RNS Number:5590E
Trans-Siberian Gold PLC
27 September 2007
Trans-Siberian Gold plc
Interim Results for the half year ended 30 June 2007
Highlights
* Sale of Krasnoyarsk properties for $40 million completed
* Asacha interest increased from 90.05% to 95.03%
* Asacha mine development commenced in July 2007
* Drilling commenced at Rodnikova
Chief Executive Officer's Report
Trans-Siberian Gold plc ("TSG" or the "Company") (TSG.L) is pleased to report
its results for the six months to 30 June 2007, which are presented for the
first time in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (including IAS 34 Interim Financial Reporting),
and further progress in the development of our Russian gold projects in
Kamchatka.
Trans-Siberian Gold plc is in the exploration and development phase of its gold
projects and therefore received no operating income in the period.
Administration expenses for the half year amounted to $2.5 million compared to
$3.1 million for the corresponding period of 2006 and $6.2 million for 2006 as a
whole. The operating loss was $2.4 million (2006 first half: $2.8 million),
after crediting $130,000 of exchange gains (2006 first half: $253,000).
Finance income (interest earned) was $164,000 (2006 first half: $154,000).
Finance costs (interest payable) of $778,000 (2006 first half: $11,000)
comprised $504,000 (2006 first half: $11,000) interest on the $10 million loan
from AngloGold Ashanti Limited (AGA) received in June 2006 and $274,000 on $10
million advance payment of the sale consideration for the Krasnoyarsk
properties.
The profit for the period was $17.6 million (2006 first half: $2.3 million
loss), net of losses from discontinued operations of $509,000 (2006 first half:
$147,000) and $21.1 million profit on disposal of the Krasnoyarsk Krai
subsidiaries to AGA.
Property, plant and equipment and capitalised exploration and evaluation costs
decreased by $758,000 and $17.1 million respectively since 31 December 2006
(2006 first half: $3.5 million and $3.0 million increases respectively). The
reductions attributed to discontinued operations amounted to $1.6 million and
$19.8 million respectively (2006 first half: nil). Cash and cash equivalents
increased from $2.6 million to $38.1 million, including the receipt of the
Krasnoyarsk Krai disposal proceeds.
Asacha Project, Kamchatka Oblast
In December 2006, it was decided to adopt a phased approach with pre-production
mine development expenditure minimised and the plant capacity reduced to 150,000
tonnes per annum.
During the first half of 2007, a senior technical team was appointed and began
work in Petropavlovsk-Kamchatsky and on site. The mining plan for 2007 was
approved by the authorities. An experienced mine construction team commenced
work on the portal area and preparations for full-scale mine development
activities. The mine detailed design contract was concluded and the first
portions of drawings were submitted. Advance orders for mining equipment,
sourced inside and outside Russia, were placed. Construction of the explosives
storage facility according to the approved design was completed and the facility
was accepted by the State Commission on 23 August 2007. Following this, licences
for the storage and use of explosives were obtained.
As part of the process, the plant design was modified to incorporate certain
processing scheme changes and practical design requirements. Design criteria for
the plant were developed. The contract for plant design was concluded with the
Irkutsk design institute (Irgiredmet). Negotiations on the purchasing of the
plant were also held with Irgiredmet. The design process is ongoing. Plant
layout drawings are to be received in October 2007 and the first working
drawings of the plant foundations are expected in November 2007. There was some
delay as a consequence of several geotechnical studies of the plant site
reaching different conclusions, but this has now been resolved.
It is anticipated that approximately 40,000 tonnes of ore will have been mined
and stockpiled by the end of December 2008, with first gold production in the
second half of 2009. The directors consider that this delay should not endanger
the Asacha licence, given the progress that will have been achieved by the end
of December 2008. The delay will also not result in any increase to the capital
cost of the project.
Actual expenditure on the Asacha project up to July 2007 amounted to $41.6
million. The remaining costs prior to the commencement of production are
estimated at $62.0 million, comprising:
$ million
----------- ------------------------------------ ---------
Capital Mine and mining equipment and facilities 9.8
expenditure
Gold plant, site facilities and tailings storage (1st 22.8
phase)
Diesel power plant and other infrastructure 12.1
Contingency 4.5
----------- ------------------------------------ ---------
Total capital 49.2
Other costs Pre-production operating costs 12.8
----------- ------------------------------------ ---------
62.0
----------- ------------------------------------ ---------
Including sunk costs, the estimated total cost of the Asacha project prior to
commencement of production has reduced from $111.0 million to $103.6 million
(comprising capital expenditure of $76.3m and $27.3 million pre-production
operating costs).
A further $11.0 million of capital expenditure will be incurred after the
commencement of production (including $4.0 million on mine development, $5.3m on
the second phase of tailings storage and $1.0m contingency).
In addition to the $40 million disposal proceeds of the Krasnoyarsk Krai based
subsidiaries, we believe that additional funding of $42 million, including debt
service on the assumption that the $10 million AGA loan is not converted to
equity, will be required to provide adequate financing for the Group until the
Asacha mine is cash flow positive. The disposal proceeds of $40 million will be
sufficient for the Group's funding requirements until the beginning of the
second quarter of 2008, by which time significant progress with mine development
and plant construction is expected to have been achieved at Asacha. It is
currently the intention of the Board to satisfy the forecast additional
requirement of $42 million through raising additional equity, debt finance,
equipment supplier credits or a combination of these, in respect of which a
number of options are being considered.
On 17 September 2007, TSG completed the acquisition of an additional 4.98% of
the shares in ZAO Trevozhnoye Zarevo at a cost of $425,000, thereby increasing
its interest in the Asacha and Rodnikova projects to 95.03%.
Rodnikova Project, Kamchatka Oblast
In accordance with an exploration programme approved in March 2007, field
exploration activities in 2007 will focus on exploration and update of existing
data on the boundaries of previously delineated ore bodies on the main area of
the field with a drilling target of 7,400 metres. The planned target for 2008 is
1,400 metres with preparation of a report with reserves estimate and its
submission for examination to the Russian GKZ (State Committee on Reserves) by
31 December 2008 as stipulated by the licence agreement.
Preparation of the exploration site at Rodnikova was finished on schedule in
June and exploratory drilling commenced. By the end of August sixteen holes had
been drilled, totalling 2,843 metres. First assay results are expected by
December 2007.
Veduga and Bogunay Projects, Krasnoyarsk Krai
The sale of all of TSG's interests in the Veduga and Bogunay projects in
Krasnoyarsk Krai to AGA for a cash consideration of $40 million was completed on
25 June 2007. In addition, AGA reimbursed to TSG the costs of the SPECTREM
airborne geophysical surveys undertaken at those properties in 2006 totalling
$505,000. AGA had funded the exploration activities of the Krasnoyarsk Krai
companies with effect from 1 November 2006 and all their expenditure from 1
December 2006. On completion of the sale, those companies refunded $536,000 of
their intra-group loans, corresponding to the advance funding provided by TSG
for their November and December 2006 expenditure.
