RNS Number : 6254Y
Target Resources Plc
09 July 2008
TARGET RESOURCES PLC
CHAIRMAN'S STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2008
I am pleased to announce the interim results of Target Resources Plc ("Target" or
"Company") for the 6 months ended 30 April 2008. The
financial information comprises the consolidated results of Target, its direct subsidiaries
Pride Diamonds LLC and Milestone Trading Limited
and Milestone's Sierra Leone subsidiaries.
As the results show, the start of our planned larger scale processing has been somewhat
set back. This results from unforeseen delays
outside the Company's control. Equipment needed to allow the Density Media Separation (DMS)
plant to operate is now anticipated to arrive on
site in August 2008. The cutter head dredge, which will feed a large new jig plant, is not now
scheduled to arrive until September 2008.
In the meantime, accumulation of gravels continues and there is limited processing as an
interim measure, through the recently
constructed scrubber and jig plant.
Due to these unforeseen delays in getting equipment to site and the resultant delay to
larger scale processing, the Company has thought
it prudent to raise further finance, and today announces that Laurelton Diamonds Inc
("Laurelton") has increased the short term debt
facility it made available to Target in April 2008, by $1.5 million. In order to demonstrate
his commitment to the business and operations
of Target, the Company announces that on 8 July, Dr Nissim Levy, CEO of Target has made
available a short term loan of $1.25 million to the
Company.
The loan made available by Dr Levy can be drawn down in whole or in part, carries an
interest of LIBOR plus 4 per cent, and is repayable
6 months following drawdown, but in any event not before the Company has repaid Laurelton the
$3.5 million (together with accrued interest)
it has made available to the Company under its short term debt facility.
The Directors believe that the funds available to it should give the Company sufficient
resources to support the Company until it is
able to reach increased scale diamond production, anticipated to be around September 2008.
Dr Levy's loan to the Company is classed as a related party transaction under the AIM
Rules. The Directors consider, having consulted
with the Company's nominated adviser, that the terms of this loan are fair and reasonable
insofar as the Company's shareholders are
concerned.
Whilst it is always tempting fate in this industry to cite the prospect of better times
around the corner, I do feel that now, with most
of the equipment purchased, with the last placement being fully on site shortly and with the
accumulated 95,000 tons of gravels already
showing a promising diamondiferous content, your company is at last well set up to maximize
the potential of its key diamond leases, as well
as to actively exploit the various new licences acquired over the last ten months.
An initial inspection of our new gold exploration licence carried out by SRK Exploration
Services suggests good prospectivity, and it is
our intention to begin exploration work in the near future.
Freddy Hager
Chairman
8 July 2008
TARGET RESOURCES PLC
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2008
Six months ended Six months ended
30 April 2008 30 April 2007
(Unaudited) (Unaudited)
Notes £ £
Group turnover 123,391 178,764
Cost of goods sold (2,238,338) (1,266,169)
Gross loss (2,114,947) (1,087,405)
Administrative expenses before (1,594,616) (996,134)
charge for share based payments
Share based payments 9 (288,327) (327,238)
Total administrative expenses (1,882,943) (1,323,372)
Group operating loss (3,997,890) (2,410,777)
Finance costs (255,706) (53,576)
Loss before taxation (4,253,596) (2,464,353)
Taxation - (21,850)
Loss for the period (4,253,596) (2,486,203)
Attributable to:
Equity holders of the Company (4,253,596) (2,486,203)
Minority interests - -
(4,253,596) (2,486,203)
Loss per share (pence) 3
Basic (3.59p) (2.84p)
Diluted (3.59p) (2.84p)
TARGET RESOURCES PLC
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 APRIL 2008
Attributable to equity holders
Share Share Other Retained Minority
Total
