RNS Number : 2313C
Angus & Ross PLC
29 August 2008
ANGUS & ROSS PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 29 FEBRUARY 2008
Highlights
* Bankable Feasibility Study completed
* Mining licence granted for Black Angel
* Geological studies received showing further potential for new deposits
* Loss for the year �4,259,213
* Post year end equity raising of �3.5 million gross
* Cash at bank �2,233,363 at year end
* Further construction delayed until project financing finalised
Chairman's statement
INTRODUCTION
Despite very difficult market conditions, Angus & Ross ("A&R") is making steady progress towards the
re-opening of the famous Black Angel zinc/lead mine in west Greenland. This progress is much slower
than originally hoped largely due to the delays in securing project finance. Recently it was decided to
delay further construction until next year. This decision recognised that the field season in Greenland,
when construction is practical and safe, is now limited. However, in view of the low current prices of zinc
and lead, the deferment of production should not impact the long term value of the project.
FINANCIAL RESULTS
The loss for the year amounted to �4,259,213 (2007: �4,365,404); cash at bank at the year end amounted
to �2,233,363 (2007: �3,957,526).
OVERVIEW
In July 2007, we concluded the arrangement of a line of credit of up to $30 million from Cyrus Capital Partners LP and, in May 2008, we
were granted a mining licence to re-open the Black Angel mine in Greenland. These positive events have coincided with a decline in the zinc
price from $3,500 tonne to the current $1,615, one of the severest
credit crunches of the last 30 years and operating costs rising due mainly to a doubling of oil prices. In July last year, the Company drew
down the first tranche of $12.5 million; many of the conditions required to enable us to draw down the second tranche have been fulfilled
but further work is required to comply with the remainder. Negotiations are continuing to source the balance of the capex finance (about $30
million) to enable production to start.
During the year, the reserves at the Glacier Zone were increased following a successful drilling programme so that the total JORC
standard resource base is now over 4.4 million tonnes. A Bankable Feasibility Study was received in February covering Phase 1 of the Black
Angel project, namely the extraction of 707,000 tonnes of high grade material from the mine itself. Further review of the Study by
management and technical staff of the Company concluded that 1.3 million tonnes could be extracted in Phase 1 of the project.
Recently, and with the critical support of its major shareholder RAB Capital, the Company completed a small equity raising of �3.5
million.
GRADE
The Black Angel project has one of the highest grade and highest quality ores available in the world today. Much of the ore that Black
Angel Mining A/S is planning to extract in the early years is graded at over 20% zinc and lead combined. This figure compares with the world
average of all zinc production of 7%.
ZINC PRICE RECOVERY
Most market analysts are predicting a "second wave" of high prices from around 2010/2011 - at a time which, all being well, could
coincide with the first year of full scale production at the Black Angel mine. The A&R team is working on proposals to reduce its operating
cost base so that it can still achieve target profitability, albeit with lower market prices for zinc and lead.
EXPLORATION AND THE DEEP ICE ZONE
The management team has been concentrating on the re-opening of the Black Angel mine, and, in consequence, no exploration drilling is
being undertaken this year. Access to the mine via the cable car is an important first step in conducting exploration in the mine itself. In
particular, one of the enticing opportunities the Company will then have is to inspect the Deep Ice Zone, which is at the far end of the
mine behind a concrete barrier. This was installed by Cominco, the original operators of the mine, to control water outflow after they had
started to extract high grade ore from this zone. About 750 metres away, offsetting the mined zone and outside the mine, several exploration
holes were drilled through the ice and came across substantial mineralisation. One of these intersected 6.9 metres of mineralisation with
grades of over 33% of combined zinc and lead. The hope is that this mineralisation can be proved to be extensive as exploration in that area
was not definitive.
After the granting of the mining licence our landholdings at Black Angel consist of 52 sq km of the mining licence and 207 sq km of
exploration licences. As mentioned earlier a significant discovery was made in 2006 near the mine at the Glacier Zone where an outcrop has
developed into a minimum of 1.7 million tonnes of average combined zinc and lead grade of 9.4%. This discovery remains open at depth.
During the year, Irish zinc specialist consultants Aurum were asked to review some of the exploration data
in the Black Angel area and in summary said, "The area is challenging but has immense potential for the discovery of new resources due to
the widespread occurrence of high grade mineralisation and a new structural understanding of the area."
