RNS Number:5812K
El Oro Mining&Exploration Co PLC
30 April 2003
EL ORO MINING AND EXPLORATION COMPANY p.l.c
CHAIRMAN'S STATEMENT
results for the year ended 31 December 2002
Total net assets at market value or Directors valuation show a decrease of
#1,112,553 compared to last year.
The Group profit before tax, including #846,715 (#733,194 loss for 2001) share
of profits, after interest payable, applicable to Associated Undertakings, was
#1,434,174 for 2002 against #1,921,428 for 2001. Group net assets, taking
investments at market value, were #36,830,273 (equal to 816p per share) against
#37,942,826 for 2001(841p per share) a decrease of 2.93%, compared to a fall of
25.03% for the FTSE All Share Index over the same period.
The heady rise in Gold shares to June last year proved to be a pinnacle too far,
and has yet to be matched, despite the substantial improvement in the metal's
price, from the lows marked by the British government's sale. Whilst the
takeover of Brancote by Meridian saw a significant early appreciation, it has
subsequently slipped back due to objections to its new mine development. We have
also been adversely affected by the demise of Navan Mining, which had appealed
as a turnaround situation. The Turnaround turned into the tip. Happier news came
from the successful sale of a long-held commercial property at a price well in
excess of its previous valuation. Amongst other favourable performers were Troy
Resources, and Lion Ore, on the back of the rise in the nickel price and the
opening of its gold mine in Western Australia. Our chequered or to be more
precise, dismal, record with start-up situations has led us to withdraw from
further activity in this area, and concentrate on the preferences proven since
the emergence of Mankind. We continue to believe that gold will play a role as a
store of value or even as a medium of exchange, whatever the wisdom of the
pundits, and will persevere with our positions in the shares of producers of
both gold and other minerals, where we have confidence in the management and
quality of the reserve. As we tip-toe with Tantalus, unable to escape the
tentacles of Recession, nor emerge into a forthright recovery, we will strive to
preserve Capital and retain income wherever possible.
The collapse of Navan left us deeply disillusioned; Disappointment at the
decline of Meridian, which took over our holding in Brancote last year, but has
failed to win the hearts and minds of the people of Esquel in allaying their
environmental fears, in order to develop its gold mine there, is mitigated by
the strength of Troy Resources. Their celebratory recent opening of the Sertao
mine in Goias, NorthWest Brazil is a text book example of how to win friends and
influence people, and our congratulations go to the Chairman and Chief Executive
for their efforts on our behalf.
The South African government seems to be determined to heap every possible
disadvantage on to its mining industry, when the forcible transfer of assets to
empowerment groups is allied to the recent announcement of a royalty levy, and
all washed down with a heavy dose of Rand revaluation. We continue to hold our
excellent Impala, Anglogold and Harmony amongst others, but wonder how long the
golden goose can be systematically sliced before there is little left to cook.
We are, quite possibly, deluded in our expectation of better if indeed not
brilliant days ahead for the gold industry, but in the meantime continue to bank
our agreeable dividends.
As the drums of war fade into the distance, leaving the detritus of weaponry,
edifices, and reputations, it would be churlish indeed not to salute our own
Prime Minister for his forthright and consistent stand in pursuing the overthrow
of the Iraqi leader, and more importantly maintaining the tradition of alliance
with the United States, so sadly spurned by the French and Germans, not to
mention many of his own party. We have hoped in the past for a more forthright
pursuit of British interests, and reiterate our concern and disappointment that
the murderous Mugabe escapes unscathed whilst retaining his knighthood, and
enjoying the distasteful obsequiousness of President Chirac, eager to assert
French influence in Central Africa and lay claim to the diamond wealth
sequestrated by the Zimbabwean dictator and his henchmen.
We are hugely heartened and in awe of the quality and bravery of our own
soldiers, as exemplified by the words of Lt. Col Tim Collins to his 1st
Battalion of the Royal Irish: "If you are ferocious in battle, remember to be
magnanimous in victory. Iraq is steeped in history. It is the site of the Garden
of Eden, of the Great Flood and the birthplace of Abraham. Tread lightly there.
You will see things that no man could pay to see and you will have to go a long
way to find a more decent, generous and upright people than the Iraqis. You will
be embarrassed by their hospitality even though they have nothing. Don't treat
them as refugees for they are in their own country. Their children will be poor,
in years to come they will know that the light of liberation in their lives was
brought by you.... As for ourselves, let's bring everyone home and leave Iraq a
better place for us having been there."
