| Tue 6 May 2008, 13:00 | | AEA - African Eagle Resources Plc - Preliminary re |
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AEA
AEA
AEA - African Eagle Resources Plc - Preliminary results for the year
ended 31 December 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
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
News Report
6 May 2008
African Eagle Resources plc ("African Eagle" or "the Company", ticker AIM:
AFE, AltX: AEA) today announces its preliminary results for the year ended 31
December 2007. The Company`s annual consolidated financial statements have,
for the first time, been prepared in accordance with International Financial
Reporting Standards ("IFRS") AS adopted by the European Union. The
information in this preliminary announcement has been extracted from the
audited financial statements for the year ended 31 December 2007 and as such,
does not contain all of the information required to be disclosed in the
financial statements prepared in accordance with IFRS. The Company will
publish its full Annual Report and Financial Statements to shareholders in
May.
Chairman`s Statement
Dear shareholder
It has been a most significant year for African Eagle on a number of fronts
and one which I believe will be recognised in years to come as having been a
landmark one for the Company. We have continued our development as a
diversified, experienced exploration and emerging mining company, with a
competitive base in stable and highly prospective countries in eastern and
southern Africa. Highlights of the year included:
* The completion of the pre-feasibility study on the Mkushi Copper Project
which indicated an initial resource of 10.7Mt at 1.11% copper. At this stage
the project looks highly viable and we are looking forward to the conclusion
of the Definitive Feasibility Study later in 2008 which I hope and expect
will increase both the size and the grade of the resource.
* The listing of the Company on the Alternative Exchange of the JSE Limited
(JSE) (AltX), in August 2007, which coincided with the placement of stock to
the value of ZAR88M (GBP6.3M) in South Africa and GBP1.1M in the UK. This
highly successful secondary listing was the largest fund-raising by a
resources company to date on the AltX and we were the first resources company
to list on this market without any assets in South Africa. Around 22% of
African Eagle`s issued shares are now held on its South African register and
we believe that about 30% of our shares are now managed from South Africa.
The funds from the placing have secured African Eagle`s near-term future and
place us in position to progress key unencumbered projects further than we
might have otherwise.
* The funding of our Ndola exploration by Phelps Dodge (now part of Freeport
McMoRan) through subscriptions for two tranches of shares. Phelps Dodge now
holds around 5% of African Eagle.
* The introduction of Randgold Resources into the Miyabi project in May and
their commencement of an exploration programme to improve the geological
model and to increase the resource estimate of 500,000 plus ounces we have
delineated there.
* The award of the Mokambo Copper Project licence in September and the
commencement in December of our drilling programme to demonstrate the
potential that exists in the eastern limb of the Mufulira syncline.
In March this year we announced that TWP Finance, a subsidiary of JSE-listed
South African consulting engineering company, TWP Holdings, an EPCM
(Engineering Procurement Construction Management) company, had acquired a
strategic stake in African Eagle, which TWP expect to increase from the
current 5% level. TWP has skills, capabilities and assets which complement
our own and we see TWP, as our relationship with them grows, as a preferred
partner, through project development partnerships or via the provision of
services by TWP Consulting. As this relationship develops we will also seek
new joint initiatives.
Our listing on the JSE was indeed well timed and beneficial to the Company.
While new shareholders may not yet have seen the benefit of this, our share
price having fallen since August in line with our peers`, I am positive that
in the longer-term they will reap the benefits afforded by the injection of
capital that will give us the ability to weather the current storm in the
global markets. Moreover, our substantial cash position will ensure that we
are well-placed to take advantage of acquisition and joint venture
opportunities that are likely to arise in a cash-strapped exploration sector
over the next year or so.
We have always encouraged investors to take a longer-term view as we develop
and deliver projects, as we believe that the market will ultimately recognize
the value of the Company. We consider, however, that our share price
performance has not reflected either the commodity price rally or the
significant progress we have made in augmenting and developing our portfolio
during the year. In respect of the former, while the major gold and copper
companies have benefited to some degree from the gold price rise, this has
not flowed through to exploration companies as yet, in an apparent disconnect
between the value above and the value below the ground. There appears, too,
to be a widespread lack of understanding of exploration companies and their
importance in the development and production processes that culminate in the
generation of the cash flow so favoured by the market. We recognise that
there is a need for us to deliver near-term cash flow and that is something
that we are addressing.
