BAFEX HOLDINGS LIMITED

Transcription

1 GROUP FINANCIAL STATEMENTS 31 MARCH 2004 Grant Thornton Neuhaus Γ

2 GROUP FINANCIAL STATEMENTS 31 MARCH 2004 I N D E X Pages General information... 2 Directors approval of financial statements... 2 Auditor s report to the members... 3 Directors report... 4 Balance sheet... 5 Income statement... 6 Statement of changes in equity... 7 Cash-flow statement... 8 Notes to the financial statements

3 GENERAL INFORMATION 31 MARCH 2004 DIRECTORS C J MacKenzie R D Williams SECRETARY Apex Advisors Limited REGISTERED ADDRESS Barker Chambers P O Box 92 Road Town Tortola British Virgin Islands REGISTERED AGENT LWB Company Limited P O Box 92 Road Town Tortola British Virgin Islands DIRECTORS APPROVAL OF FINANCIAL STATEMENTS Management is responsible for the preparation, integrity and objectivity of the financial statements and other information contained in this annual report. In order to discharge this responsibility, the company and the group maintain internal, accounting and administrative control systems designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with the company s and the group s policies and procedures. The annual financial statements, which appear on pages 4 to 14, were approved and signed by the directors on 2 August DIRECTOR DIRECTOR WINDHOEK

4 REPORT OF THE INDEPENDENT AUDITORS To the members of BAFEX HOLDINGS LIMITED We have audited the annual financial statements and the group financial statements of Bafex Holdings Limited, set out on pages 4 to 14, for the year ended 31 March These financial statements are the responsibility of the company s directors. Our responsibility is to express an opinion on these financial statements, based on our audit. Scope We conducted our audit in accordance with statements of Namibian Auditing Standards. These standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Audit opinion In our opinion, the financial statements fairly present, in all material respects, the financial position of the company and the group at 31 March 2004 and the results of its operations and cash-flow information for the year then ended in accordance with International Financial Reporting Standards and Namibian generally accepted accounting practice. GRANT THORNTON NEUHAUS Registered Accountants and Auditors Chartered Accountants (Namibia) WINDHOEK 2 August 2004

5 DIRECTORS REPORT 31 MARCH 2004 The directors herewith present their annual report, which forms part of the audited financial statements of the company and the group for the year ended 31 March GENERAL The company acts as investor in a subsidiary company, which operates in Namibia. The objectives of the subsidiary are to explore for, discover and mine mineral deposits, and develop mineral exploration properties, as well as any work connected with these objectives, including consulting. SHARE CAPITAL The authorised share capital of the company comprises par value shares of US$1 each of which 108 par value shares of US$1 were issued. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment amounting to $ (2003 : $27 249) was acquired during the year under review. Otherwise, no further major changes occurred in the nature of the property, plant and equipment or in the policy regarding its use. STATE OF AFFAIRS AND RESULTS All matters material to the appreciation of the state of the company s and group s affairs and results are disclosed in the financial statements and do not require further comment or explanation. The results are attributable to the main activity of the company and the group. SUBSIDIARY The interest in the subsidiary company is as follows: Name of company Bafex Exploration (Pty) Ltd Issued Percentage Interest of holding company capital held Shares Indebtedness Nature of business $ % $ Explore, discover and mine mineral deposits and develop mineral exploration properties The aggregate loss of the subsidiary company attributable to the group is $ (2003 : $ ) for the year under review. DIVIDENDS No dividends were declared or paid in respect of the year ended 31 March 2004 (2003 : $ Nil). DIRECTORATE AND SECRETARY The names of the directors in office at the date of this report appear on page 2 of this report together with the name, business and postal address of the secretary of the company. EVENTS SUBSEQUENT TO THE YEAR-END Subsequent to year-end, a letter of intent was entered into with Helio Capital Corporation to acquire all of the issued and outstanding shares of the company. Subject to regulatory acceptance, the resulting company will be listed in the Mining Sector on the TSX Venture Exchange. Otherwise, the directors are not aware of any matter or circumstance arising since the end of the financial year, not otherwise dealt with in the annual financial statements and the group financial statements, which significantly affects the financial position of the company and the group or the results of their operations. WINDHOEK 2 August 2004

