Toledo Mining Full Results 2009
(Thomson Reuters ONE) - 1 September 2009 Toledo Mining Full Years Results for the Year Ended 31 March 2009Toledo Mining Corporation plc ("Toledo" or the "Company") (AIM:TMC)is pleased to present its final results for the year ended 31 March2009.HighlightsOperations * Ore production of 563,280 wet metric tonnes for the financial year * Record monthly ore production of 127,849 wet metric tonnes (August 2008) * Shipments of 418,350 wet metric tonnes * Suspension of mining operations in October 2008 in response to the global financial crisis * Ipilan JORC resource of 30 million tonnes grading 1.36% nickel * Positive concept study for heap leaching at Berong prepared by European Nickel * Memorandum of Understanding with Jiangxi Rare Earth and Rare Metals Tungsten Group for possible leach process plants at Ipilan and BerongFinancial * Berong sales revenue, US$14.65 million (2008: US$23.35 million) * Consolidated Profit before Tax £1,919,887 (2008: £1,206,702) * Earnings per Share including associates 5.55p (2008: 3.43p)Corporate * Placement of 12 million shares at a price of 28 pence to raise £3,248,222 net of expenses * Additional supportive corporate investors enter the share registerFor further information, please visit www.toledomining.com orcontact:Reg Eccles, Chairman, Toledo Mining Corporation +44 (0) 20 7514 1480plcRichard Greenfield, Ambrian Partners Ltd +44 (0) 20 7634 4700Alex Buck, BuckBias Limited +44 (0) 7932 740 452CHAIRMAN'S STATEMENTDuring the period under review, your Board continued to pursuemaximising the return to shareholders from Toledo's sizeableinterests in large nickel laterite deposits on the island of Palawanin the Philippines.For the financial year to 31 March 2009, Toledo Mining Corporationreported pre-tax profits of £1.91 million and fully diluted earningsper share including associated companies results of 5.48 pence.These compared to £1.21 million and 3.36 pence respectively for theprior year.The reported 2009 profit was partly the result of interest earned oncash holdings and outstanding US$ denominated loans to Philippinepartners. The major contribution to reported profits, however, camefrom exchange rate gains on those loans. Excluding exchange gains,Toledo recorded a pre tax loss of £1.67 million of which the share ofassociated company's losses in the Philippines accounted for £1.13million. Exchange gains were also largely responsible for a rise inshareholders equity from £25.51 million as at 31 March 2008 to £27.29million as at 31 March 2009.A major contributor to overall group performance was sales revenue onore shipments from the Berong mine in which Toledo holds a 56.1 percent economic interest. Although well below the level generatedduring the nickel boom of the previous financial year, Berong salesrevenue still amounted to US$14.65 million.During the year Toledo continued to fund not only its share ofoperating expenses in the Philippine projects but also those of ourPhilippine partners under the terms of existing loan agreements. As aconsequence cash holdings declined from £5.46 million to £2.88million as at 31 March 2009.At the end of the year, the principal loan amount outstanding fromAtlas Consolidated Mining & Development Corporation ("Atlas"), ourlocal partner in Berong Nickel Corporation ("BNC") stood at US$4.8million. At the same date, the principal loan amount outstanding fromBrooks Nickel Ventures Inc, a partner in Ipilan Nickel Corporation,amounted to US$7.32 million. The loans, which are in the nature of adrawdown facility, are for principal amounts of US$5 million and US$8million respectively. Each drawdown attracts 10 per cent cumulativeinterest and is repayable three years from the date of drawdown.Repayments due on the Atlas loan, starting from April 2009, have beendeferred pending the outcome of discussions to extend the repaymentschedule.Progress towards the company's long term objective was inevitablydisrupted by the worst global banking crisis for at least threequarters of a century. When the investment bank Lehman Brothers filedfor Chapter 11 bankruptcy protection on 14 September 2008, thefinancial and economic landscape changed dramatically for the worse.No economy or market sector has been immune from the fallout.On the day the crisis broke, the London Metal Exchange cash price ofnickel, already less than half the heady heights of May 2007, wasjust under US$18,000 per tonne. Within one month, the price hadfallen to US$11,500 per tonne, and by December 2008 it was tradingbelow US$10,000 per tonne.In the run up to the financial crisis, Toledo had already takendefensive action in response to declining Chinese demand for nickelore and a falling nickel price. This encompassed stopping all capitalexpenditure other than for essential maintenance, and building astockpile of nickel ore ahead of a possible suspension of mineoperations. Consequently, when the financial crisis erupted it was arelatively straightforward decision to place the Berong mine on careand maintenance. Unfortunately, this decision meant laying off themajority of the workforce. However, this action was consideredessential to the long-term viability of Berong and the futureprosperity within the local community.Despite the deteriorating market environment, there were a number ofpositive corporate achievements during the year. Mine production forthe seven months from the start of the financial year until thesuspension of mine operations early in October 2008 was a record.Volume shipments for the same period were 2 per cent higher than inthe comparable 2007 period. Even though nickel prices declineddramatically, Toledo reported a profitable first half year.In June, we welcomed heap leach specialist European Nickel plc("European Nickel") as a substantial shareholder. Also in June wesigned a Memorandum of Understanding with Jiangxi Rare Earth and RareMetals Tungsten Group ("JXTC") for the potential joint constructionof a leach process plant at Ipilan. In November we signed a secondMoU with JXTC for the construction of a demonstration nickel leachingplant at Berong. In December we announced a sizeable JORC resourcefor the Ipilan deposit.The purchase by European Nickel, of a strategic stake both in Toledoand BNC was highly significant. By affording Berong the opportunityto access European Nickel's leading edge heap leaching technology forthe treatment of nickel