RNS Number:9169O
River Diamonds PLC
28 February 2008
RIVER DIAMONDS PLC
("River Diamonds" or "the Company")
PRELIMINARY RESULTS
FOR THE YEAR TO 31 AUGUST 2007
Key points
Vatukoula Gold Mine , Fiji
* During 2007 River Diamonds acquired a 19% indirect interest in the
Vatukoula Gold Mine for a total consideration of �4.25 million.
* In November 2007 a conditional agreement to acquire the remaining 81% of
the Vatukoula Gold Mine was entered into.
* During December 2007, the mine produced 1,211 tonnes of ore at an average
grade of 10.59 g/t Au for approximately 412 ounces of gold from 166N.13/14
Panguma, Sierra Leone
* Exploration has demonstrated that a number of the Kimberlite dyke systems
located at Panguma have a strike extent up to 4-5km
* Mini-bulk sampling programme confirms that of the most of the Panguma
dykes are diamondiferous
* Results bear comparison with similar work reported by Mano River and
partners from the Lion dykes at Kono and the Tongo dyke system.
Brazil
* The Company acquired several gold prospects in the Para region of Brazil
* A geological review of the area has been carried out, including mapping
and grab sampling in order to define targets and delineation
Kao Diamond Project , Lesotho
* Kao Diamond Mine commissioned on 22nd November 2007
* In week one 30 tonnes of alluvial material was processed, including a 0.86
carat stone
Results Summary
* Turnover this year was �28,106 (2006: �67,429) this income came from the
hire of plant and equipment to contractors in Brazil.
* The Group loss for the year was �982,111 (2006: �924,783)
Enquiries
River Diamonds plc
Colin Orr Ewing 020 7352 4117
Kiran Morzaria 020 7016 5100
W.H. Ireland Limited
James Joyce 020 7220 1666
David Porter
Hichens, Harrison & Co plc 020 7382 7785
Dave Paxton
Parkgreen Communications 020 7851 7480
Beth Harris/Laura Llewelyn
Chairman's Statement
The past year has been a very significant one for River Diamonds. We began the
year as a small diamond exploration and development company and ended the year
with the Company well advanced to becoming a mid-cap gold mining company. Our
change in focus to a more diversified mining and exploration company has been
driven by our goal to secure a near production or producing asset, and although
we achieved this in some respects with the Panguma Dykes and our investment in
the Kao Diamond Pipe neither were delivering sustained capital growth to our
shareholders. Therefore we focused our efforts on acquiring an asset that has
the potential to deliver substantial cash flow to River Diamonds in the near
future. We believe that our investment and eventual acquisition of 100% of the
Vatukoula Gold Mine, will achieve this.
Exploration Summary
Given the change in focus of the Company during the year we carried out a review
of all our projects, to assess their fit in our future strategy. In Panguma we
remain at the trial mining stage, and over the year we have focused on
identifying new targets in our exploration areas. An independent report on the
area post year end has recommended that a 1,000 tonne sample be taken via the
development of an underground mine.
In Brazil we completed our exploration of the Alto Paraguai region, and believe
that although the region may hold potential for a Kimberlite discovery, the
exploration expenditure to further develop this area is better assigned
elsewhere. During the year River Diamonds acquired interests in four areas
covering 30,000 hectares within the Tapajos gold province, in central Brazil.
These areas had undergone very little modern exploration; however the high
numbers of artisanal miners working around the area indicates significant gold
mineralisation may be present. The claims lie in a highly prospective area with
other companies actively exploring the surrounding region including the working
Palito mine, owned by Serabi Mineracao.
Corporate
In October 2006, River Diamonds announced it had completed negotiations to
acquire 100% of the Panguma Dykes project, to be satisfied by the issue of
93,985,000 ordinary shares in River Diamonds. The acquisition was completed in
December 2006 and its consideration was valued at approximately �0.7 million.
Investments
In April 2007, River Diamonds acquired �1,212,121 new ordinary shares in Lesotho
Diamond Corporation for �400,000. Lesotho Diamonds Corporation (now Global
Diamond Resources) owns 93% of the Kao Kimberlite Pipe which has proven and
probable reserves of 147 million tonnes at a grade of 6.9 carats per hundred
tonnes. The Kao Diamond Mine was commissioned on the 22 November 2007, and
during the first week 30 tonnes of alluvial material was processed producing the
first diamonds including a 0.86 carat stone.