6 BALANCE SHEETS AT 31 MARCH CANADIAN FUNDS COMPANY GROUP Notes ASSETS $ $ $ $ Non-current assets 828, ,808 98,551 48,932 Property, plant and equipment ,551 26,432 Interest in subsidiary 3 828, , Investments 4-22,500-22,500 Current assets 25,884 60, ,471 76,042 Receivables , Cash and cash equivalents 25,884 60,280 75,622 75,184 Total assets 854, , , ,974 EQUITY AND LIABILITIES Capital and reserves 849, , ,699 (42,714) Issued capital 5 190, , , ,093 Reserves - - (32,730) (25,428) Accumulated profit/(loss) 659,522 97,256 21,336 (117,379) Shareholders' interest/(deficit) 849, , ,699 (42,714) Non-current liabilities Non-interest-bearing borrowings 6-128, ,029 Current liabilities Payables 5,165-27, Total equity and liabilities 854, , , ,974

7 INCOME STATEMENTS FOR THE YEAR ENDED 31 MARCH CANADIAN FUNDS COMPANY GROUP $ $ $ $ INCOME 153, , , ,636 Income from Boulder Mining Corporation 153, , , ,592 - Option fees - 25,000-25,000 - Project management fees 47,473 22,130 47,473 22,130 - Project consulting fees 68,706 87,462 68,706 87,462 - Common shares issue 22,000 24,000 22,000 24,000 - Other income 15,000-15,000 - Interest received EXPENDITURE 376,538 (61,336) (47,382) (276,015) Administration cost (19,010) (59,957) (114,189) (136,024) Audit fees - - 2, Company registration fees - 10,000-10,000 Consulting fees - 42,300-42,478 Depreciation ,117 3,649 Fair value loss of investment - 1,500-1,500 Foreign exchange loss 709 3, ,569 Goodwill arising on consolidation written off ,619 Interest paid ,650 Legal fees 3,507-4,502 - Loss on sale of investment Office and sundry expenses 14,294 2,588 42,883 12,026 Rent paid ,362 4,102 Salaries and wages ,188 11,866 Resource property cost 395,548 (1,379) 66,807 (139,991) ERL 26 - Kaokoland South ,877 ERL 27 - Kamanjab South ,754 ERL 31 - Sinclair EPL Tevrede (429,849) (43,343) (226,205) 77,112 - Expenses 42, , , ,824 - Recoveries from Boulder Mining Corporation (472,814) (190,712) (472,814) (190,712) EPL Vredelus 6,385 13,715 46,797 15,853 EPL Otjitombo 26,394 29,439 71,660 34,527 EPL Tevrede South ,595 1,872 EPL Honib ,537 1,241 EPL Leicester ,939 1,395 EPL Zebra ,738 1,239 EPL Otjimakuru - - 8, PROFIT/(LOSS) 529,717 97, ,166 (117,379) Directors' loans waived 32,549-32,549 - PROFIT/(LOSS) for the year 562,266 97, ,715 (117,379)

8 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH CANADIAN FUNDS Issued capital Share Share Accumulated Translation capital premium profit reserves T o t a l C O M P A N Y $ $ $ $ $ Balance at commencement of business Issue of share capital , ,093 Profit for the period ,256-97,256 Balance at 31 March ,985 97, ,349 Shares repurchased (3) (9,997) - - (10,000) Repurchased shares sold 3 99, ,000 Profit for the year , ,266 Balance at 31 March , , ,615 Issued capital Share Share Accumulated Translation capital premium profit/(loss) reserves T o t a l G R O U P $ $ $ $ $ Balance at commencement of business Issue of share capital , ,093 Currency translation difference (25,428) (25,428) (Loss) for the period - - (117,379) - (117,379) Balance at 31 March ,985 (117,379) (25,428) (42,714) Shares repurchased (3) (9,997) - - (10,000) Repurchased shares sold 3 99, ,000 Currency translation difference (7,302) (7,302) Profit for the year , ,715 Balance at 31 March ,985 21,336 (32,730) 178,699

