Toledo Mining Corporation Plc

Interim Results for the six months period ended 30 September 2009

CHAIRMAN'S STATEMENT

During the period under review, Toledo Mining Corporation PLC ("Toledo" or "the Company") continued to make good progress towards realising the full commercial potential of its substantial nickel resource base in the Philippines.

For the six months to 30 September 2009, Toledo recorded an attributable loss of £1,825,759 after accounting for foreign exchange losses of £1,455,541. This compared to an attributable profit of £921,326 for the comparable 2008 period when there was a foreign exchange gain of £847,054. The foreign exchange gains and losses are primarily due to the currency translation of US$ denominated loans made by Toledo to its Philippine partners.

Revenue reported by Toledo derives mainly from marketing support on ore sales and the provision of services to Berong Nickel Corporation ("BNC") and Ipilan Nickel Corporation ("INC"). Consequent on a reduced level of ore sales and reduced activity at the Berong mine, revenue for the six months to September 30 declined from £796,664 in 2008 to £218,271 in 2009. Correspondingly, and as a result of tight cost controls, there was a very significant reduction in administrative expenses between the two periods, from £1,393,128 to £765,546. 

In July 2009, Toledo placed 12 million ordinary shares to raise £3.36 million before expenses. As a consequence, even after accounting for attributable losses, total assets as at 30 September 2009 had increased to £29,977,178 (from £27,384,750 at 30 September 2008), of which loans to Philippine associate companies amounted to £13,062,203. 

Loans to Philippine partners include a US$5 million drawdown facility granted to Atlas Consolidated Mining and Development Corporation ("Atlas") to fund its share of expenditures at Berong and a US$8 million drawdown facility to Brooks Nickel to finance the Ipilan project. Each drawdown is repayable after 3 years and carries interest of 10%. The loans are secured against project cash flows and both have now been fully utilised. Toledo and the two borrowers are presently reviewing future funding arrangements for Berong and Ipilan. One possible outcome of these discussions is that Atlas will elect to make early repayment of the total outstanding loan from Toledo by the issue of Atlas shares to Toledo at a value which reflects early settlement. Negotiations to this effect are currently taking place.

As at 30 November 2009, Toledo had cash holdings of £4.471 million (US$7.4 million) and its associate companies had a further US$1.5 million; more than sufficient to complete all previously announced work programmes for the Berong and Ipilan nickel deposits.   

Toledo has, this year welcomed two new strategic corporate shareholders onto its share register. Daintree Resources Limited ("Daintree"), whose co-owner, Jason Cheng, is both a director of Toledo and Managing Partner of Ancora Capital Management Limited, an Asia focused private equity fund and Fevamotinico S.a.r.l, whose owner, Kostyantin Zhevago is also the controlling shareholder of London listed Ferrexpo plc which has a current market capitalisation of approximately £1.1 billion.

As a result of subscribing to the share placement, Daintree's holding in Toledo's issued ordinary share capital increased from 20%, (acquired by on market purchases earlier in 2009), to 24%, whilst Fevamotinico joined the share register with a 9.8% stake. European Nickel PLC, previously Toledo's largest shareholder with 19.3%, whilst supportive of the placement, elected not to subscribe and now holds a 13.7% interest.

Although the Berong nickel mine remained on care and maintenance throughout the financial half year, there were three shipments from inventory totalling 143,765 wet metric tonnes ("wmt"). All the shipments went to the Yabulu refinery in Australia, generated gross revenue of US$3.84 million and a cash contribution of $1.97 million. An additional US$575,000 has been withheld by BHP Billiton (Yabulu's then owner) as a claim for demurrage relating to the July/August shipment which was severely disrupted by unseasonably bad weather. BNC is contesting the basis of this claim. 

On 11 November 2009, we reported that following a change of ownership, Queensland Nickel Pty Ltd ("Queensland Nickel") had given BNC notice to terminate a contract for the supply of ore to Queensland Nickel's Yabulu nickel refinery. As reported at the time, BNC disputes the grounds for this termination and has instructed legal advisors. BNC's rights are being actively pursued. The contract with Queensland Nickel runs for five years from August 2007 and is for the supply of up to 500,000wmt per annum with a minimum annual offtake of 300,000wmt.