In July 2007, River Diamonds acquired 12.5% of Viso Gero International ("VGI")
for a cash consideration of �2.5 million. VGI is a company incorporated in the
British Virgin Islands. VGI owns a 94% equity interest in the capital of Westech
Gold Pty Ltd ("Westech") which, through its wholly owned direct and indirect
subsidiaries, owns the mining rights and associated assets of the Vatukoula Gold
Mine in Fiji.
Post year end, River Diamonds announced that it had agreed to increase its stake
in VGI from 12.5% to 20%, and on 14 December 2007 River Diamonds signed a
conditional sale and purchase agreement to acquire the remaining 80% of VGI not
already held by it from Viso Gero Global Inc. It is expected that VGI will
acquire the remaining 6% of Westech Gold Pty Ltd on or before the completion of
the acquisition. Therefore, subject to completion of the acquisition, River
Diamonds will own 100% of VGI and will indirectly, through Westech Gold Pty Ltd
and its indirect subsidiaries, hold a 100% interest in the Vatukoula Gold Mine.
The acquisition constitutes a reverse takeover under the AIM Rules and therefore
requires the publication of a re-admission document and shareholder approval.
The Company continues to work on the preparation of the re-admission document
which will contain more information on the acquisition.
Since the signing of the conditional acquisition agreement River Diamonds has
made a loan of �1.45 million to VGI on commercial terms for working capital
purposes at the Vatukoula Gold Mine.
Results Summary
Turnover this year was �28,106 (2006: �67,429) this income came from the hire of
plant and equipment to contractors in Brazil. The Group loss for the year was
�982,111 (2006: �924,783).
As part of our financial key performance indicators, the Company has utilised a
comparison between expenditure this year to the budgeted amount over the same
period. This year it showed a deficit of �159,678; this variance is attributable
to higher than expected staff and fuel costs across our exploration portfolio
and is in line with rising operating costs of this nature across the mining
industry globally.
During the year two tranches of shares were issued. The first was issued on
30th March 2007, which raised �376,300, before costs, for the issue of 34.2
million shares and the second was issued on 15th June 2007 and raised �3,087,500
for the issue of 237.5 million shares.
Outlook
The Group's strategy has historically been to build a portfolio of advanced
diamond exploration projects which have the potential to yield significant
diamonds resources. We believe that although we are now focusing on commodities
outside diamonds we are achieving this goal both through our investments and our
current wholly owned assets in Sierra Leone and Brazil.
If the acquisition is completed and approved by shareholders, River Diamonds'
primary focus going forward will be to bring the Vatukoula mine to full
production. If the acquisition does not complete, or is materially delayed, the
Company will need to raise additional funds to meet its ongoing working capital
requirements.
Finally I would like to say that with the rapid growth of the Company this has
inevitably put strains on our staff across many disciplines and the
professionals with whom we work; I am especially grateful for the way that they
have adapted to these changes and we can all look forward to an exciting year.
Operational and Investment review
River Diamonds' two principal wholly owned assets are the Panguma Dykes project
in Sierra Leone, and the Rio Novo gold project in Brazil. Our investments cover
the Vatukoula Gold Mine and the Kao Diamond Project.
At the beginning of the year we set out operational targets for our wholly owned
prospects. These were based on a framework of the advancement of project
progressing from target definition through to resource definition and finally
bankable feasibility and / or mine development.
On the Panguma project, our target was to complete the resource definition
(grade and value test) this year. We did not proceed with this strategy given
our change in focus. Our secondary focus was to commence the target delineation
stage on Tapajos gold project in Brazil with some initial field mapping, this
was achieved and our efforts have identified several interesting targets.
Overall through our exploration programmes in both continents we have managed to
achieve our operational targets for the year, however in the case of Panguma we
decided to shift capital to the Vatukoula Gold Mine in Fiji, and as such we have
not made as much progess as expected.
We have highlighted over the next few pages a summary of results and progress on
each of the projects and investments. As a whole, we believe that we have
positioned ourselves over an excellent spread of assets and we are confident
that these projects will provide an exciting package for our shareholders.
