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ARCHIPELAGO RESOURCES PLC 

 

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2009
CHIEF EXECUTIVE OFFICER'S STATEMENT

Results AND DIVIDEND

The consolidated loss for the half year after taxation amounted to US$1,436,551 (2008: US$2,011,297).  No dividends have been paid or proposed.

REVIEW OF BUSINESS 

Archipelago Resources Plc ('Archipelago' or 'the Company') holds an 85% interest in its flagship Toka Tindung Gold Project in North Sulawesi, Indonesia ('the Project').  The Project has a defined resource of 1.7m ounces (oz) gold equivalent of which 1.1m oz will initially be mineable by open pit. The Company's objective remains early development of this Project.

In March 2008, the Director General of the Ministry of Energy and Mineral Resources (ESDM) issued Decrees advising that the Project's revised environmental impact statements (AMDAL's) had been approved in accordance with Regulation 27 1999 Articles 19 and 20. In addition, the Decrees approved the CoW's respectively entering (TTN) and re-entering (MSM) the Construction Phase necessary to complete development of the Project. On 20 April 2009, the Ministry of Energy, Minerals & Resources approved an extension of the MSM Construction Phase until 5 March 2010. The Construction Phase approval for PT Tambang Tondano Nusajaya is still current.

Subject to unanimous political support and project financing, production is targeted for late 2010 at an average annual rate of 160,000 oz/annum gold equivalent over the first 6 years of the initial 8 year project life. Given the excellent exploration potential existing at Toka Tindung and encouraging initial exploration results reported in January 2007, the Company is confident of extending the project life beyond 8 years.

Mining at Toka Tindung will be by way of five open pits with processing through a centralised plant. The mineralogy of the Toka Tindung deposits is simple with indicated gold recoveries of approximately 94%.

On 24 February 2009, the Company announced that it had placed 104m shares at 9 pence per share with investment funds managed by Baker Steel Funds ('Baker Steel') giving Baker Steel a 40% interest in the Company. The capital raised was used to repay a loan facility and provide working capital for the Company.  In addition, Baker Steel was granted options to acquire up to 85,000,000 shares in the Company exercisable at a price of 12 pence per share.

Events since the Balance Sheet Date

On 10 August 2009, the Company announced that prominent Indonesian company, PT Rajawali Corporation ('Rajawali'), an existing shareholder, had agreed to purchase 85,000,000 share options ('Options') and 26,505,800 shares ('Shares') in the Company from Baker Steel Funds ('Baker Steel'). Furthermore, Rajawali advised the Company that it had elected to exercise all of the Options purchased at the exercise price of 12 pence per share and accordingly, the Company which was already debt free and had working capital of GBP1.9 million, received an additional GBP10.2 million.

Following exercise of the Options, the Company now has 391,019,334 shares in issue of which Rajawali hold 117,305,800 and Baker Steel hold 97,466,867 representing 30% and 24.9% respectively of the issued capital of the Company, with a further 8 beneficial shareholders with holdings of greater than 2% representing in aggregate an additional 29.7%.

The Board is very supportive of this major investment in the Company by a strong and respected local company.  Board representation is proposed and Rajawali will be entitled to participate in any future issues of new shares by the Company to the extent of its pro rata interest.

  The Company is confident that with the support of Rajawali, it will secure regional support for the development of the Toka Tindung Gold Project, secure appropriate project financing and re-commence construction. Rajawali has made clear its intention that the Project be brought into production as a matter of priority. The Company understands that Rajawali will also be supportive of the Company acquiring additional gold project assets in due course.

Other than as already announced, there has not been any other matter or circumstance that has arisen since 30 June 2009 which has significantly affected, or may significantly affect, the operations or state of affairs of the Company.

