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Toledo Mining Corp. (TMC)
17.25p
- Change Today: -0.25p
- 52 Week High: 34.25
- 52 Week Low: 17.00
- Currency: UK Pounds
- Shares Issued: 49.85m
- Volume: 30,000
- Market Cap: £8.60m
- RiskGrade: 201
- Beta: 0.44
Full Year Results for Year Ended 31 March 2011
Toledo Mining Corporation plc
Full Year Results for the Year Ended 31 March 2011
Highlights
Operational
* Recommencement of mining operations at the Berong mine
* Sales contract secured for stockpiled ore of approximately 150,000 wmt
* Targeted production of 450,000 wmt of ore containing 1.8% nickel by Q4 2011
* Sales and production target of 750,000 wmt for 2012
Financial
* Settlement of Atlas loan: total of US$4.5 million to be received by end
September 2011
* Consolidated loss before tax: £4.4 million (2010: £1.98 million)
* Loss per share including associates:10.16p (2010: 4.74p)
* Cash balances: £1.88 million as at 31 March 2011
Corporate
* Appointment of Victor Kolesnikov as Chief Executive Officer
* Appointment of Pierre Charlent as Chief Operating Officer
* Successful placing of 8.307 million shares at a price of 23 pence to raise
£1.9 million net of expenses
Chairman's statement
In the 18 months since the beginning of Toledo's 2011 financial year, our
management has worked tirelessly to extract greater value from our nickel
investments located in the Philippines.
It was very pleasing therefore to be able to announce in April that sales
contracts had been secured to finance the reopening of the Berong mine, which
duly occurred in May.
The intention is now to produce 450,000 wet metric tonnes (wmt) of nickel ore
this calendar year rising to 750,000 wmt annually thereafter. The expected net
revenue generated from ore sales will be more than sufficient at current nickel
prices for the joint owners of Berong to fund an exploration programme of the
area around Berong and undertake engineering studies to improve ship loading
capability and determine the optimal technology for local processing of ore.
At the Ipilan project, on the eastern and opposite side of Palawan Island to
Berong, significant progress has been made towards being able to mine the
deposit. Last December, we announced that statutory licencing obligations had
been progressed to the point where only a mine feasibility plan and related
documents required official sign off before mining operations could begin. The
feasibility plan has been submitted to the Minerals and Geosciences Bureau, and
it is understood that their initial review has drawn no negative feedback.
At the beginning of our financial year, we had just commenced an exploration
programme on the Moorsom prospect, lying within a 14 kilometre radius of the
Berong mine. The stated aim was to prove up sufficient ore capable of supporting
a processing operation producing 20,000 tonnes per annum of contained nickel.
Although the initial results were encouraging, the programme was curtailed when
it became apparent that whilst the requisite tonnage undoubtedly exists, the
nickel grade is less than hoped. In-house analysis of the assay data indicates a
total resource of 43 million tonnes grading just over 0.8% nickel using a 0%
cut-off grade. Further work is required to determine whether any part of this
huge resource has the potential of commercial development.
As mentioned in my half yearly statement, the area long believed to offer
significant exploration potential is the coastal portion of the Long Point
prospect, located some 20 kilometres to the north east of the Berong mine. This
area, which lies within an Environmental Critical Area Network (ECAN), is
presently off limits to exploration. However, we remain hopeful that with the
support of the local council, which has petitioned for the ECAN map to be
redrawn, we will be granted permission to explore
Palawan is a particularly environmentally sensitive island within which to
operate. Often described as the Philippines last ecological frontier it has been
accorded special status under the Constitution. It is not surprising therefore
that obtaining permits to explore and mine on Palawan requires extensive review
and cooperation with local authorities. Management of both Berong and Ipilan has
ensured that very careful attention to community, social and environmental
issues has enabled the restart of the Berong mine and successful ratification of
the environmental plans for the development of Ipilan.
More detailed operational information on both Berong and Ipilan is contained in
the Chief Executive's review.
For the financial year to 31 March 2011 Toledo reported a pre-tax loss of £4.4
million as compared to a loss of £2.0 million in the 2010 financial year. Of the
£2.4 million increase in pre-tax losses, £1.6 million is due to non-cash
provisions with respect to the early settlement by Atlas Consolidated Mining and
Development Corporation (Atlas) of a loan from Toledo to Atlas, a partner in
Berong, and a reduction in the carrying value of our investment in Ipilan. A
further £0.21 million was due to foreign exchange losses on US$ denominated
loans to Philippine partners. Associated company losses rose by £0.36 million
and administrative expenses were £0.46 million higher, principally as a result
of negotiations with the Jinchuan Group during the financial year.
With no income during 2010 and for most of this year, Toledo has relied on the
loyal support of shareholders. Last December, the company placed 8.307 million
shares to raise £1.9 million net of expenses. As a result of the issue, Toledo
now has 49,845,333 fully paid ordinary shares in issue of which Daintree Limited
(whose major shareholder, Jason Cheng, sits on the Toledo board) holds 22% and
Fevamotinico SARL (a company related to Kostyantin Zhevago) holds 20%. The issue
also saw Mr. Jason Cropper increase his equity holding to 6.7%, since when,
through on market purchases, his holding has risen to 16%. Meanwhile, Toledo's
once most significant shareholder, European Nickel plc, now has just a little
over 5% equity holding, although it still retains its 18.7% voting interest in
Berong Nickel Corporation.
Presently financial matters look a lot better for both Toledo and its
shareholders. The Berong mine should now be self-financing for the foreseeable
future. Whilst Toledo still has a commitment to fund (on a recoverable basis)
Ipilan up to mine development, your company is well funded as a result of the
early settlement of the Atlas loan referred to earlier and which will add US$4.5
million to Toledo's cash holdings.
It is quite natural that strong commodity prices draws the attention of mineral
rich countries to the wealth beneath their feet and heightens the debate as to
how best these resources be developed for the benefit of the country concerned.
The Philippines, with its exceptional endowment of mineral resources, is no
exception to such debate, the current focus being on the pros and cons of
limiting ore exports in preference to domestic processing and on whether to
tighten or relax the legislation limiting foreign ownership of mineral
properties. Toledo welcomes clarification and resolution on both these issues.
Meanwhile, your company considers it wise to recognise Philippine nationals'
desire to process minerals within the country and, accordingly, to plan for a
more restrictive environment on ore exports. We do not see such an outcome as
necessarily financially damaging for Toledo. Equally, we believe that any change
to the legislation on foreign ownership will recognise the important
contribution foreign investment makes to the Philippine economy.
As Toledo became more confident that developments in the nickel market and in
particular the explosive growth in demand for nickel ore, primarily from China
but also elsewhere, would support a reopening of the Berong mine and accelerate
value added ambitions, we moved to strengthen our management capabilities.
In January 2011, we welcomed Victor Kolesnikov to the Toledo board. In March we
appointed him Chief Executive Officer. Victor is a metallurgist with over 22
years' experience in mining and sales in the non-ferrous metals industry,
including eight years with Norilsk Nickel, the world's largest nickel producer.
In the short time since his appointment as CEO, Victor has made a very positive
impact on our business including overseeing the commencement of operations at
Berong.
In May 2011, we appointed Pierre Charlent, Chief Operating Officer based in the
Philippines. Pierre replaces Ken Stein, who returned to Australia for personal
reasons. As a geologist and mining engineer, Pierre not only complements
Victor's metallurgical expertise, but also comes to Toledo with over 25 years'
experience in the mining industry, including 14 years in nickel laterite
exploration, mining and development in New Caledonia.
We are very fortunate to have been able to recruit two such high calibre and
experienced individuals.
With the commitment of the staff of the Manila-based management company of
Berong and Ipilan and the employees at the respective sites, we have
significantly advanced the reactivation of Berong and made substantial progress
in the permitting at Ipilan. The Toledo board owes all of them a huge debt of
gratitude.
I would also like to thank Felix Pole who stood down from the Toledo board at
the end of June. Felix was my companion in guiding Toledo through some very
challenging times. Fortunately, although Felix resigned from the board because
of the heavy demands of his business interests, he remains available should we
need to tap his wise counsel.
Finally, I would like to extend my thanks to our shareholders for their
continued support. We have made much positive progress this year and I look
forward to updating you as we continue to realise further goals over the coming
year.
Reginald Eccles
Chairman
24 August 2011
Chief Executive Officer's review
The Berong nickel mine, in which Toledo has a 56.1% economic interest,
successfully recommenced operations in May 2011.This became possible due to
favourable market conditions for high grade saprolite nickel ores and strong
nickel prices which have stayed above US$20,000/tonne since August 2010. Prior
to reopening the Berong mine, Toledo developed a new strategy with its JV
partners in Berong Nickel Corporation (BNC) to target production of nickel ore
containing 1.8% nickel, which is currently being implemented.
The 1.8% plan was developed consistent with growing market demands for this ore
type. The recent significant changes in market demand for high grade saprolite
nickel ore have opened up sound prospects for our deposits. Historically, the
development of exports of high grade saprolite nickel ore began from New
Caledonia during the 1950's by Japanese ferronickel producers. Later, they
extended their ore source market to Indonesia and the Philippines. The
requirement for nickel content in the ore in 2001 was very high at 2.45%, which
is why only a few nickel ore producers in the Philippines could compete in this
market.
From 2003, the European manufacturers of ferronickel also started using high
grade saprolite ore from Asia in their Electric Arc Furnace (EAF) production,
thereby competing with Japanese consumers. By the end of 2006, the typical
nickel content of high grade saprolite ores exported from New Caledonia,
Indonesia and the Philippines had fallen to 2.2% nickel due to a general decline
in the grade of existing deposits and also due to the increased demand for ore.
The most significant changes in the market began in 2006, when China began to
use nickel ore for the production of nickel pig iron (NPI) in blast furnaces,
which were previously used for iron production.
As the technology for production of pig iron in blast furnaces requires high
iron content in raw materials, the Chinese manufacturers mainly used limonitic
nickel ores with high iron content (45-55%) and low nickel content (0.9-1%). The
proportion of high grade saprolitic ore in the blast furnaces' production of NPI
was relatively small. At the time of the crash in nickel prices at the end of
2008, China did not yet have substantial numbers of EAF plants for ferronickel
production, and had not yet created competition in the market for high grade
ores. However, it rapidly became clear to the Chinese ferronickel and NPI
producers that the use of EAF for ferronickel production using high grade ores
was much more competitive compared to NPI production in blast furnaces.
By early 2011, China had already built significant numbers of EAF plants for the
production of ferronickel. This dramatically increased the demand for high grade
saprolitic ore, resulting in a decrease in the average available grade from
2.2% to 1.8% nickel content. All of this has led to the Berong deposit, with its
substantial reserves of 1.8% nickel ore grade, becoming very competitive against
the previous market leaders in high grade ore production from New Caledonia,
Indonesia and the Philippines.
The restart of the Berong mine by BNC was facilitated by the sale of the
existing stockpile of low grade ore, produced in 2008, the proceeds of which are
being used as working capital to support mining operations. Currently, 103,530
wet metric tonnes (wmt) of nickel ore with an average grade of 1.54% nickel has
been shipped from the existing stockpile, yielding a revenue of US$2.57 million
to BNC.
