Conroy Gold and Natural Resources plc
Annual Report 2002

Plain-text annual report

Conroy Diamonds and Gold P.l.c. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c. Annual Report and Financial Statements 2002 Contents 3 Chairman’s Statement 6 Review of Operations 10 Company Information 12 Directors’ Report 15 Auditors’ Report 17 Profit and Loss Account 18 Balance Sheet 19 Cash Flow Statement 20 Statement of Accounting Policies 22 Notes to the Financial Statements 2 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Chairman’s Statement 3 Dear Shareholder I have pleasure in presenting your Company’s Annual Report and Financial Statements for the twelve months ended 31st May 2002, a period of further major progress for your Company. I am delighted to report excellent progress with the exploration programmes for gold in Ireland and diamonds in Finland. The continuing good results from the Longford-Down Massif within which your Company has identified the Armagh-Monaghan Gold Belt, lend encouragement to your Company’s belief that the Massif itself may prove to be a new gold province of European and, perhaps, of world-class significance. Excellent Drilling Results The Armagh-Monaghan Gold Belt, which is becoming an increasingly significant discovery, is located in a geological structure called the Longford-Down Massif. The gold deposits and prospects identified to date are all spatially related to the Orlock Bridge Fault, a geological structure, which your Company’s geologists believe most influenced the creation of the Gold Belt and is the main geological control over mineralisation in the region. Results from drilling at your Company’s gold deposit at Cargalisgorran in Co. Armagh are also highly encouraging. Significant gold mineralisation has been identified in three separate structures over a strike length of approximately 150m. The deepest intersection to date is at a vertical depth of around 55m below surface. The mineralised structures are parallel, trend NNE, and all three are open at depth and along strike. Only a very small part of a very large geochemical anomaly covering the Cargalisgorran prospect has so far been Recent drilling in the Gold Belt has included investigated by trenching and drilling. the intersection of a 67m (200ft) mineralised zone at your Company’s Tullybuck-Lisglassan gold deposit in Co. Monaghan. This broad zone of gold mineralisation is much wider than any previous intersection in this deposit. The result adds further weight to the view expressed by the British Geological Survey in its March 2000 report that mineralisation at Tullybuck- Lisglassan may be considerably more extensive than previously thought. It also has important implications for the demonstration of an economic resource for future mining. A new zone of gold mineralisation has been discovered in the Gold Belt. The new discovery is located at Tivnacree in Co. Armagh, some 1.2 km south-west of Cargalisgorran where previous reconnaissance geochemistry outlined a gold – in soil anomaly some 300 x 250 metres in area. The identification of this new zone of gold mineralisation is a very welcome development which adds further weight to the view that the two gold deposits already discovered by the Company in Armagh and Monaghan are part of a larger gold bearing system. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 4 Several other gold in soil anomalies have also main host rocks for diamonds. Since studies been outlined by geochemical sampling have shown that the glacial tills in this part elsewhere within the Armagh-Monaghan Gold of Finland have moved only relatively short Belt. All of the Gold Belt lies within your distances, the source of the indicator minerals Company’s licence area. may be nearby. Elsewhere in the Longford-Down Massif, near The Kuhmo district is part of the Karelian Slieve Glah in Co. Cavan, some 45 kilometres Craton that extends into Russia and it is to the south west of Tullybuck-Lisglassan, the considered to be one of the most prospective Orlock Bridge Fault shows a marked deviation areas for diamonds in Finland. Crustal thickness to the south and may form a dilation zone. is of crucial importance in the formation of This type of geological structure is frequently kimberlite pipes of economic significance, and associated with large-scale mineral deposition. in the Kuhmo area the earth’s crust is over To date a detailed soil geochemistry 200km thick. programme has defined three extensive gold anomalies in the area and trenching to bedrock is planned in order to define drill targets. Diamond Indicator Minerals I am very pleased to report highly encouraging results from your Company’s ongoing diamond exploration programme in Finland. A large number of kimberlitic indicator minerals, together with many diamond indicator minerals, including key G9 and G10 garnets, have been recovered from the Kuhmo district. This is an exploration area in eastern Finland close to the Russian border where your Company has completed a programme of Your Company’s exploration strategy is based on the belief that world-class diamond deposits similar to those found in Russia may exist in similar geology on the Finnish side of the border. The latest results support your Company’s strategy and are a highly significant step towards finding economic diamond bearing kimberlites in Finland. The sampling programme is being undertaken on your Company’s behalf by the Geological Survey of Finland (GSF) in conjunction with Conroy Diamonds and Gold staff and consultants. Sample analysis is being undertaken in the GSF regional till sampling covering approximately laboratories. 