Whilst BNC has received enquiries for its remaining ore inventory, of 160,709wmt grading 1.4% nickel, the prices offered so far have been unattractive. Bearing in mind that BNC's shipping window is now closed until March 2010, BNC has time to explore the market for improved offers.

As set out in the share placement circular, the principal purpose of the July 2009 equity issue was, and remains, two fold:

(i) To finance a planned drilling programme at Berong with a target to increase the JORC compliant nickel laterite resource from just under 10 million tonnes to 40 million tonnes; sufficient to support a 20,000 tonne per annum contained nickel process plant, and

(ii) To complete a Declaration of Mine Feasibility ("DMF") at Ipilan and ensure compliance with the terms of the Mineral Production Sharing Agreement (MPSA) beyond 2010.

Having secured the endorsement for a mining operation from the four local councils (Barangays) on which the deposit is located, INC is now pursuing the endorsement of the municipal and provincial authorities. Such endorsements, however, are not a prerequisite for completion of the DMF, which remains on schedule to be completed around mid 2010.

At Berong, site preparation for the exploration programme is well advanced. All mandatory documentation to permit the commencement of drilling has been submitted to the Minerals and Geosciences Bureau for final sign off and drilling is expected to commence early in 2010. 

In November 2009, Toledo, Atlas and European Nickel jointly hosted a meeting in Manila with a high level delegation from Jiangxi Province, China. The delegation was led by His Excellency Vice Governor Hong Lihe and included the President and senior management of Jiangxi Rare Earth and Rare Metals Tungsten Group ("JXTC"), with whom Toledo has previously concluded two Memorandums of Understanding. At the meeting, JXTC advised that it has overcome objections to locating a pilot plant in Jiangxi Province which will determine the optimum process for the production of an intermediate nickel product to supply its planned nickel refinery. Accordingly, although there is no longer a requirement to construct a pilot plant at Berong, JXTC wished to reaffirm its commitment to Berong as the favoured ore supply and processing partner. Construction of the pilot plant is scheduled to begin during 2010 and discussions have commenced on the terms for supplying ore to the plant.

When, in November 2008, Toledo released a JORC compliant resource estimate for Ipilan prepared by Snowden consultants, we pointed out that the Snowden calculation was based on data available prior to completion of the drilling programme. The reported JORC compliant ore resource is 44.13 million tonnes averaging 1.19% at a zero cut-off grade. A recently completed in house analysis utilising 100% of the now available data and undertaken to JORC compliant standards, estimates a total resource of 53.2 million tonnes (containing 585,000 tonnes of nickel) at an average grade of 1.1% and of which 80% is in the measured category. The Company is awaiting confirmation of the updated JORC resource estimate by an independent consultant.

Under the terms of the Memorandum of Understanding signed in 2007 between Toledo and MacroAsia, which owns a deposit adjacent to Ipilan, the two companies have continued to explore joint development of their respective properties. Since February of this year, Toledo has been assisting MacroAsia undertake the necessary technical work to produce a JORC compliant resource estimate for its nickel property. Although this work remains to be completed, the initial assessment is that the two properties are contiguous, are roughly of equal size and grade and contain a combined resource of some 100 million tonnes of ore averaging in excess of 1% nickel. Once MacroAsia has a JORC compliant resource estimate, there will be a joint assessment of the practicality, desirability and commercial potential of developing a single mining and processing operation.

Since it acquired its nickel interests in the Philippines, Toledo's stated objective has never changed. It remains, "to maximise the value of the Company's large nickel resource base through product beneficiation." With a well defined work programme; dedicated and highly professional staff; a healthy balance sheet and supportive strategic shareholders and local partners; the Board is confident that the year ahead will witness Toledo taking further significant steps towards its goal.

Reg Eccles

Chairman

Toledo Mining Corporation PLC

Tim Ashworth, General Manager, Philippines, Toledo Mining Corporation, is a member of the Australian Institute of Mining and Metallurgy and is the qualified person that has reviewed and approved the technical information contained in this report, including statements relating to mineral resources. 