Oleg Bagirov
26 September 2007
Contacts:
TSG
Simon Olsen +44 (0) 1223 265760
Seymour Pierce
Stuart Lane +44 (0) 20 7107 8000
Bankside
Keith Irons +44 (0) 20 7367 8873
Oliver Winters
Independent review report to Trans-Siberian Gold plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the condensed consolidated
interim balance sheet as at 30 June 2007 and the related condensed consolidated
interim income statement, condensed consolidated interim statement of changes in
equity and condensed consolidated interim cash flow statement for the six months
then ended and related notes. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Rules
for Companies which require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in the company's
annual financial statements.
This interim report has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union. As disclosed in Note 3,
the next annual financial statements of the company will be prepared in
accordance with IFRSs as adopted by the European Union. The accounting policies
are consistent with those that the directors intend to use in the next annual
financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
Company for the purpose of the AIM Rules for Companies and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Emphasis of matter - going concern
In arriving at our review conclusion, which is not qualified, we have considered
the adequacy of the disclosures made in Note 5 to the financial information
concerning the Group's requirements for additional financing. These conditions
indicate the existence of a material uncertainty which may cast significant
doubt about the Group's ability to continue as a going concern. The financial
information does not include the adjustments that would result if the Group was
not able to continue as a going concern.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 September 2007
Condensed consolidated interim balance sheet at 30 June 2007
Note 30.06.2007 30.06.2006 31.12.2006
$ $ $
--------------------------- ------ --------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 7 22,507,305 19,569,258 23,265,007
Exploration and evaluation costs 8 12,679,585 27,701,712 29,799,969
Taxes recoverable - value added tax 4,948,316 4,853,568 6,001,683
--------------------------- ------ --------- --------- ---------
40,135,206 52,124,538 59,066,659
--------------------------- ------ --------- --------- ---------
Current assets
Trade and other receivables 3,464,600 3,370,274 2,722,326
Cash and cash equivalents 38,128,605 12,301,644 2,551,457
--------------------------- ------ --------- --------- ---------
41,593,205 15,671,918 5,273,783
--------------------------- ------ --------- --------- ---------
--------------------------- ------ --------- --------- ---------
Total assets 81,728,411 67,796,456 64,340,442
--------------------------- ------ --------- --------- ---------
Capital and reserves attributable to
equity holders of the Company
Ordinary shares 6,951,312 6,951,312 6,951,312
Share premium 60,821,126 60,821,126 60,821,126
Retained earnings 429,539 (13,551,043) (17,238,935)
--------------------------- ------ --------- --------- ---------
68,201,977 54,221,395 50,533,503
Minority interest in equity - - -
--------------------------- ------ --------- --------- ---------
Total equity 68,201,977 54,221,395 50,533,503
--------------------------- ------ --------- --------- ---------
Liabilities
Non-current liabilities
Borrowings 9 10,000,000 10,000,000 10,000,000
Provisions for other liabilities and
charges 10 200,489 156,694 200,489
--------------------------- ------ --------- --------- ---------
10,200,489 10,156,694 10,200,489
--------------------------- ------ --------- --------- ---------
Current liabilities
Trade and other payables 2,980,512 3,398,199 3,219,904
Current income tax liabilities - 20,168 36,257
Borrowings 9 - - 350,289
Provisions for other liabilities and
charges 10 345,433 - -
--------------------------- ------ --------- --------- ---------
3,325,945 3,418,367 3,606,450
--------------------------- ------ --------- --------- ---------
Total liabilities 13,526,434 13,575,061 13,806,939
--------------------------- ------ --------- --------- ---------
Total equity and liabilities 81,728,411 67,796,456 64,340,442
--------------------------- ------ --------- --------- ---------
The notes below form an integral part of this condensed interim financial
information.
Condensed consolidated interim income statement for the 6 months ended 30 June 2007
Note 6 months to 6 months to 12 months to
30.06.2007 30.06.2006 31.12.2006
$ $ $
--------------------------- ------ --------- --------- ---------
Continuing operations
Revenue - - -
Administrative expenses (2,486,407) (3,066,748) (6,168,449)
Other income 5,886 44,341 39,878
Net foreign exchange gains on operating
activities 130,295 253,484 401,817
--------------------------- ------ --------- --------- ---------
Operating loss 6 (2,350,226) (2,768,923) (5,726,754)
Finance income 164,106 154,467 294,325
Finance costs (778,449) (10,552) (491,058)
Net foreign exchange gains on financing
activities 18,189 458,450 501,165
--------------------------- ------ --------- --------- ---------
Loss before income tax (2,946,380) (2,166,558) (5,422,322)
Income tax expense (Russian) (10,791) (24,889) (190,665)
--------------------------- ------ --------- --------- ---------
Loss from continuing operations (2,957,171) (2,191,447) (5,612,987)
Discontinued operations
Profit (loss) from discontinued
operations 11 20,547,058 (146,955) (209,548)
--------------------------- ------ --------- --------- ---------
Profit (loss) for the period 17,589,887 (2,338,402) (5,822,535)
--------------------------- ------ --------- --------- ---------
Attributable to:
Equity holders of the company 17,589,887 (2,300,123) (5,784,256)
Minority interest - (38,279) (38,279)
--------------------------- ------ --------- --------- ---------
Profit (loss) for the period 17,589,887 (2,338,402) (5,822,535)
--------------------------- ------ --------- --------- ---------
Earnings (loss) per share attributable
to the equity holders of the company
(expressed in cents per share)
- basic 42.73 (5.59) (14.05)
- diluted 42.72 (5.59) (14.05)
Loss per share from continuing
operations attributable to the equity
holders of the company (expressed in
cents per share)
- basic (7.18) (5.23) (13.54)
- diluted (7.18) (5.23) (13.54)
There is no difference between the loss on ordinary activities before taxation
and the loss for the financial period stated above and their historical cost
equivalents.
There are no recognised gains or losses other than those stated above.
The notes below form an integral part of this condensed interim
financial information.