By order of the board

J C Loosemore
Managing Director
11 September 2009

  ARCHIPELAGO RESOURCES PLC

INCOME STATEMENT 

for the 6 months ended 30 June 2009

		Half-Year ended	Half-Year ended
		30 June 2009	30 June 2008
		US$	US$
	Notes
REVENUE		-	-
Cost of sales		-	-
GROSS PROFIT		-	-
Other income	3	5,441	69,063
Administrative expenses	3	(1,344,791)	(1,818,061)
Exploration expenditure written off
OPERATING (LOSS)/GAIN		(1,339,350)	(1,748,998)
Gain on sale of assets		67	823
Finance Costs		(97,268)	(263,122)
(LOSS)/GAIN ON ORDINARY ACTIVITIES BEFORE TAXATION		(1,436,551)	(2,011,297)
Taxation Expense		-	-
(LOSS)/GAIN ON ORDINARY ACTIVITIES AFTER TAXATION		(1,436,551)	(2,011,297)
RETAINED (LOSS)/GAIN FOR THE YEAR		(1,436,551)	(2,011,297)
(Loss) / earnings per share - basic	4	(0.006)	(0.011)
(Loss) / earnings per share - diluted	4	(0.005)	(0.009)

There are no other recognised gains and losses other than those shown above. All the Group's activities consist of continuing operations.

  ARCHIPELAGO RESOURCES PLC

BALANCE SHEET

for the 6 months ended 30 June 2009

		Half-Year ended	Half-Year ended
		30 June 2009	30 June 2008
		US$	US$
NON - CURRENT ASSETS
Property plant and equipment		53,232,417	51,392,272
Development, exploration and evaluation		28,922,630	24,632,441
Prepaid borrowing costs		26,943	3,047,716
Investments		485,352	612,287
		82,758,342	79,684,716
CURRENT ASSETS
Inventories		252,175	159,623
Trade and other receivables		781,832	1,512,417
Prepayments		33,346	46,195
Derivative financial instruments		-	443
Cash and cash equivalents		3,891,699	1,238,879
		4,959,052	2,957,557
TOTAL ASSETS		87,717,394	82,642,273
EQUITY
Share capital		5,194,236	3,452,884
Share premium account		103,489,654	85,809,616
Reserves		3,617,572	2,611,655
Accumulated losses		(27,014,553)	(17,911,670)
TOTAL EQUITY		85,286,909	73,962,485
CURRENT LIABILITIES
Trade and other payables		1,826,634	2,393,890
Provisions		603,851	396,701
Borrowings		-	5,889,197
TOTAL LIABILITIES		2,430,485	8,679,788
TOTAL EQUITY AND LIABILITIES		87,717,394	82,642,273

  ARCHIPELAGO RESOURCES PLC

STATEMENTS OF CHANGES IN EQUITY 

for the 6 months ended 30 June 2009

	Share	Share	Other	Accumulated
	capital	premium	reserves	losses	Total
	US$	US$	US$	US$	US$
Total equity at the beginning of the half-year	3,697,515	91,419,763	3,617,572	(25,578,002)	73,156,847
Shares issued	1,496,721	12,123,482	-	-	13,620,203
Share issue costs	-	(53,591)	-	-	(53,591)
Employee options	-	-		-
Other options	-	-
Exchange differences on translation of foreign operations	-	-	-	-	-
Loss for the half-year	-	-	-	(1,436,551)	(1,436,551)
	5,194,236	103,489,654	3,617,572	(27,014,553)	85,286,909
Total equity at the end of the half-year

  

