CGM.L Regulatory News (CGM)

18 Dec 2006 10:49

China Goldmines PLC18 December 2006 China Goldmines plc(Company Number 5529561)www.chinagoldmines.com 18 December 2006 STOCK EXCHANGE RELEASE Results for the Year to 30 June 2006 China Goldmines plc is a gold resource company with a direct interest in a gold mining project in the province of Hunan, China. 30 June 2006 - Preliminary Result Highlights:- Financial Results • Successful AIM listing on 7 February 2006 and successful £4,500,000 placing completed in February 2006. • In accordance with the Joint Venture Agreement, at 30 June 2006 China Goldmines has an 80% interest in the Hunan Westralian Mining Co., Ltd (JV Company). • Losses for the period were $US(675,735) being (3.99)c per share. • The Group's cash position at year end was US$6.2m. • Net current assets at the year end were US$6.0m Operational Highlights Since listing on AIM on 7th February 2006, good progress has been made towardsthe development of the Guanzhuang Gold Prospect. The Company is well advanced in completing Stage 1 of its exploration programbeing:- • Structural mapping, detailed sampling and re-surveying of the existing underground mine developments. • Preliminary metallurgical test work. • 3D computer modelling of all geology, assay and survey data to assist in identifying the controls on mineralisation. • Diamond drilling to test identified structural, geological and geophysical targets, along with more systematic resource definition drilling. The geological results confirm high grade mineralisation at the ShenjiayaProspect. The key highlights of our exploration since listing has indicatedthat:- • Underground sampling results of the Shenjiaya Gold Prospect confirms high grade of gold bearing quartz veins. • New discovery of gold bearing quartz veins in the southern portion of our exploration licence. • The Company has established its operational office and logistic campsite in Guanzhuang and head office in Changsha.-------------------------------------------------------------------------------- Post Period Drilling Update(as released in our December announcement) • Surface Diamond Drilling and underground channel sampling results return high grade gold mineralisation at the Shenjiaya Project. Sampling results include:- - Jinzhuwan Mine 1.5m @ 118.27 g/t Au - Xianglu Mine 1.37m @ 29.3 g /t Au - Zhengjiashan Mine 1.70m @ 13.10 g/t Au • Surface diamond drilling has commenced to drill test the depth and lateral extension to known mineralisation within the mines. Highlights of recent results include:- - Hole ZK03 0.75m @ 68.75 g/t Au - Hole ZK03 2.0m @ 48.45 g/t Au - Hole ZK601 2.3m @ 15.45 g/t Au - Hole ZK1001 1.4m @ 46.90 g/t Au • Mineralisation remains open at depth and along strike. • Continuing run of the mine sampling confirm extraction of ore grade material from the operating mines of between 5 g/t and 10 g/t Au. • Our Chinese JV Partner has estimated a gold resource, using Chinese resource methodology and standards, of some 1.2 million ounces to a depth of approximately 325m below surface. PROJECT AREA - Ore Resource Statement Mineral Resources Tonnes g/t Au Cont OzsShenjiaya Project >3.0g/t Au 2,071,833 16.12 1,073,832Xiaotaoyuan Project >3.0g/t Au 282,409 15.35 139,373 TOTALS 2,354,252 1,213,205 The area east of the Xianglu mine intersected by current drillholes has been block modelled, results from preliminary inferred resourceestimation, using a 3 g/t Au lower cut-off grade and a 35 g/t Au upper cut-offgrade, is projected for 278,000 tonnes at 3.95 g/t Au will add an additional35,000 contained ounces. China Goldmines' CEO, Mr Frank Vanspeybroeck commented:- "We are very pleased to announce that since the commencement of our explorationactivities in April of this year the results to date far exceed ourexpectations. The geological results continually indicate high gradesdemonstrating a profitable mining operation, as a grade of 2.5 - 3 (and above) g/t Au is profitable in China. Further more our initial drilling has indicatedthat the mineralisation continues beyond our 5 km strike length project. This is a significant milestone for the Company as it will validate our ChineseJV Partner's resource calculation of one million plus ounces to a depth ofapproximately 325 metres (using Chinese resource methodology and standards). The Company looks forward to accelerate our drilling program for the 2007 yearas a pre-curser to our feasibility study for mining operations." -------------------------------------------------------------------------------- Chairman's Statement Dear Shareholder In this, my first Annual Report as Chairman, I would like to thank Shareholdersfor their confidence and support of the Board and Management team of ChinaGoldmines plc (CGM). Our longer term vision is to make China Goldmines plc a dominant mining house incentral China. This year we aim to demonstrate the economic potential of ourShenjiaya and Xiaotaoyuan Prospect. The Company's objective to take advantage of opportunities in the resource goldmining sector at this very positive point in time within the commodity cycle.China Goldmines is also well positioned to take advantage of the opportunitiesin China given its experienced staff, its existing high quality prospects andits financial ability to deliver scoping and feasibility studies. China Goldmines was admitted to the Alternative Investment Market of the LondonStock Exchange on the 7th February 2006 to develop mining prospects in Chinawith an initial specific focus on gold. The group has entered into a ChineseForeign Co-operative Joint Venture contract with Brigade 407 as described in theCompany's Admission Document to form the Hunan Westralian Mining Company Limited("JVC"). The purpose of the JVC is to explore and develop the co-operationarea. China Goldmines is currently conducting exploration programmes and scopingstudies as a pre-curser to the BFS and potential development of its assets withits Chinese Joint Venture partner. Our Chinese Joint Venture Partner, Brigade 407, has produced a Resource EstimateReport (using Chinese resource standards) estimating that based on theirassessments there is a gold resource of in excess of 1.2 million ounces to adepth of no more than 325m within the Guanzhuang Project. On the basis ofBrigade 407's report, and from our independent geological consultants RSG, webelieve that the consolidation of the various interests in the co-operation areamay provide an exploration and development target of potentially over onemillion ounces of gold. Exploration in the Guanzhuang Gold Prospect started in April 2006 and theresults of this season are detailed in this Annual Report. In summary:- • The company has successfully established its head office in Changsha and exploration site office/camp site at Guanzhuang. • It has completed Stage 1 of its exploration programme, by undertaking structural mapping, detailed sampling, re-surveying underground mine developments and preliminary metallurgical test work. • Underground sampling of the Shenjiaya Gold Prospect confirms the economic grade of the gold bearing quartz veins. • Currently the company is undertaking 4,000 metres of drilling, to test economic continuation of ore bodies at depth. Delays have occurred with the backlog of assays to be undertaken in China which we are immediately addressing. • To date geological results confirm high grade mineralisation at the Shenjiaya Prospect. During the year the organisation has grown to nineteen full time employees,fifteen of whom are employed by the JVC and four in our Australian subsidiarycompany. China Goldmines has seven directors, two executives and five nonexecutives. The executive directors are predominantly based in China and are inregular communication with other Board members. The Company has a strong health and safety training policy. We are training ourstaff in the use of western geological techniques. China Goldmines is workingclosely with local government and local communities in the areas of environment,health and social responsibility. I hope that shareholders continue to share our vision with us as we move forwardinto 2007 with what promises to be a very exciting period. I wish to thank my fellow directors and the management team and staff who haveworked hard over the recent months to successfully initiate explorationprogrammes, administrative functionality and commence the Company's initialphase under the Co-operative JV Agreement. Clive Donner Chairman -------------------------------------------------------------------------------- Review of Operations The Certificate of Approval for Establishment of Enterprises with ForeignInvestment in the People's Republic of China was issued by the Hunan ProvincialDepartment of Commerce on the 4th July, 2005. This approval allows the JointVenture Company to conduct exploration, mining, refining and related activitiesin the Guanzhuang Project Area and is for a period of thirty years - keymilestone for China Goldmines. The Guanzhuang Gold Project comprises two main prospects being the ShenjiayaProspect and Xiaotaoyuan Prospect. Of these, the Shenjiaya Prospect isconsidered the most prospective and is the larger of the two. All tenementswithin the Guanzhuang prospect are in good standing. Exploration and Prefeasibility Strategy - Update After setting up an exploration office in Guanzhuang, field work started inApril 2006. A summary of the events:- • Budgeted for US$1.385 m expenditure over 18 months in 2 parts, to delineate a