capital premium reserves losses interest
equity
£ £ £ £
£ £
At 1 November 2006 867,593 9,254,171 1,053,464 (10,183,181) (132,719)
859,328
Issue of share capital 23,496 794,155 - - -
817,651
Translation differences on
re-translation to sterling of
the Group's net investment in
foreign operations - - 18,996 - -
18,996
Share based payments (note 9) - - 366,096 - -
366,096
Loss for the six months ended
30 April 2007 - - - (2,486,203) -
(2,486,203)
Transfer of minority interest
(note below) - - - (132,719) 132,719
-
At 30 April 2007 891,089 10,048,326 1,438,556 (12,802,103) -
(424,132)
At 1 November 2007 1,183,755 14,213,115 2,205,113 (15,127,046) (135,791)
2,339,146
Issue of share capital, net of 33,501 335,244 - - -
368,745
costs
Translation differences on
re-translation to sterling of
the Group's net investment in
foreign operations
- - 86,812 - -
86,812
Share based payments (note 9) - - 288,327 - -
288,327
Loss for the six months ended
30 April 2008 - - - (4,253,596) -
(4,253,596)
Transfer of minority interest
(note below) - - - (135,791) 135,791
-
At 30 April 2008 1,217,256 14,548,359 2,580,252 (19,516,433) -
(1,170,566)
Under the requirements of International Accounting Standard 27, all of the losses of the
subsidiaries with net liabilities where there
are minority shareholdings are to be taken to the results attributable to the shareholders of
the Company until the net liabilities in those
subsidiaries become nil. Accordingly the losses allocated to minority interests in earlier
periods have been transferred to the retained
losses of the Group.
TARGET RESOURCES PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 30 APRIL 2008
Notes 30 April 2008 31 October 2007
(Unaudited) (Audited)
£ £
Assets
Non-current assets
Goodwill 1,003,442 1,003,442
Other intangible assets 4 786,627 642,857
Plant and equipment 5 3,618,476 877,096
5,408,545 2,523,395
Current assets
Trade and other receivables 702,518 157,938
Cash and cash equivalents 467,255 6,066,239
1,169,773 6,224,177
Total assets 6,578,318 8,747,572
Liabilities
Non-current liabilities
Borrowings 7 2,522,705 2,422,950
Provision for liabilities 6 1,083,473 1,087,006
Licence fees payable 160,338 160,338
3,766,516 3,670,294
Current liabilities
Trade and other payables 1,618,069 1,429,739
Borrowings 7 2,364,299 1,308,393
3,982,368 2,738,132
Total liabilities 7,748,884 6,408,426
Net (liabilities)/assets (1,170,566) 2,339,146
Equity
Capital and reserves attributable
to equity holders
Share capital 8 1,217,256 1,183,755
Share premium 8 14,548,359 14,213,115
Other reserves 2,580,252 2,205,113
Retained losses (19,516,433) (15,127,046)
Equity attributable to shareholders
of the Company (1,170,566) 2,474,937
Minority interests - (135,791)
Total equity (1,170,566) 2,339,146
TARGET RESOURCES PLC
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2008
Note Six months ended Six months ended 30 April
30 April 2008 2007
(Unaudited) (Unaudited)
£ £
Cash used in operations 10 (3,112,485) (1,798,853)
Investing activities
Purchase of plant and (3,353,086) (11,361)
equipment
Costs of acquiring subsidiary - (32,469)
Cash acquired with subsidiary - 511,032
Mining licences acquired (70,440) -
Net cash (used in)/from (3,423,526) 467,202
investing activities
Financing activities
Cost of share issues (133,768) -
Loans obtained 908,174 482,875
Net cash from financing 774,406 482,875
activities
Decrease in cash and cash (5,761,605) (848,776)
equivalents
Cash and cash equivalents at 6,066,239 1,052,563
beginning of the period
Exchange rate effects 162,621 18,996
Cash and cash equivalents at 467,255 222,783
the end of the period
TARGET RESOURCES PLC
NOTES TO THE UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 APRIL 2008
1. Basis of preparation and going concern
This half-yearly financial report, which includes a condensed set of financial statements
of the Company and its subsidiary undertakings
("the Group"), has been prepared using the historical cost convention and in accordance with
the International Financial Reporting Standards
("IFRS") including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and
Evaluation of Mineral Resources', as adopted by the
European Union ("EU").
