RNS Number:4615K
AfriOre Limited
13 October 2006
13 October 2006
Afriore Limited (the "Company" or "Afriore")
AFRIORE REPORTS FINANICAL RESULTS FOR THE
SIX MONTHS ENDED AUGUST 31, 2006
Road Town, Tortola, British Virgin Islands (October 13, 2006) AfriOre Limited
("AfriOre" or "the Company") (TSX/AIM:AFO), the minerals exploration company,
reported a loss for the six month period ended August 31, 2006 of ($6,122,621)
or ($0.14) per share (basic and diluted), as compared to a loss of ($1,590,198)
or ($0.05) per share (basic and diluted) for the six month period ended August
31, 2005.
Capitalized exploration costs amount to $14,836,621, with exploration costs for
the six months period totaling $4,053,364, including $3,683,958 for Akanani
where there was a significant increase in exploration expenditure, compared to
($139,219) (Akanani $1,478,086) after an adjustment to exploration expenditure
due to the acquisition by Wits Basin Precious Minerals Inc. of a 35% equity
stake in the South African FSC project for the same period in 2005. The
increase in expenditure at Akanani followed the continuing receipt of positive
results from the intensive exploration program on the Project.
In addition, the substantial weakening of the South African Rand was responsible
for AfriOre having to report a foreign exchange loss of $2,116,269 for the six
month period ending August 31, 2006 compared to $503,566 for the six month
period ending August 31, 2005.
The loss for the six month period is also attributable to Stock Based
Compensation expense of $3,685,000 resulting from revaluing of 2,500,000
warrants per the Black-Scholes method, which were issued in terms of an
agreement between AfriOre and the original Black Economic Empowerment
Shareholders of Akanani Mining (Pty) Limited which became effective on the
successful conversion of the old order prospecting rights to new order
prospecting rights. This agreement entitles the holders of these warrants to
purchase one common share in the capital of AfriOre at an exercise price of
$4.00 expiring on May 31, 2008.
Consolidated Interim Financial Statements for the six months ending August 31,
2006 and August 31, 2005, along with Management's Discussion and Analysis, have
been filed on SEDAR and are available at www.sedar.com.
AfriOre continues to concentrate on its platinum group metals ("PGM") and gold
projects and to engage in the acquisition, exploration and development of
resource properties in Africa and elsewhere, in particular PGM and gold
projects.
AfriOre is listed in Standard & Poor's Corporation Records SEC 12g 3-2(b)
exemption 82-4514.
For additional information on AfriOre and its projects visit the Company's
website at www.afriore.com or contact:
Fiona Childe, Ph.D., P.Geo.
VP Corporate Communications
Tau Capital Corp.
Tel: (416) 361-9636 x 227
Email: fchilde@taucapital.com
Overview
AfriOre was previously a multi-commodity company whose assets
included coal mining and precious metals exploration properties. The Company
disposed of its coal assets in October 2004 and now has a sole focus on precious
metals and is engaged in the acquisition, exploration and development of
platinum group metals ("PGM") and gold exploration properties in Africa.
The Company is currently engaged in the exploration and evaluation of Akanani, a
single substantial project where there is the potential to establish a PGM mine.
In addition, rights are held to four gold exploration projects where exploration
is being undertaken currently.
Management believes that the long-term fundamentals of the PGM and gold
industries remain positive and that the African continent, with its
attractive geology and opportunities, particularly in respect of PGMs and gold,
is ideally suited to exploration and mining for these commodities. AfriOre has
established a well-balanced PGM and gold exploration portfolio, which comprises
projects from early to advanced stages of exploration.
The strategy is to continue to focus the Company's activities on PGM and gold
exploration and mining and particularly on Akanani, in which the Company holds a
74% interest. Some 80% of the world's known platinum resources are concentrated
in southern Africa and it is management's intention to continue to intensively
evaluate Akanani, to identify PGM projects in this area and to acquire interests
in any PGM projects with potential that may be available. Southern Africa has
numerous gold fields and the Company will continue to review, identify and
acquire an interest in available gold projects with potential. Management is
continually reviewing the current projects and jurisdictions in which we
operate, and will endeavour to apply the Company's resources in the most cost
effective manner to those projects with highest perceived potential, such as
Akanani, where management believes there should be a favourable return to
shareholders.
AfriOre's strategy of establishing a portfolio of PGM and gold
projects at different stages of exploration, in various jurisdictions, is aimed
to provide benefit from both exploration success and any rise in the PGM or gold
prices, while reducing any sovereign and exploration risk, to the extent that is
possible.