minimum of 150,000 oz of gold within the Guanzhuang Project. • Part One (undertaken): Establish an office and logistics camp on site, underground survey of all mining operations within the project areas,surface costeaning, geological and structural mapping, geochemical-rock chip sampling of auriferous quartz veinsystems, preliminary metallurgical test work, geological interpretation and data base management. • Part two (in progress): Commence surface diamond drilling concurrent with geological and geotechnical analysis and interpretation, wire-framingof the defined gold mineralisation; block modelling, geostatistical analysis and resource estimation. A preliminarymining review for the area will determine the requirements for ongoing development prior to mining in the area. • On successful completion of the above, CGM will conduct feasibility studies covering preliminary mine planning and production costs estimates. Metallurgy Metallurgical testing on mineralisation has commenced. Resource Verification The key initial objective was to verify previous trench and underground tunnel(adit) assays in order to establish and build confidence in the projects and theresource base. This will lead to the estimation of a resource for the advancedprospects which is assessed to international standards and accepted by the stockmarket. Trenching and drilling to increase the resource has commenced. Theassay data and maps were all captured in digital form to enable rapid retrievaland interpretation of data and flexibility in presentation, includingthree-dimensional models. Software was acquired and training given to ourChinese staff. Extensions and New Targets New Discovery Reconnaissance surface geological mapping has been concentrated to the south ofthe Shenjiaya mine. This mapping has been successful in the discovery of ananomalous gold bearing quartz vein and gold bearing vein quartz material. Oneof several specimens were found, one weighing in at 1.170 kgs. These findingsdemonstrate that the area is under explored for gold. Reconnaissance mapping inconjunction with surface sampling will continue. Profitable Mining Surface sampling programme was implemented to determine the grade of mill feed,Run of Mine Ore, for the current producing mines. The programme was for a periodof 21 days. This involved the collection of a daily bulk composite sample by thecollection of two standard shovel loads of minus 1" diameter sized material fromeach ore wagon. The composite sample was then reduced by conventional cone andquarter method to produce a 2 kg sample for assay. All assays were done by theWoxi Mine laboratory, by the fire assay method. Assays show a wide range ofvalues. Examination of the sampled material shows that there is a dilutionfactor, i.e. the presence of wall rock material which is a function of blastingwhich is likely the reason for some of the lower grade values. Furthermore noneof these mining operations practice grade control procedures. This exercise willbe repeated to ascertain the variance in ore grade from each operation. Daily sampling indicated a range of 0.5 (min) to a 40.8 (max) assay result g/tAu. Conceptual Development The planned consolidation of 8 mines within the Shenjiaya Prospect area underthe control of the Joint Venture Company, will enhance the production potentialand prospectivity for the Shenjiaya Prospect. The Directors believe there is the potential to mine to a vertical depth of1,000 metres as in the nearby Woxi mine. Sampling by Brigade 407 at theShenjiaya Prospect has shown higher grades of gold mineralisation within thestructures than at Woxi. -------------------------------------------------------------------------------- Consolidated Income Statementfor the Year Ended 30 June 2006 Year 38 week ended period ended 30 June 2006 30 June 2005 US$ US$ Continuing operations Salaries and employee benefits (199,589) -Office expenses and professional fees (391,716) (5,320)Consulting expenses (194,342) -Travel and accommodation expenses (119,255) -Other expenses (70,026) -Operating loss (974,928) (5,320) Other gains and losses 201,334 -Finance income - bank interest 97,859 728 received Loss before tax (675,735) (4,592) Tax - - Loss for the period (675,735) (4,592) Attributable to:Equity holders of the parent (657,448) (4,592)Minority interest (18,287) - (675,735) (4,592) 2006 2005 Cents Cents Earnings per share Basic and diluted (3.99) (0.04) -------------------------------------------------------------------------------- Consolidated Statement of Recognised Income andExpense for the Year Ended 30 June 2006 38 week Year ended period ended 30 June 2006 30 June 2005 US$ US$ Loss for the period (675,735) (4,592)Exchange differences on translation of foreign operations 