Preliminary Statement of results 2004
Chairman's statement
I am pleased to be able to report that the outlook for the mineral and
exploration industry has greatly improved since the issue of our last annual
report. Metal prices have increased significantly, although unevenly, during the
year. Copper in particular almost doubled within the twelve months ended 31
March 2004, and it is particularly interesting to note that, based on current
metal prices, the projected life of mine revenue from the Parys Mountain mine
would be derived in about equal measure from both zinc and copper, which is
reminiscent of Parys Mountain's long history of copper production in the 18th
and 19th centuries. Obviously, the deterioration of the US dollar relative to
sterling has had a negative effect, but overall the forecast projections for
Parys Mountain based on current metal prices are most encouraging.
Parys Mountain mine
The company's Parys Mountain polymetallic mineral deposit contains an in situ
geological resource of 6.5 million tonnes, containing an estimated - 760 million
pounds of zinc; 330 million pounds of copper; 370 million pounds of lead, 8
million ounces of silver and 60,000 ounces of gold.
The Parys Mountain mine would generate almost equal revenues from zinc and from
copper over the probable and possible resources, with more from zinc and
significant credits for silver in the early years when the probable resources
are mined. The mine would benefit enormously from any increase in the future
prices of any or all of these metals, particularly zinc and copper
During the year the dewatering of the higher levels of the old mine workings at
Parys Mountain was satisfactorily completed by Anglesey Council and others, and
the water quality to the south of the Mountain has improved as a result. The old
workings are separate from the area of our resources, however we believe there
is useful information to be learned from them; additionally they are adjacent to
a significant deposit, the Northern Copper zone, which was explored by major
mining companies, including Noranda in the 1960s and 70s. At that time it was
reported to contain 36,000,000 tonnes at an average grade of 0.66% copper. It
apparently was not assayed for gold.
Financial results
The operating loss before impairment for the year is almost unchanged at
�120,005 compared with �121,299 last year. Of this loss �72,356 represents
interest accruing in respect of the working capital loan from Juno Limited, the
company's major shareholder, and the balance is the costs of evaluating other
projects together with administrative and corporate expenses.
The improvement in metal prices means that there is no requirement to make any
further impairment provision in respect of the accumulated costs of the Parys
Mountain project this year. Indeed based on current metal prices, the impairment
provisions made in the past three years would not have been necessary.
Metal prices
It was encouraging to note that the price of zinc increased substantially during
2003 reaching 45half per pound in December, well above the average of 35half per pound
for 2002. In the first quarter of 2004 the zinc price increased further reaching
a high of 52half per pound in early March. Devaluation of the US dollar against
most producer country currencies was a contributing factor. Nevertheless even
these prices are well below the historical medium or long term prices. The
recent weakness of the US dollar has led to a rise in the operating costs of
most zinc mines.
At the same time, after almost 20 years of excess zinc supply, a major supply
gap is thought be developing in world zinc markets. The opening of the new
Century mine in Australia and the Antamina mine in Peru contributed to the
oversupply of zinc from 2000 to 2002 but there are now no new large mine
developments in the pipeline. At the same time, in 2002 China changed from being
a large net exporter of zinc metal to a net importer with imports of over
370,000 tonnes in 2003, thereby reversing a major negative factor for zinc
supply and zinc price. World wide zinc demand increased 4.2 per cent in 2003.
China is now the largest consumer of zinc in the world and much of the growth is
attributable to metal consumption in China.
At current metal prices approximately 40 per cent of the projected revenue from
the Parys Mountain mine is expected to be derived from zinc (more in earlier
years of production). Growth in zinc consumption is forecast to be strong in
2004 and Brook Hunt UK in its January Metal Bulletin forecast a supply deficit
of over 300,000 tonnes in 2004; this in turn will lead to a reduction in LME
inventories which should also lead to an increase in zinc prices
The price of copper increased strongly in 2003 driven largely by economic
growth. The rapid growth in developing countries in Asia, and especially China,
together with the recovery of the American and European economies, has led to
strong growth in consumption at a time of low metal inventories. Copper
concentrates in particular remain in tight supply and the shortfall in
concentrate has led to significant reductions in treatment charges and reduced
metal production. With few new large mines coming into production a continuation
of the global economic recovery should sustain copper prices at reasonable
levels for the immediate future.
Interestingly, 2003 marks the 15th consecutive year that silver demand has
exceeded supply. This long-running consistent supply deficit is a unique
characteristic of silver and has led some commentators to predict an eventual
dramatic increase in the price of silver when Inventories finally run down.
Parys Mountain contains about 8 million ounces of silver with a gross in situ
value of over $40 million at today's prices.