laterites, the deal raises the prospect ofearlier treatment of Berong ore than was previously envisaged.Discussions between Toledo (on behalf of BNC) and European Nickel asto the mutually best way for Berong to realise this opportunity arewell advanced.Since our financial year end, and as a result of the massiveinjection of liquidity by governments and central banks into globaldebt markets, a semblance of stability has returned to the worldeconomy. Indeed, the most recent economic data for several majoreconomies offers some encouragement that an economic recovery isunderway.As its contribution to financial stability and economic growth, theChinese government elected last November to invest 4 trillion yuan(US$586 billion) over a two-year period into domestic infrastructureand social welfare projects. The nickel market has benefited fromthis initiative and the nickel price has doubled since our March yearend.Although the Berong mine remained on care and maintenance, Toledo wasable to make three shipments of stockpiled ore during May throughJuly of this year to BHP's Yabulu refinery. These shipments amountedto some 143,765 wet metric tonnes ("WMT") of ore and generated muchwelcome gross revenue to Berong of US$3.25 million.In July 2008, BHP announced that it had reached agreement inprinciple to sell its subsidiary Queensland Nickel Pty Ltd ("QNP") toProfessor Clive Palmer. QNP is the legal owner of the Yabulurefinery. Your Board has no reason to believe that this sale will inany way alter our contract with QNP for the sale of ore from Berongto Yabulu.During the past 15 months there have been substantial changes both tothe make-up of Toledo's share register and to the composition of yourboard, which I firmly believe are very positive for Toledo. Firstcame European Nickel's 19.3 per cent investment in the company inJune 2008. Then in April of this year, we announced that 20 per centof our issued share capital had been acquired through a series ofon-market purchases by Daintree Resources Limited ("Daintree"), aprivate company controlled by Jason Cheng and an associate. JasonCheng is the Managing Partner of Ancora Capital Management Limited, aprivate equity firm investing in the natural resources sector inAsia.In August of this year Toledo placed 12 million shares at a price of28 pence to raise £3,360,000 before expenses. Added to existing cashholdings, the funds raised will fund an exploration programme atBerong to improve its resource definition as part of apre-feasibility study for the construction of a leach process plant,complete a mandatory "Declaration of Mine Feasibility" at Ipilan andservice budgeted working capital requirements to the end of 2010.Resulting from the placement, Daintree now holds 24 per cent ofToledo's issued equity and European Nickel has a 13.7 per centinterest. Additionally a new shareholder, Fevamotinico SARL,subscribed to the placement and now has a 9.8 per cent equityinterest.Fevamotinico is a private company controlled by Kostyantin Zhevago,Chief Executive and controlling shareholder of Ferrexpo plc, theLondon-listed Ukrainian iron ore pellet producer. A companycontrolled by Mr. Zhevago is converting a ferro manganese plant inMacedonia into a ferro nickel plant. The Company is exploringbusiness opportunities with Fevamotinico with respect to ourPhilippine assets.Effective the end of March this year, George Bujtor resigned as ChiefExecutive of Toledo to pursue other interests. During his tenure,George made an invaluable contribution to the development of Toledo'sPhilippine interests.The combination of an extremely capable local management team and thepresence on the Toledo board of two very seasoned operators in themining and nickel industry, Simon Purkiss and Felix Pole allowed usto defer replacing George at a time of severe weakness in the nickelmarket and consequent pressure on our finances. Simon Purkiss is theChief Executive of European Nickel. Felix Pole, although nowindependent, is a co-founder and past Chairman of European Nickel andhas considerable experience and extensive contacts within the globalnickel industry.Following George's departure, Felix agreed to assume responsibilityfor commercial dealings with the Philippine operations, current andprospective partners and customers; a function which he is performingadmirably and for which the Board is very grateful.In September 2008, we welcomed Constantine Thanassoulas to the boardas an independent director. Constantine's experience as both a seniorbanker and a nickel industry executive is proving invaluable.In July of this year, Jason Cheng accepted an invitation to join theboard. In addition to representing our largest shareholder, Jasonbrings clarity of strategic thought and advice borne of his years asan investment banker specialising in the natural resources industry,subsequently as an independent businessman and an investment managerbased in Beijing and now as Managing Partner of Ancora CapitalManagement.In April, we appointed Tim Ashworth as General Manager Philippines,Toledo Mining Corporation. Additionally, Tim has replaced GeorgeBujtor as Chief Executive of TMM Management Inc ("TMM"), the companyresponsible for managing the day-to-day operations in the Philippineson behalf of both Toledo and our partners. In this capacity Tim isfortunate to have access to the wise council of Alfredo ("Fred")Ramos, TMM's President and the Chairman of Atlas. Tim is a qualifiedmining engineer with considerable experience in the nickel industryin both Australia and Europe. Tim was previously Operations Manager,Berong Nickel Corporation where he was instrumental in the successfulimplementation of improved production and cost cutting initiatives.In May 2008, Fernando Rimando joined the Manila office as ChiefFinancial Manager. Fernando is a Certified Public Accountant whopreviously audited major mining companies for an affiliate of Ernst &Young. Tim and Fernan are ably assisted by a very experiencedtechnical team comprised predominantly of Philippine nationals.We owe a big debt of gratitude to our management and staff for thepositive and resourceful manner in which they have tackled theexceptional challenges of the past 18 months. It is largely thanks totheir efforts that Toledo has been able to weather the storm ofglobal recession and is now well placed to move forward with itsplans.The severe downturn has emphatically not diminished our