| Fri 28 Sep 2007, 8:46 | | AEA - African Eagle Resources plc - Condensed Cons |
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AEA
AEA
AEA - African Eagle Resources plc - Condensed Consolidated Interim Financial
Statements for the period ended 30 June 2007
African Eagle Resources plc
(Incorporated in England and Wales, registered number 3912362)
AIM share code: AFE & AIM ISIN: GB0003394813
JSE share code: AEA & JSE ISIN: GB0003394813
Condensed Consolidated Interim Financial Statements for the period ended 30 June
2007
AIM and AltX quoted African Eagle Resources plc ("African Eagle" or "the
Company", ticker AIM: AFE, AltX: AEA) today announces its interim results. For
the first time, the interim results have been prepared in accordance with
International Financial Reporting Standards (IFRS). The condensed consolidated
financial statements for the period, accounting policies, and notes, including
an explanation of the transition from UK Generally Accepted Accounting
principles (UK GAAP) to IFRS are detailed below.
The Chairman`s Statement is shown as a separate release.
Prior to 2007, the Group prepared its audited financial statements and
unaudited interim financial statements under UK GAAP. From 1 January 2007, the
Group is required to prepare annual consolidated financial statements in
accordance with IFRS as adopted by the European Union (EU).
The note may be viewed at www.africaneagle.co.uk/investors/financial reports/.
Bevan Metcalf
Company Secretary
African Eagle Resources plc
28 September 2007
For further information, see the Company`s web site www.africaneagle.co.uk or
contact one of the following:
Bevan Metcalf
Finance Director & Company Secretary
+44 20 7248 6059
Nicola Marrin
Seymour Pierce
+44 20 7107 8000
About African Eagle
African Eagle is a diversified mineral exploration and development company
operating in eastern and central Africa. The Company`s principal advanced
projects are the Mkushi Copper Mines project in Zambia and the Miyabi gold
project in Tanzania, which are being fast-tracked towards production. The
Company also holds a large well-balanced portfolio of promising earlier stage
gold and base metal projects, including the Ndola copper project and the Eagle
Eye iron-oxide copper gold project.
Zambia, Tanzania and Mozambique, the sites of African Eagle`s projects, are all
countries which have highly prospective geology, relatively low above ground
risks and track records of successful major investments in the metals and
minerals industries.
African Eagle specialises in project generation and exploration. To take its
discoveries into production, it seeks to sign up industry partners with records
of successful mine development. These joint ventures and, in time, the revenue
from advanced projects, will finance future exploration and new discoveries.
Condensed Consolidated interim income statement
6 months 6 months Year to 31
to 30 June to 30 June December
2007 2006 2006
Unaudited Unaudited Unaudited
Note GBP GBP GBP
Depreciation expense (41,894) (39,851) (68,895)
Employee benefits expense (271,099) (243,776) (498,287)
Impairment of deferred
exploration expenditure (44,008) (163,297) (215,201)
Foreign exchange gain/(loss) 27,082 (52,124) (263,378)
Other expenses (174,100) (166,025) (354,432)
Operating loss (504,019) (665,073) (1,400,193)
Financial income:
Bank interest receivable 59,310 26,629 101,266
Loss before tax (444,709) (638,444) (1,298,927)
Income tax expense - - -
Loss for the period (444,709) (638,444) (1,298,927)
Loss per share:
Basic loss per share 4 (0.3p) (0.5p) (1.0p)
Diluted loss per share 4 (0.3p) (0.5p) (1.0p)
All operations are continuing
Condensed Consolidated interim balance sheet
31
30 June 30 June December
2007 2006 2006
Unaudited Unaudited Unaudited
Note GBP GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 178,426 204,933 153,495
Goodwill 106,188 106,188 106,188
Available for sale
investments 9,819 8,091 10,117
Deferred exploration costs 8,683,795 7,698,774 7,172,869
Total non-current assets 8,978,228 8,017,986 7,442,669
Current assets
Other receivables 294,364 140,765 240,466
Cash and cash equivalents 1,711,806 3,717,063 2,516,712
Total Current assets 2,006,170 3,857,828 2,757,178
Total assets 10,984,398 11,875,814 10,199,847
Condensed Consolidated interim balance sheet (continued)
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Unaudited
Note GBP GBP GBP
LIABILITIES
Current liabilities
Trade and other payables (193,262) (147,424) (180,820)
Total liabilities (193,262) (147,424) (180,820)
Net assets 10,791,136 11,728,390 10,019,027
EQUITY
Equity attributable to
equity holders of the
parent
Share capital 3 1,540,341 1,475,358 1,478,249
Share premium account 3 12,415,012 11,789,457 11,803,913
Merger reserve 705,723 705,723 705,723
Available for sale
revaluation reserve (8,169) (10,138) (7,929)
Foreign currency reserve (1,006,936) (308,581) (1,471,535)
Retained losses (2,854,835) (1,923,429) (2,489,394)
