)p 2.48p
Please review the discussion under the heading "Results of Operations" in this
MD&A for an explanation of the financial results and exchange gains/losses for
the three and nine-month period ended 30 September 2006.
Fluctuations in the Company's expenditures reflect increases in administrative
costs and professional fees associated with seasonal corporate filing and
regulatory activities. Specifically, the increased costs related to the
preparation of year-end audit files and annual meeting materials, as well as the
impact of year-end audit adjustments to the financial statements. In the
quarter ended 31 December 2005 a total of #148,661 consultant costs and #41,354
travel costs were reclassified to deferred exploration based on the nature of
the activities performed. In addition, it should be noted that ffiscal 2005
was the first year of normal operations for the Company due to the fact that
prior to November 2004 it had limited financial resources to pursue its business
plan. During 2004, the Company remained largely inactive prior to completing
its initial public offering in November 2004.
* At 31 December 2005 the Company elected to adopt Financial Reporting Standards
20 ("FRS 20"), "Share Based Payments", with effect from 11 February 2004 (date
of incorporation), which represented early adoption of this standard and a
change in accounting policy. The effect of this change in accounting policy was
to increase the loss after tax for the three months ended 31 March 2005 by
#32,779 and increase the net assets of the Company by #98,338 and to increase
the loss after tax for the three months ended 30 June 2005 by #39,335 and
increase the net assets of the Company by #118,006 and to increase the loss
after tax for the three months ended 30 September 2005 by #36,382 and increase
the net assets of the Company by #83,802 and to increase the loss after tax for
the three months ended 31 December 2005 by #11,781 and increase the net assets
of the Company by #87,903.
Capital Resources and Liquidity
The Company's only sources of liquidity until the Dukwe Project reaches
commercial production are its current cash balances, possible exercise stock
options, project finance alternatives and the equity markets. With the
completion of the public offering in June of 2006 the Company is in a strong
financial position and capable of implementing the recommendations proposed in
the Technical Report. At this time, the Board believes that potential future
cash flow from operations coupled with currently available working capital
should be sufficient to permit the Company to finance its business internally
and to obtain debt financing when, and if, necessary and appropriate
The Company had working capital of #56.4 million at 30 September 2006
compared to # 9.0 million at 31 December 2005. The increase in working
capital during the nine months ended 30 September 2006 was the result of the
June 2006 public offering that included the closing of 34,375,000 new ordinary
shares of the Company and 40,625,000 subscription receipts to raise a total of
#52.9 million net of expenses. Each subscription receipt was converted
into one new ordinary share upon shareholder approval which was received at the
Extraordinary General Meeting that was convened on 5 June 2006.
During the nine months ended 30 September 2006, a total of #928,216 was
also generated from the exercise of 1,768,030 warrants to purchase ordinary
shares of the Company at 52.5p. On 6 November 2006, the remaining 706,000
warrants were exercised into ordinary shares providing aggregate proceeds of
#370,650.
On 27 June 2006, a further #145,041 was raised from the exercise of 900,000
share options to purchase ordinary shares of the Company at Can$0.25 and 100,000
share options to purchase ordinary shares of the Company at 35p. These share
options were originally granted under the Mortbury Limited option plan. At 30
September 2006 outstanding options represented a total of 12,369,872 ordinary
shares issuable for maximum aggregate proceeds of #9,187,243 if
exercised.
Contractual Obligations
The Company has entered into a number of agreements with arms-length third
parties who provide a wide range of services and equipment to the Company and
its subsidiaries. Typically these agreements are for not more that one-year and
permit either party to terminate on notice periods ranging from 30 days to 90
days.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet transactions.
Transactions with Related Parties
The Company was charged #18,102 (2005 - #21,433) and #53,352 (2005 - #77,936)
for the three and nine months ended 30 September 2006 by the Dragon Group, a
group controlled by A. J. Williams, a director of the Company for the provision
of fully serviced office accommodation in the UK and reimbursed expenses.
Accounts payable at 30 September 2006 were #12,227 (2005 - #6,976).
The Company was charged #20,931 (2005 - #9,630) and #58,170 (2005 - #30,604) for
the three and nine months ended 30 September 2006 by the Summit Resource
Management Limited, a company controlled by D. Jones, a director and Chief
Executive Officer of the Company, for the provision of fully serviced office
accommodation and bookkeeping fees in Canada and reimbursed expenses. Accounts
payable at 30 September 2006 were #2,279 (2005 - #1,714).
In July 2006, the Company entered into an agreement with Pickax Corporation
("Pickax") to provide the services of Mr. Joseph Hamilton, a director and Chief
Operating Officer of the Company. The agreement commenced on 1 July 2006, during
which time Pickax will be paid #164,800 per year. Pickax is a corporation
controlled by Joseph Hamilton. The Company was charged #41,200 (2005: - ) for
the three and nine months ended 30 September 2006 by Pickax. This agreement
replaced an existing executive services agreement with materially the same terms
and conditions.
These related party transactions were in the normal course of operations and
were measured at the exchange amounts.
Proposed Transactions
There are no proposed asset or business acquisitions or dispositions before the
board of directors for consideration.
Critical Accounting Estimates
The preparation of financial statements in conformity with UK GAAP requires the
Company to select from possible alternative accounting principles, and to make
estimates and assumptions that determine the reported amounts of assets and
liabilities at the balance sheet date, and reported costs and expenditures
during the reporting period. Estimates and assumptions may be revised as new
information is obtained, and are subject to change. The Company's accounting
policies and estimates used in the preparation of the Interim Financial
Information are considered appropriate in the circumstances, but are subject to
judgments and uncertainties inherent in the financial reporting process.
Goodwill
Goodwill arising on consolidation is capitalised and shown within fixed assets.
Amortization of goodwill arising from the acquisition of Mortbury Limited
("Mortbury") in May 2004 and the purchase of the Mortbury preference share in
November 2004 is to be deferred until production occurs, when it will be charged
over the expected production period of the project. Where a project is
abandoned or is determined to not be economically viable, the goodwill is
written off.
Resource Properties, Deferred Exploration and Development Costs
All costs related to the exploration of mineral properties are capitalised until
either the properties are brought into production, at which time they are
depleted on a unit of production basis, or until the properties are sold,
allowed to lapse or abandoned or determined not to be economically viable, at
which time they are charged to the profit and loss account.