confidence inthe fundamental value and potential of Toledo's assets and strategy.During the coming year, it is your board's intention to make majorprogress towards the goal of becoming a profitable and substantialnickel producer.In pursuing this objective, we are very fortunate in having thesupport of strategic partners both domiciled in the Philippines andresident in other countries with the technical, financial, politicaland industrial acumen that will enable us to create maximum valuefrom our investments in the nickel industry.Reginald Eccles1 September 2009OPERATING REVIEWThe global economic crisis and its damaging impact on both the demandfor nickel and the nickel price posed major challenges for themanagement of the Philippine operations during the financial year.However, prompt and decisive action has served to limit the worseeffects of the nickel market recession. Consequently, the businesshas not only emerged largely in tact but also well able to moveforward towards the long term objective of becoming a major valueadded nickel producer.Management has continued to focus on the development of the Berongmine and surrounding deposits on the West Coast of the island ofPalawan and the Ipilan project on the east coast of the Island.For the financial year under review, the Berong mine produced 563,280WMT of ore and shipped, to customers in Australia and China, 418,350WMT of ore containing 4,321 tonnes of nickel. All production andsales occurred before the end of October when mine production ceasedand the shipping window closed. Shipments through to the end ofOctober were 2 per cent higher than in the comparable 2007 period.However, full year shipments were 10.5 per cent lower there being nosales during the January to March quarter.Inventory at Berong as at 31 March 2009 amounted to some 297,000 WMTof ore. Of this, 143,765 WMT of ore has since been shipped to BHP'sYabulu refinery in Queensland, Australia. The remaining stockpile, of153,000 WMT of ore, has an average nickel grade of 1.39 per cent,insufficient for the minimum specification required by BHP butsuitable for some Chinese consumers. Together with our marketingassociates based in China we have renewed efforts to place thisinventory now that the nickel price has recovered.Throughout the year, the twin pillars of management's efforts werethe optimisation of mine production and continuation of the programmeto drive down operating costs. August 2008 witnessed the highestmonthly production rate since mine operations commenced (127,849 WMTof ore) with production for the September quarter reaching 345,000WMT of ore, an annualised rate of 1.38 million WMT. Efforts toreduce operating costs have been equally successful. The Berong mineis in a good position to recommence profitable production at shortnotice.Responding to the collapse in Chinese demand for nickel ore all mineproduction ceased in early October. Operations were then placed oncare and maintenance and some 600 Berong Nickel Corporation (BNC)personnel and 200 contractors were laid off. This was a major loss ofemployment for the local region. However, through the efforts of theBNC community relations and human resources departments the reasonsfor this decision were diligently communicated to the localcommunities.BNC also demonstrated its ongoing commitment to the Berong operationby continuing to support its community initiatives such as the healthclinic, medical services, water treatment facility and the funding ofadditional teachers for the local school. Additional personnel havebeen retained to maintain the extensive environmental controls thathave been an integral part of the successful mining programme atBerong.Since the commencement of shipments in 2007, approximately US$500,000has been paid into a fund for local and indigenous peoples to helpestablish essential community services and livelihood projects. Inaddition a further US$500,000 has been paid into the company's SocialDevelopment and Management Plan to fund direct community projects,whilst local governments have benefited from the payment of overUS600, 000 in local taxes and fees.Planning to extend the JORC compliant resource at Berong to support amajor value adding process plant has been completed. The ultimategoal of this exploration programme is to increase the JORC resourcefrom under 10 million tonnes presently to over 40 million tonnes.Approvals for the exploration permits are currently being sought,with a plan to commence drilling in October 2009. The explorationprogramme is expected to take 12 months to complete and will compriseover 17,000 metres of drilling.In July 2008, BHP announced that it had reached agreement to sell itsYabulu refinery to companies owned by Professor Clive Palmer.Berong's current five year contract with Queensland Nickel Pty,operator of Yabulu, runs until August 2012 with the possibility of afurther five year extension. The contract is for the supply of up to500,000 WMT of ore per annum with a minimum annual off-take of300,000 WMT of ore. As of August 2009 143,765 WMT of ore have beenshipped to Yabulu so far this year.In addition to the BHP contract, we continue to seek sales elsewhereand particularly in China, a market we have supplied in the past.Although Chinese imports of nickel ore have recovered in the past fewmonths, much of the material has been purchased by blast furnaces asan iron ore substitute with a low nickel content but high ironcontent. Also, reported nickel ore inventories at Chinese portsremain stubbornly high. Whilst below peak 2008 levels, as of midAugust 2009, inventories still exceeded 7 million tonnes.Nonetheless, the recovery in Chinese stainless steel production andconsequent increased demand for nickel, does offer encouragement forthe prospects of renewed profitable sales from Berong to China in themedium term.The year under review saw considerable progress made towards the goalof value added processing at both Ipilan and Berong. In October, aconcept study by European Nickel confirmed the economic viability ofa heap leaching operation at Berong. In June 2008 Toledo signed aMoU with JXTC, for the finance and construction of a jointly ownednickel leaching plant at Ipilan to supply the 40,000 tonne per annumnickel refinery which JXTC is constructing in Nanchang, China. InNovember Toledo announced the signing of a supplementary MoU withJXTC for the construction of a demonstration leach