INDEPENDENT REVIEW REPORT TO TOLEDO MINING CORPORATION PLC

Introduction

We have reviewed the accompanying condensed Consolidated Balance Sheet of Toledo Mining Corporation Plc as at 30 September 2009 and the related condensed Statements of Income, Changes in Equity and Cash Flows for the six month period then ended. Management is responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review. 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK & Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

Sawin & Edwards

Chartered Accountants
15 Southampton Place

WC1A 2AJ

18 December 2009

      UNAUDITED CONSOLIDATED INCOME STATEMENT

        For the six months period ended 30 September 2009

The Group has no recognised gains or losses other than the results for the periods as set out above. 

           UNAUDITED CONSOLIDATED BALANCE SHEET

    30 September 2009

  These interim results were approved by the Board on 18 December 2009 and signed on their behalf by:

  Reg Eccles

  Chairman

  UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months period ended 30 September 2009

  UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months period ended 30 September 2009

   UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

for the six months period ended 30 September 2009

     NOTES TO THE UNAUDITED INTERIM RESULTS

 For the six months period ended 30 September 2009

1.    General information

Toledo Mining Corporation Plc is a company incorporated in England and Wales under the Companies Act 1985. The Company's registered office is 11 Albemarle Street, London, W1S 4HH. The registration number of the Company is 5055833.

The principal activity of the Group is the investment in and exploration and development of mining projects, specifically in the Philippines.

The Group's principal activity is carried out in US dollars. The financial statements are presented in pounds sterling as this is the currency of the country (the UK) where the Company is incorporated and its ordinary shares admitted for trading.

The Board of directors has authorised the issue of these interim results on the date of the statement as set out on page 8.

2.    Accounting policies

Basis of accounting

The interim results have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs).

The interim results have been prepared on the historical cost basis except that certain financial instruments are accounted for at fair values. The same principal accounting policies and methods of computation have been followed in the interim results as compared with the Group's financial statements for the year ended 31 March 2009.

3.   Segmental analysis

The turnover and profit / (loss) are attributable to the principal activities of the Group.

Segmental information on a geographical basis is set out below:

4.   (Loss) / earnings per share - including share of associates results

(Loss) / earnings per share has been calculated by dividing the (loss) / profit for the period after taxation including share of associates losses of £396,126 (30 September 2008: profit £51,178) (31 March 2009: loss £1,133,453) attributable to the equity holders of the parent company of (£1,843,031) (30 September 2008: £839,817) (31 March 2009: £1,639,603) by the weighted average number of shares in issue at the period end of 33,341,612 (30 September 2008: 29,538,333) (31 March 2009: 29,538,333).

Diluted (loss) / earnings  per share has been calculated using the weighted average number of shares in issue at the period end, diluted for the effect of share options in existence at the period end of 650,000 ( 30 September 2008: 640,000) (31 March 2009: 395,000).

(Loss) / earnings per share - excluding share of associates results

(Loss) / earnings per share has been calculated by dividing the (loss) / profit for the period after taxation excluding share of associates losses of £396,126 (30 September 2008: profit £51,178) (31 March 2009: loss £1,133,453) attributable to the equity holders of the parent company of (£1,446,905) (30 September 2008: £788,639) (31 March 2009 £2,773,056) by the weighted average number of shares in issue at the year end of 33,341,612 (30 September 2008: 29,538,333) ( 31 March 2009:29,538,333).

Diluted (loss) / earnings per share has been calculated using the weighted average number of shares in issue at the period end, diluted for the effect of share options in existence at the period end of 650,000 (30 September 2008: 640,000) (31 March 2009: 395,000).

5.  Called up share capital

  During the period the Company undertook a share placement of 12,000,000 ordinary shares at 28p per share. The share placement generated proceeds after costs of £3,248,222.  

6.    Material related party transactions

Atlas Consolidated Mining and Development Corporation (ACMDC) and European Nickel plc are, and Natasa Mining Limited was, joint venture partners with the Company under the Berong Venture Agreement.

Brooks Nickel Ventures, Inc. (Brooks) and Celestial Nickel Mining and Exploration Corporation (CNMEC) are joint venture partners with the Company under the Celestial/Ipilan Venture Agreement.  

Atlas Consolidated Mining and Development Corporation (ACMDC) is joint venture partner with the Company under the Ulugan Venture Agreement.

Under the Berong, Celestial and Ulugan Venture Agreements, the Company has through the expenditure of qualifying costs of £10,464,306 (30 September 2008: £10,464,306) (31 March 2009: £10,464,306) acquired equity interests in the following Philippines' registered companies.