We must sincerely hope that the sacrifice many have made can achieve for Iraq
what liberation of the Falklands brought to Argentina with the demise of the
junta, but also that co-operation with the new government can start immediately,
to the mutual advantage of both nations.
The events in the Middle East have, needless to say, overshadowed and perhaps
masked the gravity of the economic downturn affecting Western economies. It is
important to realise, as it would appear few European politicians are capable of
seeing, that the alliance with the United States has formed the bedrock of
stability and peace in the world for the last 50 years. In a similar way, the
United States economy has become the mainstay of worldwide prosperity.
It is possible that as the fog of fear lifts, and the worst possibilities of
renewed war with unknown weapons dissolve, that a new sense of confidence and
encouragement will emerge, that will help lead the United States and
subsequently the Western world out of recession, or at least prevent the decline
into a "double dip". We do not discount this possibility. We do not however,
consider it the likely outcome, much as we would wish it to be. As Dr.
Richebacher has so succinctly summarised "when consumption is boosted by an
increase in asset values, at the expense of investment and the foreign trade
balance, the net result from a macro perspective is overall impoverishment".
The myth, comforting British and American economists, that rising house prices
and continuing consumer expenditure has benefitted and will further enhance the
well being of their economies is sadly far from the truth. We are firmly of the
opinion that deflation of exalted asset values and earnings ratios has still,
particularly in the United States, far further to go. It has, to date been a
drawn-out decline, and we would consider it likely to continue to be so, with
moments when it would appear that it has at last changed for the better. We
intend, therefore, to keep our powder dry and restrain ourselves, as far as
possible, from over exposure to the market, except where we see convincing
value, either through the cushion of an asset value substantially in excess of
the share price, or, and preferably in conjunction with, a high and maintainable
dividend yield.
The British economy, whilst apparently more reasonably priced than that of the
States, faces the disagreeable prospect of rapidly rising State spending, led by
a Chancellor showing scant regard for the travails of industry or the wealth
creators. His attempt to raise tax from the expatriate community of foreigners
living and plying their trade in Britain is likely to lead to their departure.
The egregious 'You need a relationship with the workplace' Mr. Clarke decries
erudition and contemplation, whilst attempting to impose on our universities the
debasement of talent by mediocrity. The raft of regulations is already leading
to the demise of many smaller companies, which were and whose survivors remain,
the backbone of the British economy. The suzerainty of Brussels, and its
stifling diktats, are more suited to the quasi-state structures prevailing in
its mainstays, France and Germany. Even our artistic triumphs succumb to this
nihilistic regime, such as the cast iron lampposts adorning the Embankment, and
St. Pancras's fine windows, on the absurd premise that their heat retention does
not comply with newly imposed standards.
The successful British entrepreneur, who stands stalwartly at the base of
British industry, is in many cases unable to cope with the compliance costs of
conforming with the increasingly complex regimes. Farming is a case in point;
Defra, led by the incomparably incompatible Mrs. Beckett, with her extraordinary
and naive reliance on, and obsequious deference to, any scientific mumbo-jumbo
emanating from Brussels, is, at its behest, introducing a new regime which will
undoubtedly lead to the demise of Farming as we now know it. Subsidies will be
paid on the basis of acreage, rather than production. An industry once at the
forefront of scientific advances, animal husbandry and innovation, will atrophy
and die, with incalculable consequences for the countryside and those who have
laboured in it over the generations: all this to help a few Polish peasants, but
primarily the farmers of France and Germany.
We are equally disheartened by the Chancellor's insatiable appetite for our cash
to fund his NHS coffers, an impossible and unending task, that is at present
only achieving inflation in the wages of the many staff there employed. The
success in alienating British business achieved by Gordon Brown is only matched
by that of Ken Livingstone, with his enormously costly-to-collect congestion
charge, which however agreeable for the cyclist in its consequences, is surely
eliminating the sparkle from Central London, so essential for a capital City
depending on confidence and je ne sais quoi. It took a long time for Carnaby
Street and its environs to recover its vibrancy once the Beatles broke up.
Already a considerable body of evidence shows how badly West End shops are
suffering.
On the sporting front, we have the absurd spectacle of the destruction of
Wembley's Twin Towers in order to spend #750m on a stadium to serve the pinnacle
of a game whose grass-roots are being so badly starved that our finest
footballers are made to look pedestrian by the thoroughbreds of Real Madrid.
Perhaps the Irish breeders will rectify the situation.