Condensed consolidated interim statement of changes in equity
for the 6 months ended 30 June 2007
Attributable to equity holders of the
Company
---------------------
Capital Retained Total Minority Total
$ earnings $ interest equity
$ $ $
--------------------- -------- -------- -------- -------- --------
At 1 January 2006 67,772,438 (11,286,635) 56,485,803 38,279 56,524,082
--------------------- -------- -------- -------- -------- --------
Loss for the period - (2,300,123) (2,300,123) (38,279) (2,338,402)
--------------------- -------- -------- -------- -------- --------
Total recognised income and
expense for the period - (2,300,123) (2,300,123) (38,279) (2,338,402)
--------------------- -------- -------- -------- -------- --------
Share options scheme:
- value of share-based
payments - 35,715 35,715 - 35,715
--------------------- -------- -------- -------- -------- --------
At 30 June 2006 67,772,438 (13,551,043) 54,221,395 - 54,221,395
--------------------- -------- -------- -------- -------- --------
At 1 January 2007 67,772,438 (17,238,935) 50,533,503 - 50,533,503
--------------------- -------- -------- -------- -------- --------
Profit for the period - 17,589,887 17,589,887 - 17,589,887
--------------------- -------- -------- -------- -------- --------
Total recognised income and
expense for the period - 17,589,887 17,589,887 - 17,589,887
--------------------- -------- -------- -------- -------- --------
Share options scheme:
- value of share-based
payments - 78,587 78,587 - 78,587
--------------------- -------- -------- -------- -------- --------
At 30 June 2007 67,772,438 429,539 68,201,977 - 68,201,977
--------------------- -------- -------- -------- -------- --------
The notes below form an integral part of this condensed interim
financial information.
Condensed consolidated interim cash flow statement for the 6 months ended 30 June 2007
Note 6 months to 6 months to 12 months to
30.06.2007 30.06.2006 31.12.2006
$ $ $
--------------------------- ------ --------- --------- ---------
Cash flows from operating activities
Continuing operations
Cash used in operations (2,189,648) (3,146,171) (6,360,763)
Interest paid on borrowings (273,951) - -
Corporation tax paid (68,586) (10,889) (202,951)
--------------------------- ------ --------- --------- ---------
(2,532,185) (3,157,060) (6,563,714)
Discontinued operations 11 (566,499) 484,592 232,976
--------------------------- ------ --------- --------- ---------
Net cash used in operating activities (3,098,684) (2,672,468) (6,330,738)
--------------------------- ------ --------- --------- ---------
Cash flows from investing activities
Continuing operations
Purchase of property, plant and
equipment (PPE) (1,268,605) (3,417,597) (8,795,970)
Proceeds from sale of PPE - 1,631 1,635
Purchase of exploration and evaluation
assets (1,769,876) (3,030,853) (2,886,258)
Interest received - third party 144,972 163,529 303,945
--------------------------- ------ --------- --------- ---------
(2,893,509) (6,283,290) (11,376,648)
Discontinued operations 11 37,085,453 (1,103,753) (2,495,316)
--------------------------- ------ --------- --------- ---------
Net cash generated (used) in investing
activities 34,191,944 (7,387,043) (13,871,964)
--------------------------- ------ --------- --------- ---------
Cash flows from financing activities
Continuing operations
Proceeds from other convertible debt - 10,000,000 10,000,000
--------------------------- ------ --------- --------- ---------
- 10,000,000 10,000,000
Discontinued operations 11 4,465,699 - 350,289
--------------------------- ------ --------- --------- ---------
Net cash generated from financing
activities 4,465,699 10,000,000 10,350,289
--------------------------- ------ --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 35,558,959 (59,511) (9,852,413)
Cash and cash equivalents at beginning
of period 2,551,457 11,902,705 11,902,705
Exchange gains on cash and cash
equivalents 18,189 458,450 501,165
--------------------------- ------ --------- --------- ---------
Cash and cash equivalents at end of
period 38,128,605 12,301,644 2,551,457
--------------------------- ------ --------- --------- ---------
The notes below form an integral part of this condensed interim
financial information.
Notes to the condensed consolidated interim financial information
1. General information
Trans-Siberian Gold plc (the Company) is a UK-based resources company, with the
objective of acquiring and developing a portfolio of quality gold-mining assets
in Russia. During the period, the Company sold its Krasnoyarsk based
subsidiaries, OOO GRK Amikan (Amikan) and OOO AS Angarskaya Proizvodstvennaya
Kompaniya (AS APK), to AngloGold Ashanti Limited (AGA).
The Company is a public limited company, incorporated and domiciled in the
United Kingdom and has subsidiaries based in the Russian Federation. The
Company's registered office and principal place of business is Church Barn, Old
Farm Business Centre, Church Road, Toft, Cambridge, CB23 2RF, United Kingdom.
The Company's shares are traded on the Alternative Investment Market (AIM) of
the London Stock Exchange.
This consolidated interim financial information was approved by the Board on 26
September 2007.
These interim financial results do not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. Statutory accounts for the
year ended 31 December 2006 were approved by the Board of directors on 19 June
2007 and filed with the Registrar of Companies. The Independent Auditors' Report
on those accounts was unqualified, however because of the existence of a
material uncertainty which cast significant doubt about the Group's ability to
continue as a going concern, the Independent Auditors' Report contained an
emphasis of matter to this effect. The Independent Auditors' Report did not
contain a statement under either Section 237(2) or (3) of the Companies Act
1985.
2. First time adoption of International Financial Reporting Standards
(IFRS)
In accordance with the AIM Rules, the Group is required to present its financial
information in accordance with IFRS as adopted by the European Union (EU) with
effect from 1 January 2007. In the current year, the Group has adopted all of
the new and revised Standards and Interpretations issued by the International
Accounting Standards Board (the IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB that have been adopted by the EU
and that are relevant to its operations and effective for accounting periods
beginning on or after 1 January 2007. This adoption has not resulted in any
significant changes to the Group's accounting policies nor has it affected the
amounts reported for the current or prior periods other than their presentation
as disclosed in Note 14.
3. Principal accounting policies
The Group's principal accounting policies applied in the presentation of the
consolidated interim financial information are set out below. These policies
have been consistently applied to all periods presented, unless otherwise
stated, and are consistent with those that the directors intend to use in the
financial statements for the year ending 31 December 2007 which will be prepared
in accordance with IFRS as adopted by the EU.
Basis of preparation
This condensed consolidated interim financial information for the six months
ended 30 June 2007, has been prepared under the historical cost convention and
in accordance with the AIM Rules and complies with IAS 34 Interim financial
reporting as adopted by the EU. The disclosures required by IFRS 1 First-time
adoption of International Financial Reporting Standards concerning the
transition from UK GAAP to IFRS are given in Note 14. The 2006 comparatives have
also been presented in accordance with IFRS. The interim condensed consolidated
financial report should be read in conjunction with the annual report and
accounts for 2006 which was prepared in accordance with UK GAAP.
The financial information is unaudited but has been reviewed by the auditors and
their report is set out on page 3.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in Note 4.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31 December 2007:
* IFRIC 7 Applying the restatement approach under IAS 29, effective for
annual periods beginning on or after 1 March 2006. This interpretation is not
relevant for the Group.
* IFRIC 8 Scope of IFRS 2, effective for annual periods beginning on or
after 1 May 2006. This interpretation has no impact on the recognition of
share-based payments in the Group.