AfriOre's PGM and gold exploration program is based on the ability to identify
targets which have the potential to host significant economic mineralization and
to select and execute exploration methods and programs, which will discover,
delineate and extend the mineralization to determine mineable resources and
reserves.
AfriOre's management team has extensive experience in the PGM and gold
industries of southern Africa and the Company continues to find, or be invited
to invest in, precious metals opportunities. Management is confident that the
mineralization that has been identified within the portfolio of PGM and gold
projects in the past year has the potential to continue to deliver positive
exploration results.
AfriOre commenced trading on the Vancouver Stock Exchange in 1995 and has been
quoted on the Toronto Stock Exchange ("TSX") since 2001.
On May 19, 2005, the Company was continued to the British Virgin Islands.
AfriOre's
new company number is 657509.
On the July 11, 2005, AfriOre was admitted to the Alternative Investment Market
of the London Stock Exchange ("AIM"). Charles Stanley and Co. Limited is acting
as Nominated Adviser and Broker.
Exploration Projects
Akanani Platinum Project, South Africa
Akanani is situated on the Northern Limb of the Bushveld Complex in South
Africa. The Bushveld Complex is host to the world's most important PGM producing
operations and resources. Akanani is 4,095 hectares ("ha") (10,119 acres) in
extent and is adjacent to Anglo Platinum Limited's holdings and its open pit
operations, within the Central Sector of the Platreef unit, which hosts the PGM
and base metal mineralization in the area.
On September 27, 2004, AfriOre signed an option agreement which allowed it to
acquire an indirect 74% interest in Akanani Mining (Pty) Ltd. ("Akanani Mining")
in staggered tranches, over a thirty six month period, for the total cost of
South African Rand ("R") 9,500,000 ($1,783,395). In addition, under the terms of
the agreement, a payment of R500,000 ($99,532) was made to the Akanani
shareholders on signing of the agreement. A further R2,000,000 is payable should
a Bankable Feasibility Study indicate that Akanani will or may achieve an
internal rate of return after tax of not less than 20% per annum over the life
of mine at a weighted average of the platinum price and other relevant metals
prices. Akanani Mining is the holder of the exclusive rights to all relevant
precious and base metals and minerals in respect of the Akanani project area,
which comprises the two farms Moordkopje 813LR and Zwartfontein 814LR, (which
are some 25 kilometres ("km") north of Mokopane (formerly Potgietersrus) in the
Limpopo Province of South Africa). On April 14, 2005, based on the initial
positive drilling results received, AfriOre, through its wholly-owned
subsidiary, Metals Technology Inc. ("MTI"), exercised its first option to earn a
20% interest in Akanani Mining, through the payment of R1,500,000 ($309,795) to
the original shareholders of Akanani Mining and issued 750,000 common shares at
$1.77 per share for the purchase of 100% of the shares in MTI. With continuing
positive results being received from the drilling operations, AfriOre elected to
advance the exercise of its option to acquire a further 54% interest in Akanani
Mining on September 29, 2005 for a consideration of R8,000,000 ($1,473,600).
With the second exercise of AfriOre's option right, AfriOre vested its complete
entitlement of the 74% interest in Akanani Mining, in terms of its option
agreement of September 27, 2004.
Exploration at Akanani commenced in November 2004 with the initial aim of
establishing a PGM resource with associated gold, nickel and copper
mineralization in the Platreef downdip to a selected depth limit of 2,000 metres
("m") below surface in the west, being within the current depth of economic
mining operations on the PGM mines in the Western Limb of the Bushveld Complex.
The first phase, nine hole, (approximately 13,000 m) diamond drilling program
was completed during the second quarter of 2006 and was followed by the second
phase (17 hole, 31,000 m) drilling program. All the holes in the initial
drilling programs were collared vertically and spaced approximately 500 m apart.
The initial program on the first line of drilling extended along the eastern
boundary of the Akanani area over a strike length of the Platreef of 6,500 m (of
the total 9,000 m of strike length within the project area).
At the end of the period under review 36 drill holes (including one historical
hole) had been completed on the project area, with a 100% success rate in
intersecting PGM mineralization within the Platreef. In addition, deflections
have been drilled in ten of the drill holes, for geostatistical, mineral
resource evaluation and metallurgical reasons. Most drill holes intersected
multiple zones of mineralization, some with high grade PGM intersections over
several metres, and the results of most holes exceeded AfriOre's initial minimum
exploration target of intersecting zones with a minimum PGM grade of some four
grams of platinum, palladium, rhodium and gold per tonne ("g/t 3PGM + Au") over
an intersection width of at least five metres.