The Pensions Crisis, which is devastating the prospects of a whole generation of
imminent retirees, received its greatest impetus from the Chancellor's removal
of the tax credit to pension funds. The collapse of equity prices has magnified
this malicious and ill-conceived act. The Commons Pension Committee, with its
head firmly rooted in the sand, speaking from the security of its index-linked
citadel, dismisses use of the term 'crisis', whilst the Government initiates
additional measures to exacerbate the situation, like most earlier amendments.
The medicine, however unpalatable, is that the retirement age will have to be
raised. Fortunately, Britain's position is less unappealing than that of Europe,
with its huge quasi-state-controlled infrastructure and the needs of its former
employees. That will be of little solace to us, if we are dragged into the
single currency.
All these factors could, perhaps, be sustained, in the middle of a conventional
economic cycle. We ourselves are convinced that we are in the early stages of a
substantial downward economic adjustment, and the "Heavy Pounding" we predicted
last year still has much further to go. We have not removed our flak jackets,
nor our helmets, although like the British Army, we seem to have a mixture of
attire, between khaki and green. We are holding on to our gold stocks and
bullion, even though the highs in the shares attained last June have yet to be
surpassed.
I am indeed grateful that we have a board that has given the executive every
assistance in attempting to benefit shareholders at large. I hope that assets
will continue to be enhanced, within the constraints of the gloomy prognosis I
have outlined above. Over the coming years we hope that our cautious stance will
protect the asset base of your company.
The immediate future is cloudy indeed, and a 4th down year for Western markets
is a distinct possibility. The scintillating victory of the Oxford crew, matched
stroke for stroke by Cambridge, has shown how tenacity, dedication and
determination can triumph over shortcomings in size. We offer our
congratulations to both crews, and coaches, on a devastating display of courage
and endeavour. The newly elected Chancellor of Oxford, fresh from his robust
role in dismantling the Royal Ulster Constabulary, and asserting Europe's
influence on the world stage in its relations with America, may like to observe
that size does not count for everything, even though that has consistently been
the assertion of the Europhiles. Perhaps even he could conclude that a more
buoyant Britain can continue to thrive without the stranglehold of the Brussels
genre of socialism.
My thanks go to our staff: the enthusiastic and able Abbie, preparing to
introduce more Blondes in to England, for which we wish her well; the impeccable
Rosanna and adroit Chris Burman, as well as the various advisers and brokers who
have served us well over the past year.
C. Robin Woodbine Parish
Chairman
30 April 2003
The Director's Report and Financial Statements will be despatched to
shareholders on 2 June 2003 and the Annual General Meeting will be held on 26
June 2003.
The financial information for the preliminary results for the year ended 31
December 2002 are unaudited. The financial information for the preliminary
announcement does not comprise the Company's statutory accounts for the years
ended 31 December 2002 or 31 December 2001. Statutory accounts for the previous
financial year ended 31 December 2001 have been delivered to the Registrar of
Companies.
The auditor's report on those accounts was unqualified and did not contain any
statement under section 237(2) or (3) of the Companies Act 1985.
The Auditors have not reported on the accounts for the year ended 31 December
2002, nor have any such accounts been delivered to the Register of Companies.
Registered office: 41 Cheval Place, London, SW7 1EW.
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
ACCOUNTING POLICIES
As permitted by the Companies Act 1985, the Directors have adapted the headings
in the consolidated profit and loss account from those prescribed in Schedule 4
in order to better reflect the special nature of the Group's business.
The following accounting policies have been applied consistently, except as
noted in 1(b), in dealing with items which are considered material in relation
to the Group's financial statements:
(a) Basis of Accounting
The accounts have been prepared on the historical cost basis of accounting and
in accordance with applicable accounting standards.
(b) Changes in accounting policies
The Group has adopted FRS19 'Deferred Tax' in these financial statements. The
adoption of this standard represents a change in accounting policy and the
comparative figures have been restated accordingly. The adoption of this policy
has increased the tax charge by #479 (2001: decreased #4,049) and decreased
profit for the financial year by #479 (2001: increased #4,049).
(c) Group Financial Statements
The Group financial statements include those of the wholly-owned Subsidiary,
General Explorations Limited, which is incorporated in England, and the Group's
share of the results of Associated Undertakings based on its effective interest.
(d) Investment Income
Income from investments includes all dividends, rents and all interest on
non-government securities, the dates of payment of which fall within the year.
Interest on government securities is accounted for on an accruals basis.
Dividends received as scrip are not accounted for as income and no adjustment is
made to the book value of the relevant investment. The effect, therefore, is to
reduce the unit cost of the shares in the investment concerned.