Total equity 10,791,136 11,728,390 10,019,027
Condensed Consolidated interim statement of changes in equity
Merger
Share Share reserve
capital premium
account
GBP GBP GBP
Note
Balance at 31 December 2005 1,129,550 7,953,968 705,723
Changes in equity for first
half of 2006
Loss for period - - -
Exchange differences on
translation of foreign
operations - - -
Available for sale investments - - -
Total recognised income and
expense for the period 1,129,550 7,953,968 705,723
Issue of share capital 345,808 4,037,576 -
Share issue costs - (202,087) -
Share based payments - - -
Balance at 30 June 2006 1,475,358 11,789,457 705,723
Available Foreign Retained Total
for sale currency losses equity
revaluation reserve Unaudited
reserve
GBP GBP GBP GBP
Balance at 31
December 2005 (9,957) - (1,390,051) 8,389,233
Changes in equity
for first
half of 2006
Loss for period - - (638,444) (638,444)
Exchange
differences on
translation of
foreign operations - (308,581) - (308,581)
Available for sale
investments (181) - - (181)
Total recognised
income and
expense for the
period (10,138) (308,581) (2,028,495) 7,442,027
Issue of share
capital - - - 4,383,384
Share issue costs - - - (202,087)
Share based
payments - - 105,066 105,066
Balance at 30 June
2006 (10,138) (308,581) (1,923,429) 11,728,390
Condensed Consolidated interim statement of changes in equity (continued)
Share
Share premium Merger
capital account reserve
GBP GBP GBP
Note
Balance at 31 December 2005 1,129,550 7,953,968 705,723
Changes in accounting policy - - -
Restated balance at 31
December 2005 1,129,550 7,953,968 705,723
Changes in equity for 2006
Loss for period - - -
Exchange differences on
translation of
foreign operations - - -
Available for sale investments - - -
Total recognised income and
expense
for the period 1,129,550 7,953,968 705,723
Issue of share capital 348,699 4,052,531 -
Share issue costs - (202,586) -
Share based payments - - -
Balance at 31 December 2006 1,478,249 11,803,913 705,723
Available
for sale Foreign Total
revaluation currency Retained equity
reserve reserve losses Unaudited
GBP GBP GBP GBP
Balance at 31
December 2005 - - (1,390,051) 8,399,190
Changes in
accounting
policy (9,957) - - (9,957)
Restated
balance at 31
December 2005 (9,957) - (1,390,051) 8,389,233
Changes in
equity for 2006
Loss for period - - (1,298,927) (1,298,927)
Exchange
differences on
translation of
foreign
operations - (1,471,535) - (1,471,535)
Available for
sale
investments 2,028 - - 2,028
Total
recognised
income and
expense
for the period (7,929) (1,471,535) (2,688,978) 5,620,799
Issue of share
capital - - - 4,401,230
Share issue
costs - - - (202,586)
Share based
payments - - 199,584 199,584
Balance at 31
December 2006 (7,929) (1,471,535) (2,489,394) 10,019,027
Condensed Consolidated interim statement of changes in equity (continued)
Share
Share premium Merger
capital account reserve
GBP GBP GBP
Note
Balance at 31 December 2006 1,478,249 11,803,913 705,723
Changes in equity for 2007
Loss for period - - -
Exchange differences on
translation
of foreign operations - - -
Available for sale investments - - -
Total recognised income and
expense for the period 1,478,249 11,803,913 705,723
Issue of share capital 62,092 613,535 -
Share issue costs - (2,436) -
Share based payments - - -
Balance at 30 June 2007 1,540,341 12,415,012 705,723
Available Foreign Retained Total
for sale currency losses equity
revaluation reserve Unaudited
reserve
GBP GBP GBP GBP
Balance at 31
December 2006 (7,929) (1,471,535) (2,489,394) 10,019,027
Changes in
equity for 2007
Loss for period - - (444,709) (444,709)
Exchange
differences on
translation
of foreign
operations - 464,599 - 464,599
Available for
sale investments (240) - - (240)
Total recognised
income and
expense for the
period (8,169) (1,006,936) (2,934,103) 10,038,677
Issue of share
capital - - - 675,627
Share issue costs - - - (2,436)
Share based
payments - - 79,268 79,268
Balance at 30
June 2007 (8,169) (1,006,936) (2,854,835) 10,791,136
Condensed Consolidated interim cash flow statement
6 months 6 months Year to 31
to 30 June to 30 June December
2007 2006 2006
Unaudited Unaudited Unaudited
Note GBP GBP GBP
Cash flows from
operating activities
Loss after taxation (444,709) (638,444) (1,298,927)
Adjustments for:
Depreciation 41,894 39,851 68,895
Profit on disposal of
property, plant and
equipment (512) - (1,615)
Interest income (59,310) (26,629) (101,266)
Impairment of deferred
exploration
expenditure 44,008 163,297 215,201
Share based payments 79,268 105,066 199,584
(Increase)/decrease in
other receivables (43,149) 31,438 (92,970)
Increase in trade and
other payables 21,315 8,655 12,801
Net cash used in
operating activities (361,195) (316,766) (998,297)
Cash flows from
investing activities
Payments to acquire
property, plant and
equipment (55,917) (3,504) (20,977)
Payments for deferred
exploration
expenditure (1,134,568) (1,258,652) (1,834,550)
Proceeds from sale of
equipment 512 - 1,615
Interest received 59,310 26,629 101,266