A provisional compilation of assay results from drilling was completed in
September 2005 and identified a broad zone of PGM mineralization, which is
developed in the "P2 unit", towards the upper part of the Platreef unit and
which had been intersected in all the drill holes. The compilation of the assay
results in the P2 unit at or near the hanging wall contact indicated an average
PGM grade of the drill hole intersections of some 4 g/t 3PGM+Au, over an average
uncorrected intersection width of some 28 m. In addition, within this broad
mineralized unit, there is a persistent higher-grade zone, intersected in most
drill holes, where the average PGM grade of the intersections is approximately
6.0 g/t 3PGM+Au over an uncorrected intersection width of some five metres. The
average grade of the base metal mineralization for the drill intersections in
the selected higher-grade zone was estimated at 0.30% nickel ("Ni") and 0.17%
copper ("Cu"). These provisional estimates of grade and widths of the
mineralized intersections represented a preliminary assessment of the tenor of
mineralization, which would be subject to change in a subsequent more rigorous
analysis of the data in a mineral resource estimation study.
The drilling results also confirmed the minimum projected depth of the Platreef
on the eastern boundary of the property of some 750 m and identified two
priority areas, one in the south of the project area and the other in the north
of the area drilled, both of which are characterized by higher-grade drill
intersections over substantial widths.
At the end of the quarter, 10 diamond drill rigs were deployed on the project as
positive results continued to be received. The drilling program initially
focused on the southern of the two priority areas (the Southern Priority Area or
"SPA"), and in particular on the area to the west, and down dip, of the first
drilling line. This drilling, covering four lines parallel to the strike of the
Platreef, has extended the area in which the mineralization has been intersected
for a horizontal distance of up to 1,400 m to the west.
A high resolution aeromagnetic survey was completed in 2005, and the results of
this survey, combined with the results of the drilling, have indicated that the
Platreef unit is developed at shallower than expected depths in the southern
parts of the SPA. Whereas regional dips at outcrop to the east of the project
are indicated to be up to 45 degrees towards the west, a number of AfriOre's
holes drilled to date in the southern part of the SPA have intersected the
Platreef unit at shallower depths than originally predicted from the dips as
reported at surface. This reduction in depth of the Platreef unit is due, in
part, to a projected flattening in the dip of the Platreef unit to some 20 to 30
degrees to the west. As a result of this development, the follow-up drilling
program was modified to focus on the area where the depths of the Platreef
mineralization extend from depths in the range of some 800 m to some 1,700 m
below surface.
A surface geological mapping survey and aerial photographic interpretation of
the geology of the project area were completed during the previous quarter.
These surveys augmented and confirmed the findings of the previously flown
aeromagnetic survey, in that the stratigraphy of the Northern Limb of the
Bushveld Complex appears to be regular and uniform throughout most of the
project area. In addition, the studies confirmed the structure and distribution
of faulting in the project area.
On June 28, 2006 the Company released results of preliminary independent
metallurgical testwork for a limited group of samples of diamond drill core.
Laboratory flotation tests achieved PGM recoveries of 80% into concentrates of
suitable quality for smelting. This level of recovery compares well with that
of PGM recoveries from existing operations in the Bushveld Complex Merensky and
UG2 ores, of 80 to 85% and 75 to 80%, respectively. With respect to base
metals, results indicate Ni and Cu recoveries of approximately 63% (of total Ni)
and 85%, respectively, at a combined concentrate grade of 7 to 10% Ni+Cu and 10
to 15% sulphur.
A previously commissioned preliminary conceptual mining study and further
metallurgical testwork were carried out during the quarter and the results of
these studies are expected to become available during the coming quarter.
Furthermore, an initial inferred mineral resource estimate study was completed
for a part of the SPA during the previous quarter. On May 11, 2006, the Company
released the results of the initial inferred mineral resource estimate for this
area of Akanani of 183.0 million tonnes ("Mt") at a grade of 4.5 g/t 3PGM+Au,
which equates to 26.4 million ounces of 3PGM+Au. This mineral resource estimate
was prepared by Snowden Mining Industry Consultants ("Snowden"), an
international minerals consultancy group, independent of AfriOre and was based
on the results of 17 diamond drill holes at nominal 500 x 500 m spacing within a
329 ha area within the SPA. This mineral resource estimate extends for 3.6 km of
the total nine km strike length of the Platreef on the project area, over a
width that extended between 0.6 km and 1.4 km (projected to surface, not on the
plane of the mineralized zone) in the P2 unit of the Platreef. The P2
mineralized zone in the P2 unit has an average estimated true thickness of 16.6
m for the resource area and is based on using the top of the P2 unit for the
upper limit of the resource and a PGM assay threshold of 2 g/t 3PGM+Au for the
lower limit. The mineralized zone also contains an average of 0.24% nickel and
0.14% copper. The mineralized P2 unit corresponds to the broad upper mineralized
zone previously identified in the discovery stage of exploration and represents
one of four subdivisions of mafic rock now identified within the pyroxenitic
Platreef unit. The P2 unit is underlain by the P1 unit which is also mineralized
in part and is overlain by two thinner, generally unmineralized units, the P3
and P4 units.
