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Sirius Exploration LSE: SXX |
Sep 30, 2008 02:00 ET
Final Results
FOR RELEASE
7.00AM
30 SEPTEMBER 2008
SIRIUS EXPLORATION PLC
("Sirius Exploration" or "The Company")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2008
Results
- Loss before tax and aborted reverse acquisition costs of £301,731 (2007: £278,703)
- Loss before tax of £676,358 (2007: £278,703)
Macedonia
- Favourable mineral legislation in Macedonia
- Moving forward on excellent base and precious metal targets at Kadiica and Osogovo
China
- Option on Bobai Bishop Tungsten operation in China lapses but discussions are continuing with CIC
Mining Resources Ltd and the Judian Group
- Successful outcome to discussions anticipated
- Planning to acquire minority (10-30%) stakes in Chinese mining and mineral processing assets which
are in production or close to production.
- New strategy should provide Sirius shareholders with an investment in one of the most robust and
fastest growing economies in the world and an investment that is underpinned by holding in strategic
natural resources
Outlook
- Looking forward to delivering substantial growth in the future.
The Annual Report will be published and mailed on 30 September 2008 and is available on the Company's
website www.siriusexploration.com
Notes to editor:
Enquiries welcomed, for further information please contact the Company:
Sirius Exploration Plc
Richard Poulden (Chairman) +44 7879 447 601
richard.poulden@siriusexploration.com or +61 406 647 976
Jonathan Harrison (Financial Director) +44 78 7988 7755
Stuart J. Bromley (Beijing, PR China) +86 136 0113 1912
Beaumont Cornish
Roland Cornish (Chairman) Tel: 020 7628 3396
Cubitt Consulting
Brian Coleman-Smith / James Verstringhe / Nicola Krafft Tel: 020 7367 5100
Website: www.siriusexploration.com
Background note
Sirius Exploration
Sirius Exploration PLC (AIM:SXX) is quoted on the Alternative Investment Market of the London Stock
Exchange Ltd in London. The Company acquires and explores mineral properties.and is currently exploring
for copper and gold on its porphyry copper mineral properties located in Macedonia.
The Company has an agreement with Phelps Dodge (now a subsidiary of Freeport McMoRan Copper & Gold Inc) and
has completed a drilling program at their exploration sites in Macedonia. It also has an agreement with Rio
Tinto to utilise their Macedonian database to identify further exploration opportunities.
China
The Group intends to exploit opportunities in China which will involve the acquisition of minority (10-30%)
stakes in Chinese mining and mineral processing assets which are in production or close to production
providing Sirius shareholders with an investment in one of the most robust and fastest growing economies in
the world and an investment that is underpinned by holding in strategic natural resources.
SIRIUS EXPLORATION PLC
("Sirius Exploration" or "The Company")
Sirius Exploration acquires and explores mineral properties
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2008
CHAIRMAN'S STATEMENT
Our operations in Macedonia are continuing and the Managing Director's report which follows gives the
results of our work there and the prospects.
However, the most significant event of the last few months, and indeed of the year, was the signing of the
option agreement to acquire a stake in the Bobai Bishop Tungsten operation in China. This option lapses
today, 30 September 2008 but I am pleased to report that discussions are continuing with our partners in
China and we are confident of a successful outcome to these discussions.
Deals in China take time to conclude and one of the major issues is working with trusted partners. We are
fortunate in this regard to be working with CIC Mining Resources Ltd and the Judian Group and believe that
this is a relationship which can be extended in the future.
Going forward our intention is to continue the strategy of exploiting other opportunities in China which we
are currently examining. This will involve the acquisition of minority (10-30%) stakes in Chinese mining
and mineral processing assets which are in production or close to production.
This will provide Sirius shareholders with an investment in one of the most robust and fastest growing
economies in the world and an investment that is underpinned by holding in strategic natural resources.
It is perhaps hard from inside the crumbling infrastructure of Britain to comprehend what is happening in
China. Too often the press talk of a lack of democracy and miss the huge freeing of the human spirit which
has occurred in China in the past 20 years. Hundreds of millions of Chinese who thought themselves destined
for a lifetime of poverty now believe they can improve their lives through their own efforts: that is an
unstoppable force for growth(1).
As regards the consumption of minerals, again China's economy needs to be put into perspective. We often
read that China's growth is reliant on exports to the West. Whilst this is part of the equation we should
remember that up until 1820 the two largest economies in the world were India and China(2). In 1820 The
United States, Canada, Australia and New Zealand combined accounted for 1.9% of Global GDP while Asia
accounted for 59.2%(3). Goldman Sachs(4) predicts that by 2050 three of the world's largest economies will be
Asian with this ranking: China, USA, India, Japan.
In addition China has massive infrastructure projects underway which underpin domestic consumption, a few
statistics will give a feel for the scale of this: 78 new regional airports(5), multiple new urban mass
transit systems; in 1991 there were 30 cities with a population over 1 million, by 2015 there will be over
70(6). By comparison the EU has 17 cities with a population over 1 million(7). All of this speaks to rapid
growth and massive infrastructure investment which will lead to a major consumption of Commodities.
_______________________________
(1) This is the opinion of the Chairman and other commentators on China
(2) Angus Madison, "The World Economy: A Millennial Perspective" 2007
(3) Ibid
(4) Goldman Sachs "Playing with the BRICS"
(5) Financial Times
(6) Kishore Mahbubani "The New Asian Hemisphere"
(7) Ibid
We believe that our focus on this region of the world and the creation of a portfolio of holdings in
operating mineral producing assets will provide a strong and exciting investment for our shareholders.
I am grateful to you for your support during the year and I and your board look forward to delivering
substantial growth in the future.
