Conroy Gold and Natural Resources plc
Annual Report 2006

Plain-text annual report

Conroy Diamonds and Gold P.l.c. Annual Report and Financial Statements 2006 C o n r o y D i a m o n D s a n D G o l D P. l . c . F i n a n C i a l s t a t e m e n t s 31 May 2006 Together with Directors’ and Independent Auditors’ Reports Index 2 Chairman’s Statement 5 Company Information 7 Directors’ Report 10 Independent Auditors’ Report 12 Profit and Loss Account 13 Balance Sheet 14 Cash Flow Statement 15 Statement of Accounting Policies 17 Notes to the Financial Statements C h a i r m a n ’ s s t a t e m e n t Dear Shareholder I have great pleasure in presenting your Company’s Annual Report and Financial Statements for the twelve months ended 31 May 2006, a period which has continued to bring exploration success in Ireland. Since the year-end your Company has acquired gold exploration assets in Finland from Conroy P.l.c. and now has active exploration programmes in place in both Ireland and Finland. The primary objective of your Company is to establish a new gold province in Ireland through the discovery and bringing into production of one or more gold deposits. Our exploration to date in the Longford-Down Massif has established a gold trend extending for at least fifty miles along strike from Co. Armagh, through Co. Monaghan and into Co. Cavan. A detailed multi-component airborne geophysical survey has now been completed over approximately 90 per cent. of your Company’s licences - an area of about 500 square miles. The results of the survey are expected to complement your Company’s extensive database of results from soil sampling, trenching and drilling programmes, together with its Landsat Enhanced Thematic Mapper (ETM) and Digital Terrain Model (DTM) data. Together, this information will provide a more comprehensive geological picture of the entire licence area, enhance your Company’s understanding of the area and highlight its potential to host one or more major gold deposits. As part of a programme to focus on the gold discoveries it has made on its licences, your Company is undertaking a detailed review of the Tullybuck-Lisglassan sector of the gold trend in County Monaghan, the location of your Company’s first discovery in the Armagh- Monaghan Gold Belt. Amongst other things, this review is expected to assist the Company in refining its geological model for that sector. The Company has also enjoyed further exploration success in this sector since the initial discovery was made and as a result the Tullybuck- Lisglassan represents just a small part of the larger Clontibret gold target. The Clontibret target covers an area measuring .5 square kms and also takes in several other gold discoveries made by your Company. The assets acquired in Finland from Conroy P.l.c. on a share exchange basis include nine exploration licences in the Central Lapland Greenstone Belt, together with an extensive geological and geophysical database. Your directors believe that Finland has excellent prospects for gold and these prospects are underdeveloped by world standards. The gold exploration assets acquired in Finland supplement the Company’s existing gold interests in the Longford-Down Massif and will, in the Directors’ opinion, expose the Company to new and exciting gold exploration opportunities in an area that is highly prospective. Finland is a mining friendly country with a well-developed infrastructure, and geological potential for large gold deposits. Most of Finland lies on the so-called Baltic Shield – the ancient cratonic mass forming the core of North Western Europe. However, this has not been subjected to the same exploration effort seen in other shield areas of the world (e.g. Southern Africa, Western Australia, Canada) and gold in Finland has been largely produced as a by-product of mining operations in massive base metal sulphide deposits.  