Our policy of partnerships remains important to the Company and will continue
to deliver significant intrinsic value. By engaging with companies which are
well-placed in terms of skills and experience, financial support and local
knowledge, we exert significant leverage to our larger projects, bringing
them to fruition on an accelerated time scale. We will continue to develop
partnerships with such as those already signed with Freeport McMoRan, CGA
Mining and Randgold Resources.
I alluded earlier to the Board`s recent review of our broad strategy, which
came to the conclusion that there is also significant value to be attained
through the development, in-house, of high quality, near-to-production
projects from our portfolio. This is particularly so given the skills within
our own company and the fortunate position that we are in, with our partners
funding the exploration and development of the larger projects. Thus, we are
currently looking closely at bringing one of our unencumbered projects into
production on our own. Whilst it is still early days and no firm decision has
been taken, the Mokambo, Rupa and Igurubi projects may have the ability to
deliver substantial returns. Their value is also currently overlooked by the
market in our resource base.
Combined with our own operations, we can also look forward to taking a
significant step towards production at Mkushi in November/December 2008 at
the conclusion of the bankable feasibility study, with production expected by
the second quarter of 2010. We have no reason to believe that the project is
not viable and, in anticipation of this, are looking to order or confirm key
long-lead items to ensure a rapid ramp up once the go-ahead decision has been
taken.
Two of African Eagle`s big advantages are, firstly, the established and
experienced team that we have on the ground in the countries in which we
operate and, secondly, the fact that the countries in which we are based -
Zambia, Tanzania and Mozambique - generally have good infrastructure and
relatively mining-friendly investment regimes. One of the benefits from the
former is the number of opportunities which are brought to us because our
teams have long-standing relationships in, and knowledge of, the area.
We place a great deal of emphasis on the professional development of our
locally-recruited people, not only to mitigate the global shortage of mining
and exploration skills, but also because we have a real interest in the
development of the countries in which we operate. That said, we are well-
resourced with both geological and technical skills and are fortunate that
many of our employees have developed a great loyalty to the group over a long
period of time.
Much has been made in some quarters about the recent increase of royalties
and introduction of windfall taxes in Zambia. In respect of the former, we
are firmly of the view that the countries and communities that are host to
our operations need to benefit from the mineral wealth of their countries.
The royalties that are being imposed in Zambia are not out of line with
progressive mining economies elsewhere in the world. In respect of windfall
taxes, this is something that still needs to pan out.
While our operations are currently confined to Zambia, Tanzania and
Mozambique, we have always said that we are interested in new projects in
some other SADC countries, particularly if we can acquire on-the-ground
skills at the same time. We are also conscious of the desirability of
increasing our market capitalisation to a level that will get us onto the
radar screen of institutional investors whose market capitalisation criteria
for investee companies means that they will not consider us now. Our
involvement with TWP, as it grows, may well be the catalyst for just such an
expansion of our operating and corporate foci.
Looking to the year ahead, our shareholders should continue to see
significant developments from African Eagle. Key among these are likely to
be:
* Finalisation of the bankable feasibility study at Mkushi and the expected
go-ahead for this project.
* Development of a resource statement for Mokambo.
* Positive drilling results from Igurubi, Ndola and Rupa.
* Investigation of a possible listing on the Zambian Stock Exchange, which
would facilitate the entrance of local investors and partners into the
Company and perhaps provide the opportunity to work more closely with local
partners.
* Progressing African Eagle managed copper and gold projects.
* Expansion of our current country, commodity and operational expertise
comfort zones.
In conclusion, I would like to thank shareholders, new and old, for their
support during the year, our partners for their diligent execution of
exploration and development work on our key joint ventures, and our employees
for their ongoing contribution and loyalty to the Company.