Richard Poulden
Chairman
MANAGING DIRECTOR'S OPERATIONAL REVIEW
Introduction
We have retained the two target porphyry copper deposits, Osogovo and Kadiica, in Macedonia which are held
in trust for the Company by Freeport McMoran subject to a 1% Net Smelter Return.
During the year, the previous government had proposed certain changes to the mining law which would have
meant a mandatory reduction in size of the claims and also the loss of the automatic right of transfer from
exploration to exploitation status should anything workable be discovered. In fact there was a proposal to
enact a system whereby claims on which a discovery was made were to be put out to tender for exploitation.
On the grounds that we felt that it would be incautious expenditure of your Company's funds to carry out
expensive exploration under such conditions we held back on our plans to carry out the planned geochemical
programmes and drilling campaigns.
I am happy to report that the recent elections have empowered a government who have confirmed their desire
to retain the original mining law. We can now confirm the spatially zoned nature of both targets from a
cupriferous core to a flanking lead-zinc-silver zone with local outlying significant gold enrichments. It
is important for us to retain the entire original claim holdings so as to be sure of having these
attractive outer zones of mineralisation within our properties. We may therefore once again be more
confident of being able to carry on exploration in Macedonia on our two targets.
These legal uncertainties, when considered alongside the instability in the financial markets, have led the
Company not to make significant expenditure on either property during the year under review. We have
managed to acquire a significant amount of outstanding geochemical data from previous exploration
campaigns. Furthermore we have sorted and moved the core from Phelps Dodge's exploration, including from
our joint venture drilling. It is now in our proprietary core store in Pehcevo on the flanks of the Kadiica
mineralised system where it is held along with assay pulps from the first stage of our joint exploration.
Further to this our Balkan staff have managed to confirm the presence of old mine workings and dumps as
probably Roman and obtained some significant assay results from surface on these old dumps.
Kadiica
During the year we have concentrated our efforts on locating outlying zones of precious metal
mineralisation. The two anomalous gold areas defined by the Rio Tinto surveys were used as training areas
for mineralogical identification from satellite data. Six potentially significant anomalous areas were
identified for follow up.
Re-examination of recently acquired Phelps Dodge geochemical database (steam sediment, soil and rock chip
surveys) defined one of the larger of these areas as anomalous for silver, gold, lead and zinc with lesser
copper and molybdenum. Ground follow-up confirmed that this is one of the old workings and dumps from Roman
mining.
A field inspection visit located the old dumps and adits as well as slags typical of Roman-style in situ
smelting for precious metals. Two grab samples demonstrated hydrothermal alteration typical of the
epithermal outer zones of a porphyry system as well as significant metal values:
- 0.1ppm Gold 30ppm Silver
- 0.5ppm Gold 114ppm Silver
A second inspection sampled characteristic examples of quartz-sericite-pyrite alteration with mineralized
quartz veining. Ten grab samples from this contained up to 0.8ppm gold and 271ppm silver with significant
lead, zinc, copper and molybdenum. In fact these samples contain the diagnostic geochemistry of the
epithermal outer part of a porphyry system. These metal values are extremely significant for the potential
of local high grade and value near surface mineralisation.
Geochemical anomalies sourcing in the other satellite anomalies suggest that these too could be other
similar outlying mineralisations around the central porphyry, even if they may not have been discovered or
worked by the ancients.
We therefore have in Kadiica, not only one well localised precious metal mineralised system and also five
further possible look-alikes in need of testing, but also the original porphyry enrichment blanket ready
for drilling and leach tests.
Osogovo
The threats to the mining law led us to make no significant expenditures on Osogovo. We have however
consolidated all previous data. In particular we have re-examined these against the results from our
proprietary ground magnetic survey. This confirms that the powerful anomaly on the south east flank of the
porphyry on the margins of our claim is likely sourced in cupriferous skarn. This is an attractive drilling
target.
The internal breccia identified by Phelps Dodge within the mineralised porphyry is a source of anomalous
base metal geochemistry. Futhermore it contains mineralised clasts. These data indicate a target at depth
also ready for drill testing.
It is likely that your Company will look to share the risk of drilling these targets. Now that the mining
legislation appears to have stabilised and favourable there should be no shortage of interested parties.
Conclusion
The stabilised and favourable mineral legislation in Macedonia encourages us to move forwards on our
excellent base and precious metal targets at Kadiica and Osogovo. We also continue to review exploration
opportunities for acquisition or joint venture. New opportunities are always being actively sought. We will
continue seeking opportunities as well as advancing those the Company holds in Macedonia.