An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . Airborne Geophysical Study of the Longford-Down Massif carried out with a DHC Twin-Otter with two magnetometers, 4 frequency EM and gamma-ray spectrometry. The survey was flown on a 200m line spacing at an altitude of 55m. Studies by the Geological Survey of Finland (GTK) have resulted in a reappraisal of Finland’s overall mineral endowment. These studies have indicated a high potential for gold in central Lapland. By 1991, the first gold mine in Finland was in operation, and this was followed by the discovery of the Suurikuusikko gold deposit in the central Lapland Greenstone Belt, which is estimated to have a resource of over  million oz of gold and is now under development by the Canadian gold mining company Agnico-Eagle Mines Limited. The previous owner of the assets has carried out an active exploration programme for gold in Finland and has acquired a significant knowledge of the style of gold deposition and mineralisation, particularly in the central Lapland Greenstone Belt. It has built up an extensive database on gold occurrences in the area, including a comprehensive overview, detailed aeromagnetic data, and a review of the entire GTK geochemical database (sample per  square kilometres). The analysis of the data was followed by the collection and analysis of over ,300 geochemical samples. This was undertaken by the GTK on behalf of the previous owner and resulted in the identification of four areas of particularly attractive prospectivity for gold in the central Lapland Greenstone Belt. The Company proposes to continue with the exploration programme over the prospective areas, which have been identified and will also continue to employ, under contract, the services of the GTK. The strategy of the Company in Finland will be to identify economic gold deposits and ultimately increase shareholder value. As I am the largest shareholder in Conroy P.l.c., and other Directors of the Company are also shareholders and Directors of both companies, an Extraordinary General Meeting was held on Wednesday 1 November 006, which resolved to proceed with the acquisition of the gold exploration assets in Finland of Conroy P.l.c. These have been independently valued at e1 million by The CSA Group, a worldwide exploration management consultancy. These assets were acquired by your Company for e1 million (£675,300), which was satisfied by the issue of 19,9,86 new Ordinary Shares, valued at 3.5p per share (the average middle market share price of the Company’s Ordinary Shares in the 3 months prior to the date of the transaction). Following this transaction, Conroy P.l.c. holds 18.6 per cent. of the issued share capital of the Company. Financials The profit after taxation for the year ended 31 May 006 was e35,153 (005: loss e513,7) and the net assets as at 31 May 006 were e5,77,35 (005: e,61,13). Caption to go here 3 F i n l a n D Auditors On 13 June 006 Deloitte & Touche were appointed as auditors to the Company. Directors, Consultants and Staff. I would like to express my deep appreciation of the support and dedication of the Directors, consultants and staff, which has made possible the continued progress and success which your Company has achieved. I am very pleased to welcome David Wathen to our Board. His extensive experience in stockbroking and corporate finance, which includes the natural resources sector, will be a valuable asset in helping the Company develop and implement plans to advance our gold projects in Ireland. I regret to report with deep sadness the death of Dr Pamela Conroy. Dr Conroy was a founding director of the Company. Her dedication, experience, advice and support, contributed significantly to the success of your Company. Future Outlook The Company will continue with its asset exploration programmes with a view to establishing a new gold province in Ireland, through the discovery and bringing into production of one or more gold deposits, and developing the gold interests in Finland. Professor Richard Conroy Chairman  An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . C o m P a n y i n F o r m a t i o n Directors Registrars Professor Richard Conroy Chairman* Maureen T.A Jones Managing Director* James P. Jones FCA Finance Director*+ Louis J. Maguire Non-Executive Director*+§ Michael E. Power Non-Executive Director§ Henry H. Rennison Non-Executive Director+ Capita Corporate Registrars P.l.c Unit 5 Manor Street Business Park Manor Street Dublin 7 www.capitacorporateregistrars.ie Nominated Adviser John East & Partners Limited Crystal Gate 8-30 Worship Street London ECA AH C. David Wathen (appointed 10 October 2006) Non-Executive Director * Member of the Executive Committee + Member of the Remuneration Committee § Member of the Audit Committee Broker City Capital Securities Ltd  John Carpenter Street London ECY AH Dublin Stockbrokers Dolmen Butler Briscoe Dolmen House  Earlsfort Terrace Dublin  Company Secretary and Registered Office James P. Jones FCA 10 Upper Pembroke Street Dublin  Ireland Auditors Deloitte & Touche Chartered Accountants Deloitte & Touche House Charlotte Quay, Limerick