The amounts capitalised at any time represent costs to be charged to operations
in the future and do not necessarily reflect the present or future values of
particular properties. The recoverability of the carrying values of exploration
properties is dependent upon the discovery of economically recoverable reserves,
the ability of the Company to obtain necessary financing to complete development
and future profitable production therefrom or alternatively upon the Company's
ability to dispose of its interests on an advantageous basis.
Management is of the view that the current policy is appropriate for the Company
at this time and is consistent with many other public exploration and
development companies in the UK and Canada. Shareholders are advised that
carrying values are not necessarily indicative of present or future values. The
Company assesses whether impairment exists in any of its exploration projects,
and writes down that project to its estimated recoverable value when such
impairment is found to exist. No writedowns were recorded in the Interim
Financial Information. A writedown would be recorded as an expense in the
Company's profit and loss account.
Asset Retirement Obligations
The fair value of the liability for an asset retirement obligation is recorded
when it is incurred and the corresponding increase to the asset is depreciated
over the life of the asset. The liability is increased over time to reflect an
accretion element considered in the initial measurement at fair value. At 13
November 2006, the Company has not incurred or committed any asset retirement
obligations related to the development of its Dukwe and Matsitama Projects.
Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
debtors, creditors and accrued liabilities, some of which are denominated in
Sterling, Botswana Pula, United States dollars, Canadian dollars, Australian
dollars and South African Rand. These accounts are recorded at cost which
approximates their fair value at each reporting period end value in Sterling.
The Company experiences financial gains or losses on these accounts as a result
of foreign exchange movements against Sterling. The Company minimizes its
foreign exchange risk by maintaining low Pula account balances, to the extent
possible. The Company does expect there to be significant expenditures in
developing and operating a mine at Dukwe and these costs will be denominated in
Botswana Pula and South African Rand. As mine development costs are incurred
and purchase commitments made, the Company may acquire Botswana Pula and South
African Rand or use derivative positions to lock in these costs in Sterling
funds, if it believes it prudent to do so.
The Company has placed its cash and cash equivalents in short-term liquid
deposits or investments which provide a revised rate of interest upon maturity.
Risks
The exploration for and exploitation of natural resources are speculative
activities that involve a high degree of risk for the Company and shareholders.
The risk factors which should be taken into account in assessing the Company's
activities include, but are not limited to, those set out below.
The risks noted below do not necessarily comprise all those faced by the Company
and are not intended to be presented in any assumed order of likelihood or
magnitude of consequences.
The development of the Dukwe and Matsitama Projects into commercial operation
cannot be guaranteed
In general, development projects have no operating history upon which to base
estimates of future cash operating costs. For development projects such as the
Dukwe Project, estimates of mineral resources and mineral reserves are, to a
large extent, based upon the interpretation of geological data obtained from
drill holes and other sampling techniques and feasibility studies. This
information is used to calculate estimates of the capital cost, cash operating
costs based upon anticipated tonnage and grades of ore to be mined and
processed, the configuration of the orebody, expected recovery rates, comparable
facility and equipment operating costs, anticipated climatic conditions and
other factors. In addition, there remains to be undertaken certain work on the
Dukwe Project that could adversely impact estimates of capital and operating
costs of the project and such differences could have a material adverse effect
on the Company's business, financial condition, results of operations and
prospects.
There can be no assurance that the Company will be able to complete development
of the Dukwe and Matsitama Projects (the "Projects") at all or on time or to
budget due to, among other things, changes in the economics of the Projects,
delays in receiving required consents, permits and registrations (including a
mining licence), the delivery and installation of plant and equipment and cost
overruns, delay in entering into contract mining agreements or that the current
personnel, systems, procedures and controls will be adequate to support the
Company's operations. Should any of these events occur, it would have a material
adverse effect on the Company's business, financial condition, results of
operations and prospects.
Copper price volatility may affect the production, profitability, cash flow and
financial position of the Company
The Company's revenues, if any, are expected to be derived from the extraction
and sale of copper concentrate. The price of copper has fluctuated widely,
particularly in recent years, and is affected by numerous factors beyond the
Company's control including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, interest rates,
global or regional consumption patterns, speculative activities and increased
production due to new extraction developments and improved extraction and
production methods. In recent years the price of copper has been affected by
changes in the worldwide balance of copper supply and demand, largely resulting
from economic growth and political conditions in China and other major
developing economies. While this demand has resulted in higher prices for copper
in recent years, if Chinese economic growth slows, it could result in lower
prices for copper. The effect of these factors on the price of copper, and
therefore the current or future economic viability of any of the Company's
projects, cannot accurately be predicted. Any material decrease in the
prevailing price of copper for any significant period of time would have an
adverse and material impact on the economic evaluations contained in this
prospectus and on the Company's results of operations and financial conditions,
as well as the economic viability of the Projects.
The Company currently depends significantly on a single project -- the Dukwe
Project
The Company's activities are focused primarily on the Dukwe Project in Botswana.
Any adverse changes or developments affecting this project would have a material
and adverse effect on the Company's business, financial condition, results of
operations and prospects.
Future production estimates may not be achieved and are subject to the normal
risks of mining operations
The Company's future mining operations are subject to all of the hazards and
risks normally incidental to exploration, development and the production of
copper, any of which could result in damage to life or property, environmental
damage and possibly legal liability for any or all damage. The Company's
activities may be subject to prolonged disruptions due to weather conditions,
hazards, such as unusual or unexpected geologic formations, flooding or other
conditions that may be encountered in the drilling and removal of material.
There may be a higher than normal risk of operational problems being
experienced, resulting from inexperience of plant management, operating and
maintenance staff should suitably trained personnel resources not be readily
available in Botswana or not otherwise easily employed from within the Southern
Africa region. This situation could also be impacted by delays in issuing of
necessary work and other labour permits to allow expatriate expertise to be
utilized to the extent necessary.
The success of current and future exploration activities cannot be assured
The exploration and development of mineral deposits involves significant
financial risks over a prolonged period of time, which even a combination of
careful evaluation, experience and knowledge cannot eliminate. While discovery
of a mineral structure may result in substantial rewards, few properties which
are explored are ultimately developed into producing mines. Major expenditure
may be required to establish mineral reserves by drilling and to construct
mining and processing facilities at a site. It is impossible to ensure that
preliminary feasibility studies or full feasibility studies on the Projects or
the current or proposed exploration programmes the Projects will ever result in
the discovery of an economically viable mineral deposit or in a profitable
commercial mining operation.