Vatukoula Gold Mine - Fiji - (19% Holding)
Stage - Mine Development / Production
The Vatukoula Gold Mine is one of the longest continuously operating high grade
mines in the world with an operational history that extends over 70 years. The
mine commenced production in 1933 and has produced some 7 million troy ounces of
gold and over 2 million troy ounces of silver from the treatment of around 30
million tonnes of ore.
In the last 10 years of full operation the plant has processed on average
560,000 tonnes per annum at a mined grade of 7.8 grams per tonne of gold
producing 122.1 thousand ounces of gold per annum.
The strategy is to bring the mine back to full production by the second half of
2009. The extraction of underground ore reserves commenced in November 2007,
with processing to begin in March 2008.
The mining operations are designed using conventional labour intensive stoping
methods; together with trackless ground handling and haulage followed by skip
hoisting via the vertical shafts. Stoping will be a mixture of Long Wall Breast,
Shrinkage and Cut and Fill.
The processing plant comprises a crushing circuit, flotation, roasting and
calcines cyanidation circuit and tailings cyanidation.
Panguma Dykes Project - Sierra Leone - (100% holding)
Stage - Resource Definition / Test for Larger Stones
The Company has a 100% interest in the Panguma Diamond Project in Sierra Leone.
The Panguma area is about 230 km from Freetown and covers approximately 5,400
hectares in eastern Sierra Leone.
In recent years Sierra Leone appears to have stabilised politically and has a
favourable mining law. New bedrock diamond discoveries, as well as the high
value of Sierra Leone diamonds, combine to make the country a prime target for
diamond exploration.
Prior to the work undertaken by River Diamonds, the Panguma Kimberlites, part of
the Tongo dyke system, had never been commercially explored. An alluvial
diamond rush took place from 1956 that made Panguma one of the main diamond
centres in Sierra Leone. Tongo diamonds are among the highest value in the
world, with up to 95% being of gem quality. The Geological Survey undertook
exploration in the 1960's, locating six dykes at surface and drill testing to
200m depth.
River Diamonds initiated a detailed exploration programme on the Panguma
concession in 2006. Field work comprised initial surveying of the concession
area, geological mapping, collection of mini-bulk samples, core drilling, and
geochemical soil sampling.
Exploration by River Diamonds has demonstrated that a number of the Kimberlite
dyke systems located at Panguma have a strike extent up to 4-5km and the
mini-bulk sampling programme confirms that of the most of the Panguma dykes are
diamondiferous, with strongly anomalous values within the widest reported
(composite) dyke at 0.8m. Some of the other dykes/fissures sampled also contain
interesting grades up to 0.77ct/t, although dykes are narrower and may splay and
pinch towards the southwest. These results bear comparison with similar work
reported by Mano River and partners from the Lion dykes at Kono and the Tongo
dyke system, although the narrow width of the dykes at Panguma can present a
challenge to economic evaluation and development. Given the narrow dyke width
the proposed collection of a bulk sample of up to 1,000 tonnes will require
shaft sinking and underground mining on one or more dykes.
Rio Novo - Brazil - (100% holding)
Stage: Target Definition / Target Delineation
The site is located within the Tapajos gold province, in central Brazil, and has
undergone very little modern exploration The Mineralisation in the area is
associated to quartz veining and hydrothermal alteration related to the veins.
Detailed exploration over the area is limited with Rio Tinto undertaking a
systematic mineral exploration across the province in the 1980's and the
Brazilian geological survey undertaking a regional mapping and geophysical
survey in 2000. In November 2006 River Diamonds undertook a geological review of
the area focusing on historic and current artisanal workings of both alluvial
and vein hosted origin. The work included mapping and grab sampling.
Kao Diamond Project -Lesotho - (0.5% holding)
Stage - Mine Development
Kao Diamond Project is a Kimberlite deposit with an indicated and measured
resource of 147 million tones of Kimberlite at a grade of 6.9 carats per hundred
tonnes. The Kao Diamond Mine was commissioned on the 22 November 2007, and
during the first week 30 tonnes of alluvial material was processed producing the
first diamonds including a 0.86 carat stone.
Colin Orr-Ewing
Chairman
Consolidated income statement
For the year ended 31 August 2007
Note 2007 2006
� �
Turnover 28,106 67,429
Cost of sales (4,116) (159,265)
Gross profit/(loss) 23,990 (91,836)
Administrative expenses (1,001,117) (843,377)
Operating loss (977,127) (935,213)
Other interest receivable and similar income 9,188 17,653
Interest payable and similar charges (14,172) (7,223)
Loss on ordinary activities before taxation (982,111) (924,783)
Taxation 4 - -
Loss on ordinary activities after taxation (982,111) (924,783)
Loss per share pence pence
Basic 5 (0.17) (0.22)
Fully diluted 5 (0.17) (0.22)
All activities relate to continuing operations.