* IFRIC 9 Reassessment of embedded derivatives, effective for annual
periods beginning on or after 1 June 2006. This interpretation is not relevant
for the Group.
* IFRIC 10 Interims and impairment, effective for annual periods
beginning on or after 1 November 2006. This interpretation is not relevant for
the Group as there were no previous impairments.
* IFRS 7 Financial instruments: Disclosures, effective for annual
periods beginning on or after 1 January 2007. IAS 1 Amendments to capital
disclosures, effective for annual periods beginning on or after 1 January 2007.
IFRS 4 Insurance contracts, revised implementation guidance, effective when an
entity adopts IFRS 7. As this interim report contains only condensed financial
information, and as there are no material financial instrument related
transactions in the period, full IFRS 7 disclosures are not required at this
stage. The full IFRS 7 disclosures, including the sensitivity analysis to market
risk and capital disclosures required by the amendment of IAS 1, will be given
in the annual financial statements.
The following new standards, amendments to standards and interpretations have
been issued, but are not effective for the financial year ending 31 December
2007 and have not been early adopted:
* IFRIC 11 IFRS 2 - Group and treasury share transactions, effective
for annual periods beginning on or after 1 March 2007. Management do not expect
this interpretation to be relevant for the Group.
* IFRIC 12 Service concession arrangements, effective for annual
periods beginning on or after 1 January 2008. Management do not expect this
interpretation to be relevant for the Group.
* IFRS 8 Operating segments, effective for annual periods beginning on
or after 1 January 2009, subject to EU endorsement. Management do not foresee
any changes to the Group's geographical or business segments.
Basis of consolidation
The consolidated financial information of the Group include the accounts of
Trans-Siberian Gold plc and its subsidiaries. The results of Trans-Siberian Gold
plc's subsidiary undertakings are accounted for from the date on which the
Company gains control.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. The accounting
policies and financial year ends of its subsidiaries are consistent with those
applied by the Company.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
information is presented in US dollars ($), which is the functional and
presentation currency of the Company and the functional currency of its
subsidiaries.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency at the
average exchange rate ruling during the month in which the transactions occur.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the
income statement. Foreign exchange gains and losses resulting from the
translation of cash, cash equivalents and borrowings denominated in foreign
currencies are shown as financing activities; all other foreign exchange gains
and losses are shown as operating activities.
Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns which are different from those of segments
operating in other economic environments.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the
acquisition of the items. Depreciation of property, plant and equipment is
calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, being:
Buildings - 16 years
Motor vehicles - 5 years
Plant and machinery - 4 years
Office furniture and equipment - 3-5 years
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount. Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount and are recognised
within 'Other income' in the income statement.
Assets under construction are not subject to depreciation until the date on
which the Group brings them into use.
Leases
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
Assets held under finance leases are capitalised as property, plant and
equipment at the estimated present value of the underlying lease payments. The
corresponding finance lease obligation is included within creditors due within
or after more than one year. The interest element is allocated to accounting
periods during the lease term to reflect a constant rate of interest on the
remaining balance of the obligation for each accounting period.
Exploration and evaluation costs
When the Group incurs expenditure on mining properties that have not reached the
stage of commercial production, the costs of acquiring the rights to such
mineral properties and related exploration and evaluation costs, including
directly attributable employment costs, are deferred where the expected recovery
of costs is considered probable by the successful exploitation or sale of the
asset. General overheads are expensed immediately. Depreciation on fixed assets
used on exploration and evaluation projects is charged to deferred costs whilst
the projects are in progress. Finance costs incurred in respect of exploration
and evaluation projects are capitalised in those instances where the other
expenditure attributable to those projects is also being capitalised. Finance
costs are also only capitalised during periods when exploration and evaluation
activities are in progress. Finance costs incurred in respect of the Group's
general borrowings are expensed in the profit and loss account as incurred. Any
discount on deferred purchase consideration is added back to reflect the actual
cash paid in respect of net assets acquired on acquisition of companies.
Where a feasibility study indicates that the future recovery of costs is not
probable, full provision is made in respect of any deferred costs. Where mining
properties are abandoned, deferred expenditure is written off in full.
Deferred exploration and evaluation costs are assessed at each reporting date to
determine whether there are indicators that the asset may be impaired. If any
such indicator exists, a review for impairment is conducted, by estimating the
recoverable amount by reference to the net present value of expected future cash
flows of the relevant income generating unit or disposal value if higher. If the
recoverable amount is less than the carrying value of an asset, an impairment
loss is recognised. Individual mining properties are considered to be separate
income generating units for this purpose, except where they would be operated
together as a single mining business.
The amounts shown as deferred exploration and evaluation expenditure represent
costs incurred and do not necessarily reflect present or future values.
Investments
Investments are valued at cost or, where there has been an impairment in value,
at their recoverable amount. Investments in subsidiary companies involved in
exploration and development are recorded at cost where the expected recovery of
costs is considered probable.
Financial instruments
Financial assets are recognised when the Group has rights or other access to
economic benefits. Such assets consist of cash, equity instruments, contractual
rights to receive cash or another financial asset, or contractual rights to
exchange financial instruments with another entity on potentially favourable
terms. Financial liabilities are recognised when there is an obligation to
transfer benefits and that obligation is a contractual liability to deliver cash
or another financial asset or to exchange financial instruments with another
entity on potentially unfavourable terms. When these criteria no longer apply, a
financial asset or liability is no longer recognised.
If a legally enforceable right exists to set off recognised amounts of financial
assets and liabilities, which are in determinable monetary amounts, and the
Group intends to settle on a net basis, the relevant financial assets and
liabilities are offset.
Interest costs are charged against income in the year in which they are
incurred. Premiums or discounts arising from the difference between the net
proceeds of financial instruments purchased or issued and the amounts receivable
or payable at maturity are taken to net interest payable over the life of the
instrument.
Inventories
Inventories of consumables are valued at the lower of cost and net realisable
value.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
Taxation
Current tax is the expected tax payable or recoverable on the taxable profit or
loss for the year, using rates enacted at the balance sheet date and any
adjustments to the tax payable in respect of previous years.
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, the deferred
income tax is not accounted for, if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Share-based payment transactions
The Company makes equity-settled share-based payments to certain Group employees
under the terms of its employee share option scheme. In addition to those
granted under the Company's employee share option scheme, the Company has
granted share options to some advisers. The fair value of options granted to
employees is recognised as an employee expense and to advisers as professional
fees, with a corresponding increase in equity by way of a credit to retained
earnings.
The fair value is measured at grant date and expensed on a straight-line basis
over the expected vesting period. The fair value of the options granted is
measured using a Black-Scholes valuation model, taking into account the terms
and conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest or
are likely to vest except where non-exercise is only due to the Company's share
price not achieving the threshold for vesting.