1,700km2. G9 and G10 garnets are formed at the same temperatures and pressures as diamonds but in larger quantities and their presence in till samples is therefore particularly encouraging at such an early stage in the programme. Your Company also discovered kimberlitic indicators and G9 garnets in an area in western Finland. Both eastern and western exploration areas lie within the Archaean Karelian Craton, the block of ancient crustal rocks, which extends into Russia where it is known to contain major diamond deposits. The type of indicator minerals found in the Kuhmo area suggests that they are derived from the erosion of kimberlites, one of the These are excellent results at this stage of your Company’s exploration programme and we are obviously very pleased particularly in terms of the numbers of indicator minerals recovered and their distribution pattern. When viewed in conjunction with studies of glacial till movement in this area of Finland, it suggests we may be close to the kimberlite source of these indicator minerals. In terms of the search for diamondiferous kimberlites in Finland by Conroy Diamonds and Gold and other companies, our results appear to be equal to, or better than, anything reported by others at a comparable stage of exploration and augur well for future diamond discoveries. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . On Site in Finland 5 Strategy Auditors The success of your Company’s exploration I would like to take the opportunity of strategy in identifying major geological and thanking the partners and staff of Arthur prospecting opportunities is most encouraging Andersen for their services to your Company with a potentially world class gold mining and to welcome KPMG, with whom Arthur discovery in Ireland and excellent results from Andersen in Ireland have combined, as the diamond exploration in Finland. new auditors. Finance Directors, Consultants and Staff At the Annual General Meeting on the 12th I would like to express my appreciation of the December, 2001 the authorised and issued support and dedication of the directors, ordinary shares of IR£0.025 each were consultants and staff. I am pleased to welcome redenominated into Euro units and renominalised as shares of €0.03 each as detailed in Note 10 to the accounts. The last year has been a very difficult one on Stock Exchanges around the globe. Despite this the Company raised €601,647, net of expenses, last spring through the issue of 3,130,000 new ordinary shares, the details of which are set out in Note 10 to the accounts. These funds have enabled your Company to continue with its programmes, the excellent results of which I have detailed above. In July a further 3,000,000 ordinary shares of €0.03 each were issued for a consideration of 10p sterling per share (€0.155 per share resulting in a premium of €0.125 per share) to further fund the exploration programme. the appointment of Mr Jim Sweeney as an additional senior geologist. Jim has extensive experience in both gold and diamond exploration and development. Future Outlook Your Company looks to the future with considerable confidence. We have a potentially world-class gold prospect in Ireland, excellent results from our diamond exploration programme in Finland and the team with a track record to build on this success. Professor Richard Conroy Chairman Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Review of Operations 2002 6 Introduction Highlights of Conroy’s operations during the past year are the identification of a wide zone of gold mineralisation at the Tullybuck-Lisglassan Gold Deposit and a new zone of gold mineralisation at Tivnacree in Co. Armagh, both on the Company’s ground holding in the Longford-Down Massif. In Finland, the discovery of diamond indicator minerals on the Company’s acreage is a significant step in the search for diamondiferous kimberlites. The latest discovery at Tullybuck-Lisglassan resulted from the most recent drilling campaign and adds weight to the view that the deposit is potentially part of a much larger mineralised system. At a new prospect, Tivnacree, preliminary trenching and drilling over a gold in soil anomaly have identified gold in bedrock. This most recent discovery confirms the Company’s view that gold mineralisation is widespread in this area and is seen as a promising breakthrough in what is an untested area. Elsewhere in the Longford-Down Massif, further prospects have been identified through work carried out in the past year. As a result of our soil sampling and trenching programmes, a number of targets have been outlined, which we expect to drill in the near future. In Finland, results from our exploration programme in the Kuhmo area are highly encouraging. To date, a large number of kimberlitic and diamond indicator minerals have been recovered. These include G9 and G10 garnets, which are particularly important diamond indicator minerals. The Company now holds approximately 1500km2 of prospective ground in Ireland and in Finland our ground holding has been increased significantly. Ireland - The Longford-Down Massif Regional Geology The Longford-Down Massif forms part of a Caledonian Terrane stretching from north- eastern America to Scandinavia. It extends through the counties of Longford, Cavan and Monaghan in the Republic of Ireland and Armagh and Down in Northern Ireland. The Massif is of Ordovician-Silurian age and was formed as an accretionary prism along the collision margin of two crustal plates, the Iapetus and the Laurentian. Comparable and correlatable geology and mineralisation is found in Scotland (the Southern Upland mineral fields and occurrences) and North America (Newfoundland and New Brunswick). The structure and lithologies of the Massif are developed more or less parallel to the plate and collision margin. The northern part of the Massif is mainly of Ordovician age and andesitic greywacke composition. The south is mainly Silurian and composed principally of lithic and feldspathic greywacke. The boundary between the two greywacke types, andesitic and non-andesitic greywacke is defined by a major strike-slip fault, known as the Orlock Bridge Fault (OBF), with a lateral displacement in excess of 400 kilometres. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 7 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 8 Armagh-Monaghan Gold Belt The Company’s mineralisation model for the Armagh-Monaghan Gold Belt in the Longford- Down Massif, proposes interaction between the OBF and deep-seated geological features. The presence of post-OBF north-south faulting and Caledonian age intrusive rocks are also regarded as significant components of the model. The Company’s work at both Tullybuck- Lisglassan in Co. Monaghan, and Cargalisgorran Also at Tullybuck-Lisglassan, another drill hole, located approximately 200m north of hole No. 10, intersected a mineralised fault structure similar to others encountered in earlier drilling. In all cases at Tullybuck-Lisglassan gold mineralisation is associated with fault breccia, wallrock alteration and the development of sulphide minerals. The results from this hole illustrate significant strike potential at Tullybuck-Lisglassan, and are seen as highly significant. in Co. Armagh has confirmed the presence of At Tivnacree in Co. Armagh, 5 kilometres north mineable widths and grades of gold mineralisation. During this year’s drilling west of Tullybuck-Lisglassan, a new zone of gold mineralisation has been discovered. programme, the best intersection yet has been Trenching over a >10 ppb gold in soil anomaly achieved at Tullybuck-Lisglassan. Significantly has returned gold in bedrock values up to 5 this showed a much wider zone of metres @ 1.62 g/t gold. Subsequent drilling mineralisation (67.3m down hole) than any has identified a mineralised shear zone previous drilling. This broad mineralised zone exhibiting characteristics similar to those seen included a number of high-grade gold bearing at Tullybuck-Lisglassan and Cargalisgorran. intervals, which are tabulated below: Hole No. From (m) To (m) Interval Au g/t 10 10 10 22.70 45.25 78.50 24.20 50.00 85.25 1.50 4.75 6.75 6.23 2.50 3.15 The significance of this intersection is that it shows gold mineralisation at Tullybuck– Lisglassan is not just confined to the high- grade veins previously reported. Elsewhere in the Armagh-Monaghan Gold Belt, additional trenching and drilling targets have been defined. Drilling is planned in selected areas where trenching has outlined areas of anomalous gold in bedrock. Several trenching targets have also been identified over areas where soil geochemistry has shown anomalous gold values. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Finland: Pitting for Indicator Minerals Other Exploration At Slieve Glah, also in the Longford-Down Massif, some 45 kilometres south west of Tullybuck-Lisglassan, soil geochemistry has shown anomalous gold values extending over approximately 1.7 kilometres. Trenching targets same temperatures and pressures as diamonds. The indicator minerals found during this programme occur in clusters and the pattern of their distribution suggests a possible kimberlite source in the vicinity and within our licensed area. have been chosen over selected parts of this The results thus far from our sampling anomaly. Elsewhere, reconnaissance work continues on numerous gold and base metal targets. Finland The Company’s exploration efforts in Finland programme in Finland reinforce the Company’s belief that world-class diamond deposits similar to those found in Russia may exist in the Karelian Craton on the Finnish side of the border. These results are also a most significant step towards the discovery of economic diamond bearing kimberlites in Finland by the are focused on the Karelian and Kola Cratons, Company. 9 two major structures which form the ancient geological core of north-west Europe, the Baltic Shield. This part of Finland is known to be highly prospective, particularly for diamonds. Indeed, major diamond discoveries have been made across the border in Russia, in particular the Lomononsova deposit, which is hosted by the Karelian Craton. Several companies have also discovered diamondiferous kimberlites in the Finnish Karelian Craton. During the past year the Company has significantly increased its ground holding in Finland. This ground holding is mostly in the Kuhmo area of eastern Finland in the Karelian Craton. The Company’s ongoing diamond exploration programme in the Kuhmo area has yielded highly significant results this year, including the recovery of a large number of kimberlitic and diamond indicator minerals. These include G9 and G10 garnets, which are of special significance, as they are known to form at the Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Company Information Directors Professor Richard Conroy Chairman* Maureen T. A. Jones Managing Director* James P. Jones Finance Director*+ Louis J. Maguire