Consolidated statement of recognised income and expense
For the year ended 31 August 2007
Note 2007 2006
� �
Loss for the financial year (982,111) (924,783)
Currency translation differences (27,945) 22,304
Total recognised income and expense for the year (1,010,056) (902,479)
Consolidated statement of changes in shareholders' equity
For the year ended 31 August 2007
Ordinary
Share Share Merger Retained Other
capital premium reserve earnings reserves Total
� � � � � �
Balance at 1 469,928 3,179,460 2,166,528 (4,779,700) 102,390 1,138,606
September 2006
Loss for the year - - - (982,111) - (982,111)
Issue of shares 365,694 3,704,951 - - - 4,070,645
Exchange adjustment - - - (27,945) - (27,945)
Convertible loan 11,445 11,445
Share based payments - - - - 40,257 40,257
Balance at 31 August 835,622 6,884,411 2,166,528 (5,789,756) 154,092 4,250,897
2007
Company statement of changes in shareholders' equity
For the year ended 31 August 2007
Ordinary
Share Share Retained Other
capital premium earnings reserves Total
� � � � �
Balance at 1 469,928 3,179,460 (3,759,777) 102,390 (7,999)
September 2006
Loss for the year - - (64,007) - (64,007)
Issue of shares 365,694 3,704,951 - - 4,070,645
Convertible loan 11,445 11,445
Share based payments - - - 40,257 40,257
Balance at 31 August 835,622 6,884,411 (3,823,784) 154,092 4,050,341
2007
Consolidated balance sheet
As at 31 August 2007
2007 2006
Note � �
Assets
Non current assets
Goodwill 1,213,091 -
Property, plant and equipment 434,268 477,596
Investments 2,900,250 233,934
4,547,609 711,530
Current assets
Investment 1 1
Trade and other receivables 56,561 60,735
Cash and cash equivalents 35,436 525,230
91,998 585,966
________ _______
Total assets 4,639,607 1,297,496
Equity and liabilities
Current liabilities
Trade and other payables 300,155 158,890
Non current liabilities
Convertible loan 88,555 -
______ ______
Total liabilities 388,710 158,890
Equity attributable to equity holders of the parent
Share capital 835,622 469,928
Share premium account 6,884,411 3,179,460
Merger reserve 2,166,528 2,166,528
Other reserves 154,092 102,390
Retained earnings (5,789,756) (4,779,700)
Total equity 4,250,897 1,138,606
________ ________
Total equity and liabilities 4,639,607 1,297,496
Consolidated cash flow statement
For the year ended 31 August 2007
Note 2007 2006
� �
Cash flow from operating activities
Loss from operating activities (977,127) (935,213)
Adjustments for:
Share based payments 40,257
Depreciation 86,031 73,408
Loss on disposal of fixed assets - 7,545
Impairment - 11,483
Foreign exchange (54,281) 22,304
Net cash from operating activities before
changes in working capital (905,120) (820,473)
Decrease in inventories - 66,233
Decrease in receivables (4,174) (35,071)
Increase/(decrease) in payables 141,265 (56,272)
Net cash flow from operating activities (768,029) (845,583)
Investing activities
Purchase of property, plant and equipment (12,073) (107,792)
Interest received 9,188 17,653
Purchase of investments (3,879,407) (233,934)
Sale of property, plant and equipment 3,877 18,469
Net cash flow from investing activities (3,878,415) (305,604)
Financing activities
Proceeds from issue of ordinary shares net of issue costs 4,070,645 1,675,500
Interest paid (14,172) (7,223)
Proceeds from issue of convertible loan note 100,000 -
Net cash flow from financing activities 4,156,473 1,668,277
Net movement in cash and cash equivalents (489,971) 517,090
Notes forming part of the financial statements
For the year ended 31 August 2007
1. Accounting policies
i) Basis of preparation
The principal accounting policies adopted in the preparation of the
financial statements are set out below.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs and IFRIC interpretations) as
adopted by the European Union, and with those parts of the Companies Act 1985
applicable to companies preparing their accounts under IFRS. The consolidated
financial statements have been prepared under the historical cost convention, as
modified by revaluation of financial assets and financial liabilities at fair
value through the income statement.