Non-market based vesting conditions are taken into account in estimating the
number of options likely to vest. The estimate of the number of options likely
to vest is reviewed at each balance sheet date up to the vesting date, at which
point the estimate is adjusted to reflect the actual options exercised. No
adjustment is made after the vesting date even if the options are not exercised.
Provisions
Provisions for decommissioning, environmental restoration and legal claims are
recognised when: the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be
required to settle the obligation; and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Group companies are generally required to restore mine and processing sites at
the end of their producing lives to a condition acceptable to the relevant
authorities and consistent with the Group's environmental policies. The expected
cost of any committed decommissioning or restoration programme, discounted to
its net present value where the effect of discounting is material, is provided
and capitalised at the beginning of each project. The capitalised cost is
amortised over the life of the operation and the increase in the net present
value of the provision for the expected cost is included with interest and
similar charges.
The cost of ongoing programmes to prevent and control pollution and to
rehabilitate the environment is charged to the income statement as incurred.
Determination of ore reserves
The Group estimates its ore reserves and mineral resources based on information
compiled by Competent Persons as defined in accordance with the 2004 edition of
the Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves (the JORC code).
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Use of estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results.
The more significant areas requiring the use of management estimates and
assumptions relate to mineral reserves that are the basis of future cash flow
estimates and unit-of-production depreciation, depletion and amortisation
calculations; decommissioning, site restoration, environmental costs and closure
obligations; estimates of recoverable gold and other materials; asset
impairments; the fair value and accounting treatment of financial instruments
and deferred taxation.
The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Critical judgements in applying the entity's accounting policies
(a) Exploration and evaluation costs
The recoverability of the amounts shown in the Group balance sheet in relation
to deferred exploration and evaluation expenditure (and also the carrying value
of the Company's investments in its subsidiaries) are dependent upon the
discovery of economically recoverable reserves, continuation of the Group's
interests in the underlying mining claims, the political, economic and
legislative stability of the regions in which the Group operates, compliance
with the terms of the relevant mineral rights licences, the Group's ability to
obtain the necessary financing to fulfil its obligations as they arise and upon
future profitable production or proceeds from the disposition of properties.
(b) Decommissioning, site restoration and environmental costs
The Group's mining and exploration activities are subject to various laws and
regulations governing the protection of the environment. The Group recognises
management's best estimate for asset retirement obligations in the period in
which they are incurred. Actual costs incurred in future periods could differ
materially from the estimates. Additionally, future changes to environmental
laws and regulations, life of mine estimates and discount rates could affect the
carrying amount of this provision. Such changes could similarly impact the
useful lives of assets depreciated on a straight-line-basis, where those lives
are limited to the life of mine.
(c) Recoverable Value Added Tax (VAT)
Generally, Russian VAT on construction costs cannot be recovered until
construction is complete and production commences. The directors anticipate that
the VAT debtor of $4,948,316 (2006 first half: $4,853,568) will be recovered,
however if the Group's exploration projects do not proceed to production some
VAT may be irrecoverable.
(d) Share-based payments
The Company makes equity-settled share-based payments to certain Group employees
and advisors. Equity-settled share-based payments are measured at fair value
using a Black-Scholes valuation model at the date of grant. The fair value is
expensed as services are rendered over the vesting period, based on the Group's
estimate of the shares that will eventually vest and adjusted for the effect of
non market-based vesting conditions. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations.
(e) Contingencies
By their nature, contingencies will only be resolved when one or more future
events occur or fail to occur. The assessment of such contingencies inherently
involves the exercise of significant judgement and estimates of the outcome of
future events.
5. Going concern
The Group has significant funding needs in order to finance the completion of
the Asacha project, continue exploration at its properties and provide ongoing
working capital.
In addition to the $40 million disposal proceeds of its Krasnoyarsk Krai based
subsidiaries, the directors believe that total additional funding of $42
million, including debt service on the assumption that the $10 million loan from
AngloGold Ashanti Limited is not converted to equity, will be required to
provide adequate financing for the Group until the Asacha mine is cash flow
positive. The disposal proceeds of $40 million will be sufficient for the
Group's funding requirements until the beginning of the second quarter of 2008,
by which time significant progress with mine development and plant construction
is expected to have been achieved at Asacha. It is currently the intention of
the Board to satisfy the forecast additional requirement of $42 million through
raising additional equity, debt finance, equipment supplier credits or a
combination of these in respect of which a number of options are being
considered. Management tightly control the level of committed expenditure to
ensure that the Group has sufficient resources available to meet its liabilities
as they fall due.
Notwithstanding the material uncertainty related to the raising of additional
finance which may cast significant doubt on the Group's ability to continue as a
going concern, the directors believe that the necessary funds to provide
adequate financing until the Asacha mine is cash flow positive can be raised as
required and accordingly they are confident that the Group will continue as a
going concern and have prepared the interim financial information on that basis.
The interim financial information does not include the adjustments that would
result if the Group was not able to continue as a going concern.
6. Segment information - Geographical
Russia UK Total Total Total
$ $ continuing discontinued Group
operations operations $
$ (Russia)
$
Six months ended 30 June 2006
Segment revenue - - - - -
Segment operating loss (1,695,323) (1,073,600) (2,768,923) (147,016) (2,915,939)
Six months ended 30 June 2007
Segment revenue - - - - -
Segment operating loss (979,134) (1,025,659) (2,004,793) (418,266) (2,423,059)
The Group's operations are entirely focused on exploration and development
activities within the Russian Federation, with its corporate head office in the
UK. Whilst the directors believe that there is only one relevant class of
business, they recognise that the risks and returns of operating within these
two economic environments are significantly different and have accordingly
presented the Group's results by geographical location.
The Group was involved in one major transaction in June 2007, the sale of its
Krasnoyarsk based subsidiaries, Amikan and AS APK, to AGA (see Note 11). In
addition, subsidiary SV was put into liquidation. The results of these three
subsidiaries are shown as discontinued operations.