(e) Investments
Listed investments are stated in the balance sheet at the lower of cost and
market value at the balance sheet date. Unlisted investments are stated at the
lower of cost and Directors' valuation at the balance sheet date. Overseas
investments are translated at the exchange rate ruling at the balance sheet
date.
(f) Fixed Assets
The cost of software and office equipment includes purchases at cost, and any
incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of fixed assets, less
their estimated residual values, on a straight-line basis over the expected
useful economic lives of the assets concerned. The principal annual rates used
for this purpose are:
Office equipment and software 33 1/3 %
(g) Deferred Taxation
Provision is made in full for all taxation deferred in respect of timing
differences that have originated but not reversed at the balance sheet date.
Such assets and liabilities are not discounted. No provision is made for
taxation on permanent timing differences. Deferred tax assets are recognised to
the extent that it is more likely than not that they will be recovered.
(h) Foreign Currency Translation
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the profit and loss account.
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 Dec 2002 *
Unaudited (Restated)
31 Dec 31 Dec
2002 2001
# #
Income from investment trading 1,224,214 3,197,215
Management expenses 446,961 448,706
Operating profit 777,253 2,748,509
Share of operating profit/(loss) of associated undertakings 952,731 (586,981)
Profit on ordinary activities before interest payable 1,729,984 2,161,528
Interest payable
Group 189,794 93,887
Associated undertakings 106,016 146,213
295,810 240,100
Profit on ordinary activities before taxation 1,434,174 1,921,428
Taxation
Group 178,302 808,099
Associated undertakings 201,795 (124,192)
380,097 683,907
Profit on ordinary activities after taxation 1,054,077 1,237,521
Dividends (net of forfeited #nil (2001:#1,812)) 1,172,895 1,174,707
Retained profit for the year (118,818) 62,814
Dividend per share 26.00p 26.00p
Earnings per share (Basic and diluted) 23.37p 27.43p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 Dec 2002
*
Unaudited (Restated)
31 Dec 31 Dec
2002 2001
# #
Profit from ordinary activities after taxation 1,054,077 1,237,521
Share of own dividend received by Associated Undertakings 285,570 285,570
Total recognisd gains and losses for the year 1,339,647 1,523,091
Prior year adjustment - FRS 19 4,049 -
Total gains and losses recognised since last annual report. 1,343,696 1,523,091
* The 2001 figures have been restated in accordance with changes in accounting
policies (see note 1(b)).
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
BALANCE SHEETS
at 31 Dec 2002
Group Company
* *
Unaudited (Restated) Unaudited (Restated)
31 Dec 31 Dec 31 Dec 31 Dec
2002 2001 2002 2001
# # # #
Fixed Assets
Office equipment & software 4,976 2,973 4,976 2,973
Subsidiary Company - - 37,500 37,500
Associated Undertakings 8,424,791 8,101,371 1,872,184 1,872,184
8,429,767 8,104,344 1,914,660 1,912,657
Current assets
Investments 15,369,000 13,285,723 15,369,000 13,285,723
Debtors 214,784 280,371 214,784 280,371
Cash and bank balances 29,058 35,018 29,058 35,018
15,612,842 13,601,112 15,612,842 13,601,112
Creditors: amounts falling due
within one year: 5,833,854 3,663,453 7,319,235 5,148,834
Net current assets 9,778,988 9,937,659 8,293,607 8,452,278
Total assets less current liabilities 18,208,755 18,042,003 10,208,267 10,364,935
Net Assets 18,208,755 18,042,003 10,208,267 10,364,935
Capital and reserves
Called up share capital 451,113 451,113 451,113 451,113
Share premium 2,435 2,435 2,435 2,435
Profit and loss account 17,755,207 17,588,455 9,754,719 9,911,387
Shareholders' funds (Equity) 18,208,755 18,042,003 10,208,267 10,364,935
Market value of investments
Listed 28,062,769 24,937,404 28,062,769 24,937,404
Unlisted 1,173,710 694,795 1,173,710 694,795
Property - 137,412 - 137,412
29,236,479 25,769,611 29,236,479 25,769,611
Group net assets at market value 36,830,273 37,942,826
The potential corporation tax liability if the Group's net assets were
realised at their market valuation or at Directors' valuation would be
approximately #7,552,000 calculated at the rate of 30%.
Group net assets at (market value) per share 816p 841p
* The 2001 figures have been restated in accordance with changes in accounting
policies (see note 1(b)).