Dr Nicholas Badham BA (Hons.Oxon)PHD, Chartered Geologist
Managing Director
CONSOLIDATED INCOME STATEMENT
for the year ended 31 MARCH 2008
2008 2007
Notes £ £
Continuing operations:
Revenue - -
Administrative expenses (677,285) (280,829)
-----------------------------------------------------------------------------------------------------
Exceptional administrative expenses -
aborted reverse acquisition 5 (374,627) -
Other administrative costs (302,658) (280,829)
-----------------------------------------------------------------------------------------------------
Operating loss 6 (677,285) (280,829)
Finance income 7 927 2,126
---------- ----------
Loss before taxation (676,358) (278,703)
Taxation 9 - -
---------- ----------
Loss for the financial year (676,358) (278,703)
---------- ----------
Attributable to:
Equity holders of the Company (676,358) (278,703)
---------- ----------
---------- ----------
Loss per share:
Basic and diluted 10 (1.0p) (0.5p)
---------- ----------
---------- ----------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 MARCH 2008
2008 2007
£ £
Income and expense recognised directly
in equity - -
Loss for the year (676,358) (278,703)
---------- ----------
Total income and expense recognised in
the year (676,358) (278,703)
---------- ----------
---------- ----------
Attributable to:
Equity holders of the Company
(676,358) (278,703)
---------- ----------
---------- ----------
CONSOLIDATED BALANCE SHEET
as at 31 MARCH 2008
2008 2007
ASSETS Notes £ £
Non-current assets
Property, plant and equipment 11 679 480
Intangible assets 12 567,994 464,022
----------- -----------
568,673 464,502
----------- -----------
Current assets
Trade and other receivables 14 10,462 17,711
Cash and cash equivalents 15 3,685 61,821
----------- -----------
14,147 79,532
----------- -----------
TOTAL ASSETS 582,820 544,034
----------- -----------
----------- -----------
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the Company
Share capital 16 172,199 149,199
Share premium account 18 1,241,334 1,019,364
Share based payment reserve 17, 18 1,205 1,205
Retained earnings 18 (1,526,789) (850,431)
----------- -----------
Total equity 18 (112,051) 319,337
----------- -----------
Current liabilities
Trade and other payables 19 694,871 224,697
----------- -----------
Total liabilities 694,871 224,697
----------- -----------
TOTAL EQUITY AND LIABILITIES 582,820 544,034
----------- -----------
----------- -----------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 MARCH 2008
2008 2007
Notes £ £
Cash outflow from operating 20
activities (199,318) (115,504)
Cash flow from investing
activities
Purchase of intangible assets (103,972) (108,847)
Purchase of property, plant and
equipment (743) (980)
----------- -----------
Net cash used in investing
activities (104,715) (109,827)
----------- -----------
Cash flow from financing
activities
Net proceeds from issue of shares 244,970 263,082
Finance income 927 2,126
Net cash generated from financing
activities 245,897 265,208
----------- -----------
Net (decrease)/increase in cash
and cash equivalents (58,136) 39,877
Cash and cash equivalents at
beginning of the year 61,821 21,944
----------- -----------
Cash and cash equivalents at end
of the year 3,685 61,821
----------- -----------
----------- -----------
NOTES TO THE ACCOUNTS
for the year ended 31 MARCH 2008
1. Accounting policies
The financial information included in the preliminary announcement does not constitute the
Group's statutory accounts for the years ended 31 March 2008 or 2007 within the meaning of
section 240 of the Companies Act 1985. Statutory accounts for 2007 have been delivered to the
registrar of companies, and those for 2008 will be delivered in due course. The auditors have
reported on those accounts; their reports were (i) unqualified, (ii) did not contain statements
under section 237(2) or (3) of the Companies Act 1985 and (iii) included references to the going
concern status to which the auditors drew attention by way of emphasis without qualifying their
reports.
Basis of preparation
The annual accounts of Sirius Exploration plc ("the Company") and its subsidiary ("the Group")
have been prepared in accordance with International Financial Reporting Standards as adopted by
the European Union ("EU") ("IFRS") applied in accordance with the provisions of the Companies Act
1985.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board
("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") and there
is an ongoing process of review and endorsement by the European Commission. The accounts have
been prepared on the basis of the recognition and measurement principles of IFRS that are
applicable at 31 March 2008.
The accounts have been prepared under the historical cost convention. The principal accounting
policies set out below have been consistently applied to all periods presented.
Going concern
The Group has incurred trading losses during the year ended 31 March 2008. At the date of
approval of these accounts, the Directors have made certain arrangements to allow the Group to
continue to trade as a going concern for a period of twelve months from the date of approval of
these accounts. These arrangements are as follows:
(i) Equity credit facilities:
On 31 March 2008 the Company signed a 24 month equity credit facility agreement with an investor
which provides a funding line of £300,000, subject to certain terms and conditions, for working
capital purposes. The £300,000 will be available in share subscriptions of no less than £50,000
each and will be made based on no less than 65% of the average bid price of the shares traded
during a five consecutive trading day draw down period. As at 30 September 2008 £100,000 of this
facility had been drawn down.
On 25 September 2008 the Company signed an additional 24 month equity credit facility agreement
with an investor which provides a further funding line of £500,000, subject to certain terms and
conditions, for working capital purposes. The £500,000 will be available in share subscriptions
of no less than £25,000 each and will be made based on no less than 70% of the average bid price
of the shares traded during a five consecutive trading day draw down period.
(ii) Directors and consulting fees:
All outstanding fees as at 31 March 2008 and all fees up to 30 September 2009 due to directors
and related consulting fees are to be settled in shares in lieu of fees if required by Company.
Accordingly, the Directors believe that, having made these arrangements, the Group will be able
to meet its third party liabilities as and when they fall due for a period of at least twelve
months from the date on which these accounts are approved. However, inherently there can be no
certainty in relation to these matters.
Therefore, given all of the above, the Directors consider it appropriate to prepare these Group
accounts on a going concern basis and hence the accounts do not include any adjustments that
would result from the Group failing to secure necessary funding.
IFRS transition
IFRS 1, First-time Adoption of International Reporting Standards ("IFRS 1") permits companies
adopting IFRS for the first time to take certain exemptions from the full retrospective
application of IFRS. The accounts have been prepared without any exemptions available being
applied as the directors do not consider the exemptions to be applicable to the Group.