To date, a further 160,569 wmt of ore with a nickel content of 1.8% has been
mined and delivered to the stockpile. We anticipate producing a total of
450,000 wmt of ore containing 1.8% nickel by the end of this year, from which we
expect to ship 200,000-250,000 wmt in this shipping season. Because Berong uses
barges to load ships offshore, sea conditions typically limit shipments to
between March and October. It is planned that shipments will be resumed at the
beginning of March 2012, when sea conditions again become conducive to barge
ship loading. We have revised our projected shipping target for BNC, as
announced on 27 May 2011, downwards by 50,000 tonnes.
The Berong mine is targeting production of 750,000 wmt of 1.8% nickel ore during
2012. To address the constraints of the limited shipping window, BNC has
recently engaged an engineering company to look into the possibility of
increasing the shipping period, the successful outcome of which would increase
the capacity of the Berong port to 1,000,000 wmt per year. Among the range of
possible measures being considered in the engineering study are the extension of
the pier to accommodate bigger barges and the construction of a protective sea
wall.
The JORC-compliant resource for Berong was prepared by Snowden Mining Industry
Consultants in June 2007. The total resource over the area drilled was stated at
9.92 million dry tonnes averaging 1.55 % Ni at a 1% cut-off grade. This resource
included a subset of high grade resource of 4.88 million dry tonnes grading
1.88% Ni at a 1.5% cut-off grade.
Currently, following the 2006 to 2008 direct shipping ore operation, the balance
of this high grade resource is approximately 4.68 million dry tonnes (equivalent
to approximately 6.98 million wet tonnes of ore) which will support a 9-year
life of mine at the present rate of production of 750,000 wmt of 1.8% nickel
grade per annum. For every tonne of high-grade ore produced, approximately two
tonnes of low grade ore with nickel content averaging 1.3% will be produced
alongside. This will be stored at the mine site area in anticipation of future
value added processing operations or for sale should favourable market
conditions prevail.
A Mining Project Feasibility Study for Ipilan, in which Toledo holds a 52%
economic interest, was carried out in August 2010 and the relevant documents
were compiled and submitted to the Mines and Geosciences Bureau for review and
approval in November 2010. These included a Declaration of Project Mining
Feasibility (DMF), Environmental Protection and Enhancement Program, Final Mine
Rehabilitation and Decommissioning Plan, Social Development and Management Plan
and a Health and Safety plan. Clearance of the all-important Strategic
Environmental Plan (SEP) has been received from the Palawan Council for
Sustainable Development (PCSD).
A comprehensive sintering test has been undertaken on Ipilan's ore, which has
highlighted an opportunity to upgrade the ore, especially its limonitic part.
This study has opened up the possibility of upgrading the iron and nickel
content of Ipilan's limonitic ore to make it more suitable for NPI blast furnace
production. As Berong's ore is similar to Ipilan's, the results of the study
could also be extended to Berong's low grade limonitic ore. Capital and
operating costs of the process are being evaluated. Mine experience gained in
the development and operation of Berong will be applied to Ipilan once full
permitting for mine development has been secured.
Past works have confirmed the possibility of using all the available leaching
technologies such as high pressure acid leaching (HPAL), atmospheric leaching
(AL) and heap leaching (HL) for processing the ores of our deposits. We continue
to assess the viability of these technologies in line with changing market
conditions. We are also expanding our study on pyro-metallurgical technologies,
such as looking into regional EAF production of ferronickel to evaluate which is
the most viable and sustainable value added process for our ore.
Berong continues to set the benchmark in best practice for its environmental
work within the community. The mine rehabilitation area is now home to 4.5
hectares of rubber trees, which should provide the community with a sustainable
source of income for years to come. Alongside this, Toledo is dedicated to
preserving its relationships with the local government units (LGUs) and schools
in support of the National Greening Project to deliver our commitment to plant
50 new trees for every one tree cut. In this regard, numerous species of value
added trees, fruit trees and grasses continue to be planted.
Funds from royalty payments made to the indigenous peoples continue to provide
essential services to the community as well as establishing livelihood projects,
which aim to empower the local community in generating its own income. We are
consistently investing more time and money into Corporate Social Responsibility
(CSR) projects than is our obligation, as mandated by law, and continue to
strive to contribute positively to the local environment and communities amongst
which we operate.
Finally, it would not have been possible to resume operations at Berong at such
short notice, or indeed at all, without the continued support and hard work of
all of our stakeholders including the local community, the LGUs, the Provincial
and National Government and of course our staff and management both locally in
the Philippines and in the UK. I would like to take this opportunity to
congratulate them all and look ahead to continued success in the months and
years to come.
Victor Kolesnikov
Chief Executive Officer
24 August 2011
Competent person statement
The resource information in this statement is based on information reviewed by
Mr Pierre Charlent, Chief Operating Officer of Toledo Mining Corporation, who is
a Member of the Australasian Institute of Mining & Metallurgy. Mr Charlent has
sufficient experience, which is relevant to the style of mineralisation and type
of deposit under consideration and to the activities undertaken, to qualify as a
Competent Person as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC
Code). Mr Charlent consents to the inclusion in this statement of the matters
based on this information, in the form and context in which they appear.
In the community
Toledo is very mindful of its duty to manage the environmental and social impact
of its mining operations in a responsible and sensitive manner. All businesses
are part of the wider society, and we believe they have both the responsibility
and the capability to make a positive contribution to the communities in which
they operate.
Berong Nickel Corporation (BNC) recognises that the efficient operation of its
business depends on the support of the local authorities and of the community as
a whole, and seeks to provide significant and sustainable benefits through its
presence. BNC's Community Relations Officer, Joy Asignacion, ensures that
everyone within the local community has a say in identifying and participating
in projects backed by the company. There are currently two main focus areas for
these projects - the Social Development and Management Programme and Community
Programmes.
BNC's Social Development and Management Programme (SDMP) was launched in 2007,
following extensive consultation with the community and local government to
ensure that the programme would be fully aligned with their interests and
aspirations. Since then, the SDMP has funded a number of very successful
initiatives, including a scholarship scheme, a para-teachers programme, improved
medical services, and a potable water system.
The Community Programmes are wide ranging, and are selected and run with the
active involvement of members of the community. Recent programmes include:
* Livelihood
Backyard gardening scheme; Tilapia Festival; manufacture of coco-based
products; buying station for recyclable materials.
* Education
Read-along scheme; Berong Elementary Extension School; Science Month
Celebration at Berong National High School.
* Health
Cooking contest; supplemental feeding; personal hygiene demonstration;
community garden and beautification; "Dumi mo, Linis mo" (construction of
comfort rooms); new mothers' classes; school garden.
Adopt-a-Mountain
BNC devised its Adopt-a-Mountain programme as a proactive and imaginative
response to a directive issued by the Environmental Management Bureau of the
Philippine Department of Environment and Natural Resources (DENR) relating to
the rehabilitation by mining operators of denuded forests or mountains outside
of currently approved mining areas. Along with restoration and conservation, the
programme also aims to provide livelihoods to local people by planting tree
species that can generate sustainable income in the future.
The Barangay (district) of Berong is home to indigenous peoples called
"Tagbanua" and migrants from the Visayan Islands. The Tagbanua are the
aborigines of Quezon and have inhabited the land for centuries. Slash and burn
farming (known locally as "kaingin") and fishing are the main sources of
livelihood of the nomadic Tagbanua, and this has had a detrimental effect on the
environment within the district.
BNC's community relations team faced a real challenge in finding denuded areas
to adopt, since most of them are still being used as "kaingin" by the Tagbanua
who understandably do not want to leave unless they can sell the land at a very
high price to BNC. However, following a series of negotiations conducted with
the helpful guidance of the DENR, the first tree planting event under the Adopt-
a-Mountain programme was able to take place on 11 September 2010. Hundreds of
people from the community, including schoolchildren along with their teachers
and mothers, government officials and local civic groups, converged and planted
around 6,000 seedlings.
The Adopt-a-Mountain initiative is not only helping to rehabilitate the local
environment, but also to promote better understanding and relationships
throughout the community. BNC will continue to fund and extend this initiative,
and the Barangay of Berong has declared that 11 September will from now on be
designated Adopt-a-Mountain Day.
Directors and senior management
Board of directors
Reginald Eccles
Chairman
Mr Eccles has extensive experience in the mining industry, specialising in the
areas of planning, strategy and finance. He has worked for major international
mining houses (Anglo American Corporation and Consolidated Goldfields plc), co-
founded a successful minerals consultancy and a publishing business, and served
as Head of Global Mining Equities for both SBC Warburg (now UBS) and ABN Amro.
Victor Kolesnikov
Chief Executive Officer
Mr Kolesnikov is a qualified metallurgical engineer with over 22 years'
experience in the non-ferrous metals industry, including eight years with
Norilsk Nickel, the world's largest nickel producer. Although based in London,
he spends extended periods in the Philippines working with the local management
and joint venture partners utilising his specialist expertise to maximise the
potential inherent in Toledo's nickel assets.
Simon Purkiss
Non-Executive Director
Mr Purkiss is a metallurgical engineer with over 25 years' experience in the
base metals and platinum group metals industries. He has held various
operational and business development roles at Impala Platinum Ltd and BHP
Billiton. Mr Purkiss was one of the founders of European Nickel plc, a UK
registered company that has developed the heap leach process for application to
nickel laterites.
Constantine Thanassoulas
Non-Executive Director
Mr Thanassoulas was the Chief Executive Officer of Larco SA, the largest
ferronickel company in Europe, from 2004-2008. Prior to this, he held a number
of senior positions in the banking industry. Mr Thanassoulas is currently a
partner of Eilon Associates Ltd, an investment banking consultancy, and is a
past President of the European Finance Association and President of the European
Financial Management Association.
Jason Cheng
Non-Executive Director
Mr Cheng is based in Hong Kong and is the Managing Director of Kerogen Capital
Ltd, a private equity firm which invests in the energy sector. Previously, he
worked in investment banking in the resources sector at Schroders and JP Morgan
in Australia, and was also based in Beijing, undertaking investment and advisory
activities at Jade International Capital Partners. Mr Cheng holds a Bachelor of
Commerce from Melbourne University and a Masters of Commerce from Sydney
University.
Senior management in the Philippines
Pierre Charlent
Chief Operating Officer
Mr Charlent is a geologist and mining engineer with over 25 years' experience
including 14 years with nickel laterite exploration, mine development and mining
in New Caledonia. His experience covers project generation, exploration,
resource and reserves calculations, mine design, development and optimisation,
mine planning, mine management for direct shipping ore and onsite processing. He
holds a Masters in Geology and Geophysics from the University of Montpellier and
a degree in Mining Engineering from ‰cole des Mines d'Al¨s, France, and is a
member of the Australasian Institute of Mining and Metallurgy and a member of
the Society of Economic Geologists (USA).
Rufo S. Cabanlig Jr
General Manager for Projects
Employed by TMM, Mr Cabanlig has been a mining engineer for over 30 years and
has extensive experience in the design, engineering and operations of surface
mines. He was previously Head of Operations for Philippines Pyrite Corporation,
a wholly owned subsidiary of the state owned Philippines Phosphate Fertiliser
Corporation, and also held senior positions with the Philippines National Oil
Company (PNOC) and its subsidiaries. He undertook postgraduate studies in
Mineral Economics from the University of the Philippines, where he also obtained
his degree in Mining Engineering.
Ramon Antonio L. Flores
Resource Development & Technical Services Manager
Employed by TMM, Mr Flores is a geologist with over 30 years' international
experience covering exploration, consulting, research, computing and management.