Whether a copper deposit will be commercially viable depends on a number of
factors, some of which are the particular attributes of the deposit, such as its
size and grade, proximity to infrastructure, financing costs and governmental
regulations, including regulations relating to prices, taxes, royalties,
infrastructure, land use, importing and exporting of copper and environmental
protection. The effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company's Projects not being, or
ceasing to be, viable, which would have a material adverse effect on the
Company's business, financial condition, results of operations and prospects.
Foreign investments and operations are subject to numerous risks associated with
operating in foreign jurisdictions
The Company is a foreign company and conducts its operations through foreign
subsidiaries, and substantially all of its assets are held in such entities.
Accordingly any limitation on the transfer of cash or other assets between the
parent corporation and such entities, or among such entities, could restrict the
Company's ability to fund its operations efficiently. Any such limitations, or
the perception that such limitations may exist in the future, could have a
material and adverse impact on the Company's valuation.
In addition, operating in foreign jurisdictions exposes the Company to the
effects of political, economic or other risks, including changes in foreign laws
(whether arbitrary or not), expropriation or nationalization of property, risks
of loss due to civil strife, acts of war, insurrection or terrorism (including
the effects of such acts which occur in neighbouring states), cancellation or
renegotiation of contracts or the inability to enforce legal rights in the
foreign jurisdiction.
The Company has no operating history and a history of losses and there can be no
assurance that the Company will ever be profitable
The Company has no mineral properties from which any ore has ever been extracted
and sold and its ultimate success will depend on its ability to generate cash
flow from producing properties in the future. The Company has not earned profits
to date and there is no assurance that it will do so in the future.
Government regulations may have an adverse effect on the Company's mining
operations
The Company, its subsidiaries, its business and its operations are subject to
various laws and regulations. The costs associated with compliance with such
laws and regulations may cause substantial delays and require significant cash
and financial expenditure, which may have a material adverse effect on the
Company's business, financial condition, results of operations, and prospects
and, in particular, the development of the Dukwe Project.
The Company's operations and its ability to hold various mineral rights require
licences, permits and authorizations and, in some cases, renewals of existing
licences, permits and authorizations from various governmental and
quasi-governmental authorities. The Company believes that it currently holds or
has applied for all necessary licences, permits and authorizations to carry on
the activities that it is currently conducting and to hold the mineral rights it
currently holds under applicable laws and regulations in effect at the present
time, and also believes that it is complying in all material respects with the
terms of such licences, permits and authorizations. However, the Company's
ability to obtain, sustain or renew such licences, permits and authorizations on
acceptable terms is subject to changes in regulations and policies and to the
discretion of the applicable governmental and quasi-governmental bodies.
Further, additional licences and permits that are necessary to permit the
Company to commercially exploit the Dukwe Project (including a mining licence)
may not be obtained. While there is no reason to believe that a mining licence
will not ultimately be granted, the grant of the mining licence and the timing
thereof cannot be guaranteed.
Currency fluctuations may affect the costs that the Company incurs in its
operations
Copper is sold throughout the world, principally in US Dollars. The Company's
costs are incurred primarily in British Pounds Sterling, Canadian Dollars, South
African Rand and Botswana Pula. Changes in the currency exchange rates of the
US Dollar against British Pounds Sterling, Canadian Dollars, South African Rand
or Pula (i) may affect the capital and operating costs of the Projects and (ii)
will affect the results presented in the Company's financial statements and
cause its earnings to fluctuate. As well, such fluctuations may affect the cash
flow that the Company hopes to realise from its operations. Accordingly, the
Company will be exposed to exchange rate fluctuations which could have a
material adverse effect on the Company's business, financial condition, results
of operations and prospects.
Further, there is no guarantee that the government of Botswana will not impose
restrictions on the convertibility of and obligations to remit and convert to
local currency in future. Such fluctuations in foreign currency or restrictions
on the convertibility of and obligations to remit and convert to the currency of
Botswana could have a material adverse effect on the Company's business,
financial condition, results of operations and prospects.
The prevalence of HIV/AIDS in Botswana may adversely impact the Company's
proposed mining operations
The per capita incidence of the HIV/AIDS virus in Botswana has been estimated as
being one of the highest in the world, according to public sources. As such,
HIV/AIDS remains the major healthcare challenge faced by Botswana and the
Company's operations in the country. If the number of new HIV/AIDS infections
in Botswana continues to increase and if the Botswana government imposes more
stringent obligations on employers related to HIV/AIDS prevention and treatment,
the Company's operations in Botswana and profitability could be adversely
affected.
The Company relies on key personnel and its management team and outside
contractors (including those in Botswana), and the loss of one or more of these
persons may adversely affect the Company
The Company's business is dependent on retaining the services of a small number
of key personnel of the appropriate calibre as the business develops. The
Company has entered into employment agreements with certain of its key
executives. The success of the Company is, and will continue to be, to a
significant extent, dependent on the expertise and experience of the directors
and senior management and the loss of one or more could have a materially
adverse effect on the Company.
The Company will rely heavily on sub-contractors to build, run and maintain the
Projects. The failure of a sub-contractor to perform properly its services to
the Company could delay or frustrate mining operations, and have a materially
adverse effect on the Company.
Outstanding Share Data
As of 13 November 2006, the Company's outstanding share data is as follows:
Number
Outstanding ordinary shares 130,507,185
Ordinary share options 12,369,872
Balance at 13 November 2006 142,877,057
AFRICAN COPPER PLC
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
Three and Nine Months ended 30 September 2006
Expressed in Pounds Sterling
The accompanying Financial Information for the three and nine months ended 30
September 2006 and 30 September 2005 have not been reviewed or audited by the
Company's Auditors and has an effective date of 13 November 2006.
AFRICAN COPPER PLC
Consolidated Profit and Loss Account
For the three and nine month periods ended 30 September 2006
(Unaudited)
Three Months Ended Nine Months Ended
30 September 30 September
2005 2005
2006 # 2006 #
# (as restated)* # (as restated)*
Administrative expenses (761,213) (368,738) (1,274,618) (1,063,396)
Operating loss (761,213) (368,738) (1,274,618) (1,063,396)
Bank interest receivable 660,398 154,409 992,325 418,551
Foreign exchange loss (579,036) - (296,876) -
Loss before and after tax (679,851) (214,329) (579,168) (644,845)
Basic loss per ordinary share (Note 2) (0.53)p (0.41)p (0.69)p (1.26)p
All amounts relate to continuing operations.