This condensed set of financial statements for the six months ended 30 April 2008 is
unaudited and does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. They have been prepared using
accounting bases and policies consistent with
those used in the preparation of the financial statements of the Company and the Group for the
year ended 31 October 2007 and those to be
used in year ending 31 October 2008. The financial statements for the year ended 31 October
2007 have been delivered to the Registrar of
Companies and the auditors' report on those financial statements was unqualified and did not
contain a statement made under Section 237(2)
or Section 237(3) of the Companies Act 1985.
The half-yearly financial report was approved by the Board of Directors on 8 July 2008.
Going concern
Although during the six months ended 30 April 2008, the Group made a loss of £4,253,596,
had net operating cash outflows of £3,112,485
and at 30 April 2008 had net liabilities of £1,170,566 and net current liabilities of
£2,812,595, the half-yearly financial report has been
prepared on the going concern basis for the following reasons.
The Directors are of the opinion that the Group has sufficient cash to fund its activities
based on projected cash flow information in
excess of twelve months from the date of approval of this half-yearly financial report.Management continues to monitor all working capital
commitments and balances on a weekly basis and believes that they have identified appropriate
levels of financing for the Group to continue
to meet its liabilities as they fall due for at least the next twelve months.
In common with many similar companies, the Group raises finance for its activities in
discrete tranches. The Directors are confident
that, as the Company has repeatedly been able to do to date, short-term debt funding can be
obtained should diamond production be
insufficient to cover ongoing costs. The Directors and senior management have their own
financial resources and have recently committed
US$1.25m in debt. Laurelton Diamonds, Inc, (a subsidiary of Tiffany & Co (NYSE: TIF), part of
the group which is a shareholder in the
Company, has remained supportive and has after date confirmed a US$3.5m line of credit. The
Directors believe there are other sources if
needed. The Directors also believe that the prospects for diamond production are now strong,
particularly in light of the arrival of most of
the equipment funded by the October 2007 equity placement and large stockpiles of
diamondiferous gravel awaiting processing.
With the prospect of a significant increase in the extraction of gravel and the high
quality of diamonds expected in the licensed areas,
the Directors believe that the Group will be able to grow its business and will become
profitable in the future. Accordingly, they are
satisfied that the going concern basis remains appropriate for the preparation of the
half-yearly financial report for the six month period
ended 30 April 2008.
2. Segment information
A business segment is a group of assets and operations engaged in providing products or
services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in
providing products or services within a
particular economic environment that are subject to risks and returns that are different from
those of segments operating in other economic
environments.
Primary reporting format - business segments
During the period, the Group's one business segment was exploration and mining of alluvial
diamonds and selling them in the related
world markets.
Secondary reporting format - geographical segments
During the period ended 30 April 2008, the Group sold its products in one geographical
area, being Europe (excluding UK).
The information on sales, total assets and capital expenditure for the period is set out
below:
6 months ended 30 April 6 months ended 30 April 2007
2008
£ £
Sales
Europe excluding UK 123,391 178,764
123,391 178,774
Sales are allocated based on the country in which the customer is located.
At 30 April At 31 October 2007
2008
£ £
Total assets
UK 1,985,707 6,007,860
Sierra Leone 4,592,611 2,739,712
6,578,318 8,747,572
Total assets consist of intangible assets, stocks, receivables and operating cash. Total
assets are allocated based on where the assets
are located.
6 months ended 30 April 2008 Year ended
31 October
2007
£ £
Capital expenditure
UK - -
Sierra Leone 3,611,497 400,634
3,611,497 400,634
Capital expenditure comprises additions to property, plant and equipment and intangible
assets. Capital expenditure is allocated based
on where the assets are located.
3. Loss per ordinary share
The basic loss per ordinary share has been calculated using the loss attributable to the
Company's equity shareholders for the financial
period of £4,253,596 (2007: £2,486,203) and the weighted average number of ordinary shares
in issue of 118,412,514 (2007: 87,628,992).
The diluted loss per share has been calculated using a weighted average number of shares
in issue and to be issued of 121,358,019 (2007:
93,177,716). The diluted loss per share has been kept the same as the basic loss per share as
the conversion of share warrants and options
decreases the basic loss per share, thus being anti-dilutive.