In addition, during the quarter under review the initial stage mineralogical and
geochemical studies were completed as were further studies on the mineralization
controls and distribution within the Platreef. This has lead to a refinement of
the mineralization model. A number of pilot surface based and down-the-hole
geophysical surveys were undertaken and these will continue in the third
quarter.
Drilling has continued during the second quarter, with most of the 10 drill rigs
initially drilling within the SPA in order to extend the inferred mineral
resources and to add confidence in the drill data, through closer spaced
drilling. Accordingly drilling was completed on a 350 metre spaced grid and four
holes have been sited with a spacing of 150 metres in a selected part of the SPA
in order to increase geostatistical confidence in the drill data, aimed at
upgrading the inferred resource to an indicated category. At the end of the
quarter drilling was continuing on this close spaced drilling program.
During the second quarter, drill rigs were progressively deployed to the
Northern and Central Areas, as closer the spaced drill holes were completed in
the SPA. The Northern and Central Areas have a cumulative strike length of 5,400
metres of the 9,000 metres of Platreef strike length on Akanani and the aim is
to test the PGM mineralization in these areas and to delineate any inferred
mineral resources in this area. All holes drilled in the first phase of drilling
in 2005, within the Central and Northern areas, intersected the Platreef, some
with significant intercepts of PGM and copper and nickel mineralization. At the
end of the quarter six rigs were drilling in these two areas.
Based on the continuing positive results, the Company entered into an agreement,
in February 2006, with SRK Consulting in Johannesburg ("SRK") to undertake and
complete a Pre-Feasibility Study during the forthcoming financial year, which
results are anticipated by early 2007. SRK is an international consulting firm,
independent of AfriOre. The various studies which form part of the
Pre-Feasibility Study continued during the period under review. Preliminary
results of this work and the first phase of metallurgical testwork have been
incorporated in the initial conceptual mining study. The limited metallurgical
work indicated that Akanani's PGM, nickel and copper mineralization may be
upgraded to a flotation concentrate product that could be acceptable to a
smelter, with PGM recovery which is broadly similar to that obtained for other
Bushveld PGM ores. In addition, progress has been made in a study to identify
potential water sources for any future mining and metallurgical operation at
Akanani.
Exploration at Akanani is being conducted under the supervision of Mr. Henri
Lombard (B.Sc. Hons.), who is a "Qualified Person" as such term is defined in
National Instrument 43-101 ("NI 43-101"). Mr. Lombard is a registered
Professional Natural Scientist ("Pr.Sci.Nat.") with the South African Council
for Natural Scientific Professions ("SACNASP") and Exploration Manager at
Akanani. Mr. Lombard is responsible for the technical information, including
drill core sampling, analytical and test data, underlying the technical
information.
The mineral resource estimate was prepared by Mr. Jeremy C. Witley (B.Sc. Hons.,
Mining Geology), who is a "Qualified Person" as such term is defined in NI
43-101. Mr. Witley is registered as a Pr.Sci.Nat. with the SACNASP and is an
employee of Snowden. Mr. Witley is responsible for the mineral resource
estimate discussed herein.
An independent technical report containing the initial mineral resource estimate
and other information on Akanani, including Quality Control/Quality Assurance
procedures and results for drill core samples, entitled "AfriOre Limited:
Akanani Platinum Project, Limpopo Province, South Africa, Project No. J883",
dated May 29, 2006, has been filed on SEDAR and may be accessed at
www.sedar.com. An updated independent technical report based on the updated
mineral resource estimate is currently being prepared by Snowden and will be
filed on SEDAR when complete.