John Park
Chairman
African Eagle Resources plc
Consolidated Income Statement
For the year ended 31 December 2007
Year to 31 Year to 31
December December
Note 2007 2006
GBP GBP
Depreciation expense (83,023) (68,895)
Employee benefits expense (622,395) (501,011)
Impairment of deferred exploration (131,668) (215,201)
expenditure
Other expenses (534,542) (351,708)
Operating loss (1,371,628) (1,136,815)
Finance costs:
Bank interest receivable 216,623 101,266
Foreign exchange gain/(loss) 28,137 (263,378)
Loss before tax (1,126,868) (1,298,927)
Income tax expense - -
Loss for the year (1,126,868) (1,298,927)
Loss per share:
Basic loss per share from total and (1.0p)
continuing operations 1 (0.7p)
Diluted loss per share from total (1.0p)
and continuing operations 1 (0.7p)
Headline loss per share from total (0.8p)
and continuing operations 1 (0.6p)
Diluted headline loss per share
from total and continuing 1 (0.6p) (0.8p)
operations
Consolidated Balance Sheet
At 31 December 2007
Year to 31 Year to 31
December December
Note 2007 2006
ASSETS
Non-current assets
Property, plant and 156,337 153,495
equipment
Goodwill 2 103,188 106,188
Available for sale 6,462 10,117
investments
Investment in Associates 3 1,809,901 -
Deferred exploration costs 2 8,441,854 7,172,869
Total non-current assets 10,517,742 7,442,669
Current assets
Other receivables 383,339 240,466
Cash and cash equivalents 7,051,744 2,516,712
Total current assets 7,435,083 2,757,178
Total assets 17,952,825 10,199,847
LIABILITIES
Current liabilities
Other payables (392,628) (180,820)
Total liabilities (392,628) (180,820)
Net assets 17,560,197 10,019,027
EQUITY
Equity attributable to
equity holders of parent
Share capital 2,123,402 1,478,249
Share premium account 19,311,622 11,803,913
Merger reserve 705,723 705,723
Available for sale (9,199) (7,929)
revaluation reserve
Foreign currency reserve (1,189,274) (1,471,535)
Retained losses (3,382,077) (2,489,394)
Total equity 17,560,197 10,019,027
Consolidated Cash Flow Statement
For the year ended 31 December 2007
Year to 31 Year to 31
December December
Note 2007 2006
GBP GBP
Cash flows from operating
activities
Loss after taxation (1,126,868) (1,298,927)
Adjustments for:
Depreciation 83,023 68,895
Exchange loss (25) -
Profit on disposal of property, (516) (1,615)
plant and equipment
Interest received (216,623) (101,266)
Impairment of deferred 131,668 215,201
exploration expenditure
Share based payments 234,185 199,584
MCJV - Group share of the loss 4,118 -
Impairment of investments for 2,335 -
resale
Impairment of goodwill 3,000 -
Increase in other receivables (135,999) (92,970)
Increase in other payables 32,068 12,801
Net cash used in operating (989,634) (998,297)
activities
Cash flows from investing
activities
Payments to acquire property, (78,280) (20,977)
plant and equipment
Payments for deferred (2,775,401) (1,834,550)
exploration expenditure
Proceeds from sale of property, 516 1,615
plant and equipment
Interest received 216,623 101,266
Net cash used in investing (2,636,542) (1,752,646)
activities
Cash flows from financing
activities
Proceeds from issue of share 8,152,862 4,198,644
capital
Net cash used from financing 8,152,862 4,198,644
activities
Net increase in cash and cash 4,526,686 1,447,701
equivalents
Cash and cash equivalents at 2,516,712 1,097,881
beginning of period
Exchange gain/(loss) 8,346 (28,870)
Cash and cash equivalents at 2,516,712
end of period 7,051,744
Notes to the Consolidated Financial Statements
For the year ended 31 December 2007
1 LOSS PER SHARE
Basic Loss Per Share
The calculation of basic loss per share is based on the loss for the period
divided by the weighted average number of shares in issue during the year. 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.
Loss Per Share 2007
2006
GBP GBP
Loss for the period (1,126,868) (1,298,927)
Weighted average number of 172,383,883 135,728,466
shares in issue
Basic & diluted loss per share (0.7p) (1.0p)
Headline Loss per share
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` and The South
African Institute of Chartered Accountants Circular 8/2007 entitled `Headline
Earnings`. The calculation of headline loss per share is based on the
headline loss for the period of GBP1,028,443 (2006: GBP1,149,417) 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.
Headline Loss
2007 2006
GBP GBP GBP GBP
Gross Net Gross Net
Loss for the period (1,126,868) (1,298,927)
Adjusted for: (361) (1,131)
Less profit on sale of (516) (1615)
fixed assets
Plus impairment of 131,668 92,168 215,201 150,641
exploration assets
Plus Group share of 4,118 2,883 -
associate loss
Plus impairment of 3,000 2,100 -
Goodwill
Plus impairment of 2,335 1,635 -
available for sale
financial assets
Headline loss for the (1,028,443) (1,149,417)
period
Weighted average 172,383,883 135,728,466
number of shares in
issue
Basic & diluted (0.6p) (0.8p)
headline loss per
share
Net is after the
deduction of tax at
the UK prevailing rate
of 30%.