He held positions previously with Gold Fields, Newcrest and Anglo American, and
has consulted for clients worldwide. He holds a Masters in Environment and
Natural Resources Management from the University of the Philippines, and a
degree in Geology as well as postgraduate diplomas in Remote Sensing and
Research and Development Management.
Marissa S. Nicdao
Officer in Charge, Accounting
Employed by TMM, Ms Nicdao has extensive accounting experience including 15
years in senior positions. She was Chief Accountant for Metals Mineral Resources
Corporation and for Minoro Mining and Exploration Corporation. Her
responsibilities include the production of regular management reports,
budgeting, reconciliation of account balances, review of mine site performance,
and analysis of costs/variances. She has a degree in Business Administration
with major in Accounting, and is a Certified Public Accountant.
TMM Management Inc is the company responsible for managing the day-to-day
operations in the Philippines on behalf of Toledo and its partners.
Report of the directors
For the year ended 31 March 2011
The directors present their report with the audited Group financial statements
for the year ended 31 March 2011.
Principal activities and review of business
The principal activity of the Group is investment directly and indirectly in,
and operation of, mining exploration and development projects. The Group is
comprised of the Toledo Mining Corporation plc ("the Company"), its subsidiaries
and associated undertakings.
During the year, the Group's main undertaking was the continuing development of
the Berong nickel project, in which the Company has a 56.1% economic interest
and the Ipilan nickel project, in which the Company has a 52% economic interest.
Loss before taxation for the year was £4,377,343 (2010: £1,982,823) and basic
loss per share including share of associated results was 10.16 pence (2010:
4.74 pence).
During the year, the Company incurred a large foreign exchange translation loss,
principally arising on the re-translation of loan investments and receivables
held at the balance sheet date. The loan investments are denominated in US
Dollars and the exchange loss arose on the unfavourable movement of the US
Dollar to the British Pound. The total foreign exchange translation loss for the
year was £905,973 (2010: loss £693,255).
The Company has continued to advance its pro-rata share of funds as required to
meet the ongoing development costs at Berong. The loan to Berong Nickel
Corporation (BNC) has been advanced as an interest-free, unsecured loan and has
no fixed terms of repayment.
Under the terms of loan agreements entered into with Atlas Consolidated Mining
and Development Corporation (ACMDC) and Brooks Nickel Ventures Inc (Brooks) to
fund their shares of required ongoing development costs respectively at Berong
and Ipilan, the Company advanced US$177,369 to ACMDC (2010: nil) and
US$1,140,000 to Brooks (2010: US$845,146) during the year. On 4 July 2011 the
Company and ACMDC reached an agreement for ACMDC to repay by 30 September 2011
the amount of US$4,449,880 in full and final settlement of ACMDC loan, resulting
in a charge of $1,197,893 (£746,767) included in the loss before taxation for
the year.
Details of these loan agreements and the ACMDC settlement are contained in note
13 to the financial statements.
The Berong mine remained on care and maintenance throughout the year. No
shipments were made to year end. In May 2011, the mine was returned to
production and direct ore shipments resumed.
The Company continued legal action on behalf of BNC against Queensland Nickel
Pty arising from the attempted cancellation of ore shipments and failure to meet
the contractual minimum 300,000 wmt annual offtake through to 2012.
On 24 December 2010, the Company raised £1.9 million after costs from the
placing of 8,307,000 ordinary shares at £0.23 each. By dilution, European Nickel
PLC reduced its equity interest in the Company from 7.7% to 6.4%, while
maintaining its 18.7 % direct interest in BNC, owner of the Berong nickel mine
and project. Immediately following the placing, Daintree's holding was decreased
by dilution to 22.01%. Fevamotinico SARL increased their holding to 20.18%, and
Mr J Cropper increased his holding to 6.67%.
Further details of the Company's activities for the year are set out in the
Chairman's statement and in the Chief Executive Officer's review.
Key performance indicators
2011 2010
Revenue growth/ decline) 26% (70)%
Loss before taxation £4,377,343 £1,982,823
Loss per share - basic
- including share of associates' results 10.16 pence 4.74 pence
- excluding share of associates' results 7.32 pence 2.43 pence
Results and dividends
The loss for the year from ordinary activities before tax amounted to £4,377,343
(2010: £1,982,823). The directors do not recommend the payment of a dividend.
Share capital
Details of share capital are given in note 20 to the financial statements.
Risk management
See note 29 to the financial statements.
Future developments
The directors anticipate the Company's major future developments will revolve
around further investment in and development of the Berong and Ipilan nickel
projects. In particular, the Company is executing an exploration programme at
Berong to prove up resources sufficient to support value-adding processing
projects. The mining at Berong will continue along with the direct ore shipping,
which recommenced in May 2011, being supplied from the existing JORC delineated
reserves. At the same time, we continue to evaluate and progress strategic
value-added processing opportunities for the entire resource managed by the
Company.
Principal risks and uncertainties facing the Group
The principal risks faced by the Group are as follows:
* The Company's ability to raise sufficient funds through the issue of equity
or debt in order to continue to fund its share of the Group's planned
exploration costs and other operating expenditure.
* The exploration for and development of mineral deposits involves significant
risks, which even a combination of careful evaluation, experience and
knowledge may not eliminate. There can be no guarantee that the estimates of
quantities and grades of minerals disclosed will be available to extract.
With all mining operations there is uncertainty and, therefore, risk
associated with operating parameters and costs resulting from the scaling up
of extraction methods tested in pilot conditions.
* Non-repayment of significant loans advanced and recovery of interest
accrued.
* The operations of the Group may be disrupted by a variety of risks and
hazards which are beyond the control of the Group. These may include
geological, geotechnical and seismic factors, environmental hazards,
industrial accidents, occupational and health hazards, technical failures,
labour disputes, unusual or unexpected rock formations, flooding and
extended interruptions due to inclement or hazardous weather conditions,
explosions and other acts. These risks and hazards could also result in
damage to, or destruction of, production facilities, personal injury,
environmental damage, business interruption, monetary losses and possible
legal liability.
* The Group's future success is substantially dependent on the continued
services and performance of its key personnel. Their loss or the inability
to recruit personnel of the appropriate calibre could have a significant
adverse effect on the business of the Group.
* The selling price of the nickel ore produced by the Group's operations
varies in line with movements of the price of nickel as quoted on the London
Metal Exchange.
* Some or all of the operating and exploration licences issued in respect of
the projects may be subject to conditions which, if not satisfied, may lead
to the revocation of such licences.
* The Group may have minority interests in the companies, partnerships and
ventures in which it invests and may be unable to exercise control over the
operations of such companies.
* The operations of the Group are located in the Philippines where there may
be a number of associated risks over which it will have no control. These
may include economic, social or political instability or change, terrorism,
hyperinflation, currency non-convertibility or instability, changes of laws
affecting foreign ownership, government participation, taxation, working
conditions, rates of exchange, exchange control, and exploration licensing.
* The Group's total return and net assets can be significantly affected by
currency movements.
Directors and their interests
The directors who served during the year and their interests in the Company's
ordinary shares were as follows:
5p ordinary shares
At 31 March 2011 At 31 March 2010
R Eccles 50,000 50,000
F Pole (1) (Resigned 30 June 2011) 20,000 20,000
S Purkiss - -
C Thanassoulas - -
J Cheng (2) 10,972,250 9,972,250
V Kolesnikov (Appointed 1 February 2011) - -
(1) Held by family interests.
(2) J Cheng is a Managing Director and controlling shareholder of Daintree
Resources Ltd.
Directors' remuneration
The remuneration of the Directors during the year was comprised as follows:
Year ended Salary Fees Share- Total Consulting Total
31 March 2011 based emoluments services
payments
£ £ £ £ £ £
R Eccles - 38,400 - 38,400 106,050 144,450
F Pole - 26,400 - 26,400 43,000 69,400
S Purkiss - 24,000 - 24,000 - 24,000
C Thanassoulas - 26,400 - 26,400 34,000 60,400
J Cheng - 24,000 - 24,000 - 24,000
V Kolesnikov 18,333 2,000 - 20,333 12,000 32,333
------------------------------------------------------
18,333 141,200 - 159,533 195,050 354,583
Year ended Salary Fees Share- Total Consulting Total
31 March 2010 based emoluments services
payments
£ £ £ £ £ £
R Eccles - 34,800 29,400 64,200 79,300 143,500
F Pole - 25,200 29,400 54,600 58,800 113,400
S Purkiss - 24,600 - 24,600 10,800 35,400
C Thanassoulas - 25,200 - 25,200 22,600 47,800
J Cheng - 17,400 - 17,400 - 17,400
------------------------------------------------------
- 127,200 58,800 186,000 171,500 357,500
The share-based payments arose on options granted to Directors on 14 September
2009.
No options were granted to the directors during the year. Directors' options at
31 March 2011 and 2010 were:
Director Grant Date Number Exercise Price Vesting Date Expiring Date
R Eccles 14/09/2009 150,000 50p 14/09/2009 14/09/2012
F Pole 14/09/2009 150,000 50p 14/09/2009 14/09/2012
Note
1. At the discretion of the Board, Mr Pole's share options will not expire 90
days after his resignation on 30 June 2011 but will continue to vest until
their full expiry date.
Events since the balance sheet date
Subsequent to 31 March 2011:
The Company has advanced a further:
* £68,700 (as US$112,200) to Berong Nickel Corporation as an interest-free,
unsecured advance under the Berong Venture Agreement;
* £317,329 (as US$520,000) to Brooks Nickel Ventures Inc. to meet that
company's share of Ipilan project expenditure.
* £248,433 (as US$400,000) to Berong Nickel Corporation as an interest-free
bridging loan for short-term working capital. The bridging loan was repaid
in full on 1 August 2011.
* The Company received:
* £121,552 (as US$195,000) from China Nickel Corporation as an interest free
loan. The loan was repaid in full on 29 July 2011.
On 4 July 2011, the Company and ACMDC reached an agreement for ACMDC to repay by
30 September 2011 the amount of US$4,449,880 in full and final settlement of
ACMDC loan. The first of three staged repayments, in the amount of US$1,500,000,
was received by the Company on 29 July 2011. Details of the financial impact of
this settlement are set out in note 13.
Substantial shareholdings
At 19 August 2011, the following shareholders held 3% or more of the issued
share capital of the Company:
Number of Percentage issued
ordinary shares ordinary shares
Daintree Resources Limited 10,972,250 22.01%
Fevamotinico SARL 10,060,000 20.18%
J Cropper 7,966,771 15.98%
European Nickel plc 2,501,019 5.02%
Barclays Wealth (retail) 1,562,989 3.13%
Corporate governance
As Toledo Mining Corporation plc is not a fully listed company, it is not
required to comply with the Code of Best Practice published by the Committee on
the Financial Aspects of Corporate Governance ("the Combined Code"). However,
the directors do place a high degree of importance on ensuring that high
standards of corporate governance are maintained. As a result, most of the
relevant principles set out in the Combined Code have been adopted during the
period and these are summarised below.
Directors
The Company supports the concept of an effective Board leading and controlling
the Company. The Board is responsible for approving the Company's policies and
strategies. It meets frequently and receives and reviews, on a timely basis,
financial and operating information appropriate to being able to discharge its
duties. Directors are free to seek any further information they consider
necessary. All directors submit themselves for re-election every three years by
rotation in accordance with the Articles of Association. All new appointments to
the Board are subject to resolution of the shareholders at the following Annual
General Meeting.