International Financial Reporting Standards in "issue" but not yet effective
At the date of authorisation of these consolidated accounts, the IASB and IFRIC have issued the
following standards and interpretations which are effective for annual accounting periods
beginning on or after the stated effective date. These standards and interpretations are not
effective for and have not been applied in the preparation of these consolidated accounts:
IAS 1: Presentation of Financial Statements (Revised 2007) (effective as of 1 January 2009)
IAS 23: Borrowing costs (Revised 2007) (effective as of 1 January 2009)
IAS 27: Consolidated and Separate Financial Statements (Amended) (effective as of 1 July 2009)
Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective as
of 1 January 2009)
Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items
(effective as of 1 July 2009)
Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards
Amendment to IFRS 2: Share Based Payments: Vesting conditions and cancellations (Amended)
(effective as of 1 January 2009)
IFRS 3: Business Combinations (Revised) (effective as of 1 July 2009)
IFRS 8: Operating Segments (effective as of 1 January 2009)
IFRIC Interpretation 12: Service Concession Agreements (effective as of 1 January 2008 - not yet
endorsed by the EU)
IFRIC Interpretation 13: Customer Loyalty Programmes (effective as of 1 July 2008 - not yet
endorsed by the EU)
IFRIC Interpretation 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction (effective as of 1 July 2008 - not yet endorsed by the EU)
IFRIC Interpretation 15: Agreements for the Construction of real Estate (effective as of 1
January 2009 - not yet endorsed by the EU)
IFRIC Interpretation 16: Hedges of a Net Investment in a Foreign Operation (effective as of 1
October 2008 - not yet endorsed by the EU)
The directors anticipate that the adoption of these standards and interpretations will not have a
material impact on the Group's accounts in the period of initial adoption with the exception of
IFRS 3: Business Combinations (Revised), which will require transaction costs arising on business
combinations to be expensed to the income statement as opposed to the existing treatment of
capitalisation, in the event that acquisitions are undertaken.
Basis of consolidation
The consolidated accounts incorporate the accounts of the Company and its subsidiary undertaking.
As a consolidated income statement is published, a separate income statement for the parent
Company is omitted from the Group accounts by virtue of section 230 of the Companies Act 1985.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation less any recognised impairment
losses. Cost includes expenditure that is directly attributable to the acquisition or
construction of these items. Subsequent costs are included in the asset's carrying amount only
when it is probable that future economic benefits associated with the item will flow to the Group
and the costs can be measured reliably. All other costs, including repairs and maintenance costs
are charged to the income statement in the period in which they are incurred.
Depreciation is provided on all tangible fixed assets and is calculated on a straight-line basis
to allocate cost, other than assets in the course of construction, over the estimated useful
lives, as follows:
Computer and diagnostic equipment - 33.3% per
annum
Exploration and evaluation assets
Costs arising from exploration and evaluation activities are accumulated separately for each area
of interest and only capitalised where such costs are expected to be recouped through successful
development, or through sale, or where exploration and evaluation activities have not, at the
reporting date, reached a stage to allow a reasonable assessment regarding the existence of
economically recoverable reserves.
Expenditure capitalised comprise direct costs and an appropriate portion of expenditure not
having a specific connection with a particular area of interest.
Capitalised expenditure in respect of areas of interest is written off in the income statement
when the above criteria do not apply or when the directors assess that the carrying value may
exceed the recoverable amount.
Capitalised costs in respect of an area of interest that is abandoned are written off in the
period in which the decision to abandon is made.
Once production commences, capitalised expenditure in respect of an area of interest is amortised
on a unit of production basis by reference to the reserves of that area of interest.
The Group determines whether the capitalised exploration and evaluation costs are impaired at
least each financial reporting date. This requires an estimation of the remaining reserves
and the mine life and assumptions about the success of the Group's exploration pursuits in order
to estimate the recoverable amount of the cash-generating unit.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset, for which the estimates of future cash flow have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (cash-generating unit) in prior periods. A reversal
of the impairment loss is recognised in the income statement immediately, unless the relevant
asset is carried at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Foreign currencies
The reporting and functional currency of the Group is Sterling. Transactions dominated in a
foreign currency are translated into sterling at the rate of exchange ruling at the date of the
transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign
currency are translated at the rate ruling at that date. All exchange differences are dealt with
in the profit and loss account
Investments
Where investments in equity instruments do not have a quoted market price in an active market and
whose fair value cannot be measured reliably they are measured at cost. If an investment
measured at cost is determined to be impaired, the impairment loss is recognised directly in the
income statement for the period and such impairment losses cannot be reversed.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at
initial fair value less provision for impairment. Provision for impairment is established when
there is objective evidence that the Group will not be able to collect all amounts due according
to the original terms of the receivable. The amount of the impairment is the difference between
the asset's carrying amount and the present value of the estimated future cash flows, discounted
at the effective interest rate.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits held with banks.
Trade and other payables
Trade payables are initially measured at fair value, and subsequently measured at amortised cost,
using the effective interest rate method.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation 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 accounts. However, if the deferred tax arises from the 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, it is not accounted for.
Deferred 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 tax asset
is realised or the deferred tax liability is settled.
Deferred 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.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded
at the proceeds received, net of any direct issue costs.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment.
The Group issues equity-settled share-based payments to certain directors and sales agents.
Equity-settled share-based payments are measured at fair value (excluding the effect of non market-
based vesting conditions) at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of non-transferability and
exercise restrictions.
Segmental information
The Group's primary segmentation is by business line of which there is one segment: resource
evaluation and exploitation.
The Group's secondary segmentation is geographical, based on the location of the Group's assets.
There is one segment: Macedonia.
2. Critical accounting estimates and judgements
The critical accounting estimates and judgements made by the Group regarding the future or
other key sources of estimation, uncertainty and judgement that may have a significant risk of
giving rise to a material adjustment to the carrying values of assets and liabilities within the
next financial year are:
Impairment of exploration and evaluation assets
At each reporting date, the Group assesses whether there is any indication that an asset may
be impaired. Where an indication of impairment exists, the Group makes a formal estimate of
recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset
is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is
determined for an individual asset unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets, in which case, the recoverable
amount is determined for the cash-generating unit to which the asset belongs.
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.