During March 2006, one of the original shareholding entities within the Akanani
consortium, Catalyst Investments CC ("Catalyst") was restructured in respect of
its sole asset which comprises its shareholding in Akanani Mining. Thereafter
AfriOre Precious Metals Inc., purchased 100% of the members' interest in
Catalyst for R32,000,000 ($5,772,998), in order to facilitate the restructuring
of the Black Economic Empowerment ("BEE") interests in the Akanani Platinum
Project.
In August 2006 AfriOre Precious Metals Holdings Inc. sold its 100% shareholding
in Catalyst to the BEE shareholders of Akanani Mining on the same terms as
Catalyst was purchased by AfriOre. Catalyst has a 5.46% interest in Akanani
Mining. This sale brings the collective interest of the BEE shareholders in
Akanani Mining to 26%.
On June 13, 2006 Akanani Mining successfully completed the conversion of "old
order prospecting rights" to "new order prospecting rights" through the granting
of a notarially executed prospecting right in favour of Akanani Mining by South
Africa's Department of Minerals and Energy. This conversion is required under
the terms of the Mineral and Petroleum Resources Development Act (Act 28 of
2002) ("MPRDA"). The converted new order rights grant Akanani Mining the
exclusive prospecting rights on the 4,095 hectare (10,119 acre) Akanani Project
area for a period of five years, with the exclusive right to apply for an
extension to the prospecting right for a further three years and the exclusive
right to apply for mining rights, prior to the termination of the prospecting
right, or the extension period.
Under the terms of an agreement entered into between AfriOre and the original
BEE shareholders of Akanani Mining, the BEE shareholders will offer AfriOre a
first right to participate in any new PGM properties they acquire in South
Africa for a period of two years. This agreement became effective on the
successful conversion of the old order prospecting rights to new order
prospecting rights, and under the terms of the agreement, 2,500,000 common share
purchase warrants were issued entitling the holder to purchase one common share
in the capital of AfriOre at an exercise price of $4.00 expiring on the second
anniversary of issuance.
FSC Gold Project, South Africa
On the 117,268 ha FSC Gold Project, where the aim is to discover a major, buried
extension to the Witwatersrand Basin; AfriOre has a joint venture agreement with
Wits Basin Precious Minerals Inc. ("Wits Basin"). Wits Basin is funding the
current stage of exploration and has a 35% interest in the project after
contributing United States ("US") dollars $2,100,000 to the project. Wits Basin
has the right to earn an additional 15% interest for the additional expenditure
of US$1,400,000. During the previous year AfriOre, as managers of the project,
completed the drilling of drill hole BH 48, one of the range finding drill
holes. BH 48 succeeded in intersecting Witwatersrand quartzite rocks between the
depths of 1,936 m and the end-of-hole depth of 2,560 m. Although the drilling
was successful in confirming the model that there is indeed an extension to the
Witwatersrand basin within the FSC project area, the rocks intersected were
lower in the stratigraphy than the Central Rand Group rocks, in which most of
the economic gold reefs in the main Witwatersrand basin are developed.
The interpretation of the data from the drilling, together with the available
geophysical data in the area, identified three sites close to BH 48 where there
is a possibility of the gold-bearing Central Rand Group rocks being preserved.
AfriOre has identified an additional source of geophysical data for these
potential drilling areas and attempts will be made to acquire and interpret the
data in order to define the highest priority drill target. Prospecting rights to
these areas were applied for during the transition period from the previous
Minerals Act of 1991 to the MPRDA and the granting of these prospecting rights
is still awaited. AfriOre intends to access additional geophysical data and
quotations have been called for from drilling contractors to undertake the next
phase of drilling. The future drilling program will depend on the successful
granting of new order prospecting rights.
Ndori and Siaya Gold Projects, Kenya
During the previous financial year, the gold exploration program continued with
much of the focus being on the Masumbi target in the Ndori licence area (283,300
ha), where an initial program of diamond drilling was completed, following the
Company's 67 hole percussion drilling program on this target during 2004.
Although the deep level of weathering in the area and highly fractured rock
resulted in a less than satisfactory level of core recovery, the drilling
confirmed the wide and low grade tenor of gold mineralization over the
considerable widths drilled. The drilling also allowed for the reinterpretation
of the host rock drilled, which has been interpreted as a highly sheared diorite
body within a major regional shear zone. Further drilling is required and this
will be undertaken in the coming year in conjunction with drilling programs on
other priority targets. During the quarter geological mapping, trenching,
sampling and induced polarization ("IP") surveys continued on six additional
gold targets, namely Ramba-Lumba, Ngiga, Kerebe, Kitson, Nango and Viyala. IP
anomalies were identified on all six projects, where the sampling and mapping
surveys have identified priority areas that warrant drilling. In the coming
quarter the higher priority targets will be subjected to a preliminary rotary
percussion drilling program to test the mineralization. The aim of exploration
on these licences continues to be the identification of shallow, wide zones of
gold mineralization that could support an open pit mining operation.