The Group and Company have not applied the following IFRSs and IFRICs
that are applicable to the Group and Company and that have been issued but are
not yet effective.
IAS 1, Amendment to IAS 1 (Revised), Presentation of Financial Statements,
effective for financial year beginning 1 January 2007
IAS 23, Borrowing Costs, revised 2007 (effective 1 January 2009)
IAS 27, Consolidated and Separate Financial Statements, revised 2008 (effective
1 July 2009)
IAS 28, Investment in Associates, revised 2008 (effective 1 July 2009)
IAS 31, Interests in Joint Ventures, revised 2008 (effective 1 July 2009)
IAS 32, Financial Instruments: Presentation, revised 2008 (effective 1 January
2009)
IFRS 2, Share-based Payment, revised 2008 (effective 1 January 2009)
IFRS 3, Business Combinations, effective for financial year beginning 1 January
2007
IFRS 7, Financial Instruments: Disclosures, effective for financial year
beginning 1 January 2007
IFRS 8, Operating Segements (effective 1 January 2009)
IFRIC 10, Interim Financial Reporting and Impairment (effective 1 November 2006)
IFRIC 11, IFRS 2 - Group and Treasury Share Transactions (effective 1 March
2007)
IFRIC 12, Service Concession Agreement (effective 1 January 2008)
IFRIC 13, Customer Loyalty Programmes (effective 1 July 2008)
IFRIC 14, IAS 19 - The Limited on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (effective 1 January 2008)
ii) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Group and entities controlled by the Group (its subsidiaries) made up to 31
August each year. Control is achieved where the Group has the power to govern
the financial and operating policies of an investee entity so as to obtain
benefits from its activities.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
The result of subsidiaries acquired or disposed of during the period
are included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate except for
the acquisition by River Diamonds plc of River Diamonds UK Limited which was
treated as a merger.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
iii) Going concern
The financial information has been prepared assuming the Group will continue as
a going concern. Under the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable future with neither the
intention nor the necessity of liquidation, ceasing trading or seeking
protection from creditors pursuant to laws or regulations. In assessing whether
the going concern assumption is appropriate, management takes into account all
available information for the foreseeable future, in particular for the twelve
months from the date of approval of the financial statements. The directors
consider this to be appropriate, as the shareholders will continue to provide
financial support to the company for the foreseeable future. Should the company
be unable to continue trading, adjustments would have to be made to reduce the
value of assets to their reasonable amounts, to provide for further liabilities
which might arise, and to classify fixed assets as current assets.
iv) Significant accounting estimates
The preparation of financial statements requires the application of
estimates and judgement by management, which affects assets and liabilities at
the balance sheet date and income and expenditure for the period. The areas
involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the consolidated financial statements are set
out in the relevant accounting policies discussed below. The best estimates of
management may differ from the actual result.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Material estimates and assumptions are made in particular with regard to:
Income taxes
The Group is subject to income taxes in the United Kingdom and jurisdictions
where it has foreign operations. Significant judgment is required in determining
the worldwide provision for income taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the
ordinary course of business. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in which such
determination is made.
2. Changes in accounting principles
The accounting policies adopted are consistent with those of the
previous financial periods except for:
(a)Adoption of IFRS
Previously the Company and its subsidiaries prepared the financial
statements in accordance with UK GAAP. The Group elected to publish its first
consolidated interim financial statements to 31 August 2007 under IFRS with its
transition date to IFRS being 1 September 2006.
(b) Introduction to IFRS - First time adoption
The rules for first time adoption of IFRS are set out in IFRS 1,
First-Time Adoption of International Financial Reporting Standards. In general,
selected accounting policies must be applied retrospectively in determining the
opening balance sheet under IFRS. However, IFRS 1 allows a number of exemptions
to this general principle.