* see Note 7 Share Based Payments
Consolidated Statement of Total Recognised Gains and Losses
For the three and nine month periods ended 30 September 2006
(Unaudited)
Three Months Ended Nine Months Ended
30 September 30 September
2006 2005 2006 2005
# # # #
(as restated)* (as restated)*
Loss after tax for the financial period (679,851) (214,329) (579,168) (644,845)
Currency translation differences (784,409) 40,824 (1,892,958) (3,192)
Total recognised losses for the period (1,464,260) (173,505) (2,472,126) (648,037)
* see Note 7 Share Based Payments
AFRICAN COPPER PLC
CONSOLIDATED BALANCE SHEETS
As at 30 September 2006
(Unaudited)
As at As at
30 September 31 December
2006 2005
(unaudited) (audited)
Notes # #
Fixed Assets
Intangible Assets
Goodwill 3 8,684,180 8,684,180
Deferred exploration costs 3 12,033,294 7,158,314
Total Intangible Assets 20,717,474 15,842,494
Tangible assets 4 240,830 120,120
20,958,304 15,962,614
Current Assets
Debtors 269,533 227,618
Prepayments 15,177 -
Cash at bank and short term deposits 58,083,052 10,675,709
58,367,762 10,903,327
Creditors
Amounts falling due within one year (1,980,121) (1,912,530)
Net Current Assets 56,387,641 8,990,797
Net Assets 77,345,945 24,953,411
Share capital 5 1,298,012 520,332
Share premium 8 69,353,581 16,157,506
Merger reserve 8 8,606,461 8,606,461
Other reserve 8 2,139,530 1,248,625
Profit and loss account 8 (4,051,639) (1,579,513)
Equity Shareholders' Funds 77,345,945 24,953,411
AFRICAN COPPER PLC
Consolidated Cash Flow Statement
For the three and nine month periods ended 30 September 2006
(Unaudited)
Three Months Ended Nine Months Ended
30 September 30 September
2006 2005 2006 2005
# # # #
Net cash inflow/(outflow) from operating activities (606,858) 538,780 (1,117,724) 258,451
Return on investment and servicing of finance 81,362 154,409 695,449 418,551
Capital expenditure (1,946,966) (1,722,247) (6,144,138) (2,614,478)
Management of liquid resources 1,525,966 - (47,433,677) -
Financing - issue of equity shares during the 733,255 14,709 53,973,755 1,021,192
period
Cash outflow during the period (213,241) (1,014,349) (26,334) (916,284)
Note 11 provides further information on cash flows.
Reconciliation of net cash flow to movement in net funds
(Unaudited)
Three Months Ended Nine Months Ended
30 September 30 September
2006 2005 2006 2005
# # # #
Decrease in cash in the period (213,241) (1,014,349) (26,334) (916,284)
Cash inflow/(outflow) from management of liquid (1,525,966) - 47,433,677 -
resources
Change in net funds arising from cash flows (1,739,207) (1,014,349) 47,407,343 (916,284)
Opening net funds 59,822,259 13,508,548 10,675,709 13,410,483
Closing net funds 58,083,052 12,494,199 58,083,052 12,494,199
1. Nature of Operations and Availability of Project Finance
African Copper Plc ("African Copper" or the "Company") is the holding company of
a mineral exploration and development group of companies (the "Group"). The
Group is involved in the exploration and development of copper deposits in
Botswana and is currently in the development of a copper deposit (the "Dukwe
Project") and an exploration project (the "Matsitama Project"). The Dukwe
Project is located in the northeastern portion of Botswana and the Matsitama
Project is contiguous to the southern boundary of the Dukwe Project.
On 30 March 2006 a report prepared by A.C.A. Howe International Limited entitled
"Technical Report on the Dukwe Copper Project and Matsitama Prospecting Licences
Botswana Africa" (the "Technical Report") was released (a copy of which is
available at www.africancopper.com or SEDAR at www.sedar.com). The Technical
Report reviewed work completed to date on the Company's projects and provided
recommendations to develop a mine at the Dukwe Project and advance the Matsitama
Project.
On 5 June 2006 the Company received shareholder approval at an Extraordinary
General Meeting for the completion of a public offering to raise #52.9 million,
net of expenses, through the issue of 34,375,000 ordinary shares at 77.5p per
share and 40,625,000 ordinary shares at Can$1.60. The Board plans to use the
funds raised to execute on the recommendations contained in the Technical
Report. The strategy contemplates cashflow generated from the proposed mining
operations at the Dukwe deposit to continue funding the further exploration and
development of the Matsitama Belt.
If the aforementioned strategy is successful, the Board believes that future
cash flow from operations coupled with available working capital, should be
sufficient to permit the Company to finance its business internally and to
obtain debt financing when, and if, necessary and appropriate.
The accompanying interim consolidated financial information is prepared by
management in accordance with United Kingdom generally accepted accounting
principles. Selected information and disclosures required in notes to annual
consolidated financial statements has been condensed or omitted. This interim
consolidated financial information should be read in conjunction with the
Company's audited annual consolidated financial statements and notes for the
year ended 31 December 2005. The interim financial information has been prepared
following the same accounting policies and methods of computation as the annual
consolidated financial statements for the year ended 31 December 2005.
2. Basic and Diluted Loss Per Share
The calculation of basic loss per ordinary share for the nine months ended 30
September 2006 is based on the loss on ordinary activities after taxation of
#579,168 (2005: #644,845) and on 83,807,529 (2005:51,320,922) ordinary shares
being the weighted average of ordinary shares in issue during the period. For
the three months ended 30 September 2006, the calculation of basic loss per
ordinary share is based on the loss on ordinary activities after taxation of
#679,851 (2005: #214,329) and on 128,187,547 (2005:52,013,971). No diluted loss
per share is presented as the effect of the exercise of warrants and share
options would be to decrease the loss per share.
Details of warrants and share options in issue which could potentially dilute
earnings per share in the future are shown in Note 6 and Note 7.
