RNS Number:5606B
Moydow Mines International Inc
14 April 2006
Moydow Mines International Inc.
Consolidated Financial Statements
December 31, 2005 and 2004
(expressed in U.S. dollars, unless otherwise stated)
March 3, 2006
Management's Responsibility for Financial Reporting
The annual report and consolidated financial statements have been prepared by
management who, when necessary, has made informed judgments and estimates of the
outcome of events and transactions, with due consideration given to materiality.
Management acknowledges its responsibility for the fairness, integrity and
objectivity of all information contained in the annual report, including the
consolidated financial statements.
As a means of fulfilling its responsibility, management relies on the company's
system of internal control. This system has been established to ensure, within
reasonable limits, that the assets are safeguarded, transactions are properly
recorded and are executed in accordance with management's authorization and that
the accounting records provide a solid foundation from which to prepare the
consolidated financial statements.
The Board of Directors carries out its responsibility for the consolidated
financial statements principally through its Audit Committee, consisting solely
of non-management directors. This committee meets periodically, reviews the
scope of the external audit, the adequacy of the system of internal control and
the appropriateness of the financial reporting and then makes its
recommendations to the Board of Directors. Based on those recommendations, the
Board of Directors approves the consolidated financial statements.
Brian Kiernan
Chief Executive Officer
March 3, 2006
Auditors' Report
To the Shareholders of
Moydow Mines International Inc.
We have audited the consolidated balance sheets of Moydow Mines International
Inc. as at December 31, 2005 and 2004 and the consolidated statements of loss,
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 2005
and 2004 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Toronto, Ontario
2005 2004
$ $
Assets
Current assets
Cash and cash equivalents 18,344 808,321
Newmont common shares (quoted market value - 2,214,000 6,217,400
$2,403,000;
2004 - $6,217,400)
Accounts receivable and prepaid expenses 67,715 177,786
Current income tax recoverable 19,821 -
--------- ---------
2,319,880 7,203,507
Mineral properties (note 4) 3,992,612 2,064,293
Other assets (note 5) 22,104 28,904
--------- ---------
6,334,596 9,296,704
--------- ---------
Liabilities
Current liabilities
Current income taxes - 1,274,481
Accounts payable and accrued liabilities 593,140 379,158
--------- ---------
593,140 1,653,639
Future income taxes (note 8) 160,166 740,546
--------- ---------
753,306 2,394,185
--------- ---------
Shareholders' Equity
Capital stock (note 6) 16,759,055 16,480,245
Contributed surplus 414,726 402,406
Deficit (11,592,491) (9,980,132)
--------- ---------
5,581,290 6,902,519
--------- ---------
6,334,596 9,296,704
--------- ---------
Nature of operations and going concern (note 1)
Commitments (note 10)
2005 2004
$ $
Expenses
General and administrative 1,150,189 1,281,817
Writedown of mineral properties (note 4) 1,247,971 432,901
Stock-based compensation (note 6) 12,320 365,206
Amortization of plant and equipment 6,800 936
Foreign exchange gain (55,490) (181,502)
--------- ---------
2,361,790 1,899,358
--------- ---------
Other income and expenses
Loss on Newmont common shares, net (20,868) (894,567)
Interest income 8,419 11,534
Dividend income 26,500 42,075
--------- ---------
14,051 (840,958)
--------- ---------
Loss before income taxes (2,347,739) (2,740,316)
Recovery of income taxes (note 8) (735,380) (801,551)
--------- ---------
Loss for the year (1,612,359) (1,938,765)
--------- ---------
Basic and diluted loss per common share (0.05) (0.07)
--------- ---------
Weighted average number of common shares outstanding 29,393,998 28,798,190
--------- ---------
Diluted weighted average number of common shares 29,393,998 29,627,779
outstanding --------- ---------
2005 2004
$ $
Deficit - Beginning of year (9,980,132) (8,041,367)
Loss for the year (1,612,359) (1,938,765)
--------- ---------
Deficit - End of year (11,592,491) (9,980,132)
--------- ---------
2005 2004
$ $
Cash provided by (used in)
Operating activities
Loss for the year (1,612,359) (1,938,765)
Adjustments for non-cash items
Writedown of mineral properties 1,247,971 432,901
Amortization of plant and equipment 6,800 936
Loss on Newmont common shares, net 20,868 894,567
Future income taxes (580,380) (2,076,032)
Stock-based compensation 12,320 365,206
--------- ---------
(904,780) (2,321,187)
--------- ---------
Changes in non-cash working capital
Loan receivable - 200,000
Accounts receivable and prepaid expenses 110,071 (9,603)
Accounts payable and accrued liabilities and income (1,080,320) 894,125
taxes --------- ---------
(970,249) 1,084,522
--------- ---------
(1,875,029) (1,236,665)
--------- ---------
Investing activities
Proceeds from sale of Newmont common shares 3,982,532 30,186,033
Exploration of mineral properties (3,176,290) (1,686,912)
--------- ---------
806,242 28,499,121
--------- ---------
Financing activities
Proceeds from issue of capital stock 278,810 7,795
Distribution to shareholders (note 3) - (27,576,000)
--------- ---------
278,810 (27,568,205)
--------- ---------