ARCHIPELAGO RESOURCES PLC

CONSOLIDATED STATEMENT OF CASHFLOWS

for the 6 months ended 30 June 2009

		Half-Year ended	Half-Year ended
		30 June 2009	30 June 2008
	Notes	US$	US$
NET CASH OUTFLOW FROM OPERATING ACTIVITIES	6	(1,889,864)	(1,049,080)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and equipment		(889,624)	(3,494,690)
Payments for development, exploration and evaluation expenditure		(1,658,674)	(2,932,768)
Proceeds from sale of property, plant and equipment		67	823
Proceeds from sale of investments		-	833,383
Interest paid		(97,268)	(263,122)
NET CASH USED IN INVESTMENT ACTIVITIES		(2,645,499)	(5,856,374)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of ordinary share capital		13,566,613	2,952,110
New short term loans		-	-
Repayment of loans		(6,500,000)	(3,000,000)
Loan to related party		(302,455)	(4,981)
Prepaid borrowing costs		(26,943)	(31,646)
NET CASH FROM FINANCING ACTVITIES		6,737,215	(84,517)
Effect of change in exchange rates on cash and cash equivalents		25,938	(150,899)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS		2,227,790	(7,140,870)
CASH AND CASH EQUIVALENTS AT START OF PERIOD		1,663,909	8,379,749
CASH AND CASH EQUIVALENTS AT END OF PERIOD		3,891,699	1,238,879

NOTES TO THE INTERIM RESULTS 

1.    accounting policies

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting and Accounting Standards adopted by the European Union and comply with the Companies Act.

At the date of authorisation of these financial statements, there were Standards and Interpretations that were in issue but are not yet effective and have not been applied in these financial statements. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group or Company, except for additional disclosures when the relevant Standards come into effect.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from those estimates.

The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.  The accounting policies adopted are consistent with those of the previous financial year.

The financial statements have been prepared on the going concern basis, assuming the Group and the Company to continue as going concerns, and therefore realise their assets and extinguish their liabilities in the normal course of business at the amounts stated in the financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of a subsidiary.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make additional investment to cover the losses.

All intercompany transactions and balances between group enterprises are eliminated on consolidation.

Depreciation

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition of each asset evenly over its expected useful life as follows:

    Plant and equipment    - over 3 to 7 years

Exploration expenditure will be amortised over expected production volumes from the date production commences.

Derivatives

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. 

  

The Group designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

  (i) Fair value hedges

    Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

  (ii) Cash flow hedges

    The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised directly in equity, while the gain or loss relating to the ineffective portion is recognised immediately in the income statement.

    Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a nonߛfinancial asset or a nonߛfinancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

    When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

  (iii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

Deferred taxation

    Deferred tax assets and liabilities are recognised for temporary timing differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. 

The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary timing differences to measure the deferred tax asset or liability. An exception is made for certain temporary timing differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

    Deferred tax assets are recognised for deductible temporary timing differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary timing differences and losses.

    Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary timing differences and it is probable that the differences will not reverse in the foreseeable future.

    Current and deferred tax attributable to amounts recognised directly in equity are also recognised directly in equity.

Foreign currencies

Translation of foreign currency transactions

Transactions in foreign currencies of entities are converted to local currency at the rate of exchange ruling at the date of the transaction.

Amounts payable to and by related entities that are outstanding at the reporting date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial period.

Translation of foreign currency financial statements

Items included in the financial statements of each of the entities within the Group are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The functional currency of the Group is US dollars. The consolidated financial statements are presented in US dollars, which is Archipelago Resources Plc presentation currency.

As at the reporting date, the assets and liabilities of the subsidiaries are translated into US dollars at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rate for the year. The exchange differences arising on the translation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation, is transferred to profit or loss account.

 

Development, exploration and evaluation expenditure

Exploration and evaluation costs (including the acquisition cost of exploration properties) which relate to 'an area of interest' are carried forward on the balance sheet where the rights to tenure are current and:

•    the area of interest has commercially recoverable reserves; or

•    the exploration and/or evaluation activities of the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of commercially recoverable reserves.

The Group performs impairment testing when facts and circumstances suggest the carrying amount has been impaired. If it is determined that the asset has been impaired it is immediately written off in the income statement.

Development expenditure incurred on or on behalf of the Group is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the Directors. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure having a specific nexus with the development property.

Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area of interest is aggregated with the cost of development.

All expenditure incurred prior to commencement of commercial levels of production from each development property, is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured.

No amortisation is provided in respect of development properties until they are reclassified as 'Mine Properties' following a decision to commence mining.

Borrowing costs

Borrowing costs are recognised as an expense when incurred, except where the entity holds a qualifying asset. Those borrowing costs directly associated with the qualifying asset are capitalised.