Capricorn Gold Project, Namibia
The Capricorn Project comprises six exclusive prospecting licences ("EPL"),
covering an area of some 236,265 ha in northern Namibia. In the period under
review, exploration focused on further gold-in-soil geochemical surveys over the
geophysical anomalies identified in the past year with an objective of
delineating targets with subcropping gold mineralization. Low level gold
anomalies have been identified over certain targets where results have been
received. Elsewhere in the region, coincident gold-in-soil and aeromagnetic
anomalies are closely associated with mineralized gold-bearing sheeted veins.
Such is the case on the adjacent property at the Otjikoto gold deposit of Teal
Exploration and Mining Incorporated.
The results of most of the sampling surveys have been received and the higher
priority targets have been identified and tenders have been called for from
drilling companies. It is aimed to commence this drilling in the forthcoming
quarter.
Dwaalboom Gold Project, South Africa
Located north of Rustenburg in South Africa, the 31,621 ha Dwaalboom Project is
an advanced-stage low grade gold project, which was originally held and
extensively prospected by Anglo American Corporation Ltd. ("Anglo American"),
which subsequently ceded the rights to African Pioneer Mining (Pty) Ltd.
("APM"). Anglo American drilled in excess of 600 drill holes and reportedly
delineated gold mineralization, which was developed in wide mineralized zones in
a number of targets over a widespread area. AfriOre has a joint venture with APM
and is managing the project and has the right to acquire a 70% interest in the
project. Limited progress has been made on this project, initially due to delays
in the issuance of new order prospecting rights.
During the quarter selected rock samples were collected and have been submitted
for analysis to determine the possible amenability of the gold mineralization to
heap leaching treatment. In addition, the data in the mineralization zones is
being re-examined with the aim of better defining these zones and any extensions
that may exist. The results of this work are awaited and will influence
management's decision on the future development of this project.
AfriOre Limited
Consolidated Balance Sheets
Expressed in Canadian Dollars
August 31, February 28,
2006 2006
Notes (unaudited) (audited)
Assets
Current assets:
Cash $ 26,365,010 $ 30,099,090
Accounts receivable 7 322,324 1,089,300
Other receivables 301,528 306,194
Prepayments 104,386 131,621
27,093,248 31,626,205
Non-current assets
Property and equipment 5 187,004 143,621
Exploration properties 6 14,836,621 10,783,257
$ 42,116,873 $ 42,553,083
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities 8 $ 2,547,408 $ 1,647,018
Long-term liabilities
Long-term debt 9 62,552 72,766
Shareholders' equity 10 39,506,913 40,833,299
$ 42,116,873 $ 42,553,083
Commitments 6,12,15
See accompanying notes to the consolidated financial statements.
Unaudited, Consolidated Statements of Operations and Deficit
Expressed in Canadian Dollars
Three months ended Six months ended
August 31, August 31,
Notes 2006 2005 2006 2005
Other income and expenses
Other income 14 $ 255,034 $ 37,789 $ 440,553 $ 106,192
Loss on foreign exchange (1,386,901) (397,188) (2,116,269) (503,699)
(1,131,867) (359,399) (1,675,716) (397,507)
Corporate and exploration expenses
Administrative costs (247,106) (483,824) (573,045) (768,243)
Listing expenses (31,986) (374,502) (46,833) (374,502)
Exploration and project evaluation (13,709) (11,770) (50,491) (38,570)
Stock based compensation:
. Akanani Warrants 10 (3,685,000) - (3,685,000) -
. Options 10 - - (78,150) -
Depreciation (10,822) (5,678) (13,386)
(11,376)
(3,988,623) (875,774) (4,446,905) (1,192,691)
Net loss before income taxes (5,120,490) (1,235,173) (6,122,621) (1,590,198)
Income taxes 11
- - - -
Net loss $ (5,120,490) $(1,235,173) $(6,122,621) $(1,590,198)
Basic and diluted loss per share 17 $ (0.10) $ (0.03) $ (0.14) $ (0.05)
See accompanying notes to the consolidated financial statements.