3. Financial risk management
The Group's current activities result in the following financial risks and management's
responses to those risks in order to minimise any resulting adverse effect on the Group's
financial performance.
Foreign exchange risk
The Group's reporting currency is Sterling. Its principal activities of finding
properties with good mineral potential and bringing them to the point of proven reserves where
they can be sold or joint ventured for exploitation will be transacted in US$. All fund raising
and other operational costs are in Sterling. The Group does not undertake any specific foreign
currency hedging to mitigate its exposure to fluctuations in foreign currency.
Interest rate risk
Interest rate risk arises from cash held on deposit. The Group has no external borrowings and
no significant cash held on deposit therefore the Group currently has no material interest rate
exposure. The Group's cash balances are kept in interest bearing current accounts and on short
term deposit, so as to maximise the level of return while maintaining an adequate level of
liquidity.
Credit risk
The Group has not generated revenue up to 31 March 2008 and therefore has no significant
credit risk.
Liquidity risk
The availability of adequate cash resources is managed by the Group through managing its funds
conservatively thereby ensuring it meets its continual operational requirements.
4. Segmental analysis
Primary reporting format - business segment
No primary segmental analysis has been presented since the Group operates within a single business
segment: resource evaluation and exploitation.
Secondary reporting format - geographic segments
No geographical segmental analysis has been presented since the Group operates within a single
geographic segment: Macedonia.
5. Exceptional administrative expenses
The Group and Company incurred £374,627 (2007: £nil) of expenditure in due diligence costs on the
proposed reverse acquisition of Njahili Resources Limited. These costs were written off in the
year ended 31 March 2008 as the acquisition was not completed.
6. Operating loss is stated after charging: 2008 2007
£ £
Auditors' remuneration
- audit of the parent Company and consolidated accounts 16,500 12,500
- taxation services (paid to related companies of the auditors) 9,300 8,000
- Services relating to corporate finance transactions proposed
to be entered into by the Company 120,000 -
Depreciation 544 333
-------- ---------
-------- ---------
7. Finance income 2008 2007
£ £
Bank interest 927 2,126
-------- ---------
-------- ---------
8. Staff costs (including directors)
There were no staff costs, including directors emoluments, incurred during the year (2007: £nil).
There were no employees, including directors, during the year (2007: £nil).
9. Taxation on loss on ordinary activities
2008 2007
£ £
Corporation tax payable based on the loss for the year at 20%
(2007: 19%) - -
--------- ----------
--------- ----------
Taxation reconciliation
Loss on ordinary activities before taxation (676,358) (278,703)
--------- ----------
--------- ----------
Loss on ordinary activities multiplied by the standard rate (135,272) (52,954)
of corporation taxation in the UK of 20% (2007: 19%)
Taxation effects of:
Expenses not deductible for tax purposes 75,256 370
Depreciation in excess of capital allowances 12 35
Trading losses not utilised 60,004 52,549
--------- ----------
- -
--------- ----------
--------- ----------
The Group has an unrecognised deferred tax asset of £238,476 (2007: £167,116) relating to trading
losses not utilised. The deferred tax asset has not been recognised in the accounts due to the
uncertainty surrounding its recoverability. The deferred tax asset can be recovered against
suitable future trading profits.
10. Loss per share
Given the loss for both years the share warrants are anti-dilutive and have therefore not been
taken into consideration for the purposes of calculating earnings per share.
The calculation of the basic and diluted earnings per share is based on the following data:
Loss 2008 2007
£ £
Loss for the purposes of basic earnings per (676,358) (278,703)
share being net loss attributable to equity
shareholders of the parent
------------ ------------
------------ ------------
Loss for the purpose of diluted earnings per (676,358) (278,703)
share
------------ ------------
------------ ------------
Number of shares
Weighted average number of ordinary shares for
the purpose of basic and diluted earnings per
share 68,299,784 57,968,384
------------ ------------
------------ ------------
Earnings per share
Basic and diluted loss per share - pence (1.0) (0.5)
11. Property, plant and Computer and
equipment diagnostic
equipment
£
Cost
At 1 April 2006 and 1 April 2007 980
Additions 743
--------------
At 31 March 2008 1,723
--------------
Depreciation
At 1 April 2006 167
Charge for year 333
--------------
At 1 April 2007 500
Charge for year 544
--------------
At 31 March 2008 1,044
--------------
Net book value
At 31 March 2008 679
--------------
--------------
Net book value
At 31 March 2007 480
--------------
--------------
12. Intangible fixed assets Exploration
costs
£
At 1 April 2006 355,175
Additions 108,847
--------------
At 31 March 2007 464,022
Additions 103,972
--------------
At 31 March 2008 567,994
--------------
--------------
No exploration and evaluation expenditure has been expensed to the income statement during the
year ended 31 March 2008 (2007: £nil)
13. Fixed asset investments 2008 2007
£ £
Sirius Exploration - Balkan DOOEL Strumica 3,427 3,427
--------- ---------
--------- ---------
The Company formed a subsidiary, Sirius Exploration - Balkan DOOEL Strumica, a company incorporated in
Macedonia. The Company owns 100% of the issued ordinary share capital. The trading company of Sirius
Exploration - Balkan DOOEL Strumica is consistent with the Company as disclosed in the Directors'
Report. The fixed asset investment is held at cost as it represents equity instruments which do not
have a quoted market price in an active market and whose fair value cannot be measured reliably. As
at 31 March 2007 and 2008, the Directors consider the fixed asset investment is not impaired.
14. Trade and other receivables 2008 2007
£ £
Other debtors 7,445 8,226
Prepayments 3,017 9,485
--------- -----------
10,462 17,711
--------- -----------
--------- -----------
The directors consider that the carrying amount of trade and other receivables approximates to their fair
value.