Relations with shareholders
The Company values the views of its shareholders and recognises their interest
in the Company's strategy and performance. The Board is available to discuss
current events with its institutional and private shareholders and positively
encourages attendance at General Meetings.
Audit Committee
The Company has established an audit committee comprised of the non-executive
directors. It is responsible for making recommendations to the Board on the
appointment of auditors and the audit fee. It is also responsible for ensuring
that the financial performance of the Company is properly monitored and reported
on, and receives and reviews reports from management and the auditors relating
to the interim report, the annual report and accounts, and the internal control
systems of the Company.
Nomination Committee
This committee was responsible for overseeing the selection and appointment of
directors. The committee makes recommendations to the Board on the appropriate
skill mix, personal qualities, expertise and diversity of each position. With
effect from 1 July 2011, the function of the Nomination Committee has been
incorporated into the scope of the Remuneration Committee.
Remuneration Committee
The Company has established a remuneration committee comprised of the non-
executive directors. It is responsible for the review and recommendation of the
scale and structure of remuneration for key management personnel, including any
bonus arrangements or the award of share options. Details of the directors'
emoluments are set out in the financial statements. However, there is no
separate Report of the Remuneration Committee. It is the Company's policy that
the remuneration of directors should be commensurate with services provided by
them to the Company.
Internal financial control and risk management
The directors are responsible for the Company's system of internal financial
control and also for identifying the major business risks faced by the Company.
The system of internal financial control is designed to provide reasonable, but
not absolute, assurance against material misstatement or loss. In fulfilling
these responsibilities, the Board has reviewed the effectiveness of the system
of internal financial control. The directors have established procedures for
planning, budgeting and for monitoring, on a regular basis, the performance of
the Company and for determining the appropriate course of action to manage any
major business risks. The Board has considered the need for an internal audit
function but has decided the size of the Company does not justify it at present.
This decision will be reviewed annually.
Supplier payment policy
It is the Company's policy to agree terms of payment with all suppliers at the
time of the transaction, and to pay suppliers as and when they fall due for
payment or alternatively to agree revised terms of payment. No distinction is
made between different classes of suppliers. At the year end, trade payables
amounted to 21 days (2010: 18 days).
Political and charitable donations
No political or charitable donations were made during the year.
Indemnity provision
Directors and Officers insurance is in place to indemnify the directors against
liabilities arising from the discharge of their duties as directors of the
Company.
Auditors
Length of service of audit assignment partner
W K Sawin has been the audit assignment partner for six years. Under APB Ethical
Standard 3, the audit partner should be rotated after five years but may
continue for a sixth year in cases where changes and developments within the
company make a change of audit partner inadvisable at that time. The audit
committee fully endorsed the one-year extension on the understanding that a
rotation of audit partner takes place before the next annual audit.
Reappointment of auditors
Sawin & Edwards have indicated their willingness to continue in office. A
resolution to reappoint as auditors Sawin & Edwards for the ensuing year will be
proposed at the 2011 Annual General Meeting.
By order of the Board:
Reginald Eccles
Chairman
24 August 2011
Statement of directors' responsibilities
For the year ended 31 March 2011
The directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law, the directors have elected to prepare the
financial statements in accordance with International Financial Reporting
Standards and applicable law. The financial statements are required by law to
give a true and fair view of the state of affairs of the Company and Group and
of the profit or loss of the Group for that period. In preparing those financial
statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently
b. make judgments and estimates that are reasonable and prudent
c. state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements
d. prepare the financial statements on the going concern basis, unless it is
inappropriate to presume that the Company and Group will continue in
business.
The directors are responsible for keeping adequate accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The directors confirm that so far as they are aware, there is no relevant audit
information (as defined by section 418(3) of the Companies Act 2006) of which
the Company's auditors are unaware. They have taken all the steps that they
ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the Company's auditors are
aware of that information.
Independent auditors' report
To the shareholders of Toledo Mining Corporation plc
We have audited the financial statements of Toledo Mining Corporation plc for
the year ended 31 March 2011 which comprise the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the Consolidated and Company
Balance Sheets, the Consolidated and Company Statements of Changes in Equity,
the Consolidated and Company Cash Flow Statements and the related notes numbered
1 to 31. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and as regards the parent Company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibility Statement set out on
page 19, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's Ethical
Standards for Auditors
Scope of the audit
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of whether the accounting policies are
appropriate to the Group's and the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the
financial statements. In addition we read all the financial information and non-
financial information in the Annual Report to identify material inconsistencies
with the audited Financial Statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our
report.
Opinion
In our opinion:
* the financial statements give a true and fair view of the state of the
Group's and the parent Company's affairs as at 31 March 2011 and of the
Group's loss for the year then ended;
* the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
* the parent Company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; and
* the financial statements have been prepared in accordance with the Companies
Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors' report for the financial
year for which the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
* adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
* the Company's financial statements are not in agreement with the accounting
records and returns; or
* certain disclosures of directors' remuneration specified by law are not
made; or
* we have not received all of the information and explanations we require for
our audit.
Witold K Sawin (Senior Statutory Auditor) 15 Southampton Place
For and on behalf of Sawin & Edwards, London
Statutory Auditors WC1A 2AJ
24 August 2011
Consolidated income statement
For the year ended 31 March 2011
Year Year
ended ended
31 March 2011 31 March 2010
Notes £ £
Revenue 3 457,949 362,098
Gross profit 457,949 362,098
Administration expenses (2,023,351) (1,567,371)
Foreign exchange losses (946,775) (693,255)
Other operating income 153,179 92,711
Unrealised losses on non-current investments 12,13 (1,619,527) -
Share of results of associates (1,225,830) (863,997)
Loss from operations 4 (5,204,355) (2,669,814)
Investment income 8 ___827,012 686,991
Loss before taxation (4,377,343) (1,982,823)
Income tax credit 8 ________ - 198,100
Loss for the year (4,377,343) (1,784,723)
Attributable to:
Equity holders of the parent (4,388,197) (1,772,838)
Minority interest 10,854 (11,885)
___ _____ __________
(4,377,343) (1,784,723)
Loss per share in pence - including share of
associates' results
Basic 9 (10.16) (4.74)
Diluted 9 (10.16) (4.74)
Loss per share in pence - excluding share of
associates' results
Basic 9 (7.32) (2.43)
Diluted 9 (7.32) (2.43)
The Company has taken advantage of section 408 of the Companies Act 2006 not to
publish its own income statement account.
Consolidated statement of comprehensive income
For the year ended 31 March 2011
Year Year
ended ended
31 March 2011 31 March 2010
£ £
(Loss)/profit for the year (4,377,343) (1,784,723)
Foreign currency translation differences
for foreign operations 55,551 (57,799)
Other comprehensive (expense)/ income _ ______ ________
for the year 55,551 (57,799)
Total comprehensive (expense)/income _________ _________
for the year (4,321,792) (1,842,522)
Attributable to:
Equity holders of the parent (4,357,033) (1,810,097)
Minority interest 35,241 (32,425)
________ _________
(4,321,792) (1,842,522)
Consolidated balance sheet
As at 31 March 2011
31 March 2011 31 March 2010
Notes £ £
ASSETS
Non-current assets
Property, plant and equipment 10 1,184 281
Investment in associated undertakings 12 8,435,801 10,409,711
Loans and receivables 13 16,127,408 14,451,634
Trade and other receivables 14 ____ - 40,036
Total non-current assets 24,564,393 24,901,662
Current assets
Trade and other receivables 15 964,934 901,623
Taxation 16 11,741 211,512
Cash and cash equivalents 17 1,877,242 3,916,603
Total current assets 2,853,917 5,029,738
_________ _________
TOTAL ASSETS 27,418,310 29,931,400
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 18 678,396 682,392
Taxation 19 __ 11,772 -
Total current liabilities 690,168 682,392
________ _________
Total liabilities 690,168 682,392
Equity
Share capital 20 2,492,267 2,076,917
Share premium account 21 28,714,157 27,218,897
Share-based payments reserve 22 193,801 233,183
Translation reserve 78,806 109,970
Retained (loss)/profit (5,133,449) (786,052)
Equity attributable to equity holders of
the parent 26,345,582 28,852,915
Minority interest 23 ___382,560 396,093
Total equity 26,728,142 29,249,008
TOTAL EQUITY AND LIABILITIES 27,418,310 29,931,400
The financial statements were approved by the Board of directors on 24 August
2011 and signed on their behalf by:
R Eccles
Director
Company balance sheet
As at 31 March 2011
31 March 2011 31 March 2010
Notes £ £
Assets
Non-current assets
Property, plant and equipment 10 1,184 281
Investment in subsidiary undertaking 11 10,286 10,286
Investment in associated undertakings 12 9,122,027 9,870,107
Loans and receivables 13 16,127,408 14,451,634
Trade and other receivables 14 - 40,036
Total non-current assets 25,260,905 24,372,344
Current assets
Trade and other receivables 15 81,035 43,549
Taxation 16 11,741 211,512
Cash and cash equivalents 17 1,859,271 3,852,581
Total current assets 1,952,047 4,107,642
Total assets 27,212,952 28,479,986
Equity and liabilities
Current liabilities
Trade and other payables 18 657,966 672,561
Taxation 19 11,772 -
Total current liabilities 669,738 672,561
Total liabilities 669,738 672,561
Equity
Share capital 20 2,492,267 2,076,917
Share premium account 21 28,714,157 27,218,897
Share based payments reserve 22 193,801 233,183
Retained loss (4,857,011) (1,721,572)
Equity attributable to equity holders of the
parent 26,543,214 27,807,425
Total equity 26,543,214 27,807,425
TOTAL EQUITY AND LIABILITIES 27,212,952 28,479,986
The financial statements were approved by the Board of directors on 24 August
2011 and signed on their behalf by:
R Eccles
Director
Toledo Mining Corporation plc Company number 5055833
Consolidated statement of changes in equity
For the year ended 31 March 2011
Share- Trans-
based Retained lation
31 March 2011 Share Share payments profit/ Minority exchange
capital premium reserve (loss) interest reserve Total
£ £ £ £ £ £ £
Balance at 1
April 2010 2,076,917 27,218,897 233,183 (786,052) 396,093 109,970 29,249,008
Total
comprehensive
expense for
the year
Profit/(loss) - - - (4,388,197) 10,854 - (4,377,343)
Total other
comprehensive
expense - - - - (24,387) (31,164) (55,551)
________ _______ ________ _________ ________ ________ ________
Total
comprehensive
expense for
the year - - - (4,388,197) (13,533) (31,164) (4,432,894)
Transactions
with
owners
Issue of new
shares 415,350 1,495,260 - - - - 1,910,610
Transfer from
reserve - - (40,800) 40,800 - - -
Share options
granted in
year - - 1,418 - - - 1,418
------------------------------------------------------------------------
Balance at
31 March 2011 2,492,267 28,714,157 193,801 (5,133,449) 382,560 78,806 26,728,142
Consolidated statement of changes in equity (continued)
For the year ended 31 March 2011
Share- Trans-
based Retained lation
31 March 2010 Share Share payments profit/ Minority exchange
capital premium reserve (loss) interest reserve Total
£ £ £ £ £ £ £
Balance at 1
April 2009 1,476,917 24,570,675 307,899 795,810 433,352 142,395 27,727,048
Total
comprehensive
expense for
the year
Loss - - - (1,772,838) (11,885) - (1,784,723)
Total other
comprehensive
expense - - - - (25,374) (32,425) (57,799)
________ _______ ________ _________ ________ ________ ________
Total
comprehensive
expense for
the year - - - (1,772,838) (37,259) (32,425) (1,842,522)
Transactions
with
owners
Issue of new
shares 600,000 2,648,222 - - - - 3,248,222
Transfer from
reserve - - (190,976) 190,976 - - -