Legal Advisers William Fry Solicitors Fitzwilton House Wilton Place Dublin  Roschier-Holmberg Keskuskatu 7A 00 100 Helsinki Finland Head Office Conroy Diamonds and Gold P.l.c 10 Upper Pembroke Street Dublin  Tel: 353-1-661 8958 Fax: 353-1-66 113 For further information visit the Company’s website at: www.conroydiamondsandgold.com or contact: City of London PR Triton Court, Finsbury Square London ECA 1BR Tel: -0-768-5518 Professor Richard Conroy Chairman Maureen Jones Managing Director James P. Jones Finance Director Louis Maguire Non-Executive Director Michael E. Power Non-Executive Director Henry H. Rennison Non-Executive Director David Wathen Non-Executive Director Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 5 Working in Coreshed and out in the field in the Longford-Down Massif 6 An nual Repo r t and Finan cial Stat em ent s 2 0 06 Conroy D iam ond s and Gold P.l. c . D i r e C t o r s ’ r e P o r t for the Year Ended 31 May 006 The Directors present their annual report, together with the audited financial statements of Conroy Diamonds and Gold P.l.c. for the year ended 31 May 006. Principal Activities and Business Review The current focus of the Company’s activities is gold exploration on a major geological structure in Ireland known as the Longford-Down Massif. The Company holds prospecting licences over an area of almost 1,500 square kilometres on this structure. Exploration within the Company’s licence area has demonstrated an extensive gold belt which extends over a distance of approximately 18km from County Armagh into County Monaghan. Future Development of the Business It is the intention of the Directors to continue to develop the activities of the Company, concentrating particularly on gold. Further strategic opportunities in mineral resources, both in Ireland and abroad, will be sought by the Company. Risks and Uncertainties The Company’s activities are directed towards the discovery, evaluation and development of mineral deposits. Exploration for and development of mineral deposits is speculative. Whilst the rewards can be substantial, there is no guarantee that exploration on the Company’s properties will lead to the discovery of commercially extractable mineral deposits. The future net asset value is therefore, inter alia, dependent on the success or otherwise of the Company’s future exploration programmes. Whether a mineral deposit will be commercially viable in a mining operation depends on a number of factors, such as the grade of the deposit, prices of the commodities being exploited, currency fluctuations, proximity to infrastructure, financing costs and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, import and export regulations and environmental protection. Results for the Year and State of Affairs at 31 May 2006 The profit and loss account for the year ended 31 May 006 and the balance sheet at that date are set out on pages 1 and 13 respectively. The Company recorded a profit for the financial year of e35,153 (005 - Loss e513,7). The profit included a non-recurring credit of e607,197 re waiver of directors’ remuneration (Note 9). Taking account of the profit and net proceeds of a share issue which raised e807,759, the shareholders’ funds increased to e5,77,35 at 31 May 006 from e,61,13 at 31 May 005. Important Events since the Year End Subsequent to year end, On 1 November 006 the Company acquired the gold interests of Conroy Plc, which included a number of claims (licence areas) in Finland which have potential gold prospects and an extensive database. The purchase consideration of e1,000,000 was satisfied by the issue of 19,9,86 ordinary shares of e0.03 each. Directors The Directors who served during the year are as follows: R.T.W.L. Conroy J.P. Jones M.T.A. Jones H.H. Rennison P. Conroy L.J. Maguire M. E. Power The Board reports, with great sadness and regret, the death of Dr Pamela Conroy on 6 December 005. Dr Conroy had been a director of your Company since its foundation. Her dedication, experience, advice and support contributed to a major degree in the success of your Company. In accordance with the Company’s Articles of Association, Mr L.J. Maguire and Mr M. E. Power will retire by rotation and, being eligible, will offer themselves for re-election at the Annual General Meeting. Since the last Annual General Meeting, on 10 October 006, Mr David Wathen has been appointed director. Mr Wathen now retires in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c .  