9 CASH-FLOW STATEMENTS FOR THE YEAR ENDED 31 MARCH CANADIAN FUNDS COMPANY GROUP Note Cash flows from operating activities: $ $ $ $ Cash receipts from customers 603, , , ,304 Cash paid to suppliers and employees (73,776) (226,548) (502,544) (462,640) Cash generated from/(utilised by) operations A 530,217 98, ,818 (137,336) Cash flows from investing activities: Investment to maintain or expand operations: Additions to property, plant and equipment - - (84,065) (30,602) Investment in subsidiary company (585,588) (243,308) - - Investment made/(sold) 22,000 (24,000) 22,000 (24,000) Net cash (outflow) from investing activities (563,588) (267,308) (62,065) (54,602) Cash flows from financing activities: Issued capital raised 90, ,093 90, ,093 Non-interest-bearing borrowings raised (91,025) 128,739 (129,315) 167,029 Net cash (outflow)/inflow from financing activities (1,025) 228,832 (39,315) 267,122 Net movement in cash and cash equivalents (34,396) 60, ,184 Change in cash and cash equivalents Balance at beginning of the year 60,280-75,184 - Net movement (34,396) 60, ,184 Balance at end of the year 25,884 60,280 75,622 75,184 The balance comprises: Cash on hand and at bank 25,884 60,280 75,622 75,184 NOTE TO THE CASH-FLOW STATEMENT A. RECONCILIATION OF PROFIT/(LOSS) BEFORE TAXATION TO CASH GENERATED FROM/(UTILISED BY) OPERATIONS Profit/(Loss) for the year 562,266 97, ,715 (117,379) Adjusted for: Depreciation ,117 3,649 Fair value loss of investment - 1,500-1,500 Translation differences - - (16,473) (24,907) Directors' loans waived (32,549) - (32,549) - Loss on sale of investment Operating profit/(loss) before working capital changes 530,217 98, ,310 (137,137) Working capital changes: Increase in receivables - - (30,991) (858) Increase in payables , Cash generated from/(utilised by) operations 530,217 98, ,818 (137,336)

10 NOTES TO THE FINANCIAL STATEMENTS 31 MARCH ACCOUNTING POLICIES The financial statements have been prepared in compliance with International Financial Reporting Statements and Namibian generally accepted accounting practice. The following are the principal accounting policies of the company and the group, which are consistent in all material respects with those applied in the previous year. The financial statements have been prepared on the historical cost basis, except if otherwise stated. 1.1 Basis of consolidation of financial results The consolidated financial statements reflect the financial results of the group. All financial results are consolidated with similar items on a line-by-line basis. Inter-company transactions, balances and unrealised gains and losses between group entities are eliminated on consolidation. To the extent that a loss on a transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, that loss is recognised in the income statement Subsidiaries The financial results of subsidiaries are consolidated into the group's results from the acquisition date until the disposal date. Minority interest at the acquisition date is determined as the minority shareholders' proportionate share of the fair value of the net assets of subsidiaries acquired. 1.2 Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation. Depreciation is calculated on the straight-line method to write off the cost of each asset over its estimated useful life as follows: Furniture and fittings Office equipment Motor vehicles Field equipment Computer equipment 6-7 years 6-7 years 5 years 4 years 3 years 1.3 Measurement currency and foreign currency translations Measurement currency The financial results of the entity are accounted for in its measurement currency. The consolidated financial statements are presented in Canadian Dollars, which is the measurement currency of the group Foreign entities Income and expenditure transactions of foreign entities are translated at the average rate of exchange for the year. All assets and liabilities, including fair value adjustments arising on acquisition, are translated at the rate of exchange ruling at the balance sheet date. Differences arising on translation are recognised in the changes in equity statement as a foreign currency translation reserve.