Share options
granted in
year - - 116,260 - - - 116,260
-------------------------------------------------------------------------
Balance at
31 March 2010 2,076,917 27,218,897 233,183 (786,052) 396,093 109,970 29,249,008
Company statement of changes in equity
For the year ended 31 March 2011
Share- based
31 March 2011 Share Share payments Retained
capital premium reserve loss Total
£ £ £ £ £
Balance at 1 April
2010 2,076,917 27,218,897 233,183 (1,721,572) 27,807,425
Total comprehensive
expense for the year
Loss - - - (3,176,239) (3,176,239)
Transactions with
owners
Issue of new shares 415,350 1,495,260 - - 1,910,610
Transfer from reserve - - (40,800) 40,800 -
Share options granted
in year - - 1,418 - 1,418
----------------------------------------------------------
Balance at 31 March
2011 2,492,267 28,714,157 193,801 (4,857,011) 26,543,214
Company statement of changes in equity (continued)
For the year ended 31 March 2011
Share- based
31 March 2010 Share Share payments Retained
capital premium reserve loss Total
£ £ £ £ £
Balance at 1 April 2009 1,476,917 24,570,675 307,899 (1,018,895) 25,336,596
Total comprehensive
expense for the year
Loss - - - (893,653) (893,653)
Transactions with
owners
Issue of new shares 600,000 2,648,222 - - 3,248,222
Transfer from reserve - - (190,976) 190,976 -
Share options granted
in year - - 116,260 - 116,260
---------------------------------------------------------
Balance at 31 March
2010 2,076,917 27,218,897 233,183 (1,721,572) 27,807,425
Consolidated cash flow statement
For the year ended 31 March 2011
Year Year
ended ended
31 March 2011 31 March 2010
Notes £ £
Net cash outflow from operating activities 24 (1,454,070) (1,291,874)
Investing activities
Investment income 17,813 22,560
Investments (124,680) -
Loan investments advanced (2,586,390) (747,723)
_________ _________
Net cash outflow from investing activities (2,693,257) (725,163)
Financing activities
Issue of equity share capital 1,910,610 3,248,222
________ _________
Net cash inflow from financing activities 1,910,610 3,248,222
Taxation
Refund/(payment) of corporation tax 197,356 (197,356)
________ ________
Net increase/(decrease) in cash and cash
equivalents (2,039,361) 1,033,829
Cash and cash equivalents at 1 April 3,916,603 2,882,774
________ _________
Cash and cash equivalents at 31 March 17 1,877,242 3,916,603
Company cash flow statement
For the year ended 31 March 2011
Year Year
ended ended
31 March 2011 31 March 2010
Notes £ £
Net cash outflow from operating activities 24 (1,408,019) (1,185,417)
Investing activities
Investment income 17,813 22,560
Investments (124,680) -
Loan investments advanced (2,586,390) (747,723)
_________ _________
Net cash outflow from investing activities (2,693,257) (725,163)
Financing activities
Issue of equity share capital 1,910,610 3,248,222
________ ________
Net cash inflow from financing activities 1,910,610 3,248,222
Taxation
Refund/(payment) of corporation tax 197,356 (197,356)
________ ________
Net increase/(decrease) in cash and cash
equivalents (1,993,310) 1,140,286
Cash and cash equivalents at 1 April 3,852,581 2,712,295
________ ________
Cash and cash equivalents at 31 March 17 1,859,271 3,852,581
Notes to the financial statements
For the year ended 31 March 2011
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 Ground Floor,
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 are
admitted for trading.
The Board of directors has authorised the issue of these financial statements on
the date of the statement as set out on page 18.
2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs).
The financial statements have been prepared on the historical cost basis except
that certain financial instruments are accounted for at fair values. The
principal accounting policies adopted are set out below.
New standards applied
The Group has applied the following relevant standards which are effective for
annual reporting periods beginning on or after 1 April 2010.
IFRS 2 (revised) Share-based payment vesting conditions and
cancellations
IFRS 3 (revised) Business combinations
IFRS 7 Financial instruments - disclosures
IFRS 8 Operating segments
IAS 1 (revised and amended) Presentation of financial statements
IAS 7 (amended) Statement of cash flows
IAS 16 (amended) Property, plant and equipment
IAS 19 (amended) Employee benefits
IAS 23 (revised and amended) Borrowing costs
IAS 27 (amended) Consolidated and separate financial statements
IAS 28 (amended) Investments in associates
IAS 32 (amended) Financial instruments - presentation
IAS 36 (amended) Impairment of assets
IAS 38 (amended) Intangible assets
IAS 39 (amended) Financial instruments- recognition and measurement
The adoption of these standards did not have a material impact on the Group and
Company's financial position or performance. IAS 1 (revised) resulted in a
change in the manner in which the statements are presented.
New standards not applied
The IASB has issued the following relevant standards which are not yet effective
and have not been adopted early for these financial statements:
IFRS 3 (amended) Business combinations, effective date 1 July 2010
IFRS 7 (amended) Disclosures, effective date 1 January 2011
IFRS 9 Financial Instruments, effective date 1 January 2013
IAS 1 (amended) Presentation of financial statements, effective date 1 January
2011
IAS 24 (revised) Related party disclosure, effective date 1 January 2011
IAS 27 (amended) Consolidated and separate financial statements, effective date
1 July 2010
IAS 34 (amended) Interim financial reporting, effective date 1 January 2011
The directors do not anticipate that adoption of these standards will have a
material impact on the Group and Company's financial position or performance.
Going concern
The financial statements have been prepared on a going concern basis, which
contemplates continuity of normal business activities and the realisation of
assets and settlement of liabilities in the ordinary course of business.
The Directors believe that it is appropriate to prepare the financial report on
a going concern basis as they are confident that the Company will be able to
raise additional funds through further debt or equity raisings when required.
The Directors are of the opinion that the proposed debt or equity raising
measures and the existing cash resources will provide sufficient funds to enable
the Company to continue its operations for at least the next 12 months.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and all Group undertakings. Control is achieved when the Company has
the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair value of the identifiable net
assets acquired is recognised as goodwill.
Any deficiency of the cost of acquisition below the fair value of the
identifiable net assets acquired (i.e. discount on acquisition) is credited to
the income statement in the period of acquisition. The interest of minority
shareholders is stated at the minority's proportion of the fair values of the
assets and liabilities recognised. Subsequently, any losses applicable to the
minority interest in excess of the minority interest are allocated against the
interests of the parent.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
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.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Investments in associates
An associate is an entity over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation
in the financial and operating policy decisions of the investee.
The results and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting. Investments in
associates are carried in the balance sheet at cost as adjusted by post-
acquisition changes in the Group's share of the net assets of the associate,
less any impairment in the value of individual investments. Losses of the
associates in excess of the Group's interest in those associates are not
recognised.
Where a Group company transacts with an associate of the Group, unrealised
profits and losses are eliminated to the extent of the Group's interest in the
relevant associate. Losses may provide evidence of an impairment of the asset
transferred in which case appropriate provision is made for impairment.
The Group and its associated undertakings have complied with the requirements of
IFRS 6 Exploration for and evaluation of mineral resources.
Upon commencement of commercial production operation of a mining property, the
investment in the associate company relating to that property is amortised on
the basis of ore body extracted as a proportion of the ore body estimate of that
property.
Revenue recognition
Revenue and other operating income represent the provision of consultancy,
management and office services for the year.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Losses on current asset investments represent realised and unrealised losses.
Foreign currencies
Transactions in currencies other than pounds sterling are recorded at the rates
of exchange prevailing on the dates of the individual transactions. For
practical reasons, a rate that approximates to the actual rate at the date of
the transaction is often used. At each balance sheet date, assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Gains and losses arising on
retranslation are included in net profit or loss for the period.
On consolidation, the assets and liabilities of the Group's overseas operations
are translated at exchange rates prevailing on the balance sheet date. 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. Such translation differences are recognised as income or as expenses in
the period in which the operation is disposed of.
The following rates of exchange have been applied:
2011 2010
1 US Dollar to 1 British Pound
Closing rate 0.6234 0.6637
Average rate 0.6433 0.6276
1 Philippine Peso to 1 British Pound
Closing rate 0.0144 0.0147
Average rate 0.0144 0.0135
Taxation
The income tax expense represents the sum of the tax currently payable and
deferred tax. The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the income
statement, because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the original recognition of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
No recognition has been made for the deferred tax asset arising in respect of
current losses as the directors are of the opinion that this may not be
realisable in the foreseeable future.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the Company becomes a party to the contractual provisions of the
instrument.
Non-current intangible assets
Non-current intangible assets are shown at cost less any provisions made in
respect of impairment.
Asset impairments
Assets are reviewed for impairment at each balance sheet date or if events or
changes in circumstances indicate that the carrying amount may not be
recoverable. When a review is conducted, the recoverable amount is assessed by
reference to the net present value of expected future cash flows of the relevant
income generating unit or disposal value, if higher.
If an asset is impaired, a provision is made to reduce the carrying amount to
its estimated recoverable amount.
Non-current asset investments
Loan investments are shown at cost less provision for any permanent diminution
in value. Loan investments are recognised as an asset when sums are advanced.
Property, plant and equipment
Office equipment and furniture are shown at cost less accumulated depreciation
and any recognised impairment loss. Depreciation is charged so as to write off
the cost of assets over their estimated useful lives, using the straight line
method on the following basis:
Office furniture and fittings 33% - 50%
Computer and office equipment 33% - 100%
Cash and cash equivalents
Cash and cash equivalents comprise cash held at bank and on short term deposits.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
Investments
Investments are recognised and derecognised on a trade date where a purchase or
sale of an investment is under a contract whose terms require delivery of the
investment within the timeframe established by the market concerned, and are
initially measured at cost, including transaction costs.
Investments are classified as held-for-trading and are measured at subsequent
reporting dates at fair value. Where securities are held for trading purposes,
gains and losses arising from changes in fair value are included in net profit
or loss for the period.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received
except where those proceeds appear to be less than the fair value of the equity
instruments issued, in which case the equity instruments are recorded at fair
value. The difference between the proceeds received and the fair value is
reflected in the share based payments reserve.
The costs of issuing new equity are charged against the share premium account.
Operating leases
Rental costs under operating leases are charged to the income statement on a
straight line basis over the term of the lease. Where an incentive to sign the
lease has been taken, the incentive is spread on a straight line basis over the
lease term.
Pension costs
The Company makes defined contributions to the independent pension scheme of its
employees.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payments.
The Group issues equity-settled share-based payments to directors, staff and
certain professional advisors of the Group. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair value determined at
the grant date of the equity-settled share-based payment is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest.
Fair value is measured using a Black-Scholes model. The expected life used in
the model has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions, and behavioural
considerations.