Directors’ and Secretary’s Shareholdings and Other Interests The interests of the Directors and Secretary, all of which were beneficially held, in the ordinary share capital of the Company at 31 May 005 and 31 May 006 were as follows: At 31 May 2005 At 31 May 2006 Ordinary Shares of €0.03 Each Options Ordinary Shares of €0.03 Each Options Warrants R.T.W.L. Conroy 3,800,010 ,100,000 9,50,00 ,5,000 1,36,93 P. Conroy 500,010 15,000 - - - M.T.A. Jones 755,010 1,150,000 880,010 1,150,000 13,839,858 J.P. Jones 350,010 85,000 75,010 85,000 8,058,19 H.H. Rennison 330,010 50,000 330,010 50,000 1,50,7 M.E. Power L.J. Maguire - - 175,000 - 301,03 310,010 50,000 310,010 50,000 1,50,7 Details of the warrants, all of which were granted during the year and are exercisable currently, are as follows: Directors R.T.W.L. Conroy M.T.A. Jones J.P. Jones L.J. Maguire M.E. Power H.H. Rennison At 31 May 2006 1,36,93 13,839,858 8,058,19 1,50,7 301,03 1,50,7 Price € 0.037 0.037 0.037 0.037 0.037 0.037 Expiry Date 15 November 015 15 November 015 15 November 015 15 November 015 15 November 015 15 November 015 Details of the options, all of which are exercisable currently, are as follows: Directors At 31 May 2006 Granted During Year At 31 May 2005 Price € Expiry Date R.T.W.L. Conroy 1,15,000 15,000 1,000,000 0.539  December 010 R.T.W.L. Conroy 500,000 R.T.W.L. Conroy 600,000 M.T.A. Jones M.T.A. Jones M.T.A. Jones J.P. Jones J.P. Jones J.P. Jones P. Conroy 35,000 375,000 50,000 75,000 75,000 75,000 - - - - - - - - 500,000 0.08 1 March 013 600,000 0.10 6 November 013 35,000 0.539  December 010 375,000 0.08 1 March 013 50,000 0.10 6 November 013 75,000 0.539  December 010 75,000 0.08 1 March 013 75,000 0.10 6 November 013 - (15,000) 15,000 0.539  December 010 H.H. Rennison 50,000 L.J. Maguire 50,000 - - 50,000 0.539  December 010 50,000 0.539  December 010 8 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . 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. Substantial Shareholdings So far as the Board is aware, no person or company, other than the Directors' interests disclosed above and the shareholders listed below, held 3% or more of the issued ordinary share capital of the Company at 31 May 006 Name Gartmore Fund Managers Limited Number of Shares % 1,310,000 1.5 Mr Bruce Rowan 10,50,000 1.01 Political Donations • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 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 with the Companies Acts, 1963 to 005. They 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. 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. There were no political donations during the year. Auditors The auditors, Deloitte & Touche, Chartered Accountants, were appointed during the year and have expressed their willingness to continue in office in accordance with Section 160 () of the Companies Act, 1963. On behalf of the Board R.T.W.L. Conroy Director 15 November 006 J.P. Jones Director Books of Account The measures which the Directors have taken to ensure that proper books of account are kept are the adoption of suitable policies for recording transactions, assets and liabilities, the employment of appropriately qualified staff and the use of computer and documentary systems. The Company's books of account are kept at 10 Upper Pembroke Street, Dublin . Directors’ Responsibility Statement Company law requires the Directors to prepare 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 Company for that year. In preparing the financial statements, the Directors have: • selected suitable accounting policies and then applied them consistently; • made judgements and estimates that are reasonable and prudent; Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 9 i n D e P e n D e n t a u D i t o r s ’ r e P o r t to the Shareholders of Conroy Diamonds and Gold P.l.c. We have audited the financial statements of Conroy Diamonds and Gold P.l.c. for the year ended 31 May 006 which comprise the Profit and Loss Account, the Balance Sheet, the Cash Flow Statement, the Statement of Accounting Policies and the related notes 1 to 17. These financial statements have been prepared under the accounting policies set out in the Statement of Accounting Policies. This report is made solely to the company's members, as a body, in accordance with Section 193 of the Companies Act 1990. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report, including as set out in the Statement of Directors’ Responsibilities, the preparation of the financial statements in accordance with applicable law and accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland). Our responsibilities, as independent auditors, are to audit the financial statements in accordance with relevant legal and regulatory requirements, the rules of the London Stock Exchange for the Alternative Investment Market and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 005. 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 the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the company's balance sheet and its profit and loss account are in agreement with the books of account. We also report to you if, in our opinion, any information specified by law or the rules of the London Stock Exchange for the Alternative Investment Market regarding directors' remuneration and directors' transactions is not disclosed and, where practicable, include such information in our report. We read the other information contained in the Annual Report and considered whether it is consistent with the audited financial statements. The other information comprises only the Report of the Directors and the Chairman’s Statement. We consider the implications for our report if we become aware of any apparent misstatement or material inconsistency with the financial statements. Our responsibilities do not extend to other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the company, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations 10 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion proper books of account have been kept by the company. The company’s balance sheet and its profit and loss account are in agreement with the books of account. In our opinion the information given in the directors' report is consistent with the financial statements. The net assets of the company, as stated in the balance sheet are more than half the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 May 006 a financial situation which, under Section 0(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the company. Deloitte & touche Chartered Accountants and Registered Auditors Limerick 15 November 006 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 evaluated the overall adequacy of the presentation of information in the financial statements. Mineral Interests In forming our opinion we have considered the adequacy of the disclosures made in the financial statements concerning the valuation of mineral interests of €5,781,855 included in the balance sheet. The realisation of the mineral interests by the company is dependent on successful development of economic reserves. We draw attention to further details given in Notes 1 and 6. Our opinion is not qualified in this respect. Opinion In our opinion the financial statements: • give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of affairs of the company as at 31 May 006 and of the profit for the year then ended; and • have been properly prepared in accordance with the Companies Acts, 1963 to 005. Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 11 P r o F i t a n D l o s s a C C o u n t For the Year Ended 31 May 006 Operating Expenses – recurring – non-recurring Other Income Profit/(Loss) on ordinary activities Tax on profit on ordinary activities Profit/(Loss) retained for the Year Earnings/(Loss) per ordinary share – Basic – Fully diluted Notes 2 9 3 4 5 5 2006 € (254,316) 607,197 1,272 005 € (515,05) - 1,958 354,153 (513,7) - - 354,153 (513,7) €0.0048 €0.0044 (€0.008) - There are no recognised gains or losses other than the profit for the year. The above all result from continuing operations. 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 15 November 006 1 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . B a l a n C e s h e e t 31 May 006 Fixed Assets Mineral interests Tangible assets Current Assets Debtors Cash at bank and in hand Creditors: Amounts falling due within one year Net Current Liabilities Net Assets Capital and Reserves Called up share capital Capital conversion reserve fund Share premium Profit and loss account Shareholders’ Funds – all equity Notes 2006 € 2005 € 6 7 8 9 10 10 10 12 13 5,781,855 6,03,76 43,635 53,015 5,825,490 6,096,71 55,835 312,397 368,232 39,00 6,689 101,709 (419,397) (1,586,037) (51,165) (1,8,38) 5,774,325 ,61,13 2,591,820 ,16,30 30,617 30,617 5,069,866 ,707,607 (1,917,978) (,7,131) 5,774,325 ,61,13 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 15 November 006 Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 13 C a s h F l o w s t a t e m e n t For