Decrease in cash and cash equivalents during the year (789,977) (305,749)
Cash and cash equivalents - Beginning of year 808,321 1,114,070
--------- ---------
Cash and cash equivalents - End of year 18,344 808,321
--------- ---------
Supplemental information
Cash income taxes paid 905,116 5,570
Cash interest paid - -
1 Nature of operations and going concern
Moydow Mines International Inc. (Moydow or the company) is an international
exploration company with primary interests in precious and industrial minerals
and diamonds. Moydow's common shares are listed on both the Toronto Stock
Exchange and the Alternative Investment Market of the London Stock Exchange.
The company is exploring its mineral properties and, as at December 31, 2005,
had not determined the existence of economically recoverable reserves (note 4).
The recoverability of the amounts shown for mineral properties is dependent upon
the existence of economically recoverable mineral reserves, the preservation of
the company's interest in the underlying mineral claims, the ability to obtain
necessary financing, to obtain government approval and to attain profitable
production or, alternatively, upon the company's ability to profitably dispose
of its interests.
Changes in future conditions could require material writedowns of the carrying
amounts of future expenditures. As at December 31, 2005, the company had an
excess of current assets over current liabilities of $1,726,740 and has recorded
losses and net cash outflows from operations for the past two years. The company
is also required to pay $1,000,000 in the near term to keep its mineral property
rights in Angola. These circumstances cast significant doubt as to the ability
of the company to continue as a going concern. Management is currently pursuing
several financing alternatives to secure capital. It is not possible to
determine, with any certainty, the success or adequacy of these initiatives.
The financial statements of the company have been prepared on the basis that the
company will continue as a going concern, which presumes that it will be able to
realize its assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments that might be
necessary if the company is unable to continue as a going concern. If management
is unsuccessful in securing capital, the company's assets may not be realized or
its liabilities discharged at their carrying amounts and these differences could
be material.
2 Summary of significant accounting policies
Basis of presentation and consolidation
These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles. The consolidated financial
statements include the accounts of the company, its subsidiaries and a
proportionate share of the company's interests in joint ventures. All
significant intercompany accounts and transactions have been eliminated.
Use of estimates
The preparation of financial statements in accordance with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant areas requiring the use of management's estimates
are recoverability of mineral property deferred costs, future income taxes,
estimation of the fair value of stock options and the carrying value of
investments. Financial results as determined by actual events could differ
materially from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist of highly liquid investments that are readily
convertible to known amounts of cash and have maturities of three months or less
at acquisition.
Investments
Investments in companies where the company has the ability to exercise
significant influence over the operating, financing and investing activities of
the companies are accounted for using the equity method, whereby the cost of the
investment is adjusted for the company's share of post-acquisition earnings or
losses of these companies.
Current asset investments are carried at the lower of cost and market value.
Long-term investments in shares of other companies are carried at cost less any
provision for other than temporary impairment in value.
Plant and equipment
Plant and equipment are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method at rates sufficient to
amortize costs over the estimated useful lives of the assets, which range
between four and six years. Amortization of equipment used in exploration
activities has been included in exploration expenditures.
Mineral properties
Acquisition costs of mineral properties, together with direct exploration and
development expenses incurred thereon, are deferred and capitalized on a
property-by-property basis. Upon reaching commercial production, these
capitalized costs are transferred from exploration properties to producing
properties on the consolidated balance sheets and are amortized into operations
using the unit-of-production method over the estimated useful lives of the
estimated related ore reserves.
In the event that the long-term expectation is that the net carrying amount of
these capitalized exploration costs will not be recovered, the carrying amount
is written down accordingly and the writedown amount charged to operations. Such
would be indicated when:
* exploration activities have ceased;
* exploration results are not promising such that exploration will not be
planned for the foreseeable future;
* lease ownership rights expire; or
* insufficient funding is expected to be available to complete the
exploration program.