plant at Berong.Although the global financial crisis has slowed progress both inconverting the Moue's with JXTC into binding and detailed contractsand in reaching agreement with European Nickel for access to theirheap leach technology, some positive progress has been made on bothcounts. Samples of ore supplied to JXTC for metallurgical testing atthe Beijing General Research Institute of Mining and Metallurgy haveshown that Berong ore is amenable to both heap and tank leaching.Thus the first crucially important step in converting the MoU withJXTC into binding agreements has been achieved. Samples of Berong orehave also been sent for leaching tests to the same laboratory inCanada previously used by European Nickel.Good progress has been made at the Ipilan deposit towards a"Declaration of Mine Feasibility" which must be submitted to theMines and Geosciences Bureau before the end of 2010. An initial,sizeable JORC resource, completed by the Snowden Mining Group, wasannounced in November 2008. Snowden calculated a JORC resource of30.59 million tonnes grading 1.36 per cent nickel (416,000 tonnes ofcontained nickel) at a 1.0 per cent nickel cut-off grade. The Snowdencalculation comprised only 69 per cent of the now available drilldata. Recalculation of the resource based on 100 per cent of thedrill data is currently being undertaken in house. The results areexpected during the December quarter.The other main focus at Ipilan has been on community relations andpermitting. Endorsement for a mining operation has been obtainedfrom the four Barangays (local councils) upon which Ipilan issituated. The next stage of process entails securing the endorsementof the municipal council, following a successful outcome of which,Provincial endorsement will be sought. This process is targeted forcompletion in October 2009. In addition, the Free and Prior InformedConsent (FPIC) process must be completed through the NationalCommission on Indigenous Peoples (NCIP) and approval must also besought from the Palawan Council for Sustainable Development (PCSD)both of which are targeted for completion in December 2009.Following completion of the in house calculation of the Ipilanresource, we will undertake a study on the viability of a direct oreshipping operation. A major part of this work will involve obtainingan Environmental Clearance Certificate (ECC). The ultimate goal is tohave the study and all permitting completed by mid 2010 and to submita Declaration of Mine Feasibility shortly thereafter.In parallel with this work, Ipilan Nickel Corporation (INC) hascontinued its collaboration with MacroAsia, a major Philippinecorporation which owns the adjoining tenement to the Ipilan deposit.In September 2007, Toledo Mining and MacroAsia signed a Memorandum ofUnderstanding to assess the potential for joint development andoperation of the adjoining properties. During the past year, INCpersonnel have been outsourced to MacroAsia to assist with theirexploration programme. Although, MacroAsia has yet to announce a JORCresource, the two tenements potentially contain a combined resourceof over 100 million tonnes for the two tenements. There is no doubtthat joint development of this major resource would have substantialcommercial benefits and we continue to explore this possibility withMacroAsia.The commitment over the past year of the teams both on site at Berongand Ipilan and in the Manila office has been greatly appreciated. Theworld has been through a major economic downturn which has happenedwith unprecedented speed and ferocity. The ability of management toreact quickly to these conditions, significantly reducing expenseswhilst maintaining a core of expertise at the operations, has beenimpressive.The Company is now in a position to react just as quickly to arebounding nickel market. With the ongoing support of employees,local community members and government, Toledo looks forwardpositively to the ongoing development and success of its operationsin the Philippines.CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2009 Year Year Ended Ended 31 March 2009 31 March 2008 Notes £ £Revenue 3 1,190,121 981,487Gross profit 1,190,121 981,487Administration expenses (2,467,557) (2,317,544)Exceptional item 4 - (583,433)Foreign exchange gains /(losses) 3,590,618 (98,722)Other operating income 71,786 104,804Realised and unrealised gains /(losses) oncurrent asset investments 142,291 (221,298)Share of results of associates (1,133,453) 2,649,630Profit from operations 5 1,393,806 514,924Investment income 8 526,081 691,778Profit before taxation 1,919,887 1,206,702Income tax expense 9 (198,100) -Profit for the year 1,721,787 1,206,702Attributable to:Equity holders of the parent 1,639,603 1,003,144Minority interest 82,184 203,558 ________ ________ 1,721,787 1,206,702Earnings per share (pence) -includingshare of associates resultsBasic 10 5.55 3.43Diluted 10 5.48 3.36Earnings / (loss) per share(pence) -excluding share of associatesresultsBasic 10 9.39 (5.62)Diluted 10 9.26 (5.52)The Company has taken advantage of section 230 of the Companies Act1985 not to publish its own income statement accountCONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2009 Notes 31 March 2009 31 March 2008 £ £ASSETSNon-current assetsProperty, plant and equipment 11 1,629 8,429Investment in associatedundertakings 13 11,273,708 12,408,531Loans and receivables 14 13,755,986 7,625,613Trade and other receivables 15 38,450 38,450Total non-current assets 25,069,773 20,081,023Current assetsTrade and other receivables 16 951,159 567,651Taxation 17 29,001 23,928Loans and receivables 18 - -Current investments 19 - 413,616Cash and cash equivalents 20 2,882,774 5,458,262Total current assets 3,862,934 6,463,457 _________ _________TOTAL ASSETS 28,932,707 26,544,480EQUITY AND LIABILITIESCurrent liabilitiesTrade and other payables 21 996,112 622,770Taxation 22 209,547 171,583 ________ _______Total current liabilities 1,205,659 794,353 ________ _______Total liabilities 1,205,659 794,353EquityShare capital 23 1,476,917 1,476,917Share premium account 24 24,570,675 24,508,568Share based payments reserve 25 307,899 408,980Translation reserve 142,395 (735)Retained profit / (loss) 795,810 (882,767)Equity attributable to equityholders ofthe parent 27,293,696 25,510,963Minority Interest 26 433,352 239,164Total equity 27,727,048 25,750,127 _________ _________TOTAL EQUITY AND LIABILITIES 28,932,707 26,544,480COMPANY