OTHER ASSETS:
MOTZFELDT
It should be remembered that A&R, through its subsidiary Greenland Resources Ltd, also has important exploration interests at Motzfeldt
in the south west of Greenland. This is an area which according to the Mining Journal (November 2007 edition, Special Tantalum Supplement)
has the world's fourth largest tantalum and niobium deposit. The deposit also contains some low grade uranium. When A&R completed a scoping
study in 2003/4, no credits were included for either the niobium or the uranium. However, with niobium prices increasing from about $6/lb to
around $18/lb and the current ban on uranium exploration being re-considered by the Government of Greenland, there is reason to believe the
Motzfeldt project
could be attractive to another specialised mining or exploration company.
BRAZIL
All of the Brazilian interests are held by a private, 62% owned, subsidiary called St Andrews Mining Ltd ("SAM"). This company has a
portfolio of largely gold exploration interests and hence requires capital, which has been difficult to find in current market conditions.
Fortunately outside investors have kept SAM on a care and maintenance basis whilst all options are considered.
AUSTRALIA
A&R own 28% of Queensland Gold and Minerals Ltd, which is quoted on the Australian Stock Exchange. This company owns a portfolio of
mainly Queensland located exploration properties and, rather like SAM, needs capital to continue exploring. Local management is attempting
to arrange new finance, which is likely to result in dilution of A&R's percentage ownership. Again, this historic holding is no longer a
core asset of A&R and will be sold in due course.
CHANGES OF DIRECTORS, MANAGEMENT AND PROFESSIONAL ADVISERS
Towards the end of 2007 your Board instituted several changes in personnel and advisers in preparation
for the changes that are inevitable and necessary when an exploration company takes on the challenge
of putting a mine into production.
In particular, the Company welcomed Mr Nicholas Hall onto the Board to relieve me, as Chairman, of my role as Chief Executive Officer.
Mr Hall trained as an accountant before working in the mining industry with Rand London Ltd in South Africa, Geevor in the UK and PBS Coals
Inc. in the USA.
Another important appointment was that of Mr Tim Daffern as Director of Mining and Exploration. Mr Daffern is a Chartered Mining
Engineer and, for the last four years, had worked as Technical Director with Wardell Armstrong International Ltd, who carried out the work
on the Bankable Feasibility Study for the Black Angel mine.
We were also pleased to welcome Mr Chris Innis as a Non-executive Director. Mr Innis was formerly a corporate financier with Hambros
Bank, an owner of the Mining Journal and a Director of AIM Resources. His experience is particularly relevant to A&R as the Company works
through this period of change.
On behalf of the Company, I would also like to express my grateful thanks to Mr Richard Burt and Mr Malcolm Swallow, both of whom
retired as Non-executive Directors on 1 February 2008. The contribution they both made was invaluable.
In November 2007 the Company also appointed Fox-Davies Capital as brokers while retaining the services of Landsbanki Securities as
nominated adviser.
THE FUTURE
We are now a company with a mining licence to re-open an historically rich zinc mine in a politically stable area of the world.
Currently the share price reflects neither the mine's profit potential nor the exploration potential of the area. I expect this to be
remedied, at least in part, when full project financing is confirmed.
In conclusion, I would like to thank all the Board, the management and staff who have, together, coped with significant changes in the
Company and its organisation.
I appreciate it has also been a disappointing year for shareholders but despite the uncertainties in financial markets, we are confident
that the Black Angel mine, with its high grade ore and its potential to host other rich deposits, will prove to be an attractive investment.
Robin Andrews
Chairman
29 August 2008
Extract from Directors' report
Risks and Uncertainties
The Company is subject to a number of risk factors due to the fundamental nature of the mining business in which it is engaged, not
least adverse movements in commodity prices, which are impossible to forecast. A&R seeks to counter this risk as far as possible by
selecting exploration areas on the basis of their recognised geological potential to host high grade deposits. At the same time, the area of
under-explored Proterozoic terrain on which the Company focuses in Greenland, benefits from one particular advantage, namely, very low
political risk.
Controls and Procedures
Management is responsible for establishing and maintaining a system of controls and procedures over the public disclosure of financial
and non-financial information regarding the Company. Management is also responsible for the design and maintenance of effective internal
control over financial reporting to provide reasonable assurance regarding the integrity and reliability of the Company's financial
information and the preparation of its financial statements in accordance with IFRS principles. Management maintains appropriate information
systems, procedures and controls to ensure integrity of the financial statements and maintains appropriate information systems, procedures
and controls to ensure that information used internally and disclosed externally is complete and reliable.
The Company's management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within A&R have been detected.
However, management is committed to continuously mitigating any risks and systematically improving operating controls where and when
possible in a cost-effective manner.