Unaudited, Consolidated Statements of Cash Flows
Expressed in Canadian Dollars
Three months ended Six months ended
August 31, August 31,
Notes 2006 2005 2006 2005
Cash flows from Operating Activities
Net loss $(5,120,490) $(1,235,173) $(6,122,621) $(1,590,198)
Items not affecting cash:
Depreciation 10,822 5,678 13,386 11,376
Loss on foreign exchange 1,386,901 397,188 2,116,269 503,699
Stock based compensation 3,685,000 - 3,763,150 -
Net operating working capital changes 13(a) (1,131,733) (281,261) 1,699,267 (904,901)
(1,169,500) (1,113,568) 1,469,451 (1,980,024)
Cash flows from Investing Activities
Property and equipment (28,298) (5,417) (56,769) (9,118)
Investments 5,772,998 - - (309,795)
Exploration properties (3,562,179) (1,717,650) (6,169,634) (1,882,478)
2,182,521 (1,723,067) (6,226,403) (2,201,391)
Cash flows from Financing Activities
Common shares issued 734,015 7,270,478 1,033,086 7,668,894
Loans raised (3,819) (323,673) (10,214) -
Cash - project specific 246,750 548,692
- -
730,196 7,193,555 1,022,872 8,217,586
Net cash (applied to) from continuing
operations 1,743,217 4,356,920 (3,734,080) 4,036,171
Net cash from discontinued operations 3 2,094,207
- - -
1,743,217 4,356,920 (3,734,080) 6,130,378
Increase (decrease) in cash
Cash, beginning of period 24,621,793 4,626,333 30,099,090 2,852,875
Cash, end of period $ 26,365,010 $ 8,983,253 $ 26,365,010 $ 8,983,253
See accompanying notes to the consolidated financial statements.
NATURE OF OPERATIONS
AfriOre Limited (the "Company" or "AfriOre") was incorporated under the Company
Act (British Columbia) on July 11, 1986, and subsequently continued under the
Canada Business Corporations Act. On July 30, 1997, the Company was continued
under the New Brunswick Business Corporations Act. On July 31, 2001 the Company
was continued under the provisions of the Companies Act Cap. 308 of the Laws of
Barbados. The Company was continued from Barbados to British Virgin Isles on May
19, 2005.
The Company is engaged in the acquisition, exploration and development of
resource properties in Africa and elsewhere.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in Canada.
(b) Principles of consolidation
These financial statements consolidate the financial statements of all
controlled companies. Inter-company transactions and balances have been
eliminated in consolidation. Subsidiaries with different year-end dates are
consolidated taking into account transactions between the subsidiaries' year end
to the Group's financial year end.
(c) Translation of foreign currencies
The Company's exploration subsidiaries are accounted for as integrated foreign
operations and are translated into Canadian dollars using the temporal method.
Monetary assets and liabilities denominated in foreign currencies are translated
into Canadian dollars at the year-end exchange rates, while non-monetary items
are translated at the exchange rate in effect at the transaction date. Income
and expense items are translated at the exchange rates in effect on the date of
the transaction. Exchange gains and losses resulting from the translation of
these amounts are included in the consolidated statements of operations.
(d) Property and equipment
Property and equipment are stated at cost and depreciated on a straight-line
basis over five years.
(e) Exploration properties
The Company considers its exploration costs to have the characteristics of plant
and equipment. As such, the Company capitalizes all exploration costs that
result in the acquisition and retention of resource properties or an interest
therein. The amounts shown for exploration properties represents costs to date
and do not necessarily reflect present or future values. If the properties are
sold, allowed to lapse or are no longer of interest, accumulated costs are
written down. Once a project reaches commercial production, the exploration
costs are amortized over the estimated useful life of the producing properties.
The recoverability of the carrying values of the properties is dependent on the
ability of AfriOre to obtain the necessary financing and permits to continue
exploration, the establishment of economically recoverable reserves, future
profitable production and/or proceeds from the disposition thereof.
(f) Income taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, future tax assets and liabilities are
recognized for future tax consequences attributable to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities.
Future tax assets and liabilities are measured using tax rates enacted or
substantially enacted and expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the year that includes the enactment or substantive
enactment date.
A valuation allowance is provided to reduce future tax assets to the amount that
is more likely than not to be recovered.
(g) Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenues and expenses during the years.
Significant items subject to such estimates and assumptions include the carrying
amount of property and equipment, exploration properties, valuation allowances
of receivables and stock-based compensation. Actual results could differ from
those estimates.
(h) (Loss) / earnings per share
Basic (loss) / earnings per share ("EPS") are calculated by dividing net (loss)
/ income by the weighted average number of shares outstanding during the year.