11 NOTES TO THE FINANCIAL STATEMENTS (Contd) 31 MARCH ACCOUNTING POLICIES (contd) Other foreign currency transactions Income and expenditure transactions are translated into the measurement currency of the individual entity at the rate of exchange ruling at the transaction date. 1.4 Intangible assets Intangible assets are recognised if it is probable that future economic benefits will flow to the entity from the assets and the costs of the assets can be reliably measured Exploration expenditure Mining exploration costs are recognised in the income statement until completion of a final feasibility study supporting proven and probable reserves. Expenditure incurred subsequent to proven and probable reserves being identified is capitalised. Expenditure on producing mines or development properties is capitalised only when excavation or drilling is incurred to extend reserves or further delineate existing proven and probable reserves. 1.5 Deferred tax Deferred tax is calculated on the comprehensive basis using the liability method, which requires provision for temporary differences between book and tax values of assets and liabilities. Tax losses are taken into account in determining the liability or asset. 1.6 Environmental expenditures The operations of the company may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the company are not predictable. The company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated life of the operation, net of expected recoveries. 1.7 Fair value of financial instruments The company's financial instruments consist of investments, cash, VAT receivable, accounts payable and amounts due to parent company. Unless otherwise noted, it is management's opinion that the company is not exposed to significant interest, currency or credit risks arising from the financial instruments. The carrying value of these financial instruments approximates their fair value due to their short-term maturity or capacity of prompt liquidation.

12 NOTES TO THE FINANCIAL STATEMENTS (Contd) 31 MARCH CANADIAN FUNDS 2. PROPERTY, PLANT AND EQUIPMENT GROUP Motor Office Furniture Field Computer vehicles equipment and fittings equipment equipment T o t a l $ $ $ $ $ $ Carrying amount at 1 April ,178 3,305 2,870 2,255 7,825 26,432 At cost 11,622 3,769 3,356 2,551 9,304 30,602 Accumulated depreciation (1,444) (464) (486) (296) (1,479) (4,170) Additions 57, ,805 3,276 19,911 84,065 Depreciation (11,999) (623) (751) (1,113) (6,631) (21,117) Translation difference 5, ,208 9,171 Carrying amount at 31 March ,470 3,407 5,465 4,896 23,313 98,551 At cost 76,227 4,611 6,832 6,446 32, ,001 Accumulated depreciation (14,757) (1,204) (1,367) (1,550) (9,572) (28,450) Carrying amount at commencement of business At cost Accumulated depreciation Acquisition of subsidiary ,353 3,353 Additions 11,622 3,769 3,356 2,551 5,951 27,249 Depreciation (1,265) (407) (425) (259) (1,293) (3,649) Translation difference (179) (57) (61) (37) (186) (520) Carrying amount at 31 March ,178 3,305 2,870 2,255 7,825 26,432 At cost 11,622 3,769 3,356 2,551 9,304 30,602 Accumulated depreciation (1,444) (464) (486) (296) (1,479) (4,170)

13 NOTES TO THE FINANCIAL STATEMENTS (Contd) 31 MARCH CANADIAN FUNDS COMPANY GROUP INTEREST IN SUBSIDIARY $ $ $ $ Investment in and amounts owing to subsidiary, Bafex Exploration (Pty) Ltd: Investment in shares Loans 828, , , , The recovery of the company's investment in the subsidiary and the attainment of profitable operations is dependent upon the discovery and development of economic ore reserves and the ability to arrange sufficient financing to bring the ore reserves into production. As the ultimate outcome of these matters cannot presently be determined, because they are contingent on future events, the company has subordinated its claim against the subsidiary in favour of other creditors until such time that the assets, fairly valued, exceed the liabilities. 4. INVESTMENTS Listed at fair value Available for sale Balance at beginning of the year 22,500-22, Boulder Mining Corporation shares received free of consideration 22,000 24,000 22,000 24,000 Revaluation to fair value - (1,500) - (1,500) Shares sold during the year (44,500) - (44,500) - Balance at end of the year - 22,500-22,500 The shares are granted to the company in terms of an option agreement as disclosed in note 11 to the financial statements.