No bad and doubtful debt charges have been recognised by the Group in the income statement during the
year (2007: £nil).
15. Cash and cash equivalents 2008 2007
£ £
Cash at bank and in hand 3,685 61,821
--------- --------
--------- --------
The directors consider that the carrying amount of these assets approximates to their fair value. The
credit risk on liquid funds is limited because the counter-party is a bank with a high credit rating.
16. Share capital 2008 2007
£ £
Authorised
240,000,000 (2007: 240,000,000) ordinary shares of 0.25p each 600,000 600,000
--------- ----------
--------- ----------
Allotted and called up
68,879,511 (2007: 59,679,511) ordinary shares of 0.25p each 172,199 149,199
--------- -----------
--------- -----------
On 5 April 2007 the Company issued 2,500,000 ordinary shares of 0.25p nominal value per ordinary share at
2p per share, giving total consideration of £50,000.
On 4 May 2007 the Company issued 6,700,000 ordinary shares of 0.25p nominal value per ordinary shares at 3p
per share, giving total consideration of £201,000.
17. Share-based payments
The Company issued warrants in connection with its flotation on AIM in August 2005. Each warrant was
convertible into one ordinary share at an exercise price of 5p per share. 2,293,375 warrants expired on 1
August 2006. The remaining 200,000 warrants expire on 1 August 2010.
Details of the warrants in issue during the years ended 31 March 2007 and 31 March 2008 are as follows:
Weighted
Average
Exercise Price
Number of £
warrants
Outstanding at 1 April 2006 2,725,000 0.05
Exercised during the year 231,625 0.05
Expired during the year 2,293,375 0.05
-----------
Outstanding at 31 March 2007 200,000 0.05
-----------
Exercisable at 31 March 2007 200,000 0.05
-----------
Outstanding at 1 April 2007 and 31 March 2008
200,000 0.05
-----------
Exercisable at 31 March 2008 200,000 0.05
-----------
The Group has applied the requirements of IFRS 2 - Share based payment. In accordance with the
transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002
that were unvested from 30 October onwards.
The Group issues equity-settled payments to certain employees and agents. Equity settled share-based
payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the
date of grant. The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that
will eventually vest and adjusted for the effect of non market-based vesting conditions.
The fair value of warrants granted as at 31 March 2008 is £1,205. The warrants were fully vested on date
of issue.
The remaining warrants outstanding expire on 1 August 2010.
18. Reserves Share Share premium Share Profit and Equity
capital account based loss account share-
payments holders'
reserve funds
£ £ £ £ £
At 31 March 2006 132,545 772,936 21,073 (591,596) 334,958
Loss for the year - - - (278,703) (278,703)
Share capital issued in
the year 16,654 253,928 - - 270,582
Share-based payment
transaction on exercise
or expiry of warrants - - (19,868) 19,868 -
Share issue costs - (7,500) - - (7,500)
--------- -------------- ---------- ------------- ------------
At 31 March 2007 149,199 1,019,364 1,205 (850,431) 319,337
Loss for the year - - - (676,358) (676,358)
Share capital issued in
the year 23,000 228,000 251,000
Share issue costs - (6,030) - - (6,030)
--------- -------------- ---------- ------------- ------------
At 31 March 2008 172,199 1,241,334 1,205 (1,526,789) (112,051)
--------- -------------- ---------- ------------- ------------
--------- -------------- ---------- ------------- ------------
The share premium account is used to record the excess proceeds over nominal value on the issue of shares.
The share-based payment reserve is used to record the share based payments made by the Group.
19. Trade and other payables 2008 2007
£ £
Other creditors 368,336 201,307
Accruals 326,535 23,390
--------- ---------
694,871 224,697
--------- ---------
--------- ---------
20. Cash outflow from operating activities 2008 2007
£ £
Loss before tax (676,358) (278,703)
Depreciation 544 333
Finance income (927) (2,126)
--------- ---------
Operating cash flow before changes in working capital (676,741) (280,496)
Decrease in receivables 7,249 5,607
Increase in payables 470,174 159,385
--------- ---------
Net cash outflow from operating activities (199,318) (115,504)
--------- ---------
--------- ---------
21. Related party transactions
During the year ended 31 March 2008, the Company was charged £60,000 (2007: £60,000) by Nicholas Badham, a
director of the Company, for consulting services. As at the year end £50,000 (2007: £30,000) was due to
Nicholas Badham.
During the year ended 31 March 2008 the Company was charged £30,000 (2007: £30,000) by Easy Business Consulting
Limited, in which Jonathan Harrison, a director of the Company, has an interest, for consultancy services. At
the year end £27,500 (2007: £15,000) was due to Easy Business Consulting Limited.
During the year ended 31 March 2008 the Company was charged £60,000 (2007: £60,000) by Pacific Corporate
Management Limited for management services. Richard Poulden, a director of the Company, is an employee of
Pacific Corporate Management Limited. At the year end £50,000 (2007: £35,000) was due to Pacific Corporate
Management Limited.
During the year ended 31 March 2008, the Company was charged £10,000 (2007: 10,000) by Derek Stonley, a
director of the Company, for consulting services. At the year end £8,333 (2007: £nil) was due to Derek Stonley.
During the year ended 31 March 2008, the Company was charged £10,000 (2007: £10,000) by Z/Yen Group Limited, in
which Michael Mainelli, a director of the Company, has an interest, for consulting services. At the year end
£1,667 (2007: £1,667) was due to Z/Yen Group Limited.
During the year ended 31 March 2008, the Company was charged £nil (2007: £5,637) by Wendy Faulkner, the then
Company Secretary of the Company, for consulting services.
22 Financial instruments
The Group's financial instruments comprise cash and cash equivalents, bank borrowings and items such as
trade payables and trade receivables which arise directly from its operations. The main purpose of these
financial instruments is to provide finance for the Group's operations.
