RNS Number:3962C
Platinum Diversified Mining Inc.
17 August 2007
Platinum Diversified Mining Inc
("Platinum" or "the Company")
Annual Report and Financial Statements
Chairman's statement
--------------------
The Company was formed in March 2006 to take advantage of mining industry
opportunities during the beginning of what is described as an economic
super-cycle with a sustained period of increased real commodity prices, driven
by higher demand growth as major economies industrialize and urbanize,
particularly in China and India. Over the past year as commodity prices have
risen and sustained these new advances, the acceptance of the "super-cycle"
premise has grown.
Despite the disappointing outcome to the proposed Nord Resources Corporation
acquisition, the Company has identified an acquisition target that provides the
shareholders an opportunity to participate in a significant poly-metallic
project providing exposures to the silver, copper, zinc and lead markets. The
Pachapaqui Mine, located in Peru and the primary asset of International
Consolidated Minerals Limited, comprises a large mining concession in an area
well known for the quality of its mineral deposits.
Platinum is moving forward with the acquisition of International Consolidated
Minerals Limited, which is expected to be finalised in September.
Mark Nordlicht
Executive Chairman
17 August 2007
Enquiries to:
Thomas Loucks: +1 (303) 781 7203
Platinum Diversified Mining Inc
Warren Pearce: +44 20 7409 3494
Strand Partners Limited
Income statement For the period ended 31 December 2006
------------------------------------------------------
Note Period ended
31 December
2006
$
Revenue -
Operating expenses (7,695,098)
-----------
Loss from operations 2 (7,695,098)
Interest receivable and similar income 2,926,386
---------
Loss before taxation (4,768,712)
Income tax expense 3 -
-----------
Loss for the period (4,768,712)
-----------
Loss per share 4 ($0.38)
Balance sheet As at 31 December 2006
------------------------------------
Note As at
31 December
2006
$
Assets
Current assets
Investments 6 77,945,546
Cash and cash equivalents 91,094
----------
78,036,640
----------
Total assets 78,036,640
----------
Equity and liabilities
Capital and reserves
Called up share capital 7 12,419
Shares to be issued under warrant 72,907,799
Shares to be issued under option 8 1,902,553
Retained loss (4,768,712)
-----------
70,054,059
Current liabilities
Trade and other payables 9 5,382,581
Other liabilities 10 2,600,000
7,982,581
----------
Total equity and liabilities 78,036,640
----------
Statement of changes in equity for the period ended 31 December 2006
--------------------------------------------------------------------
Share Shares to Shares to Income Total
Capital be issued be issued Statement
under under
warrant option
$ $ $ $ $
Balance at incorporation - - - - -
Share capital issued 12,419 79,470,066 - - 79,482,485
Costs of issue - (6,562,267) 1,902,553 - (4,659,714)
Loss for the period - - - (4,768,712) (4,768,712)
------- ----------- --------- ----------- -----------
Balance as at 31 December 12,419 72,907,799 1,902,553 (4,768,712) 70,054,059
2006 ------- ----------- --------- ----------- -----------
Cash flow statement for the period ended 31 December 2006
---------------------------------------------------------
Period ended
31 December
2006
$
Cash flows from operating activities
Operating loss (7,695,098)
Movements in working capital;
Increase in trade and other payables 5,258,581
Increase in other liabilities 2,600,000
-------
Net cash generated from operations 163,483
-------
Cash flows from investing activities
------------------------------------
Interest income 2,926,386
---------
Net cash generated from investing 2,926,386
activities
Cash flows from financing activities
------------------------------------
Proceeds from shares to be issued under 79,482,485
warrant
Cost of shares to be issued under warrant (4,659,714)
Purchase of treasury shares (77,945,546)
Advances from shareholder loan facility 824,000
Repayments on shareholder loan (700,000)
---------
Net cash used in financing activities (2,998,775)
-------
Increase in cash and cash 91,094
equivalents
Cash and cash equivalents at beginning of -
the period
------
Cash and cash equivalents at the end of the 91,094
period ------
Notes to the financial statements
---------------------------------
1. Accounting policies
General information
-------------------
The Company was incorporated in the Cayman Islands on 12 January 2006 as an
exempted company with the name Platinum Diversified Mining Inc.
The Company was admitted to trading on the Alternative Investment Market ("AIM")
operated by the London Stock Exchange on 14 March 2006 as a vehicle for
investing in the metals and mining industry whether through an asset
acquisition, share of assets, share purchase merger, share capital exchange,
scheme of arrangement or similar transaction.