BALANCE SHEET AS AT 31 MARCH 2009 Notes 31 March 2009 31 March 2008 £ £ASSETSNon-current assetsProperty, plant and equipment 11 1,629 8,429Investment in subsidiaryundertaking 12 10,286 10,286Investment in associatedundertakings 13 9,870,107 9,871,477Loans and receivables 14 13,755,986 7,625,613Trade and other receivables 15 38,450 38,450Total non-current assets 23,676,458 17,554,255Current assetsTrade and other receivables 16 52,703 177,772Taxation 17 29,001 23,928Loans and receivables 18 - -Current investments 19 - 413,616Cash and cash equivalents 20 2,712,295 5,249,534Total current assets 2,793,999 5,864,850 _________ _________TOTAL ASSETS 26,470,457 23,419,105EQUITY AND LIABILITIESCurrent liabilitiesTrade and other payables 21 924,314 578,958Taxation 22 209,547 171,583 ________ ______Total current liabilities 1,133,861 750,541 ________ _______Total liabilities 1,133,861 750,541EquityShare capital 23 1,476,917 1,476,917Share premium account 24 24,570,675 24,508,568Share based payments reserve 25 307,899 408,980Retained loss (1,018,895) (3,725,901)Equity attributable to equityholders ofthe parent 25,336,596 22,668,564Total equity 25,336,596 22,668,564 _________ _________TOTAL EQUITY AND LIABILITIES 26,470,457 23,419,105CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31MARCH 2009 Share Trans- Based Retained lation Share Share Payments (Loss) / Minority Exchange Capital Premium Reserve Profit Interest Reserve Total £ £ £ £ £ £ £Balance at1April 2008 1,476,917 24,508,568 408,980 (882,767) 239,164 (735) 25,750,127Transferfromreserve - 62,107 (101,081) 38,974 - - -Translationmovement - - - - 112,004 143,130 255,134Profit forthe year - - - 1,639,603 82,184 - 1,721,787 ________ _________ ______ _______ _______ _______ _________Balance at31 March2009 1,476,917 24,570,675 307,899 795,810 433,352 142,395 27,727,048 Share Trans- Based lation Share Share Payments Retained Minority Exchange Capital Premium Reserve Loss Interest Reserve Total £ £ £ £ £ £ £Balance at1April 2007 1,429,417 23,062,908 1,107,326 (2,491,097) 36,181 - 23,144,735Share issue 47,500 1,352,500 - - - - 1,400,000Transferfromreserve - 93,160 (698,346) 605,186 - - -Translationmovement - - - - (575) (735) (1,310)Profit forthe year - - - 1,003,144 203,558 - 1,206,702 ________ _________ ______ _______ _______ ____ _________Balance at31 March2008 1,476,917 24,508,568 408,980 (882,767) 239,164 (735) 25,750,127CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009 Notes Year Year Ended Ended 31 March 2009 31 March 2008 £ £Net cash outflow from operating 27activities (1,312,017) (2,098,744)Investing activitiesInvestment income 220,540 406,784Purchase of property, plant &equipment - (3,871)Sale of current investments 555,907 280,654Loan investments advanced (2,039,918) (5,687,372)Loan investments repaid - 3,129,520 _________ _________Net cash outflow from investingactivities (1,263,471) (1,874,285)Financing activitiesIssue of equity share capital - 1,400,000 ________ ________Net cash inflow from financingactivities - 1,400,000Net decrease in cash and cashequivalents (2,575,488) (2,573,029)Cash and cash equivalents at 1April 5,458,262 8,031,291 ________ ________Cash and cash equivalents at 31 20March 2,882,774 5,458,262NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 20091. General informationToledo Mining Corporation Plc is a company incorporated in Englandand Wales under the Companies Act 1985. The Company's registeredoffice is Ground Floor, 11 Albemarle Street, London, W1S 4HH. Theregistration number of the Company is 5174452.The principal activity of the Group is the investment in andexploration and development of mining projects, specifically in thePhilippines.The Group's principal activity is carried out in US dollars. Thefinancial statements are presented in pounds sterling as this is thecurrency of the country (the UK) where the Company is incorporatedand its ordinary shares admitted for trading.The Board of directors has authorised the issue of these financialstatements on the date of the statement as set out in Chairman'sReport.2. Accounting policiesBasis of accountingThe financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRSs).The financial statements have been prepared on the historical costbasis except that certain financial instruments are accounted for atfair values. The principal accounting policies adopted are set outbelow.New standards and interpretations not appliedThe IASB and IFRIC have issued the following standards andinterpretations which are not effective and have not been earlyadopted for these financial statements:International Accounting Standards Effective for financial(IAS/IFRSs) year beginningIFRS 2 (amended) Share-based payment vestingconditions and cancellations 1 January 2009IFRS 8 Operating segments 1 January 2009IAS 1 (revised) Presentation of financial 1 January 2009statementsIAS 1 (amended) Presentation of financial 1 January 2009statementsIAS 16 (amended) Property, plant and 1 January 2009equipmentIAS 19 (amended) Employee benefits 1 January 2009IAS 23 (revised) Borrowing costs 1 January 2009IAS 23 (amended ) Borrowing costs 1 January 2009IAS 27 (amended) Consolidated and separate 1 January 2009financial statementsIAS 28 (amended) Investments in associates 1 January 2009IAS 32 (amended) Financial instruments - 1 January 2009presentationIAS 36 (amended) Impairment of assets 1 January 2009IAS 38 (amended) Intangible assets 1 January 2009IAS 39 (amended) Financial instruments-recognition and 1 January 2009measurementInternational Financial ReportingInterpretationsCommittee (IFRIC)IFRIC 13 Customer Loyalty Programmes 1 July 2008IFRIC 16 Hedges of a net investment in a 1 October 2008foreign operationThe directors do not anticipate that adoption of these standards andinterpretations will have a material impact on the Group andCompany's financial position or performance other than additionaldisclosure requirements in the period of initial application,although IAS 1 (revised) will change the manner in which thestatements are presented.Basis of consolidationThe consolidated financial statements incorporate the financialstatements of the Company and all Group undertakings. Control isachieved when the Company has the power to govern the financial andoperating policies of an investee entity so as to obtain benefitsfrom its activities.On acquisition, the assets and liabilities and contingent liabilitiesof a subsidiary are measured at their fair values at the date ofacquisition. Any excess of the cost of acquisition over the fairvalue of the identifiable net assets acquired is recognised asgoodwill.Any deficiency of the cost of acquisition below the fair value of theidentifiable net assets acquired (i.e. discount on acquisition) iscredited to the income statement in the period of acquisition. Theinterest of minority shareholders is stated at the minority'sproportion of the fair values of the assets and liabilitiesrecognised. Subsequently, any losses applicable to the minorityinterest in excess of the minority interest are allocated against theinterests of the parent.The results of subsidiaries acquired or disposed of during the yearare included in the consolidated income statement from the effectivedate of acquisition or up to the effective date of disposal, asappropriate.Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line withthose used by the Group.All intra-group transactions, balances, income and expenses areeliminated on consolidation.Investments in AssociatesAn associate is an entity over which the Group is in a position toexercise significant influence, but not control or joint control,through participation in the financial and operating policy decisionsof the investee.The results and assets and liabilities of associates are incorporatedin these financial statements using the equity method of accounting.Investments in associates are carried in the balance sheet at cost asadjusted by post-acquisition changes in the Group's share of the netassets of the associate, less any impairment in the value ofindividual investments. Losses of the associates in excess of theGroup's interest in those associates are not recognised.Where a Group company transacts with an associate of the Group,unrealised profits and losses are eliminated to the extent of theGroup's interest in the relevant associate. Losses may provideevidence of an impairment of the asset transferred in which caseappropriate provision is made for impairment.The Group and its associated undertakings have complied with therequirements of IFRS 6 Exploration for and Evaluation of MineralResources.Upon commencement of commercial production operation of a miningproperty, the investment in the associate company relating to thatproperty is amortised on the basis of ore body extracted as aproportion of the ore body estimate of that property.Revenue recognitionRevenue and other operating income represent the provision ofconsultancy, management and office services for the year.Interest income is accrued on a time basis, by reference to theprincipal outstanding and at the effective interest rate applicable,which is the rate that exactly discounts estimated future cashreceipts through the expected life of the financial asset to thatasset's net carrying amount.Gains and losses on current asset investments represent realised andunrealised gains / (losses).Foreign currenciesTransactions in currencies other than pounds sterling are recorded atthe rates of exchange prevailing on the dates of the individualtransactions. For practical reasons, a rate that approximates to theactual rate at the date of the transaction is often used. At eachbalance sheet date, monetary assets and liabilities that aredenominated in foreign currencies are retranslated at the ratesprevailing on the balance sheet date. Non-monetary assets andliabilities that are denominated in foreign currencies areretranslated at the rates prevailing at the balance sheet date.Gains and losses arising on retranslation are included in net profitor loss for the period. On consolidation, the assets and liabilitiesof the Group's overseas operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items aretranslated at the average exchange rates for the period unlessexchange rates fluctuate significantly. Exchange differencesarising, if any, are classified as equity and transferred to theGroup's translation reserve. Such translation differences arerecognised as income or as expenses in the period in which theoperation is disposed of.The following rates of exchange have been applied: 2009 20081 US Dollar to 1 British PoundClosing rate 0.703 0.501Average rate 0.591 0.4981 Philippine Peso to 1 British PoundClosing rate 0.014 0.012Average rate 0.012 0.011TaxationThe income tax expense represents the sum of the tax currentlypayable and deferred tax. The tax currently payable is based ontaxable profit for the year. Taxable profit differs from net profitas reported in the income statement, because it excludes items ofincome or expense that are taxable or deductible in other years andit further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates thathave been enacted or substantively enacted by the balance sheet date.Deferred tax is the tax expected to be payable or recoverable ondifferences between the carrying amounts of assets and liabilities inthe financial statements and the corresponding tax bases used in thecomputation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generallyrecognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxableprofits will be available against which deductible temporarydifferences can be utilised. Such assets and liabilities are notrecognised if the temporary difference arises from the originalrecognition of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit.The carrying amount of deferred tax assets is reviewed at eachbalance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profits will be available to allowall or part of the asset to be recovered.Deferred tax is calculated at the tax rates that are expected toapply in the period when the liability is settled or the asset isrealised. Deferred tax is charged or credited in the incomestatement, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also dealt within equity.No recognition has been made for the deferred tax asset arising inrespect of current losses as the directors are of the opinion thatthis may not be realisable in the foreseeable future.Financial instrumentsFinancial assets and financial liabilities are recognised on thebalance sheet when the Company becomes a party to the contractualprovisions of the instrument.Non-current intangible assetsNon-current intangible assets are shown at cost less any provisionsmade in respect of impairment.Asset impairmentsAssets are reviewed for impairment at each balance sheet