Industry
The Company is engaged in the exploration of mineral properties, an inherently risky business. Most exploration projects do not result
in the discovery of commercially mineable ore deposits. The geological focus of the Company is on areas in which the geological setting is
well understood by management and the technological tools it employs are regularly updated to better focus exploration efforts.
Reserve and resource estimates
The estimation of mineral resources and reserves is a subjective process and the accuracy of any such estimates is a function of the
quality of available data, and of engineering and geological interpretation and judgement. Assurances cannot be given that the volume and
grade of reserves recovered and rates of production achieved will be at the level anticipated.
Metal prices
The price of metals is affected by numerous factors totally beyond the control of the Company, including the exchange rate of the US
dollar relative to other major currencies, demand, political and economic conditions and production levels. In addition, the price of metals
has been volatile over short periods of time due to speculative activities.
Cash flows and additional funding requirements
A&R currently has no revenues from operations. If the Company's exploration programmes are successful, the Company will be required to
fund on-going exploration and development costs. Substantial additional capital is required to put a property into commercial production.
The sources of funds currently available to the Company for its exploration and development stage projects are either: the sale of equity
capital, loan notes or the offering of an interest in its projects to another party.
The Company has a loan of $12.5m from Cyrus Capital Partners LP, which is repayable on or before 10 July 2010. If the Company defaults
on the loan agreement or is unable to satisfy Cyrus of its ability to meet the repayment terms, the loan could become repayable on demand.
A&R does not presently have sufficient financial resources to undertake its currently planned exploration and development programmes
and, although it has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate
financing in the future or that such financing will be on terms advantageous to the Company.
Exchange rate fluctuations
Fluctuations in currency exchange rates can significantly impact cash flows. The US dollar exchange rate in particular has varied
substantially over time, while the Company has historically raised all of its equity financing in UK currency. Some of the Company's
exploration expenses, meanwhile, are denominated in other currencies, such as the Danish Kroner. Fluctuations in exchange rates may give
rise to foreign currency exposure, either favourable or unfavourable, which may impact on financial results. A&R does not engage in currency
hedging to offset the risk of exchange rate fluctuation.
Environmental
A&R's exploration and development activities are subject to extensive laws and regulations governing environmental protection. The
Company is also subject to various reclamation-related requirements. Although the Company closely follows, and believes it is operating in
compliance with, all applicable environmental regulations, there can be no assurance that all future requirements will be achievable on
reasonable terms. Failure to comply may result in enforcement actions causing operations to cease or be curtailed and may include corrective
measures requiring significant capital expenditures.
Laws and regulations
A&R's exploration activities are subject to local laws and regulations governing prospecting, development, production, exports, taxes,
labour standards, occupational health and safety, mine safety and other matters. Such laws and regulations are subject to change and can
become more stringent, and compliance can therefore become more costly. The Company applies the expertise of its management, its advisors,
its employees and contractors to ensure compliance with current laws.
Title to mineral properties
While the Company has undertaken all the customary due diligence in the verification of title to its mineral properties, this should not
be construed as a guarantee of title. The properties may be subject to prior unregistered agreements or transfers and title may be affected
by undetected defects.
Competition
There is constant competition from other mineral exploration companies, with operations similar to those of the Company. Many of the
mining companies with which the Company competes have operations and financial resources substantially greater than those of A&R.
Dependence on management
A&R strongly depends on the business and technical expertise of its small management team and there is little possibility that this
dependence will decrease in the near term. A&R has no key-man insurance.