Critical accounting judgments and key sources of estimation uncertainty
In the process of applying the Group's accounting policies above, management
necessarily makes judgments and estimates that have a significant effect on the
amounts recognised in the financial statements. Changes in the assumptions
underlying the estimates could result in a significant impact to the financial
statements. The most critical of these accounting judgment and estimation areas
are as follows:
Impairment of assets
The Group reviews the carrying amounts of assets as at each balance sheet date,
or if events or changes in circumstance indicate that the carrying amount may
not be recoverable, to determine whether there is any indication of impairment.
If any such indication exists, the asset's recoverable amount or value in use is
estimated. Determining the value in use requires the determination of future
cash flows expected to be generated from the continued use and ultimate disposal
of the asset. This requires the Company to make estimates and assumptions that
can materially affect the financial statements. Any resulting impairment loss
could have a material adverse impact on the Group's financial position and
results of operations.
3. Segmental analysis
The turnover and loss before tax are attributable to the principal activities of
the Group.
Segmental information on a geographical basis is set out below:
Year ended 31 March 2011
UK Philippines China Total
£ £ £ £
Revenue
7,299 - 450,650 457,949
Profit/(loss) for the year
(3,176,239) - 24,725 (3,151,514)
Share of associates' results
- (1,225,830) - (1,225,830)
Depreciation/amortisation
_______612 - - _______612
Total assets 1,045,018 25,471,424 __901,868 27,418,310
Total liabilities _
233,358 __436,380 20,429 ___ 690,168
Loan investment additions
- 1,800,454 - 1,800,454
Year ended 31 March 2010
UK Philippines China Total
£ £ £ £
Revenue 6,380 - 355,718 362,098
Loss for the year (893,653) - (27,073) (920,726)
Share of associates' results - ( 863,997) - (863,997)
Depreciation 1,348 - - 1,348
Total assets 4,147,678 24,861,626 922,096 29,931,400
Total liabilities 207,971 464,590 9,831 682,392
Loan investment additions - 1,410,568 - 1,410,568
Details of associated companies' results are shown in note 30.
4. Loss from operations
Loss from operations is stated after charging:
Year ended Year ended
31 March 2011 31 March 2010
£ £
Auditors remuneration:
-auditing of the financial statements of the Company
pursuant to legislation 48,490 43,690
- as reporting accountants - 18,750
- taxation compliance 1950 820
Audit fees - other auditor 24,316 15,067
Operating lease - office rent 69,186 69,186
Foreign exchange losses 946,775 693,255
Directors' fees and emoluments (see note 6) 159,533 247,205
Depreciation 612 __1,348
5. Particulars of employees
The average number of staff employed by the Group during the financial year
amounted to:
Year ended Year ended
31 March 2011 31 March 2010
No. No.
Administrative staff 1 2
The aggregate costs of the above were:
£ £
Wages and salaries 29,664 43,404
Social security costs 4,450 (1,115)
Share based payments 1,418 57,640
______ ______
35,532 99,929
Share-based payments charge relates to share options granted during the year to
management and employees of TMM Management Inc in the Philippines.
6. Directors' emoluments and fees
The Company also employed six (2010: five) directors during the year with
aggregate emoluments in respect of qualifying services as follows:
Year ended Year ended
31 March 2011 31 March 2010
£ £
Directors' emoluments 42,333 25,200
Directors' fees 54,800 42,600
Amounts paid to third parties for the provision of
directors' services 62,400 59,400
Share-based payments and related costs - 58,800
______ ______
159,533 186,000
£ £
Highest paid director 38,400 64,200
Amounts paid in respect of professional consulting services are not included
above. These are disclosed in the report of the directors on page 15 and the
related party transactions note 26 discloses the full amounts paid to directors
directly and to third parties, for directors' fees, consulting fees and
expenses.
7. Investment income
Year ended Year ended
31 March 2011 31 March 2010
Group Group
£ £
Interest on bank deposits 17,813 24,146
Interest on loan investments 809,199 662,845
_______ ______
827,012 686,991
8. Income tax expense
Group Group
Year ended Year ended
31 March 2011 31 March 2010
£ £
Taxation credit - 198,100
Current tax reconciliation
Loss for the year before taxation (4,377,343) (1,982,823)
Group Group
Year ended Year ended
31 March 2011 31 March 2010
£ £
Loss for the year multiplied by standard
rate of UK corporation tax 28% (1,225,656) (555,190)
Effects of:
Expenses not deductible for tax purposes 454,584 16,624
Excess of capital allowance over depreciation (3,655) (4,299)
Overseas loss/(profit) (6,923) 7,581
Share of associates' results 343,232 241,919
Increase in potential tax credits 438,418 95,265
________ _______
Tax credit _______- (198,100)
Potential UK tax credits available multiplied by
standard rate of corporation tax 28% 818,527 217,296
No recognition has been made of the deferred tax asset in respect of the losses
shown above as the directors are of the opinion that this may not be realisable
in the foreseeable future.
9. Loss per share
Including share of associates' results
Loss per share has been calculated by dividing the loss for the year after
taxation including share of associates' losses of £1,225,830 (2010: £863,997)
attributable to the equity holders of the parent company of £4,388,197 (2010:
£1,772,838) by the weighted average number of shares in issue at the year end
of 43,176,974 (2010: 37,439,972).
Diluted loss per share has been calculated using the weighted average number of
shares in issue at the year end, diluted for the effect of share options in
existence at the year end of 665,000 (2010: 790,000).
Excluding share of associates' results
Loss per share has been calculated by dividing the loss for the year after
taxation excluding share of associates losses of £1,225,830 (2010: £863,997)
attributable to the equity holders of the parent company of £3,162,367 (2010:
£908,841) by the weighted average number of shares in issue at the year end of
43,176,974 (2010: 37,439,972).
Diluted loss per share has been calculated using the weighted average number of
shares in issue at the year end, diluted for the effect of share options in
existence at the year end of 665,000 (2010: 790,000).
10. Property, plant and equipment
Company and Group
Computer and Furniture, fixtures Total
office equipment and fittings
£ £ £
Cost
Balance at 1 April 2010 39,986 38,105 78,091
Additions in year 1,515 - 1,515
_____ _____ _____
Balance at 31 March 2011 41,501 38,105 79,606
Depreciation
Balance at 1 April 2010 39,705 38,105 77,810
Charge for the year 612 - 612
_____ _____ _____
Balance at 31 March 2011 40,317 38,105 78,422
Net book value
At 31 March 2011 1,184 _____- 1,184
At 31 March 2010 281 _____- 281
Computer and Furniture, fixtures Total
office equipment and fittings
£ £ £
Cost
Balance at 1 April 2009 39,986 38,105 78,091
_____ _____ _____
Balance at 31 March 2010 39,986 38,105 78,091
Depreciation
Balance at 1 April 2009 39,102 37,360 76,462
Charge for the year 603 745 1,348
_____ _____ _____
Balance at 31 March 2010 39,705 38,105 77,810
Net book value
At 31 March 2010 281 - 281
At 31 March 2009 884 745 1,629
11. Investment in subsidiary undertakings
Company 2011 2010
£ £
Cost
Balance brought forward 10,286 10,286
_____ _____
Balance carried forward 10,286 10,286
Subsidiary Country of Holding Proportion of Nature of
undertaking incorporation voting shares business
held
China Nickel British Virgin Ordinary Consultancy
Corporation Islands shares 56.1% Services
China Nickel & British Virgin
Steel Islands Ordinary
Corporation shares 100% Dormant
12. Investment in associated undertakings
Group 2011 2010
£ £
Cost
Balance brought forward 11,005,854 11,869,851
Addition 124,680 -
Share of associate undertakings' results (1,225,830) (863,997)
_________ _________
Balance carried forward 9,904,704 11,005,854
Amortisation/impairment
Balance brought forward 596,143 596,143
Impairment charge 872,760 -
________ ______
Balance carried forward 1,468,903 596,143
Net book value 8,435,801 10,409,711
Company 2011 2010
£ £
Cost
Balance brought forward 10,466,250 10,466,250
Addition 124,680 -
Balance carried forward 10,590,930 10,466,250
Amortisation/impairment
Balance brought forward 596,143 596,143
Impairment charge 872,760 -
________ _______
Balance carried forward 1,468,903 596,143
Net book value 9,122,027 9,870,107
13. Loans and receivables
Company and Group 2011 2010
£ £
Balance brought forward 14,451,634 13,755,986
Additions 3,395,590 1,410,568
Impairment charge (746,767) -
Translation exchange movement (973,049) (714,920)
Balance carried forward 16,127,408 14,451,634
In April 2006, the Company subscribed for up to US$5 million in a three-year
Loan Note in Atlas Consolidated Mining and Development Corporation (ACMDC),
secured over ACMDC's share of the Berong nickel project. The Note bears interest
at the rate of 10% cumulative per annum and was repayable three years from each
drawdown; it is repayable out of ACMDC's share of the Berong nickel project
cash flow or is convertible into ACMDC shares or repayable in US$ cash (at the
election of the Company).
The principal amount advanced at 31 March 2011 was US$4,967,676 (2010
US$4,803,616). On 7 July 2010, the agreement was amended to extend repayments to
four years from each drawdown. On 4 July 2011 the Company accepted an offer to
settle the Loan Note in the amount of US$4,499,880 to be paid by ACMDC in three
equal instalments at the ends of July, August and September 2011. The first
instalment of US$1,500,000 was received on 29 July 2011. The balance at 31 March
2011 of US$5,693,464 was written down to US$4,499,880, resulting in an
impairment charge for the year of US$1,193,584 (£746,767).
In 2007, the Company entered into an agreement to make a loan facility available
to Brooks Nickel Ventures Inc. (Brooks) of up to US$2.5 million, secured over
Brooks' share of the Ipilan nickel project. This facility was subsequently
increased in 2007 and in 2010 to US$10 million and terms extended from three to
four years from each drawdown, to meet continuing pre-operational exploration
and working capital requirements. The loan bears interest at 10% cumulative per
annum and is repayable out of Brooks' share of the Ipilan nickel project
operating cash flow. The principal amount advanced at 31 March 2011 was
US$9,314,930 (2010: US$8,174,930). At 31 March 2011, amounts totalling
US$3,206,602 made up of principal drawn of US$2,137,421 and accrued interest of
US$1,069,181 were due to be repaid. The Company is in discussions with Brooks in
respect of addressing the repayments falling due.
Company and Group
As repayments are linked to successful commercial exploitation of the Berong and
Ipilan nickel projects respectively, the directors are of the opinion that it
would be impractical to predict when these repayments might occur. The
receivables are therefore shown at historical cost.
Under the Celestial joint venture agreement, the Company has the option to take
a 40% holding in Celestial Nickel Mining and Exploration Corporation (CNMEC). In
August 2007, the board agreed to an advance of US$900,000 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 advance. The advances are interest-free
and guaranteed by CNMEC but are otherwise unsecured. Due to the uncertainty as
to when, or if, the Company will exercise this option, the receivable has been
shown at historical cost.
Under the Berong venture agreement, the Company has advanced funds to Berong
Nickel Corporation (BNC) to meet ongoing mine development costs. The total
amount advanced at 31 March 2011 was US$7,953,005 (2010: US$5,554,181). The loan
amounts advanced are interest-free, unsecured and have no fixed terms of
repayment. As repayments are linked to successful commercial exploitation of
the Berong nickel project, the directors are of the opinion that it would be
impractical to predict when this receivable will be repaid and it is therefore
shown at historical cost.