date or ifevents or changes in circumstances indicate that the carrying amountmay not be recoverable. When a review is conducted, the recoverableamount is assessed by reference to the net present value of expectedfuture cash flows of the relevant income generating unit or disposalvalue, if higher.If an asset is impaired, a provision is made to reduce the carryingamount to its estimated recoverable amount.Non-current asset investmentsLoan investments are shown at cost less provision for any permanentdiminution in value. Loan investments are recognised as an assetwhen sums are advanced.Property, plant and equipmentOffice equipment and furniture are shown at cost less accumulateddepreciation and any recognised impairment loss. Depreciation ischarged so as to write off the cost of assets over their estimateduseful lives, using the straight line method on the following basis:Office furniture and fittings 33% - 50%Computer and office equipment 33% - 100%Cash and cash equivalentsCash and cash equivalents comprise cash held at bank and on shortterm deposits.Trade payablesTrade payables are not interest bearing and are stated at theirnominal value.Trade receivablesTrade receivables do not carry any interest and are stated at theirnominal value as reduced by appropriate allowances for estimatedirrecoverable amounts.InvestmentsInvestments are recognised and derecognised on a trade date where apurchase or sale of an investment is under a contract whose termsrequire delivery of the investment within the timeframe establishedby the market concerned, and are initially measured at cost,including transaction costs.Investments are classified as held-for-trading and are measured atsubsequent reporting dates at fair value. Where securities are heldfor trading purposes, gains and losses arising from changes in fairvalue are included in net profit or loss for the period.Equity instrumentsEquity instruments issued by the Company are recorded at the proceedsreceived except where those proceeds appear to be less than the fairvalue of the equity instruments issued, in which case the equityinstruments are recorded at fair value. The difference between theproceeds received and the fair value is reflected in the share basedpayments reserve.The costs of issuing new equity are charged against the share premiumaccount.Operating LeasesRental costs under operating leases are charged to the incomestatement on a straight line basis over the term of the lease. Wherean incentive to sign the lease has been taken the incentive is spreadon a straight line basis over the lease term.Pension costsThe Company makes defined contributions to the independent pensionscheme of its employees.Share based paymentsThe Group has applied the requirements of IFRS 2 Share-basedPayments.The Group issues equity-settled based payments to directors, staffand certain professional advisors of the Group. Equity-settledshare-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of theequity-settled share-based payment is expensed on a straight-linebasis over the vesting period, based on the Group's estimate ofshares that will eventually vest.Fair value is measured using a Black-Scholes model. The expectedlife used in the model has been adjusted, based on management's bestestimate, for the effects of non-transferability, exerciserestrictions, and behavioural considerations.Critical Accounting Judgements and Key Sources of EstimationUncertaintyIn the process of applying the Group's accounting policies above,management necessarily make judgements and estimates that have asignificant effect on the amounts recognised in the financialstatements. Changes in the assumptions underlying the estimates couldresult in a significant impact to the financial statements. The mostcritical of these accounting judgement and estimation areas are asfollows:Impairment of AssetsThe Group reviews the carrying amounts of assets as at each balancesheet date or if events or changes in circumstance indicate that thecarrying amount may not be recoverable to determine whether there isany indication of impairment. If any such indication exists, theassets' recoverable amount or value in use is estimated. Determiningthe value in use requires the determination of future cash flowsexpected to be generated from the continued use and ultimate disposalof the asset. This requires the Company to make estimates andassumptions that can materially affect the financial statements. Anyresulting impairment loss could have a material adverse impact on theGroup's financial position and results of operations.3. Segmental analysisThe turnover and loss before tax are attributable to the principalactivities of the Group.Segmental information on a geographical basis is set out below: Year ended 31 March 2009 UK Philippines China Total £ £ £ £Revenue 32,126 - 1,157,995 1,190,121Profit for the year 2,668,032 - 187,208 2,855,240Share of associatesresults - (1,133,453) - (1,133,453)Depreciation /Amortisation - 6,267 - 6,267Total assets 2,832,448 25,031,323 1,068,936 28,932,707Total liabilities 641,202 492,657 71,800 1,205,659Loan investment additions - 2,433,719 - 2,433,719 Year ended 31 March 2008 UK Philippines China Total £ £ £ £Revenue 99,225 - 882,262 981,487(Loss)/profit for theyear (1,906,614) - 463,686 (1,442,928)Share of associatesresults - 2,649,630 - 2,649,630Depreciation /Amortisation - 40,179 - 40,179Impairment - investments - 583,433 - 583,433Total assets 5,903,300 20,042,573 598,607 26,544,480Total liabilities 399,490 351,050 43,813 794,353Tangible assets additions - 3,871 - 3,871Loan investment additions - 5,986,823 - 5,986,823Details of associated company's results are shown in note 33.4. Exceptional item Year ended Year ended 31 March 2009 31 March 2008 £ £Impairment write down - investment in - 583,433associateThe directors, having carried out an impairment review haveconsidered that the investment in the Ulugan nickel project should besubject to an impairment charge of £583,433 (100%) and accordinglyinvestments in associates have been written down by this amount.5. Profit from operationsProfit from operations is stated after charging / (crediting): Year ended Year ended 31 March 2009 31 March 2008 £ £Auditors remuneration: - as auditors 37,695 28,060 - as reporting accountants 17,365 16,740 - taxation compliance 4,984 2,000Audit fees - other auditor 29,953 38,723Operating lease - office rent 69,298 