The Group's operations expose it to a variety of financial risks including credit risk, liquidity risk,
interest rate risk, equity price risk and foreign currency exchange rate risk. Given the size of the
Group, the directors have not delegated the responsibility of monitoring financial risk management to a
sub committee of the board. The policies set by the board of directors are implemented by the Company's
finance department.
Classification of financial instruments
With the exception of investments held by the Company of £3,427 (2007: £3,427), which is held as available-
for-sale, all other Company and Group financial assets are classified as loans and receivables and the
carrying value of all financial assets approximates to its fair value. All of the Company and Group
financial liabilities are held at amortised cost.
Capital management
The Group and Company's objectives when managing capital are to safeguard the Group and Company's ability
to continue as a going concern, to provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. The Group and Company defines capital as being share capital plus
reserves. The Board of Directors monitor the level of capital as compared to the Group and Company's
commitments and adjusts the level capital as is determined to be necessary, by issuing new shares. The
Group and Company is not subject to any externally imposed capital requirements.
Credit risk
The Group's credit risk is primarily attributable to its trade receivables. The Group has implemented
policies that require appropriate credit checks on potential customers before sales are made. The amount
of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the
board.
The carrying mount of financial assets represents the maximum credit exposure. The maximum credit exposure
to credit risk at the reporting date was:
2008 2007
£ £
Trade receivables 7,445 8,226
Cash and cash equivalents 3,685 61,821
-------- --------
11,130 70,047
-------- --------
-------- --------
Interest rate risk
The Group has both interest bearing assets and interest bearing liabilities. Interest bearing assets
comprise only cash and cash equivalents which earn interest at a variable rate. The Group has a policy of
maintaining debt at fixed rates to ensure certainty of future interest cash flows. The directors will
revisit the appropriateness of the policy should the Group's operations change in size or nature.
The Group has not entered into any derivative transactions during the period under review.
The Group's cash and cash equivalents earned interest at a variable rate based on a daily cleared credit
balances at 2.5% (2007: 2.75%) below the base rate.
Liquidity risk
The Group actively maintains cash balances that are designed to ensure that sufficient available funds
for operations and planned expansions. The Group monitors its levels of working capital to ensure that it
can meet its debt repayments as the fall due. The following table shows the contractual maturities of the
Group's financial liabilities, all of which are measured at amortised cost:
Trade Accrual Total
payables
£ £ £
At 31 March 2007
6 months or less 190,840 18,390 209,230
6-12 months 10,467 5,000 15,467
-------- -------- --------
Total contractual cash flows 201,307 23,390 224,697
-------- -------- --------
-------- -------- --------
Carrying amount of financial liabilities
measured at amortised cost 201,307 23,390 224,697
-------- -------- --------
-------- -------- --------
Trade Accruals Total
payables
£ £ £
At 31 March 2008
6 months or less 35,334 185,058 220,392
6-12 months 333,002 141,477 474,479
-------- -------- --------
Total contractual cash flows 368,336 326,535 694,871
-------- -------- --------
-------- -------- --------
Carrying amount of financial liabilities
measured at amortised cost 368,336 326,535 694,871
-------- -------- --------
-------- -------- --------
No separate analysis of liquidity risk has been provided for the Company as it is not materially different
to that of the Group.
Market risk and sensitivity analysis
Foreign currency risk
The reporting currency of the Group is Sterling. Transactions dominated in a foreign currency are
translated into sterling, the functional currency of the Company, at the rate of exchange ruling at
the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated
in foreign currency are translated at the rate ruling at that date. All exchange differences are
charged or credited to the income statement as appropriate. The Group and Company has no material
financial assets held in a foreign currency. Therefore the Group and Company considers this to be a
manageable risk to the extent that further sensitivity analysis is not required.
Interest rate risk
The Group and Company is exposed to interest rate risk as the result of positive cash balances,
denominated in Sterling, which earn interest at a variable rate. As these cash balances are not
material, the Group and Company considers this to be a manageable risk to the extent that further
sensitivity analysis is not required.
23. Post balance sheet events
Share issues
On 29 April 2008 the Company issued 14,800,907 new ordinary shares at 2.5p per share.
On 30 April 2008 the Company issued 3,075,292 new ordinary shares at 1.6259p per share.
On 12 June 2008 the Company increased its authorised ordinary share capital from £600,000 to
£1,250,000 by the creation of 260,000,000 ordinary shares of 0.25p per share.
On 19 June 2008 the Company issued 258,041 new ordinary shares at 2.5p per share.
On 25 June 2008 the Company issued 2,222,222 new ordinary shares at 2.25p per share.
On 27 June 2008 the Company issued 1,200,000 new ordinary shares at 1.5p per share.
On 29 August 2008 the Company issued 7,000,000 new ordinary shares at 1p per share.
Option agreement
On 31 May 2008 the Company signed an Option Agreement with CIC Mining Resources Limited ("CICM") and
Judian Group shareholders to purchase up to 25% of the equity of certain tungsten production assets
in Jiangxi Province and Guangxi ("Target Assets") in China. The term of Option Agreement has been
extended to 30 September 2008. Currently the Target Assets are in trial production with full
production anticipated to commence in 2009.
Subject to due diligence, the initial interest of 10% of the Target Assets will be sold to the
Company for £6,000,000 payable in ordinary shares valued at 22p per ordinary share, plus £2,000,000
cash payable out of future capital raising. The cash payment may be converted into shares in the
Company if CICM elects to do so at 22p per ordinary share.
On 12 June 2008 the Company established a new Executive Management Share Option Scheme and a new
General Share Option Scheme.