3. Summary of significant accounting policies
i) Revenue recognition
Revenue and associated costs from the sale of minerals are recognised
when effective control together with the risks and rewards of ownership are
transferred to the customer, and the amount of revenue and costs can be reliably
measured, as long as it is probable that the economic benefits associated with
the transaction will flow to the entity.
ii) The Company's investments in subsidiaries
In its separate financial statements the Company recognises its
investments in subsidiaries at cost, less any impairment for permanent
diminution in value.
iii) Foreign currency
Transactions entered into by individual Group companies in currencies
other than the currency of the primary economic environment in which it operates
(the 'functional currency') of the entity involved in the transaction are
recorded at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Non-monetary assets and liabilities carried at fair value, that are
denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Gains and losses arising on
retranslation are included in net profit or loss for the period, except for
exchange differences arising on non-monetary assets and liabilities where the
changes in fair values are recognised directly in equity.
On consolidation, the assets and liabilities of the Group's overseas
operations are translated at exchange rates prevailing on the balance sheet
date. Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Income and expense items are translated at the average exchange rates for the
period unless exchange rates fluctuate significantly. Exchange differences
arising, if any, are classified as equity and transferred to the Group's
translation reserve. Exchange differences recognised in the income statement of
Group entities' separate financial statements on the translation of long-term
monetary items forming part of the Group's net investment in the overseas
operation concerned are reclassified to the foreign exchange reserve. On
disposal of a foreign operation, the cumulative exchange differences recognised
in the foreign exchange reserve relating to that operation up to the date of
disposal are transferred to the income statement as part of the profit or loss.
iv) Tangible fixed assets and depreciation
Fixed assets are stated at cost less depreciation and impairment.
Depreciation is calculated to write down the cost, of all tangible fixed assets
by equal annual instalments over their expected useful life, as follows:
Plant and Machinery Over 3 - 10 years
Motor Vehicles Over 3 years
Fixtures, Fittings and Equipment Over 4 years
Assets under construction Transferred to plant and
machinery when completed
and no depreciation is charged
until completion
The depreciation charge for each period is recognised in the income statement,
unless it is included in the carrying amount of another asset.
Subsequent expenditure relating to an item of property, plant and equipment is
capitalised when it is probable that future economic benefits from the use of
the asset will be increased. All other subsequent expenditure is recognised as
an expense in the period in which it is incurred.
Repairs and maintenance which neither materially add to the value of assets nor
appreciably prolong their useful lives are charged against income.
The gain or loss arising from the de-recognition of any items of property, plant
and equipment is included in the income statement when the item is
de-recognised. The gain or loss arising from the de-recognition of an item of
property, plant and equipment is determined as the difference between the net
disposal proceeds, if any, and the carrying amount of the item.
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate the carrying value may not be
recoverable.
Assets under construction are carried at cost less any recognised impairment.
Borrowing costs attributable to assets under construction are recognised as an
expense as incurred.
v) Mining and exploration expenditure
The Group applies the full cost method of accounting for Exploration and
Evaluation costs, having regard to the requirements of IFRS 6 'Exploration for
and Evaluation of Mineral Resources'. Under the full cost method of accounting,
costs of exploring for and evaluating areas of gold interest are accumulated and
capitalized by reference to appropriate cost pools. Each area of interest is
considered to be a separate cash pool.
Exploration and evaluation costs are initially capitalised within 'Intangible
assets'. Such exploration and evaluation costs are capitalised provided that
one of the following conditions is met;
i. such costs are expected to be recouped through successful
development and exploitation of the area of interest or alternatively by its
sale; or
ii. the activities have not established whether or not economically
recoverable resources exist; and active and significant operations in relation
to the area are continuing.
Costs incurred prior to having obtained the legal rights to explore an areas,
are expensed directly to the income statement as they are incurred.
Tangible assets acquired for use in exploration and evaluation activities are
classified as property, plant and equipment. However, to the extent that such a
tangible asset is consumed in developing an intangible exploration and
evaluation asset, the amount reflecting that consumption is recorded as part of
the cost of the intangible asset.
Intangible exploration and evaluation assets related to each exploration license
/prospect are not depreciated and are carried forward until the existence (or
otherwise) of commercial reserves has been determined. The Group's definition
of commercial reserves for such purpose is proven and probable reserve on an
entitlement basis.
If commercial reserves have been discovered, the related exploration and
evaluation assets are assessed for impairment on a cost pool basis as set out
below and any impairment loss is recognised in the income statement. The
carrying value, after any impairment loss, of the relevant exploration and
evaluation assets is then reclassified as development and production assets
within property, plant and equipment.