14. Trade and other receivables - non-current
Company and Group
2011 2010
£ £
Rent deposit - 40,036
15. Trade and other receivables - current
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Trade receivables 903,771 19,872 879,887 21,813
Rent deposit 40,063 40,063 - -
Prepayments and accrued income 21,100 21,100 21,736 21,736
964,934 81,035 901,623 43,549
16. Taxation
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Corporation tax recoverable - - 197,356 197,356
Net payroll taxes recoverable 5,060 5,060 6,314 6,314
VAT recoverable 6,681 6,681 7,842 7,842
______ ______ ______ ______
11,741 11,741 211,512 211,512
17. Cash and cash equivalents
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Cash held in trust bank account 13,381 13,381 14,246 14,246
Cash at bank and in hand 1,863,861 1,845,890 3,902,357 3,838,335
1,877,242 1,859,271 3,916,603 3,852,581
18. Trade and other payables
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Trade payables 98,111 81,419 84,639 74,808
Accruals 143,905 140,167 133,163 133,163
Other payables 436,380 436,380 464,590 464,590
678,396 657,966 682,392 672,561
Other payables relate to the Company's remaining expenditure commitments which
have been capitalised as part of the cost of acquiring the equity interests in
the fixed asset investments as follows:
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Ulugan nickel project 436,380 436,380 464,590 464,590
19. Taxation liabilities
Group Company Group Company
2011 2011 2010 2010
£ £ £ £
Payroll taxes 11,772 11,772 - -
Corporation tax - - - -
______ ______ ______ ______
11,772 11,772 - -
20. Called up share capital
Company and Group
Number £ Number £
Ordinary shares of 5p each 2011 2011 2010 2010
Authorised 55,879,500 2,793,975 55,879,500 2,793,975
Allotted and fully paid 49,845,333 2,492,267 41,538,333 2,076,917
The Company has one class of ordinary shares which carry no right to fixed
income.
On 18 January 2011, the Company undertook a placement of 8,307,000 ordinary
shares at 23 pence per share.
Share options in existence at 31 March 2011 are as follows:
Number Description Exercise price Expiry date
150,000 Ordinary shares 1.50 30 November 2011
300,000 Ordinary shares £0.50 13 September 2012
140,000 Ordinary shares £0.50 11 February 2013
75,000 Ordinary shares £0.50 9 November 2013
The share options vested on the date of grant and are capable of being exercised
at any time from the date of grant until the earlier of:
1. the third anniversary of the date of grant;
2. 12 months after the death of the optionholder; or
3. 90 days after the optionholder ceases to hold office or employment with the
Company or any subsidiary of the Company (other than at the discretion of
the Board or by reason of his death).
21. Share premium account
Company and Group
2011 2010
£ £
Balance brought forward 27,218,897 24,570,675
Premium arising on issue of equity shares 1,495,260 2,648,222
_________ _________
Balance carried forward 28,714,157 27,218,897
22. Share-based payments reserve
Company and Group
2011 2010
£ £
Balance brought forward 233,183 307,899
Share options granted in year 1,418 116,260
Transfer to retained loss (40,800) (190,976)
_______ _______
Balance carried forward 193,801 233,183
The share-based payments reserve relates to share options granted to directors,
staff and certain professional advisors.
The share options vest on the date of grant and are capable of being exercised
at any time between the date of grant and the expiry date. Share options granted
since 1 April 2009 shall expire on the earlier of the date of expiry and 90 days
after the date the grantee ceases to be a director or employee of the Company or
of its associate (this can be amended at the discretion of the Directors).
Movement on share options was as follows:
2011 2010
No. of options No. of options
Options at beginning of year 790,000 395,000
Options granted 75,000 640,000
Options lapsed (200,000) (245,000)
_______ ________
Options at end of year _665,000 790,000
Options exercisable at year end 665,000 790,000
Weighted average exercise prices were as
follows:
Options at beginning of year £0.66 £1.50
Options granted £0.50 £0.47
Options lapsed £0.40 £1.50
Options at end of year £0.73 £0.66
Options exercisable at year end £0.73 £0.66
2011 2010
Weighted average remaining contracted life
of options outstanding at the year end (years) 1.5 2.8
Exercise prices of options outstanding at the
year end
No. of options No. of options
Exercise price per share
£0.40 - 200,000
£0.50 515,000 440,000
£1.50 150,000 150,000
665,000 790,000
Weighted average fair value of options granted
in the period £0.02 £0.18
The option pricing model used in calculating the fair value of options granted
was the Black Scholes model.
Inputs into the model for share options granted in the year were as follows:
2011 2010
Weighted average share price £0.23 £0.33
Weighted average exercise price £0.50 £0.47
Average expected volatility 44% 89%
Average option life (years) 3.0 3.6
Average risk-free rate 0.63% 2.67%
Expected dividends Nil Nil
Expected volatility was determined by calculating the actual volatility of the
Company's share price based on historical movement.
23. Minority interest - Group
The minority interest is in relation to a 43.9% share in China Nickel
Corporation.
2011 2010
£ £
Share of current assets 391,530 400,409
Share of current liabilities _(8,970) (4,316)
382,560 396,093
24. Cash flows from operating activities
Group 2011 2010
£ £
Net (loss)/profit from operations (5,204,355) (2,669,814)
Adjustments for:
Share of associate undertakings' losses 1,225,830 863,997
Unrealised losses on investments 1,619,527 -
Foreign exchange movements 917,497 657,121
Depreciation 612 1,348
Share-based payments charge 1,418 116,260
_________ _________
Operating cash flows before movements in working (1,439,471) (1,031,088)
capital
Capital expenditure (1,515)
Decrease/(increase) in trade and other receivables (20,860) 52,934
(Decrease)/increase in trade and other payables 7,776 (313,720)
Cash outflow from operations (1,454,070) (1,291,874)
Company 2011 2010
£ £
Net (loss)/profit from operations (4,003,251) (1,778,741)
Adjustments for:
Unrealised losses on investments 1,619,527 -
Foreign exchange movements 973,049 714,919
Amortisation - -
Depreciation 612 1,348
Share-based payments charge 1,418 116,260
Loss on disposal of fixed assets - -
_________ _________
(1,408,645) (946,214)
Capital expenditure (1,515) -
(Increase)/decrease in trade and other receivables 4,964 12,551
(Decrease)/increase in trade and other payables (2,823) (251,754)
_________ _________
Cash outflow from operations (1,408,019) (1,185,417
25. Controlling party
There is no ultimate controlling party of the Company.
26. Related party transactions
The Company was charged £155,437 (2010: £120,708) by Metal Analysis Limited for
the provision of services of R Eccles, £38,600 (2010: £34,800) for services as
Chairman and Director of the Company and £106,050 (2010: £78,300) for services
as a consultant to the Company. Metal Analysis Limited also incurred expenses
and recharged to the Company £10,787 (2010: £7,608).
At the year end the Company owed £2,800 (2010: £4,000) to Metal Analysis
Limited.
During the year, the Company was charged £nil (2010: £12,600) by BHM Limited for
the provision of services of S Purkiss, £nil (2010:£12,600) for services as
Director of the Company and £nil (2010: £nil) for services as a consultant to
the Company.
At the year end and at 31 March 2010, the Company owed £nil to BHM Limited.
During the year, the Company was charged £24,000 (2010: £22,800) by Consolidated
Mines & Metals Limited for the provision of services of S Purkiss, £24,000
(2010: £12,000) for services as Director of the Company and £nil (2010: £10,800)
for services as a consultant to the Company.
At the year end, the Company owed £2,000 (2010:£11,600) to Consolidated Mines &
Metals Limited.
The Company was charged £77,748 (2010: £92,476) by F Pole, £26,400 (2010:
£25,200) for services as Director of the Company and £43,000 (2010: £58,800) for
services as a consultant to the Company. F Pole also incurred expenses and
recharged to the Company £8,348 (2010: £8,476).
At the year end the Company owed £12,400 (2010: £12,100) to F Pole.
The Company was charged £60,400 (2010: £48,364) by C Thanassoulas, £26,400
(2010: £25,200) for services as Director of the Company and £34,000 (2010:
£22,600) for services as a consultant to the Company. C Thanassoulas also
incurred expenses and recharged to the Company £nil (2010: £564).
At the year end the Company owed £2,400 (2010: £7,364) to C Thanassoulas.
Simon Purkiss resigned as Executive Deputy Chairman and a director of European
Nickel plc on 31 January 2011.
Atlas Consolidated Mining and Development Corporation (ACMDC) and European
Nickel plc are 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 acquired equity
interests in the following Philippines' registered companies.
Ulugan Nickeline Nickel
TMM Resources Ulugan Resources Laterite Berong Ipilan
Management Holdings Nickel Holdings Resources Nickel Nickel
Inc. Inc. Corp. Inc. Inc. Corp. Corp.
Direct 40% 30% 40% 40% 20% 21.3% 40%
Indirect - - 18% 18% - 34.8% 12%
Total 40% 30% 58% 58% 20% 56.1% 52%
In April 2006, the Company subscribed for up to US$5 million in a three-year
Loan Note in Atlas Consolidated Mining and Development Corporation (ACMDC),
secured over ACMDC's share of the Berong nickel project. The Note bears interest
at the rate of 10% cumulative per annum and was repayable three years from each
drawdown; it is repayable out of ACMDC's share of the Berong nickel project
cash flow or is convertible into ACMDC shares or repayable in US$ cash (at the
election of the Company). The principal amount advanced at 31 March 2011 was
US$4,967,676 (2010 US$4,803,616). On 7 July 2010, the agreement was amended to
extend repayments to four years from each drawdown. On 4 July 2011, the Company
accepted an offer to settle the Loan Note in the amount of US$4,499,880 to be
paid by ACMDC in three equal instalments at the ends of July, August and
September 2011. The first instalment of US$1,500,000 was received on 29 July
2011.
During the year, the Company made further advances of US$177,369 (2010: US$nil)
to ACMDC under the Loan Note. This amount forms part of total principal amount
advanced as shown under non-current loan investments (see note 13).
In 2007, the Company entered into an agreement to make a loan facility available
to Brooks Nickel Ventures Inc. (Brooks) of up to US$2.5 million, secured over
Brooks' share of the Ipilan nickel project. This facility was subsequently
increased in 2007 and in 2010 to US$10 million and terms extended from three to
four years from each drawdown, to meet continuing pre-operational exploration
and working capital requirements. The loan bears interest at 10% cumulative per
annum and is repayable out of Brooks' share of the Ipilan nickel project
operating cash flow. The principal amount advanced at 31 March 2011 was
US$9,314,930 (2010: US$8,174,930).
Under the Celestial 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 US$900,000, as shown in note 13, 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 and its guarantors but is otherwise unsecured.
CNMEC owns 40% of the issued share capital of Nickel Laterite Resources Inc.
During the year, the Company paid CNMEC US$200,000 on completion of the
definitive mining feasibility study. There is an agreement in place such that
the Company has a commitment to make certain further payments to CNMEC as
described in note 27.
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 that
respect.
The Company's expenditure commitment under the Ulugan Venture Agreement at the
year end and at 31 March 2010 is US$700,000.
Under the Berong Venture Agreement, the Company has advanced funds to Berong
Nickel Corporation (BNC) to meet ongoing mine development costs, of which
US$6,129,258 was repaid in 2007. During the year, the Company advanced
US$2,398,824 (2010: US$327,789) to BNC. This amount forms part of the total
amount advanced as shown under non-current loan investments (see note 13). The
loan amounts advanced are interest-free, unsecured and have no fixed terms of
repayment.