7. Property, plant and equipment
Buildings Plant and Motor Office Assets under Total
$ machinery vehicles equipment construction(a) $
$ $ and $
furniture
$
Cost
At 1 January
2006 981,333 1,817,921 1,145,838 557,965 12,753,915 17,256,972
Additions 12,891 227,644 9,364 18,380 3,568,981 3,837,260
Disposals (14,208) (14,690) - (1,545) - (30,443)
At 30 June 2006 980,016 2,030,875 1,155,202 574,800 16,322,896 21,063,789
Accumulated depreciation
At 1 January
2006 (210,725) (367,239) (299,354) (279,989) - (1,157,307)
Charge for
period (b) (83,478) (100,161) (98,762) (66,299) - (348,700)
Disposals 4,960 6,078 - 438 - 11,476
At 30 June 2006 (289,243) (461,322) (398,116) (345,850) - (1,494,531)
Net book value
At 1 January
2006 770,608 1,450,682 846,484 277,976 12,753,915 16,099,665
At 30 June 2006 690,773 1,569,553 757,086 228,950 16,322,896 19,569,258
Cost
At 1 January
2007 1,013,001 2,077,054 1,155,298 554,397 20,275,473 25,075,223
Additions 57,989 107,859 - 77,444 878,460 1,121,752
Disposals - (1,403) - (8,537) - (9,940)
Discontinued
operations (315,902) (938,295) (747,755) (157,368) (360,885) (2,520,205)
At 30 June 2007 755,088 1,245,215 407,543 465,936 20,793,048 23,666,830
Accumulated depreciation
At 1 January
2007 (371,937) (556,683) (499,345) (382,251) - (1,810,216)
Charge for
period (b) (80,557) (104,240) (97,564) (44,141) - (326,502)
Disposals - 415 - 7,289 - 7,704
Discontinued
operations 124,737 389,952 340,540 114,260 - 969,489
At 30 June 2007 (327,757) (270,556) (256,369) (304,843) - (1,159,525)
Net book value
At 1 January
2007 641,064 1,520,371 655,953 172,146 20,275,473 23,265,007
At 30 June 2007 427,331 974,659 151,174 161,093 20,793,048 22,507,305
a. Assets under construction at 30 June 2007 comprise $15,676,735 for
building construction, $4,379,019 in relation to the construction of an access
road and $737,294 for plant and equipment at Asacha.
b. $267,862 (2006 first half: $261,298) of the depreciation charge related
to property, plant and equipment used on exploration and evaluation projects and
was capitalised in exploration and evaluation costs in accordance with the
Group's accounting policy.
c. Contracted commitments for capital purchases amount to $3,353,176
(2006 first half: $1,874,896).
8. Exploration and evaluation costs
Movements on deferred exploration and evaluation expenditure, by location of the
property, are as follows:
01.01.2006 Additions Disposals 30.06.2006
$ $ $ $
Kamchatka - Asacha and Rodnikova 9,491,185 1,893,791 - 11,384,976
Krasnoyarsk - Veduga 14,181,128 594,558 - 14,775,686
Krasnoyarsk - Bogunay 1,027,020 514,030 - 1,541,050
24,699,333 3,002,379 - 27,701,712
01.01.2007 Additions Disposals 30.06.2007
$ $ $ $
Kamchatka - Asacha and Rodnikova 12,009,511 670,074 - 12,679,585
Krasnoyarsk - Veduga 15,843,762 1,622,532 (17,466,294) -
Krasnoyarsk - Bogunay 1,946,696 400,319 (2,347,015) -
29,799,969 2,692,925 (19,813,309) 12,679,585
9. Borrowings
30.06.2007 31.12.2006 30.06.2006
$ $ $
Non-current 10,000,000 10,000,000 10,000,000
Current - 350,289 -
10,000,000 10,350,289 10,000,000
Movement in borrowings is analysed as follows:
$
-------------------------------------------- ---------
Six months ended 30 June 2006
At 1 January 2006 -
Increase in borrowings 10,000,000
-------------------------------------------- ---------
At 30 June 2006 10,000,000
-------------------------------------------- ---------
Six months ended 30 June 2007
At 1 January 2007 10,350,289
Increase in borrowings by discontinued operations 4,465,699
Advance on sale of subsidiaries 10,000,000
Repayment of advance upon completion of sale of subsidiaries (10,000,000)
Discontinued operations (4,815,988)
-------------------------------------------- ---------
At 30 June 2007 10,000,000
-------------------------------------------- ---------
All borrowings were from AngloGold Ashanti Limited (AGA), a related party by
virtue of its 29.79% holding in the shares of the Company. Details of related
party transactions are given in Note 12.
The sale of Amikan and AS APK to AGA was completed on 25 June 2007 (see Note
11). Prior to this date, AGA made two initial payments, comprising $8.7 million
on 1 March 2007 and $1.3 million on 30 May 2007, which were subject to interest
on commercial terms.
10. Provisions for liabilities and charges
Legal claims Environmental Total
provision /site $
restoration
$ provision
$
Six months ended 30 June 2006
At 1 January 2006 - 156,694 156,694
At 30 June 2006 - 156,694 156,694
Six months ended 30 June 2007
At 1 January 2007 - 200,489 200,489
Additional provisions 345,433 - 345,433
At 30 June 2007 345,433 200,489 545,922
11. Discontinued operations
On 22 January 2007, in line with the Group's decision to focus its activities in
Kamchatka, the Board arranged the appointment of a liquidator of the Company's
wholly owned subsidiary OOO Kompaniya Svezhiy Veter (SV) which had been seeking
licences in the Yakutia region. The liquidation process was substantially
completed by 30 June 2007.
On 12 February 2007, the Company announced that the sale and purchase agreements
in respect of the sale of all of its interests in its two wholly owned
subsidiaries, OOO GRK Amikan (Amikan) and OOO AS Angarskaya Proizvodstvennaya
Kompaniya (AS APK), to AngloGold Ashanti Limited (AGA) for a cash consideration
of $40 million (the AGA Transaction) had been signed. The AGA Transaction was
approved by the Company's shareholders on 30 March 2007, and completed on 25
June 2007.
The income statement and cash flow statement distinguish discontinued operations
from continuing operations. The results of SV, Amikan and AS APK are presented
in this condensed interim financial information as discontinued operations.
Financial information relating to discontinued operations for the period to the
date of discontinuance or disposal is set out below.
6 months to 6 months to 12 months to
30.06.2007 30.06.2006 31.12.2006
Income statement information $ $ $
Revenue - - -
Administrative expenses (444,274) (395,414) (834,283)
Other income 325 86,010 473,093
Net foreign exchange gains on operating 25,683 162,388 158,625
activities
Operating loss for discontinued (418,266) (147,016) (202,565)
operations
Finance costs - net (90,237) 61 (314)
Loss before income tax for discontinued (508,503) (146,955) (202,879)
operations
Income tax expense (328) - (6,669)
Loss for discontinued operations (508,831) (146,955) (209,548)
Loss per share from discontinued
operations attributable to
the equity holders of the company
(expressed in cents per share)
- basic and diluted (1.24) (0.36) (0.51)
Cash flow information 6 months to 6 months to 12 months to
30.06.2007 30.06.2006 31.12.2006
$ $ $
Operating cash flows for discontinued
operations (566,499) 484,592 232,976
Investing cash flows for discontinued
operations (1,717,505) (1,103,753) (2,495,316)
Financing cash flows for discontinued
operations (a) 4,465,699 - 350,289
Total cash flows for discontinued
operations 2,181,695 (619,161) (1,912,051)
a. AGA funded the exploration activities of the Krasnoyarsk Krai companies
with effect from 1 November 2006 and all their expenditure from 1 December 2006.