Basis of preparation
--------------------
The financial statements have been prepared in accordance with International
Financial Reporting Standards including standards and interpretations issued by
the International Accounting Standards Board, as approved by the European Union.
The financial statements have been prepared under the historical cost convention
and using the accounting policies as set out herein.
The financial statements are presented in US dollars ($) rounded to the nearest
dollar.
Going concern
-------------
The financial statements have been prepared on a going concern basis. The Board
of Directors believes this assumption to be realistic and accurate. In making
this assumption the Board of Directors has considered the Company's credit
position and prospects for achieving a qualified acquisition prior to
14 September 2007, the AIM deadline.
As at 31 December 2006, the Company had cash at bank of $91,094 and current
liabilities, excluding shareholder loans and accrued placing costs, of $2.7
million. Since January, PDM has made payments to its creditors from interest
income of approximately $150,000 per month and worked with its creditors to
arrange delayed payment plans. Hunton & Williams and KBC Peel Hunt, which
represent approximately 25% of the current outstanding amount, have agreed to
deferred payment plans. Additionally, two other key creditors, Fladgate Fielder
and Holland & Hart, representing approximately 50% of the current outstanding
invoices, have verbally agreed to accept delayed payment with a promise of full
payment upon de-spac or liquidation. The Board has been advised by the Company's
AIM advisor that in the case of liquidation, outstanding vendors can be paid
ahead of shareholders from the "SPAC" trust account which contains approximately
$78 million.
In addition to funds from monthly interest income, the Company has access to
$1.87 million in shareholder loans from an agreement with Mark Nordlicht, dated
8 March 2006, to pay creditors demanding immediate payment or threatening legal
action to force payment.
On 27 June 2007, the Company announced a non-exclusive, non-binding letter of
intent regarding the proposed acquisition of International Consolidated Minerals
Limited ("ICM"). ICM's Board of Directors is supportive of this acquisition and
aware of the Company's time deadlines. ICM's board and management are being
cooperative in consummating the merger prior to the time deadline. The Company's
AIM advisor, Strand Partners Limited has advised the Board members that they
believe the proposed ICM acquisition meets the qualified acquisition criteria
and that the merger can be consummated by 14 September 2007. The Company has
engaged legal counsel, technical advisors, and financial service providers
required to meet the 14 September 2007 acquisition deadline.
For the reasons discussed above, the Board of Directors is confident that the
Company can meet its financial obligations to creditors and consummate a
qualified acquisition and will not be required to liquidate its assets prior to
consummating the acquisition.
Foreign currencies
-------------------
Both the functional and presentational currency of the Company is US dollars
($). Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the income statement.
Investment Transactions
------------------------
Investment transactions are accounted for on the trade date. Realized gains or
losses are accounted for using the specific identification method.
Cash and cash equivalents
-------------------------
Investments with original maturities of 90 days or less, as of the date of
purchase, are classified as cash equivalents in the statement of net assets.
Share Capital
-------------
Shares are classified as equity when there is no obligation to transfer cash or
other assets. Incremental costs directly attributable to the issue of equity
instruments are shown in equity as a deduction from the proceeds, net of tax.
Use of Estimates
----------------
The preparation of financial statements in accordance with International
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Loss per share
--------------
Loss per share is computed by dividing net income by the weighted-average number
of shares of common stock outstanding during the period. The warrants
outstanding were not considered in the calculation since they are not
exercisable as of 31 December 2006.
Concentration of credit risk
----------------------------
At 31 December 2006, the Company had cash balance in banks in excess of the
maximum amount insured by the Federal Deposit Insurance Corporation.
Interest Income
---------------
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 discounted estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Taxation
---------
The charge for taxation is based on the result for the period at current rates
of tax, and this takes into account deferred taxation on all timing differences
between the treatment of certain items for accounts purposes and their treatment
for Corporation tax purposes, except where it can be demonstrated that no
Corporation tax liabilities will arise in the foreseeable future.
Deferred taxation
-----------------
Deferred tax is recognised 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 generally
recognised for all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which those deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a net
basis.
Trade and other payables
------------------------
Trade payables and other payables are carried at amortized cost and represent
liabilities for services provided to the Company prior to the end of the
financial year that are unpaid and arise when the Company becomes obliged to
make future payments in respect of the purchase of these goods and services.
Share based payments
--------------------
Equity settled transactions
---------------------------
The Company issued share options to KBC Peel Hunt Ltd and Casimir Capital L.P in
connection with the admission to AIM. The Company has accounted for the fair
value of these options as an expense of the original Placing resulting in a
charge directly to Shares to be issued under warrant rather than to the income
statement.