The amount shown for mineral properties represents costs incurred to date, net
of recoveries from option or joint venture participants and writedowns, and does
not necessarily reflect present or future values.
Translation of foreign currency
The consolidated financial statements are presented in U.S. dollars, unless
otherwise stated. Transactions denominated in foreign currencies are translated
into U.S. dollars at the rate prevailing at the date of the transactions.
At the balance sheet dates, monetary assets and liabilities denominated in
foreign currencies are translated at the year-end rate of exchange. Exchange
gains and losses arising on translation or settlement of foreign currency
denominated monetary items are included in the determination of loss for the
year.
Earnings (loss) per common share
Basic earnings (loss) per common share are computed by dividing the earnings
(loss) for the year by the weighted average number of common shares outstanding
during the year, including contingently issuable common shares, which are
included when the conditions necessary for issuance have been met, but excluding
contingently returnable common shares until all conditions necessary for their
release from escrow have been satisfied. Diluted earnings (loss) per common
share are calculated in a manner similar to basic earnings (loss) per common
share, except the number of weighted average common shares outstanding is
increased to include potential common shares from the assumed exercise of stock
options and warrants, if dilutive. The number of additional common shares
included in the calculation is based on the treasury stock method for stock
options and warrants and on the as-if-converted method for convertible
securities.
Financial instruments
As at December 31, 2005 and 2004, the carrying values of the company's cash and
cash equivalents, accounts receivable and accounts payable and accrued
liabilities approximate their fair values.
Stock-based compensation
Stock options granted to employees or external parties are recognized at fair
value as an expense in equal instalments over the vesting period and an offset
to contributed surplus. The expense is determined using an option pricing model
that takes into account the exercise price, the term of the option, the impact
of dilution, the current price and expected volatility of the underlying share,
the expected dividend yield and the risk-free interest rate for the term of the
option.
Cash received from the exercise of options for common shares is credited to
capital stock.
Income taxes
The provision for future income taxes is based on the asset and liability
method. Future income taxes arise from the recognition of the income tax
consequences of temporary differences by applying statutory income tax rates
applicable to future years to differences between the consolidated financial
statements' carrying amounts and the income tax amounts of assets and
liabilities. The company records a valuation allowance against any portion of
those future income tax assets that it believes will, more likely than not, fail
to be realized. Future income tax balances relating to expenditures funded by
the issue of flow-through shares are recognized as liabilities and share issue
costs when the income tax benefits are renounced.
3 Distribution to shareholders
On December 12, 2003, the Board of Directors declared a distribution to the
shareholders of record of the company as at December 23, 2003 in the amount of
CA$1.25 per common share, comprising a return of capital of CA$1.15 per common
share for income tax and legal purposes, and a special dividend of CA$0.10 per
common share. The distribution was paid on January 6, 2004. On December 30,
2003, the company sold 600,000 Newmont Mining Corporation (Newmont) common
shares and received cash of $27,576,000 on January 6, 2004.
4 Mineral properties
The company, either directly or through certain joint ventures, has obligations
to expend various amounts on its mineral properties and projects in order to
keep its mineral property rights in good standing. All agreements are in the
normal course of business.
Mineral exploration properties in Africa and North America are described below
and are recorded with their carrying values as follows:
Angola Sierra Ghana North Total
Leone America
$ $ $ $ $
Balance - December 31, - - 185,340 541,242 726,582
2003
Costs 390,015 267,403 454,259 658,935 1,770,612
Writedown (18,175) - (32,977) (381,749) (432,901)
-------- -------- -------- -------- --------
Balance - December 31, 371,840 267,403 606,622 818,428 2,064,293
2004
Costs 1,399,727 1,373,725 302,530 100,308 3,176,290
Writedown - - (329,235) (918,736) (1,247,971)
-------- -------- -------- -------- --------
Balance - December 31, 1,771,567 1,641,128 579,917 - 3,992,612
2005 -------- -------- -------- -------- --------
a) Angola, Africa
Dala project, Angola
The company is party to two separate exploration projects with the same partners
on the Dala property in Angola, relating to the exploration for alluvial and
kimberlite diamonds.