4. Other intangible assets
The movements of other intangible assets during the period were as follows:
Deferred Mining licences Rehabilitation
Total
exploration costs costs
£ £ £
£
Cost
At 1 November 2007 193,861 469,888 189,660
853,409
Additions - 117,303 -
117,303
Exchange differences 7,981 19,346 7,808
35,135
30 April 2008 606,537 197,468
1,005,847
201,842
Amortisation
At 1 November 2007 16,813 4,079 189,660
210,552
Charge for the period - - -
-
Exchange differences 692 168 7,808
8,668
At 30 April 2008 17,505 4,247 197,468
219,220
Net book value
At 30 April 2008 184,337 602,290 -
786,627
At 31 October 2007 177,048 465,809 -
642,857
The costs for mining licences above includes a sum of £390,829 (US$750,000) for the
acquisition of mining licences during 2006, payable
over a period of five years. Of this amount £198,084 has been paid to date by 30 April 2008,
£32,407 is included in other payables, payable
in the next financial year and £160,338 is payable after more than one year. The costs of
mining licences also includes a sum of £93,726 for
the acquisition of mining licences in 2008, of which £46,863 remains unpaid at 30 April
2008.
There have been no amortisation charges on deferred exploration and mining licences this
year as the accumulated amortisation brought
forward exceeded the total amortisation as at 30 April 2008 in respect of these assets based
on the Group's accounting policy.
5. Plant and equipment
Mining equipment, Cabins and Motor vehicles
Fixtures and Total
plant and machinery associated set up
fittings
costs
£ £ £
£ £
Cost
At 1 November 2007 1,331,948 59,498 77,886
89,020 1,558,352
Additions 3,458,611 - 35,583
- 3,494,194
Exchange differences 54,621 2,408 3,167
3,965 64,161
At 30 April 2008 4,845,180 61,906 116,636
92,985 5,116,707
Depreciation and impairment
At 1 November 2007 620,911 17,587 19,694
23,064 681,256
Depreciation charge 783,602 6,783 12,273
10,513 813,171
Exchange differences 2,890 133 202
579 3,804
At 30 April 2008 1,407,403 24,503 32,169
34,156 1,498,231
Net book value
At 30 April 2008 3,437,777 37,403 84,467
58,829 3,618,476
At 31 October 2007 711,037 41,911 58,192
65,956 877,096
6. Provisions for liabilities and charges
30 April 31 October
2008 2007
£ £
Provision for employer's national insurance
on share based payments 122,551 122,551
Provision for deferred consideration 960,922 964,455
1,083,473 1,087,006
The provision for deferred consideration arose on the acquisition of Pride Diamonds LLC in
2007, less payments made to date.
7. Borrowings
30 April 31 October
2008 2007
£ £
Non-Current
Loan (note a) 2,522,705 2,422,950
Current
Loans (note b) 2,364,299 1,308,393
4,887,004 3,731,343
a) This is a US$5,000,000 loan received from Tiffany & Co in 2007. The loan is
repayable in a single instalment five years after
drawdown, and contains representations, warranties and events of default which are usual for a
facility of this type. The loan is unsecured
and incurs interest at 1% above LIBOR. Tiffany has agreed a ten year exclusive marketing
agreement for the Company's diamonds output.
b) Other loans are denominated in US Dollars and are subject to fixed interest rates of
10% to 12.5%. These loans are repayable on
demand and are unsecured.
8. Share capital, warrants and options
30 April 31 October
2008 2007
£ £
Authorised
1,000,000,000 ordinary shares of 1p each 10,000,000 10,000,000
Allotted, called up and fully paid
121,725,580 (31 October 2007: 118,375,496) ordinary 1,217,256 1,183,755
shares of 1p each
The movements of the issued share capital and the share premium account for the six months
ended 30 April 2008 are shown below:
Number of shares Share capital at Share
of 1p each nominal value premium
£ £
118,375,496 1,183,755 14,213,115
At 1 November 2007
Issue of shares, net of costs 3,350,084 33,501 335,244
At 30 April 2008 121,725,580 1,217,256 14,548,359
The Company issued the above 3,350,084 ordinary shares of 1p each for 15p per share in
April 2008. The cash proceeds of £502,513 were
received in May 2008.