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
CONSOLIDATED CASHFLOW STATEMENT
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Net cash outflow/(inflow) from operating activities 208,236 70,667
Dividends received from associated undertakings 607,070 780,519
Returns on investments and servicing of finance (180,994) (92,988)
Taxation (532,485) (604,697)
Capital expenditure and management of non-liquid resources (158,678) 250,599
Equity dividends paid (1,172,895) (1,172,895)
Net cash (outflow) before management of liquid resources (1,229,746) (768,795)
Management of liquid resources (1,439,984) 104,174
(Decrease) in cash in the year (2,669,730) (664,621)
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Operating profit 777,253 2,748,509
Depreciation 3,231 10,740
Increase in provision for diminution in investments 846,665 650,829
(Profits) on investments realised (1,584,486) (2,777,059)
Currency translation losses 247,972 (274,557)
Decrease in debtors 49,176 265,066
(Decrease) in creditors (131,575) (552,861)
Net cash inflow from operating activities 208,236 70,667
ANALYSIS OF CASH FLOW
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Dividends received from associated undertakings
Dividends received from associated undertakings 607,070 780,519
Returns on investments and servicing of finance
Interst paid (180,994) (92,988)
Taxation
UK Corporation tax paid (532,485) (585,050)
Overseas tax paid - (5,955)
UK tax witheld - (13,692)
Net cash (outflow) (532,485) (604,697)
Capital expenditure and management of non-liquid resources
Purchase of fixed assets (5,235) (4,460)
Purchase of unlisted securities (1,213,048) (506,909)
Sale of unlisted securities 499,290 761,968
Sale of property 560,315 -
Net cash (outflow)/inflow (158,678) 250,599
Equity dividend paid
Dividend paid (1,172,895) (1,172,895)
Management of liquid resources
Purchases of Investments (12,984,558) (5,870,882)
Sales of investments 11,544,574 5,975,056
Net cash (outflow)/inflow (1,439,984) 104,174
EL ORO MINING AND EXPLORATION COMPANY p.l.c.
ANALYSIS AND RECONCILIATION OF NET FUNDS
for the year ended 31 Dec 2002
1 Jan Unaudited 31 Dec
2002 Cash flow 2002
# # #
Cash and bank balances 35,018 (5,960) 29,058
Overdrafts and deal funding (1,576,873) (2,663,770) (4,240,643)
(1,541,855) (2,669,730) (4,211,585)
Current asset investments 13,285,723 2,083,277 15,369,000
Less: unlisted securities and property (708,343) (126,645) (834,988)
12,577,380 1,956,632 14,534,012
Net funds 11,035,525 (713,098) 10,322,427
Unaudited
31 Dec 31 Dec
2002 2001
# #
(Decrease) in cash in year (2,669,730) (664,621)
Cash inflow from increase in liquid resources 2,083,277 2,045,329
Cash (outflow)/inflow from non-liquid resources (126,645) 150,476
Change in net funds resulting from cash flows (713,098) 1,531,184
Net funds at 1 January 11,035,525 9,504,341
Net funds at 31 December 10,322,427 11,035,525
PROFIT AND LOSS ACCOUNT
for the year ended 31 Dec 2002
Associated
Undertaking Total
# # #
Group
Balance 1 January 2002 - as previously reported 11,356,546 6,227,860 17,584,406
Prior year adjustment - FRS19 2,722 1,327 4,049
Balance 1 January 2002 - as restated 11,359,268 6,229,187 17,588,455
Retained (loss)/profit for the year (156,668) 37,850 (118,818)
Share of dividends from the Company 285,570 285,570
Balance 31 December 2002 11,202,600 6,552,607 17,755,207
Company
Balance 1 January 2002 - as previously reported 9,908,665 9,908,665
Prior year adjustment - FRS19 2,722 2,722
Balance 1 January 2002 - as restated 9,911,387 9,911,387
Retained (loss) for the year (156,668) (156,668)
Balance 31 December 2002 9,754,719 9,754,719
RECONCILIATION OF SHAREHOLDERS FUNDS
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Profit from ordinary activities 1,054,077 1,237,521
Dividends (1,172,895) (1,174,707)
Share of own company dividend 285,570 285,570
166,752 348,384
Opening Shareholder funds - as previously reported 18,037,954 17,693,619
Prior year adjustment - FRS19 4,049 -
Opening Shareholder funds 18,042,003 17,693,619
Closing Shareholder funds - as restated 18,208,755 18,042,003
This information is provided by RNS
The company news service from the London Stock Exchange
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