Alluvial diamonds
On October 1, 2004, the company signed an agreement with Empressa Nacional De
Diamantes De Angola (Endiama), the Angolan state diamond mining company and
Cimader-Comercio Geral Limitada (Cimader), a local Angola company, to explore
for alluvial diamonds on the Dala concession, located near
the town of Saurimo, in north-east Angola. The concession comprises 3,000 square
kilometres. To obtain a 33% interest, the company will have to incur
expenditures of not less than $5,000,000 on or before October 1, 2007. Cimader
and Endiama have a free carried interest in the project.
The company entered into a separate agreement with Concord Minerals LLC
(Concord), a private Nevada company, whereby Concord has the right to earn up to
50% of Moydow's interest in the concession by funding exploration expenditures
under Moydow's agreement with Endiama and Cimader.
The company's cumulative expenditures to December 31, 2005 amounted to
$1,838,615 of which $1,466,775 was incurred during 2005. Concord's cumulative
expenditures to December 31, 2005 amounted to $688,797.
Kimberlite
On December 16, 2005, the company signed another agreement with Endiama and
Cimader to explore for kimberlite (primary) diamonds on the Dala concession.
Under the terms of the agreement, the company can earn 40% interest in the
concession with the remaining percentages held by Endiama and Cimader. To obtain
its interest, the company will have to incur expenditures of not less than
$10,000,000 on or before January 14, 2009. Cimader and Endiama have a free
carried interest in the project. The granting of the licence is subject to the
receipt of Angolan regulatory approval.
The company also has an agreement with Concord, whereby Concord has the right to
earn up to 50% of Moydow's interest in the kimberlite concession, by funding
exploration expenditures under Moydow's agreement with Endiama and Cimader.
No amounts had been expended by Moydow or Concord to December 31, 2005.
b) Sierra Leone, West Africa
Port Loko property, Sierra Leone
On September 8, 2004, the company entered into an option agreement with Gondwana
Investments Limited (Gondwana), a company incorporated in Luxembourg. The
agreement allows Moydow to acquire up to a 60% interest in the Port Loko bauxite
deposit in Sierra Leone, West Africa, provided that Moydow spends $1,000,000 in
exploration work and produces and delivers a feasibility study on or before June
30, 2006. Under the terms of the agreement, Moydow also issued 150,000 common
shares and 200,000 warrants. The warrants, which expire in 2006, have a strike
price of CA$0.38. The agreement covers only bauxite and no other minerals on the
property. Cumulative expenditures by the company to December 31, 2005 amounted
to $1,641,128, of which $1,373,725 was incurred in 2005.
c) Ghana, West Africa
Ntotoroso property, Ghana
On December 8, 2003, the company sold its wholly owned subsidiary, Moydow
Limited (Isle of Man), which, following an internal restructuring, owned the
company's 50% joint venture interest in the Ntotoroso property but no other
mineral properties, to Newmont.
In connection with the sale, the company entered into a royalty agreement,
whereby the company acquired the right to a net smelter return royalty of 2% on
all recovered ounces of gold and silver produced from the Ntotoroso property
after the first 1.2 million gold equivalent ounces in consideration for
$250,000. No value has been ascribed to the royalty rights acquired by the
company.
Kanyankaw property, Ghana
On October 3, 2005, the company was granted a two-year extension to its
prospecting licence with respect to the Kanyankaw property by the Minister for
Lands, Forestry and Mines in Ghana. The carrying value of the Kanyankaw property
was written off in 2005 in the amount of $329,235, of which $29,820 was incurred
during 2005, as exploration results are not promising such that exploration will
not be planned for the foreseeable future.
Hwidem property, Ghana
On October 3, 2005, the company was granted a two-year extension to its
prospecting licence with respect to the Hwidem property by the Minister for
Lands, Forestry and Mines in Ghana. The licence area covers 24.7 square
kilometres and it adjoins the Kenyase-Ntotoroso area currently under lease to
Rank Mining Company Limited, a subsidiary of Newmont. The company incurred
exploration expenditures on this property of $59,467 in 2005. The minimum
exploration expenditures required to be spent by the end of the extension in
order to maintain the licence are $523,000, of which $341,527 had been spent as
at December 31, 2005. If gold mineralization does not exist in sufficient
quantities in the area to warrant completion of the work program, the company is
not liable for any shortfall of the minimum exploration expenditures.
Okumpreko property, Ghana
On September 17, 2004, the company signed an agreement with PW Limited, an
international engineering and mining contractor. Under the terms of the
agreement, the company can earn a majority interest in the Nyaduom and Kushea
mining leases, which are collectively known as the Okumpreko gold project. The
leases, which extend to 2020, have a combined area of 93 square kilometres.