Intangible exploration and evaluation assets that relate to exploration and
evaluation activities that have not yet resulted in the discovery of commercial
reserves remain capitalised as intangible exploration and evaluation assets at
cost less accumulated amortisation, subject to meeting a pool-wide impairment
test as set out below. Such exploration and evaluation assets are amortised on
a unit of production basis over the life of the commercial reserves o the pool
to which they relate.
Exploration and evaluation assets are assessed for impairment when facts and
circumstances suggest that the carrying amount may exceed its recoverable
amount. Such indicators include the point at which a determination is made as
to whether or not commercial reserves exist. Where the exploration and
evaluation assets concerned fall within the scope of an established full cost
pool, the exploration and evaluation assets are tested for impairment together
with all development and production assets associated with that cost pool, as a
single cash generating unit. The aggregate carrying value is compared against
the expected recoverable amount of the pool, generally by reference to the
present value of the future net cash flows expected to be derived from
production of commercial reserves. Where the exploration and evaluation assets
to be tested fall outside the scope of any established cost pool, there will
generally be no commercial reserves and the exploration and evaluation assets
concerned will generally be written off in full.
Any impairment loss is recognised in the income statement as additional
depreciation and separately disclosed.
Summary of significant accounting policies (continued)
vi) Impairment of tangible and intangible assets
The Group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of the asset's
or cash-generating unit's fair value less costs to sell and its value in use and
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. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount.
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 risk specific to the asset.
Impairment losses of continuing operations are recognised in the income
statement in those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the previously recognised
impairment loss is reversed only if there has been a change in the estimates
used to determine the asset's recoverable amount since the last impairment loss
was recognised. If that is the case the carrying amount of the asset is
increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried at a revalued amount,
in which case the reversal is treated as a revaluation increase. After such a
reversal the depreciation charge is adjusted in future periods to allocate the
asset's revised carrying amount, less any residual value, on a systematic basis
over its remaining useful life.
vii)Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes
a party to the contractual provisions of the instruments and on a trade date
basis. A financial asset is derecognised when the Group's contractual rights to
future cash flows from the financial asset expire or when the Group transfers
the contractual rights to future cash flows to a third party. A financial
liability is derecognised only when the liability is extinguished.
Loans and receivables
Loans and receivables including trade and other receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an
active market and are not held for trading. They are measured at amortised cost
using the effective interest method, except where receivables are interest-free
loans and without any fixed repayment term or the effect of discounting would be
insignificant. In such case, the receivables are stated at cost less impairment
loss. Amortised cost is calculated by taking into account any discount or
premium on acquisition, over the year to maturity. Gains and losses arising from
derecognition, impairment or through the amortisation process are recognised in
the income statement.
Summary of significant accounting policies (continued)
Impairment of financial assets
At each balance sheet date, the Company assesses whether there is objective
evidence that financial assets, other than those at fair value through profit or
loss, are impaired. The impairment loss of financial assets carried at amortised
cost is measured as the difference between the assets' carrying amount and the
present value of estimated future cash flow discounted at the financial asset's
original effective interest rate.
Financial liabilities
The Company's financial liabilities include trade and other payables, bank loans
and other borrowings and obligations under finance leases. All financial
liabilities, except for derivatives, are recognised initially at their fair
value plus transaction costs that are directly attributable to the acquisition
or issue of the financial liability and subsequently measured at amortised
cost, using effective interest method, unless the effect of discounting would be
insignificant, in which case they are stated at cost.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments and which are not quoted in an active market. Such assets
are carried at amortised cost using the effective interest method. Gains and
losses are recognized in income when the loans and receivables are sold or
impaired, as well as through the amortization process.
viii) Trade and other payables
Trade and other payables are not interest-bearing and are stated at cost.
ix) Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. Where the time value of money is
material, receivables are carried at amortised cost.
x) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held on call with
bank, and investments in money market instruments, net of bank overdrafts, all
of which are available for use by the Company unless otherwise stated. Cash and
cash equivalents are measured at fair value, based in the relevant exchange
rates at balance sheet date.
xi) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligations, and a reliable
estimate of the amount can be made.
xii) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Summary of significant accounting policies (continued)
xiii) Income taxes
Tax on profit or loss for the period comprises current and deferred tax. Tax is
recognised in the income statement except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following temporary differences are not provided for:
the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
xiv) Share-based payments
The Company operates a share option scheme for granting share options, for the
purpose of providing incentives and rewards to eligible employees of the Group.