The cost of these equity settled transactions is measured by reference to the
fair value of the equity instruments at the date at which they are granted. The
fair value is determined by using a Black-Scholes model.
In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of Platinum
Diversified Mining Inc (market conditions) if applicable.
The cumulative expense recognised for equity-settled transactions at each
reporting date until vesting date reflects (i) the extent to which the vesting
period has expired and (ii) the Company's best estimate of the number of equity
instruments that will ultimately vest. No adjustment is made for the likelihood
of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date. The Income Statement
charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is only conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is
recognised as if the terms had not been modified. In addition, an expense is
recognised for any modification that increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the employee, as
measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled
award and designated as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
2. Loss from operations
Loss from operations is stated after charging:
Period ended
31 December
2006
$
Director's emoluments 58,620
Auditors' remuneration 15,000
Auditors' remuneration non audit 45,493
------
3. Income tax expense
Tax charge for the period
-------------------------
No taxation arises on the result for the period because of the trading loss.
Factors affecting the tax charge for the period
-----------------------------------------------
The tax charge for the period does not equate to the loss for the period at the
applicable rate of Cayman Islands exempt Companies corporation tax of 0% under.
The differences are explained below:
Period ended
31 December
2006
$
Loss for the period before taxation (2,082,461)
-----------
Loss for the period before tax multiplied by the standard rate of -
corporation tax of 0%
Tax losses for the period not relieved -
-----------
-
-----------
4. Loss per share
The calculation of basic loss per share is based on the loss attributable to
ordinary shareholders of $4,768,712 (period ended 31 December) divided by the
weighted average number of ordinary shares in issue of 12,432,786. As the
Company has incurred a loss for the period, no options or warrants are
potentially dilutive, and hence basic and diluted loss per share are the same.
5. Directors and employees
There were no employees in the period other than the Directors.
6. Investments
As at
31 December
2006
$
Treasury Bills 77,945,546
-----------
An amount of $77,945,546 is being held in a trust account ("Trust Account") and
invested in United States Treasury Bills having a maturity of 180 days or less
meeting certain conditions under Rule 2a.7 promulgated under the Investment
Company Act of 1940 until the earlier of the consummation of its first business
combination or liquidation of the Company. Until the completion of a business
combination, the money held in the Trust Account will not be available for the
Company's use for any expenses related to the sale of the Units or expenses
which the Company may incur related to the investigation and section of business
target, any required deposits or other payment or the negotiation of agreements
to acquire business targets. These expenses will be met by the interest received
on the Trust Account or a drawdown from the amounts advanced from a shareholder,
as discussed in Note 9. The Company's first business combination must be with a
target business or businesses whose collective fair market value would be at
least equal to 50 percent of the Company's net assets at the time of such
acquisition (Qualified Acquisition). The remaining net proceeds (held in the
Trust Account) not paid as consideration to the sellers of the target business
or businesses may be used to finance operations of the target business or
businesses, to effect further business combinations as determined by the Board,
or for general working capital. All interest income derived from the investment
proceeds held in the Trust will be deemed to be proceeds not held in the Trust
and accordingly may be used for working capital purposes and repayment of the
shareholder advance described above. The Company, after signing a definitive
agreement for the acquisition of a target business, will submit such transaction
for shareholder approval. In the event that shareholders owning 20 percent or
more of the shares sold in the Placing vote against, the business combination
will not be consummated. All of the Company's shareholders prior to the Placing,
including all of the directors of the Company ("Founder Shareholders"), have
agreed to vote their 2,483,751 founding shares of common stock in accordance
with the vote of the majority in interest of all other shareholders of the
Company ("New Shareholders") with respect to any business combination.
7. Share capital
Period ended
31 December
2006
$
Authorised
50,000,000 ordinary shares of $ 0.001 each 50,000
------
50,000
------
Allotted, issued and fully paid
12,418,752 ordinary shares of $ 0.001 each 12,419
------
At the date of incorporation, 12 January 2006, the authorised share capital of
the Company comprised 50,000,000 ordinary shares of $ 0.001 each. On the same
date the Company issued 1 ordinary share for a consideration of $0.001.
On 28 February 2006, 2,483,751 shares were issued at par for a total
consideration of $2,484.