Net cash used in
investing activities (1,130,663) (1,235,527) (1,752,646)
Cash flows from
financing activities
Proceeds from issue of
share capital 673,191 4,181,297 4,198,644
Net cash used in
financing activities 673,191 4,181,297 4,198,644
Net
(decrease)/increase in
cash and cash
equivalents (818,667) 2,629,004 1,447,701
Cash and cash
equivalents at
beginning of period 2,516,712 1,097,881 1,097,881
Exchange gain/(loss) 13,761 (9,822) (28,870)
Cash and cash
equivalents at end of
period 1,711,806 3,717,063 2,516,712
The accompanying notes form an integral part of these consolidated financial
statements
Notes to the condensed consolidated interim financial statements
1 NATURE OF OPERATIONS AND GENERAL INFORMATION
African Eagle Resources plc ("African Eagle" or the "Company") is a public
limited company incorporated and domiciled in England and is listed on the
Alternative Investment Market ("AIM") of the London Stock Exchange. African
Eagle is a holding company of a mineral exploration and development group of
companies (the "Group"). The principal activities of the Group are the
exploration and development of mineral deposits, especially copper and gold, in
eastern and central Africa.
African Eagle listed on the Alternative Exchange of the Johannesburg Exchange
(AltX) on 24 August 2007 (see note 5 "Events after the balance sheet date").
The listing was accompanied by a fund raising which raised gross circa GBP7.4M.
This ensures the Group has sufficient resources to finance its exploration
activities over the next 2 years. For this reason the Directors continue to
adopt the going concern basis in preparing the financial statements.
African Eagle`s consolidated interim financial statements are presented in
Pounds Sterling (GBP), which is also the functional currency of the parent
company.
These consolidated interim financial statements have been approved for issue by
the Board of Directors on 27 September 2007.
The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
Group`s statutory financial statements for the year ended 31 December 2006,
prepared under UK GAAP, have been filed with the Registrar of Companies. The
auditor`s report on those financial statements was unqualified.
2 SUMMARY OF ACCOUNTING POLICIES
a) Statement of Compliance and basis of preparation
Prior to 2007, the Group prepared its audited financial statements and
unaudited interim financial statements under UK Generally Accepted Accounting
principles (UK GAAP). From 1 January 2007, the Group is required to prepare
annual consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU). As
the 2007 annual financial statements will include comparatives for 2006, the
Group`s date of transition to IFRS is 1 January 2006 with the 2006 comparatives
restated to IFRS. Thus these interim financial statements for the period ended
30 June 2007 have been prepared by applying the recognition and measurement
provisions of IFRS and the accounting policies to be adopted for the annual
accounts.
An exercise to assess the full impact that the change to IFRS has had on the
Group`s reported equity, reported losses and accounting policies, has been
completed. In preparing its opening IFRS balance sheet, the Group has adjusted
amounts reported previously in financial statements prepared in accordance with
its previous basis of accounting (UK GAAP).
The financial information for the twelve months ended 31 December 2006 has been
derived from the group`s audited financial statements for the period as filed
with the Registrar of Companies and adjusted for the transition to IFRS. It
does not constitute the financial statements for that period. The auditor`s
report on the statutory financial statements for the year ended 31 December
2006 was unqualified and did not contain any statement under Section 237(2) or
(3) of the Companies Act 1985.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these condensed consolidated interim financial
statements.
The Group has elected to apply the following IFRS 1 exemptions and transitional
provisions:
Business combinations exemption
The Group has taken advantage of the business combinations exemption which
allows the Group not to restate business combinations prior to 1 January 2006.
Instead, the existing goodwill has been frozen at that date, tested for
impairment and not subsequently amortised.
Share based compensation
The Group has used the exemption under IFRS 1 and has only included those
equity instruments granted after 7 November 2002 that had not vested as of 1
January 2006. All share options issued subsequent to that date have been
expensed as appropriate in accordance with IFRS 2, "Share Based Payments".
Cumulative translation differences exemption
The Group has elected to set previously accumulated translation differences to
zero at the transition date.
b) Basis of consolidation
The Group financial statements consolidate those of the Company and its
subsidiary undertakings drawn up to 30 June 2007.