The cost of share options granted is measured by reference to the fair value at
the date at which they are granted. It is recognised together with a
corresponding increase in equity, over the vesting period. The cumulative
expense recognised at each reporting date until the end of the vesting period
reflects the extent to which the vesting period has expired and the number of
shares that in the opinion of the Directors of the Group at that date will
ultimately vest.
xv) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and
whose existence will only be confirmed by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the Group.
It can also be a present obligation arising from past events that is not
recognised because it is not probable that outflow of economic resources will be
required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the
accounts. When a change in the probability of an outflow occurs so that the
outflow is probable, it will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose
existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain events not wholly within the control of the Group.
Contingent assets are not recognised but are disclosed in the notes to the
accounts when an inflow of economic benefits is probable. When inflow is
virtually certain, an asset is recognised.
Key estimates are made by management.
Summary of significant accounting policies (continued)
xvi) Pensions
The Company operates a defined contribution pension scheme. The assets
of the scheme are held separately from those of the Company in an independently
administered fund. The pension cost charge represents contributions payable by
the company to the fund.
xvii) Investments
Fixed and current asset investments are stated at cost less provision
for any impairment in value.
xviii) Foreign currency translation
The reporting currency of the Group is Sterling (GBP), which is also
the financial currency of the principal business of the River Diamonds Group in
the period.
Gains and losses that arise from the effect of exchange rate changes on
balances denominated in currencies other than that of the measurement currency
of the company and its subsidiaries are included in the operating results.
xix) Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
accrual basis to the profit and loss account using the effective interest method
and are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
4. Taxation
2007 2006
� �
Current tax charge/(credit) - -
Deferred tax charge - -
The charge for the year has can be reconciled to the profit per the income
statement as follows:
Loss before tax (982,111) (924,783)
Tax at UK corporation tax
rate of 30% (2006: 30%) (294,633) (277,435)
Effect of depreciation in
excess of capital allowances
not recognised 25,809 22,022
Effect of utilisation of tax
losses not previously utilised 268,824 255,413
UK Corporation tax - -
5. Earnings per share
In accordance with IAS 33 and as the group has reported
a loss for the period the shares are not dilutive
Group Group
2007 2006
� �
Loss after taxation (982,111) (924,783)
Number Number
Basic and diluted weighted average ordinary shares in 583,857,497 414,706,048
issue during the period
Basic and diluted earnings per share based on the
issued share capital as at 31 August 2007 (0.17) (0.22)
6. Explanation of transition to IFRS
This is the first year that the company has presented its financial statements
under IFRS. The following disclosures are required in the year of transition.
The last statements under UK GAAP were for the year ended 31 August 2006 and the
date of transition to IFRS was therefore 1 September 2006.
Reconciliation of equity at 1 September 2006
Effect of transition
Note UK GAAP to IFRSs IFRSs
Property, plant and equipment 477,596 - 477,596
Goodwill - - -
Investments 233,934 - 233,934
Total non-current assets 711,530 - 711,530
Investment 1 - 1
Trade and other receivables 60,735 - 60,735
Cash and cash equivalents 525,230 - 525,230
Total current assets 585,966 - 585,966
Total assets 1,297,496 - 1,297,496
Trade and other payables 158,890 - 158,890
Total liabilities 158,890 - 158,890
Total assets less total liabilities 1,138,606 - 1,138,606
Issued capital 469,928 - 469,928
Share premium 3,179,460 - 3,179,460
Merger reserve 2,166,528 - 2,166,528
Other reserves - 102,390
Retained earnings (4,677,310) - (4,779,700)
Total equity 1,138,606 - 1,138,606
There is no effect on the transition of IFRS.
Reconciliation of profit and loss for 2006
Effect of transition
Note UK GAAP to IFRSs IFRSs
Revenue 67,429 - 67,429
Cost of sales (159,265) - (159,265)
Gross profit (91,836) - (91,836)
Other operating income 17,653 - 17,653
Administrative expenses (843,377) - (843,377)
Other operating expense (7,223) - (7,223)
Finance income - - -
Finance costs - - -
Profit before tax (924,783) - (924,783)
Tax expense - - -
Net loss (924,783) - (924,783)
There is no effect on the transition of IFRS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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