Consolidated income statement
Year ended 29 February 2008
2008 2007
� �
CONTINUING OPERATIONS
Revenue * *
Depreciation of capitalised exploration * (222,962)
costs
Exploration costs written off (2,922,260) (2,544,175)
Gain on part disposal of holding in 761,936 334,514
subsidiary
Impairment of goodwill (26,545) (855,988)
Other operating costs (1,479,257) (1,275,260)
OPERATING LOSS (3,666,126) (4,563,871)
Finance costs (635,022) *
Finance income 232,974 226,947
Share of loss of associate (191,039) (28,480)
LOSS BEFORE TAX (4,259,213) (4,365,404)
Taxation * *
LOSS FOR THE YEAR FROM CONTINUING (4,259,213) (4,365,404)
OPERATIONS
Attributable to:
Equity holders of the parent (4,169,654) (4,161,801)
Minority interests (89,559) (203,603)
EARNINGS (LOSS) PER SHARE
Basic loss per share (2.97)p (3.16)p
Diluted loss per share (2.86)p (3.04)p
Consolidated balance sheet
As at 29 February 2008
2008 2007
� �
NON*CURRENT ASSETS
Property, plant and equipment 5,333,830 51,988
Investments accounted for using the equity 353,718 544,757
method
5,687,548 596,745
CURRENT ASSETS
Inventories 126,017 *
Trade and other receivables 199,088 395,921
Cash and cash equivalents 2,233,363 3,957,526
2,558,468 4,353,447
CURRENT LIABILITIES
Trade and other payables (1,024,149) (468,431)
(1,024,149) (468,431)
NET CURRENT ASSETS 1,534,319 3,885,016
TOTAL ASSETS LESS CURRENT LIABILITIES 7,221,867 4,481,761
NON*CURRENT LIABILITIES
Other payables (356,430) (87,077)
Non*current borrowings (5,670,176) *
Non*current provisions (250,000) *
(6,276,606) (87,077)
NET ASSETS 945,261 4,394,684
EQUITY
Share capital 1,413,772 1,387,772
Share premium 12,473,896 11,990,417
Translation reserve (113,564) 47,625
Retained earnings (12,828,843) (9,031,130)
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
OF THE pARENT cOMPANY 945,261 4,394,684
Minority interests * *
TOTAL EQUITY 945,261 4,394,684
Consolidated statement of changes in equity
Year ended 29 February 2008
Ordinary
share Share Retained Translation Minority Total
capital premium earnings reserve Total interest equity
� � � � � � �
At 1 March 2006 753,144 4,874,178 (5,197,419) * 429,903 1,043,543 1,473,446
Loss for * * (4,161,801) * (4,161,801) (203,603) (4,365,404)
the period
Shares issued 634,628 7,419,887 * * 8,054,515 * 8,054,515
Costs of share issues * (303,648) * * (303,648) * (303,648)
Effect of changes
in minority interests
* * * * * (839,940) (839,940)
Share*based payments * * 328,090 * 328,090 * 328,090
Exchange difference * * * 47,625 47,625 * 47,625
At 28 February 2007 1,387,772 11,990,417 (9,031,130) 47,625 4,394,684 * 4,394,684
Loss for * * (4,169,654) * (4,169,654) (89,559) (4,259,213)
the period
Shares issued 26,000 498,000 * * 524,000 * 524,000
Costs of share issues * (14,521) * * (14,521) * (14,521)
Effect of changes
in minority interests
* * * * * 89,559 89,559
Share*based payments * * 371,941 * 371,941 * 371,941
Exchange difference * * * (161,189) (161,189) * (161,189)
balance at 29 February 2008
1,413,772 12,473,896 (12,828,843) (113,564) 945,261 * 945,261
Consolidated cash flow statement
Year ended 29 February 2008
2008 2007
� �
Loss before tax (4,259,213) (4,365,404)
Adjusted for:
Depreciation 210,734 234,493
Impairment/amortisation of goodwill 26,545 855,988
Share of loss of associate 191,039 28,480
Profit on part disposal of subsidiary (761,936) (334,514)
Finance income (232,974) (226,947)
Finance costs 635,022 *
Increase in inventories (126,017) *
Decrease/(increase) in trade and other 196,833 (215,983)
receivables
Increase/(decrease) in trade and other 825,071 187,528
payables
Movement in receivables and payables
on disposal of subsidiary * (213,437)
Share*based payments 371,941 328,090
Other non*cash movements including
exchange differences (170,463) 56,093
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (3,093,418) (3,665,613)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (5,233,303) (24,112)
Interest received 232,974 226,947
CASH FLOWS FROM INVESTING ACTIVITIES (5,000,329) 202,835
FINANCING ACTIVITIES
Equity share capital subscription (net) 509,479 6,036,632
New borrowings, net of costs 5,470,780 *
Proceeds of shares issued to minorities 824,950 381,020
Interest paid (435,625) *
CASH FLOWS FROM FINANCING ACTIVITIES 6,369,584 6,417,652
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (1,724,163) 2,954,874
Cash and cash equivalents at start of year 3,957,526 1,008,062
Exchange movements * (5,410)
CASH AND CASH EQUIVALENTS AT END OF YEAR 2,233,363 3,957,526
Notes to the accounts
Year ended 29 February 2008
1. Basis of preparation
A) CONSOLIDATED FINANCIAL INFORMATION
The accounting policies applied are consistent with those described in the Annual Report and Financial Statements 2007 and the auditors have
confirmed that they are not currently aware of any issue other than an emphasis of matter on going concern, that may give rise to a
modification to their audit report.