2 INTANGIBLES
The Group 2007
Goodwill on Purchase Deferred Total
Consolidati d Exploration
on goodwill costs
GBP GBP GBP GBP
Cost:
At 1 January 2007 103,188 3,000 7,172,869 7,279,057
Foreign currency - - 260,330 260,330
exchange differences
Additions - - 2,954,342 2,954,342
Transfer to investment (1,814,019) (1,814,019)
in associates
Impairment costs - (3,000) (131,668) (134,668)
At 31 December 2007 103,188 - 8,441,854 8,545,042
The Group 2006
Goodwill Purchased Deferred Total
on goodwill Exploration
Consolid costs
ation
GBP GBP GBP GBP
Cost:
At 1 January 2006 103,188 3,000 7,169,287 7,275,475
Foreign currency - - (1,414,516) (1,414,516)
exchange differences
Additions - - 1,633,299 1,633,299
Transfers - - - -
Impairment costs - - (215,201) (215,201)
At 31 December 2006 103,188 3,000 7,172,869 7,279,057
Goodwill is reviewed annually for impairment or when changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Goodwill on consolidation relates to the acquisition of Katanga Resources Ltd
in 2002. The goodwill is linked to the recovery of the deferred exploration
costs on the Katanga mineral licences. The directors have reviewed the
Katanga deferred exploration costs by licence in conjunction with the
goodwill on consolidation and believe the goodwill to be fairly valued.
Following the incorporation of Mkushi Copper Joint Ventures Ltd the Mkushi
exploration licences were transferred to the joint venture company. The
Mkushi intangible asset was transferred to investments under non-current
assets in the consolidated balance sheet.
3 SUBSIDARY & ASSOCIATE UNDERTAKINGS
During the year Mkushi Copper Joint Ventures Ltd (MCJV) was created in
Zambia. This company was established with CGA Mining as part of the Joint
Venture agreement on the Mkushi copper project. Katanga Resources Ltd a fully
owned subsidiary of the Group holds 49% of the ordinary shares and Seringa
Mining Ltd a fully owned subsidiary of CGA Mining owns 51% of the ordinary
shares. MCJV has been treated as an associate company for purposes of the
Group consolidation as the Group has a significant influence over the
financial and operating policy decisions but not control or joint control
over those policies.
The functional currency for MCJV is US dollars. MCJV have expensed the costs
associated with the Mkushi copper project in the income statement in
accordance with its policy on exploration and evaluation expenditure. The
loss reported by MCJV has been restated to reflect the Group policy for
treating deferred exploration. The Group share of the adjusted loss is
GBP4,118 which has been included in the Consolidated Income Statement under
other expenses with a contra entry to investment in associates. The MCJV year
end is the 30 June 2008 but it has also prepared financial statements for the
period ending 31 December 2007 in line with the Group`s year end date.
The Group`s share of the summarised financial information of MCJV is detailed
below:
2007
GBP
Total non-current assets 2, 2,354,968
Total current assets 35,065
Total current liabilities -
Total non-current liabilities (2,394,151)
Group share of associate net assets (4,118)
Group share of associate Loss for the year (4,118)
The fair value of the investment in MCJV at the balance sheet date is
GBP1,809,901 as detailed below. The Group did not have any contingent
liabilities in MCJV.
Investment in
Associates
GBP
Cost:
At 1 January 2007 -
Transfer from deferred exploration costs 1,814,019
MCJV - Group share of loss (4,118)
Carrying amount at 31 December 2007 1,809,901
4. PREPARATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute the Group`s statutory accounts for the years ended 31 December
2007 or 2006 as defined in section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 2006 is derived from
the statutory accounts for that year which have been delivered to the
Registrar of Companies, as subsequently restated under IFRS. The auditors
reported on those accounts; their report was unqualified and did not contain
a statement under s.237(2) or (3) Companies Act 1985.
The consolidated balance sheet at 31 December 2007, the consolidated income
statement, consolidated cash flow statement and associated notes for the year
then ended have been extracted from the Group`s 2007 statutory financial
statements upon which the auditors` opinion is unqualified.
5. PRELIMINARY STATEMENT
Copies of the Annual Report will be sent to shareholders in May and will be
available from the Company at 2nd Floor, 6-7 Queen Street, London, EC4N 1SP.
The full financial statements will be made available on the Company`s website
www.africaneagle.co.uk at the same time they are mailed to shareholders.
For further information, see the Company`s web site www.africaneagle.co.uk or
contact one of the following:
African Eagle
Bevan Metcalf
+44 20 7248 6059
Seymour Pierce
Nicola Marrin
+44 20 7107 8000
Date: 06/05/2008 13:00:01 Produced by the JSE SENS Department.
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