Under the terms of the agreement, the company earns a 40% interest in the
project in return for incurring direct exploration expenditures of $250,000
within one year of signing the agreement. Following this, the company can
increase its interest to 51% by incurring further exploration expenditures of
$250,000 within two years of signing the agreement. Management is currently
negotiating an extension to the terms of the agreement.
Cumulative expenditures to December 31, 2005 amounted to $238,390, of which
$213,243 was incurred during 2005.
d) North America
Newfoundland and Labrador
During 2003, the company signed an agreement with Cornerstone Capital Resources
Inc. (Cornerstone) in relation to a group of claims located in south-central
Newfoundland and Labrador. As exploration results are not promising, the company
has written off its investment in the amount of $874,608 in 2005.
Altius Baie d'Espoir property
On March 10, 2004, the company signed an agreement with Altius Resources Inc.
(Altius) for an option to earn up to 80% interest in the Altius Baie d'Espoir
property located in south-central Newfoundland and Labrador. As exploration
results are not promising, in 2005 the company has written off its investment in
the amount of $36,033.
Other properties - North America
During 2005, the company incurred and wrote off costs of $8,095 (2004 - $54,082)
relating to general exploration.
Botwood Basin property
During 2004, the company decided not to continue with the renewal application of
the Botwood Basin licence, located in central Newfoundland and Labrador, as
exploration results were not promising, and it has written off its investment in
the amount of $308,319.
5 Other assets
2005 2004
$ $
Plant and equipment - at cost 157,623 157,623
Less: Accumulated amortization 152,933 146,133
--------- ---------
Net book value 4,690 11,490
Investments - (quoted market value - $83,709; 17,414 17,414
2004 - $74,800)
--------- ---------
22,104 28,904
--------- ---------
6 Capital stock
Authorized
Unlimited number of common shares
Issued
Number of $
shares
Balance - December 31, 2003 28,784,382 16,425,950
Issue of shares - July 17, 2004 30,000 7,795
Issuable shares 150,000 46,500
--------- ---------
Balance - December 31, 2004 28,964,382 16,480,245
Issue of shares - July 19, 2005 60,000 10,348
Issue of shares for cash - September 30, 2005 1,596,193 268,462
--------- ---------
Balance - December 31, 2005 30,620,575 16,759,055
--------- ---------
In 2005, the company issued 60,000 shares in connection with the acquisition of
its interest in the Altius Baie d'Espoir property.
In 2004, the company agreed to issue 150,000 shares in connection with the
acquisition of its interest in the Port Loko property. These shares were issued
in 2005.
Stock options
Stock option plan
The company has a stock option plan (the plan), which has been approved by the
shareholders, that allows the company to grant up to 4,000,000 stock options to
officers, directors, employees and consultants. Under the plan, options are
non-assignable and may be granted for a term not exceeding ten years. The number
of common shares that may be reserved for issuance to any one person pursuant to
options must not exceed 5% of the outstanding common shares. The exercise price
of an option may not be lower than the closing price of the common shares on the
Toronto Stock Exchange on the business day immediately proceeding the date the
options are granted.
Movements in stock options of the company are set out in the table below:
Number of Weighted
stock average
options exercise
price
CA$
Balance - December 31, 2003 1,255,000 1.79
Granted 2,000,000 0.33
Expired (20,000) 1.15
---------
Balance - December 31, 2004 3,235,000 0.89
Granted 100,000 0.23
Expired (1,235,000) 1.79
---------
Balance - December 31, 2005 2,100,000 0.33
---------
The stock options are exercisable as follows:
Number of Exercise Expiry date
stock options price
exercisable and CA$
outstanding
2,000,000 0.33 August 13, 2009
100,000 0.23 June 26, 2010
------------
2,100,000
------------
Stock-based compensation
The estimated fair value of the 100,000 stock options issued on June 16, 2005
was CA$15,250 (CA$0.15 per option).
The fair value of each stock option granted in 2004 and 2005 was estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions:
Risk-free interest rate 3.75%
Expected life 5 years
Estimated volatility 80.00%
Dividend yield nil%
Warrants
In 2004, the company agreed to issue 200,000 warrants for the purchase of
200,000 common shares at a strike price of CA$0.38, with a value of $37,200,
expiring in 2006. These warrants were issued in connection with the Port Loko
bauxite deposit (note 4(b)).