The acquisition of African Eagle Resources Limited and its subsidiary Katanga
Resources Limited in 2002 was accounted for using the acquisition method of
accounting. The Company took advantage of the merger relief provisions of
section 131 of the Companies Act 1985 to record the shares issued in connection
with the acquisition at their nominal value. In the consolidated accounts the
shares issued were accounted for at fair value with an appropriate transfer to
the merger reserve. African Eagle Resources Limited has since been dissolved
and its investment in Katanga Resources Limited transferred to Twigg Resources
Limited and the Company. Under IFRS 1 the Group has elected to apply the
business combination exemption which allows the Group not to restate business
combinations prior to 1 January 2006. From this date the goodwill arising on
acquisition has been frozen. There have been no business combinations since the
1 January 2006.
The combination of the Company with Twigg Resources Limited and its
subsidiaries in 2000 was accounted for using merger accounting as applicable to
group reconstructions.
Profits or losses on intra group transactions, and balances are eliminated on
consolidation.
c) Property, plant and equipment
Property, plant and equipment are held at historical cost net of depreciation
and any provision for impairment. Depreciation is calculated to write down the
cost or valuation less estimated residual value of all property, plant and
equipment over their estimated useful economic lives. The rates generally
applicable are:
Motor vehicles 25%
Fixtures and fittings 25%
Leasehold Improvements Depreciated over the life of the lease
Material residual value estimates are updated as required, but at least
annually, whether or not the asset has been revalued. Where the carrying amount
of an asset is greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
d) Exploration and development costs
The Group has elected to apply the transitional provisions under IFRS 6
("Exploration for and Evaluation of Mineral Resources") which permits the
existing accounting policy under UK GAAP for accounting for and capitalisation
of mineral exploration costs. The policy adopted under UK GAAP is based on the
Statement of Recommended Practice "Accounting for Oil and Gas Exploration,
Development, Production and Decommissioning Activities" revised in June 2001
(the SORP currently in effect).
In accordance with the full cost method as set out in the SORP, expenditure
including directly attributable overheads on the acquisition, exploration and
evaluation of interests in licences not yet transferred to a cost pool is
capitalised under intangible assets.
All costs incurred prior to obtaining the legal right to undertake exploration
and evaluation activities on a project are written-off to the income statement
as incurred.
Exploration and evaluation costs arising following the acquisition of an
exploration licence are capitalised on a project-by-project basis, pending
determination of the technical feasibility and commercial viability of the
project. Costs incurred include appropriate technical and administrative
overheads. Deferred exploration costs are carried at historical cost less any
impairment losses recognised.
When it is determined that such cost will be recouped through successful
development and exploitation or alternatively by sale of the interest,
expenditure will be transferred to tangible assets and depreciated over the
expected productive life of the asset. Whenever a project is considered no
longer viable the associated exploration expenditure is written-off to the
income statement.
e) Impairment
Whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable an asset is reviewed for impairment. An
asset`s carrying value is written down to its estimated recoverable amount if
that amount is less than the asset`s carrying amount. The recoverable amount is
the higher of fair value less costs to sell and value in use.
Impairment reviews for deferred exploration and evaluation costs are carried
out on a project by project basis, with each project representing a potential
single cash generating unit. An impairment review is undertaken when indicators
of impairment arise but typically when one of the following circumstances
apply:
(i) title to the asset is compromised;
(ii) variations in metal prices that render the project uneconomic; and
(iii) unexpected geological occurrences that render the resource uneconomic
f) Taxation
Current income tax assets and liabilities comprise those obligations to, or
claims from fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable profit for the period.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill or on the
initial recognition of an asset or liability unless the related transaction is
a business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not provided if
reversal of these temporary differences can be controlled by the Group and it
is probable that reversal will not occur in the foreseeable future. In addition
tax losses available to be carried forward as well as other income tax credits
to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax
is also charged or credited to equity.
g) Share based payments
Share based payment arrangements granted after 7 November 2002 which have not
vested by 1 January 2006 are recognised in the financial statements.
All goods and services received in exchange for the grant of any share based
payment are measured at their fair values. Where employees are rewarded using
share based payments, the fair values of employees` services are determined
indirectly by reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and excludes the
impact of non-market vesting conditions. Shares options granted by the Group
vest 1 year from the date of grant.
All equity-settled share based payments are ultimately recognised as an expense
in the income statement with a corresponding credit to retained losses in the
balance sheet.
If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Estimates are revised subsequently if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options that have vested are not
exercised.
Upon exercise of share options, the proceeds received net of attributable
transaction costs are credited to share capital, and where appropriate share
premium.
h) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
Financial assets include cash and cash equivalents, trade and other
receivables, equity instruments of another enterprise and are initially
recognised in the balance sheet at fair value, net of transaction costs where
applicable. Thereafter, their carrying value depends on how those financial
instruments have been classified. 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 from acquisition.
Financial assets are divided into the following categories: loans and
receivables; financial assets at fair value through the income statement;
available for sale assets; and held to maturity investments. Financial assets
are assigned to the different categories by management on initial recognition,
depending on the purpose for which they were acquired. The designation of
financial assets is re-evaluated at every reporting date at which a choice of
classification or accounting treatment is available.