   

2.    segment information 

	UK	Australia	Indonesia	South East Asia	Total
	US$	US$	US$	US$	US$
Half-year 2009
Segment result	(1,053,547)	(375,205)	(7,799)	-	(1,436,551)
Unallocated revenue less unallocated expenses					-
Loss before income tax					(1,436,551)
Half-year 2008
Segment result	(1,389,300)	(523,955)	(98,042)	-	(2,011,297)
Unallocated revenue less unallocated expenses					-
Loss before income tax					(2,011,297)

3.    OPERATING GAIN/(LOSS)

			Half-Year ended	Half-Year ended
			30 June 2009	30 June 2008
			US$	US$
(a) Revenue
Interest income			5,441	69,063
			5,441	69,063
(b) Expenses
Directors' remuneration			171,310	208,630
Other staff costs			142,902	182,982
Rent			8,303	8,480
Depreciation			1,593	4,022
Borrowing costs			400,481	230,023
Fair value change of investments			(103,533)	156,458
Net foreign exchange differences			70,146	318,439
Other expenses			281,671	709,027
Exploration Expenditure written off			371,918	-
Total administrative expenses			1,344,791	1,818,061

4.    EARNINGS PER SHARE

The calculation of basic earnings per share is based on a loss for the half year of US$1,436,551 (2008: US$2,011,297), and on 237,351,033 (2008: 183,541,936) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The calculation of dilutive earnings per share is based on a dilutive loss for the half year of US$1,347,403   (2008: US$1,781,741), and on 256,166,033 (2008:  200,701,937) potential dilutive ordinary shares.

5.    SHARE CAPITAL

	30-Jun	30-Jun	30-Jun	30-Jun
	2009	2008	2009	2008
	Shares	Shares	US$	US$
Balance at beginning of the half-year	201,149,334	182,769,334	3,697,515	3,334,800
Issued during the period	104,870,000	6,000,000	1,496,721	118,084
Balance at end of the half-year	306,019,334	188,769,334	5,194,236	3,452,884

 

6.    NOTES TO THE STATEMENT OF CASH FLOWS

	Half-Year ended	Half-Year ended
	30 June 2009	30 June 2008
	US$	US$
(a)  Reconciliation of operating loss/gain to net cash outflow from operating activities
Operating (loss) / gain	(1,339,350)	(1,748,998)
Non-cash items
Exploration and evaluation expenditure written off	371,918	-
Foreign exchange loss / (gain)	44,208	318,397
Share options expensed	-	373,913
Depreciation	1,593	4,022
Fair value change of investments	(103,725)	156,458
Borrowing costs amortised	207,635	226,300
Provision for doubtful debt	-	(45,694)
Movement in assets and liabilities
(Increase)/Decrease in debtors	(319,820)	129,109
(Increase)/Decrease in prepayments	(4,593)	(5,260)
(Increase)/Decrease in inventory	828	616,096
Increase/(Decrease) in creditors	(751,726)	(1,111,290)
Increase/(Decrease) in provisions	3,169	37,868
Net cash outflow from operating activities	(1,889,864)	(1,049,080)

7.    Post balance sheet eventS

On 10 August 2009, the Company announced that prominent Indonesian company, PT Rajawali Corporation ('Rajawali'), an existing shareholder, had agreed to purchase 85,000,000 share options ('Options') and 26,505,800 shares ('Shares') in the Company from Baker Steel Funds ('Baker Steel'). Furthermore, Rajawali advised the Company that it had elected to exercise all of the Options purchased at the exercise price of 12 pence per share and accordingly, the Company which was already debt free and had working capital of GBP1.9 million, received an additional GBP10.2 million.

8.    GENERAL 

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. 

The interim report will be available from the Company's website, www.archipelagoresources.com.au

 

 

CONTACTS

Colin Loosemore, Managing Director, Archipelago Resources Plc.

Tel:       00-618-9364-8301

Gerry Beaney / Fiona Kindness, Grant Thornton UK LLP

Tel:       020 7383 5100

ENDIR GUUUWBUPBGCG