69,298(Gains) / losses on current assetinvestments (142,291) 221,298Foreign exchange (gains) / losses (3,590,618) 98,722Depreciation 4,897 28,839Amortisation 1,370 11,3406.Particulars of employeesThe average number of staff employed by the Group during thefinancial year amounted to: Year ended Year ended 31 March 2009 31 March 2008 No. No.Administrative staff 2 2The aggregate costs of the above were: £ £Wages and salaries 54,584 108,647Social security costs 6,001 17,631Pension costs - defined contribution 2,084 5,142 ______ ______ 62,669 131,4207. Directors' emoluments and feesThe Company also employed seven (2008: five) directors during theyear with aggregate emoluments in respect of qualifying services asfollows: Year ended Year ended 31 March 2009 31 March 2008 £ £Directors' emoluments 16,500 -Social security costs 1,420 -Directors' fees 30,150 15,000Amounts paid to third parties for theprovision ofdirectors' services 188,750 104,250Share based payments and related costs 10,385 127,296 ______ ______ 247,205 246,546 Year ended Year ended 31 March 2009 31 March 2008 £ £Highest paid director 120,000 84,995Share options exercised by highest paid - 100,000directorNumber of directors who exercised shareoptionsduring the year - 3During the year the Company paid £126,000 (2008: £nil) to directorsas compensation for loss of office. This amount is included in thedirectors' fees total of £247,205 above.Amounts paid in respect of professional consulting services notincluded above are disclosed in the related party note (note 29).8 Investment income Year ended Year ended 31 March 2009 31 March 2008 Group Group £ £Interest on bank deposits 132,280 389,783Interest on loan investments 393,801 299,452Other interest - 18Dividends - 2,525 ______ ______ 526,081 691,7789 Income tax expense Group Group Year ended Year ended 31 March 2009 31 March 2008 £ £Taxation charge 198,100 -Current tax reconciliationProfit for the year beforetaxation 1,919,887 1,206,702Profit for the year multipliedby standardrate of UK corporation tax 28%(2008: 30%) 537,568 362,011Effects of:Expenses not deductible for taxpurposes 2,609 268,717Non taxable income 11,474 (758)Excess of capital allowance overdepreciation (4,091) -Overseas profits (52,418) (139,106)Share of associate results 317,367 (794,889)Utilisation of losses (614,409) -Increase in potential tax credits - 304,025 _______ _______Tax charge 198,100 -Potential UK tax creditsavailable multiplied bystandard rate of corporation tax28% (2008: 30%) 122,031 789,044From 1 April 2008 there was a change in the standard rate of UKcorporation tax from 30% to 28%.No recognition has been made of the deferred tax asset in respectof the losses shown above as the directors are of the opinion thatthis may not be realisable in the foreseeable future.10. Earnings per share - including share of associates resultsEarnings per share has been calculated by dividing the profit forthe year after taxation including share of associates(losses)/profits of (£1,133,453) (2008: profit £2,649,630)attributable to the equity holders of the parent company of£1,639,603 (2008: £1,003,144) by the weighted average number ofshares in issue at the year end of 29,538,333 (2008: 29,278,552).Diluted earnings per share has been calculated using the weightedaverage number of shares in issue at the year end, diluted for theeffect of share options in existence at the year end of 395,000(2008: 545,000).Earnings / (loss) per share - excluding share of associates resultsEarnings / (loss) per share has been calculated by dividing theprofit / (loss) for the year after taxation excluding share ofassociates (losses)/profits of (£1,133,453) (2008: profit £2,649,630)attributable to the equity holders of the parent company of£2,773,056 (2008: loss £1,646,486) by the weighted average number ofshares in issue at the year end of 29,538,333 (2008: 29,278,552).Diluted earnings / (loss) per share has been calculated using theweighted average number of shares in issue at the year end, dilutedfor the effect of share options in existence at the year end of395,000 (2008: 545,000).11. Property, plant and equipment Company and Group Computer and Furniture, fixtures Total office equipment and fittings £ £ £CostBalance at 1 April 2008 42,278 40,425 82,703Disposals (2,292) (2,320) (4,612) _____ _____ _____Balance at 31 March 39,986 38,105 78,0912009DepreciationBalance at 1 April 2008 38,080 36,194 74,274Charge for the year 1,690 3,207 4,897Disposals (668) (2,041) (2,709) _____ _____ _____Balance at 31 March 39,102 37,360 76,4622009Net book valueAt 31 March 2009 884 745 1,629At 31 March 2008 4,198 4,231 8,429 Computer and Furniture, fixtures Total office equipment and fittings £ £ £CostBalance at 1 April 2007 46,838 40,425 87,263Additions 3,871 - 3,871Disposals (8,431) - (8,431) _____ _____ _____Balance at 31 March 42,278 40,425 82,7032008DepreciationBalance at 1 April 2007 28,411 25,455 53,866Charge for the year 18,100 10,739 28,839Disposals (8,431) - (8,431) _____ _____ _____Balance at 31 March 38,080 36,194 74,2742008Net book valueAt 31 March 2008 4,198 4,231 8,429At 31 March 2007 18,427 14,970 33,39712. Investment in subsidiary undertakings Company 2009 2008 £ £CostBalance brought forward 10,286 286Additions - 10,000 _____ _____Balance carried forward 10,286 10,286Subsidiary Country of Holding Proportion of Nature ofUndertaking incorporation voting shares held BusinessChina Nickel British Virgin Ordinary ConsultancyCorporation Islands shares 56.1% ServicesChina Nickel & British VirginSteel Islands Ordinary DormantCorporation shares 100%13. Investment in Associated UndertakingsCompany 2009 2008 £ £CostBalance brought forward 10,466,250 10,466,250 _________ ________Balance carried forward 10,466,250 10,466,250Amortisation / ImpairmentBalance brought forward 594,773 -Impairment charge - 583,433Amortisation 1,370 11,340 ______ ______Balance carried forward 596,143 594,773Net book value 9,870,107 9,871,477Group 2009 2008 £ £CostBalance brought forward 13,003,304 10,353,674Share of associate undertakings results (1,133,453) 2,649,630 _________ _________Balance carried forward 11,869,851 13,003,304Amortisation / ImpairmentBalance brought forward - -Impairment charge 594,773 583,433Amortisation 1,370 11,340 ______ ______Balance carried forward 596,143 594,773Net book value 11,273,708 12,408,53
Datum: 01.09.2009 - 12:51 Uhr
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