Trade and other receivables are categorised as "loans and other receivables".
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. After initial
recognition these assets are measured at amortised cost using the effective
interest method less provision for impairment. Any change in their value is
recognised in the income statement.
Financial liabilities are obligations to pay cash or other financial assets and
are recognised when the Group becomes a party to the contractual provisions of
the instrument. The financial liabilities included in the accounts are recorded
initially at fair value, net of direct issue costs.
Recognition of trade and other payables occurs when a Group company becomes a
party to the contractual provisions of the instrument. Most obligations are
legally enforceable and arise under contractual arrangements. These include
amounts owed for assets purchased or services obtained (trade creditors).
Accrued expenses are liabilities to pay for goods or services that have been
received or supplied but have not been paid, invoiced or formally agreed with
the supplier. The recognition of accrued expenses results directly from the
recognition of expenses for items of goods and services consumed during the
period. The initial measurement of trade and other payables is usually at fair
value.
The Group has not entered into any derivative financial instruments for hedging
or any other purpose.
Interest is recognised using the effective interest method which calculates the
amortised cost of a financial asset and allocates the interest income over the
relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
i) Available for sale
Available for sale financial assets include non-derivative financial assets
that are either designated as such or do not qualify for inclusion in any of
the other categories of financial assets. All financial assets within this
category are measured subsequently at fair value, with changes in value
recognised in equity, through the statement of changes in equity. Gains and
losses arising from investments classified as available for sale are recognised
in the income statement when they are sold or when the investment is impaired.
In the case of impairment of available for sale assets, any loss previously
recognised in equity is transferred to the income statement.
j) Income and expense recognition
The Group`s only income is interest receivable from bank deposits. Operating
expenses are recognised in the income statement upon utilisation of the service
or at the date of their origin. Interest received is recognised using the
effective interest method which calculates the amortised cost of a financial
asset and allocates the interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of
the financial asset. All other income and expenses are reported on an accrual
basis.
k) Foreign currency translation
The financial information for the Group is presented in pounds sterling, which
is also the functional currency of the parent company. Sterling is the currency
that management uses when controlling and monitoring the performance of the
group.
Items included in the financial statements of each of the Group`s subsidiaries
are measured using the functional currency with the exception of Twigg Gold
Limited (a Tanzanian based subsidiary) which is measured in US dollars.
In the financial statements of the parent and subsidiaries, foreign currency
transactions are translated into the functional currency of the subsidiary
using the exchange rates prevailing at the date of the transaction.
Exchange rate differences arising when monetary items are settled or upon
translation at the spot rate ruling at the end of the period are separately
reported in the income statement.
In the consolidated financial statements, all separate financial statements of
subsidiary entities, originally presented in a currency different from the
Group`s presentation currency, have been converted into sterling.
Assets and liabilities have been translated into sterling at the closing rate
at the balance sheet date. Income and expenses have been translated into
sterling at the average rates over the reporting period. Any differences
arising from this procedure have been charged/credited to the "Foreign currency
reserve" in equity.
Exchange differences arising on a reporting entities net investment in a
foreign operation are recognised in the consolidated financial statements in a
separate component of equity ("Foreign currency reserve").
These exchange differences will be recognised in the income statement on
disposal of the net investment.
l) Equity
Equity comprises the following:
- "Share capital" is the nominal value of equity shares.
- "Share premium account" represents the excess over nominal value of the fair
value of consideration received for equity shares, net of expenses of the share
issue.
- "Merger reserve" is the difference between the net assets of the subsidiary
acquired and the nominal value of the consideration (e.g. shares issued) to
acquire the subsidiary
- "Available for sale revaluation reserve" represents the difference between
the fair value of the available for sale investments and the acquisition cost
of those investments.
- "Foreign currency reserve" represents the differences arising from
translation of investments in overseas subsidiaries.
- "Retained losses" represents retained earnings.
m) Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight line basis over the period of the lease.
n) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash on hand and demand
deposits together with other short term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
o) Goodwill
Goodwill which represents the excess of the cost of acquisition over the fair
value of the Group`s share of the identifiable net assets acquired is
capitalised and reviewed annually for impairment. Goodwill is carried at cost
less accumulated impairment losses.
Goodwill written off to reserves prior to date of transition to IFRS remains in
reserves. There is no re- instatement of goodwill that was amortised prior to
transition to IFRS. Goodwill previously written off to reserves is not written
back to the income statement on subsequent disposal.