3. Intangible Assets
Deferred
Exploration Costs
Goodwill Total
# # #
Balance, 31 December 2004 8,684,180 2,330,128 11,014,308
Additions - 4,755,317 44,755,317
Share option expense - 388,048 388,048
Exchange - (315,179) (315,179)
Balance, 31 December 2005 8,684,180 7,158,314 15,842,494
Additions - 5,656,928 5,656,928
Share option expense - 434,102 434,102
Exchange - (1,216,050) (1,216,050)
At 30 September 2006 8,684,180 12,033,294 20,717,474
4. Tangible Fixed Assets
Vehicles Computer and Furniture and Total
Office Equipment Fittings
# # # #
Cost
Balance, 31 December 2004 28,431 - - 28,431
Additions 102,759 25,987 4,661 133,407
Balance, 31 December 2005 131,190 25,987 4,661 161,838
Additions 174,160 23,393 10,700 208,253
Exchange (28,514) (5,648) (1,014) (35,176)
At 30 September 2006 276,836 43,732 14,348 334,915
Depreciation
Balance, 31 December 2004 - - - -
Charge for the year 32,798 7,988 932 41,718
Balance, 31 December 2005 32,798 7,988 932 41,718
Charge for the period 51,226 8,156 2,052 61,434
Exchange (7,129) (1,736) (202) (9,067)
At 30 September 2006 76,895 14,409 2,782 94,085
Net book value
At 31 December 2004 28,431 - - 28,431
At 31 December 2005 98,392 17,999 3,729 120,120
At 30 September 2006 199,941 29,323 11,566 240,830
5. Share Capital
Amount
Number #'000
Authorised
Ordinary Shares of 1p each 495,000,000 4,950
Redeemable preference shares of #1 each 50,000 50
Issued Amount
Number #
Balance, 31 December 2004 49,992,173 499,922
Ordinary Shares issued on exercise of warrants 2,040,982 20,410
Balance, 31 December 2005 52,033,155 520,332
Ordinary Shares issued on exercise of warrants 1,768,030 17,680
Ordinary Shares issued on public placement 75,000,000 750,000
Ordinary Shares issued on exercise of share options 1,000,000 10,000
Balance 30 September 2006 129,801,185 1,298,012
On 9 February 2006 a total of #52,521 was raised from the exercise of 100,000
warrants to purchase ordinary shares of 1p of the Company at 52.5p.
On 6 June 2006 the Company completed a public placement to raise gross proceeds
of #57.96 million, through the issuance of 34,375,000 ordinary shares of 1p at
77.5p per share and 40,625,000 ordinary shares of 1p at Can$1.60 per share. The
net proceeds of the offering were #52.9 million after deducting a 6% cash
commission to the underwriters of #3.48 million plus various professional fees
and stamp duty reserve tax costs related to the offering.
On 27 June 2006, a total of #145,041 was raised from the exercise of 900,000
share options to purchase ordinary shares of the Company at Can$0.25 and 100,000
share options to purchase ordinary shares of the Company at 35p. These share
options were options originally granted under the Mortbury Limited option plan
(Note 7).
On 27 September 2006 a total of #875,715 was raised from exercise of 1,668,030
warrants to purchase ordinary shares of 1p of the Company at 52.5p.
Subsequent to 30 September 2006:
On 6 November 2006 a total of #370,650 was raised from the exercise of 706,000
warrants to purchase ordinary shares of 1p of the Company at 52.5p (Note 6).
6. Share purchase warrants
The Company has in issue the following warrants at 30 September 2006:
Number of Warrants Number of
at 30 September Warrants at 31
2006 December 2005 Date of Grant Subscription Price Exercise Period
706,0002 2,474,030 26 May 2004 #0.525 from admission1 until two up to 3 years
years following admission date. following
#0.70 from that date until three admission.
years following admission date.
1. Admission to the Alternative Investment Market of the London Stock
Exchange at November 12, 2004.
2. On 6 November 2006, 706,000 warrants were exercised for ordinary
shares of 1p each at an exercise price of 52.5p per share for gross proceeds
totalling #370,650.
7. Share Based Payments
During 2005, the Company elected to adopt Financial Reporting Standards 20 ("FRS
20"), "Share Based Payments", with effect from 11 February 2004 (date of
incorporation), which represents early adoption of this standard and a change in
accounting policy. Under FRS 20, the Group either charges the profit and loss
account or capitalises as deferred exploration costs with the fair value of
share options issued, depending on the nature of the grant. The fair value is
calculated using the Black-Scholes method, which is then spread over the vesting
period after allowing for any expected lapses. An exemption applies for options
which were granted prior to 7 November 2002. The effect of this change in
accounting policy was to increase the loss before tax for the nine months ended
30 September 2005 by #108,497 and increase the net assets of the Group at 30
September 2005 by #300,146.
The Company has established a share option scheme with the purpose of motivating
and retaining qualified management and to ensure common goals for management and
the shareholders. Under the African Copper share plan each option gives the
right to purchase one African Copper ordinary share. For options granted to
employees the vesting period is generally between one and three years. If the
options remain unexercised after a period of 10 years from the date of grant,
the options expire. Furthermore, options are forfeited if the consultant or
employee leaves the Company.
As part of the acquisition of Mortbury Limited, the Company agreed to grant
options in the Company on the same basis as the Mortbury options outstanding on
the date of acquisition. No further options will be granted under the Mortbury
share scheme. Under the Mortbury share option scheme, directors, employees and
consultants of Mortbury were granted a total of 1,700,000 to acquire ordinary
shares of Mortbury with a weighted average exercise price of 17p. On 27 June
2006 a total of #145,041 was generated from the exercise of Mortbury options
with the exercise of 900,000 share options at Can$0.25 and 100,000 share options
at 35p.
As at 30 September 2006 ordinary share options held by directors, officers,
employees and consultants are as follows:
Weighted Average
Outstanding Remaining Exercisable
Exercise Number of Contractual Life Number of
Prices Share Options (years) Options
Can$0.25 350,000 0.50 350,000
35.0p 850,000 4.90 683,333
76.0p 2,960,000 8.33 2,566,667
77.5p 7,710,000 9.85 2,820,000
83.6p 499,872 1.12 499,872
12,369,872 8.53 6,919,872
During the nine month period ended 30 September 2006, 7,710,000 options (2005:
2,020,000) were granted. During this period #890,905 (2005: #408,643) in share
based expense was recorded as other reserve. Of the #890,905 recorded as other
reserve, #456,803 (2005:#108,497) was recorded as share based expense and
#434,102 (2005: #300,146) was charged to deferred exploration costs.