Diluted EPS data is calculated using the treasury stock method. The calculation
of diluted (loss) / earnings per share assumes that options and warrants with an
exercise price lower than the average quoted market price were exercised at the
later of the beginning of the period or time of issue. In applying the treasury
stock method, options with an exercise price greater than the average quoted
market price of the common shares are not included in the calculation of diluted
earnings per share, as the effect is anti-dilutive.
(i) Cash
Cash includes those short-term money market instruments which, on acquisition,
have a remaining term to maturity at acquisition of three months or less.
(j) Impairment of long-lived assets
Long-lived assets, including property and equipment and exploration properties,
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to estimated undiscounted cash future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognised by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet and reported at
the lower of the carrying amount or fair value less costs to sell, and are no
longer depreciated. The assets and liabilities of disposed group classified as
held for sale would be presented separately in the appropriate asset and
liability sections of the balance sheet.
(k) Stock-based compensation
The Company has a stock-based compensation plan for agent options and
compensation warrants, employees and property acquisition agreements, which is
described in note 10. The Company accounts for all stock-based payments to
non-employees, and employee awards that are direct awards of stock granted on or
after March 1, 2004 under the fair value based method and accounts for all
stock-based employee awards that call for settlement by the issuance of equity
instruments under that method.
Effective March 1, 2004, the Company adopted the amended recommendations of the
Canadian Institute of Chartered Accountants ("CICA") with respect to stock-based
compensation and other stock payments. Under these recommendations, a fair value
based method of accounting is required for all stock-based payments to
non-employees and employees that are directly affected by stock appreciation
rights.
Under the fair value based method, compensation cost for equity settled stock
options and direct awards of stock is measured at fair value at the grant date,
while compensation costs for awards that call for settlement in cash or other
assets, or are stock appreciation rights that call for settlement in cash or
other assets, or are stock appreciation rights that call for settlement by the
issuance of equity instruments, is measured at the ultimate settlement amount.
Compensation cost is recognised in earnings on a straight-line basis over the
relevant vesting period. The counterpart is recognised in contributed surplus.
Upon exercise of a stock option, share capital is recorded at the sum of the
proceeds received and the related amount of contributed surplus.
(l) Environmental rehabilitation
Provision for environmental rehabilitation is provided as exploration work is
conducted. Estimates are based on management's estimates of costs to restore the
exploration site to comply with the respective country's environmental
legislation. Estimates are based on undiscounted future cash flows.
DISCONTINUED OPERATIONS
All assets and liabilities for the coal operations were sold and transferred
under the terms of a purchase agreement effective October 29, 2004. AfriOre
provided vendor finance for the sale of the coal mining operation under a
short-term loan agreement. All outstanding balances were fully recovered and
settled before May 31, 2005.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
(i) Fair values
The fair values of the Company's cash, receivables, other current assets,
accounts payable and accrued liabilities approximate their carrying values due
to the relatively short-term nature of these amounts.
(ii) Foreign exchange risk
The Company carries out a significant portion of its transactions in currencies
other than its reporting currency. No hedging instruments are used as
uncertainty exists as to the exact settlement dates of these transactions. Cash
is held in the currency of the expected payment to reduce risks related to
short-term fluctuations in foreign currencies.
(iii) Interest rate risk
The company is not exposed to significant interest rate risk as borrowings are
interest free.
(iv) Credit risk
The Company's financial instruments do not represent a concentration of credit
risk, as the company deals with a number of reputable banks. Credit risk
related to accounts receivable is not significant.
ABOUT AFRIORE
AfriOre is engaged in the acquisition, exploration and development of gold and
platinum exploration properties in Africa and is currently engaged in the
exploration and evaluation of the Akanani project in South Africa, a single
substantial project where there is the potential to establish a PGM mine. In
addition, rights are held to four gold exploration projects where exploration is
currently being undertaken. These exploration properties are in South Africa,
Namibia and Kenya.
The company has 51,089,720 shares outstanding, 57,098,402 fully diluted.
AfriOre is listed in Standard and Poor's Corporation Records and furnishes
information to the SEC pursuant to Rule 12g 3-1(b) under Securities Exchange Act
of 1934.
This document may contain or refer to forward looking information based on
current expectations. Forward-looking statements are subject to significant
risks and uncertainties, and other factors that could cause actual results to
differ materially from expected results. These forward-looking statements are
made as of the date hereof and we assume no responsibility to update or revise
them to reflect new events or circumstances. Afriore continues to concentrate
on its strategy to acquire, explore and develop gold and platinum projects in
Africa.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR MJBATMMMBBAF
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