7 Related party transactions
Related party transactions relate primarily to the payment of fees under
contracts for services with companies in which a Moydow director is a
shareholder and director. The company was charged a total of $251,597 during
2005 (2004 - $492,880) with respect to drilling and administration services.
Included in accounts payable and accrued liabilities as at December 31, 2005 is
$35,696 (2004 - $26,819) payable to these related parties for such services.
The company's primary legal counsel is a firm in which a director of the company
is a partner. The company was charged $68,101 during 2005 (2004 - $49,521) for
legal services provided by this firm. Included in accounts payable and accrued
liabilities as at December 31, 2005 is $57,053 (2004 - $nil) with respect to
such services.
These transactions are made in the normal course of business.
8 Income taxes
The effective rate of income taxes recorded in the consolidated statements of
loss differs from the normal combined rate of federal and provincial income
taxes, as follows:
2005 2004
% %
Combined basic federal and Ontario income tax rate 36.12 36.12
--------- ---------
Increase (decrease) in rate resulting from
Currency translation adjustments (1.14) (4.59)
Foreign tax rate differential (1.85) -
Tax-free portion of gains (1.72) (3.43)
Prior year's income tax losses recognized 6.49 -
Prior year's income tax asset recognized (0.73) -
Stock-based compensation and other non-deductible (0.42) 1.15
items
Increase in valuation allowance (5.43) -
--------- ---------
(4.80) (6.87)
--------- ---------
Effective income tax rate 31.32 29.25
--------- ---------
2005 2004
$ $
Current income tax (recovery) expense (155,000) 1,274,481
Future income tax recovery (580,380) (2,076,032)
--------- ---------
(735,380) (801,551)
--------- ---------
Future income taxes are applicable to the following temporary differences:
2005 2004
$ $
Plant and equipment, subject to amortization (3,844) (8,229)
Currency translation adjustments 1,850 243,055
Investments 219,104 542,156
Other (56,944) (36,436)
--------- ---------
Future income tax liability 160,166 740,546
--------- ---------
9 Segmented disclosures
The company has one reportable operating segment, being the exploration of
mineral properties in the geographic areas disclosed in note 4.
10 Commitments
On October 24, 2005, the company appointed Chlumsky Armbrust & Meyer (CAM) to
prepare a Bankable Feasibility Study on the Port Loko bauxite deposit in Sierra
Leone, West Africa. CAM estimated the cost for the Bankable Feasibility Study to
be $145,000, of which $16,243 was incurred during 2005.
On January 14, 2006, pursuant to the agreement with Endiama (note 4(a)), Moydow
paid $1,000,000 to the Angolan state diamond mining company. In order for the
deposit to be refunded to Moydow, Moydow must incur expenditures of $1,000,000
within six months of making the deposit.
11 Subsequent events
On February 28, 2006, the company reached an agreement with Diamond Fields
International Ltd. (Diamond Fields), pursuant to which, Moydow's common
shareholders will exchange their Moydow securities for securities of Diamond
Fields (the acquisition). Diamond Fields is engaged in mineral exploration and
development worldwide.
As a condition to the acquisition, Moydow is required to complete a private
equity placement (the placing) to raise net proceeds of at least $1.8 million.
Upon completion of the placing and the satisfaction of all conditions and
regulatory requirements, Moydow's shareholders will exchange all of their Moydow
common shares, including shares to be issued, as part of the placing for a total
of 75,412,208 Diamond Fields' shares, with warrants and options of Moydow being
exchanged for warrants and stock options of Diamond Fields in proportion to the
share exchange. Diamond Fields will acquire all of the issued shares of Moydow
and the shares to be issued pursuant to the placing. Diamond Fields currently
has outstanding 113,118,312 common shares. Upon completion of the proposed
acquisition, Diamond Fields will have 188,530,520 common shares in issue, of
which Moydow's shareholders (including the shareholders pursuant to the placing)
will own 40%.
The acquisition is subject to, among other things, full due diligence
examination, receipt of all necessary regulatory, court and stock exchange
approvals, Moydow's shareholders' approval, a valuation and/or fairness opinion
by each company and lock-up agreements executed by the chairman and chief
executive officer of Moydow under which they have agreed to vote in favour of
the merger and entry of the parties into a definite agreement. In the event that
the merger is not completed under certain circumstances, the party who
terminates the agreement will be required to pay to the other a break fee of
$250,000.
12 Comparative figures
Certain comparative figures have been reclassified to be consistent with the
current year's consolidated financial statement presentation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ILFLTSFISLIR
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