The following table reflects the continuity of stock options for the nine months
ended 30 September 2006:
Number of Weighted Average
Stock Options Exercise Price
Balance, 31 December 2004 3,489,872 43p
Options granted 2,260,000 76p
Forfeited during the year (90,000) 76p
Balance, 31 December 2005 5,659,872 55p
Options granted 7,710,000 77.5p
Options exercised (1,000,000) 14p
Balance, 30 September 2006 12,369,872 74p
8. Reserves
Share Merger Other Profit and Loss Total
Premium Reserve Reserve Account
# # # # #
Balance, 31 December 2004 15,156,725 8,606,461 740,300 (652,128) 23,851,358
Premium on exercise of warrants 1,000,781 - - - 1,000,781
Loss arising in the period - - - (612,206) (612,206)
Currency translation differences - - - (315,179) (315,179)
Credit arising on share options - - 508,325 - 508,325
Balance, 31 December 2005 16,157,506 8,606,461 1,248,625 (1,579,513) 24,433,079
Premium on exercise of warrants 910,556 - - - 910,556
Premium on public placement 52,150,478 - - - 52,150,478
Premium on exercise of share options 135,041 - - - 135,041
Loss arising in the period - - - (579,168) (579,168)
Currency translation differences - - - (1,892,861) (1,892,861)
Credit arising on share options - - 890,905 - 890,905
At 30 September 2006 69,353,581 8,606,461 2,139,530 (4,051,639) 76,047,933
9. Equity Shareholders' Funds
Three Months ended Nine Months ended
30 September 30 September
2006 2005 2006 2005
# # # #
Loss for the period (679,851) (214,329) (579,168) (644,845)
Currency translation losses/(gain) in the period (784,409) 40,824 (1,892,958) (3,192)
(1,464,260) (173,505) (2,472,126) (648,037)
New share capital subscribed 16,680 - 777,680 20,052
Share premium arising on share issue net of 716,575 - 53,196,075 986,432
expenses
Credit arising on share options 844,957 134,892 890,905 423,350
Net change to shareholders' funds in the period 113,953 (38,613) 52,392,534 781,797
Opening shareholders' funds 77,231,992 25,171,679 24,953,411 24,351,269
Closing shareholders' funds 77,345,945 25,133,066 77,345,945 25,133,066
10. Related Parties and Transactions With Directors
The following amounts were paid to companies in which directors of the group
have an interest:
Three Months ended Nine Months ended
30 September 30 September
2006 2005 2006 2005
# # # #
Amount paid to the Dragon Group, a group controlled by 18,102 21,433 53,352 77,936
A.J. Williams, for fully serviced office accommodation in
the UK and reimbursed expenses
Amount paid to Summit Resource Management Limited, a 20,931 9,630 58,170 30,604
company controlled by David Jones, for fully serviced
office accommodation in Canada and reimbursed expenses
The Company entered into an agreement with Pickax 41,200 - 41,200 -
Corporation ("Pickax") to provide the services of Mr.
Joseph Hamilton, a director and Chief Operating Officer of
the Company. The agreement commenced on 1 July 2006,
during which time Pickax will be paid #164,800 per
year. Pickax is a corporation controlled by Joseph
Hamilton. This agreement replaced an existing executive
services agreement on materially the same terms and
conditions.
These related party transactions were in the normal course of operations and
are recorded at their exchange amount. At 30 September 2006, #12,227 (2005:
#6,976) was outstanding to the Dragon Group and #2,279 (2005: #1,714) was
outstanding to Summit Resource Management Limited.
11. Notes to the Cash Flow Statement
Reconciliation of operating loss to net cash inflow/(outflow) from operating
activities:
Three Months ended Nine Months ended
30 September 30 September
2006 2005 2006 2005
# # # #
Operating loss (761,213) (368,738) (1,274,618) (1,063,396)
Decrease/(increase) in debtors 7,713 (27,170) (57,092) 43,105
Increase/(decrease) in creditors (306,063) 898,306 (242,817) 1,170,244
Share option expense 452,705 36,382 456,803 108,498
Net cash inflow/(outflow) from operating (606,858) 538,780 (1,117,724) 258,451
activities
11. Notes to the Cash Flow Statement (continued)
Gross cash flows:
Three Months ended Nine Months ended
30 September 30 September
2006 2005 2006 2005
# # # #
Returns on investment and servicing of finance
Interest received 660,398 154,409 992,325 418,551
Foreign exchange loss (579,036) - (296,876) -
81,362 154,409 695,449 418,551
Capital expenditure
Payments to acquire tangible fixed assets (76,785) (36,599) (182,145) (162,908)
Payments to acquire intangible fixed assets (1,870,180) (1,685,648) (5,961,992) (2,451,570)
(1,946,965) (1,722,247) (6,144,137) (2,614,478)
Management of liquid resources
Amounts placed on term deposit 1,525,966 - (47,433,677) -
1,525,966 - (47,433,677) -
Financing
Issue of equity upon exercise of 875,715 14,709 928,236 1,021,192
warrants
Issue of equity share capital - public - - 57,964,248 -
placement
Cost of equity share capital - public (142,460) (5,063,770)
placement
Issue of equity upon exercise of share - - 145,041 -
options
733,255 14,709 53,973,755 1,021,192
Analysis of net funds
At 31 December 2005 Cash flows At 30 September 2006
# # #
Cash at bank and in hand 296,990 (26,334) 270,656
Liquid resources 10,378,719 47,433,677 57,812,396
10,675,709 47,407,343 58,083,052
12. Significant Differences from Canadian GAAP
The interim financial statements of the Company for the three and nine months
ended 30 September 2006 have been prepared in accordance with United Kingdom
Generally Accepted Accounting Principles ("UK GAAP") which, as applied in the
financial statements, conforms in all material respects to those accounting
principles generally accepted under Canadian Generally Accepted Accounting
Principles ("CDN GAAP"), except as described below.
(a) Acquisition Accounting
Under UK GAAP the exchange of shares of African Copper for the shares of
Mortbury Limited ("Mortbury") is accounted for as an acquisition of Mortbury by
African Copper. This share exchange resulted in the former shareholders of
Mortbury owning a majority of African Copper. As a result, under CDN GAAP this
transaction is treated as an acquisition of African Copper by Mortbury, referred
to as a "reverse take-over". As African Copper was not an operating business
prior to this share exchange, the transaction will be accounted for as a capital
transaction of Mortbury. This transaction is the equivalent of the issuance of
shares by Mortbury for the net assets of African Copper, accompanied by a
recapitalization of Mortbury.
For CDN GAAP purposes, Mortbury is considered the continuing business.
Accordingly, the financial statements would reflect the results of operations of
Mortbury for the year from 1 January 2004 to 31 December 2004 and include the
results of operations of African Copper only from the date of the share
exchange, 26 May 2004. The reverse take-over acquisition would be recorded at
the book value of the net assets of African Copper acquired, being $1.
Accordingly, no goodwill would arise from this transaction. Also, all costs
pertaining to the transaction would be considered costs of issuing the shares
and recapitalizing Mortbury.