17,060 - Total recognised income and expense for the period (658,675) (4,592) Attributable to:Equity holders of the parent (640,388) (4,592)Minority interests (18,287) - (658,675) (4,592) -------------------------------------------------------------------------------- Consolidated Balance Sheet as at 30 June 2006 As at As at 30 June 2006 30 June 2005 $ $Non-current assetsIntangible assets 587,551 -Property, plant and equipment 108,583 -Investments - 238,869 696,134 238,869 Current assetsTrade and other receivables 182,754 4,656Cash and cash equivalents 6,197,074 46,000 6,379,828 50,656 Total Assets 7,075,962 289,525 Trade and other payables (339,093) (37,549) Total Liabilities (339,093) (37,549) Net assets 6,736,869 251,976 EquityShare capital 390,151 256,568Share premium account 6,725,683 -Foreign exchange reserve 17,060 -Other reserves 61,344 -Retained earnings (662,040) (4,592) Equity attributable to equity holders of the parent 6,532,198 251,976 Minority interest 204,671 - Total equity 6,736,869 251,976 -------------------------------------------------------------------------------- Consolidated Cash Flow Statement for the Year Ended 30 June 2006 38 week Year ended period ended 30 June 2006 30 June 2005 $ $ Net cash from operating activities (865,677) (5,476) Investing activitiesInterest received 97,859 728Costs of acquiring an investment - (97,285)Acquisition of subsidiary (186,123) (59,785)Purchases of property, plant and equipment (33,989) - Net cash used in investing activities (122,253) (156,342) Financing activitiesProceeds on issue of shares 6,920,610 207,818 Net cash from financing activities 6,920,610 207,818 Net increase in cash and cash equivalents 5,932,680 46,000 Movement in foreign exchange rate 218,394 - Cash and cash equivalents at beginning of year 46,000 - Cash and cash equivalents at end of year 6,197,074 46,000 -------------------------------------------------------------------------------- Notes to the Financial Statements 1. General information These financial statements are presented in US dollars because that is thecurrency of the primary economic environment in which the group operates. 2. Significant accounting policies Basis of accounting The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs). The financial statements have also beenprepared in accordance with IFRSs adopted for use in the European Union andtherefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared on the historical cost basis exceptfor the revaluation of financial instruments. 3. Loss per share The calculation of the basic and diluted earnings per share is basedon the following data: Earnings Year Year 2006 2005 $US $US Earnings for the purposes of basic and diluted earnings per share (657,448) (4,592)being net profit attributable to equity holders of the parent -Loss Number Number Number of shares Weighted average number of ordinary shares for the purposes ofbasic and diluted earnings per share 11,835,882 11,383,439 Cents (Loss) Earnings per share (3.99) (0.04) 4. Report and Financial Statements The above financial information does not constitute statutory accounts asdefined in Section 240 of the Companies Act 1985. It is based on the auditedstatutory accounts for both years, upon which the auditors have issuedunqualified audit opinions. The accounts for the year to 30 June 2006 will bemailed to shareholders shortly and will be available from the registered officeat Sandgate House, 102 Quayside, Newcastle Upon Tyne, NE1 3DX. The Company will hold its Annual General Meeting at 10:30 am on Tuesday, the30th January 2007 at Brewin Dolphin Securities, Fifth Floor, 12 SmithfieldStreet, London EC1A 9BD-------------------------------------------------------------------------------- About China Goldmines plc China Goldmines plc listed on the Aim Board on the 7th February 2006 as a goldresources company focussed on the discovery and development of gold projects inthe Hunan Province, China. The Company is preparing a feasibility study on its Guanzhuang Gold Project,where a resource of + 1 million ounces within the top 325m from surface and overa strike distance of 1.5 km has been identified by our Joint Venture Partner,Brigade 407 of the Hunan Region Bureau of Geology and Mineral ResourcesExploration and Development. The Guanzhuang Gold Project consists of eight gold mines which the Company plansto consolidate. This could enhance the production potential to a vertical depthof 1000 metres from surface. Contact Phone Numbers Frank Vanspeybroeck (CEO) +61 041 116 6276Marinko Vidovich (CFO) +61 041 997 4744Changsha Office +86 731 515 8211Alex Worrall (Director/Company Secretary) +44 207 788 7621 This information is provided by RNS The company news service from the London Stock Exchange