On 14 March 2006, the Company sold to the public 9,935,000 units ("Units") at an
offering price of $8.00 per Unit to institutional investors pursuant to a
private placement ("Placing") and was admitted to trading on AIM. Each Unit
consists of one share of the Company's common stock, $0.001 par value, and one
Redeemable Common Stock Purchase Warrant ("Warrants"). Each Warrant entitles the
holder to purchase from the Company one common stock at an exercise price of
$6.00 commencing the later of the completion of an acquisition of a target
business or one year from the effective date of the Original Admission and
expiring four years from the effective date of the Placing. The Warrants will be
redeemable, in whole or in part, at the price of $0.01 per Warrant upon thirty
(30) days notice after the Warrants become exercisable, only in the event that
the last sale price of the common stock is at least $10.50 per share for the
twenty (20) trading days within a thirty (30) trading day period ending on the
third day prior to the date on which notice of redemption is given. The
liability element of these warrants has not been valued as it is believed to be
immaterial.
8. Share options
In connection with the Placing, the Company issued an option, to each of KBC
Peel Hunt Ltd and Casimir Capital L.P. to purchase up to an equivalent of 5
percent of the Placing Units at an exercise price of $10 per Unit. The Units
issuable upon exercise of this option are identical to those described in the
preceding paragraph, except that the warrants underlying the Units will be
exercisable at $8.50 per share.
Name Date granted/ Number Exercise price Expiry date Fair value at
vested grant date
$ per unit $ per unit
KBC Peel Hunt Ltd 14 March 2006 87,312 10 13 March 2010 3.83
Casimir Capital 14 March 2006 409,438 10 13 March 2010 3.83
L.P -------
496,750
This option is exercisable at $10 per Unit at any time from the date of the
Original Admission and expiring four years from such date.
No options were exercised, forfeited or expired during the period to 31 December
2006.
The Company has accounted for the fair value of the options, as an expense of
the offering resulting in a charge directly to the Shares to be issued under
warrant reserve. The Company estimates that the fair value of this option is
$1,902,553 ($3.83 per unit) using a Black-Scholes option-price model. The fair
value of the option granted to the representative of the underwriters is
estimated as of the date of grant using the following assumptions:
Dividend rate (%) -
Risk free interest rate (%) 4.75
Expected volatility (%) 65.40
Share price at grant date ($) 10.00
The volatility calculation of 65.4 percent is based on the annualized volatility
of over one year (250 trading days) of a representative sample of seven (7)
companies with an average market capitalization of $323 million, ranging from
$95 million to $558 million, that Management believe are engaged in the mining
industry (the "Sample Companies"). Because the Company does not have a trading
history, the Company needed to estimate the potential volatility of its common
stock price, which will depend on a number of factors which cannot be
ascertained at this time. The Company referred to that annualized 250 trading
day volatility of the Sample Companies because Management believes that the
average volatility of such companies is a reasonable benchmark to use in
estimating the expected volatility of the Company's common stock
post-acquisition. A one-year period was selected as being representative of the
current environment and market valuation for companies in this sector. Although
an expected life of four years was taken into account for purposes of assigning
a fair value to the options, if the Company does not consummate an acquisition
within the prescribed time period and liquidates, the option would become
worthless.
9. Trade and other payables
As at
31 December
2006
$
Shareholder loan 124,000
Other payables 1,549,225
Placing costs 2,543,360
Accruals and deferred income 1,165,996
---------
5,382,581
---------
The shareholder loan relates to amounts owed to Mark Nordlicht, the Chairman and
a shareholder of the Company. Under the terms of the agreement, Mr Nordlicht is
to make available to the Company the advance of an aggregate of up to
$2,000,000. The advance can be drawn and re-drawn, in whole or in part, at any
time up to 30 April 2008 and in the event that the Company completes a
qualifying acquisition it will become repayable. Repayment of the advance ranks
behind all payments to shareholders due upon or prior to the Company's first
business combination, and no repayment, at the discretion of the Board from the
interest on the Trust Account or the funds from the exercise of warrants, is to
be made prior to the Company's first business combination or the Company's
liquidation. No money from the Trust Account can be used to repay the advance,
and if there is insufficient cash in the Company to repay the advance when it
has become due then the repayment date is deferred until there is sufficient
cash. The advance is unsecured and no interest is payable. Platinum Management
(NY) LLC, a Company controlled by Mr Nordlicht has agreed to guarantee the
obligations to make the advance available although it has no recourse to the
Company pursuant to such guarantee.