Non-Executive Director*+ Henry B. Knott Non-Executive Director+§ Dr. Pamela Conroy Non-Executive Director§ Company Secretary and Registered Office James P. Jones 10 Upper Pembroke Street Dublin 2 Ireland Dublin Stockbrokers Dolmen Butler Briscoe Dolmen House 4 Earlsfort Terrace Dublin 2 www.conroydiamondsandgold.com Registrars Auditors KPMG Chartered Accountants 1 Harbourmaster Place IFSC Dublin 1 Capita Corporate Registrars PLC Unit 5 Manor Street Business Park Manor Street Dublin 7 Legal Advisers William Fry Solicitors Fitzwilton House Wilton Place Dublin 2 Roschier-Holmberg Keskuskatu 7A 00 100 Helsinki Finland 10 Henry H. Rennison+§ Nominated Adviser * Members of Executive Committee Seymour Pierce Limited + Members of Remuneration Committee 29/30 Cornhill London EC3V 3NF § Members of Audit Committee Nominated Broker Seymour Pierce Ellis Limited Talisman House Jubilee Walk Three Bridges Crawley West Sussex RH10 1LQ Professor Richard Conroy Maureen T. A. Jones James P. Jones F.C.A. Dr. Pamela Conroy Henry H. Rennison Louis J. Maguire Henry B. Knott Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Conroy Diamonds and Gold P.l.c. Annual Report and Financial Statements 2002 Financial Information Contents 12 Directors’ Report 15 Auditors’ Report 17 Profit and Loss Account 18 Balance Sheet 19 Cash Flow Statement 20 Statement of Accounting Policies 22 Notes to the Financial Statements Directors’ Report for the Year Ended 31 May 2002 The Directors present their annual report, Future Development of the Business together with the audited financial statements of Conroy Diamonds and Gold Plc for the year ended 31 May 2002. It is the intention of the Directors to continue to develop the activities of the Company. Further strategic opportunities in mineral resources, both in Ireland and abroad, will be Principal Activities and Business Review sought by the Company. The current focus of the Company’s activities is on a major geological structure in Ireland Results for the Year and State of Affairs at known as the Longford-Down Massif. The 31 May 2002 Company has acquired prospecting licences over an area of almost 1,500km2 .On one small portion of this licence area, at Clontibret in County Monaghan, the Company has intersected high grades and mineable widths of gold mineralisation in the Tullybuck/ Lisglassan deposit, which, the Directors believe, has the potential to become the first major gold mine in Britain or Ireland in recent The profit and loss account for the year ended 31 May 2002 and the balance sheet at that date are set out on pages 17 and 18 respectively. The Company recorded a loss for the financial year of €347,862 (2001 - €305,369). The shareholders’ funds increased to €3,485,595 at 31 May 2002 from €3,231,810 at 31 May 2001. times. Recent drilling of the Tullybuck/ No dividends or transfers to reserves are Lisglassan deposit has yielded further excellent recommended by the Directors. 12 results. Exploration within the Company’s licence area has demonstrated, in addition to the Tullybuck/Lisglassan gold deposit, an extensive gold belt which extends over a distance of up to 18km from County Armagh into County Monaghan. Geochemical surveys within this gold belt point to the existence of lookalike units to Tullybuck/Lisglassan, with the potential to host further similar mineral deposits. In the prior year a new gold deposit was discovered at Cargalisgorran in County Armagh on one of the anomalies identified in the Geochemical survey. The Company has also acquired claim reservations in Finland which have diamond and gold prospects. Important Events since the Year End Between 19 and 23 July 2002, 3,000,000 ordinary shares of €0.03 each were issued for a consideration of 10p sterling per share to fund further mineral exploration. This realised €0.155 per share resulting in a premium of €0.125 per share. There have been no other significant events affecting the Company since the end of the financial year. Health and Safety at Work The wellbeing of the Company’s employees is safeguarded through adherence to health and safety standards in accordance with the requirements of the Safety, Health and Welfare at Work Act, 1989. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Directors Directors’ and Secretary’s Shareholdings The Directors who served during the year are and Other Interests as follows: R.T.W.L. Conroy P. Conroy The interests of the Directors and Secretary, all of which were beneficially held, in the ordinary share capital of the Company at 31 May 2001 J.P. Jones L.J. Maguire and 31 May 2002 were as follows: M.T.A. Jones H.B. Knott H.H. Rennison Ordinary Shares of €0.03 each Options In accordance with the Company’s Articles of R.T.W.L. Conroy 3,750,010 1,000,000 Association, Mr J.P. Jones and Mr Henry B. Knott J.P. Jones 350,010 275,000 will retire by rotation and, being eligible, will offer themselves for re-election at the Annual M.T.A. Jones 750,010 325,000 General Meeting. H.H. Rennison 330,010 50,000 P. Conroy 500,010 125,000 L.J. Maguire 310,010 H.B. Knott 150,010 50,000 25,000 13 Details of the options are as follows: Directors May 2001 During During May 2002 At 31 Granted Exercised At 31 Price € Expiry Date Year Year R.T.W.L. Conroy 1,000,000 J.P. Jones M.T.A. Jones 275,000 325,000 H.H Rennison 50,000 P. Conroy L.J. Maguire H.B. Knott 125,000 50,000 25,000 - - - - - - - - - - - - - - 1,000,000 0.2539 4 Dec 2010 275,000 0.2539 4 Dec 2010 325,000 0.2539 4 Dec 2010 50,000 0.2539 4 Dec 2010 125,000 0.2539 4 Dec 2010 50,000 0.2539 4 Dec 2010 25,000 0.2539 4 Dec 2010 Except as disclosed above, neither the Directors nor their families had any beneficial interest in the share capital of the Company. There have been no contracts or arrangements entered into during the financial year in which a Director of the Company had a material interest and which were significant in relation to the Company’s business. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Directors’ Report continued Substantial Shareholdings So far as the Board is aware, no person or company, other than the Directors’ interests disclosed above and the shareholder listed below, held 3% or more of the issued ordinary share capital of the Company at 31 May 2002. Number of Shares 946,000 % 4.57 Name Gartmore Fund Managers Limited Political Donations As explained in Note 1 to the financial statements, the Directors have reviewed cashflow projections and other relevant information and are satisfied that the Company will be able to continue in operation for the foreseeable future. Accordingly, the financial statements have been prepared on the going concern basis. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply There were no political donations during the with the Companies Acts 1963 to 2001. They year. Books of Account 14 The measures which the Directors have taken to ensure that proper books of account are kept are the adoption of suitable policies for are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Auditors recording transactions, assets and liabilities, The auditors, Arthur Andersen, Chartered the employment of appropriately qualified staff Accountants have expressed their willingness and the use of computer and documentary to continue in office in accordance with Section systems. The Company’s books of account are 160 (2) of the Companies Act, 1963. kept at 10 Upper Pembroke Street, Dublin 2. Directors’ Responsibility Statement Company law requires the Directors to prepare On behalf of the Board financial statements for each year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the R.T.W.L. Conroy Director J.P. Jones Director Company for that year. In preparing the 30 August 2002 financial statements, the Directors have: • selected suitable accounting policies and then applied them consistently; • made judgements and estimates that are reasonable and prudent. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Independent Auditors’ Report We have audited the financial statements We read the Directors’ Report and consider the on pages 17 to 27 which have been prepared implications for our report if we become aware under the historical cost convention and in of any apparent misstatement within it. accordance with the accounting policies set out on pages 20 and 21. Basis of Opinion Respective Responsibilities of Directors and Auditors We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, The Directors’ responsibilities for preparing the on a test basis, of evidence relevant to the Annual Report and the financial statements in amounts and disclosures in the financial accordance with applicable law and Irish statements. It also includes an assessment of Accounting Standards are set out in the the significant estimates and judgements made Statement of Directors’ Responsibilities. by the Directors in the preparation of the Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and Auditing Standards promulgated by the Auditing financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. Practices Board in Ireland and the United We planned and performed our audit so as to Kingdom. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Acts. We also report to you whether, in our opinion: proper books of account have been kept by the Company; whether, at the balance sheet date, there exists a financial situation requiring the convening of an extraordinary general meeting of the Company; and whether the information given in the Directors’ Report is consistent with obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Mineral Interests the financial statements. In addition, we state In forming our opinion, we considered the whether we have obtained all the information adequacy of the disclosures made in the necessary for the purposes of our audit and financial statements, particularly in Note 6 in whether the Company’s balance sheet and its relation to the Directors’ assessment of the profit and loss account are in agreement with carrying value of the Company’s mineral the books of account. We report to the shareholders if, in our opinion, any information required by law regarding Directors’ remuneration and Directors’ transactions is not given and, where practicable, include such information in our report. interests held outside the cost pools of €4,250,337. In view of the significance of this uncertainty, we consider that this should be drawn to your attention. Our opinion is not qualified in this respect. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 15 Independent Auditors’ Report continued Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company at 31 May 2002 and of its loss and cashflows for the year then ended and have been properly prepared in accordance with the Companies Acts, 1963 to 2001. We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The Company’s financial statements are in agreement with the books of account. In our opinion, the information given in the Directors’ report on pages 12 to 14 is consistent with the financial statements. The net assets of the Company, as stated in the balance sheet on page 18 are more than half of the amount of its called up share capital and, in our opinion on that basis there did not exist at 31 May 2002, a financial situation which, under Section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the Company. Arthur Andersen Chartered Accountants and Registered Auditor Dublin 30 August 2002 16 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Profit and Loss Account for the Year Ended 31 May 2002 Notes 2002 € 2001 € Operating Expenses Other Income Loss on Ordinary Activities before Taxation Tax on loss on ordinary activities Loss for the Year Profit and Loss Account, at 31 May 2001 Profit and Loss Account, at 31 May 2002 2 3 4 (355,245) (320,190) 7,383 14,821 (347,862) (305,369) - (347,862) (743,794) (1,091,656) - (305,369) (438,425) (743,794) Loss per ordinary share – Basic and fully diluted 5 (€0.019) (€0.022) There are no recognised gains or losses other than the loss for the year. The accompanying notes form an integral part of this profit and loss account. R.T.W.L. Conroy Director J.P. Jones Director Approved by the Directors on 30 August 2002 17 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Balance Sheet 31 May 2002 Fixed Assets Mineral interests Tangible assets Current Assets Debtors Cash at bank and in hand Notes 2002 € 2001 € 6 11 7 4,250,337 3,261,035 66,746 65,863 4,317,083 3,326,898 19,449 208,549 227,998 45,957 1,049,695 1,095,652 Creditors: Amounts falling due within one year 8 (1,059,486) (968,536) Net Current (Liabilities)/Assets (831,488) 127,116 18 Total Assets less current Liabilities 3,485,595 3,454,014 Creditors: Amounts falling due after more than one year Net Assets Capital and Reserves Called up share capital Capital Conversion Reserve Fund Share premium account Profit and loss account Shareholders’ Funds – all equity 9 10 10 10 12 - (222,204) 3,485,595 3,231,810 620,732 30,617 557,449 - 3,925,902 3,418,155 (1,091,656) (743,794) 3,485,595 3,231,810 The accompanying notes form an integral part of this balance sheet. R.T.W.L. Conroy Director J.P. Jones Director Approved by the Directors on 30 August 2002 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Cash Flow Statement For the Year Ended 31 May 2002 Net Cash Outflow from Operating Activities 13A (199,579) (16,875) Notes 2002 € 2001 € Returns on Investments and Servicing of Finance Taxation - - - - Capital Expenditure and Financial Investments 13B (1,008,031) (1,419,985) Net Cash Outflow before Financing (1,207,610) (1,436,860) Financing Decrease in Cash 13B 13C 411,489 1,155,468 (796,121) (281,392) The accompanying notes form an integral part of this cash flow statement. R.T.W.L. Conroy Director J.P. Jones Director Approved by the Directors on 30 August 2002 19 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 20 Statement of Accounting Policies The financial statements have been prepared under the historical cost convention. The Company’s principal accounting policies are set out below. All of these policies have been applied consistently throughout the year. A Mineral Interests i Exploration, appraisal and development expenditure The Company accounts for mineral expenditure under the ‘full cost’ method of accounting. Exploration, appraisal and development expenditure is incurred on acquiring, exploring or testing exploration prospects. All lease, licence and property acquisition costs, geological and geophysical costs and other direct costs of exploration, appraisal and development are capitalised. The amount capitalised includes other operating expenses directly related to these activities. ii Cost Pools Costs are capitalised within geographic cost pools which initially comprise Ireland and the rest of the world. Costs relating to the exploration and appraisal of mineral interests which the Directors consider to be unevaluated are initially held outside the cost pool. Costs held outside the cost pool are reassessed at each year end. When a decision to develop these interests has been taken, or there is evidence of impairment, the related costs are transferred to the cost pool. Proceeds from the disposal of part or all of an interest which is outside the cost pool is credited to that interest with any excess being credited to the cost pool. iii Ceiling Test A ceiling test is carried out at each balance sheet date to assess whether the net book value of capitalised costs in the pool, together with the future costs of development of undeveloped reserves, is covered by the discounted future net revenues from the reserves within the pool, calculated at prices prevailing at the year end. Any deficiency arising is provided for to the extent that, in the opinion of the Directors, it is considered to represent a permanent diminution in the value of the related asset, and where arising, is dealt with in the profit and loss account as additional depreciation. iv Depreciation Expenditure within the cost pool is depreciated using the unit of production method based on commercial reserves. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the anticipated future costs of development of the undeveloped reserves at current year end unescalated prices. Changes in cost and reserve estimates are dealt with prospectively. B Issue Expenses and Share Premium Account Issue expenses arising on the issue of equity securities are written off, in the first instance, against the share premium account, with any issue expenses in excess of the balance on the share premium account being written off to the profit and loss account. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . C Tangible Fixed Assets Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis to write off the cost less estimated residual value of the assets over their estimated useful lives as follows: Motor vehicles Office equipment 5 years 8 years D Taxation Corporation tax is provided on taxable profits (if any) at current rates. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis. 21 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Notes to the Financial Statements 31 May 2002 1 Operations and Going Concern The Company is an investment holding company and is currently involved in the development of mineral exploration opportunities, principally in the Longford-Down Massif. During the year €601,647, net of expenses, was raised by the issue of new share capital. The finance raised will be used to continue to develop the Company’s activities. On the basis of their review of projected cash flow information, existing commitments and taking into account the above funding together with the very encouraging results obtained from the exploration programme, the Directors consider it appropriate to prepare the financial statements on the going concern basis. 2 Operating Expenses 2002 € 2001 € Management services and operating expenses (a) 944,597 862,509 Transfer to Mineral Interests (Note 6) (589,352) (542,319) 355,245 320,190 22 a The Company had eight employees during the period (2001 - seven). The remuneration paid during the period comprised salary of €417,329, social welfare costs of €22,816 and pension costs of €90,764 (2001 - €385,848, €25,161 and €86,972 respectively). 3 Loss on Ordinary Activities before Taxation The loss on ordinary activities before taxation is arrived at after charging the following items, which are stated at amounts prior to the re-allocation to mineral interests: Auditors’ remuneration Directors’ emoluments • fees • other including pension contributions 2002 € 15,872 79,359 410,071 2001 € 15,872 79,359 393,638 Included in Director’s emoluments is an amount of €90,764 (2001 - €86,972) which relates to pension costs accrued at the year end. This amount will be transferred to a defined contribution pension scheme, which is currently being established. All losses arose from continuing operations. 4 Tax on loss on Ordinary Activities No taxation charge arises in the financial year due to losses incurred. There was no unprovided deferred taxation at 31 May 2002 (2001 - €Nil). Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 5 Loss per ordinary share The calculation of the loss per ordinary €0.019 share is based on the loss for the financial year of €347,862 (2001 – €305,369) and the weighted average number of ordinary shares on a basic and fully diluted basis during the year of 18,343,570 (2001 – 14,185,070). Share options are not included in the calculation of fully diluted shares since the Company incurred a loss in 2002 and 2001 which resulted in these shares being anti-dilutive. 6 Mineral Interests Costs held outside cost pool: Cost Ireland € Overseas € Total € At 31 May 2001 2,775,955 485,080 3,261,035 Expenditure during the period - licences and appraisal - other operating costs (Note 2) 307,216 500,949 92,734 88,403 399,950 589,352 At 31 May 2002 3,584,120 666,217 4,250,337 The Directors have considered the proposed work programmes for these mineral interests, presently held outside the cost pools. They are satisfied that there are no indications of impairment, but recognise that future realisation of the mineral interests, held outside the cost pools, is dependent on further successful exploration and appraisal activities and the subsequent economic production of the mineral reserves. 7 Debtors Amounts falling due within one year VAT receivable Other 8 Creditors: Amounts falling due within one year Accruals Due to related undertaking (Note 15) Bank overdraft 2002 € 4,284 15,165 19,449 2002 € 784,684 274,802 - 1,059,486 2001 € 41,512 4,445 45,957 2001 € 701,307 222,204 45,025 968,536 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 23 Notes to the Financial Statements continued 9 Creditors: Amounts falling due after more than one year Due to related undertaking 10 Called up Share Capital and Premium Authorised: 2002 € - 2002 € 2001 € 222,204 2001 € 400,000,000 ordinary shares of €0.03 each 12,000,000 12,000,000 Issued and Fully Paid: Start of year 17,561,070 557,449 Renominalisation of shares (a) (30,617) 30,617 3,130,000 93,900 24 Share issue (b) Issue expenses End of year Share Capital € Capital conversion reserve fund € Number Share Premium € 3,418,155 - 600,960 (93,213) - - 20,691,070 620,732 30,617 3,925,902 a On 12 December 2001,in accordance with the Economic and Monetary Union Act, 1998 (the “EMU Act”), the authorised share capital of IR£10,000,000 divided into 400,000,000 ordinary shares of IR£0.025 each and the total issued share capital of 17,561,070 ordinary shares of IR£0.025 each were redenominated into the Euro unit (as defined in the EMU Act) at the conversion rate of IR£0.787564 = €1, and then renominalised giving rise to a total issued share capital of 17,561,070 ordinary shares of €0.03 each. The total issued share capital was reduced by €30,617 as a result of the above redenomination and renominalisation and this amount was transferred to a Capital Conversion Reserve Fund. b Between 25 February 2002 and 10 March 2002, 3,130,000 ordinary shares of €0.03 were issued for a consideration of 13.5p sterling per share to fund further mineral exploration. This realised €0.222 per share resulting in a premium of €0.192 per share. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 11 Tangible Fixed Assets Cost 31 May 2001 Additions 31 May 2002 Accumulated Depreciation 31 May 2001 Depreciation charge 31 May 2002 Net Book Value 31 May, 2001 31 May 2002 Office Equipment € 27,865 18,729 46,594 8,077 5,824 13,901 19,788 32,693 12 Reconciliation of Movement in Shareholders’ Funds At 31 May, 2001 Loss for the financial year Shares issued, net At 31 May 2002 Motor Vehicles € 60,112 - Total € 87,977 18,729 60,112 106,706 14,037 12,022 26,059 46,075 34,053 22,114 17,846 39,960 65,863 66,746 2002 € 2001 € 3,231,810 2,603,915 (347,862) (305,369) 601,647 933,264 3,485,595 3,231,810 13 Notes to the Cash Flow Statement A Reconciliation of Loss to Net Cash Outflow from Operating Activities: 25 Operating Loss Depreciation Increase in Creditors Decrease/ (Increase) in Debtors Net Cash (Outflow) from Operating Activities (199,579) 2002 € 2001 € (347,862) (305,369) 17,846 103,929 26,508 15,506 300,811 (27,823) (16,875) Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Notes to the Financial Statements continued B Analysis of Cash Flows: Capital Expenditure and Financial Investment Investment in mineral interests (989,302) (1,350,576) Purchase of tangible fixed assets (18,729) (69,409) 2002 € 2001 € Financing Issue of share capital, net Due to related party (Note 15) (1,008,031) (1,419,985) 601,647 (190,158) 933,264 222,204 411,489 1,155,468 C Analysis and Reconciliation of Net Funds 31 May 2001 Cash Flow 26 Cash at bank and in hand 1,049,695 (841,146) Bank overdrafts (45,025) 45,025 31 May 2002 208,549 - 1,004,670 (796,121) 208,549 14 Commitments and Contingencies Obligations under Mineral Interests The Company has received prospecting licences under the Republic of Ireland Mineral Development Acts 1940 to 1995 for areas in Monaghan and Cavan. It has also received licences in Northern Ireland for areas in Armagh and Down in accordance with the Mineral Development Act (Northern Ireland) 1969. The Company has certain obligations in respect of these licences at year end. The commitments in relation to these licences are as follows: Expiration period: • Within one year • Between two and five years 2002 € 2001 € 110,000 240,000 350,000 176,494 250,138 426,632 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 15 Related Party Transactions In the prior year, the Company acquired information, knowledge and expertise from Conroy Plc, a company which has common shareholders and Directors and in which one of the Directors and shareholders of the Company has a controlling interest. The purchase consideration of €444,408 was payable at 31 May 2001 (Notes 8 and 9). An amount of €190,158 was paid during the current year and the remaining balance of €254,250 at 31 May 2002 is payable within one year and included in the balance due to related undertaking. The remaining amount of €20,552 included in the total balance of €274,802 (Note 8) relates to VAT reclaimed by the Company on behalf of Conroy Plc, which is now repayable to Conroy Plc. The Company also shares accommodation with Conroy Plc. The Company bears its appropriate share of the related costs directly. 27 Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . Notice of Meeting NOTICE is hereby given that the Annual General Meeting of Conroy Diamonds and Gold P.l.c. (“the Company”) will be held at the Conrad Hotel, Earlsfort Terrace, Dublin 2 on Thursday 12 December 2002 at 12.00 noon for the purposes of transacting the following business: 1 To receive and consider the Financial Statements for the year ended 31 May 2002 together with the Directors’ and Auditors’ Reports thereon (Resolution No. 1). 2 To re-elect as Directors the following persons: Mr J P Jones (Resolution No.2 (a)) Mr H B Knott (Resolution No.2 (b)) 3 To authorize the Directors to fix the remuneration of the Auditors (Resolution No.3). 4 To consider and, if thought fit, pass the following resolution as a Special Resolution (Resolution No.4): “That, for the purposes of Section 24 of the Companies (Amendment) Act, 1983 and subject to the Directors being authorized pursuant to Article 10 of the Articles of Association of the Company, the Directors be empowered to allot equity securities for cash pursuant to and in accordance with Article 11 of the Articles of Association of the Company. The authority hereby conferred shall expire at the close of business on the date of the next Annual General Meeting of the Company unless previously revoked or renewed in accordance with the provisions of 28 the Companies (Amendment) Act, 1983.” 5 To transact any other business. By Order of the Board Dated this 12th day of November 2002 James P Jones Secretary Registered Office 10 Upper Pembroke Street Dublin 2 Notes: The holders of the Ordinary Shares are entitled to attend and vote at the above General meeting of the Company. A holder of Ordinary Shares may appoint a proxy or proxies to attend, speak and vote instead of him. A proxy need not be a member of the Company. A Form of Proxy is enclosed for use by shareholders unable to attend the meeting. Proxies to be valid must be lodged with the Company’s Registrars, Capita Corporate Registrars PLC, Unit 5 Manor Street Business Park, Manor Street, Dublin 7 not less than 48 hours before the time appointed for the holding of the meeting. Annual Report and Financial Statements 2002 Conroy Diamonds and Gold P.l.c . 

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