The share warrants and share options outstanding at 30 April 2008 are as follows:
Number of warrants Number of options
At 1 November 2007 and 30 April 2008 15,895,262 11,904,163
9. Share based payments
Six months ended Six months ended
The Group recognised the following 30 April 2008 30 April 2007
charges in the income
statement in respect of its share based
payment plans:
£ £
Employer's national insurance - 366,096
IFRS 2 charge 288,327 (38,858)
288,327 327,238
The above charge is based on the requirements of IFRS 2 on share based payments and
relates entirely to share options granted in prior
financial periods which are still in their vesting periods. For this purpose, the weighted
average estimated fair value for the share
options granted was calculated, using a Black-Scholes option pricing model in respect of
options. The volatility measured at the standard
deviation of expected share price return is based on statistical analysis of the share price
since the Company's admission to the
Alternative Investment Market ("AIM") and this has been calculated at 90%. The risk free rate
has been taken at 5.50%.
10. Reconciliation of cash generated from operations
Six months ended Six months ended
30 April 2008 30 April 2007
£ £
Group operating loss (3,997,890) (2,410,777)
Adjustments for non-cash items:
Depreciation and amortisation 813,171 368,274
Share based payments charge 288,327 327,238
(2,896,392) (1,715,265)
Changes in working capital (147,410) (30,012)
Cash used in operations (3,043,802) (1,745,277)
Net finance costs paid (68,683) (53,576)
(3,112,485) (1,798,853)
11. Events after the balance sheet date
In June 2008 the Company borrowed US$2 million from Laurelton Diamonds, Inc. (a subsidiary
of Tiffany & Co (NYSE: TIF)) to be used for
working capital requirements.
In July 2008 the Company agreed to borrow US$1.25 from Dr Nissim Levy, a director and CEO
of the Company, and an additional US$1.5
million from Laurelton Diamonds, Inc. Further details are set out in the Chairman's
Statement.
12. Exploration commitments
In order to maintain an interest in the new licences acquired in early 2008, the Group is
committed to provide US$1.25 million to
service operational aspects of the work programme over the first two years of the licences.
INDEPENDENT REVIEW REPORT BY THE AUDITORS
TO TARGET RESOURCES PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in
the half-yearly financial report for the six
months ended 30 April 2008, which comprises the consolidated income statement, consolidated
statement of changes in equity, consolidated
balance sheet, consolidated cash flow statement and related explanatory notes.
We have read the other information contained in the half-yearly financial report and
considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the
directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the AIM Rules for Companies.
As disclosed in note 1, the annual financial statements of the Group are prepared in
accordance with IFRSs, as adopted by the European
Union. The condensed set of financial statements, included in this half-yearly financial
report, has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting", as adopted by the
European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity", issued by the
Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Review conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of financial statements in the
half-yearly financial report for the six months ended 30 April 2008 is not prepared, in all
material respects, in accordance with
International Accounting Standard 34, as adopted by the European Union and the AIM Rules for
Companies.
Emphasis of matter
In forming our conclusion on the condensed set of financial statements which is not
qualified, we have considered the adequacy of the
disclosures made in Note 1 to the half-yearly financial report concerning the Group's ability
to continue as a going concern. The Group
incurred a net loss of £4,253,596 and had net operating cash outflows of £3,112,485 for the
six months ended 30 April 2008 and, as of that
date, the Group had net liabilities of £1,170,566 and net current liabilities of £2,812,595.These conditions, along with other matters
discussed in Note 1, indicate the existence of a material uncertainty which may cast
significant doubt on the Group's ability to continue as
a going concern. The half-yearly financial report does not include the adjustments that would
result if the Group were unable to continue as
a going concern.
UHY Hacker Young LLP Quadrant House
17 Thomas More Street
Chartered Accountants Thomas More Square
Registered Auditors London E1W 1YW
8 July 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UWUNRWNRBRAR
|