In April 2006, the Company entered into an agreement to subscribe for up to US$5 million, in a three-year Loan Note in ACMDC secured over ACMDC's share of the Berong nickel project cash flows. The Note bears interest at the rate of 10% cumulative per annum and is repayable three years from each drawdown. The loan is repayable out of ACMDC's share of the Berong nickel project cash flow or is convertible into ACMDC shares or repayable in US$ cash (at the election of the Company). 

During the period, the Company advanced US$Nil (30 September 2008: US$238,799) (31 March 2009: US$238,799) to ACMDC under the Loan Note. This amount forms part of the total principal amount advanced as shown under non-current loan investments.   

In May 2007, the Company entered into an agreement to make a loan facility available to Brooks of up to US$2.5 million. Brooks confirmed that the US$585,191 already advanced by the Company in excess of its US$2 million funding commitment would be subject to the terms of the agreement. This loan facility was subsequently increased to US$8 million. During the period, the Company advanced a further US$379,788 (30 September 2008: US$1,905,772) (31 March 2009: US$2,329,812) to Brooks. This amount forms part of the total principal amount advanced as shown under non-current loan investments. The loan facility bears interest at 10% cumulative per annum and is repayable three years from each drawdown. The loan is secured over Brooks' share of earnings from the Ipilan nickel project and is repayable out of Brooks' share of the Ipilan nickel project cash flows

Under the Celestial joint venture agreement, the Company has the option to take a 40% holding in CNMEC. During the year ended 30 March 2007 the Company agreed to an advance of $900,000, as shown in note 14, against the option exercise amount. If the Company decides not to exercise the option to purchase, or is prevented by any cause from exercising the option to purchase, then the borrowers are required to reimburse the US$900,000.  The advance is interest free and guaranteed by CNMEC but is otherwise unsecured. This amount forms part of the total principal amount advanced as shown under non-current loan investments.

The Company's expenditure commitment under the Ulugan Venture Agreement at the year end is US$700,000 (30 September 2008: US$700,000) (31 March 2009: US$700,000).

Under the Berong Venture Agreement, the Company has advanced funds to Berong Nickel Corporation (BNC) to meet ongoing mine development costs. During the period, the Company advanced US$327,778 (30 September 2008: US$410,000) (31 March 2009: US$1,063,652) to BNC. This amount forms part of the total principal amount advanced as shown under non-current loan investments. The loan amounts advanced are interest free, unsecured and have no fixed terms of repayment.

CNMEC owns 40% of the issued share capital of Nickel Laterite Resources Inc. There is a royalty agreement in place such that the Company has a commitment to make certain payments to CNMEC as described in note 7.

The Company has two subsidiaries, China Nickel Corporation and China Nickel & Steel Corporation.

During the period China Nickel Corporation charged Berong Nickel Corporation US$272,907 (30 September 2008: US$1,183,333) (31 March 2009: US$1,637,396) in respect of consulting fees. At the period end Berong Nickel Corporation owed China Nickel Corporation US$1,228,531 (30 September 2008: US$996,772) ( 31 March 2009: US$672,188).

During the period China Nickel Corporation charged Ipilan Nickel Corporation US$55,018 (30 September 2008: US$211,266) (31 March 2009: US$318,809) in respect of consulting fees. At the period end Ipilan Nickel Corporation owed China Nickel Corporation US$205,660 (30 September 2008: US$93,676) (31 March 2009: US$105,237).

7.    Commitments and contingencies

Under a royalty agreement, the Company has made a commitment to make certain payments to Celestial Nickel Mining Exploration Corporation as follows:

A potential claim for an unspecified sum for breach of contract has been notified to the Company in respect of a dispute with Celestial Nickel Mining Exploration Corporation. The directors are firmly of the opinion that the claim is without foundation and no provision has been made in these accounts in respect of this.

8.    Associate Undertakings

    The Company has equity holdings in the following associate undertakings:

The principal place of business and country of incorporation of the associate undertakings is the Philippines.

Summarised results of the associate undertakings as translated in sterling are as follows:

9.    Post balance sheet events

    All significant post balance sheet events are dealt with in the Chairman's Statement.

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