3 Share issues
During the period to 30 June 2007 6,209,254 shares were issued of which 300,500
shares were issued to satisfy share options previous granted under the
Company`s employee share option scheme and 5,908,754 shares were issued to
Phelps Dodge Mining (Zambia) Limited (PDMZ) under the terms of the Ndola,
Zambia earn-in agreement. Shares issued and allotted during the period to 30
June 2007, together with the 2006 comparatives are summarised below:
6 months to 30 June 2007
Share Share
Number capital GBP premium GBP
At 1 January 2007 147,824,890 1,478,249 11,803,913
Issue of shares 6,209,254 62,092 613,535
Expenses on share issues - - (2,436)
At 30 June 2007 154,034,144 1,540,341 12,415,012
6 months to 30 June 2006
Share
Share premium GBP
Number capital GBP
At 1 January 2006 112,954,962 1,129,550 7,953,968
Issue of shares 34,580,825 345,808 4,037,576
Expenses on share issues - - (202,087)
At 30 June 2006 147,535,787 1,475,358 11,789,457
Year to 31 December 2006
Share
Share premium GBP
Number capital GBP
At 1 January 2006 112,954,962 1,129,550 7,953,968
Issue of shares 34,869,928 348,699 4,052,531
Expenses on share issues - - (202,586)
At 31 December 2006 147,824,890 1,478,249 11,803,913
The issue of shares yielded GBP675,627 gross in the period with related expenses
amounting to GBP2,436. PDMZ acquired 5,908,754 shares for GBP651,588 at a price
of 11.0275 pence per share representing a 10% premium to the average closing
mid-market price of African Eagle`s shares for the 10 consecutive dealing days
immediately proceeding 15 February 2007.
The employee share options were exercised at 8 pence per share and the weighted
average share price at the date of exercise was 10.14 pence per share.
An agreement dated 14 March 2007, was entered into between African Eagle and
Loeb Aron & Company Ltd., under which, warrants to subscribe for up to 600,000
ordinary shares in the Company will be issued in two tranches at a subscription
price of 18 pence per warrant share. The subscription period terminates on the
third anniversary of the date of issuance.
Additional shares have been issued after the balance sheet date and these are
listed under "Events after the balance sheet date" in note 5.
4 Loss per share
The calculation of basic loss per share is based on the loss for the period of
GBP444,709 (June 2006: GBP638,444; December 2006: GBP1,298,927) divided by the
weighted average number of shares in issue during the period of 152,144,955
(June 2006: 123,437,168; December 2006: 135,728,466).
In calculating the diluted loss per share potential ordinary shares such as
share options and warrants have not been included as they would have the effect
of decreasing the loss per share. Decreasing the loss per share would be
antidilutive.
Headline loss per share has been calculated in accordance with the Institute of
Investment Management and Research`s ("IIMR") Statement of Investment Practice
No.1 entitled `The Definition of Headline Earnings`. The calculation of
headline loss per share is based on the loss for the period adjusted for profit
on sale of fixed assets, loss on impairment of exploration assets and the tax
impact of these adjustments as calculated below divided by the weighted average
number of shares in issue during the year. No diluted headline loss per share
has been calculated as it would be antidilutive by reducing the headline loss
per share.
6 months 6 months Year to 31
to 30 June to 30 June December
2007 2006 2006
Unaudited Unaudited Unaudited
GBP GBP GBP
Loss for the period (444,709) (638,444) (1,298,927)
Adjusted for:
Profit on sale of fixed assets (512) - (1,615)
Loss on impairment of
exploration assets 44,008 163,297 215,201
Tax impact of these adjustments (13,049) (48,989) (64,076)
Headline loss (414,262) (524,136) (1,149,417)
Weighted average number of
shares in issue 135,728,46
152,144,955 123,437,168 6
Basic & diluted headline loss
per share (0.3p) (0.4p) (0.8p)
5 Events after the balance sheet date
The financial statements were authorised for issue by the Board of Directors on
the 27 September 2007. The following non-adjusting events arose after the
balance sheet date:
Placing of Shares
The Company announced the exercise of employee share options on the 27 July
2007 whereby employees exercised 15,000 share options at 8p to purchase
ordinary shares in the Company.
On 31 July 2007 African Eagle announced a GBP7.4M (ZAR 104,231,315 at ZAR 14.07
to the pound) capital raising in South Africa and confirmed its intention to
list on the Johannesburg Stock Exchange (AltX). African Eagle`s corporate
adviser and AltX Sponsor, Nedbank Capital, advised the Company that it had
received irrevocable applications from South African investors to subscribe for
45,457,310 shares for a total of ZAR 88,641,755 gross. In addition African
Eagle had received an irrevocable application from JP Morgan Fleming Natural
Resources Fund, a long standing UK shareholder, for 8,000,000 shares,
equivalent to ZAR 15,600,000 gross.
On the 24 August the Company announced that it had listed on the Alternative
Exchange of the Johannesburg Stock Exchange (AltX).
Other Announcements
On 18 September 2007 the Company announced that it had been awarded Mokambo
South prospecting licence.