This consolidated financial information does not constitute statutory financial statements for the years ended 29 February 2008 or 28
February 2007 as defined in section 240 of the Companies Act 1985. The Annual Report and Financial Statements for the year ended 28 February
2007 have been filed with the Registrar
of Companies and the Annual Report and Financial Statements for 2008 will be filed with the registrar of Companies in due course.
B) Going concern
Capital market and economic conditions have significantly deteriorated in recent months and may continue to do so; at the same time,
commodity prices, amongst them zinc and lead, have fallen sharply.
In the light of these factors, the Directors have given detailed consideration to the Group*s ability to continue as a going concern. As
part of this process, they have carried out a comprehensive review of the existing and forecast commitments over the next twelve months,
including the interest payable on the Cyrus debt.
As a consequence, the cash currently available to the Company is being managed in accordance with a plan approved by the Board, which is
based on:
* the elimination of all non-essential costs;
* a voluntary reduction in the remuneration of the Directors; and
* deferring further development work at the Black Angel mine and other projects until late spring 2009, provided that the
necessary finance is in place (this may be dependent upon the recovery
of commodity prices).
The Company is currently in discussion with a number of parties in order to arrange a finance package, which is presently expected to
include a combination of the following:
* a secured term loan;
* the issue of a convertible unsecured loan note; and
* a small element of new equity.
Securing this finance package is critical and the ability to raise it is largely dependent upon:
* an off take agreement being put in place;
* the Company proving that it can produce a concentrate on site using equipment that can be purchased within the existing
capital expenditure budget, which has been set by the Bankable Feasibility Study. A number of independent studies and trials have been
commissioned to provide the necessary empirical data needed to underpin the business plan and long term cash forecast; and
* the market price for zinc and lead not reducing below the level at which the Black Angel mine can be economically viable.
Current market opinion indicates the likelihood that zinc prices will recover from around 2010.
The Board recognises the existence of uncertainties together with the additional risks outlined in the Directors* Report and seeks, by
careful management, to minimise the impact of such factors. The Company has recently raised over �3.5 million in new equity, which enables
it to meet its anticipated obligations over most of the coming year. The Board is of the opinion that further limited interim funding will
be required, at a level the Directors are confident of being able to raise.
The Black Angel mine contains ore of exceptional grades in a politically stable part of the world and, once economic recovery takes place,
future prospects are outstanding. At the same time, efforts are being made to investigate other business strategies and opportunities to
protect and enhance shareholders* interests.
After due and careful consideration, the Directors are of the opinion that the going concern basis is still valid in the light of all the
above.
C) Operating loss
Operating loss is the loss before taxation, finance income, finance costs and share of the results of associates.
2. Loss per share
The basic and diluted loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number
of ordinary shares in issue during the year. The weighted average number of shares in issue is adjusted on the fully diluted basis by
5,465,220 (2007: 4,978,265) in respect of the potential dilutive effect of share options.
2008 2007
Weighted Weighted
average Per average Per
Losses number of share Losses number of share
� shares p � shares p
Basic loss per share (4,169,654) 140,449,532 (2.97) (4,161,801) 131,895,511 (3.16)
Fully diluted loss (4,169,654) 145,914,752 (2.86) (4,161,801) 136,873,776 (3.04)
per share
Warrants are anti*dilutive and have not been included in the fully diluted loss per share calculation. Options of 7,900,000 were also
anti*dilutive at the year end (2007: nil) and have not been included in the diluted calculation.
3. Transition to IFRS
This is the first year that the Group has presented its consolidated financial statements under IFRS.
The accounting policies set out in the statutory financial statements have been applied in preparing the financial statements for the year
ended 29 February 2008, the comparative information presented in these financial statements for the year ended 28 February 2007 and in the
preparation of the opening balance sheet at 1 March 2006, the transition date.
Apart from classification differences, the Directors have identified no numerical adjustments required to reconcile the Group*s date of
transition balance sheet, comparative balance sheet, comparative income statement or comparative cash flow statement from UK GAAP to IFRS.
Annual accounts
The annual accounts for the year ended 29 February 2008 will today be posted to shareholders and made available for download from the
Company*s website at www.angusandross.com.
Enquiries:
Angus & Ross plc
Robin Andrews, Chairman 01751 430 988
Nicholas Hall, Chief Executive 07931 709 053
Fox-Davies Capital 0207 936 5200
Daniel Fox-Davies
Richard Hail
Bishopsgate Communications Limited 0207 562 3366
Nick Rome
Landsbanki Securities (UK) Limited 0207 426 9000
Fred Walsh
Sebastian Jones
This information is provided by RNS
The company news service from the London Stock Exchange
END
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