(b) Re-purchase of Mortbury Preference Share
As a result of the accounting treatment given the share exchange, as described
previously, the subsequent purchase of the Mortbury Class C Preference share
would also be treated as a capital transaction for CDN GAAP. Accordingly, the
excess of the fair value of the consideration given for the Preference share
over its book value would be reflected as a premium on re-purchase of the share,
charged separately to the accumulated loss account. Under UK GAAP this
difference became an additional component of goodwill.
(c) Warrants
Under UK GAAP the fair value of warrants issued is not required. Under CDN GAAP
the Company is required to determine the fair value of warrants issued using an
acceptable pricing model (in this case the Black-Scholes Option Pricing Model
has been used) and to separate this value from the underlying equity instrument,
or record a cost equal to the fair value of the warrants issued.
In 2004 the Company issued warrants in connection with its 26 May private
placement (with each investor receiving 1/2 share purchase warrant and one
ordinary share per unit invested) and issued warrants to former Mortbury
creditors as part of the 26 May share exchange. The following details the value
attributed to the warrants granted:
i) On 9 June 2004, 2,841,182 warrants at a price of 50p per share were
granted in connection with the 26 May 2004 private placement. The fair value of
these warrants amounted to #92,744, estimated based on the following
assumptions: dividend yield of 0%; risk-free interest rate of 4.5%; expected
life of 1 year; and volatility of 60%. This value has been recorded as an
increase in "Contributed Surplus" in the Equity Shareholders' Funds section of
the balance sheet and a reduction in share premium related to the proceeds
received from the private placement. During 2005, a total of 2,012,967 warrants
were exercised and 828,215 warrants expired. The exercise of these warrants was
recorded as a decrease in " Contributed Surplus" in the Equity Shareholders'
Funds section and an addition to the share premium related to the fair value
that was previously recorded for the warrants.
ii) On 12 November 2004, 2,502,045 warrants at a price of 52.5p per
share for the first two years and 70p per share for the third year were granted
in connection with the 26 May 2004 share exchange. The fair value of these
warrants amounted to #878,894, estimated based on the following assumptions:
dividend yield of 0%; risk-free interest rate of 4.5%; expected life of 3 years;
and volatility of 60%. This value has been recorded as an increase in "
Contributed Surplus" in the Equity Shareholders' Funds section of the balance
sheet and a reduction in share premium related to the costs of the share
exchange. During the nine months ended 30 September 2006, a total of 1,768,030
warrants were exercised. The exercise of these warrants were recorded as a
decrease in " Contributed Surplus" in the Equity Shareholders' Funds section and
an addition to the share premium related to the fair value that was previously
recorded for the warrants.
(d) Goodwill
Under UK GAAP amortization of goodwill arising from an acquisition is to be
deferred until production occurs, when it will be charged over the expected
production period of the project. Where a project is abandoned or is determined
to not be economically viable, the goodwill is written off.
Under CDN GAAP, the accounting treatment given the Mortbury share exchange would
have resulted in no goodwill being recorded. Accordingly, there is no
adjustment required relating to goodwill or amortisation of goodwill under UK
GAAP or CDN GAAP.
(e) Cash and Cash Equivalents
Under UK GAAP, cash at bank includes cash in hand and bank deposits repayable
within 24 hours without penalty. All other bank deposits are included in short-
term deposits. For purposes of the cash flow statement, management of liquid
resources includes movements in short term deposits which do not fall within the
definition of cash at bank.
Under CDN GAAP, cash and cash equivalents include cash on hand, balances with
banks and short term deposits with original maturities of three months or less.
Accordingly, there is no adjustment in the cashflow for management of liquid
resources as the Company's short term investments have maturities less than
three months and movements in short term deposits fall into the definition of
cash at bank.
(f) Cash Flow Statement
The format of the UK GAAP cash flow statement differs from that of the CDN GAAP
cash flow statement. Under UK GAAP, interest paid and received is reported in a
separate cash flow category called "Return on investment and servicing of
finance." In addition, under the UK GAAP cash flow statement there is a
separate section for "Acquisitions". Finally, under UK GAAP, movements in
short-term investments are not included in cash but classified as "Management of
Liquid Resources." Under CDN GAAP, short-term investments with a maturity of
three months or less at the date of acquisition are included in cash.
(g) Foreign Exchange Data and Foreign Currency Translation
All amounts included in this report are reported in Sterling. The following
table reflects the low and high rates for one Pound Sterling, expressed in
Canadian dollars in effect during the periods noted, the rates of exchange at
the end of such periods and the average rates of exchange during such periods,
based on the Bank of Canada average noon spot rate of exchange.
Three Months ended Nine months ended
30 September 30 September
2006 2005 2006 2005
Low for the period 2.0389 2.0546 1.9806 2.0546
High for the period 2.1523 2.1882 2.1523 2.4032
Rate at the end of period 2.0874 2.0546 2.0874 2.0546
Average rate for period 2.1008 2.1433 2.0583 2.2571
Under UK GAAP, Mortbury and its subsidiaries, Matsitama Minerals (Proprietary)
Limited ("Matsitama") and Messina Copper (Botswana) (Proprietary) Limited ("
Messina") are considered self-sustaining foreign subsidiaries. Accordingly, all
assets and liabilities are translated into Sterling at the exchange rate
prevailing at the balance sheet date and revenues and expenses at the exchange
rate prevailing when the transaction occurred with the resulting differences
reflected in Reserves. Under CDN GAAP, Mortbury is considered the parent
company and African Copper, Matsitama and Messina are considered integrated
foreign subsidiaries. Accordingly, monetary assets and liabilities are
translated using the exchange rate prevailing at the balance sheet date,
non-monetary assets and liabilities are translated at historical exchange rates
and revenues and expenses are translated at the exchange rate prevailing when
the transactions occurred, with the resulting differences reflected in the
determination of net income for the period.
Effective 1 January 2004, Mortbury changed its reporting currency from U.S.
dollars to Sterling. As required by CDN GAAP Emerging Issues Committee Release
130, all assets and liabilities of Mortbury would be translated from U.S.
dollars to Sterling at the rate of exchange in effect at that date, with any
resulting gain or loss being charged as a separate component of Shareholders'
Equity.
(h) Share Based Compensation
Under UK GAAP, the fair value of share options issued are included in the Equity
Shareholders' Funds as an Other Reserve. Under CDN GAAP, the fair value of
share options issued are also included in the Shareholders' Equity Funds but
included under the Contributed Surplus category.