$
-------------------------------------------- ---------
Consideration received on sale of subsidiaries 40,000,000
Direct costs relating to the disposal (443,860)
Cash transferred on disposal (753,182)
-------------------------------------------- ---------
Proceeds from sale of subsidiaries, net of cash transferred 38,802,958
-------------------------------------------- ---------
Net asset value of sold subsidiaries:
- property, plant and equipment 1,550,716
- exploration and evaluation costs 19,813,309
- debtors 1,895,331
- trade and other payables (5,512,240)
-------------------------------------------- ---------
17,747,116
Net asset value of liquidated subsidiary:
- trade and other payables (47)
-------------------------------------------- ---------
17,747,069
-------------------------------------------- ---------
Profit on disposal of subsidiaries 21,055,889
-------------------------------------------- ---------
AGA paid the first $10 million of the sale proceeds in two tranches on 1 March
2007 and 30 May 2007, and the balance of $30 million on 25 June 2007. Also on 25
June 2007, AGA paid $505,094 as reimbursement of the costs of the airborne
geophysical survey undertaken at the Veduga and Bogunay properties in 2006 which
was credited to exploration and evaluation costs.
The directors currently believe that the disposal qualifies for the Substantial
Shareholdings Exemption (SSE) and therefore no tax has been provided on the
profit on disposal.
12. Related party transactions
There are no related party transactions other than those relating to major
shareholder AngloGold Ashanti Limited, as detailed below:
Related party Nature of Purchases Amount owing/ Purchases Amount owing/
transaction during (owed) at during (owed) at
the 6 months the 6 months
to to
30 June 2007 30 June 2007 30 June 2006 30 June 2006
$ $ $ $
AngloGold Technical
Ashanti services 214,530 997,852 259,521 446,363
Loans (see
Note 9) 14,465,699 10,000,000 10,000,000 10,000,000
Loan interest 868,726 995,556 10,552 10,552
Directors'
fees - - 21,464 11,019
Other services (5,947) (32,693) (26,746) (26,746)
15,543,008 11,960,715 10,264,791 10,441,188
In addition to the above, on 25 June 2007 the Company completed the sale of its
Krasnoyarsk based subsidiaries, Amikan and AS APK, to AGA for $40 million (see
Note 11).
13. Contingent liabilities
Under the terms of its acquisition of ZAO Trevozhnoye Zarevo (TZ), the Company
(TSG) agreed with the two minority shareholders to purchase their residual
shareholdings, in aggregate 9.95%, for $500,000 each, conditional upon the
Company's directors formally deciding to proceed with mine development of the
Asacha deposit. On 17 September 2007, TSG completed the acquisition of one of
the minority shareholdings in TZ at a cost of $425,000, thereby increasing its
interest in the Asacha and Rodnikova projects to 95.03%.
14. Explanation of transition to IFRS
As set out in Note 2, the Group is required to present its financial information
in accordance with IFRS as adopted by the EU with effect from 1 January 2007,
with comparative figures restated. The following disclosures are required in the
year of transition from United Kingdom Generally Accepted Accounting Practices
(UK GAAP) to IFRS. The last financial statements under UK GAAP were for the year
ended 31 December 2006 and the date of transition to IFRS was therefore 1
January 2006.
Reconciliation of equity at 1 January 2006 (date of transition to IFRS):
Note UK GAAP Effect of IFRS
1.01.2006 transition 1.01.2006
$ to IFRS $
$
--------------------------- ------ --------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 16,099,665 - 16,099,665
Exploration and evaluation costs 24,699,333 - 24,699,333
Taxes recoverable - value added tax a - 4,608,939 4,608,939
--------------------------- ------ --------- --------- ---------
40,798,998 4,608,939 45,407,937
--------------------------- ------ --------- --------- ---------
Current assets
Trade and other receivables a 6,796,744 (4,608,939) 2,187,805
Cash and cash equivalents 11,902,705 - 11,902,705
--------------------------- ------ --------- --------- ---------
18,699,449 (4,608,939) 14,090,510
--------------------------- ------ --------- --------- ---------
--------------------------- ------ --------- --------- ---------
Total assets 59,498,447 - 59,498,447
--------------------------- ------ --------- --------- ---------
Total equity b 56,524,082 - 56,524,082
--------------------------- ------ --------- --------- ---------
Total equity and liabilities 59,498,447 - 59,498,447
--------------------------- ------ --------- --------- ---------
a. The directors anticipate that the value added tax debtor will be
recoverable when the Group commences production and has been reclassified from
current assets to non-current assets in accordance with IAS 1 Presentation of
Financial Statements.
b. Transition to IFRS had no impact on any line item included in equity or
liabilities.
Reconciliation of equity at 30 June 2006 (included as equivalent period
comparatives):
Note UK GAAP Effect of IFRS
30.06.2006 transition 30.06.2006
$ to IFRS $
$
--------------------------- ------ --------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 19,569,258 - 19,569,258
Exploration and evaluation costs 27,701,712 - 27,701,712
Taxes recoverable - value added tax a - 4,853,568 4,853,568
--------------------------- ------ --------- --------- ---------
47,270,970 4,853,568 52,124,538
--------------------------- ------ --------- --------- ---------
Current assets
Trade and other receivables a 8,223,842 (4,853,568) 3,370,274
Cash and cash equivalents 12,301,644 - 12,301,644
--------------------------- ------ --------- --------- ---------
20,525,486 (4,853,568) 15,671,918
--------------------------- ------ --------- --------- ---------
--------------------------- ------ --------- --------- ---------
Total assets 67,796,456 - 67,796,456
--------------------------- ------ --------- --------- ---------
Total equity b 54,221,395 - 54,221,395
Total liabilities b 13,575,061 - 13,575,061
--------------------------- ------ --------- --------- ---------
Total equity and liabilities 67,796,456 - 67,796,456
--------------------------- ------ --------- --------- ---------
a. The directors anticipate that the value added tax debtor will be
recoverable when the Group commences production and has been reclassified from
current assets to non-current assets in accordance with IAS 1 Presentation of
Financial Statements.
b. Transition to IFRS had no impact on any line item included in equity or
liabilities.