On 25 September 2008 the Company signed an equity credit facility agreement with an investor which
provides a funding line of £500,000, subject to certain terms and conditions, for working capital
purposes.
The £500,000 will be available in share subscriptions of no less than £25,000 each and will be made
based on no less than 70% of the average bid price of the shares traded during a 5 consecutive
trading day draw down period.
DIRECTORS
The Board comprises of three executive Directors and two non-executive Directors.
Executive Directors
Mr Richard Poulden, Executive Chairman, aged 56
Following a law degree from Oxford University, Mr Poulden qualified as a Barrister, after which he moved
into merchant banking where he worked for Samuel Montagu & Co Limited. Following an MBA at London
Business School, he joined the international management consultancy firm, Arthur D Little, where he
worked in their European strategy practice and was co-founder of their Financial Industries Group. He
worked on natural resource projects in South America and the United States in ammonia production and oil
and natural gas respectively. He has advised at a corporate finance level, on the securing of natural
resource projects in the Middle East and Central Asia. He served in the UK Leadership Team of Electronic
Data Systems where he worked on the merger of EDS's global energy practice.
Dr Nicholas Badham, Managing Director, aged 62
After graduating from Oxford and obtaining a PhD from the University of Alberta, Canada, Dr Badham
established the School of Economic Geology at the University of Southampton in 1973. Subsequently, he
left academia to join Selection Trust as area selection and exploration research manager. In this role
he transferred to BP Minerals International following their takeover of Selection Trust. He then spent 7
years with RTZ Mining & Exploration Limited, rising to the position of Chief Geologist and as such was
responsible for worldwide regional are selection and exploration research. Since 1996, he has run his
own exploration consulting business including amongst his consulting clients Rio Tinto plc, BHP World
Minerals, Noranda Inc., Exxon Minerals S.A., Inco Technical Services Limited, Anglo American
Corporation, WMC Corporate Services Inc. and Phelps Dodge. During this period he was a director of West
African Gold Limited and Chief Geologist of Azco Mining Limited. He is a Fellow of the Geological
Society, a Chartered European Geologist, a Fellow of the Society of Economic Geologists and has written
as author or co-author a substantial number of geological papers.
Jonathan Harrison, Finance Director, aged 61
Mr Harrison is a Chartered Accountant with experience in quoted and unquoted companies. Previously, he
spent 16 years at Intercontinental Hotels Corporation, where he held various positions of Vice President
of Finance responsible for Europe, Middle East and Africa. In 1989 he joined Boddington Group Plc, where
he developed and became Operations Director of the Village Leisure Hotels division, responsible for the
operation of six leisure hotels. Between February 1994 and May 1996, while still at the Boddington
Group, he was Finance Director of Country House Retirement Homes Limited business during which time the
number of nursing homes nearly doubled to 31 nursing homes and assisted with the sale of the business to
BUPA.
In March 1997 he led a management buy-in of 25 hotels from Queens Moat Houses plc with Duke Street
Capital. Six months later he managed the refinancing of the new Group, County Hotels Group plc, through
a listed bond offering and, in January 1999, successfully sold the company to Regal Hotels Group plc.
After researching the health and fitness market, he joined Topnotch Health Clubs plc in September 1999
and oversaw the company's listing on AIM in March 2000. At the same time, as seed capital investor in UK
Explorer Limited and a non-executive director, nurtured this internet business through the dot-com boom
bust to a successful trade sale in February 2005. He is a Non Executive Director of Plus listed Fundy
Minerals Limited and a Director of Plus listed World Mining Services Limited and Circle Resources Plc.
Non-Executive Directors
Professor Michael Mainelli, Non-Executive Director, aged 50
Professor Mainelli is Chairman of Z/Yen, the UK's leading risk/reward Group, where he has worked since
1994 on strategy, technology, finance and business development. He started his career as a research
scientist in aerospace and computer graphics and then spent seven years as a partner in a leading
accountancy firm directing much of their consultancy work in the UK and overseas. Prof. Mainelli's
natural resources experience dates back to 1979 where his early research work led him to starting
companies in seismology, cartography and oil and gas information for a Swiss firm. In the early 1980's
Prof. Mainelli initiated and ran the Swiss firm's multi-million dollar oil industry consortium (Shell,
BP, Chevron and Elf Aquitaine were primary partners plus 10 minor partners) to digitise the world which
culminated in the development of Geodat and Mundocart, oil industry standard sets of cartographic data
at scales of 1:50,000 to 1:1,000,000 and over 60 million geographic features. Prof. Mainelli has worked
for public, private and not-for-profit companies, led several privatisation projects, was Chief
Scientist of the DTI Foresight Challenge award-winning Financial Laboratory, and Corporate Development
Director on the board of Europe's largest R&D organisation - the 12,000 strong Defence Evaluation and
Research Agency of the UK's Ministry of Defence.
Derek Charles William Stonley, Non-Executive Director, aged 67
Mr Stonley graduated from Cambridge with a BA in Natural Sciences and has over forty years experience in
the mining sector. From 1980 to 1987, Mr Stonley held senior positions at BP Minerals International
Limited in exploration in Europe and North America for stratiform copper and lead-zinc, diamonds, gold
and copper-gold porphyries. As Consulting Geologist at BP Minerals, he was responsible for the
development of methodologies for valuing exploration properties worldwide. Following the sale of BP
Minerals to RTZ, Mr Stonley was Senior Geologist and ultimately Consulting Geologist at Rio Tinto Mining
and Exploration Limited, involved in the exploration and assessment of projects in Africa, Russia and
Europe for iron ore, diamonds, gold and bauxite. Since 2002 he has been running his independent
consultancy, Derek Stonley Consulting, with particular focus in Africa and Europe.
For more information, please contact
Sirius Exploration