Under UK GAAP, the 450,000 Mortbury options issued at 35p granted by the Company
as part of the Mortbury acquisition were dealt with as part of the acquisition
accounting of Mortbury. Under CDN GAAP, these options represent a grant to
employees and their fair value was calculated using the Black Scholes option
pricing model and accounted for in the Share Premium account as a cost of issue.
(i) Summary of GAAP Differences
The following table summarizes the components of the significant differences
between UK GAAP and CDN GAAP:
30 September 30 September
2006 2005
# #
(i) Goodwill
Goodwill costs following UK GAAP 8,684,180 8,684,180
Less: goodwill arising on Mortbury acquisition not recorded (5,439,808) (5,439,808)
under CDN GAAP
Less: goodwill arising on purchase of Mortbury preference (3,244,372) (3,244,372)
share not recorded under CDN GAAP
Goodwill following CDN GAAP - -
(ii) Deferred exploration costs
30 September 30 September
2006 2005
# #
Deferred exploration costs following UK GAAP 12,033,294 5,081,844
Add: increase in value due to foreign exchange rate at 31 51,470 51,470
December 2003 compared to 26 May 2004 under CDN GAAP
Add: elimination of UK GAAP foreign exchange effect on 2,208,137 3,192
non-monetary asset
Deferred exploration costs following CDN GAAP 14,292,901 5,136,506
(iii) Share capital
Share capital following UK GAAP 1,298,012 520,332
Less: share capital on Mortbury acquisition shares not (206,500) (206,500)
recorded under CDN GAAP
Add: share capital on Mortbury acquisition shares recorded 166,500 166,500
under CDN GAAP
Add: share capital issued in lieu of fee payable for 40,000 40,000
assistance in the acquisition of Mortbury recorded under CDN
GAAP
Share capital following CDN GAAP 1,298,012 520,332
(iv) Share premium
Share premium following UK GAAP 69,353,581 16,157,506
Add: share premium on Mortbury acquisition recorded under CDN 1,702,537 1,702,537
GAAP
Add: share premium on purchase of Mortbury preference share 2,945,957 2,945,957
recorded under CDN GAAP
Less: related cash costs of issue under CDN GAAP (71,000) (71,000)
Less: related share costs of issue under CDN GAAP (40,000) (40,000)
Less: allocation of fair value of 1,700,000 Mortbury options and (504,718) (504,718)
499,872 underwriters options issued and recorded under CDN GAAP
Less: allocation of fair value of 2,836,182 warrants issued in (91,546) (91,546)
private placement under CDN GAAP
Less: allocation of fair value of 2,502,045 warrants issued and (878,995) (878,995)
recorded under CDN GAAP
Add: value of warrants exercised during 2005 and 2006 under CDN 722,442 22,099
GAAP
Add: value of share options exercised during second quarter 2006 239,918 -
Share premium following CDN GAAP 73,378,176 19,241,840
(v) Merger reserve
Merger reserve following UK GAAP 8,606,461 8,606,461
Less: premium on issue on Mortbury acquisition shares not (8,606,461) (8,606,461)
recorded under CDN GAAP
Merger reserve following CDN GAAP - -
Other reserve 30 September 30 September
2006 2005
(vi)
# #
Other reserve following UK GAAP 2,139,530 1,148,942
Less: reallocation of fair value of share options recorded as (2,139,530) (1,148,942)
Contributed Surplus under CDN GAAP
Other reserve following CDN GAAP - -
(vii) Contributed surplus
Contributed surplus following UK GAAP - -
Add: reallocation of fair value of share options recorded 2,139,530 1,148,942
as Other Reserve under UK GAAP
Add: fair value of 499,872 underwriters options issued and 123,968 123,968
recorded under CDN GAAP
Add: fair value of 450,000 Mortbury options issued and 68,750 68,750
recorded under CDN GAAP
Add: allocation of fair value of 2,502,045 warrants issued 878,995 878,995
and recorded under CDN GAAP
Add: allocation of fair value of 2,836,182 warrants issued 91,546 91,546
in private placement under CDN GAAP
Less: value of warrants exercised under CDN GAAP (722,443) (22,099)
Less: value of share options exercised under CDN GAAP (239,918) -
Contributed surplus following CDN GAAP 2,340,428 2,290,103
(viii) Profit and loss account
Profit and loss account following UK GAAP (4,051,639) (1,300,176)
Less: opening accumulated loss of Mortbury recorded under CDN GAAP (897,326) (897,326)
Add: elimination of UK GAAP foreign exchange effect on non-monetary 2,208,137 3,192
asset
Less: premium on redemption of preference share recorded under CDN GAAP (3,244,372) (3,244,372)
Less: Loss of Mortbury for the period from 1 January 2004 to 26 May (138,090) (138,090)
2004 recorded under CDN GAAP
Add: Foreign currency gain for the period from 1 January 2004 to 26 May 28,046 28,046
2004 recorded under CDN GAAP
Profit and loss account following CDN GAAP (6,095,244) (5,548,726)
(j) CDN GAAP Condensed Financial Statements
Had the financial statements been reported under CDN GAAP, the condensed
consolidated balance sheets and profit and loss accounts would be reported as
follows:
Consolidated Balance Sheets 30 September 30 September
2006 2005
# #
Deferred exploration costs 14,292,901 5,136,506
Tangible assets 240,830 191,339
Current assets 58,367,763 12,610,595
Creditors (1,980,121) (1,434,890)
Net assets 70,921,373 16,503,550
Share capital 1,298,012 520,332
Share premium 73,378,176 19,241,840
Contributed surplus 2,340,428 2,290,103
Profit and loss account (6,095,244) (5,548,726)
70,921,373 16,503,550
Profit and Loss Account Three months ended Nine months ended
30 September 30 September
2006 2005 2006 2005
# # # #
Net loss, as reported in accordance with UK GAAP (679,851) (214,329) (579,168) (644,845)
Net loss, as reported in accordance with CDN GAAP (679,851) (214,329) (579,168) (644,845)
Opening losses brought forward (5,415,393) (5,334,397) (5,516,076) (4,903,881)
Accumulated losses carried forward (6,095,244) (5,548,726) (6,095,244) (5,548,726)
Loss per ordinary share for the period (0.53)p (0.41)p (0.69)p (1.26)p
The differences arising between UK GAAP and CDN GAAP would have had no affect on
the consolidated cash flow statement other than the differences in disclosure
noted above.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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