Reconciliation of equity at 31 December 2006 (latest period presented in the
most recent annual financial statements under UK GAAP):
Note UK GAAP Effect of IFRS
31.12.2006 transition 31.12.2006
$ to IFRS $
$
--------------------------- ------ --------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 23,265,007 - 23,265,007
Exploration and evaluation costs 29,799,969 - 29,799,969
Taxes recoverable - value added tax a - 6,001,683 6,001,683
--------------------------- ------ --------- --------- ---------
53,064,976 6,001,683 59,066,659
--------------------------- ------ --------- --------- ---------
Current assets
Trade and other receivables a 8,724,009 (6,001,683) 2,722,326
Cash and cash equivalents 2,551,457 - 2,551,457
--------------------------- ------ --------- --------- ---------
11,275,466 (6,001,683) 5,273,783
--------------------------- ------ --------- --------- ---------
--------------------------- ------ --------- --------- ---------
Total assets 64,340,442 - 64,340,442
--------------------------- ------ --------- --------- ---------
Total equity b 50,533,503 - 50,533,503
Total liabilities b 13,806,939 - 13,806,939
--------------------------- ------ --------- --------- ---------
Total equity and liabilities 64,340,442 - 64,340,442
--------------------------- ------ --------- --------- ---------
a. The directors anticipate that the value added tax debtor will be
recoverable when the Group commences production and has been reclassified from
current assets to non-current assets in accordance with IAS 1 Presentation of
Financial Statements.
b. Transition to IFRS had no impact on any line item included in equity or
liabilities.
Reconciliation of loss for the period ended 30 June 2006 (included as equivalent
period comparatives):
Note UK GAAP Effect of Reclassification IFRS
6 months to transition of discontinued 6 months to
30.06.2006 to IFRS operations (c) 30.06.2006
$ $ $ $
---------------------- ---- --------- --------- --------- ---------
Continuing operations
Revenue - - - -
Administrative expenses a (3,331,811) (130,351) 395,414 (3,066,748)
Other income a - 130,351 (86,010) 44,341
Net foreign exchange gains on b 874,322 (458,450) (162,388) 253,484
operating activities
---------------------- ---- --------- --------- --------- ---------
Operating loss (2,457,489) (458,450) 147,016 (2,768,923)
Finance income 154,528 - (61) 154,467
Finance costs (10,552) - - (10,552)
Net foreign exchange gains on
financing activities b - 458,450 - 458,450
---------------------- ---- --------- --------- --------- ---------
Loss before income tax (2,313,513) - 146,955 (2,166,558)
Income tax expense (24,889) - - (24,889)
---------------------- ---- --------- --------- --------- ---------
Loss from continuing operations (2,338,402) - 146,955 (2,191,447)
Discontinued operations
Loss from discontinued
operations - - (146,955) (146,955)
---------------------- ---- --------- --------- --------- ---------
Loss for the period (2,338,402) - - (2,338,402)
---------------------- ---- --------- --------- --------- ---------
Attributable to:
Equity holders of the company (2,300,123) - - (2,300,123)
Minority interest (38,279) - - (38,279)
---------------------- ---- --------- --------- --------- ---------
Loss for the period (2,338,402) - - (2,338,402)
---------------------- ---- --------- --------- --------- ---------
a. Other income, previously included in administration expenses, relates
to the hiring out of staff and drilling equipment from the Veduga project of
$86,010 and equipment from the Asacha project of $44,341 during periods of
exploration inactivity. For the year to 31 December 2006, as previously
presented under UK GAAP, these items were included in 'Operating income'.
b. Foreign exchange gains and losses resulting from the translation of
cash, cash equivalents and borrowings denominated in foreign currencies,
previously included in operating expenses, have been reclassified as financing
activities in accordance with the Group's revised accounting policies.
c. During the period, Group subsidiary Svezhiy Veter (SV) was put into
liquidation and Amikan and AS APK were sold and as such the results of SV,
Amikan and AS APK are presented in this condensed interim financial information
as discontinued operations (see Note 11), with comparatives reclassified in
accordance with IFRS 5 Non-current assets held for sale and discontinued
operations.
Reconciliation of loss for the year ended 31 December 2006 (latest period
presented in the most recent annual financial statements under UK GAAP):
Note UK GAAP Effect of Reclassification IFRS
12 months to transition of discontinued 12 months to
31.12.2006 to IFRS operations (b) 31.12.2006
$ $ $ $
---------------------- ---- --------- --------- --------- ---------
Continuing operations
Revenue - - - -
Administrative expenses (7,002,732) - 834,283 (6,168,449)
Other income 512,971 - (473,093) 39,878
Net foreign exchange gains on a 1,061,607 (501,165) (158,625) 401,817
operating activities
---------------------- ---- --------- --------- --------- ---------
Operating loss (5,428,154) (501,165) 202,565 (5,726,754)
Finance income 294,451 - (126) 294,325
Finance costs (491,498) - 440 (491,058)
Net foreign exchange gains on
financing activities a - 501,165 - 501,165
---------------------- ---- --------- --------- --------- ---------
Loss before income tax (5,625,201) - 202,879 (5,422,322)
Income tax expense (197,334) - 6,669 (190,665)
---------------------- ---- --------- --------- --------- ---------
Loss from continuing operations (5,822,535) - 209,548 (5,612,987)
Discontinued operations
Loss from discontinued
operations - - (209,548) (209,548)
---------------------- ---- --------- --------- --------- ---------
Loss for the period (5,822,535) - - (5,822,535)
---------------------- ---- --------- --------- --------- ---------
Attributable to:
Equity holders of the company (5,784,256) - - (5,784,256)
Minority interest (38,279) - - (38,279)
---------------------- ---- --------- --------- --------- ---------
Loss for the period (5,822,535) - - (5,822,535)
---------------------- ---- --------- --------- --------- ---------
a. Foreign exchange gains and losses resulting from the translation of
cash, cash equivalents and borrowings denominated in foreign currencies,
previously included in operating expenses, have been reclassified as financing
activities in accordance with the Group's revised accounting policies.
b. During the period, Group subsidiary Svezhiy Veter (SV) was put into
liquidation and Amikan and AS APK were sold and as such the results of SV,
Amikan and AS APK are presented in this condensed interim financial information
as discontinued operations (see Note 11), with comparatives reclassified in
accordance with IFRS 5 Non-current assets held for sale and discontinued
operations.
Explanation of material adjustments to the cash flow statement for the six
months to 30 June 2006:
Bank deposits of $10,785,550 that were held for periods of one week, two weeks
and one month and form an integral part of the Group's cash management were
classified under management of liquid resources under UK GAAP and are classified
as cash and cash equivalents under IFRS. There are no other material differences
between the cash flow statement presented under IFRS and that presented under UK
GAAP.
Explanation of material adjustments to the cash flow statement for the year
ended 31 December 2006:
Bank deposits of $1,705,611 that were held for periods of one week and two weeks
and form an integral part of the Group's cash management were classified under
management of liquid resources under UK GAAP and are classified as cash and cash
equivalents under IFRS. There are no other material differences between the cash
flow statement presented under IFRS and that presented under UK GAAP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Trans-siberian Gold (LSE:TSG)
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