6 Explanation of transition to IFRS
Basis of transition to IFRS
As stated in the Basis of Preparation, these are the Group`s first condensed
consolidated interim financial statements for part of the period covered by the
first IFRS annual consolidated financial statements prepared in accordance with
IFRS. An explanation of how the transition from UK GAAP to IFRS has affected
the Group`s financial position, financial performance and cash flows is set out
below.
The accounting policies as set out in note 2 have been applied in preparing the
restatement of the financial statements for the periods ending 30 June 2006 and
31 December 2006 and the actual performance for the period ending 30 June 2007.
The rules for first time adoption under IFRS 1, "First time adoption of IFRS"
allow the Group to take advantage of a number of exemptions. These exemptions
are designed to simplify the transition process.
The Group has adopted the following exemptions:
IFRS 1 exemptions:
1. Business comb inations exemption
The Group has elected the business combinations exemption under IFRS 1, which
allows the Company not to restate business combinations prior to 1 January
2006.
2. Share based compensation
The Group has used the exemption under IFRS 1 and has only included those
equity instruments granted after 7 November 2002 that had not vested as of 1
January 2006. All share options issued subsequent to that date have been
expensed as appropriate in accordance with IFRS 2, "Share Based Payments".
3. Cumulative translation differences exemption
The Group has elected to set previously accumulated translation differences to
zero at the transition date.
Reconciliation of equity at 1 January 2006
UK GAAP Note a Note b IFRS
Audited Unaudited
ASSETS GBP GBP GBP GBP
Non-current assets
Property, plant and
equipment 250,362 - - 250,362
Goodwill 106,188 - - 106,188
Available for sale
investments 18,372 (9,957) - 8,415
Deferred exploration
costs 7,169,287 - - 7,169,287
Current assets
Other receivables 176,039 - - 176,039
Cash and cash
equivalents 1,097,881 - - 1,097,881
Current liabilities
Trade and other
payables (418,939) - - (418,939)
Net assets 8,399,190 (9,957) - 8,389,233
EQUITY
Share capital 1,129,550 - - 1,129,550
Share premium account 7,953,968 - - 7,953,968
Merger reserve 705,723 - - 705,723
Share based payment
reserve 92,871 - (92,871) -
Available for sale
revaluation reserve - (9,957) - (9,957)
Retained losses (1,482,922) - 92,871 (1,390,051)
Total equity 8,399,190 (9,957) - 8,389,233
Reconciliation of equity at 30 June 2006
UK GAAP Note a Note b
Unaudited
GBP GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 204,933 - -
Goodwill 72,890 - -
Available for sale investments 18,229 (10,138) -
Deferred exploration costs 7,698,774 - -
Current assets
Other receivables 140,765 - -
Cash and cash equivalents 3,717,063 - -
Current liabilities
Trade and other payables (147,424) - -
Net assets 11,705,230 (10,138) -
EQUITY
Share capital 1,475,358 - -
Share premium account 11,789,457 - -
Merger reserve 705,723 - -
Share based payment reserve 197,937 - (197,937)
Available for sale revaluation
reserve - (10,138) -
Foreign currency reserve - - -
Retained losses (2,463,245) - 197,937
Total equity 11,705,230 (10,138) -
IFRS
Note d Note e Unaudited
GBP GBP GBP
ASSETS
Non-current assets
Property, plant and equipment - - 204,933
Goodwill 33,298 - 106,188
Available for sale investments - - 8,091
Deferred exploration costs - - 7,698,774
Current assets
Other receivables - - 140,765
Cash and cash equivalents - - 3,717,063
Current liabilities
Trade and other payables - - (147,424)
Net assets - 33,298 11,728,390
EQUITY
Share capital - - 1,475,358
Share premium account - - 11,789,457
Merger reserve - - 705,723
Share based payment reserve - - -
Available for sale revaluation
reserve - - (10,138)
Foreign currency reserve (308,581) (308,581)
Retained losses 33,298 308,581 (1,923,429)
Total equity 33,298 - 11,728,390
Reconciliation of equity at 1 January 2007
UK GAAP Note a Note b
Audited
ASSETS GBP GBP GBP
Non-current assets
Property, plant and equipment 153,495 - -
Goodwill 39,593 - -
Available for sale investments 18,046 (7,929) -
Deferred exploration costs 7,172,869 - -
Current assets - -
Other receivables 240,466
Cash and cash equivalents 2,516,712 - -
Current liabilities - -
Trade and other payables (180,820) (7,929) -
Net assets 9,960,361 (7,929) -
EQUITY
Share capital 1,478,249 - -
Share premium account 11,803,913 - -
Merger reserve 705,723 - -
Share based payment reserve 292,455 - (292,455)
Available for sale revaluation reserve - (7,929) -
Foreign currency reserve - - -
Retained losses (4,319,979) - 292,455
Total equity 9,960,361 (7,929) -
Note d Note e IFRS
Unaudited
ASSETS GBP GBP GBP
Non-current assets
Property, plant and equipment - - 153,495
Goodwill 66,595 - 106,188
Available for sale investments - - 10,117
Deferred exploration costs - - 7,172,869
Current assets
Other receivables - - 240,466