Outlook
For a number of years the directors have felt that the economics of Parys
Mountain could be greatly enhanced if the mine production rate could be
increased: higher daily production rates lead to better mine economics. There is
no doubt that Parys Mountain has excellent potential for the discovery of the
further resources needed to support higher production rates and with this in
mind a major exploration programme has been planned, with the objective of
delineating new mineral zones. Unfortunately, the weakness in metal prices,
particularly zinc, which existed for about five years prior to 2004, made
financing such an exploration programme difficult, except at share prices that
would be very unattractive to existing shareholders. With the improvement in
metal prices in 2004, and the projected deficit in zinc supply, which should
lead to a longer term sustained increase in the price of zinc, the prospects for
Parys Mountain have improved enormously.
To reactivate and advance the project, the following steps are planned, subject
to financing:
- An update of the 1990 feasibility study, including examination of a 2,000
tonne per day production scenario, twice the rate used in the feasibility study.
- A review and reassessment of the Northern Copper zone to determine (a) if
the zone contains any reasonable gold levels and (b) if there are any higher
grade parts of the zone which could be mined and produced in conjunction with
the polymetallic Engine and White Rock zones.
- An assessment of the viability of the early production of gold and silver
on a small scale. Parts of the Engine zone near the shaft and current
underground development are known to contain high grades of gold that perhaps
could be mined and processed in conjunction with further exploratory work.
- A major drilling programme on exploration targets related to the Engine
zone to the north and east of the current established resource and to the west
of the adjacent White Rock zone.
We are currently examining a number of options for financing the plans set out
above. The directors believe that the company's current share price, being less
than both book value and projected net asset value, does not adequately reflect
the value or potential of the company assets, and would be reluctant to issue
new shares at a low price.
The improved outlook for metal prices, and market sentiment, has opened the
possibility of attracting a joint venture partner to help develop the Parys
Mountain mine and this option is being given careful consideration. At same time
the improved outlook has also opened up other new project opportunities for the
company. A number of these opportunities have been examined in recent months and
this exercise is continuing. I hope be able to report meaningful progress on
these objectives in the not-too-distant future.
I would like to thank shareholders for their continued patience and support
through the lean times of the past few years. I believe we can now look forward
to significant progress and better times ahead.
John F. Kearney
Chairman
Consolidated Unaudited Profit and Loss account for the year ended 31 March 2004
2004 2003
� �
Turnover - continuing operations - -
Operating expenses (49,557) (51,260)
Exceptional item:
Provision for impairment of intangible
assets - (2,000,000)
Operating loss on ordinary activities
before interest & taxation (49,557) (2,051,260)
Interest receivable and similar income 1,908 2,139
Interest payable and similar charges (72,356) (72,178)
Loss on ordinary activities before
taxation (120,005) (2,121,299)
Tax on loss on ordinary activities - -
Loss on ordinary activities after tax
and retained loss for the year (120,005) (2,121,299)
Loss per share - basic (0.1) pence (1.8) pence
Loss per share - diluted (0.1) pence (1.8) pence
Consolidated Unaudited Balance Sheet at 31 March 2004
2004 2003
� �
Fixed assets
Intangible assets 5,217,006 5,156,609
Tangible assets 186,102 186,602
5,403,108 5,343,211
Current assets
Debtors 108,819 106,211
Cash at bank and in hand 1,266 2,260
110,085 108,471
Current liabilities
Creditors - amounts due
within one year (1,456,989) (1,275,473)
Net current liabilities (1,346,904) (1,167,002)
Total assets less current
liabilities 4,056,204 4,176,209
Capital and reserves
Share capital - equity 1,162,414 1,162,414
Share capital - non equity 5,510,833 5,510,833
Share premium account - equity 5,737,146 5,737,146
Profit & loss account - equity (8,354,189) (8,234,184)
Shareholders' funds 4,056,204 4,176,209
Consolidated Unaudited Cash Flows for the year ended 31 March 2004
2004 2003
� �
Net cash outflow from continuing
operating activities (36,095) (57,991)
Returns on investments and servicing
of finance
Interest received 39 18
Interest paid (41) (11)
(2) 7
Capital expenditure and financial
investment
Payments to acquire intangible (9,897) (10,922)
fixed assets
Payments to acquire tangible - (2,000)
fixed assets
Net cash outflow from capital
investment & financial investment (9,897) (12,922)
Net cash outflow before financing (45,994) (70,906)
Financing
Increase in loans 45,000 60,000
(Decrease)/increase in cash (994) (10,906)
These financial statements are unaudited. In 2003 and earlier years the auditors
issued an unqualified but non-standard audit report, making reference to matters
of going concern and the impairment of development expenditure. The company
expects that the audit report for 2004 will be couched in similar terms.
Contacts J F Kearney + (1) 416 362 6686
Ian Cuthbertson + (44) 1248 361333
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