The Company has two subsidiaries, details of which are given in note 11.
During the year, China Nickel Corporation charged Berong Nickel Corporation
US$339,659 (2010: US$524,195) in respect of consulting fees. At the year end,
Berong Nickel Corporation owed China Nickel Corporation US$1,134,887 (2010:
US$1,182,197).
During the year, China Nickel Corporation charged Ipilan Nickel Corporation
US$334,225 (2010: US$116,040) in respect of consulting fees. At the year end,
Ipilan Nickel Corporation owed China Nickel Corporation US$282,954 (2010:
US$110,667).
27. Commitments and contingencies
Under a royalty agreement, the Company has made a commitment to make certain
payments to CNMEC as follows:
Upon completion of positive bankable feasibility study US$500,000
Upon the commencement of construction of plant US$1,200,000
A potential claim for an unspecified sum for breach of contract has been
notified to the Company in respect of a dispute with CNMEC. 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.
28. Post balance sheet events
Subsequent to 31 March 2011:
The Company has advanced a further:
* £68,700 (as US$112,200) to Berong Nickel Corporation as an interest free,
unsecured advance under the Berong Venture Agreement;
* £317,329 (as US$520,000) to Brooks Nickel Ventures Inc. to meet that
company's share of Ipilan project expenditure;
* £248,433 (as US$400,000) to Berong Nickel Corporation as an interest-free
bridging loan for short-term working capital. The bridging loan was repaid
in full on 1 August 2011.
The Company received:
* £121,552 (as US$195,000) from China Nickel Corporation as an interest-free
loan. The loan was repaid in full on 29 July 2011.
On 4 July 2011, the Company and ACMDC reached an agreement for ACMDC to repay by
30 September 2011 the amount of US$4,498,880 in full and final settlement of
ACMDC loan. The first of three staged repayments, in the amount of US$1,500,000,
was received by the Company on 29 July 2011.
29. Financial assets and liabilities
The Group's financial instruments comprise cash and cash equivalents, loan
investments and financial assets and various items such as trade receivables,
trade payables, accruals and prepayments that arise directly from its
operations.
The main purpose of these financial instruments is to finance the Group's
operations.
The Board regularly reviews and agrees policies for managing the level of risk
arising from the Group's financial instruments. These are summarised below:
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company and Group,
and arises principally from the consolidated entity's loan receivables which are
considered by the directors to be recoverable.
The carrying amounts of the financial assets recognised in the balance sheet
best represents the Company and Group's maximum exposure to credit risk at the
reporting date. In respect of certain of the loans receivable the amounts are
repayable from the borrower's share of cash flows from the related mining
projects (see note 13). No other collateral or security is held by the Company
or Group in respect of these assets. The credit quality of all financial assets
that are neither past due nor impaired is appropriate and is consistently
monitored in order to identify any potential adverse changes in credit quality.
There are no financial assets that have had renegotiated terms that would
otherwise, without that renegotiation, have been past due or impaired at the
balance sheet date.
Liquidity risk
Liquidity risk is the risk that the Company and Group will not be able to meet
its financial obligations as they fall due.
The Company and Group's policy throughout the year has been to ensure that it
has adequate liquidity to meet its liabilities when due by careful management of
its working capital.
The following are the contractual maturities of financial liabilities:
Group
31 March 2011 3 months or Greater than 3
Carrying amount Cash flows less months
£ £ £ £
Trade and other 242,016 242,016 242,016 -
payables
Project expenditure 436,380 436,380 - 436,380
commitment
________ ________ ______ _______
678,396 678,396 242,016 436,380
31 March 2010
3 months or Greater than 3
Carrying amount Cash flows less months
£ £ £ £
Trade and other 217,802 217,802 217,802 -
payables
Project expenditure 464,590 464,590 - 464,590
commitment
Tax liabilities ________ ________ ______ _______
682,392 683,392 217,802 464,590
Company
31 March 2011 3 months or Greater than 3
Carrying amount Cash flows less months
£ £ £ £
Trade and other 221,586 221,586 221,586 -
payables
Project expenditure 436,380 436,380 - 436,380
commitment
________ ________ ______ _______
657,966 657,966 221,586 436,380
Company
31 March 2010 3 months or Greater than 3
Carrying amount Cash flows less months
£ £ £ £
Trade and other 207,971 207,971 207,971 -
payables
Project expenditure 464,590 464,590 - 464,590
commitment
Tax liabilities
________ ________ ______ ______
672,561 672,561 207,971 464,590
Market risk
Market risk is the risk that changes in market prices, such as commodity prices,
foreign exchange rates, interest rates and equity prices will affect the
Company's and Group's income or the value of its holdings in financial
instruments.
Commodity price risk
The principal activity of the Company and the Group is the development of nickel
mining properties in the Philippines and the principal market risk facing the
Group is an adverse movement in the commodity price of nickel.
Any long-term adverse movement in this price would affect the commercial
viability of the mining properties and hence the value of investments by the
Company and the Group as a whole.
Foreign currency risk
The Group undertakes transactions principally in Sterling and US Dollars. While
the Group continually monitors its exposure to movements in currency rates, it
does not utilise hedging instruments to protect against currency risks. The main
currency exposure risk to the Company is in relation to the US Dollar loan
investments which are repayable in US Dollars.
Interest rate risk
The Group utilises cash deposits at variable rates of interest for a variety of
short-term periods, depending on cash requirements. The rates are reviewed
regularly and the best rate obtained in the context of the Group's needs.
Extent and nature of financial instruments
The financial assets and liabilities held by the Company and Group at the period
end are shown below together with their fair values. Fair values have been
arrived at after due and careful consideration by the Company's directors.
Group 31 March 31 March 31 March 31 March
2011 2011 2010 2010
£ £ £ £
Assets Carrying Net fair Carrying Net fair
amount value amount value
Loans and receivables 16,127,140 16,127,140 14,451,634 14,451,634
Trade and other receivables 964,934 964,934 941,659 941,659
Taxation 11,741 11,741 211,512 211,512
Short-term deposits 1,816,436 1,816,436 2,517,686 2,517,686
Cash at bank and in hand 60,806 60,806 1,398,917 1,398,917
_________ _________ _________ _________
18,981,057 18,981,057 19,521,408 19,521,408
Group 31 March 31 March 31 March 31 March
2011 2011 2010 2010
£ £ £ £
Liabilities Carrying Net fair Carrying Net fair
amount value amount value
Trade and other payables 242,016 242,016 217,802 217,802
Project expenditure commitment 436,380 436,380 464,590 464,590
Taxation 11,772 11,772 - -
________ ________ ________ ________
690.168 690,168 682,392 682,392
Company 31 March 31 March 31 March 31 March
2011 2011 2010 2010
£ £ £ £
Assets Carrying Net fair Carrying Net fair
amount value amount value
Loans and receivables 16,127,140 16,127,140 14,451,634 14,451,634
Trade and other receivables 81,036 81,036 83,585 83,585
Taxation 11,741 11,741 211,512 211,512
Short-term deposits 1,816,436 1,816,436 2,517,686 2,517,686
Cash at bank and in hand 42,835 42,835 1,334,895 1,334,895
_________ _________ _________ _________
18,079,188 18,079,188 18,599,312 18,599,312
Company 31 March 31 March 31 March 31 March
2011 2011 2010 2010
£ £ £ £
Liabilities Carrying Net fair Carrying Net fair
amount value amount value
Trade and other payables 221,586 221,586 207,971 207,971
Project expenditure
commitment 436,380 436,380 464,590 464,590
Taxation 11,772 11,772 - -
________ ________ ________ ________
669,738 669,738 672,561 672,561
Capital management
The Company's capital consists wholly of ordinary shares. There are no other
categories of shares in issue and the Company does not use any other financial
instruments as capital substitutes or quasi capital. The Company manages its
issued capital by considering future capital requirements of the Group which are
largely dictated by the exploration and development of the mining properties in
the Philippines and the head office overhead costs of the Company in London. The
Company's board of directors as a whole manages the capital by considering the
need to raise further capital to meet the above costs on a rolling 12 month
basis so as to enable the accounts to be prepared on a going concern basis but
without unnecessary dilution of existing shareholder interests. The Board always
places a priority on maximising the return to existing shareholders before
raising further capital.
There are no externally imposed capital requirements on the Company.
Details of the ordinary share capital are set out in note 20.
30. Associate undertakings
The Company has equity holdings in the following associate undertakings:
Ulugan Nickeline Nickel
TMM Resources Ulugan Resources Laterite Berong Ipilan
Management Holdings Nickel Holdings Resources Nickel Nickel
Inc Inc Corp. Inc Inc Corp. Corp.
Direct 40% 30% 40% 40% 20% 21.3% 40%
Indirect - - 18% 18% - 34.8% 12%
Total 40% 30% 58% 58% 20% 56.1% 52%
The principal place of business and country of incorporation of the associate
undertakings is the Philippines.
Summarised results of the associate undertakings as translated into sterling are
as follows:
Berong Nickel Ipilan Nickel Remaining
Corporation Corporation associates Total
Year ended 31
March 2011 £ £ £ £
Revenue ________- ________- __392,796 __392,796
Profit/(loss) for
the year (2,028,577) (180,460) (16,164) (2,192,873)
Total assets 12,218,121 6,961,851 2,285,953 21,465,925
Total liabilities 8,695,249 253,780 1,830,367 10,779,396
Berong Remaining
Nickel Ipilan Nickel Associates
Corporation Corporation Total
Year ended 31 March
2010 £ £ £ £
Revenue 2,387,297 - 405,612 2,792,909
Profit/(loss) for
the year (1,402,435) (174,709) 14,517 (1,562,627)
Total assets 13,187,476 6,425,163 2,176,616 21,789,255
Total liabilities 7,520,371 104,218 1,728,040 9,352,629
31. Operating lease commitments
The Company and Group had outstanding operating lease commitments falling due as
follows:
Land and buildings 2011 2010
£ £
Within one year 38,131 76,895
Within 2 - 5 years ___ - 38,131
Total 38,131 115,026
On 23 April 2010, the Company entered into a new lease to occupy its offices at
Ground Floor, 11 Albemarle Street, London W1S 4HH for a period expiring on 28
September 2011.
Corporate directory
Directors Reg Eccles (Chairman)
Victor Kolesnikov (Chief Executive Officer)
Simon Purkiss (Non-Executive Director)
Constantine Thanassoulas (Non-Executive Director)
Jason Cheng (Non-Executive Director)
Secretary Thrings LLP
Registered office Ground Floor, 11 Albemarle Street
London
W1S 4HH
Nominated adviser
and broker Ambrian Partners Limited
Old Change House
128 Queen Victoria Street
London
EC4V 4BJ
Solicitors Thrings LLP
Kinnaird House
1 Pall Mall East
London
SW1Y 5AU
Auditors Sawin & Edwards
15 Southampton Place
London
WC1A 2AJ
Financial Adrian Harvey FCCA
GHCP Services Limited
Second Floor, 81 Piccadilly
London
W1J 8HY
Principal bankers Coutts & Co
188 Fleet Street
London
EC4A 2HT
Registrars Capita IRG plc
Bourne House, 34 Beckenham Road
Beckenham
Kent
BR3 4TU
Website www.toledomining.com
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Toledo Mining Corporation PLC via Thomson Reuters ONE
[HUG#1540688]
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