the Year Ended 31 May 006 Net Cash (Outflow)/Inflow from Operating Activities Capital Expenditure and Financial Investments Net Cash Outflow before Financing Financing Increase/(Decrease) in Cash Notes 2006 € 2005 € 14A 14B 14B 14C (1,951) 73,638 (556,100) (888,353) (558,051) (81,715) 807,759 249,708 359,5 (55,173) 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 15 November 006 1 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . s t a t e m e n t o F a C C o u n t i n G P o l i C i e s The financial statements have been prepared under the historical cost convention in accordance with applicable accounting standards generally accepted in Ireland and Irish statute comprising the Companies Acts, 1963 to 005. The Company's principal accounting policies are set out below. All of these policies have been applied consistently throughout the year and the previous 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 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 is taken, or if there is evidence of impairment, the related costs will be transferred to the cost pool or amortised to the profit and loss account as necessary. Costs will be capitalised within geographic cost pools which initially comprise Ireland and the rest of the world. Proceeds from any disposal of part or all of an interest which is outside the cost pool will be credited to that interest with any excess being credited to the cost pool. (iii) Ceiling Test When a decision to develop mineral interests is taken, and the related costs are transferred to the cost pool, a ceiling test will be 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 will be 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, will be dealt within the profit and loss account as additional depreciation. (iv) Depreciation Expenditure within the cost pool will be depreciated using the unit of production method based on commercial reserves. Costs used in the unit of production calculation will 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. Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 15 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. 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 D. Taxation 5 years 8 years The charge for taxation is based on the result for the year. Deferred taxation is calculated on the differences between the company’s taxable profits and the results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those that are recognised in the financial statements. 16 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . n o t e s t o t h e F i n a n C i a l s t a t e m e n t s for the year ended 31 May 006 1. Operations and Going Concern The Company is an exploration company and is currently involved in the development of mineral exploration opportunities, principally in the Longford-Down Massif. During the year e807,759, net of expenses, was raised by the issue of new share capital. The proceeds of the share issue were used to fund the Company’s ongoing exploration activities. On the basis of the capital funding achieved to date and existing commitments for future capital funding together with the very encouraging results obtained from the exploration programme and their review of projected cash flow information the directors consider it appropriate to prepare the financial statements on a going concern basis. 2. Operating Expenses - Recurring Operating expenses (a) 2006 € 2005 € 599,005 1,097,110 Transfer to Mineral Interests (Note 6) (344,689) (581,905) 254,316 515,05 (a) The Company had nine employees during the period (005 – ten). The remuneration charged during the period comprised salaries of e66,996, social welfare costs of e1,7 and pension costs of e3,875 (005 – e581,869, e30,373 and e90,76 respectively). 3. Profit on Ordinary Activities before Taxation The profit 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 Depreciation 2006 € 15,500 56,265 151,125 11,766 2005 € 15,500 79,359 03,1 3,088 Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 17 4. Tax on profit on Ordinary Activities No taxation charge arises in the financial year due to utilisation of losses incurred in previous years. There was no unprovided deferred taxation at 31 May 006 (005 – eNil). 