Cash and cash equivalents - - 2,516,712
Current liabilities
Trade and other payables - - (180,820)
Net assets 66,595 - 10,019,027
EQUITY
Share capital - - 1,478,249
Share premium account - - 11,803,913
Merger reserve - - 705,723
Share based payment reserve - - -
Available for sale revaluation
reserve - - (7,929)
Foreign currency reserve - (1,471,535) (1,471,535)
Retained losses 66,595 1,471,535 (2,489,394)
Total equity 66,595 - 10,019,027
Reconciliation of profit for the 6 months ended 30 June 2006
UK GAAP Note b Note c
Unaudited
GBP GBP GBP
Depreciation expense - - (39,851)
Administrative expenses (541,181) - 507,883
Share based payments (105,066) 105,066 -
Employee benefits expense - (105,066) (138,710)
Impairment of deferred exploration
expenditure - - (163,297)
Foreign exchange losses (52,124) - -
Other expenses - - (166,025)
Operating loss (698,371) - -
Financial income:
Bank interest receivable 26,629 - -
Loss before tax (671,742) -
Income tax expense - - -
Loss for the period (671,742) - -
Note d IFRS
Unaudited
GBP GBP
Depreciation expense - (39,851)
Administrative expenses 33,298 -
Share based payments - -
Employee benefits expense - (243,776)
Impairment of deferred exploration
expenditure - (163,297)
Foreign exchange losses - (52,124)
Other expenses - (166,025)
Operating loss 33,298 (665,073)
Financial income:
Bank interest receivable - 26,629
Loss before tax 33,298 (638,444)
Income tax expense - -
Loss for the period 33,298 (638,444)
Reconciliation of profit for the year to 31 December 2006
UK GAAP Note b Note c
Audited
GBP GBP GBP
Depreciation expense - - (68,895)
Administrative expenses (1,003,826) - 937,231
Share based payments (199,584) 199,584 -
Employee benefits expense - (199,584) (298,703)
Impairment of deferred exploration
expenditure - - (215,201)
Foreign exchange losses (263,378) - -
Other expenses - - (354,432)
Operating loss (1,466,788) - -
Financial income:
Bank interest receivable 101,266 - -
Loss before tax (1,365,522) - -
Income tax expense - - -
Loss for the period (1,365,522) - -
Note d IFRS
Unaudited
GBP GBP
Depreciation expense - (68,895)
Administrative expenses 66,595 -
Share based payments - -
Employee benefits expense - (498,287)
Impairment of deferred exploration
expenditure - (215,201)
Foreign exchange losses - (263,378)
Other expenses - (354,432)
Operating loss 66,595 (1,400,193)
Financial income:
Bank interest receivable - 101,266
Loss before tax 66,595 (1,298,927)
Income tax expense - -
Loss for the period 66,595 (1,298,927)
Reconciliations between IFRS and UK GAAP
Notes to the Reconciliations
(a) Investments in Listed Companies
The Group in applying IAS 32 and IAS 39 has valued the listed shares in
Sub-Sahara Resources N.L. at fair value. This investment is treated as
"available for sale financial assets" and the movement in fair value has been
recognised through equity.
(b) Share based payments
Under UK GAAP, the Group recorded the credit to equity arising on share based
payments as a separate reserve. On moving to IFRS, it has been determined that
this reserve may be eliminated against retained losses.
(c) Administrative expense
Under IFRS the Group has adopted the consolidated income statement, "expense by
nature" as opposed to "expense by function". The main change is to replace
administrative expense and share based payments as reported under UK GAAP with:
employee benefits; depreciation; impairment of deferred exploration and other
expenses.
(d) Goodwill amortisation
IFRS 3 prohibits the amortisation of goodwill. The standard requires goodwill
to be carried at cost from the transition date. Impairment reviews are required
annually or when there are indications the carrying value may not be
recoverable. The goodwill amortised under UK GAAP during 2006 has been reversed
in the income statement with a resulting impact on retained losses in the
balance sheet. The directors are satisfied that the value of goodwill has not
been impaired.
(e) Foreign currency reserve
A translation reserve was created for the exchange differences arising from the
retranslation of the opening net investment in subsidiaries.
Explanation of material adjustments on the cash flow statement
Interest received has been reclassified under net cash used in investing
activities where, under UK GAAP, it formed part of the return on investments
and servicing of finance.
The movement in liquid resources, which comprise the cash equivalents of the
Group, was classified as a cash flow under UK GAAP. Under IFRS, liquid
resources have been reclassified as cash equivalents and movements and are a
component of the increase or decrease in cash and cash equivalents in the year.
There are no other material differences between the cash flow statement
presented under IFRS and the cash flow statement presented under UK GAAP.
Sponsor
Nedbank Capital
Date: 28/09/2007 08:46:50 Produced by the JSE SENS Department.
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