14 NOTES TO THE FINANCIAL STATEMENTS (Contd) 31 MARCH CANADIAN FUNDS COMPANY GROUP ORDINARY SHARE CAPITAL $ $ $ $ Authorised Par value shares of US$1 each 50,000 50,000 50,000 50,000 Issued 108 Par value shares of US$1 each Share premium 189,985 99, ,985 99, , , , ,093 The unissued shares are placed under the control off the directors until the next annual general meeting. 6. NON-INTEREST-BEARING BORROWINGS The loans are unsecured, bear no fixed rate of interest and have no fixed terms for repayment but, by their nature, should be regarded as longterm C J Mackenzie - 109, ,941 R D Williams - 14,521-27,923 C Ford - 5,165-5,165 No interest was charged on these loans for the year under review (2003 : $ Nil) , , DIRECTORS EMOLUMENTS For other services 60, ,972 85, , COMMITMENTS Lease commitments Payable within 12 months ,627 16,784

15 NOTES TO THE FINANCIAL STATEMENTS (Contd) 31 MARCH 2004 CANADIAN FUNDS 9. TAXATION No provision for current taxation has been made as no such liability is anticipated. 10. EXCLUSIVE PROSPECTING LICENCES The subsidiary company is the holder of eight exclusive prospecting licences issued in respect of precious metals, base and rare metal and industrial minerals over certain portions of land situated in Namibia. The subsidiary owns a 100% interest in all of its eight properties except the Tevrede property (EPL 2909), which is subject to an earn-in agreement with Boulder Mining Corporation as disclosed in note 11 to the financial statements. The exclusive prospecting licences give the subsidiary the sole and exclusive right to conduct prospecting on the properties for a three-year term, renewable for a further two periods each of two years duration. The expiry dates of the licences range between 26 April 2004 and 8 July OPTION AGREEMENT The company and its subsidiary granted an exclusive right and option on the exclusive prospecting licence, EPL 2909, to Boulder Mining Corporation to acquire, subject to the terms and conditions of an option agreement, and subject to the approval of the Ministry of Mines and Energy of the Republic of Namibia for the transfer of the licence, a 100% interest in the company's and subsidiary's right, title and interest in and to the licence, subject to a 3% NSR royalty to the subsidiary. The option has to be exercised on or before 3 June In terms of the option agreement, the Optionee will make an initial payment of $ to the Optionor and incur exploration expenditures of $3 million on the property by 3 June The Optionee will further issue common shares to the Optionor in four tranches by 3 June Further free-trading common shares up to a maximum of shares shall be issued if no commercial production has taken place on the property before 3 June 2011, on a schedule of shares per year starting 3 June The optionee has the right, at any time, prior to the commencement of commercial production to purchase one-third of the 3% NSR royalty for US$1 million.

16 Bafex Holdings Limite d 92 Road Town Tortola British Virgin Islands 2 August 2004 Grant Thornton Neuhaus P O Box 2558 Win dhoek Namibia Dear Sirs FINANCIAL S TATEMENTS OF BAFEX HOLDINGS LIMITED FOR THE YEAR ENDED 31 MARCH 2004 This representation letter is provided in connection with your audit of the financial statements and the group financial statements of Bafex Holdings Limited for the year ended 31 March 2004 for the purpose of expressing an opinion as to whether the financial statements and the group financial statements present fairly, in all material respects, the financial position of Bafex Holdings Limited as at 31 March 2004 and the results of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards and Namibian generally accepted accounting standards. We acknowledge our responsibility for fair presentation in the financial statem ents in accordance wit h Namibian generally accepted accounting practice and acknowledge that these financial statements are the representations of the directors. We confirm to the best of our knowledge and belief, the following representations: 1. We have made available to you all books of account and supporting documentation and all minutes of meetings of the shareholders and the board of directors. 2. We confirm the completeness and accuracy of the information provided regarding the identification of related parties as well as related party disclosures in the financial statem ents. 3. The financial statements are free of material misstatements, including omissions; the effects of those uncorrected financial statement misstatements aggregated by the auditor during the audit are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. 4. We have assessed as minimal the risk that the financial statements may be materially misstated as a result of fraud. 5. An income has been included in the financial statements. 6. The company has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance. There has been no non-compliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of non-compliance. 7. We have no plans or intentions that may materially alter the carrying value or classification of assets and liabilities reflected in the financial statements. 8. The company has satisfactory title to all assets and there are no liens or encumbrances on the company s assets, except for those noted in the financial statements. 9. We have recorded or disclosed, as appropriate, all liabilities, both actual and contingent, and have disclosed in the financial statements all guarantees that we have given to third parties.