5. Earnings per ordinary share The calculation of the basic earnings per ordinary share of e0.008 (005 – Loss e0.008) is based on the profit for the financial year of e35,153 (005 – Loss e513,7) and the weighted average number of ordinary shares in issue during the year of 73,57,73 (005 – 6,87,011). The calculation of the fully diluted earnings per ordinary share of e0.00 is based on the profit for the financial year of e35,153 and the weighted average number of ordinary shares in issue on a fully diluted basis during the year of 80,658,17. Since the Company incurred a loss in 005 the effect of share options and warrants would be anti-dilutive. 6. Mineral Interests Costs held outside cost pool: Cost At 31 May 005 Write back of director’s remuneration (Note 9) Expenditure during the period - licence and appraisal costs - other operating costs (Note ) At 31 May 2006: Total Gold € 6,03,76 (815,585) 09,05 3,689 5,781,855 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. 18 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . 7. Tangible Fixed Assets Cost 31 May 005 Additions Disposals 31 May 2006 Accumulated Depreciation 31 May 005 Depreciation charge Disposals 31 May 2006 Net Book Value 31 May 005 31 May 2006 8. Debtors: Amounts falling due within one year VAT receivable Other debtors Office Equipment € 87,37 ,386 Motor Vehicles € 60,860 - Total € 18,187 ,386 - (8,060) (8,060) 89,713 12,800 102,513 39,98 11,1 55,188 55 95,17 11,766 - (8,060) (8,060) 51,198 7,680 58,878 7,33 38,515 5,67 5,120 2006 € 9,215 46,620 55,835 53,015 43,635 2005 € 10 38,880 39,00 Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 19 9. Creditors: Amounts falling due within one year Accrued directors’ remuneration - fees and salaries - pension contributions Other accruals Shareholder's loan Due to related undertaking (Note 16) 2006 € 172,515 34,875 88,247 108,182 15,578 419,397 2005 € 880,91 50,053 39,63 - 15,600 1,586,037 During the year the directors considered the financial position of the Company and in particular the level of current liabilities which mainly arose from the accrual of unpaid directors’ fees and remuneration since incorporation. The relevant individual directors agreed to waive their entitlement to all amounts accruing from incorporation up to 31 August 005, amounting to e1,,78. The amount that had been allocated to the gold exploration programme, e815,585 was credited to mineral interests (Note 6) and the balance was treated as a non-recurring credit to the profit and loss account. 10. Called up Share Capital and Premium Authorised: 00,000,000 ordinary shares of €0.03 each 12,000,000 1,000,000 2006 € 2005 € Issued and Fully Paid: Number Share Capital € Capital Conversion Reserve Fund € Share Premium € Start of year 71,5,011 ,16,30 30,617 ,707,607 Share issues (a) 1,850,000 5,500 Issue expenses - - - - 1,830 (50,571) End of year 86,394,011 2,591,820 30,617 5,069,866 (a) In April 006, 1,850,000 ordinary shares of e0.03 were issued for a consideration of p sterling per share to fund further mineral exploration. This realised e0.0578 per share resulting in a premium of e0.078 per share. 0 An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . (b) At 31 May 005 warrants over 0,000,000 shares exercisable at 3.75p sterling at any time up to 0 January 009 were outstanding.During the year ended 31 May 006, 9,06,190 warrants were issued to the Directors for nil consideration exercisable at a subscription price of e0.037 (Sterling .5p) per share at any time up to 15 November 015. (c) At 31 May 006, options had been issued over 5,95,000 shares (005 – 5,005,000) These options are exercisable at prices ranging from e0.0633 to e0.539 and expire between  December 010 and 6 November 013. (d) The share price at 31 May 006 was .15p sterling. During the year the price ranged from 1.65p to 7.5p sterling. 11. Subsequent event On 1 November 006 the Company acquired the gold interests of Conroy Plc, which included a number of claims (licence areas) in Finland which have potential gold prospects and an extensive database. The purchase consideration of e1,000,000 was satisfied by the issue of 19,9,86 ordinary shares of e0.03 each. 12. Profit and Loss Account At 1 June 005 2006 € 2005 € (2,272,131) (1,758,88) Profit/(loss) for the financial year 354,153 (513,7) At 31 May 006 (1,917,978) (,7,131) 13. Reconciliation of Movement in Shareholders’ Funds At 31 May 005 Profit/(loss) for the financial year Share issues, net Diamond interest de-merger At 31 May 006 2006 € 2005 € 4,612,413 5,791,118 354,153 807,759 (513,7) 359,5 - (1,05,000) 5,774,325 ,61,13 Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 1 14. Notes to the Cash Flow Statement A. Reconciliation of Operating Profit/(Loss) to Net Cash Inflow/(Outflow) from Operating Activities: 2006 € 2005 € Operating Expenses - Recurring (253,044) (513,7) Depreciation Loss on disposal of fixed assets Write back of directors’ remuneration accrual – – credited to Profit and Loss – credited to Mineral Interests 11,766 3,088 - 607,197 815,585 7 - - (Decrease)/Increase in Creditors (1,166,640) 557,697 (Increase)/Decrease in Debtors Net Cash (Outflow)/Inflow from Operating Activities (16,815) (1,951) 6,06 73,638 B. Analysis of Cash Flows Capital Expenditure and Financial Investment Investment in mineral interests (excluding write-back) (553,713) (866,73) 2006 € 2005 € Purchase of tangible fixed assets Financing Issue of share capital, net (2,387) (1,61) (556,100) (888,353) 807,759 249,708 359,5 359,5 C. Analysis and Reconciliation of Net Funds Cash at bank and in hand 31 May 2005 6,689 Cash Outflow 31 May 2006 9,708 312,369  An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . 15. Commitments and Contingencies Obligations under Mineral Interests The Company has received prospecting licences under the Republic of Ireland Mineral Development Acts 190 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 which comprise total expenditure commitments as follows: Commitments for expenditure: • due within one year • due between two and five years 2006 € 2005 € 315,000 630,000 50,000 350,000 945,000 00,000 16. Related Party Transactions The amount due to related parties of e15,578 (Note 9) relates to advances received from Conroy P.l.c. and VAT reclaimed by the Company on behalf of Conroy Plc. These amounts are unsecured, interest free and have no specific repayment terms. The Company also shares accommodation with Conroy Plc and Karelian Diamond Resources P.l.c. The Company bears its appropriate share of the related costs directly. 17. Approval of Financial Statements. These financial statements were approved by the board on 15 November 006. Annual Re por t and Financial Statements 2006 Conroy Dia monds and Gold P.l.c . 3 n o t i C e o F a n n u a l G e n e r a l m e e t i n G 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  on Friday 8th December 006, at .30pm for the purposes of transacting the following business: 1. To receive and consider the Financial Statements for the year ended 31st May 006 together with the Directors’ and Independent Auditors’ Reports thereon (Resolution No.1) 2. To re-elect as Directors the following persons: Mr Louis J Maguire (Resolution No. (a)) Mr Michael E Power (Resolution No.(b)) Mr C David Wathen (Resolution No. (c)) 3. To authorise the directors to fix the remuneration of the Auditors (Resolution No. 3) 4. To consider and, if thought fit, pass the following resolution as an Ordinary Resolution (Resolution No.) “That, in accordance with the provisions of Section 0 of the Companies (Amendment) Act, 1983, the directors of the Company be generally and unconditionally authorised to allot 'relevant securities' (as defined by Section 0(10) of the Companies (Amendment) Act, 1983) up to the amount of the authorised but unissued share capital of the Company at the date of this resolution and to allot and issue any shares purchased by the Company pursuant to the provisions of the Companies Act, 1990 and held as treasury shares and that the authority hereby granted shall, subject to Section 0(3) of the said Act, expire on the 7 December, 011 unless previously renewed, varied or revoked by the Company.” 5. To consider and, if thought fit, pass the following resolution as a Special Resolution (Resolution No.5) “That, for the purposes of Section  of the Companies (Amendment) Act, 1983 and subject to the Directors being authorised 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 the Companies (Amendment) Act, 1983.” 6. To transact any other business. By Order of the Board Dated this 15th day of November 006 James P. Jones Secretary Registered Office 10 Upper Pembroke Street, Dublin . Notes 1. 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/her. A proxy need not be a member of the Company 2. 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, Manor Street Business Park, Manor Street, Dublin 7 not less than 48 hours before the time appointed for the holding of the meeting.  An nual Repo r t and Fin ancial Stat ements 20 06 Conroy D iam ond s and Gold P.l. c . Conroy Diamonds and Gold P.l.c. 10 Upper Pembroke Street Dublin 2 Tel: 353-1-661 8958 Fax: 353-1-662 1213 For further information visit the Company’s website at: www.conroydiamondsandgold.com 

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