On 8 March 2006 the Company entered into a Placement Agreement with Casimir
Capital and KBC Peel Hunt Ltd, pursuant to which the Company appointed Casimir
Capital and KBC Peel Hunt Ltd as Placing Agents in connection with the Placing
and Admission to AIM. In consideration of the agreement of Casimir Capital to
provide its services, the Company shall pay Casimir a commission fee payable in
cash on the Initial Acquisition equal to 3.2 percent of the gross proceeds
raised by Casimir pursuant to the Placing. This amounts to $1,604,520. In
consideration of the agreement of KBC Peel Hunt to provide its services, the
Company shall pay KBC Peel Hunt a commission fee payable in cash on the Initial
Acquisition equal to 3.2 percent of the gross proceeds raised by KBC Peel Hunt
pursuant to the Placing. This amounts to $938,840. Both these amounts are
included in Placing costs.
10. Other liabilities
Aborted merger
fees
$
Balance at beginning of the period -
Additions 2,600,000
Amount used -
---------
Balance at the end of the period 2,600,000
---------
On 23 October 2006, Nord Resources Corporation ("Nord") entered into an
Agreement and Plan of Merger with the Company for the sale of 100 percent of its
common stock and outstanding options and warrants and payment of Nord's
outstanding corporate debt and other expenses in return for $60,000,000 from the
Company. The proposed Acquisition received approval of Nord's shareholders and
the approval of at least 80 percent of the Company's shareholders. Among the
provisions of the agreement the Company was to place $250,000 per month in a
trust account to fund possible termination expenses should the transaction not
be closed.
On 22 December 2006 the Company refused to close the merger leading to a claim
by Nord that they had breached the agreement.
On 5 March 2007, Nord and the Company entered into a Settlement Agreement and
Release wherein the parties agreed to terminate the merger agreement. As payment
of settlement, the Company agreed to pay Nord up to the sum of $3.6 million in
full and final settlement of all claims and disputes between the parties, which
sum shall be paid as follows:
i. $1.1 million upon signing the Settlement Agreement and Release, it was agreed
that the balance in the trust account to fund termination expenses of $1.0
million be part of this amount.
ii. The Company is to pay Nord $50,000 per month until the earlier of (i)
completion of a Qualified Acquisition by the Company and release from the SPAC
Trust Fund; or (ii) the disbursement of the SPAC Trust Funds pursuant to the
Company's liquidation under the Trust Agreement.
iii. In the event the Company completes a Qualified Acquisition the Company
shall be required to pay the balance owing on the settlement amount of $3.6
million.
iv. In the event the Company liquidated, the amount paid by the Company to Nord
prior to the liquidation shall be decreed to be the settlement amount and the
Company shall be relieved of any further obligations to Nord.
The financial statements for the period ended 31 December 2006 include the
financial consequences of the termination. Transaction fees of $2.68 million for
the proposed Nord acquisition and $3.6 million payable as part of the Settlement
Agreement and Release have been included within administrative expenses. The
Company has already advanced $1million to Nord in respect of the settlement fee
and a liability exists for $2.6 million being the remainder of this balance.
11. Capital commitments
There were no capital commitments authorised by the Directors or contracted for
at 31 December 2006.
12. Related party transactions
During the period the company reimbursed travel and miscellaneous expenses from
the following Directors.
Director's Name Reimbursed Balance as at
expenses for 31 December
the period 2006
ended
31 December
2006
$ $
Bobby Cooper 54,354 13,327
Mark Nordlicht 714 -
John Ryan 24,541 -
Thomas Loucks 134,761 50,884
Howard Crosby 36,026 24,548
Brian Burgess 144 -
John May 3,431 -
Included in the Income statement are service fees totalling $71,250 due to
Platinum Management (NY) LLC, a company controlled by one of the Directors, for
the provision of meeting space and various administrative services. $71,250
remained outstanding at the year end.
An unsecured interest free loan facility of $2 million was made available to the
Company by Mark Nordlicht, executive chairman and shareholder. The Company drew
down $824,000 in the period of which $124,000 remained outstanding at the
balance sheet date.
13. Events after the balance sheet date
Strand Partners Limited Agreement
On 18 April 2007, the Company announced the appointment, with immediate effect,
of Strand Partners Limited as its Nominated Adviser and Broker. Under the terms
of the agreement, Strand will be paid a fee of #200,000, of which #75,000 is due
upon signing and #125,000 is due upon a successful completion of a Qualified
Acquisition and re-admission of the enlarged share capital to trade on AIM.
Concurrent with the Strand appointment, KBC Peel Hunt's services as the
Company's Nominated Advisor and Broker were terminated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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